UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from:
Commission File Number
(Exact name of registrant as specified in its charter)
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(State of incorporation) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
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(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
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Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No
As of April 30, 2021, there were 61,495,671 shares of the registrant's $0.001 par value common stock issued and
1
HAMMER FIBER OPTICS HOLDINGS CORP.
TABLE OF CONTENTS
2
Special Note Regarding Forward-Looking Statements
Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended ("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Hammer Fiber Optics Holdings Corp. (the "Company"), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "may," "will," "should," "expect," "anticipate," "estimate," "believe," "intend," or "project" or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," "HMMR," or Hammer Fiber Optics Holdings Corp.
3
Consolidated Balance Sheets
(Unaudited)
| April 30, | July 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Security Deposits | ||||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Intangible and other assets | ||||||||
| Assets from Discontinued Operations | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Loans payable | ||||||||
| Deferred Revenue | ||||||||
| Liabilities from Discontinued Operations | ||||||||
| Total current liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders' Equity | ||||||||
| Common stock, $ |
||||||||
| July 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total Stockholder's Equity | ||||||||
| Total Liabilities and Stockholders' Equity | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
4
Hammer Fiber Optics Holdings Corp
Consolidated Statements of Operations
(Unaudited)
| For the Three Months Ended | For the Nine Months Ended | ||||||||||||
| April 30, | April 30, | ||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||
| Revenues | $ | $ | $ | $ | |||||||||
| Costs and expenses: | |||||||||||||
| Cost of sales | |||||||||||||
| Selling, general and administrative expenses | |||||||||||||
| Depreciation expense | |||||||||||||
| Total operating expenses | |||||||||||||
| Operating income (loss) | ( |
) | ( |
) | ( |
) | |||||||
| Other expenses | |||||||||||||
| Interest expense | |||||||||||||
| Financing charges | |||||||||||||
| Other expenses | |||||||||||||
| Total other expenses | |||||||||||||
| Loss Before Discontinued Operations | ( |
) | ( |
) | ( |
) | ( |
) | |||||
| Income (Loss) From Discontinued Operations | ( |
) | |||||||||||
| Net income (loss) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||
| Weighted average number of common shares outstanding - basic and diluted | |||||||||||||
| Income (loss) per share- basic and diluted | |||||||||||||
| Continuing operations | $ | ( |
) | $ | $ | ( |
) | $ | |||||
| Discontinued operations | |||||||||||||
| Total | $ | ( |
) | $ | $ | ( |
) | $ | |||||
See accompanying notes to consolidated statements.
5
Hammer Fiber Optics Holdings Corp.
Consolidated Statement of Stockholders' Equity (Deficit)
| Additional | Total | ||||||||||||||||||||
| Common Stock | Treasury Stock | Paid-in | Accumulated | Stockholders' | |||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Equity (Deficit) | |||||||||||||||
| Balance, July 31, 2020 | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Net loss for the quarter | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||
| Balance, October 31, 2020 | ( |
) | ( |
) | |||||||||||||||||
| Net income for the quarter | - | - | - | - | - | ||||||||||||||||
| Balance, January 31, 2021 | ( |
) | ( |
) | |||||||||||||||||
| Treasury stock issued | - | - | ( |
) | - | - | - | - | |||||||||||||
| Net loss for the quarter | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||
| Balance, April 30, 2021 | $ | $ | $ | $ | ( |
) | $ | ( |
) | ||||||||||||
| Balance, July 31, 2021 | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Net loss for the quarter | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||
| Balance, October 31, 2021 | ( |
) | |||||||||||||||||||
| Shares returned to treasury | - | - | - | - | - | - | |||||||||||||||
| Treasury shares issued for acquisition | - | - | ( |
) | - | - | |||||||||||||||
| Net loss for the quarter | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||
| Balance, January 31, 2022 | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
| Commitment shares issued for debt | - | - | - | ||||||||||||||||||
| Treasury shares issued | - | - | ( |
) | - | - | - | - | |||||||||||||
| Net loss for the quarter | - | - | - | - | - | ( |
) | ( |
) | ||||||||||||
| Balance, April 30, 2022 | $ | $ | $ | $ | ( |
) | $ | ||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
Hammer Fiber Optics Holdings Corp
Consolidated Statements of Cash Flows
(Unaudited)
| For the Nine Months Ended | |||||||||
| April 30, | |||||||||
| 2022 | 2021 | ||||||||
| OPERATING ACTIVITIES | |||||||||
| Net income (loss) | $ | ( |
) | $ | |||||
| (Income) Loss from discontinued operations | ( |
) | |||||||
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|||||||||
| Depreciation expense | |||||||||
| Commitment shares issued | |||||||||
| Amortization of debt discount | |||||||||
| Changes in operating assets and liabilities: | |||||||||
| Accounts receivable | ( |
) | |||||||
| Security deposits |
( |
) | |||||||
| Prepaid expenses | ( |
) | |||||||
| Accounts payable | |||||||||
| Deferred revenue | |||||||||
| Net cash provided by (used in) operating activities- continuing operations | ( |
) | ( |
) | |||||
| Net cash provided by (used in) operating activities- discontinued operations | ( |
) | |||||||
| Net cash provided by (used in) operating activities | ( |
) | ( |
) | |||||
| INVESTING ACTIVITIES | |||||||||
| Purchase of property and equipment | ( |
) | ( |
) | |||||
| Net cash provided by (used in) investing activities- continuing operations | ( |
) | |||||||
| Net cash provided by (used in) investing activities- discontinued operations | |||||||||
| Net cash provided by (used in) investing activities | ( |
) | ( |
) | |||||
| FINANCING ACTIVITIES | |||||||||
| Repayment of loans | ( |
) | ( |
) | |||||
|
Proceeds from PPP loans |
|
||||||||
| Proceeds from loans | |||||||||
| Net cash provided by (used in) financing activities- continuing operations | |||||||||
| Net cash provided by (used in) financing activities- discontinued operations | |||||||||
| Net cash provided by (used in) financing activities | |||||||||
| Net increase (decrease) in cash | |||||||||
| Cash, beginning of period | |||||||||
| Cash, end of period | $ | $ | |||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES: | |||||||||
| Cash paid for interest | $ | $ | |||||||
| Cash paid for taxes | $ | $ | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
7
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2022
(Unaudited)
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Hammer Fiber Optics Holdings Corp (OTCQB:HMMR) is a company focused on sustainable shareholder value investing in both financial services technology and wireless telecommunications infrastructure.
Hammer's financial technologies business is focused on providing digital stored value technology via its HammerPay mobile payments platform to enable digital commerce between consumers and branded merchants across the developing world, ensuring Swift, Safe and Secure encrypted remittances and banking transactions.
Hammer's "Everything Wireless" go to market strategy for its telecommunications business includes the development of high speed fixed wireless service for residential, small business and enterprise clients using its wireless fiber platform, Hammer Wireless AIR®, mobility networks including 4G/LTE, Over-the-Top services such as voice, SMS and collaboration services and hosting services.
NOTE 2 - CORPORATE HISTORY AND BACKGROUND ON MERGER
The Company was originally incorporated in the State of Nevada on September 23, 2010, under the name Recursos Montana S.A. The Company's principal activity was an exploration stage company engaged in the acquisition of mineral properties then owned by the Company.
On February 2, 2015, the Company entered into a Share Exchange Agreement with Tanaris Power Holdings, Inc., whereby the Company acquired
On April 25, 2016, Tanaris Power Holdings, Inc., a Nevada corporation entered into s Share Exchange Agreement (the "Share Exchange Agreement") with Hammer Fiber Optics Investments, Ltd., a Delaware corporation ("HFOI"), and the controlling stockholders of HFOI (the "HFOI Shareholders"). Pursuant to the Share Exchange Agreement, the Company acquired
On April 13, 2016, the Board of Directors (BOD) approved a Plan of Merger (the "Plan of Merger") under Nevada Revised Statuses (NRS) Section 92A.180 to merge (the "Merger") with our wholly-owned subsidiary HFO Holdings, a Nevada corporation, to effect a name change from Tanaris Power Holdings Inc. to Hammer Fiber Optics Holdings Corp. The Plan of Merger also provides for a
On May 3, 2016, the FINRA approved the merger with the wholly-owned subsidiary, HMMR Fiber Optics Holdings Corp. ("HFO Holdings"). Accordingly, thereafter, the Company's name was changed and the shares of common stock began trading under new ticker symbol "HMMR" as of May 27, 2016. The merger was effected on July 19, 2016.
In 2016 Hammer Fiber Optics Investments Ltd deployed its first beta network in Atlantic County, New Jersey. The network used a spectrum license agreement from Straightpath Communications, LLC. On January 17, 2018 Verizon Communications, LLC purchased Straightpath Communications, LLC and on July 14 2018, Verizon terminated the spectrum license agreement effective October 31, 2018 despite communications that it would continue to honor the agreement. On October 31, 2018 the Company ceased operations of the network in Atlantic County and subsequently classified the subsidiary as a discontinued operation.
On November 1, 2018, the Company acquired Open Data Centers, LLC, 1stPoint Communications, LLC and its subsidiaries. 1stPoint and its subsidiaries possess CLEC licenses in Florida, New York State, and a nationwide CMRS (Commercial Mobile Radio Services) license. The companies operate data center facilities in Piscataway, New Jersey and Homewood, Alabama. On December 17, 2018, the Company closed the acquisition of Endstream Communications, LLC, a wholesale voice operator in the United States.
On January 29, 2019 our board of directors approved a stock purchase agreement with American Network, Inc to acquire all of its equity.
8
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2022
(Unaudited)
NOTE 2 - CORPORATE HISTORY AND BACKGROUND ON MERGER (CONTINUED)
The acquisition of American Network, Inc closed on September 1, 2019.
As of April 30, 2020 our board of directors approved the discontinuation of the operations of Open Data Centers LLC. The operations of Open Data Centers, LLC were discontinued effective April 30, 2020 and the Company shut down its operations in its Piscataway, NJ data center.
On October 25, 2021 our board of directors approved a share exchange agreement with Telecom Financial Services Limited ("TFS") for the acquisition one hundred percent (
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). The interim financial statements for the three and nine months ending April 30, 2021 are unaudited. These financial statements are prepared in accordance with requirements for unaudited interim periods and consequently do not include all disclosures required to be in conformity with accounting principles generally accepted in the United States of America. The results of operations for the interim periods are not necessarily indicative of the results for the full year. In management's opinion, all adjustments necessary for a fair presentation of the Company's financial statements are reflected in the interim periods included and are of a normal recurring nature. These interim financial statements should be read in conjunction with the financial statements included in our Form 10-K, for the year ended July 31, 2021, as filed with the Securities and Exchange Commission ("the SEC") at www.sec.gov
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
COVID-19 Pandemic Update
In March 2020, the World Health Organization declared a global health pandemic related to the outbreak of a novel coronavirus. The COVID-19 pandemic adversely affected the company's financial performance in the third and fourth quarters of fiscal year 2020 and could have an impact throughout fiscal year 2021. In response to the COVID-19 pandemic, government health officials have recommended and mandated precautions to mitigate the spread of the virus, including shelter-in-place orders, prohibitions on public gatherings and other similar measures. As a result, the company and certain of the company's customers and suppliers temporarily closed locations beginning late in the second quarter of fiscal year 2020, continuing into the third quarter of fiscal year 2020. Partly due to the COVID-19 pandemic, the Company shut down the operations of its' Open Data Centers, LLC operations effective April 30, 2020. There is uncertainty around the duration and breadth of the COVID-19 pandemic, as well as the impact it will have on the company's operations, supply chain and demand for its products. As a result, the ultimate impact on the company's business, financial condition or operating results cannot be reasonably estimated at this time.
On May 5, 2020, and on February 26, 2021 the Company's 1stPoint Communications LLC subsidiary entered into two notes payable, each for $
Cash and cash equivalents
Cash and cash equivalents include cash in banks, money market funds and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.
9
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2022
(Unaudited)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation is recorded on a
Impairment of long-lived assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted cash flows to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company has not recognized any related impairment losses.
Indefinite lived intangible assets
The Company reviews property, plant and equipment, inventory component prepayments and certain identifiable intangibles, excluding goodwill, for impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If property, plant and equipment, inventory component prepayments and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value. The Company has not recorded any related impairment losses. The Company does not amortize goodwill and intangible assets with indefinite useful lives, rather such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company has not recorded any related impairment losses.
Revenue recognition
We adopted ASC 606 on August 1, 2018. Revenue is measured based on a consideration specified in a contract or agreement with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Incidental items that are immaterial in the context of the contract are recognized as expense. Unearned revenues are recorded when cash payments are received or due in advance of the performance of the services. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
Income taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, "Accounting for Income Taxes". The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. As of July 31, 2020, the Company did not have any amounts recorded pertaining to uncertain tax positions.
Fair value measurements
The Company adopted the provisions of ASC Topic 820, "Fair Value Measurements and Disclosures", which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement.
10
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2022
(Unaudited)
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Level 1 - quoted prices in active markets for identical assets or liabilities
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 - unobservable inputs reflecting management's assumptions about the inputs used in pricing the asset or liability (for example cash flow modeling inputs based on assumptions) The Company has no assets or liabilities valued at fair value on a recurring basis.
Consolidation of financial statements
Hammer Fiber Optics Holdings Corp. is the parent company and sole shareholder of Hammer Wireless Corporation and its subsidiaries, 1stPoint Communications, LLC and its subsidiaries (which includes Shelcomm, Inc), Endstream Communications, LLC and American Network Inc., Hammer Wireless [SL], Ltd, and HammerPay [USA], Ltd. The financial statements for Hammer Fiber Optics Holdings Corp. and its wholly-owned subsidiaries are reported on a consolidated basis. All significant intercompany accounts and transactions have been eliminated. Its subsidiaries Open Data Centers, LLC and Hammer Fiber Optics Investments, Ltd. are discontinued and are considered discontinued operations. Open Data Centers, LLC was dissolved on December 30, 2020.
Basic and Diluted Earnings (Loss) Per Share
The basic earnings (loss) per share are calculated by dividing the Company's net income available to common shareholders by the weighted average number of common shares during the year. The diluted earnings (loss) per share is calculated by dividing the Company's net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company. As of April 30, 2021, and April 30, 2020, there were no common stock equivalents outstanding.
Recent accounting pronouncements
In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718) ("ASU 2018-07"). ASU 2018-07 provides for improvements to nonemployee share-based payment accounting by expanding the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The awards will be measured at grant date, consistent with accounting for employee share-based payment awards. The measurement date has been redefined as the date at which the grantor and grantee reach a mutual understanding of the key terms and conditions of the award. The requirement to reassess classification of equity- classified awards upon vesting has been eliminated. We do not expect the adoption of this standard to have a material impact on the Company's financial statements. The Company adopted ASU 2018-07 August 1, 2018.
In February 2016, FASB issued ASU No. 2016-02, Accounting Standards Update No. 2016-02, Leases (Topic 842). ASU 2016-02 provides for improvements for accounting guidance related to leasing treatments on financial statements as a response to user input. The update maintains two classifications of leases, Financial lease and Operating leases. The Update is effective for fiscal years beginning after July 31, 2021. The company has not yet adopted this standard but there may be impact to the presentation of the Company's financial statements during the period of adoption.
11
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2022
(Unaudited)
NOTE 4 - GOING CONCERN
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has consistently sustained losses since its inception. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The Company's continuation as a going concern is dependent upon, among other things, its ability to increase revenues, adequately control operating expenses and receive debt and/or equity capital from third parties. No assurance can be given that the Company will be successful in these efforts.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
The Company intends to continue to address this condition by seeking to raise additional capital through the issuance of debt and/or the sale of equity until such time that ongoing revenues can sustain the business, at which time capitalization may be considered through other means.
NOTE 5 - DISCONTINUED OPERATIONS
Hammer Fiber Optics Investment Ltd ceased operations in the Atlantic County geographical market on October 31, 2018 when Verizon Communications, LLC terminated the spectrum lease agreement. The operations of Hammer Fiber Optics Investments, Ltd were classified as a discontinued operation. Reporting of the discontinued operation is in accordance with Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.
Open Data Centers, LLC ceased operations at its sole location in Piscataway, NJ on May 1, 2020. The operations of Open Data Centers, LLC were classified as a discontinued operation. Reporting of the discontinued operation is in accordance with Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.
12
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2022
(Unaudited)
NOTE 5 - DISCONTINUED OPERATIONS (CONTINUED)
The following summarizes the assets and liabilities of the discontinue operations:
| April 30, | July 31, | |||||
| 2022 | 2021 | |||||
| Assets | ||||||
| Property and equipment- net | ||||||
| Total Assets | $ | $ | ||||
| Liabilities and Net Assets | ||||||
| Current Liabilities | ||||||
| Accounts payable | $ | $ | ||||
| Total current liabilities | ||||||
| Net assets (liabilities) | $ | $ |
The following summarizes the operations of the discontinued operations:
| April 30, 2022 |
January 31, 2021 |
|||||
| Revenue | $ | $ | ||||
| Operating expenses | ||||||
| Loss from operations | ||||||
| Other income (expense) | ||||||
| Net Income | $ | $ |
13
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2022
(Unaudited)
NOTE 6 - COMMITMENTS AND LEASES
In discontinuing Open Data Centers, LLC and Hammer Fiber Optics Investments, Ltd. the company no longer has any material long term leases or obligations.
NOTE 7 - PROPERTY AND EQUIPMENT
As of April 30, 2022 and July 31, 2021, property and equipment consisted of the following:
| April 30, | July 31, | ||||||||
| 2022 | 2021 | Life | |||||||
| Computer and Telecom equipment | $ | $ | |||||||
| Less: Accumulated depreciation | ( |
) | ( |
) | |||||
| Total | $ | $ |
NOTE 8 - INDEFINITE LIVED INTANGIBLE ASSETS
The Company has $
NOTE 9 - RELATED PARTY TRANSACTIONS
During the fiscal year ended July 31, 2016, the Company entered into two promissory notes with a related party for an aggregate amount of $
During the nine months ended April 30, 2020, the Company entered into a Stock Purchase Agreement with a related party on May 5, 2020 and May 30, 2020 in the amounts of $
On January 15, 2022 the Company entered into a promissory note for the sum of $
As of April 30, 2022, all of the related party payables are reported as current liabilities in the Consolidated Balance Sheet.
14
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2022
(Unaudited)
NOTE 10 - INCOME TAXES
The Company's income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management's best estimate of current and future taxes to be paid. The Company is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgments and estimate are required in the determination of the consolidated income tax expense. The reconciliation of income tax benefit at the U.S. statutory rate of
| April 30, | ||||||
| 2022 | 2021 | |||||
| Income tax benefit provision at statutory rate | $ | $ | ||||
| Change in valuation allowance | ( |
) | ( |
) | ||
| $ | $ | |||||
The tax effects of temporary differences that give rise to the Company's net deferred tax assets as of April 30, 2022 and July 31, 2021 are as follows:
| April 30, | July 31, | |||||
| 2022 | 2021 | |||||
| Net operating loss | $ | $ | ||||
| Valuation allowance | ( |
) | ( |
) | ||
| $ | $ |
The Company has approximately $
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.
As of April 30, 2022 and April 30, 2021, the Company has no unrecognized income tax benefits. The Company's policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items as a tax expense. No interest or penalties have been recorded during the quarters ended April 30, 2022 and April 30, 2021. As of April 30, 2022 and April 30, 2021, the Company did not have any amounts recorded pertaining to uncertain tax positions.
The tax years from 2015 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities.
15
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2022
(Unaudited)
NOTE 11 - STOCKHOLDERS' EQUITY
Treasury Stock
In July 2016, certain shareholders of the Company contributed
On January 4, 2019 the Company repurchased
During the three months ended January 31, 2022, the company reclaimed
During the three months ended April 30, 2022, the Company issued
As a result of these transactions, the Company has a balance of
NOTE 12 - FOREIGN CURRENCY
We transact business in various foreign currencies including the Euro and the Leone. In general, the functional currency of a foreign operation is the local country's currency. Consequently, revenues and expenses of operations outside the United States are translated into USD Dollars using the weighted-average exchange rates on the period end date and assets and liabilities of operations outside the United States are translated into US Dollars using the change rate on the balance sheet dates. The effects of foreign currency translation adjustments are not material to the Company's accompanying financial statements.
NOTE 13 - CLAIMS
The following parties have filed claims against Hammer Fiber Optics Investments Ltd and are not secured:
| Calvi Electric v. Hammer Fiber Optics Inv, Ltd. | $ | ||
| 15 Corporate Place, LLC v. Open Data | $ | ||
| Horizon Blue Cross v. Hammer Fiber Optics Inv, Ltd. | $ | ||
| Cross River Fiber v. Hammer Fiber Optics Inv, Ltd. | $ |
The matter of 15 Corporate Place, LLC v. Open Data Centers, LLC the plaintiff failed to appear for the trial on May, 16, 2022 and a new trial date of July 11, 2022 has been established. The claim is secured only by the security deposit provided under the lease agreement. Claims are only against the subsidiary, which does not currently have any assets, and there is no other security under the lease. Open Data Centers, LLC operated a single data center facility in Piscataway, NJ, on the premise of the plaintiff. The plaintiff is in possession of the premises and a security deposit made by the founders of the LLC in 2012. The plaintiff has offered a settlement of release of the security deposit and an additional $
16
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2022
(Unaudited)
NOTE 14 - NOTES PAYABLE
On February 11, 2022, the Company entered into a Securities Purchase Agreement (the "Mast SPA") by and between the Company and Mast Hill Fund, L.P. ("Mast"). Pursuant to the terms of the Mast SPA, the Company agreed to sell to Mast and Mast agreed to purchase from the Company, a promissory note in the aggregate principal amount of $
Pursuant to the terms of the Mast SPA, the Company also agreed to issue (i) a common stock purchase warrant to purchase
The Mast Note bears interest at a rate of
The foregoing description of the Mast SPA, the Mast Note and the Mast Warrants does not purport to be complete and is qualified in its entirety by reference to the Mast SPA, the Mast Note, the First Mast Warrant and the Second Mast Warrant, copies of which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4 to Form 8-K filed on February 23, 2022.
On February 17, 2022, the Company entered into a Securities Purchase Agreement (the "Talos SPA") by and between the Company and Talos Victory Fund, LLC ("Talos"). Pursuant to the terms of the Talos SPA, the Company agreed to sell to Talos, and Talos agreed to purchase from the Company, a promissory note in the aggregate principal amount of $
Pursuant to the terms of the Talos SPA, the Company also agreed to issue (i) a common stock purchase warrant to purchase
The Talos Note bears interest at a rate of
NOTE 15 - SUBSEQUENT EVENTS
None
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The following Management's Discussion and Analysis should be read in conjunction with Hammer Fiber Optics Holdings Corp., financial statements and the related notes thereto. The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words "believe," "plan," "intend," "anticipate," "target," "estimate," "expect," and the like, and/or future-tense or conditional constructions ("will," "may," "could," "should," etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Report on Form 10-Q. The Company's actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report on Form 10-Q.
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other financial data included elsewhere in this report. See also the notes to our condensed consolidated financial statements and Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K/A for the year ended July 31, 2020, filed with the SEC on November 13, 2020.
Results of Operations
Three Months Ended April 30, 2022 Compared to the Three Months Ended April 30, 2021
Revenues for the three months ended April 30, 2022 and April 30, 2021 were $819,131 and $611,237, respectively, an increase of 34.01%. The increase was primarily due to the expansion of the Company's Over-the-Top ("OTT") business segment which includes its SMS messaging and hosting business units and contributions from its fixed wireless operations in Huntsville, AL.
During the three months ended April 30, 2022, the Company incurred total operating expenses of $1,049,914 compared with $609,606, an increase of 72.23%, for the comparable period ended April 30, 2021. The increase was primarily due to the addition of the financial technologies business unit and expenses of ongoing operations of the HammerPay subsidiary.
Operating loss increased to $230,783 during the three months ended April 30, 2022 as compared with income of $1,631, an increase of 1,4249.79%. The loss was primarily due to expenses associated with the ongoing operations of the HammerPay subsidiary.
During the three months ended April 30, 2022 and April 30, 2021 interest and other expense was $589,937 and $9,908 respectively. The increase was due to interest and borrowing costs on new facilities.
During the three months ended April 30, 2022 the Company recorded a loss of $810,720 as compared to a loss of $28,277 for the three months ended April 30, 2021, an increase of 2,767.07%. The increase in loss was primarily due to the addition of the financial technologies business unit and expenses of ongoing operations of the HammerPay subsidiary.
.
Nine Months Ended April 30, 2022 Compared to the nine Months Ended April 30, 2021
Revenues for the nine months ended April 30, 2022 and April 30, 2021 were $2,039,367 and $1,604,927, respectively, an increase of 27.06%. The increase was primarily due to the expansion of the Company's Over-the-Top ("OTT") business segment which includes its SMS messaging and hosting business units and contributions from its fixed wireless operations in Huntsville, AL.
During the nine months ended April 30, 2022, the Company incurred total operating expenses of $2,424,235 compared with $1,655,232, an increase of 46.46%, for the comparable period ended April 30, 2021. The increase in loss was primarily due to the addition of the financial technologies business unit and expenses of ongoing operations of the HammerPay subsidiary and the expansion of the Company's Over-the-Top ("OTT) business segment which includes its SMS messaging and hosting business unit.
Operating loss increased to $384,868 during the nine months ended April 30, 2022 as compared with a loss of $50,305, and increase of 665.07%. The increase in loss was primarily due to the addition of the financial technologies business unit and expenses of ongoing operations of the HammerPay subsidiary and the expansion of the Company's Over-the-Top ("OTT) business segment which includes its SMS messaging and hosting business unit.
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During the nine months ended April 30, 2022 and April 30, 2021 interest and other expense was $622,134 and $20,942 respectively. The increase was due to interest and borrowing costs on new facilities.
During the nine months ended April 30, 2022 the Company recorded a net loss of $1,007,002 as compared to net income of $4,110,749 for the nine months ended April 30, 2021. The decrease was due to expenses associated with the ongoing operations of the HammerPay subsidiary and the one-time income adjustments due to settlement of liabilities associated with discontinued operations.
Liquidity and Capital Resources
The Company is at risk of remaining a going concern. Its ability to remain a going concern is dependent upon whether the company can raise debt and/or equity capital from third-party sources for both working capital and business development needs until such time as the Company may be substantially sustained as a going concern through cash flow from operations or the Company increases its cash flow from operations through sale of services in the ongoing business units, Endstream Communications, 1stPoint Communications, its new markets and the continuing operations of the HammerPay business.
Cash Flow from Operating Activities
During the nine months ended April 30, 2022 the Company's total cash increased by $649,369, compared to an increase in cash of $1,447 in the nine months ended April 30, 2021. Cash flow used in Operating Activities was $156,925, compared to $340,932 in the nine months ended April 30, 2021. This was primarily due to improved operational efficiencies and the ongoing operations of the HammerPay business.
Cash Flow from Investing Activities
During the nine months ended April 30, 2022, the Company's investing activities used $170,923, compared to $25,535 used in investing activities during the six months ended April 30, 2021. The decrease was primarily due to the investments in licenses for Hammer Pay.
Cash Flow from Financing Activities
During the nine months ended April 30, 2022, the Company netted $977,217 in cash from financing activities compared with $367,944 used during the nine months ended April 30, 2021. The increase was mainly due to the proceeds from notes payable.
Going Concern
As of April 30, 2022, doubt existed as to the Company's ability to continue as a going concern as the Company has no certainty of earning additional revenues in the future, has a working capital deficit and an overall accumulated deficit since inception. The Company will require additional financing to continue operations either from management, existing shareholders, or new shareholders through equity financing and/or sources of debt financing. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. The financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Future Financings
We will continue to rely on equity sales of our common shares in order to continue to fund business operations. Issuances of additional shares may result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of equity securities or arrange for debt or other financing in amounts sufficient to fund our operations and other development activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
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Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States, applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
Recently Issued Accounting Pronouncements
The Company has implemented new accounting pronouncements that are relevant to the company and are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Management's Report on Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer to allow for timely decisions regarding required disclosure.
Management's Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibilities, estimates, and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Our management assessed the effectiveness of our internal control over financial reporting as of April 30, 2022. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in Internal Control-Integrated Framework (2013). Our management has concluded that, as of April 30, 2022, our internal control over financial reporting was not effective. This is due to an inherent staffing limitation and the Principal Financial Officer and the President are the same individual. That individual does not maintain day-to-day banking responsibilities to provide some limitation in such risks.
Inherent Limitations on Effectiveness of Controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. The President and Principal Financial Officer are the same individual. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
We have not identified any changes in our internal control over financial reporting that occurred during the period ended April 30, 2021, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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ITEM 1. LEGAL PROCEEDINGS
The following parties have filed claims against Hammer Fiber Optics Investments Ltd and are not secured:
| Calvi Electric v. Hammer Fiber Optics Inv, Ltd. | $ | 9209.69 | |
| 15 Corporate Place, LLC v. Open Data | $ | 1,621,529 | |
| Horizon Blue Cross v. Hammer Fiber Optics Inv, Ltd. | $ | 17,308.58 | |
| Cross River Fiber v. Hammer Fiber Optics Inv, Ltd. | $ | 273,220 |
The matter of 15 Corporate Place, LLC v. Open Data Centers, LLC the plaintiff failed to appear for the trial on May, 16, 2022 and a new trial date of July 11, 2022 has been established. The claim is secured only by the security deposit provided under the lease agreement. Claims are only against the subsidiary, which does not currently have any assets, and there is no other security under the lease. Open Data Centers, LLC operated a single data center facility in Piscataway, NJ, on the premise of the plaintiff. The plaintiff is in possession of the premises and a security deposit made by the founders of the LLC in 2012. The plaintiff has offered a settlement of release of the security deposit and an additional $35,000 in cash.
Cross River Fiber has advanced its claim against Hammer Fiber Optics Investments, Ltd. Cross River Fiber has expanded its claim to include Hammer Fiber Optics Holdings Corp, 1stPoint Communications, LLC, Endstream Communications, LLC, Open Data Centers, LLC, Manhattan Carrier Company, LLC, Erik Levitt personally, Local Telecommunications Services - FL, LLC, Local Telecommunications Services - NY, LLC, American Network Inc and Hammer Wireless Corporation. There never was, nor has there ever been, a contract between any of these entities or Mr. Levitt personally and Cross River Fiber, nor is there any security under the agreement between Cross River Fiber and Hammer Fiber Optics Investments, Ltd. The claims in this matter are similar to those made by Zayo Group and Crown Castle Fiber, which were both settled.
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. OTHER INFORMATION
Please refer to our Current Reports on Form 8-K filed since August 19, 2016, which are incorporated by reference herein.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 2022
(Unaudited)
ITEM 5. EXHIBITS
| Exhibit | ||||
| Number | Description of Exhibit | |||
| 31.1 | Certification of Principal Executive Officer Pursuant to Rule 13a-14 | Filed herewith. | ||
| 32.1 | CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act | Filed herewith. | ||
| 101.INS* | Inline XBRL Instance Document–the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document | Filed herewith. | ||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | Filed herewith. | ||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith. | ||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith. | ||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed herewith. | ||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith. | ||
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | Filed herewith. |
*Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.
22
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| HAMMER FIBER OPTICS HOLDINGS CORP | |
| Date: June 14, 2022 | /s/ Erik B. Levitt |
| Erik B. Levitt | |
| Principal Executive Officer | |
| Date: June 14, 2022 | /s/ Erik B. Levitt |
| Erik B. Levitt | |
| Principal Financial Officer |
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