High Wire Networks, Inc 10-Q for FY2021 Q2
High Wire Networks, Inc. (HWNI)
About this 10-Q
High Wire Networks, Inc filed this 10-Q on August 27, 2021, covering the quarter ended June 30, 2021 (FY2021 Q2).
Headline figures
Quarter ended June 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $7.79M
- up 148.6% from $3.13M a year earlier
- Net loss
- $1.66M
- compared with a net loss of $577.44K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
Or
For the transition period from to
Commission
File Number
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
| 980 North | ||
| (Address of principal executive offices) | (Zip Code) |
407-512-9102
(Registrant’s telephone number, including area code)
SPECTRUM GLOBAL SOLUTIONS, INC.
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ YES ☐ NO
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ☒ YES ☐ NO
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | 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 ☒
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. ☐ YES ☐ NO
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| OTCQB |
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Table of Contents
| PART I - FINANCIAL INFORMATION | 1 | ||
| Item 1. | Financial Statements | 1 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 34 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 39 | |
| Item 4. | Controls and Procedures | 39 | |
| PART II - OTHER INFORMATION | 40 | ||
| Item 1. | Legal Proceedings | 40 | |
| Item 1A. | Risk Factors | 40 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 40 | |
| Item 3. | Defaults Upon Senior Securities | 40 | |
| Item 4. | Mine Safety Disclosures | 40 | |
| Item 5. | Other Information | 40 | |
| Item 6. | Exhibits | 41 | |
| SIGNATURES | 42 | ||
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited interim consolidated financial statements of our company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars, unless otherwise noted.
HWN, INC. f/k/a Spectrum Global Solutions, Inc.
1
HWN, INC. f/k/a Spectrum Global Solutions, Inc.
Condensed consolidated balance sheets
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net of allowances of $ | ||||||||
| Contract assets | ||||||||
| Prepaid expenses and deposits | ||||||||
| Total current assets | ||||||||
| Property and equipment, net of accumulated depreciation of $ | ||||||||
| Goodwill | ||||||||
| Intangible assets, net of accumulated amortization of $ | - | |||||||
| Operating lease right-of-use assets | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Contract liabilities | ||||||||
| Loans payable to related parties, current portion | ||||||||
| Loans payable, current portion | ||||||||
| Convertible debentures, current portion, net of discount of $ | ||||||||
| Factor financing | ||||||||
| Derivative liabilities, current portion | ||||||||
| Operating lease liabilities | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Loans payable, net of current portion | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and Contingencies | ||||||||
| Series A preferred stock; $ | ||||||||
| Series B preferred stock; $3,500 stated value; 1,000 shares authorized; 1,000 and 0 issued and outstanding as of June 30, 2021 and December 31, 2020 | - | - | ||||||
| Series D preferred stock; $ | - | |||||||
| Total mezzanine equity | - | |||||||
| Stockholders’ Equity: | ||||||||
| Common stock; $ | ||||||||
| Additional paid-in capital | ||||||||
| Retained earnings | ||||||||
| Total HWN, Inc. stockholders’ equity | ||||||||
| Non controlling interest | ||||||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
(The accompanying notes are an integral part of these unaudited condensed consolidated financial statements)
2
HWN, INC. f/k/a Spectrum Global Solutions, Inc.
Condensed consolidated statements of operations
(Unaudited)
| For the three months ended | For the six months ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss) on settlement of debt | ( | ) | ( | ) | ||||||||||||
| Amortization of discounts on convertible debentures and loans payable | ||||||||||||||||
| Gain (loss) on change in fair value of derivatives | ( | ) | ( | ) | ||||||||||||
| Exchange gain | ||||||||||||||||
| Gain on settlement of warrants | ||||||||||||||||
| Management fee income | ||||||||||||||||
| Other income | ||||||||||||||||
| Gain on PPP loan forgiveness | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net (loss) before non-controlling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Less: Net income attributable to non -controlling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net (loss) attributable to HWN, Inc. common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| (Loss) per share attributable to HWNs, Inc. common stockholders basic and diluted: | ||||||||||||||||
| Net (loss) basic and diluted | $ | ( | ) | $ | ( | ) | ||||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
(The accompanying notes are an integral part of these unaudited condensed consolidated financial statements)
3
HWN, INC. f/k/a Spectrum Global Solutions, Inc.
Condensed consolidated statements of stockholder’s equity
(Unaudited)
| Common stock | Additional paid-in |
Accumulated | Non controlling | |||||||||||||||||||||
| Shares | $ | capital | deficit | interest | Total | |||||||||||||||||||
| Balances, December 31, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Net loss for the period | - | ( |
) | |||||||||||||||||||||
| Ending balance, March 31, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Issuance of shares for reverse merger | - | - | ||||||||||||||||||||||
| Stock compensation in connection with reverse merger | - | |||||||||||||||||||||||
| Fair value of convertible debt issued to HWN shareholders | - | - | - | ( |
) | ( |
) | |||||||||||||||||
| Issuance of common stock to Cobra Equities upon conversion of a convertible debenture | ||||||||||||||||||||||||
| Issuance of common stock to Efrat Ioldersnvestments upon conversion of a convertible debenture | ||||||||||||||||||||||||
| Issuance of common stock to Dominion upon conversion of Series A preferred stock | ||||||||||||||||||||||||
| Issuance of common stock to Pawn Funding upon exercise of warrants | ||||||||||||||||||||||||
| Net loss for the period | - | ( |
) | ( |
) | |||||||||||||||||||
| Ending balance, June 30, 2021 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Common stock | Additional paid-in |
Accumulated | Non controlling | |||||||||||||||||||||
| Shares | $ | capital | deficit | interest | Total | |||||||||||||||||||
| Balances, December 31, 2019 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Distributions to shareholders | - | ( |
) | ( |
) | ( |
) | |||||||||||||||||
| Net loss for the period | - | |||||||||||||||||||||||
| Ending balance, March 31, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||
| Net loss for the period | - | ( |
) | ( |
) | |||||||||||||||||||
| Ending balance, June 30, 2020 | $ | $ | $ | $ | $ | |||||||||||||||||||
(The accompanying notes are an integral part of these unaudited condensed consolidated financial statements)
4
HWN, INC. f/k/a Spectrum Global Solutions, Inc.
Condensed consolidated statements of cash flows
(Unaudited)
| For the six months ended | ||||||||
| June 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Loss on change in fair value of derivative liability | ||||||||
| Amortization of discounts on convertible debentures and loans payable | ( | ) | ||||||
| Depreciation and amortization | ||||||||
| Amortization of operating right-of-use assets | ||||||||
| Amortization of operating right-of-use liabilities | ( | ) | ( | ) | ||||
| Stock compensation | ||||||||
| Loss on settlement of debt | ||||||||
| Gain of forgiveness of Cares Act loan | ( | ) | ||||||
| Gain on settlement of warrants | ( | ) | ||||||
| Gain on settlement of debt | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Contract assets | ( | ) | ||||||
| Prepaid expenses and deposits | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Contract liabilities | ||||||||
| Net cash provided by (used) in operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Cash acquired in reverse acquisition | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Repayments of loans payable | ( | ) | ( | ) | ||||
| Proceeds from loans payable to related parties | ||||||||
| Distributions to shareholders | ( | ) | ||||||
| Proceeds from Cares Act loans | ||||||||
| Proceeds from convertible debentures | ||||||||
| Repayments of convertible debentures | ||||||||
| Proceeds from factor financing | ||||||||
| Repayments of factor financing | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash | ||||||||
| Cash, beginning of period | ||||||||
| Restricted cash, beginning of period | ||||||||
| Cash and restricted cash, beginning of period | $ | $ | ||||||
| Cash, end of period | ||||||||
| Restricted cash, end of period | ||||||||
| Cash and restricted cash, end of period | $ | $ | ||||||
| Supplemental disclosures of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Common stock issued for conversion of convertible debentures | $ | $ | ||||||
| Common stock issued for conversion of Series A preferred stock | $ | $ | ||||||
| Common stock issued upon cashless exercise of warrants | $ | $ | ||||||
| Common stock issued for conversion of warrants | $ | $ | ||||||
| Related party note issued | $ | $ | ||||||
| Convertible debentures issued | $ | $ | ||||||
(The accompanying notes are an integral part of these unaudited condensed consolidated financial statements)
5
HWN, INC./f/k/a Spectrum Global Solutions, Inc.
Notes to the unaudited condensed consolidated financial statements
June 30, 2021
| 1. | Organization |
Spectrum Global Solutions, Inc., (“Spectrum”) (f/k/a Mantra Venture Group Ltd.) was incorporated in the State of Nevada on January 22, 2007 to acquire and commercially exploit various new energy related technologies through licenses and purchases. On December 8, 2008, Spectrum reincorporated in the province of British Columbia, Canada.
On April 25, 2017, Spectrum
entered into and closed on an Asset Purchase Agreement with InterCloud Systems, Inc. (“InterCloud”). Pursuant to the terms
of the Asset Purchase Agreement, Spectrum purchased
On November 15, 2017, Spectrum changed its name to “Spectrum Global Solutions, Inc.” and reincorporated in the state of Nevada.
On February 14, 2018, Spectrum
entered into an agreement with InterCloud providing for the sale, transfer, conveyance and delivery to Spectrum of the remaining
On February 6, 2018, Spectrum entered into and closed on a Stock Purchase Agreement with InterCloud Systems, Inc. (“InterCloud”). Pursuant to the terms of the Stock Purchase Agreement Spectrum purchased all of the issued and outstanding capital stock and membership interests of ADEX Corporation, ADEX Puerto Rico LLC, ADEX Towers, Inc. and ADEX Telecom, Inc. (collectively “ADEX” or the “ADEX Entities”). Spectrum completed the acquisition on February 27, 2018.
On May 18, 2018, Spectrum transferred all of its ownership interests in and to its subsidiaries Carbon Commodity Corporation, Mantra China Limited, Mantra Media Corp., Mantra NextGen Power Inc., Mantra Wind Inc., Climate ESCO Ltd. and Mantra Energy Alternatives Ltd. to an entity controlled by Mantra’s former Chief Executive Officer, Larry Kristof. The new owner of the aforementioned entities assumed all liabilities and obligations with respect to such entities.
On January 4, 2019, Spectrum entered into a Stock Purchase Agreement with InterCloud. Pursuant to the terms of the Purchase Agreement, InterCloud agreed to sell, and Spectrum agreed to purchase, all of the issued and outstanding capital stock of TNS, Inc. (“TNS”), an Illinois corporation.
During September 2019, Spectrum formed ADEX Canada, which is included in the ADEX Entities.
On September 30, 2020, Spectrum sold its TNS subsidiary.
On December 31, 2020, Spectrum sold its AWS subsidiary.
HWN, Inc., (d/b/a High Wire Network Solutions, Inc.) (“High Wire” or the “Company”) was incorporated in Delaware on January 20, 2017. The Company is a global provider of managed security, professional services and commercial/industrial electrical solutions delivered exclusively through a channel sales model. The Company’s Overwatch managed security platform-as-a-service offers organizations end-to-end protection for networks, data, endpoints and users via multiyear recurring revenue contracts in this fast-growing technology segment.
6
On
February 7, 2019, High Wire and JTM Electrical Contractors, Inc. (“JTM”), an Illinois Corporation, entered into an operating
agreement through which High Wire owns
On June 16, 2021, the Company completed a merger with Spectrum. The merger was accounted for as a reverse merger (refer to Note 3, Reverse Merger, for additional detail). At the time of the reverse merger, Spectrum’s subsidiaries included ADEX Corporation, ADEX Puerto Rico LLC, ADEX Towers, Inc. and ADEX Telecom, Inc. (collectively “ADEX” or the “ADEX Entities”), AW Solutions Puerto Rico, LLC (“AWS PR”), and Tropical Communications, Inc. (“Tropical”).
Spectrum is in process of legally changing its name to HWN, but for accounting purposes, HWN is the surviving entity and is referred to throughout as “HWN”, “High Wire”, or “the Company”.
The Company’s AWS PR and Tropical subsidiaries are professional, multi-service line, telecommunications infrastructure companies that provide outsourced services to the wireless and wireline industry. The Company’s ADEX Entities are a leading outsource provider of engineering and installation services, staffing solutions and other services which include consulting to the telecommunications industry, service providers and enterprise customers domestically and internationally.
| 2. | Significant Accounting Policies |
Condensed Financial Statements
In the opinion of management, the accompanying financial statements reflect all adjustments of a recurring nature considered necessary to present fairly the Company’s financial position and the results of its operations and its cash flows for the periods shown.
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported. Actual results could differ materially from those estimates. The results of operations and cash flows for the periods shown are not necessarily indicative of the results to be expected for the full year.
7
Basis of Presentation/Principles of Consolidation
These consolidated financial
statements and related notes are presented in accordance with accounting principles generally accepted in the United States. These consolidated
financial statements include the accounts of the Company and JTM, as well as Spectrum and its subsidiaries, the ADEX Entities, AWS PR,
and Tropical. All subsidiaries are wholly-owned, with the exception of JTM, which is
All inter-company balances and transactions have been eliminated.
Reverse Merger
On January 27, 2021, Spectrum Global Solutions, Inc. HW Merger Sub, Inc., HWN, Inc. and the stockholders of HWN, Inc. (the “Stockholders”) entered into an Agreement and Plan of Merger (the “Agreement”) whereby the Stockholders agreed to sell to the Company all of the capital stock of HWN, Inc.. On June 16, 2021, the transaction contemplated by the Agreement closed, and HWN, Inc. became a wholly-owned subsidiary of Spectrum Global Solutions, Inc. As previously disclosed, as part of the consideration for the transaction, Spectrum Global Solutions, Inc. issued shares of a newly established Series D Preferred Stock.
The merger has been accounted for as a reverse merger in accordance with US GAAP. This determination was primarily based on High Wire’s business comprising the ongoing operations of the Company following the Merger, High Wire’s senior management comprising the senior management of the Company and High Wire’s stockholders having a majority of the voting power of the Company. For accounting purposes, Spectrum is considered the “acquired” company and High Wire is considered the “acquirer.” Accordingly, for accounting purposes, the Merger is treated as the equivalent of High Wire issuing stock for the net assets of Spectrum, accompanied by a recapitalization. The net assets of Spectrum have been remeasured at fair value and applied against the purchase price resulting in goodwill or other intangible assets recorded. The consolidated assets, liabilities and results of operations prior to the Closing Date of the merger are those of High Wire, and Spectrum’s assets, liabilities and results of operations are consolidated with High Wire beginning on the Closing Date. The shares and corresponding capital amounts and earnings per share available to common stockholders, pre-merger, have been retroactively restated as shares reflecting the exchange ratio in the merger. The historical financial information and operating results of Spectrum prior to the merger have not been separately presented in these condensed consolidated financial statements.
Impact of the COVID-19 Pandemic
The extent to which the coronavirus (“COVID-19”) outbreak and measures taken in response thereto impact the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.
Global health concerns relating to the COVID-19 outbreak have been weighing on the macroeconomic environment, and the outbreak has significantly increased economic uncertainty. Risks related to consumers and businesses lowering or changing spending, which impact domestic and international spend. The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and business shutdowns. These measures have not only negatively impacted consumer spending and business spending habits, they have also adversely impacted and may further impact the Company’s workforce and operations and the operations of its customers, suppliers and business partners. These measures may remain in place for a significant period of time and they are likely to continue to adversely affect the Company’s business, results of operations and financial condition.
The spread of COVID-19 has caused the Company to modify its business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences), and the Company may take further actions as may be required by government authorities or that the Company determines are in the best interests of its employees, customers and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities.
The extent to which the COVID-19 outbreak impacts the Company’s business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, the Company may continue to experience materially adverse impacts to its business as a result of its global economic impact, including any recession that has occurred or may occur in the future.
8
There are no comparable recent events which may provide guidance as to the effect of the spread of COVID-19 and a global pandemic, and, as a result, the ultimate impact of the COVID-19 outbreak or a similar health epidemic is highly uncertain and subject to change. The Company does not yet know the full extent of the impacts on its business, its operations or the global economy as a whole. However, the effects could have a material impact on the Company’s results of operations, and the Company will continue to monitor the COVID-19 situation closely. As of August 2021, multiple variants of the COVID-19 virus are circulating globally that are highly transmissible, and there is uncertainty around vaccine effectiveness on the new strains of the virus. Uncertainty around vaccine distribution, supply and effectiveness will impact when the negative economic effects as a result of COVID-19 will abate or end and the timing of such recovery may affect the Company’s financial condition.
Use of Estimates
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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to allowance for doubtful accounts, the estimated useful lives and recoverability of long-lived assets, equity component of convertible debt, stock-based compensation, and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents.
Restricted Cash
As of June 30, 2021, the Company
had $
Accounts Receivable
Trade accounts receivable
are recorded at the invoiced amount and do not bear interest. The Company records unbilled receivables for services performed but not
billed. Management reviews a customer’s credit history before extending credit. The Company maintains an allowance for doubtful
accounts for estimated losses. Estimates of uncollectible amounts are reviewed each period, and changes are recorded in the period in
which they become known. Management analyzes the collectability of accounts receivable each period. This review considers the aging of
account balances, historical bad debt experience, and changes in customer creditworthiness, current economic trends, customer payment
activity and other relevant factors. Should any of these factors change, the estimate made by management may also change. The allowance
for doubtful accounts at June 30, 2021 and December 31, 2020 was $
Property and Equipment
Property and equipment are stated at cost. The Company depreciates the cost of property and equipment over their estimated useful lives at the following annual rates:
| Automotive | ||
| Computer equipment and software | ||
| Leasehold improvements | ||
| Office equipment and furniture | ||
| Software | ||
| Machinery and equipment |
9
Goodwill
Goodwill was initially generated through the acquisition of JTM in 2019, and the reverse merger with Spectrum in 2021, as the total consideration paid exceeded the fair value of the net assets acquired.
The Company tests its goodwill for impairment at least annually on December 31st and whenever events or circumstances change that indicate impairment may have occurred. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others: a significant decline in the Company’s expected future cash flows; a significant adverse change in legal factors or in the business climate; unanticipated competition; and slower growth rates. Any adverse change in these factors could have a significant impact on the recoverability of goodwill and the Company’s consolidated financial results.
The Company tests goodwill by estimating fair value using a Discounted Cash Flow (“DCF”) model. The key assumptions used in the DCF model to determine the highest and best use of estimated future cash flows include revenue growth rates and profit margins based on internal forecasts, terminal value and an estimate of a market participant’s weighted-average cost of capital used to discount future cash flows to their present value. There were no impairment charges during the three and six months ended June 30, 2021 and 2020.
Intangible Assets
At
June 30, 2021 and December 31, 2020, definite-lived intangible assets consist of tradenames and customer relationships which are being
amortized over their estimated useful lives of
The Company periodically evaluates the reasonableness of the useful lives of these assets. Once these assets are fully amortized, they are removed from the accounts. These assets are reviewed for impairment or obsolescence when events or changes in circumstances indicate that the carrying amount may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows or other valuation techniques. The Company has no intangibles with indefinite lives.
For long-lived assets, impairment losses are only recorded if the asset’s carrying amount is not recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets are written down to fair value. There were no impairment charges during the three and six months ended June 30, 2021 and 2020.
Long-lived Assets
In accordance with ASC 360, “Property, Plant and Equipment”, the Company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. Circumstances which could trigger a review include, but are not limited to: significant decreases in the market price of the asset; significant adverse changes in the business climate or legal factors; accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of the asset; current period cash flow or operating losses combined with a history of losses or a forecast of continuing losses associated with the use of the asset; and current expectation that the asset will more likely than not be sold or disposed significantly before the end of its estimated useful life. Recoverability is assessed based on the carrying amount of the asset and its fair value, which is generally determined based on the sum of the undiscounted cash flows expected to result from the use and the eventual disposal of the asset, as well as specific appraisal in certain instances. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value. There were no impairment charges recorded during the three and six months ended June 30, 2021 and 2020.
Foreign Currency Translation
Transactions in foreign currencies are translated into the currency of measurement at the exchange rates in effect on the transaction date. Monetary balance sheet items expressed in foreign currencies are translated into U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting foreign exchange gains and losses are recognized in income.
The Company’s integrated foreign subsidiaries are financially or operationally dependent on the Company. The Company uses the temporal method to translate the accounts of its integrated operations into U.S. dollars. Monetary assets and liabilities are translated at the exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are translated at historical rates. Revenues and expenses are translated at average rates for the period, except for amortization, which is translated on the same basis as the related asset. The resulting foreign exchange gains or losses are recognized in income.
10
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.
The Company conducts business, and files federal and state income, franchise or net worth, tax returns in Canada, the United States, in various states within the United States and the Commonwealth of Puerto Rico. The Company determines it’s filing obligations in a jurisdiction in accordance with existing statutory and case law. The Company may be subject to a reassessment of federal and provincial income taxes by Canadian tax authorities for a period of three years from the date of the original notice of assessment in respect of any particular taxation year. For Canadian and U.S. income tax returns, the open taxation years range from 2010 to 2020. In certain circumstances, the U.S. federal statute of limitations can reach beyond the standard three year period. U.S. state statutes of limitations for income tax assessment vary from state to state. Tax authorities of Canada and U.S. have not audited any of the Company’s, or its subsidiaries’, income tax returns for the open taxation years noted above.
Significant management judgment is required in determining the provision for income taxes, and in particular, any valuation allowance recorded against the Company’s deferred tax assets. Deferred tax assets are regularly reviewed for recoverability. The Company currently has significant deferred tax assets resulting from net operating loss carryforwards and deductible temporary differences, which should reduce taxable income in future periods. The realization of these assets is dependent on generating future taxable income.
The Company follows the guidance set forth within ASC Topic 740, “Income Taxes” (“ASC Topic 740”) which prescribes a two-step process for the financial statement recognition and measurement of income tax positions taken or expected to be taken in an income tax return. The first step evaluates an income tax position in order to determine whether it is more likely than not that the position will be sustained upon examination, based on the technical merits of the position. The second step measures the benefit to be recognized in the financial statements for those income tax positions that meet the more likely than not recognition threshold. ASC Topic 740 also provides guidance on de-recognition, classification, recognition and classification of interest and penalties, accounting in interim periods, disclosure and transition. Penalties and interest, if incurred, would be recorded as a component of current income tax expense.
AWS
PR received a tax notice from the Puerto Rican government requesting payment of taxes related to 2014. The amount due as of June 30,
2021 was $
Revenue Recognition
Adoption of New Accounting Guidance on Revenue Recognition
The Company recognizes revenue based on the five criteria for revenue recognition established under Topic 606: 1) identify the contract, 2) identify separate performance obligations, 3) determine the transaction price, 4) allocate the transaction price among the performance obligations, and 5) recognize revenue as the performance obligations are satisfied.
11
Contract Types
The Company’s contracts fall under three main types: 1) unit-price, 2) fixed-price, and 3) time-and-materials. Unit-price contracts relate to services being performed and paid on a unit basis, such as per mile of construction completed. Fixed-price contracts are based on purchase order line items that are billed on individual invoices as the project progresses and milestones are reached. Time-and-materials contracts include employees working permanently at customer locations and materials costs incurred by those employees.
A significant portion of the Company’s revenues come from customers with whom the Company has a master service agreement (“MSA”). These MSA’s generally contain customer specific service requirements.
Performance Obligations
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in the new revenue standard. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. For the Company’s different revenue service types the performance obligation is satisfied at different times. For professional services revenue, the performance obligation is met when the work is performed. In certain cases this may be each day, or each week depending on the customer. For construction services, the performance obligation is met when the work is completed and the customer has approved the work. Contract assets include unbilled amounts for costs of services incurred on contracts with open performance obligations. These amounts are included in contract assets on the consolidated balance sheets. Contract liabilities include costs incurred and are included in contract liabilities on the consolidated balance sheets.
Revenue Service Types
The following is a description of the Company’s revenue service types, which include professional services and construction:
| ● | Professional services are services provided to the clients where the Company delivers distinct contractual deliverables and/or services. Deliverables may include but are not limited to: engineering drawings, designs, reports and specification. Services may include, but are not limited to: consulting or professional staffing to support our client’s objectives. Consulting or professional staffing services may be provided remotely or on client premises and under their direction and supervision. |
| ● | Construction Services are services provided to the client where the Company may self-perform or subcontract services that require the physical construction of infrastructure or installation of equipment and materials. |
12
Disaggregation of Revenues
The Company disaggregates its revenue from contracts with customers by service type, contract type, contract duration, and timing of transfer of goods or services. See the below tables:
| Revenue by service type | Three months ended June 30, 2021 |
Three
months ended June 30, 2020 |
Six
months ended June 30, 2021 |
Six
months June
30, |
||||||||||||
| Professional Services | $ | $ | $ | $ | ||||||||||||
| Construction | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Revenue by contract duration | Three months ended June 30, 2021 |
Three months
ended June 30, 2020 |
Six
months ended June 30, 2021 |
Six
months ended June 30, 2020 |
||||||||||||
| Short-term | $ | $ | $ | $ | ||||||||||||
| Long-term | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Revenue by contract type | Three months ended June 30, 2021 | Three months
ended June 30, 2020 | Six
months ended June 30, 2021 | Six
months June
30, | ||||||||||||
| Fixed-price | $ | $ | $ | |||||||||||||
| Time-and-materials | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The Company also disaggregates its revenue by operating segment and geographic location (refer to Note 15, Segment Disclosures, for additional information).
Accounts Receivable
Accounts receivable include amounts from work completed in which the Company has billed. The amounts due are stated at their net estimated realizable value. The Company maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected. The allowance is based upon an assessment of customer creditworthiness, historical payment experience, the age of outstanding receivables and collateral to the extent applicable.
Contract Assets and Liabilities
Contract
assets include costs and services incurred on contracts with open performance obligations. These amounts are included in contract assets
on the consolidated balance sheets. At June 30, 2021 and December 31, 2020, contract assets totaled $
Contract
liabilities include payment received for incomplete performance obligations and are included in contract liabilities on the consolidated
balance sheets. At June 30, 2021 and December 31, 2020, contract liabilities totaled $
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Cost of Revenues
Cost of revenues includes all direct costs of providing services under the Company’s contracts, including costs for direct labor provided by employees, services by independent subcontractors, operation of capital equipment (excluding depreciation and amortization), direct materials, insurance claims and other direct costs.
Research and Development Costs
Research and development costs are expensed as incurred.
Stock-based Compensation
The Company records stock-based compensation in accordance with ASC 718, “Compensation – Stock Compensation” (“ASC 718”), using the fair value method. All transactions in which goods or services are the consideration received for the issuance of equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable.
The Company accounts for stock-based compensation awards issued to non-employees for services, as prescribed by ASC 718-10, at either the fair value of the services rendered or the instruments issued in exchange for such services, whichever is more readily determinable, using the measurement date guidelines enumerated in ASU 2018-07.
The Company uses the Black-Scholes option pricing model to calculate the fair value of stock-based awards. This model is affected by the Company’s stock price as well as assumptions regarding a number of subjective variables. These subjective variables include, but are not limited to, the Company’s expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The value of the portion of the award that is ultimately expected to vest is recognized as an expense in the consolidated statement of operations over the requisite service period.
Loss per Share
The Company computes (loss) per share in accordance with ASC 260, “Earnings
per Share” which requires presentation of both basic and diluted (loss) per share (“EPS”) on the face of the income
statement. Basic EPS is computed by dividing the (loss) available to common shareholders (numerator) by the weighted average number of
shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during
the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the
average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options
or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive. As of June 30, 2021 and December 31,
2020, respectively, the Company had
Leases
The Company adopted FASB Accounting Standards Codification, Topic 842, Leases (“ASC 842”) on January 1, 2019.
The new leasing standard requires recognition of leases on the consolidated balance sheets as right-of-use (“ROU”) assets and lease liabilities. ROU assets represent the Company’s right to use underlying assets for the lease terms and lease liabilities represent the Company’s obligation to make lease payments arising from the leases. Operating lease ROU assets and operating lease liabilities are recognized based on the present value and future minimum lease payments over the lease term at commencement date. As the Company’s leases do not provide an implicit rate, the Company uses its estimated incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. A number of the Company’s lease agreements contain options to renew and options to terminate the leases early. The lease term used to calculate ROU assets and lease liabilities only includes renewal and termination options that are deemed reasonably certain to be exercised.
The Company recognized lease liabilities, with corresponding ROU assets, based on the present value of unpaid lease payments for existing operating leases longer than twelve months as of January 1, 2019. The ROU assets were adjusted per ASC 842 transition guidance for existing lease-related balances of accrued and prepaid rent, unamortized lease incentives provided by lessors, and restructuring liabilities, Operating lease cost is recognized as a single lease cost on a straight-line basis over the lease term and is recorded in selling, general and administrative expenses. Variable lease payments for common area maintenance, property taxes and other operating expenses are recognized as expense in the period when the changes in facts and circumstances on which the variable lease payments are based occur. The Company has elected not to separate lease and non-lease components for all property leases for the purposes of calculating ROU assets and lease liabilities.
14
Going Concern Assessment
Management assesses going concern uncertainty in the Company’s consolidated financial statements to determine whether there is sufficient cash on hand and working capital, including available borrowings on loans, to operate for a period of at least one year from the date the unaudited consolidated financial statements are issued or available to be issued, which is referred to as the “look-forward period”, as defined in GAAP. As part of this assessment, based on conditions that are known and reasonably knowable to management, management will consider various scenarios, forecasts, projections, estimates and will make certain key assumptions, including the timing and nature of projected cash expenditures or programs, its ability to delay or curtail expenditures or programs and its ability to raise additional capital, if necessary, among other factors. Based on this assessment, as necessary or applicable, management makes certain assumptions around implementing curtailments or delays in the nature and timing of programs and expenditures to the extent it deems probable those implementations can be achieved and management has the proper authority to execute them within the look-forward period.
The Company
has generated losses since its inception and has relied on cash on hand, sales of securities, external bank lines of credit, and issuance
of third-party and related party debt to support cashflow from operations. For the six months ended June 30, 2021, the Company had operating
income of $
Management has prepared estimates of operations for fiscal year 2021 and believes that sufficient funds will be generated from operations to fund its operations and to service its debt obligations for one year from the date of the filing of the unaudited consolidated financial statements in the Company’s Quarterly Report on Form 10-Q, which indicate improved operations and the Company’s ability to continue operations as a going concern.
The impact
of COVID-19 on the Company’s business has been considered in these assumptions; however, it is too early to know the full impact
of COVID-19 or its timing on a return to more normal operations. Further, the recently enacted CARES Act provides for economic assistance
loans through the SBA. As of June 30, 2021, HWN had $
The accompanying unaudited consolidated financial statements have been prepared on a going concern basis under which the Company is expected to be able to realize its assets and satisfy its liabilities in the normal course of business.
Management believes that based on relevant conditions and events that are known and reasonably knowable that its forecasts for one year from the date of the filing of the unaudited consolidated financial statements in the Company’s Quarterly Report on Form 10-Q indicate improved operations and the Company’s ability to continue operations as a going concern. The Company has contingency plans to reduce or defer expenses and cash outlays should operations not improve in the look forward period.
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements and 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 result of operations.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivables. The Company maintains its cash balances with high-credit-quality financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. These deposits may be withdrawn upon demand and therefore bear minimal risk.
The Company provides credit
to customers on an uncollateralized basis after evaluating client creditworthiness. For the six months ended June 30, 2021, three customers
accounted for
The Company’s customers
are primarily located within the domestic United States of America, Puerto Rico, and Canada. Revenues generated within the domestic United
States of America accounted for approximately
Fair Value Measurements
The Company measures and discloses the estimated fair value of financial assets and liabilities using the fair value hierarchy prescribed by US generally accepted accounting principles. The fair value hierarchy has three levels, which are based on reliable available inputs of observable data. The hierarchy requires the use of observable market data when available. The three-level hierarchy is defined as follows:
Level 1 – quoted prices for identical instruments in active markets;
15
Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3 – fair value measurements derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
Financial instruments consist principally of cash and cash equivalents, accounts receivable, restricted cash, accounts payable, loans payable and convertible debentures. Derivative liabilities are determined based on “Level 3” inputs, which are significant and unobservable and have the lowest priority. There were no transfers into or out of “Level 3” during the six months ended June 30, 2021 or the year ended December 31, 2020. The recorded values of all other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations.
The Company’s financial assets and liabilities carried at fair value measured on a recurring basis as of June 30, 2021 and December 31, 2020 consisted of the following:
| Total fair value at June 30, 2021 |
Quoted prices in active markets for identical assets (Level 1) |
Significant other observable inputs (Level 2) |
Significant unobservable inputs (Level 3) |
|||||||||||||
| Derivative liability (1) | $ | $ | $ | $ | ||||||||||||
| Total fair value at December 31, 2020 |
Quoted prices in active markets (Level 1) |
Quoted prices in active markets (Level 2) |
Quoted prices in active markets (Level 3) |
|||||||||||||
| Derivative liability (1) | $ | $ | $ | $ | ||||||||||||
| (1) | The Company has estimated the fair value of these derivatives using the Monte-Carlo model. |
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial statement. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Refer to Note 10, Derivative Liabilities, for additional information.
Derivative Liabilities
The Company accounts for derivative
instruments in accordance with ASC Topic 815, “Derivatives and Hedging” and all derivative instruments are reflected
as either assets or liabilities at fair value in the balance sheet. The Company uses estimates of fair value to value its derivative instruments.
Fair value is defined as the price to sell an asset or transfer a liability in an orderly transaction between willing and able market
participants. In general, the Company’s policy in estimating fair values is to first look at observable market prices for identical
assets and liabilities in active markets, where available. When these are not available, other inputs are used to model fair value such
as prices of similar instruments, yield curves, volatilities, prepayment speeds, default rates and credit spreads, relying first on observable
data from active markets. Depending on the availability of observable inputs and prices, different valuation models could produce materially
different fair value estimates. The values presented may not represent future fair values and may not be realizable. The Company categorizes
its fair value estimates in accordance with ASC 820 based on the hierarchical framework associated with the three levels of price transparency
utilized in measuring financial instruments at fair value as discussed above. As of June 30, 2021 and December 31, 2020, the Company had
a derivative liability of $
Sequencing Policy
Under ASC 815-40-35, the Company has adopted a sequencing policy whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance of securities to the Company’s employees or directors are not subject to the sequencing policy.
16
| 3. | Reverse Merger |
As noted in Note 2, on June 16, 2021, the Company consummated a reverse merger in which HWN, Inc. became a legal subsidiary of Spectrum Global Solutions, Inc., but HWN, Inc. was deemed to be the accounting acquirer.
The
purpose of the acquisition was to continue to increase revenue. Goodwill recognized represents $
The acquisition was accounted for under the acquisition method of accounting which requires the consideration given, assets acquired, and liabilities assumed to be measured at fair value. In measuring the consideration transferred, since this was a reverse merger between a public company (as the legal acquirer) and a private company (as the accounting acquirer), the fair value of the legal acquirer’s public stock generally was more reliably determinable than the fair value of the accounting acquirer’s private stock. As such, the determination and measurement of the consideration transferred was based on the fair value of the legal acquirer’s stock rather than the fair value of the accounting acquirer’s stock. Further, since this was a reverse merger for accounting purposes, the consideration transferred consists of the equity-based instruments retained by the legacy shareholders of Spectrum Global Solutions, Inc.
The fair value of the assets acquired, liabilities assumed and consideration transferred denoted below are provisional in nature and based on the management’s best estimates using information that it has obtained as of the reporting date. The Company is awaiting additional valuation information and expects to finalize the purchase price allocation before the end of the fiscal year.
The fair value of the consideration transferred (provisional), liabilities assumed (provisional) are as follows:
| Provisional | ||||
| Purchase consideration | Fair Value | |||
| Common stock | $ | |||
| Convertible debt | ||||
| Derivative liabilities | ||||
| Loans payable | ||||
| Loans payable, related parties | ||||
| Lease liabilities | ||||
| Fair value of stock options | ||||
| Fair value of warrants | ||||
| Fair value of Series A Preferred | ||||
| Fair value of Series D Preferred | ||||
| Total provisional purchase price | $ | |||
The fair value of the net assets acquired (provisional) are as follows:
| Allocation of provisional purchase consideration | ||||
| Working capital | $ | |||
| Other assets | ||||
| Contract assets | ||||
| Provisional goodwill | ||||
| Customer lists | ||||
| Tradenames | ||||
| Total provisional enterprise value | $ |
The preliminary allocation of consideration to the assets acquired and liabilities assumed at their estimated acquisition date fair values are considered preliminary and may change within the permissible measurement period, not to exceed one year.
The following shows pro forma results for the three and six month periods ended June 30, 2021 and 2020, as if the transaction had occurred on January 1, 2020.
| Three months ended June 30, 2021 |
Six months ended June 30, 2021 |
Three months ended June 30, 2020 |
Six months ended June 30, 2020 |
|||||||||||||||||||||||||||||
| As Reported | Pro Forma | As Reported | Pro Forma | As Reported | Pro Forma | As Reported | Pro Forma | |||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Net income (loss) attributable to HWN, Inc. common shareholders | $( |
) | $ |
$( |
) | $( |
) | $( |
) | $( |
) | $( |
) | $( |
) | |||||||||||||||||
| Income (loss) per common share, basic and diluted: | ($0.36) | ) | $ |
($0.55) | ) | ($3.90) | ) | |||||||||||||||||||||||||
17
| 4. | Property and Equipment |
Property and equipment as of June 30, 2021 and December 31, 2020 consisted of the following:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Computers and office equipment | $ | $ | ||||||
| Vehicles | ||||||||
| Leasehold improvements | ||||||||
| Software | ||||||||
| Machinery and equipment | ||||||||
| Total | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Equipment, net | $ | $ | ||||||
During the six months ended
June 30, 2021 and 2020, the Company recorded depreciation expense of $
| 5. | Intangible Assets |
Intangible assets as of June 30, 2021 and December 31, 2020 consisted of the following:
| Cost | Accumulated Amortization | Impairment | Net carrying value at June 30, 2021 | Net carrying value at December 31, 2020 | ||||||||||||||||
| Customer relationship and lists | $ | $ | $ | $ | $ | |||||||||||||||
| Trade names | ||||||||||||||||||||
| Total intangible assets | $ | $ | $ | $ | $ | |||||||||||||||
During the six months ended
June 30, 2021 and 2020, the Company recorded amortization expense of $
The estimated future amortization expense for the next five years and thereafter is as follows:
| Year ending December 31, | ||||
| 2021 | ||||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Thereafter | ||||
| Total | $ | |||
18
| 6. | Related Party Transactions |
Exchange of Shares of Common Stock for Series B Preferred Stock
On June 16, 2021, in connection
with the merger transaction discussed in Note 3, Reverse Merger, the Company’s Chief Executive Officer, Mark Porter, exchanged
Loans Payable to Related Parties
As of June 30, 2021 and December 31, 2020, the Company had outstanding the following loans payable to related parties:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Convertible promissory note issued to Keith Hayter, | $ | $ | ||||||
| Convertible promissory note issued to Roger Ponder, | ||||||||
| Promissory note issued to Mark Porter, | ||||||||
| Total | $ | $ | ||||||
| Less: Long-term portion of loans payable to related parties | ( | ) | ||||||
| Loans payable to related parties, current portion | $ | $ | ||||||
The Company’s loans
payable to related parties have an effective interest rate range of
Convertible promissory note, Roger Ponder,
On June 15, 2021, in connection
with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed Spectrum’s convertible promissory note issued
to Roger Ponder. The note was originally issued on August 31, 2020 in the principal amount of $
As of June 30, 2021, the Company
owed $
Convertible promissory note, Keith Hayter, 10% interest, unsecured, matures August 31, 2022
On June 15, 2021, in connection
with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed Spectrum’s convertible promissory note issued
to Keith Hayter. The note was originally issued on August 31, 2020 in the principal amount of $
As of June 30, 2021, the Company
owed $
Promissory note, Mark Porter, 9% interest, unsecured, matures December 15, 2021
On June 15, 2021, the Company
issued a $
As of June 30, 2021, the Company
owed $
19
| 7. | Loans Payable |
As of June 30, 2021 and December 31, 2020, the Company had outstanding the following loans payable:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Promissory note issued to the Mark Munro 1996 Charitable Remainder UniTrust, |
$ | * | $ | |||||
| Promissory note issued to Cornerstone National Bank & Trust, |
||||||||
| Bank of America auto loan, matures on March 31, 2025 | ||||||||
| Ailco equipment financing | - | |||||||
| CARES Act Loans | ||||||||
| Promissory note issued to InterCloud Systems, Inc., non-interest bearing, unsecured and due on demand | ||||||||
| Total | ||||||||
| Less: Long-term portion of loans payable | ( |
) | ( |
) | ||||
| Loans payable, current portion, net of debt discount | $ | $ | ||||||
| * | During the six months ended June 30, 2021, this note was assigned to the Mark Munro 1996 Charitable Remainder UniTrust by Jeffrey Gardner and James Marsh. |
Promissory note issued to Jeffrey Gardner and
James Marsh,
On February 17, 2019, the
Company issued a promissory note to Jeffrey Gardner and James Marsh with an original principal amount of $
On January 1, 2021, this note was assigned by Jeffrey Gardner and James Marsh to the Mark Munro 1996 Charitable Remainder UniTrust.
During the six months ended
June 30, 2021, the Company did not make any cash payments for principal. During the year ended December 31, 2020, the Company made cash
payments for principal of $
As of June 30, 2021, the Company
owed $
Auto loan with Bank of America,
On September 23, 2019, the
Company entered into an auto loan with Bank of America. The total amount financed was $
During the six months ended
June 30, 2021, the Company made cash payments of $
As of June 30, 2021, the Company
owed $
Promissory note issued to Cornerstone National
Bank & Trust,
On October 21, 2019, the Company
issued a promissory note to Cornerstone National Bank & Trust with an original principal amount of $
During the six months ended
June 30, 2021, the Company made cash payments for principal of $
As of June 30, 2021, the Company
owed $
Promissory note issued to InterCloud Systems, Inc., non-interest bearing, unsecured and due on demand
On
June 15, 2021, in connection with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed Spectrum’s promissory
note issued to InterCloud Systems, Inc. The note was originally issued on February 27, 2018 in the principal amount of $
As
of June 30, 2021, the Company owed $
20
CARES Act Loans
On
April 8, 2020 and March 31, 2021, High Wire received $
These loan agreements were pursuant to the CARES Act. The CARES Act was established in order to enable small businesses to pay employees during the economic slowdown caused by COVID-19 by providing forgivable loans to qualifying businesses for up to 2.5 times their average monthly payroll costs. The amount borrowed under the CARES Act is eligible to be forgiven provided that (a) the Company uses the PPP Funds during the eight week period after receipt thereof, and (b) the PPP Funds are only used to cover payroll costs (including benefits), rent, mortgage interest, and utility costs. The amount of loan forgiveness will be reduced if, among other reasons, the Company does not maintain staffing or payroll levels. Principal and interest payments on any unforgiven portion of the PPP Funds will be deferred for six months and will accrue interest at a fixed annual rate of 1.0% and carry a two year maturity date. There is no prepayment penalty on the CARES Act Loan.
On November 4, 2020, High Wire received approval for forgiveness of its $873,400 CARES Act Loan.
On March 30, 2021, JTM received approval for forgiveness of its $250,800 CARES Act Loan. As a result, the Company recorded a gain on PPP loan forgiveness to the unaudited condensed consolidated statement of operations for the six months ended June 30, 2021.
As
of June 30, 2021 and December 31, 2020, the aggregate balance of these loans was $
| 8. | Convertible Debentures |
As of June 30, 2021 and December 31, 2020, the Company had outstanding the following convertible debentures:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Convertible promissory note, Cobra Equities SPV, LLC, |
$ | $ | ||||||
| Convertible promissory note, SCS Capital Partners, LLC, |
||||||||
| Convertible promissory note, SCS Capital Partners, LLC, |
||||||||
| Convertible promissory note, IQ Financial Inc., Tranche 1, |
||||||||
| Convertible promissory note, IQ Financial Inc., Tranche 2, |
||||||||
| Convertible promissory note, Jeffrey Gardner, |
||||||||
| Convertible promissory note, James Marsh, |
||||||||
| Total | ||||||||
| Less: Long-term portion of convertible debentures, net of debt discount | - | |||||||
| Convertible debentures, current portion, net of debt discount | $ | $ | ||||||
The
Company’s convertible debentures have an effective interest rate range of
Convertible
promissory note, Cobra Equities SPV, LLC,
On
June 15, 2021, in connection with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed a convertible promissory
note issued to Cobra Equities SPV, LLC. The note had been previously assigned to Cobra Equities SPV, LLC by another lender. The amount
outstanding as of June 15, 2021 was $
Interest accrues on the note at 18% per annum. The note is convertible into shares of the Company’s common stock at a conversion price equal to 60% of the lowest VWAP for the 10 consecutive trading days immediately preceding the conversion.
The embedded conversion option qualified for derivative accounting and the conversion option qualified for bifurcation under ASC 815-15 “Derivatives and Hedging.”
21
The
Company owed $
Convertible
promissory note, SCS Capital Partners, LLC,
On
June 15, 2021, in connection with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed a convertible promissory
note issued to SCS, LLC. The note had been previously assigned to SCS, LLC by another lender. The amount outstanding as of June 15, 2021
was $
The
interest on the outstanding principal due under the note accrues at a rate of
The embedded conversion option qualified for derivative accounting and the conversion option qualified for bifurcation under ASC 815-15 “Derivatives and Hedging.”
At
June 30, 2021, the Company owed $
Convertible
promissory note, SCS Capital Partners, LLC,
On
June 15, 2021, in connection with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed a convertible promissory
note issued to SCS, LLC. The amount outstanding as of June 15, 2021 was $
The
note was originally issued on December 29, 2020 in the principal amount of $
The embedded conversion option qualified for derivative accounting and the conversion option qualified for bifurcation under ASC 815-15 “Derivatives and Hedging.”
At
June 30, 2021, the Company owed $
Convertible
promissory note, IQ Financial Inc.,
On
June 15, 2021, in connection with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed a convertible promissory
note issued to IQ Financial Inc. The amount outstanding for Tranche 1 as of June 15, 2021 was $
The
note was originally issued on January 27, 2021 in the aggregate principal amount of $
Convertible
promissory note, IQ Financial Inc. Tranche 1,
On
January 28, 2021, Spectrum received the first tranche of the note discussed in the “Convertible promissory note, IQ Financial Inc.,
22
The
interest on the outstanding principal due under the secured note accrues at a rate of
The embedded conversion option qualified for derivative accounting and the conversion option qualified for bifurcation under ASC 815-15 “Derivatives and Hedging.”
At
June 30, 2021, the Company owed $
Convertible
promissory note, IQ Financial Inc. Tranche 2,
On
March 1, 2021, Spectrum received the second tranche of the note discussed in the “Convertible promissory note, IQ Financial Inc.,
The interest on the outstanding principal due under the secured note accrues at a rate of 9% per annum. All principal and accrued but unpaid interest under the secured note is due on January 1, 2023. The holder may begin converting the note into shares of the Company’s common stock six months after issuance when it is Rule 144 eligible. The conversion price is fixed at $0.05 per share.
The embedded conversion option qualified for derivative accounting and the conversion option qualified for bifurcation under ASC 815-15 “Derivatives and Hedging.”
At
June 30, 2021, the Company owed $
Convertible
promissory note, Jeffrey Gardner,
On
June 15, 2021 the Company issued to Jeffrey Gardner an unsecured convertible promissory note in the aggregate principal amount of $
The
interest on the outstanding principal due under the note accrues at a rate of
The embedded conversion option qualified for derivative accounting and the conversion option qualified for bifurcation under ASC 815-15 “Derivatives and Hedging.”
At June 30, 2021, the Company
owed $
Convertible
promissory note, James Marsh,
On June 15, 2021 the Company issued to James Marsh an unsecured convertible promissory note in the aggregate principal amount of $125,000 in connection with the merger transaction discussed in Note 3, Reverse Merger.
The embedded conversion option qualified for derivative accounting and the conversion option qualified for bifurcation under ASC 815-15 “Derivatives and Hedging.”
At June 30, 2021, the Company
owed $
23
Convertible promissory note, Efrat Investments LLC, 10% interest, secured, matures October 5, 2021
On
June 15, 2021, in connection with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed a convertible promissory
note issued to Efrat Investments, LLC. The amount outstanding as of June 15, 2021 was $
The
note was originally issued on September 14, 2020 in the aggregate principal amount of $
The embedded conversion option and warrant qualified for derivative accounting and the conversion option qualified for bifurcation under ASC 815-15 “Derivatives and Hedging.”
During
the period of June 16, 2021 through June 30, 2021, the holder of the note converted $
| 9. | Factor Financing |
On
June 15, 2021, in connection with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed a factor financing
agreement between ADEX and Bay View Funding. The amount outstanding as of June 15, 2021 was $
The
agreement began on February 11, 2020 when, pursuant to an assignment and consent agreement, Bay View Funding purchased and received all
of a previous lender’s right, title, and interest in the loan and security agreement with Spectrum’s wholly-owned subsidiary,
ADEX. In connection with the agreement, Spectrum received $
Under
During
the period of June 16, 2021 through June 30, 2021, the Company paid $
During
the period of June 16, 2021 through June 30, 2021, the Company received an aggregate of $
| 10. | Derivative Liabilities |
On June 15, 2021, in connection
with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed Spectrum’s derivative liabilities. As of June
15, 2021, the derivative liability balance of $
The embedded conversion options
of the convertible debentures described in Note 8, Convertible Debentures, which were assumed as part of the merger transaction, contain
conversion features that qualify for embedded derivative classification. The fair value of the liability is re-measured at the end of
every reporting period and the change in fair value is reported in the statement of operations as a gain or loss on change in fair value
of derivatives. Derivative liabilities also include the fair value of the Company’s share purchase warrants and stock options discussed
in Note 13, Share Purchase Warrants and Stock Options.
24
The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities for the period of June 16, 2021 through June 30, 2021:
| June 30, | ||||
| 2021 | ||||
| Balance at the beginning of the period | $ | |||
| Initial value of derivatives after reverse merger | ||||
| Change in fair value of embedded conversion option | ||||
| Initial value of derivatives upon issuance | ||||
| Conversion of derivative liability | ( |
) | ||
| Fair value of warrant exercises | ( |
) | ||
| Balance at the end of the period | $ | |||
The Company uses Level 3 inputs for its valuation methodology for the embedded conversion option liabilities as their fair values were determined by using Monte-Carlo model based on various assumptions.
Significant changes in any of these inputs in isolation would result in a significant change in the fair value measurement. As required, these are classified based on the lowest level of input that is significant to the fair value measurement. The following table shows the assumptions used in the calculations:
| Expected volatility | Risk-free interest rate | Expected dividend yield | Expected life (in years) | |||||||||||||
| At June 30, 2021 | % | % | % | |||||||||||||
| 11. | Common Stock |
Authorized Shares
The Company has
Issuance of shares pursuant to a Cobra Equities SPV, LLC convertible debenture
On June 16, 2021, the Company
issued
Issuance of shares pursuant to an Efrat Investments LLC convertible debenture
On June 17, 2021, the Company
issued
Issuance of Shares Pursuant to Conversion of Series A Preferred Stock
On June 24, 2021, the Company
issued
Issuance of shares pursuant to a Pawn Funding warrant
On
June 29, 2021, the Company issued
Issuance of convertible debt to HWN shareholders
On June 16, 2021, the Company
issued $
| 12. | Preferred Stock |
On June 15, 2021, in connection
with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed Spectrum’s Series A preferred stock obligations.
Additionally, the holders of Spectrum’s Series B preferred stock transferred their shares to the Company’s Chief Executive
Officer. Lastly, a new class of preferred stock, Series D, was designated and issued. At the time of the merger transaction, the fair
value of the Series A and Series B preferred stock was $
25
See below for a description of each of the Company’s outstanding classes of preferred stock, including historical and current information.
Series A
On
November 15, 2017, Spectrum created one series of the
On October 29, 2018, Spectrum made the first amendment to the Certificate of Designation of its Series A convertible preferred stock. This amendment updated the conversion price to be equal to the greater of 75% of the lowest VWAP during the ten trading day period immediately preceding the date a conversion notice is delivered or $120.00, subject to adjustment for any subdivision or combination of the Company’s outstanding shares of common stock.
On August 16, 2019, Spectrum made the second amendment to the Certificate of Designation of its Series A convertible preferred stock. As a result of this amendment, the Company recorded a deemed dividend in accordance with ASC 260-10-599-2.
On
April 8, 2020, Spectrum made the third amendment to the Certificate of Designation of its Series A preferred stock which lowered the
fixed conversion price and the conversion price floor to $
On
June 18, 2020, Spectrum made the fourth amendment to the Certificate of Designation of its Series A preferred stock, which lowered the
fixed conversion price to $
On
January 27, 2021, Spectrum made the fifth amendment to the Certificate of Designation of its Series A preferred stock which lowered the
fixed conversion price to $
Subsequent to the fifth amendment, the principal terms of the Series A preferred stock shares are as follows:
Voting rights – The Series A preferred stock shares do not have voting rights.
Dividend rights – The holders of the Series A preferred stock shares shall not be entitled to receive any dividends. No dividends (other than those payable solely in common stock) shall be paid on the common stock or any class or series of capital stock ranking junior, as to dividends, to the Series A preferred stock shares during any fiscal year of the Company until there shall have been paid or declared and set apart during that fiscal year for the holders of the Series A preferred stock shares a dividend in an amount per share equal to (i) the number of shares of common stock issuable upon conversion of the Series A preferred stock times (ii) the amount per share of the dividend to be paid on the common stock.
Conversion
rights – The holders of the Series A preferred stock shares have the right to convert each Series A preferred stock share
and all accrued and unpaid dividends thereon shall be convertible at the option of the holder thereof, at any time after the issuance
of such share into fully paid and nonassessable shares of common stock of the Company.
Liquidation rights – Upon the occurrence of any liquidation, each holder of Series A preferred stock shares then outstanding shall be entitled to receive, out of the assets of the Company available for distribution to its stockholders, before any payment shall be made in respect of the common stock, or other series of preferred stock then in existence that is outstanding and junior to the Series A preferred stock shares upon liquidation, an amount per share of Series A preferred stock shares equal to the amount that would be receivable if the Series A preferred stock shares had been converted into common stock immediately prior to such liquidation distribution, plus, accrued and unpaid dividends.
On June 24, 2021, the Company
issued
As a result of the conversion,
on June 30, 2021, the fair value of the Series A Preferred Stock was $
26
In accordance with ASC 480 Distinguishing Liabilities from Equity, the Company has classified the Series A preferred stock shares as temporary equity or “mezzanine.”
Series B
On
April 16, 2018, Spectrum designated
Issue
Price - The stated price for the Series B preferred stock shares shall be $
Redemption - The Series B preferred stock shares are not redeemable.
Dividends - The holders of the Series B preferred stock shares shall not be entitled to receive any dividends.
Preference
of Liquidation - The Corporation’s Series A preferred stock (the “Senior Preferred Stock) shall have a liquidation
preference senior to the Series B preferred stock. Upon any fundamental transaction, liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of the shares of the Series B preferred stock shares shall be entitled, after any distribution
or payment is made upon any shares of capital stock of the Company having a liquidation preference senior to the Series B preferred stock
shares, including the Senior Preferred Stock, but before any distribution or payment is made upon any shares of common stock or other
capital stock of the Company having a liquidation preference junior to the Series B preferred stock shares, to be paid in cash the sum
of $
Voting - The holders of shares of Series B preferred stock shall be voted together with the shares of common stock such that the aggregate voting power of the Series B preferred stock is equal to 51% of the total voting power of the Company.
Conversion - There are no conversion rights.
In accordance with ASC 480 Distinguishing Liabilities from Equity, the Company has classified the Series B preferred stock shares as temporary equity or “mezzanine.”
On June 30, 2021, the
fair value of the Series A Preferred Stock was calculated to be $
Series D
On
June 14, 2021, Spectrum designated
Issue
Price - The stated price for the Series D preferred stock shares shall be $
Redemption - The Series D preferred stock shares are not redeemable.
27
Dividends - The holders of the Series D preferred stock shares shall not be entitled to receive any dividends.
Preference
of Liquidation - Upon any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a “Liquidation”),
the Holders shall (i) first be entitled to receive out of the assets, whether capital or surplus, of the Corporation an amount equal
to $
Conversion
- Beginning ninety (90) days from the date of issuance, all or a portion of the Series D may be converted into Common Stock
at the greater of the Fixed Price and the Average Price (as defined below). To determine the number of shares of Common Stock issuable
upon any such conversion, the product of the number of shares of Series D being converted multiplied by the stated value of each share,
would be divided by the conversion price set forth in the preceding sentence.
Vote
to Change the Terms of or Issuance of Series D - The affirmative vote at a meeting duly called for such purpose, or written consent
without a meeting, of the holders of not less than fifty-one (
On June 30, 2021, the fair value of the Series D Preferred Stock was $1,271,000
In accordance with ASC 480 Distinguishing Liabilities from Equity, the Company has classified the Series B preferred stock shares as temporary equity or “mezzanine.”
| 13. | Share Purchase Warrants and Stock Options |
On
June 15, 2021, in connection with the merger transaction discussed in Note 3, Reverse Merger, the Company assumed Spectrum’s share
purchase warrants and stock options. As of June 15, 2021, the total fair value of Spectrum’s share purchase warrants and stock
options was $
The
total fair value of the Company’s share purchase warrants and stock options was $
28
The following table summarizes the activity of share purchase warrants for the period of June 16, 2021 through June 30, 2021:
| Number of warrants | Weighted average exercise price | Intrinsic value | ||||||||||
| Balance at December 31, 2020 | $ | $ | ||||||||||
| Assumed in merger transaction | ||||||||||||
| Issued | ||||||||||||
| Exercised | ( | ) | ||||||||||
| Expired | ||||||||||||
| Balance at June 30, 2021 | $ | $ | ||||||||||
As of June 30, 2021, the following share purchase warrants were outstanding:
| Number of warrants | Exercise price | Issuance Date | Expiry date | Remaining life | ||||||||
The following table summarizes the activity of stock options for the period of June 16, 2021 through June 30, 2021:
| Number of stock options | Weighted average exercise price | Intrinsic value184 | ||||||||||
| Balance at December 31, 2020 | $ | $ | ||||||||||
| Assumed in merger transaction | ||||||||||||
| Issued | 875,708 | |||||||||||
| Exercised | ||||||||||||
| Expired | ||||||||||||
| Balance at June 30, 2021 | $ | $ | ||||||||||
As of June 30, 2021, the following stock options were outstanding:
| Number of stock options |
Exercise price | Issuance Date | Expiry date | Remaining Life | ||||||||
29
| 14. | Leases |
The Company leases certain office space and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. The depreciable lives of operating lease assets and leasehold improvements are limited by the expected lease term. The Company’s leases generally do not provide an implicit rate, and therefore the Company uses its incremental borrowing rate as the discount rate when measuring operating lease liabilities.
The following table sets forth the operating lease right of use (“ROU”) assets and liabilities as of June 30, 2021 and December 31, 2020:
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Operating lease assets | $ | $ | ||||||
| Operating lease liabilities: | ||||||||
| Current operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
Expense
related to leases is recorded on a straight-line basis over the lease term, including rent holidays. During the three and six months
ended June 30, 2021, the Company recognized operating lease expense of $
Cash
paid for amounts included in the measurement of operating lease liabilities were $
The
operating lease liabilities as of June 30, 2021 reflect a weighted average discount rate of
| Year ending December 31, | ||||
| 2021 | ||||
| 2022 | ||||
| 2023 | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total | $ | |||
30
| 15. | Commitments and Contingencies |
Leases
The Company leases certain of its properties under leases that expire on various dates through 2023. Some of these agreements include escalation clauses and provide for renewal options ranging from one to five years. Leases with an initial term of 12 months or less and immaterial leases are not recorded on the balance sheet (refer to Note 14, Leases, for amounts expensed during the three and six months ended June 30, 2021 and 2020).
Proposed acquisition
On
April 13, 2021, Spectrum, SVC, Inc., Secure Voice Corp. (“SVC”) and Telecom Assets Corp.
The
business being purchased by Spectrum is a wholesale network services provider with network footprint and licenses in the Northeast and
Southeast United States as well as Texas. This network carries VoIP and other traffic for other service providers. A transition services
agreement will be entered into in order to begin the integration process prior to the closing of the transaction. As of June 30, 2021,
HWN has a receivables balance from SVC of $
| 16. | Segment Disclosures |
During the three and six months ended June 30, 2021, the Company had three operating segments including:
| ● | Technology. which is comprised of the ADEX Entities, AWS PR, and High Wire. |
| ● | Construction, which is comprised of JTM and Tropical |
| ● | Spectrum Global Solutions (SGS), which consists of the rest of the Company’s operations. |
During the three and six months ended June 30, 2020, the Company had two operating segments including:
| ● | Technology, comprised of High Wire |
| ● | Construction, comprised of JTM. |
Factors
used to identify the Company’s reportable segments include the organizational structure of the Company and the financial information
available for evaluation by the chief operating decision-maker in making decisions about how to allocate resources and assess performance.
The Company’s operating segments have been broken out based on similar economic and other qualitative criteria.
31
Financial statement information by operating segment for the three and six months ended June 30, 2021 is presented below:
| Three Months Ended June 30, 2021 | Six Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||
| Spectrum Global | Technology | Construction | Total | Spectrum Global | Technology | Construction | Total | |||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | $ | $ | $ | |
|||||||||||||||||||||||
| Operating income (loss) | ( |
) | ( |
) | ( |
( |
) | ( |
) | ( |
||||||||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||
| Total assets as of June 30, 2021 | ||||||||||||||||||||||||||||||||
Geographic information for the three and six months ended and as of June 30, 2021 is presented below:
| Revenues | ||||||||||||
| Three Months Ended June 30, 2021 |
Six Months Ended June 30, 2021 |
Long-lived Assets as of June 30, 2021 |
||||||||||
| Puerto Rico and Canada | $ | $ | $ | |||||||||
| United States | ||||||||||||
| Consolidated total | ||||||||||||
Financial statement information by operating segment for the three and six months ended June 30, 2020 is presented below:
| Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 | |||||||||||||||||||||||
| Technology | Construction | Total | Technology | Construction | Total | |||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Operating (loss) income | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Interest expense | ||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||
| Total assets as of December 31, 2020 | ||||||||||||||||||||||||
Geographic information for the six months ended June 30, 2020 and as of December 31, 2020 is presented below:
| Revenues | ||||||||||||
| Three
Months Ended June 30, 2020 | Six
Months Ended June 30, 2020 | Long-lived Assets as of December 31, 2020 | ||||||||||
| Puerto Rico | $ | $ | $ | |||||||||
| United States | ||||||||||||
| Consolidated total | ||||||||||||
32
| 17. | Subsequent Events |
Issuance of shares pursuant to Cobra Equities SPV, LLC convertible debentures
On
July 15, 2021, the Company issued
On
August 12, 2021, the Company issued
Restricted Cash
On
July 26, 2021, the Company’s restricted cash balance of $
Assignment of portion of convertible debenture
On
August 12, 2021, SCS, LLC assigned $
CARES Act Loan forgiveness
On
August 6, 2021, HWN received approval for forgiveness of its $
Issuance of Shares Pursuant to Conversion of Series A Preferred Stock
On
August 12, 2021, the Company issued
Grant of Stock Options
On
August 18, 2021, the Company granted
33
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plan”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
Our unaudited consolidated financial statements are stated in United States dollars ($) and are prepared in accordance with United States generally accepted accounting principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars. All references to “$” refer to United States dollars and all references to “common stock” refer to the common shares in our capital stock.
Unless specifically set forth to the contrary, when used in this report the terms “we”, “our”, the “Company” and similar terms refer to HWN, Inc., a Nevada corporation, and its consolidated subsidiaries.
The information that appears on our websites at www.HighWireNetworks.com and www.SpectrumGlobalSolutions.com is not part of this report.
Description of Business
We were incorporated in Delaware on January 20, 2017. Our principal offices are located at 980 N. Federal Highway, Suite 304, Boca Raton, Florida 33432. Our telephone number is (407) 512-9102. We are a global provider of managed security, professional services and commercial/industrial electrical solutions delivered exclusively through a channel sales model. Our Overwatch managed security platform-as-a-service offers organizations end-to-end protection for networks, data, endpoints and users via multiyear recurring revenue contracts in this fast-growing technology segment. Please see Note 1 for a further description of the business.
On February 7, 2019, High Wire and JTM Electrical Contractors, Inc. (“JTM”), an Illinois Corporation, entered into an operating agreement through which High Wire owns 50% of JTM.
On June 16, 2021, we completed a merger with Spectrum Global Solutions, Inc. (“Spectrum”). The merger was accounted for as a reverse merger (refer to Note 3, Reverse Merger, for additional detail). At the time of the reverse merger, Spectrum’s subsidiaries included ADEX Corporation, ADEX Puerto Rico LLC, and ADEX Telecom, Inc., (collectively “ADEX”), AW Solutions Puerto Rico, LLC (“AWS PR”), and Tropical Communications, Inc. (“Tropical”).
34
We provide the following categories of offerings to our customers:
| ● | Technology Solutions: We provide a comprehensive technology platform and array of professional services and solutions to our clients that are applicable across multiple platforms and technologies to include but not limited to: Wi-Fi , Wi-Max and wide-area networks, fiber networks (ISP/OSP), DAS networks (iDAS/oDAS), small cell distributed networks, public safety networks and enterprise networks for incumbent local exchange carriers (ILECs), telecommunications original equipment manufacturers (OEMs), cable broadband multiple system operators (MSOs), tower and network aggregators, utility entities, government and enterprise customers. Our services teams support the deployment of new networks and technologies, as well as expand, maintain and decommission existing networks. |
| ● | Construction Solutions: We are also a global provider of managed security, professional services and commercial/industrial electrical solutions delivered exclusively through a channel sales model. | |
| ● | Security: High Wire’s Overwatch managed security platform-as-a-service offers organizations end-to-end protection for networks, data, endpoints and users via multiyear recurring revenue contracts in this fast-growing technology segment. |
The Technology Solutions division offers carriers, service providers and enterprise customers professional contracting services, to include: infrastructure audits; site acquisition; architectural, structural and civil design and analysis; construction management; construction; installation; warehousing and logistics; maintenance services, that support the build-out and upgrade and operation of some of the most advanced networks, small cell, Wi-Fi, fiber and distributed antenna system (DAS) networks. We believe the expansion and migration of these next-generation networks, our long-term relationships supported by multiyear Master Service Agreements (MSA) and multi-year service contracts with major wireless, commercial wireline and wireless operators, DAS operators, tower companies, original equipment manufacturers (OEM’s) and prime contractor/project management organization provides us a significant opportunity as a long term leading and well respected industry leader in this marketplace.
Our Technology Solutions division is supported by its subsidiaries: AW Solutions Puerto Rico, LLC and Tropical Communications, Inc. (collectively known as “AWS” or the “AWS Entities”) and ADEX CORP, ADEX Puerto Rico LLC, and ADEX Canada (collectively known as “ADEX” or the “ADEX Entities”). The AWS Entities provide a broad range of professional services and solutions to top tier communication carriers and Fortune 1000 enterprise customers.
Our Operating Units
Our company is comprised of the following:
| ● | Technology Solutions: The Technology Solutions group is composed of the following: High Wire is a global provider of managed security, professional services delivered exclusively through a channel sales model. ADEX is a leading outsource provider of engineering and installation services, staffing solutions and other services which include consulting to the telecommunications and technology industry, service providers and enterprise customers domestically and internationally. |
| ● | High Wire’s Overwatch managed security platform-as-a-service offers organizations end-to-end protection for networks, data, endpoints and users via multiyear recurring revenue contracts in this fast-growing technology segment. | |
| ● | Construction Solutions: JTM is a national provider of commercial/industrial electrical solutions delivered exclusively through a channel sales model. AWS PR provides in-field design, computer aided design and drawing services (CADD). Tropical provides fiber and DAS deployments for facilities and outdoor environments. |
| ● | The Spectrum Entities. ADEX is a leading outsource provider of engineering and installation services, staffing solutions and other services which include consulting to the telecommunications and technology industry, service providers and enterprise customers domestically and internationally. ADEX seeks to assist its customers throughout the entire life cycle of a network deployment via its comprehensive suite of managed solutions that include consulting and professional staffing services to service providers as well as enterprise customers, network implementation, network installation, network upgrades, rebuilds, design, engineering and integration wireless network support, wireless network integration, wireless and wireline equipment installation and commissioning, wireless site development and construction management, network engineering, project management, disaster recovery design engineering and integration. The AWS Entities are professional, multi-service line, telecommunications infrastructure company that provide outsourced services to the wireless and wireline industry. The AWS Entities services include network systems design, site acquisition services, asset audits, architectural and engineering services, program management, construction management and inspection, construction, installation, maintenance and other technical services. The AWS Entities provide in-field design, computer aided design and drawing services (CADD), fiber and DAS deployments for facilities and outdoor environments. |
35
Impact of the COVID-19 Pandemic
The extent to which the coronavirus (“COVID-19”) outbreak and measures taken in response thereto impact our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted.
Global health concerns relating to the COVID-19 outbreak have been weighing on the macroeconomic environment, and the outbreak has significantly increased economic uncertainty. Risks related to consumers and businesses lowering or changing spending, which impact domestic and international spend. The outbreak has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and business shutdowns. These measures have not only negatively impacted consumer spending and business spending habits, they have also adversely impacted and may further impact our workforce and operations and the operations of its customers, suppliers and business partners. These measures may remain in place for a significant period of time and they are likely to continue to adversely affect our business, results of operations and financial condition.
The spread of COVID-19 has caused us to modify our company’s business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus or otherwise be satisfactory to government authorities.
The extent to which the COVID-19 outbreak impacts our business, results of operations and financial condition will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume. Even after the COVID-19 outbreak has subsided, we may continue to experience materially adverse impacts to our business as a result of its global economic impact, including any recession that has occurred or may occur in the future.
There are no comparable recent events which may provide guidance as to the effect of the spread of COVID-19 and a global pandemic, and, as a result, the ultimate impact of the COVID-19 outbreak or a similar health epidemic is highly uncertain and subject to change. We do not yet know the full extent of the impacts on our business, our operations or the global economy as a whole. However, the effects could have a material impact on our results of operations, and we will continue to monitor the COVID-19 situation closely. As of May 2021, multiple variants of the COVID-19 virus are circulating globally that are highly transmissible, and there is uncertainty around vaccine effectiveness on the new strains of the virus. Uncertainty around vaccine distribution, supply and effectiveness will impact when the negative economic effects as a result of COVID-19 will abate or end and the timing of such recovery may affect our financial condition.
Results of Operations for the Three - Month Periods Ended June 30, 2021 and June 30, 2020
Our operating results for the three - month periods ended June 30, 2021 and 2020 are summarized as follows:
| Three Months Ended | ||||||||||||
| June 30, 2021 | June 30, 2020 | Difference | ||||||||||
| Revenue | $ | 7,794,068 | $ | 3,134,899 | $ | 4,659,169 | ||||||
| Operating expenses | 8,324,436 | 3,673,411 | 4,651,025 | |||||||||
| Other income (expense) | (-1,129.365 | ) | (38,929 | ) | (1,090,436 | ) | ||||||
| Non-controlling interest | (291,857 | ) | (19,429 | ) | (272,428 | ) | ||||||
| Net (loss) | (1,951,590 | ) | (596,870 | ) | (1,354,720 | ) | ||||||
Revenues
Our revenue increased from $3,134,899 for the three months ended June 30, 2020 to $7,794,068 for the three months ended June 30, 2021. The increase is primarily related to increases in our electrical contracting division along with the addition of the Spectrum entities, which accounted for $992,782 in revenue from the date of acquisition through June 30, 2021. We expect revenue to increase with the addition of the Spectrum entities.
Additionally, our operations, as well as the operations of many of our customers, were impacted by the ongoing COVID-19 pandemic, which negatively impacted our revenues in 2020. We anticipate that as the COVID-19 restrictions are removed, revenues should begin to increase.
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A significant portion of our services are performed under master service agreements and other arrangements with customers that extend for periods of one or more years. We are currently party to numerous master service agreements, and typically have multiple agreements with each of our customers. Master Service Agreements (MSAs) generally contain customer-specified service requirements, such as discreet pricing for individual tasks. To the extent that such contracts specify exclusivity, there are often a number of exceptions, including the ability of the customer to issue work orders valued above a specified dollar amount to other service providers, perform work with the customer’s own employees and use other service providers when jointly placing facilities with another utility. In most cases, a customer may terminate an agreement for convenience with written notice. The remainder of our services are provided pursuant to contracts for specific projects. Long-term contracts relate to specific projects with terms in excess of one year from the contract date. Short-term contracts for specific projects are generally three to four months in duration. The percentage of revenue from long-term contracts varies between periods depending on the mix of work performed under our contracts.
Operating Expenses
During the three months ended June 30, 2021, our operating expenses were $8,324,436, compared to operating expenses of $3,673,471 for the same period of 2020. The increase of $4,651,025 is primarily related to a $3,268,722 increase in cost of revenues as a result of the increase in sales as discussed above, combined with stock compensation expense of $729,292.
Other Expense
During the three months ended June 30, 2021, we had other expense of $1,129,365, compared to other expense of $ 38,929 for the same period of 2020. The increase of $1,090,436 is primarily related to an increase a loss on change in fair value of derivatives of $1,576,315 which was offset by forgiveness of Paycheck Protection Program loans of $250,800 and management fees of $208,668.
Net Loss
For the three months ended June 30, 2021, we incurred a net loss of $1,951,590, compared to a net loss of $596,870 for the same period in 2020.
Results of Operations for the Six - Month Periods Ended June 30, 2021 and June 30, 2020
Our operating results for the six month periods ended June 30, 2021 and 2020 are summarized as follows:
| Six Months Ended | ||||||||||||
| June 30, 2021 | June 30, 2020 | Difference | ||||||||||
| Revenue | $ | 12,867,904 | $ | 8,744,510 | $ | 4,123,394 | ||||||
| Operating expenses | 13,201,176 | 9,062,228 | 4,138,948 | |||||||||
| Other expense | (922,659 | ) | (72,724 | ) | (849,935 | ) | ||||||
| Non-controlling interest | (795,235 | ) | (127,857 | ) | (667,378 | ) | ||||||
| Net loss | (2,051,165 | ) | (518,229 | ) | (1,532,866 | ) | ||||||
Revenues
Our revenue increased from $8,744,510 for the six months ended June 30, 2020 to $12,867,904 for the six months ended June 30, 2021. The increase is primarily related to increases in our electrical contracting division along with the addition of the Spectrum entities, which accounted for $992,782 in revenue from the date of acquisition through June 30, 2021. We expect our revenue to continue to increase with the addition of the Spectrum entities going forward.
Additionally, our operations, as well as the operations of many of our customers, were impacted by the ongoing COVID-19 pandemic, which negatively impacted our revenues in 2020. We anticipate that as the COVID-19 restrictions are removed, revenues should begin to increase.
A significant portion of our services are performed under master service agreements and other arrangements with customers that extend for periods of one or more years. We are currently party to numerous master service agreements, and typically have multiple agreements with each of our customers. Master Service Agreements (MSAs) generally contain customer-specified service requirements, such as discreet pricing for individual tasks. To the extent that such contracts specify exclusivity, there are often a number of exceptions, including the ability of the customer to issue work orders valued above a specified dollar amount to other service providers, perform work with the customer’s own employees and use other service providers when jointly placing facilities with another utility. In most cases, a customer may terminate an agreement for convenience with written notice. The remainder of our services are provided pursuant to contracts for specific projects. Long-term contracts relate to specific projects with terms in excess of one year from the contract date. Short-term contracts for specific projects are generally three to four months in duration. The percentage of revenue from long-term contracts varies between periods depending on the mix of work performed under our contracts.
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Operating Expenses
During the six months ended June 30, 2021, our operating expenses were $13,201,176, compared to operating expenses of $9,662,228 for the same period of 2020. The increase of $4,134,948 is primarily related to a $2,924,679 increase in cost of revenues as a result of the increase in sales as discussed above, combined with stock compensation expense of $729,292.
Other Expense
During the six months ended June 30, 2021, we had other expense of $922,659, compared to other expense of $72,724 for the same period of 2020. The increase of $849,935 is primarily related to an increase in loss on change in fair value of derivatives of $1,576,315 which was offset by forgiveness of Paycheck Protection Program loans of $250,800 and management fees of $208,668.
Net Loss
For the six months ended June 30, 2021, we incurred a net loss of $2,051,165, compared to a net loss of $518,999 for the same period in 2020.
Liquidity and Capital Resources
As of June 30, 2021, our total current assets were $11,787,222 and our total current liabilities were $22,290,399, resulting in a working capital deficit of $10,503,177, compared to working capital of $692,598 as of December 31, 2020.
We suffered recurring losses from operations. The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional capital as needed. In this regard, we have historically raised additional capital through equity offerings and loan transactions.
Cash Flows
| Six months ended | ||||||||
| June 30, | ||||||||
| (dollars amounts in thousands) | 2021 | 2020 | ||||||
| Net cash provided by (used) in operating activities | $ | (853,087 | ) | $ | 548,999 | |||
| Net cash provided by (used in) investing activities | 2,125,707 | (80,320 | ) | |||||
| Net cash provided by financing activities | 486,159 | 616,025 | ||||||
| Change in cash | $ | 1,758,779 | $ | 1,084,704 | ||||
For the six months ended June 30, 2021, cash and restricted cash increased $1,758,779, compared to an increase in cash and restricted cash of $1,084,704 for the same period of 2020. The increase was primarily related to the cash provided by investing activities of $2,125,707 during the six months ended June 30, 2021. Of that amount, $2,155,707 was acquired in the reverse merger with Spectrum. $2,000,000 of these funds are included in restricted cash on the unaudited condensed consolidated balance sheet as of June 30, 2021. During the six - month period ended June 30, 2020, we received $1,124,200 of CARES Act loans.
As of June 30, 2021, we had cash and restricted cash of $4,195,227 compared to $436,448 as of December 31, 2020.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements.
Inflation
The effect of inflation on our revenue and operating results has not been significant.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures.
Our management, with the participation of our Chief Executive Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Based on management’s evaluation, our Chief Executive Officer concluded that, as a result of the material weaknesses described below, as of June 30, 2021, our disclosure controls and procedures are not designed at a reasonable assurance level and are not effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate, to allow timely decisions regarding required disclosure. The material weaknesses, which relate to internal control over financial reporting, that were identified are:
| a) | Due to our small size, we do not have a proper segregation of duties in certain areas of our financial reporting process. The areas where we have a lack of segregation of duties include cash receipts and disbursements, approval of purchases and approval of accounts payable invoices for payment. This control deficiency, which is pervasive in nature, results in a reasonable possibility that material misstatements of the consolidated financial statements will not be prevented or detected on a timely basis; |
| b) | we do not have any formally adopted internal controls surrounding our cash and financial reporting procedures; and |
| c) | the lack of the quantity of resources to implement an appropriate level of review controls to properly evaluate the completeness and accuracy of transactions entered into by our company. |
We are committed to improving our financial organization. In addition, we will look to increase our personnel resources and technical accounting expertise within the accounting function to resolve non-routine or complex accounting matters.
Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or operating results.
Item 1A. Risk Factors
As a “smaller reporting company,” we are not required to provide the information required by this Item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Since the beginning of the three - month period ended June 30, 2021, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in an annual report on Form 10-K, in a quarterly report on Form 10-Q or in a current report on Form 8-K, or are listed below.
On June 16, 2021, we issued 1,086,917 shares of our common stock to Cobra Equities SPV, LLC upon the conversion of $116,000 of principal and $2,300 of accrued interest pursuant to a convertible debenture.
On June 17, 2021, we issued 660,000 shares of our common stock to Efrat Investments LLC upon the conversion of $33,000 of principal pursuant to a convertible debenture.
On June 24, 2021, we issued 985,651 shares of our common stock to Dominion Capital upon the conversion of 96,101 shares of Series A preferred stock with a stated value of $1 per share.
On June 29, 2021, we issued 69,281 shares of our common stock to Pawn Funding upon the cashless exercise of a warrant.
The above issuances of our securities were not registered under the Securities Act and the Company relied on an exemption from registration provided by rule 506 of Regulation D promulgated under the Securities Act for such issuances.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| HWN, INC. | ||
| Date: August 27, 2021 | By: | /s/ Mark W. Porter |
| Mark W. Porter | ||
| Chief Executive Officer | ||
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| HWN, INC. | ||
| Date: August 27, 2021 | By: | /s/ Daniel J. Sullivan |
| Daniel J. Sullivan | ||
| Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer | ||
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