High Wire Networks, Inc 10-Q for FY2024 Q3
High Wire Networks, Inc. (HWNI)
About this 10-Q
High Wire Networks, Inc filed this 10-Q on November 22, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $2.05M
- up 3.9% from $1.97M a year earlier
- Net loss
- $1.67M
- compared with a net loss of $3.55M a year earlier
- Diluted EPS
- -$0.01
- compared with -$0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
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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 | 37 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 41 |
| Item 4. | Controls and Procedures | 41 |
| PART II - OTHER INFORMATION | 42 | |
| Item 1. | Legal Proceedings | 42 |
| Item 1A. | Risk Factors | 42 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 42 |
| Item 3. | Defaults Upon Senior Securities | 42 |
| Item 4. | Mine Safety Disclosures | 42 |
| Item 5. | Other Information | 42 |
| Item 6. | Exhibits | 43 |
| SIGNATURES | 44 | |
i
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
The unaudited interim condensed 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.
High Wire Networks, Inc.
1
High Wire Networks, Inc.
Condensed consolidated balance sheets
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowances of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| 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 | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Contract liabilities | ||||||||
| Current portion of loans payable to related parties, net of debt discount of $ | ||||||||
| Current portion of loans payable, net of debt discount of $ | ||||||||
| Current portion of convertible debentures, net of debt discount of $ | ||||||||
| Factor financing | ||||||||
| Warrant liabilities | ||||||||
| Operating lease liabilities, current portion | ||||||||
| Current liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities: | ||||||||
| Loans payable to related parties, net of current portion, net of debt discount of $ | ||||||||
| Loans payable, net of current portion | ||||||||
| Convertible debentures, net of current portion, net of debt discount of $ | ||||||||
| Operating lease liabilities, net of current portion | ||||||||
| Total long-term liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 15) | ||||||||
| Series B preferred stock; $ | ||||||||
| Total mezzanine equity | ||||||||
| Stockholders’ equity (deficit): | ||||||||
| Common stock; $ | ||||||||
| Series D preferred stock; $ | ||||||||
| Series E preferred stock; $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ||||||
(The accompanying notes are an integral part of these unaudited condensed consolidated financial statements)
2
High Wire Networks, Inc.
Condensed consolidated statements of operations
(Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Cost of revenue | ||||||||||||||||
| Depreciation and amortization | ||||||||||||||||
| Salaries and wages | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of debt discounts | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on change in fair value of warrant liabilities | ||||||||||||||||
| Gain (loss) on settlement of debt | ( | ) | ||||||||||||||
| Exchange loss | ( | ) | ( | ) | ( | ) | ||||||||||
| Warrant expense | ( | ) | ||||||||||||||
| Gain on extinguishment of warrant liabilities | ||||||||||||||||
| Penalty fee | ( | ) | ||||||||||||||
| Liquidated damages related to escrow shares | ( | ) | ||||||||||||||
| Gain on change in fair value of derivative liabilities | ||||||||||||||||
| Gain on extinguishment of derivatives | ||||||||||||||||
| Other (expense) income | ( | ) | ( | ) | ||||||||||||
| Total other (expense) income | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss from continuing operations before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ||||||||||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) from discontinued operations, net of tax | ( | ) | ||||||||||||||
| Net (loss) income attributable to High Wire Networks, Inc. common shareholders | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Income (loss) per share attributable to High Wire Networks, Inc. common shareholders, basic: | ||||||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) from discontinued operations, net of taxes | $ | $ | $ | $ | ( | ) | ||||||||||
| Net income (loss) per share | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Income (loss) per share attributable to High Wire Networks, Inc. common shareholders, diluted: | ||||||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) from discontinued operations, net of taxes | $ | $ | $ | $ | ( | ) | ||||||||||
| Net income (loss) per share | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
(The accompanying notes are an integral part of these unaudited condensed consolidated financial statements)
3
High Wire Networks, Inc.
Condensed consolidated statements of stockholder’s equity (deficit)
(Unaudited)
| For the nine months ended September 30, 2024 | ||||||||||||||||||||||||||||||||||||
| Common stock | Series D preferred stock | Series E preferred stock | Additional paid-in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | $ | Shares | $ | Shares | $ | capital | deficit | Total | ||||||||||||||||||||||||||||
| Balances, January 1, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Issuance of common stock and warrants upon issuance of debt | - | - | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Ending balance, March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Issuance of warrants | - | - | - | |||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Net income for the period | - | - | - | |||||||||||||||||||||||||||||||||
| Ending balance, June 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Issuance of shares to employee | - | - | ||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Ending balance, September 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| For the nine months ended September 30, 2023 | ||||||||||||||||||||||||||||||||||||
| Common stock | Series D preferred stock | Series E preferred stock | Additional paid-in | Accumulated | ||||||||||||||||||||||||||||||||
| Shares | $ | Shares | $ | Shares | $ | capital | deficit | Total | ||||||||||||||||||||||||||||
| Balances, January 1, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||
| Issuance of common stock upon conversion of Series A preferred stock | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock pursuant to PIPE transaction | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of Series D preferred stock | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock to third-party vendors | - | - | ||||||||||||||||||||||||||||||||||
| Reclassification of Series D and E preferred stock to permanent equity | - | |||||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Net income for the period | - | - | - | |||||||||||||||||||||||||||||||||
| Ending balance, March 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Issuance of common stock pursuant to PIPE transaction | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of Series D preferred stock | ( | ) | ( | ) | - | |||||||||||||||||||||||||||||||
| Issuance of common stock upon conversion of Series E preferred stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||
| Cancelation of Series E preferred stock shares | - | - | ( | ) | ||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Liquidated damages related to escrow shares | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Ending balance, June 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Issuance of warrants in connection with convertible debt | - | - | - | |||||||||||||||||||||||||||||||||
| Stock-based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Net loss for the period | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Ending balance, September 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
(The accompanying notes are an integral part of these unaudited condensed consolidated financial statements)
4
High Wire Networks, Inc.
Condensed consolidated statements of cash flows
(Unaudited)
| For the nine months ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: | ||||||||
| Amortization of discounts on convertible debentures and loans payable | ||||||||
| Depreciation and amortization | ||||||||
| Amortization of operating lease right-of-use assets | ||||||||
| Stock-based compensation related to stock options | ||||||||
| Stock-based compensation related to employee stock issuance | ||||||||
| Gain on change in fair value of warrant liabilities | ( | ) | ||||||
| Warrant expense | ||||||||
| Penalty fee | ||||||||
| Loss on settlement of debt | ||||||||
| Gain on extinguishment of warrant liabilities | ( | ) | ||||||
| Gain on change in fair value of derivative liabilities | ( | ) | ||||||
| Stock-based compensation related to third-party vendors | ||||||||
| Gain on extinguishment of derivatives | ( | ) | ||||||
| Liquidated damages related to escrow shares | ||||||||
| Loss on disposal of subsidiary | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| Contract liabilities | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities of continuing operations | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities of discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Cash received from sale of technology services business unit | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Cash received in connection with disposal of JTM | ||||||||
| Cash received in connection with sale of AWS PR assets | ||||||||
| Net cash provided by investing activities | ||||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from loans payable to related parties | ||||||||
| Repayments of loans payable to related parties | ( | ) | ||||||
| Proceeds from loans payable | ||||||||
| Repayments of loans payable | ( | ) | ( | ) | ||||
| Proceeds from convertible debentures | ||||||||
| Repayments of convertible debentures | ( | ) | ||||||
| Proceeds from factor financing | ||||||||
| Repayments of factor financing | ( | ) | ( | ) | ||||
| Securities Purchase Agreement proceeds | ||||||||
| Net cash (used in) provided by financing activities of continuing operations | ( | ) | ||||||
| Net cash used in financing activities of discontinued operations | ( | ) | ||||||
| Net cash (used in) provided by financing activities | ( | ) | ||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| 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: | ||||||||
| Original issue discounts on loans payable and convertible debentures | $ | $ | ||||||
| Issuance of common stock and warrants upon issuance of debt | $ | $ | ||||||
| Issuance of common stock to employee | $ | $ | ||||||
| Common stock issued for conversion of Series A preferred stock | $ | $ | ||||||
| Common stock issued for conversion of Series D preferred stock | $ | $ | ||||||
| Common stock issued for conversion of Series E preferred stock | $ | $ | ||||||
| Right-of-use asset obtained in exchange for lease liability | $ | $ | ||||||
(The accompanying notes are an integral part of these unaudited condensed consolidated financial statements)
5
High Wire Networks, Inc.
Notes to the unaudited condensed consolidated financial statements
September 30, 2024
| 1. | Organization |
HWN, Inc., (d/b/a High Wire
Network Solutions, Inc.) (“HWN” or the “Company”) was incorporated in Delaware on
HWN and JTM Electrical Contractors,
Inc. (“JTM”), an Illinois Corporation, entered into an operating agreement through which High Wire owned
On June 16, 2021, the Company completed a merger with Spectrum Global Solutions, Inc. On January 7, 2022, Spectrum Global Solutions, Inc. legally changed its name to High Wire Networks, Inc. (“High Wire” or, collectively with HWN, “the Company”). The merger was accounted for as a reverse merger. At the time of the reverse merger, High Wire’s subsidiaries included ADEX Corporation, ADEX Puerto Rico LLC, ADEX Canada, 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”). For accounting purposes, HWN is the surviving entity.
High Wire 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, High Wire reincorporated in the province of British Columbia, Canada.
On November 4, 2021, the Company closed on its acquisition of Secure Voice Corp (“SVC”). The closing of the acquisition was facilitated by a senior secured promissory note.
On February 15, 2022, HWN
sold its
On March 6, 2023, HWN divested the ADEX Entities. The divestiture of the ADEX Entities qualified for discontinued operations treatment (refer to Note 18, Discontinued Operations, for additional detail).
On July 31, 2023, the Company paused the operations of its AWS PR subsidiary and sold off certain assets.
On August 4, 2023, the Company
formed a new entity – incorporated as Overwatch Cyberlab, Inc. (“OCL”) – which is
On November 3, 2023, the Company paused the operations of its Tropical subsidiary.
On June 27, 2024, HWN entered into an asset purchase agreement with INNO4 LLC (the “Buyer”) pursuant to which the Buyer agreed to purchase certain assets of HWN related to the Company’s technology services business unit (refer to Note 3, Recent Subsidiary Activity, for additional detail). The assets related to the technology services business unit qualified for discontinued operations treatment. Additionally, the asset purchase agreement includes a non-compete which precludes the Company from operating businesses similar to that of AWS PR and Tropical. As a result, both subsidiaries also now qualify for discontinued operations treatment. (refer to Note 18, Discontinued Operations, for additional detail).
The Company’s SVC subsidiary 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.
6
| 2. | Significant Accounting Policies |
Condensed Financial Statements
In the opinion of management, the accompanying unaudited condensed consolidated 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.
Basis of Presentation/Principles of Consolidation
These unaudited condensed consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States. These unaudited condensed consolidated financial statements include the accounts of the Company as well as High Wire and its subsidiaries, SVC and OCL. All subsidiaries are wholly-owned.
All inter-company balances and transactions have been eliminated.
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.
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 September 30, 2024 and December 31, 2023 was $
7
Property and Equipment
Property and equipment are
stated at cost.
| Computers and office equipment | ||
| Vehicles | ||
| Leasehold improvements | ||
| Software | ||
| Machinery and equipment |
Goodwill
The Company has two reporting units, HWN and SVC, and tests its goodwill for impairment at least annually on December 31 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 impairment charges during the three and nine months ended September 30, 2024 and 2023.
In connection with the sale
of HWN’s technology services business unit discussed in Note 3, Recent Subsidiary Activity, the Company assigned $
Intangible Assets
At September 30, 2024 and
December 31, 2023, definite-lived intangible assets consisted 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 impairment charges during the three and nine months ended September 30, 2024 and 2023.
The sale of HWN’s technology
services business unit discussed in Note 3, Recent Subsidiary Activity included all of HWN’s remaining intangible assets. The net
book value at the time of the sale of $
8
Long-lived Assets
In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 impairment charges during the three and nine months ended September 30, 2024 and 2023.
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 United States, in various states within the United States and the Commonwealth of Puerto Rico. The Company determines its 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 2020 to 2023. 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 the 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 740, “Income Taxes” 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 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.
Prior to 2021, the Company had elected to be treated as a Subchapter S Corporation for income tax purposes, and as such recognized no income tax liability or benefit.
9
Revenue Recognition
The Company recognizes revenue based on the five criteria for revenue recognition established under ASC 606, “Revenue from Contracts with Customers”: 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.
Contract Types
The Company’s contracts fall under two main types: 1) fixed-price and 2) time-and-materials. 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 on an as needed basis 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.
Revenue Service Types
The following is a description of the Company’s revenue service types:
| ● | Managed Services are services provided to the clients where the Company monitors, maintains, handles break/fix issues and protects customer networks. The Managed Services Segment encompasses all of the Company’s recurring revenue businesses including Overwatch Managed Security, all network managed services, all managed services performed under a Statement of Work (SoW), and the Company’s SVC revenue. |
Disaggregation of Revenues
The Company disaggregates its revenue by operating segment (refer to Note 16, Segment Disclosures, for additional information).
Contract Assets and Liabilities
Contract assets would include costs and services incurred on contracts with open performance obligations. These amounts would be included in contract assets on the unaudited condensed consolidated balance sheets. At September 30, 2024 and December 31, 2023, the Company did not have any contract assets.
Contract liabilities include
payment received for incomplete performance obligations and are included in contract liabilities on the unaudited condensed consolidated
balance sheets. At September 30, 2024 and December 31, 2023, contract liabilities totaled $
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, direct materials, insurance claims and other direct costs.
10
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”, 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 grant date 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, at either the grant date 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 Accounting Standards Update (“ASU”) 2018-07. In accordance with ASU 2016-09, the Company accounts for forfeitures as they occur.
The Company uses certain pricing models 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, which is generally the vesting period.
(Loss) Income per Share
The Company computes (loss)
income per share in accordance with ASC 260, “Earnings per Share” which requires presentation of both basic and diluted
earnings per share (“EPS”) on the face of the income statement. Basic EPS is computed by dividing the (loss) income 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 conversion of convertible debentures or preferred stock and the exercise of stock options or
warrants. Diluted EPS excludes dilutive potential shares if their effect is anti-dilutive. As of September 30, 2024 and December 31, 2023,
respectively, the Company had
Leases
ASC 842, “Leases” 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. Certain 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.
11
Going Concern Assessment
Management assesses going concern uncertainty in the Company’s unaudited condensed 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 condensed 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 generated operating
losses in the three and nine months ended September 30, 2024 and 2023, and High Wire has historically generated operating 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 cash flow from operations. As of and for the nine months ended September 30, 2024, the Company had an operating
loss of $
The accompanying unaudited condensed 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, its forecasts of operations for one year from the date of the filing of the unaudited condensed 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. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of management to raise additional equity capital through private and public offerings of its common stock, and the attainment of profitable operations. These unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Management requires additional funds over the next twelve months to fully implement its business plan. Management is currently seeking additional financing through the sale of equity and from borrowings from private lenders to cover its operating expenditures. There can be no certainty that these sources will provide the additional funds required for the next twelve months.
Recent Accounting Pronouncements
In November 2023, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for the Company’s annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topics 740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for the Company’s annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on its financial statement disclosures.
Any other new accounting pronouncements recently issued, but not yet effective, have been reviewed and determined to be not applicable or were related to technical amendments or codification. As a result, the adoption of such new accounting pronouncements, when effective, is not expected to have a material effect on the Company’s financial position or results of operations.
12
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable. 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. As of September 30, 2024, there were no cash balances in excess of provided insurance.
The Company provides credit
to customers on an uncollateralized basis after evaluating client creditworthiness. For the nine months ended September 30, 2024 and 2023,
no customers accounted for
The Company’s customers are all located within the domestic United States of America
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;
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. Warrant 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 nine months ended September 30, 2024 and 2023. 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.
| Total fair value at September 30, 2024 | Quoted prices in active markets (Level 1) | Quoted prices in active markets (Level 2) | Quoted prices in active markets (Level 3) | |||||||||||||
| Description: | ||||||||||||||||
| Warrant liabilities (1) | $ | $ | $ | $ | ||||||||||||
| Total fair value at December 31, 2023 | Quoted prices in active markets (Level 1) | Quoted prices in active markets (Level 2) | Quoted prices in active markets (Level 3) | |||||||||||||
| Description: | ||||||||||||||||
| Warrant liabilities (1) | $ | $ | $ | $ | ||||||||||||
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, Warrant Liabilities, for additional information.
13
Warrant Liabilities
The Company accounts for its
liability-classified warrants in accordance with ASC 480, “Distinguishing Liabilities from Equity” and all warrant
liabilities are reflected as liabilities at fair value in the balance sheet. The Company uses estimates of fair value to value its warrant
liabilities. 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 September 30, 2024 and
December 31, 2023, respectively, the Company had warrant liabilities 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.
| 3. | Recent Subsidiary Activity |
HWN Asset Purchase Agreement
On June 27, 2024, HWN entered
into an asset purchase agreement with INNO4 LLC pursuant to which INNO4 LLC agreed to purchase certain assets of HWN related to the Company’s
technology services business unit, for a base purchase price equal to $
Upon closing, (i) $
The Company considered whether or not this transaction would cause the sold assets to qualify for discontinued operations treatment. The Company determined that the sale of the assets qualifies for discontinued operations treatment as of September 30, 2024 due to the size of their operations and because the sale represents a strategic shift (refer to Note 18, Discontinued Operations, for additional detail).
In connection with the sale,
the Company recorded a gain on sale of business unit of $
14
Additionally, the asset purchase
agreement includes a non-compete which precludes the Company from operating businesses similar to that of AWS PR and Tropical. As a result,
both subsidiaries also now qualify for discontinued operations treatment as of September 30, 2024 (refer to Note 18, Discontinued Operations,
for additional detail). The operations of AWS PR and Tropical had net loss and net income of $
| 4. | Property and Equipment |
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Computers and office equipment | $ | $ | ||||||
| Vehicles | ||||||||
| Leasehold improvements | ||||||||
| Software | ||||||||
| Machinery and equipment | ||||||||
| Total | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Equipment, net | $ | $ | ||||||
During the nine months ended
September 30, 2024 and 2023, the Company recorded depreciation expense of $
| 5. | Intangible Assets |
| Cost | Accumulated Amortization | Net carrying value at September 30, 2024 | Net carrying value at December 31, 2023 | |||||||||||||
| Customer relationship and lists | $ | $ | ( | ) | $ | $ | ||||||||||
| Trade names | ( | ) | ||||||||||||||
| Total intangible assets | $ | $ | ( | ) | $ | $ | ||||||||||
During the nine months ended
September 30, 2024 and 2023, the Company recorded amortization expense of $
| Year ending December 31, | ||||
| 2024 | $ | |||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| 2028 | ||||
| Thereafter | ||||
| Total | $ | |||
15
| 6. | Related Party Transactions |
Loans Payable to Related Parties
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Promissory note issued to Mark Porter, | $ | $ | ||||||
| Convertible promissory note issued to Mark Porter, | ||||||||
| Convertible promissory note issued to Mark Porter, | ||||||||
| Total | $ | $ | ||||||
| Less: Current portion of loans payable to related parties | ( | ) | ( | ) | ||||
| Loans payable to related parties, net of current portion | $ | $ | ||||||
Promissory note, Mark Porter,
On June 1, 2021, the Company
issued a $
On December 15, 2021, this note matured and was due on demand.
On June 28, 2024, the Company
and the holder of the note entered into an amendment whereby outstanding accrued interest was added to the principal balance and the due
date of the note was changed to December 31, 2025. The updated principal amount is $
During the nine months ended
September 30, 2024, the Company paid $
As September 30, 2024, the
Company owed $
Convertible promissory note, Mark Porter,
On December 6, 2023, the Company
issued to Mark Porter an unsecured promissory note in the aggregate principal amount of $
The note matured on
On June 28, 2024, the Company
and the holder of the note entered into an amendment whereby outstanding accrued interest and a penalty of $
During the nine months ended
September 30, 2024, the Company paid $
As September 30, 2024, the
Company owed $
16
Convertible promissory note, Mark Porter,
In connection with the Securities
Purchase Agreement discussed in Note 8, Convertible Debentures, on September 25, 2023, the Company issued to Mark Porter a senior subordinated
secured convertible promissory note in the aggregate principal amount of $
Additionally, in connection
with the note, the Company issued Mark Porter a warrant to purchase
The warrants, including those
issued to the placement agent, had a relative fair value of $
During the nine months ended
September 30, 2024, the remaining principal balance of $
| 7. | Loans Payable |
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Future receivables financing agreement with Cedar Advance LLC, non-interest bearing, matures | $ | $ | ||||||
| Future receivables financing agreement with Pawn Funding, non-interest bearing, matures | ||||||||
| Future receivables financing agreement with Slate Advance LLC, non-interest bearing, matures | ||||||||
| Future receivables financing agreement with Meged Funding Group, non-interest bearing, matures | ||||||||
| Promissory note issued to InterCloud Systems, Inc., non-interest bearing, unsecured and due on demand | ||||||||
| Future receivables financing agreement with Arin Funding LLC, non-interest bearing, matures | ||||||||
| Future receivables financing agreement with Arin Funding LLC, non-interest bearing, matures | ||||||||
| Total | $ | $ | ||||||
| Less: Current portion of loans payable | ( | ) | ( | ) | ||||
| Loans payable, net of current portion | $ | $ | ||||||
The Company’s loans
payable have an effective interest rate range of
Future receivables financing agreement with
Cedar Advance LLC, non-interest bearing, matures
On May 15, 2023, the Company,
together with its subsidiaries (collectively with the Company, the “Financing Parties”), entered into an Agreement of Sale
of Future Receipts (the “Financing Agreement”) with Cedar Advance LLC. Under the Financing Agreement, the Financing Parties
sold to Cedar Advance future receivables in an aggregate amount equal to $
17
Pursuant to the terms of the
Financing Agreement, the Company agreed to pay Cedar Advance $
During the year ended December
31, 2023, the Company paid $
During June 2024, the Company
and Cedar Advance LLC executed a settlement agreement and release whereby the Company is to pay a total of $
During the nine months ended
September 30, 2024, the Company paid $
As of September 30, 2024,
the Company owed $
Future receivables financing agreement with
Pawn Funding, non-interest bearing, matures
On May 15, 2023, the Company,
together with its subsidiaries (collectively with the Company, the “Financing Parties”), entered into an Agreement of Sale
of Future Receipts (the “Financing Agreement”) with Pawn Funding. Under the Financing Agreement, the Financing Parties sold
to Pawn Funding future receivables in an aggregate amount equal to $
Pursuant to the terms of the
Financing Agreement, the Company agreed to pay Pawn Funding $
During the year ended December
31, 2023, the Company paid $
During June 2024, the Company
and Pawn Funding executed a settlement agreement whereby the Company is to pay a total of $
During the nine months ended
September 30, 2024, the Company paid $
As of September 30, 2024,
the Company owed $
Future receivables financing agreement with
Slate Advance LLC, non-interest bearing, matures
On June 9, 2023, the Company,
together with its subsidiaries (collectively with the Company, the “Financing Parties”), entered into an Agreement of Sale
of Future Receipts (the “Financing Agreement”) with Slate Advance. Under the Financing Agreement, the Financing Parties sold
to Slate Advance future receivables in an aggregate amount equal to $
18
Pursuant to the terms of the
Financing Agreement, the Company agreed to pay Slate Advance $
During the year ended December
31, 2023, the Company paid $
During May 2024, the Company
and Slate Advance LLC executed a forbearance and release agreement whereby the Company is to pay a total of $
During the nine months ended
September 30, 2024, the Company paid $
As of September 30, 2024,
the Company owed $
Future receivables financing agreement with
Meged Funding Group, non-interest bearing, matures
On July 25, 2023, the Company,
together with its subsidiaries (collectively with the Company, the “Financing Parties”), entered into an Agreement of Sale
of Future Receipts (the “Financing Agreement”) with Meged Funding Group. Under the Financing Agreement, the Financing Parties
sold to Slate Advance future receivables in an aggregate amount equal to $
Pursuant to the terms of the
Financing Agreement, the Company agreed to pay Meged Funding Group $
During the year ended December
31, 2023, the Company paid $
During June 2024, the Company
and Meged Funding Group executed a settlement agreement whereby the Company is to pay a total of $
During the nine months ended
September 30, 2024, the Company paid $
As of September 30, 2024,
the Company owed $
19
Future receivables financing agreement with
Arin Funding LLC, non-interest bearing, matures
On August 25, 2023, the Company,
together with its subsidiaries (collectively with the Company, the “Financing Parties”), entered into an Agreement of Sale
of Future Receipts (the “Financing Agreement”) with Arin Funding LLC. Under the Financing Agreement, the Financing Parties
sold to Arin Funding LLC future receivables in an aggregate amount equal to $
Pursuant to the terms of the
Financing Agreement, the Company agreed to pay Arin Funding LLC $
During the year ended December
31, 2023, the Company paid $
During the nine months ended
September 30, 2024, the Company paid $
Future receivables financing agreement with
Arin Funding LLC, non-interest bearing, matures
On September 5, 2023, the
Company, together with its subsidiaries (collectively with the Company, the “Financing Parties”), entered into an Agreement
of Sale of Future Receipts (the “Financing Agreement”) with Arin Funding LLC. Under the Financing Agreement, the Financing
Parties sold to Arin Funding LLC future receivables in an aggregate amount equal to $
Pursuant to the terms of the
Financing Agreement, the Company agreed to pay Arin Funding LLC $
During the year ended December
31, 2023, the Company paid $
During the nine months ended
September 30, 2024, the Company paid $
Future receivables financing agreements with J.J. Astor & Co., non-interest bearing, matures March 6, 2025
The Company, together with
its subsidiaries (collectively with the Company, the “Financing Parties”), entered into an several bridge loan agreements
with J.J. Astor &Co., dated May 9, 2024 (Loan #1), May 16, 2024 (Loan #2), and May 23, 2024 (Loan #3). Under these loan agreements,
the Financing Parties issued warrants to J.J. Astor & Co., Warrant #1 dated May 9, 2024 to purchase
Pursuant to the terms of the
agreements, the Company agreed to pay J.J. Astor & Co. $
The Company, together with
its subsidiaries (collectively with the Company, the “Financing Parties”), entered into a Senior Loan Agreement with J.J.
Astor & Co., dated May 29, 2024. Under this Senior Loan Agreement, the Financing Parties collectively paid off the three previous
short term notes aggregating $
20
Pursuant to the terms of the
Senior Loan Agreement, the Company agreed to pay J.J. Astor & Co. $
During June 2024, the Company
and J.J. Astor & Co. executed a payoff agreement and release whereby the Company was to pay a total of $
Promissory note issued to InterCloud Systems, Inc., non-interest bearing, unsecured and due on demand
On June 15, 2021, in connection
with the 2021 merger transaction, the Company assumed High Wire’s promissory note issued to InterCloud Systems, Inc. The note was
originally issued on February 27, 2018 in the principal amount of $
As of September 30, 2024,
the Company owed $
| 8. | Convertible Debentures |
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Convertible promissory note issued to Herald Investment Management Limited, | $ | $ | ||||||
| Convertible promissory note issued to 1800 Diagonal Lending LLC, | ||||||||
| Convertible promissory note, Jeffrey Gardner, | ||||||||
| Convertible promissory note, James Marsh, | ||||||||
| Convertible promissory note issued to Roger Ponder, | ||||||||
| Convertible promissory note issued to Kings Wharf Opportunities Fund, LP, | ||||||||
| Convertible promissory note issued to Mast Hill Fund, L.P., | ||||||||
| Convertible promissory note issued to FirstFire Global Opportunities Fund, LLC, | ||||||||
| Convertible promissory note issued to Mast Hill Fund, L.P., | ||||||||
| Total | $ | $ | ||||||
| Less: Current portion of convertible debentures, net of debt discount/premium | ( | ) | ( | ) | ||||
| Convertible debentures, net of current portion, net of debt discount | $ | $ | ||||||
The Company’s convertible
debentures have an effective interest rate range of
21
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 accrued at a rate of
On September 15, 2021, this
note matured and was due on demand. Additionally, the interest rate increased to
During the nine months ended
September 30, 2024, the remaining principal balance of $
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 $
The interest on the outstanding
principal due under the note accrued at a rate of
On September 15, 2021, this
note matured and was due on demand. Additionally, the interest rate increased to
During the nine months ended
September 30, 2024, the remaining principal balance of $
Convertible promissory note, Roger Ponder,
On June 15, 2021, in connection
with the 2021 merger transaction, the Company assumed High Wire’s convertible promissory note issued to Roger Ponder. The note was
originally issued on
On September 30, 2022, the
Company and the holder of the note mutually agreed to extend the maturity date to
On December 31, 2022, the
Company and the holder of the note mutually agreed to extend the maturity date to
On March 31, 2023, the Company
and the holder of the note mutually agreed to extend the maturity date to
On June 30, 2023, the Company
and the holder of the note mutually agreed to extend the maturity date to
On September 30, 2023, the
Company and the holder of the note mutually agreed to extend the maturity date to
22
On December 31, 2023, the
Company and the holder of the note mutually agreed to extend the maturity date to
On March 31, 2024, the Company and the holder of the note mutually agreed to extend the maturity date to June 30, 2024. The terms of the note were unchanged.
During the nine months ended
September 30, 2024, the remaining principal balance of $
Securities Purchase Agreement – September 2023
On September 25, 2023, the
Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company may issue to
accredited investors (the “Investors”)
The Notes mature 18 months
after issuance (the “Maturity Date”), bear interest at a rate of
The Notes constitute senior secured indebtedness of the Company, subject to a preexisting senior lien, and are guaranteed by all existing or future formed, direct and indirect, domestic subsidiaries of the Company (the “Guarantors”) pursuant to a subsidiary guarantee (the “Subsidiary Guarantee”) with the collateral agent for the Investor (the “Agent”). On September 25, 2023, the Company, the Investor, the Guarantors and the Agent also entered into a security agreement (the “Security Agreement”) pursuant to which the Notes are secured by a lien in, and security interest upon, and a right of set-off against all of its right, title and interest of whatsoever kind and nature in and to, all assets of the Company and the Guarantors, subject to customary and mutually agreed permitted liens.
The Warrant is exercisable
at an initial exercise price of $
As of September 30, 2024,
the Company had issued an aggregate of $
Additionally, the placement
agent for the Purchase agreement receives
For information on the debt
issued under the agreement, refer to the “Convertible promissory note, Herald Investment Management Limited,
23
Convertible promissory note, Herald Investment
Management Limited,
On September 25, 2023, the
Company issued to Herald Investment Management Limited a senior subordinated secured convertible promissory note in the aggregate principal
amount of $
Additionally, in connection
with the note, the Company issued Herald Investment Management Limited a warrant to purchase
The warrants, including those
issued to the placement agent, had a relative fair value of $
As of September 30, 2024,
the Company owed $
Convertible promissory note, Kings Wharf Opportunities
Fund, LP,
On September 25, 2023, the
Company issued to Kings Wharf Opportunities Fund, LP a senior subordinated secured convertible promissory note in the aggregate principal
amount of $
Additionally, in connection
with the note, the Company issued Kings Wharf Opportunities Fund, LP a warrant to purchase
The warrants, including those
issued to the placement agent, had a relative fair value of $
During the nine months ended
September 30, 2024, the remaining principal balance of $
Securities Purchase Agreement – December 2023
On December 7, 2023, the Company
entered into a securities purchase agreement pursuant to which the Company may issue to accredited investors (the “Investors”)
The notes have a term of
As of September 30, 2024,
the Company had issued an aggregate of $
For information on the debt
issued under the agreement, refer to the “Convertible promissory note, Mast Hill Fund, L.P.,
In connection with the issuances
of debt discussed below, the Company issued
24
Convertible promissory note, Mast Hill Fund,
L.P.,
On December 7, 2023, the Company
issued to Mast Hill Fund, L.P. a senior convertible promissory note in the aggregate principal amount of $
Additionally, in connection
with the note, the Company issued Mast Hill Fund, L.P.
On December 7, 2023, the Company
issued
The warrants qualified for
warrant liability accounting under ASC 480 “Distinguishing Liabilities from Equity”. The initial fair value of the
warrants was $
A total of $
On January 1, 2024, $
During the nine months ended
September 30, 2024, the remaining principal balance of $
Convertible promissory note, FirstFire Global
Opportunities Fund, LLC,
On December 11, 2023, the
Company issued to FirstFire Global Opportunities Fund, LLC a senior convertible promissory note in the aggregate principal amount of $
Additionally, in connection
with the note, the Company issued FirstFire Global Opportunities Fund, LLC
On December 11, 2023, the
Company issued
The warrants qualified for
warrant liability accounting under ASC 480 “Distinguishing Liabilities from Equity”. The initial fair value of the
warrants was $
A total of $
On January 1, 2024, $
25
During the nine months ended
September 30, 2024, the remaining principal balance of $
Convertible promissory note, Mast Hill Fund,
L.P.,
On January 11, 2024, the Company
issued to Mast Hill Fund, L.P. a senior convertible promissory note in the aggregate principal amount of $
Additionally, in connection
with the note, the Company issued Mast Hill Fund, L.P.
On January 11, 2024, the Company
issued
The warrants qualified for
warrant liability accounting under ASC 480 “Distinguishing Liabilities from Equity”. The initial fair value of the
warrants was $
A total of $
During the nine months ended
September 30, 2024, the remaining principal balance of $
Convertible promissory note, 1800 Diagonal
Lending LLC,
On January 24, 2024, the Company
issued to 1800 Diagonal Lending LLC an unsecured convertible promissory note in the aggregate principal amount of $
During the nine months ended
September 30, 2024, the Company paid $
As of September 30, 2024,
the Company owed $
26
| 9. | Factor Financing |
On February 22, 2023, ADEX,
a former subsidiary of the Company, entered into an amendment to its factor financing agreement, pursuant to which ADEX agreed to sell
and assign and Bay View Funding agreed to buy and accept, certain accounts receivable owing to ADEX. The amendment amended the agreement
to include the Company’s HWN and SVC subsidiaries. Under the terms of the Amendment, upon the receipt and acceptance of each assignment
of accounts receivable, Bay View Funding will pay ADEX, HWN and SVC, individually and together, ninety percent (
Under the factoring agreement,
HWN and SVC may borrow up to the lesser of $
On March 6, 2023, in connection with the divestiture of the ADEX Entities, the amounts owed and related to ADEX accounts receivable were assumed by the buyer.
During the nine months ended
September 30, 2024, the Company paid $
During the nine months ended
September 30, 2024, the Company received an aggregate of $
The Company owed under the agreement as of September 30, 2024 and the Company will receive no further amounts from Bay View Funding.
| 10. | Warrant Liabilities |
Certain of the warrants related to the convertible debentures described in Note 8, Convertible Debentures, qualify for liability classification under ASC 480, “Distinguishing Liabilities from Equity”. The fair value of the warrant liabilities was measured upon issuance and is re-measured at the end of every reporting period, with the change in fair value reported in the consolidated statement of operations as a gain or loss on change in fair value of warrant liabilities.
During the nine months ended
September 30, 2024, in connection with the related notes being paid off in full, the Second Warrants were canceled and extinguished, resulting
in a gain on extinguishment of warrant liabilities of $
| September 30, | ||||
| 2024 | ||||
| Balance at the beginning of the period | $ | |||
| Issuance of warrants | ||||
| Change in fair value of warrant liabilities | ( | ) | ||
| Return of warrants | ( | ) | ||
| Balance at the end of the period | ||||
27
The Company uses Level 3 inputs for its valuation methodology for the warrant liabilities as their fair values were determined by using either the Black-Scholes model based on various assumptions or the price of the Company’s common stock.
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.
| Expected volatility | Risk-free interest rate | Expected dividend yield | Expected life (in years) | |||||||||||
| At September 30, 2024 | % | % | | % | ||||||||||
| At December 31, 2023 | % | % | % | |||||||||||
| 11. | Common Stock |
Authorized shares
The Company has
Issuance of shares to employee
On September 3, 2024, the
Company issued
| 12. | Preferred Stock |
See below for a description of each of the Company’s outstanding classes of preferred stock, including historical and current information.
Series B
On April 16, 2018, High Wire
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 $
28
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
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.”
Series D
On June 14, 2021, High Wire
designated
On December 13, 2021, the
Company made the first amendment to the Certificate of Designation of its Series D preferred stock which changed the conversion right.
As a result of this amendment, the Company recorded a deemed dividend of $
Subsequent to the first amendment, the principal terms of the Series D preferred stock shares are as follows:
Issue Price — The
stated price for the Series D preferred stock shares shall be $
Redemption — The Series D preferred stock shares are not redeemable.
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
$
Voting — Except
as otherwise provided in the agreement or as required by law, the Series D shall be voted together with the shares of common stock, par
value $
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). On the business day immediately preceding the listing of the Common Stock on a national
securities exchange (the “Automatic Series D Conversion Date”), without any further action, all shares of Series D shall automatically
convert into shares of Common Stock at the Fixed Price, which is defined as the closing price of the Common Stock on the trading day immediately
preceding the date of issuance of the Series D ( subject to adjustment for any reverse or forward split of the Common Stock). The Series
D shares were issued on June 16, 2021, and the closing price of the Company’s common stock was $
29
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 (
As of September 30, 2024,
the carrying value of the Series D Preferred Stock was $
Series E
On December 20, 2021, the
Company designated
The principal terms of the Series E preferred stock shares are as follows:
Issue Price — The
stated price for the Series E preferred stock shares shall be $
Redemption — The Series E preferred stock shares are not redeemable.
Dividends — The holders of the Series E 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
$
Voting — Except
as otherwise provided herein or as required by law, the Series E shall be voted together with the shares of common stock, par value $
Conversion — Beginning
ninety (90) days from the date of issuance, all or a portion of the Series E may be converted into Common Stock at the Fixed Price (as
defined below). On the business day immediately preceding the listing of the Common Stock on a national securities exchange (the “Automatic
Series E Conversion Date”), without any further action, all shares of Series E shall automatically convert into shares of Common
Stock at the Fixed Price. “Fixed Price” shall be defined as the closing price of the Common Stock on the trading day immediately
preceding the date of issuance of the Series E (subject to adjustment for any reverse or forward split of the Common Stock or similar
occurrence). The Series E shares were issued on December 30, 2021, and the closing price of the Company’s common stock was $
Vote to Change the Terms
of or Issuance of Series E — 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 (
30
As of September 30, 2024,
the carrying value of the Series E Preferred Stock was $
| 13. | Share Purchase Warrants and Stock Options |
In connection with the issuance
of new convertible debentures during December 2023 and January 2024, the associated warrants qualified for liability classification. The
fair value of these warrants was $
During June 2024, current employees of the Company with outstanding underwater stock options were given the option of returning the existing options in exchange for new options with an exercise price based on the closing price on the date of the election. The exchanged options were considered canceled. The effective date of the election was June 21, 2024.
| Number of warrants | Weighted average exercise price | Intrinsic value | ||||||||||
| Balance at December 31, 2023 | $ | $ | ||||||||||
| Granted | ||||||||||||
| Exercised | ||||||||||||
| Expired/forfeited | ( | ) | ||||||||||
| Outstanding at September 30, 2024 | $ | $ | ||||||||||
| Exercisable at September 30, 2024 | $ | $ | ||||||||||
| Number of warrants | Exercise price | Issuance Date | Expiry date | Remaining life | ||||||||||
31
| Number of stock options | Weighted average exercise price | Intrinsic value | ||||||||||
| Balance at December 31, 2023 | $ | $ | ||||||||||
| Issued | - | |||||||||||
| Exercised | - | |||||||||||
| Canceled/expired/forfeited | ( | ) | - | |||||||||
| Outstanding at September 30, 2024 | $ | $ | ||||||||||
| Exercisable at September 30, 2024 | $ | $ | ||||||||||
| Number of stock options | Exercise price | Issuance Date | Expiry date | Remaining Life | ||||||||||
The remaining stock-based
compensation expense on unvested stock options was $
| 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; the Company recognizes 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.
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Operating lease assets | $ | $ | ||||||
| Operating lease liabilities: | ||||||||
| Current operating lease liabilities | ||||||||
| Long term operating lease liabilities | ||||||||
| Total operating lease liabilities | $ | $ | ||||||
32
Expense related to leases
is recorded on a straight-line basis over the lease term, including rent holidays. During the nine months ended September 30, 2024 and
2023, 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 September 30, 2024 reflect a weighted average discount rate of
| Year ending December 31, | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Total lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total | $ | |||
| 15. | Commitments and Contingencies |
Leases
The Company leases its principal offices under a lease that expires in 2026. 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 nine months ended September 30, 2024 and 2023).
Legal proceedings
In the normal course of business or otherwise, the Company may become involved in legal proceedings. The Company will accrue a liability for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. When only a range of possible loss can be established, the most probable amount in the range is accrued. If no amount within this range is a better estimate than any other amount within the range, the minimum amount in the range is accrued. The accrual for a litigation loss contingency might include, for example, estimates of potential damages, outside legal fees and other directly related costs expected to be incurred.
| 16. | Segment Disclosures |
During the nine months ended
September 30, 2024 and 2023, the Company had
| ● | Cybersecurity, which is comprised of HWN and OCL. |
| ● | SVC, which consists of the Company’s SVC subsidiary. | |
| ● | Corporate, which consists of the rest of the Company’s operations. |
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. The Company operates all reporting segments in one geographical area (the United States).
33
| Three Months Ended September 30, 2024 | Nine Months Ended September 30, 2024 | |||||||||||||||||||||||||||||||
| Corporate | Cybersecurity | SVC | Total | Corporate | Cybersecurity | SVC | Total | |||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Operating (loss) income | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Interest expense | ||||||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||
| Total assets as of September 30, 2024 | ||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2023 | Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||
| Corporate | Cybersecurity | SVC | Total | Corporate | Cybersecurity | SVC | Total | |||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Interest expense | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Depreciation and amortization | ||||||||||||||||||||||||||||||||
| Total assets as of December 31, 2023 | ||||||||||||||||||||||||||||||||
| 17. | Earnings Per Share |
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Numerator: | ||||||||||||||||
| Net (loss) income attributable to High Wire Networks, Inc. common shareholders | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Denominator | ||||||||||||||||
| Weighted average common shares outstanding, basic | ||||||||||||||||
| Effect of dilutive securities | ||||||||||||||||
| Weighted average common shares outstanding, diluted | ||||||||||||||||
| Income (loss) per share attributable to High Wire Networks, Inc. common shareholders, basic: | ||||||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) from discontinued operations, net of taxes | $ | $ | $ | $ | ( | ) | ||||||||||
| Net income (loss) per share | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
| Income (loss) per share attributable to High Wire Networks, Inc. common shareholders, diluted: | ||||||||||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net income (loss) from discontinued operations, net of taxes | $ | $ | $ | $ | ( | ) | ||||||||||
| Net income (loss) per share | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||
34
| 18. | Discontinued Operations |
On March 6, 2023, HWN divested the ADEX Entities. The divestiture of the ADEX Entities qualified for discontinued operations treatment.
The results of operations of the ADEX Entities have been included within net income (loss) from discontinued operations, net of tax, on the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2023.
On June 27, 2024, HWN sold the assets of its technology services business unit. The operations of the sold business unit qualified for discontinued operations treatment.
The assets and liabilities of the sold business unit as of December 31, 2023 have been included within the unaudited condensed consolidated balance sheet as current assets of discontinued operations and current liabilities of discontinued operations.
The results of operations of the sold business unit have been included within net income (loss) from discontinued operations, net of tax, on the unaudited condensed consolidated statements of operations for the nine months ended September 30, 2024 and the three and nine months ended September 30, 2023.
In connection with the sale of HWN’s technology services business unit, the Company is now subject to a non-compete which precludes it from operating businesses similar to that of AWS PR and Tropical. As a result, both subsidiaries qualify for discontinued operations treatment.
The assets and liabilities of AWS PR and Tropical as of September 30, 2024 and December 31, 2023 have been included within the unaudited condensed consolidated balance sheet as current assets of discontinued operations and current liabilities of discontinued operations.
The results of operations of AWS PR and Tropical have been included within net income (loss) from discontinued operations, net of tax, on the unaudited condensed consolidated statements of operations for the nine months ended September 30, 2024 and 2023.
| September 30, 2024 | December 31, 2023 | |||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Current assets of discontinued operations | $ | $ | ||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Contract liabilities | ||||||||
| Current liabilities of discontinued operations | $ | $ | ||||||
35
| For the three months ended | For the nine months ended | |||||||||||
| September 30, | September 30, | |||||||||||
| 2023 | 2024 | 2023 | ||||||||||
| Revenue | $ | $ | $ | |||||||||
| Operating expenses: | ||||||||||||
| Cost of revenues | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Salaries and wages | ||||||||||||
| General and administrative | ||||||||||||
| Total operating expenses | ||||||||||||
| Income from operations | ||||||||||||
| Other income (expenses): | ||||||||||||
| Gain on sale of business unit | ||||||||||||
| Other income | ||||||||||||
| Gain (loss) on disposal of subsidiary | ( | ) | ||||||||||
| Gain on sale of asset | ||||||||||||
| Exchange loss | ( | ) | ||||||||||
| Total other income (expense) | ( | ) | ||||||||||
| Pre-tax income (loss) from discontinued operations | ( | ) | ||||||||||
| Provision for income taxes | ||||||||||||
| Net income (loss) from discontinued operations, net of tax | $ | $ | $ | ( | ) | |||||||
36
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 condensed 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.
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 High Wire Networks, Inc., a Nevada corporation, and its consolidated subsidiaries.
The information that appears on our website at www.HighWireNetworks.com is not part of this report.
Description of Business
Business Overview
HWN, Inc., (d/b/a High Wire Network Solutions, Inc.) (“HWN”) was incorporated in Delaware on January 20, 2017. HWN is a global provider of managed cybersecurity and managed networks 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. HWN has continuously operated under the High Wire Networks brand for more than 20 years.
HWN and JTM Electrical Contractors, Inc. (“JTM”), an Illinois Corporation, entered into an operating agreement through which High Wire owned 50% of JTM. On February 15, 2022, HWN sold its 50% interest in JTM.
On June 16, 2021, we completed a merger with Spectrum Global Solutions, Inc. On January 7, 2022, Spectrum Global Solutions, Inc. legally changed its name to High Wire Networks, Inc. (“High Wire”). The merger was accounted for as a reverse merger. At the time of the reverse merger, High Wire’s subsidiaries included ADEX Corporation, ADEX Puerto Rico LLC, ADEX Canada, 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”). For accounting purposes, HWN is the surviving entity. On March 6, 2023, HWN divested the ADEX Entities. On July 31, 2023, HWN paused the operations of its AWS PR subsidiary. On November 3, 2023, HWN paused the operations of its Tropical subsidiary.
On November 4, 2021, we closed on the acquisition of Secure Voice Corp (“SVC”). The closing of the acquisition was facilitated by a senior secured promissory note which has been repaid.
On August 4, 2023, we formed a new entity – incorporated as Overwatch Cyberlab, Inc. (“OCL”) – which is 80% owned by our company and 20% owned by John Peterson.
37
On June 27, 2024, HWN entered into an asset purchase agreement with INNO4 LLC pursuant to which INNO4 LLC agreed to purchase certain assets of HWN related to our technology services business unit. Additionally, the asset purchase agreement includes a non-compete which precludes our company from operating businesses similar to that of AWS PR and Tropical.
Our SVC subsidiary is a wholesale network services provider with network footprint in the Northeast United States. This network carries VoIP and other traffic for other service providers.
We provide the following category of offerings to our customers:
| ● | Security: High Wire’s award-winning Overwatch Managed Security offers organizations end-to-end protection for networks, data, endpoints, and users via multiyear recurring revenue contracts in this fast-growing technology segment. This segment is nearly 100% recurring revenue with multi-year contracts. Overwatch delivers services through Managed Service Providers (MSPs), strategic partnerships and alliances, Value Added Resellers (VARs), Distributors, and Network Service Providers. |
Our Operating Units
Our company is comprised of the following:
| ● | Managed Services: The Managed Services Segment encompasses all of our recurring revenue businesses including our Overwatch Managed Cybersecurity, all network managed services, all managed services performed under a Statement of Work (SoW), and our SVC revenue. |
Results of Operations for the Three-Month Periods Ended September 30, 2024 and 2023
Our operating results for the three-month periods ended September 30, 2024 and 2023 are summarized as follows:
| For the three months ended | ||||||||
| September 30, | ||||||||
| Statement of Operations Data: | 2024 | 2023 | ||||||
| Revenue | $ | 2,051,672 | $ | 1,974,464 | ||||
| Operating expenses | 3,621,782 | 4,588,039 | ||||||
| Loss from operations | (1,570,110 | ) | (2,613,575 | ) | ||||
| Total other expense | (100,329 | ) | (1,202,490 | ) | ||||
| Net income from discontinued operations, net of tax | - | 265,416 | ||||||
| Net loss attributable to common shareholders | (1,670,439 | ) | (3,550,649 | ) | ||||
Revenues
Our revenue increased from $1,974,464 for the three months ended September 30, 2023 to $2,051,672 for the three months ended September 30, 2024, an increase of $77,208. Additionally, there was an improvement in gross profit (revenue minus cost of revenue) of $34,636. The improvement in the gross profit was primarily related to an improvement in more cost-efficient software provider contracts as well as efficiencies resultant in a larger install base.
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 with our channel partner managed service providers (“MSPs”). Most MSPs have multiple sub-agreements with us supporting their end-customer base. Contract terms with MSPs are typically three-year agreements.
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Operating Expenses
During the three months ended September 30, 2024, our operating expenses were $3,621,782, compared to $4,588,039 for the same period of 2023. The decrease of $966,257 is primarily related to a $811,708 decrease in salaries and wages.
Other Expense
During the three months ended September 30, 2024, we had other expense of $100,329, compared to $1,202,490 for the same period of 2023. The decrease of $1,102,161 is primarily related to a decrease in interest expense of $1,067,411 in the 2024 period compared to the same period of 2023.
Net Income from Discontinued Operations, Net of Tax
Discontinued operations did not impact the unaudited condensed consolidated statement of operations for the three months ended September 30, 2024. Net income from discontinued operations, net of tax of $265,416 in the 2023 period included income from operations of $61,335 and a gain on sale of asset of $204,081.
Net Income (Loss)
For the three months ended September 30, 2024, we had net income attributable to High Wire Networks, Inc. common shareholders of $1,670,439, compared to a net loss of $3,550,649 in the same period of 2023.
Results of Operations for the Nine-Month Periods Ended September 30, 2024 and 2023
Our operating results for the nine-month periods ended September 30, 2024 and 2023 are summarized as follows:
| For the nine months ended | ||||||||
| September 30, | ||||||||
| Statement of Operations Data: | 2024 | 2023 | ||||||
| Revenue | $ | 6,050,793 | $ | 5,623,104 | ||||
| Operating expenses | 12,151,942 | 13,016,179 | ||||||
| Loss from operations | (6,101,149 | ) | (7,393,075 | ) | ||||
| Total other (expense) income | (1,621,796 | ) | 1,012,172 | |||||
| Net income (loss) from discontinued operations, net of tax | 9,737,003 | (1,143,432 | ) | |||||
| Net income (loss) attributable to common shareholders | 2,014,058 | (7,524,335 | ) | |||||
Revenues
Our revenue increased from $5,623,104 for the nine months ended September 30, 2023 to $6,050,793 for the nine months ended September 30, 2024, an increase of $427,689. Additionally, there was an improvement in gross profit (revenue minus cost of revenue) of $743,869. The improvement in the gross profit as a percentage of revenue from 30% for the nine months ended September 30, 2023 to 40% for the nine months ended September 30, 2024 was primarily related to an improvement in more cost-efficient software provider contracts as well as efficiencies resultant in a larger install base.
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 with our channel partner managed service providers (“MSPs”). Most MSPs have multiple sub-agreements with us supporting their end-customer base. Contract terms with MSPs are typically three-year agreements.
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Operating Expenses
During the nine months ended September 30, 2024, our operating expenses were $12,151,942, compared to $13,016,179 for the same period of 2023. The decrease of $864,237 is primarily related to a decrease of $1,193,540 in general and administrative expenses due to certain cost cutting measures and a decrease of $316,180 in cost of revenue due to the efficiencies discussed above. These decreases were partially offset by a $651,298 increase in salaries and wages due to increasing personnel costs as we increase investment in our cybersecurity business, as well as bonuses related to meeting certain strategic objectives.
Other (Expense) Income
During the nine months ended September 30, 2024, we had other expense of $1,621,796, compared to other income of $1,012,172 for the same period of 2023. The change of $2,633,968 is primarily related to a gain on change in fair value of derivative liabilities of $3,140,404 and a gain on extinguishment of derivatives of $1,692,232 during the 2023 period. These changes were partially offset by one-time liquidated damages related to escrow shares of $1,222,000 in the 2023 period along with a gain on extinguishment of warrant liabilities of $921,422 in the 2024 period and a decrease of $668,391 in interest expense in 2024 compared to the 2023 period.
Net Income (Loss) from Discontinued Operations, Net of Tax
For the nine months ended September 30, 2024, we had net income from discontinued operations, net of tax of $9,737,003, compared to a net loss from discontinued operations, net of tax of $1,143,432 in the same period of 2023. The 2024 period included income from operations of $1,784,730, the gain on sale of business unit of $7,950,773, and other income of $1,500, while the 2023 period included income from operations of $87,802, the loss on disposal of subsidiary of $1,434,392, the gain on sale of asset of $204,081, and an exchange loss of $923.
Net Income (Loss)
For the nine months ended September 30, 2024, we had net income attributable to High Wire Networks, Inc. common shareholders of $2,014,058, compared to a net loss of $7,524,335 in the same period of 2023.
Liquidity and Capital Resources
As of September 30, 2024, our total current assets were $1,901,036 and our total current liabilities were $7,101,513, resulting in a working capital deficit of $5,200,477, compared to a working capital deficit of $9,915,819 as of December 31, 2023.
We have historically 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
| For the nine months ended | ||||||||
| September 30, | ||||||||
| 2024 | 2023 | |||||||
| Net cash used in operating activities | $ | (5,801,122 | ) | $ | (7,817,319 | ) | ||
| Net cash provided by investing activities | $ | 9,767,115 | $ | 190,000 | ||||
| Net cash (used in) provided by financing activities | $ | (4,153,593 | ) | $ | 7,401,821 | |||
| Change in cash | $ | (187,600 | ) | $ | (225,498 | ) | ||
For the nine months ended September 30, 2024, cash decreased $187,600, compared to an decrease in cash of $225,498 for the same period of 2023.
As of September 30, 2024, we had cash of $140,682 compared to $328,282 as of December 31, 2023.
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 September 30, 2024, 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 September 30, 2024 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
On September 3, 2024, we issued 959,233 shares of our common stock to a new employee.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
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Item 6. Exhibits
| Exhibit # | Exhibit Description | |
| 31.1* | Certification of the Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2* | Certification of the Principal Financial Officer and Principal Accounting Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1* | Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 32.2* | Certification of the Principal Financial Officer and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File––the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. |
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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.
| High Wire Networks, Inc. | ||
| Date: November 22, 2024 | By: | /s/ Mark W. Porter |
| Mark W. Porter | ||
| Chief Executive Officer | ||
| High Wire Networks, Inc. | ||
| Date: November 22, 2024 | By: | /s/ Curtis E. Smith |
| Curtis E. Smith | ||
| Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer | ||
44
Exhibit 31.1
CERTIFICATION
I, Mark W. Porter, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of High Wire Networks, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 22, 2024 | ||
| By: | /s/ Mark W. Porter | |
| Mark W. Porter | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION
I, Curtis E. Smith, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of High Wire Networks, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods present in this report; |
| 4. | I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: November 22, 2024 | ||
| By: | /s/ Curtis E. Smith | |
| Curtis E. Smith | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
Exhibit 32.1
Section 1350 CERTIFICATION
In connection with this Quarterly Report of High Wire Networks, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2024, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Mark W. Porter, Chief Executive Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report, fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 22, 2024 | ||
| By: | /s/ Mark W. Porter | |
| Mark W. Porter | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
Section 1350 CERTIFICATION
In connection with this Quarterly Report of High Wire Networks, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2024, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Curtis E. Smith, Chief Financial Officer of the Company, certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report, fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| Date: November 22, 2024 | ||
| By: | /s/ Curtis E. Smith | |
| Curtis E. Smith | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |