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EX-32.2 - EXHIBIT 32.2 SECTION 906 CERTIFICATION - HAMMER FIBER OPTICS HOLDINGS CORPf10qa043018_ex32z2.htm
EX-32.1 - EXHIBIT 32.1 SECTION 906 CERTIFICATION - HAMMER FIBER OPTICS HOLDINGS CORPf10qa043018_ex32z1.htm
EX-31.2 - EXHIBIT 31.2 SECTION 302 CERTIFICATION - HAMMER FIBER OPTICS HOLDINGS CORPf10qa043018_ex31z2.htm
EX-31.1 - EXHIBIT 31.1 SECTION 302 CERTIFICATION - HAMMER FIBER OPTICS HOLDINGS CORPf10qa043018_ex31z1.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended April 30, 2018

 

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from:

 

Commission file number 000-1539680

 

HAMMER FIBER OPTICS HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

 

NEVADA

 

98-1032170

(State or Other Jurisdiction of Incorporation of Organization)

 

(I.R.S. Employer Identification No.)

 

311 Broadway

Point Pleasant Beach, NJ 08742

(Address of principal executive offices)

 

 

844-413-2600

(Registrant’s telephone number, including area code)

 

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 has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405of 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). Yes [X] No [   ] (Not required)

 

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 definition of “large accelerated filer and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large Accelerated Filer

[   ]

Non-Accelerated Filer

[   ]

 

 

 

 

Accelerated Filer

[   ]

Smaller Reporting Company

[X]

 

 

 

 

Emerging Growth Company

[X]

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [   ] No [X]

 

As of June 15, 2018, there were 60,503,341 shares of the registrant’s $.001 par value common stock issued and 52,543,162 shares outstanding.


1


 

 

EXPLANATORY NOTE

 

The purpose of this Amendment to the Quarterly Report of Hammer Fiber Optics, Inc. (the “Company”) on Form 10-Q for the period ended April 30, 2018, filed with the Securities and Exchange Commission on June 14, 2018 (the “Form 10-Q”), is to correct the General and Administrative Expense in the 2017 column of the Condensed Consolidated Statements of Operations and the resulting impact of on the Condensed Consolidated Statement of Cash Flows and Condensed Consolidated Balance Sheets. The correction addresses unrecorded transactions in September 2017 and February 2018 for the issuance of treasury stock to third parties as compensation for services rendered. The correction further amends Exhibit 101 to the Form 10-Q furnished in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the consolidated financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

 

Other than the aforementioned, no other changes have been made to the Form 10-Q. This Amendment to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

 

Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.


2


 

 

HAMMER FIBER OPTICS HOLDINGS CORP.

 

TABLE OF CONTENTS

 

 

Page

 

 

PART I. FINANCIAL INFORMATION

 

 

 

ITEM 1.

FINANCIAL STATEMENTS

4

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

13

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

15

ITEM 4.

CONTROLS AND PROCEDURES

15

 

 

PART II. OTHER INFORMATION

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

17

ITEM 1A.

RISK FACTORS

17

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

17

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

17

ITEM 4.

MINE SAFETY DISCLOSURES

17

ITEM 5.

OTHER INFORMATION

17

ITEM 6.

EXHIBITS

17

 

 

 

 

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


 

 

HAMMER FIBER OPTICS HOLDINGS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

Restated

 

 

 

 

April 30, 2018

 

July 31, 2017

ASSETS

 

(UNAUDITED)

 

 

Current Assets

 

 

 

 

Cash

$

1,580

$

528,380

Accounts Receivable, net

 

33,012

 

7,488

Other current assets

 

33,729

 

44,791

Total current assets

 

68,321

 

580,659

 

 

 

 

 

Other Assets

 

 

 

 

Property and equipment, net

 

4,784,386

 

5,005,016

Intangible assets

 

18,934

 

18,934

Notes receivable, long-term

 

235,000

 

235,000

Total other assets

 

5,038,320

 

5,258,950

 

 

 

 

 

TOTAL ASSETS

$

5,106,641

$

5,839,609

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

Accounts payable

$

266,558

$

111,612

Unearned Revenue

 

128,000

 

6,905

Notes Payable

 

3,624,067

 

-

Current portion of long-term notes payable - related parties

 

103,000

 

1,210,000

Accrued interest

 

200,332

 

107,094

Total current liabilities

 

4,321,957

 

1,435,611

 

 

 

 

 

Notes payable - related party

 

-

 

2,394,567

 

 

 

 

 

TOTAL LIABILITIES

 

4,321,957

 

3,830,178

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

Common stock, $0.001 par value, 250,000,000 shares authorized,

60,503,341 shares issued at April 30, 2018 and July 31, 2017;

52,536,495 and 51,960,948 shares outstanding at April 30, 2018

and July 31, 2017, respectively.

 

60,503

 

60,503

Treasury stock

 

-

 

-

Additional paid-in capital

 

13,980,120

 

10,625,287

Accumulated deficit

 

(13,255,939)

 

(8,676,359)

Total Stockholders' Equity

 

784,684

 

2,009,431

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

5,106,641

$

5,839,609

 

The accompanying notes are an integral part of these condensed consolidated financial statements.


4


 

 

HAMMER FIBER OPTICS HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

 

 

 

 

3 Months

Ended

April 30,

2018

 

3 Months

Ended

April 30,

2017

 

Restated

9 Months

Ended

April 30,

2018

 

9 Months

Ended

April 30,

2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REVENUES, net of discounts

$

56,551

$

20,315

$

146,525

$

58,329

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Operations and maintenance costs

 

289,758

 

729

 

298,014

 

20,592

General and administrative

 

683,885

 

995,365

 

3,602,742

 

2,939,640

Depreciation expense

 

286,956

 

244,562

 

849,901

 

630,639

Total operating expenses

 

1,260,599

 

1,240,656

 

4,750,657

 

3,590,871

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

(1,204,048)

 

(1,220,341)

 

(4,606,445)

 

(3,532,542)

 

 

 

 

 

 

 

 

 

OTHER INCOME AND EXPENSE

 

 

 

 

 

 

 

 

Interest expense

 

(94,154)

 

(68,108)

 

(269,742)

 

(233,935)

Interest income

 

1,765

 

21,728

 

5,295

 

25,254

Other Income

 

174,000

 

(1,098)

 

289,000

 

1,850

Total other income (expense)

 

81,611

 

(47,479)

 

24,553

 

(206,831)

 

 

 

 

 

 

 

 

 

NET LOSS

$

(1,122,437)

$

(1,267,820)

$

(4,579,580)

$

(3,739,373)

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic and diluted

 

52,498,376

 

51,496,759

 

52,326,786

 

51,357,471

 

 

 

 

 

 

 

 

 

Loss per common share - basic and diluted

$

(0.02)

$

(0.02)

$

(0.09)

$

(0.07)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.


5


 

 

HAMMER FIBER OPTICS HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

For the Nine Months Ended April 30,

 

 

Restated

 

 

 

 

2018

 

2017

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

Net loss

$

(4,579,580)

$

(3,739,373)

Adjustments to reconcile net loss to net cash

 

 

 

 

used in operating activities:

 

 

 

 

Treasury stock issued for services

 

1,218,223

 

-

Depreciation expense

 

849,901

 

630,639

Changes in operating assets and liabilities

Current assets

 

11,062

 

12,184

Accounts receivable

 

(25,524)

 

-

Accounts payable

 

93,196

 

(632,020)

Accrued interest

 

93,238

 

102,165

Increase in Unearned Revenue

 

128,000

 

-

 

 

 

 

 

Net cash used in operating activities

 

(2,211,484)

 

(3,626,405)

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

Acquisition of property and equipment

 

(567,521)

 

(538,607)

Cash in lieu of Note Receivable

 

-

 

65,000

Net cash used in investing activities

 

(567,521)

 

(473,607)

 

Cash flows from financing activities:

 

 

 

 

Proceeds from loans payable

 

103,000

 

-

Proceeds from loans payable – related party

 

20,000

 

310,000

Repayment of loans payable

 

(6,905)

 

(28,147)

Repayment of loans payable – related party

 

(500)

 

-

Proceeds from subscription of treasury stock held by subsidiary

 

2,136,610

 

3,329,243

Net cash provided by financing activities

 

2,252,205

 

3,611,096

 

 

 

 

 

Net change in cash

 

(526,800)

 

(488,916)

Cash at beginning of period

 

528,380

 

563,754

Cash at end of period

 

$ 1,580

 

$ 74,838

 

 

 

 

 

Supplemental disclosures of cash flows information:

 

 

 

 

Interest paid

$

175,000

$

130,791

Taxes paid

$

8,044

$

7,362

 

 

 

 

 

Non-cash investing and financing activities:

 

 

 

 

Purchase of property and equipment with accounts payable

$

61,750

$

157,982

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.


6


 

 

HAMMER FIBER OPTICS HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2018

(UNAUDITED)

 

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

 

Hammer Fiber Optics Holdings Corp. (“the Company”) is an alternative telecommunications carrier formed to provide high capacity broadband through a wireless access network. Hammer Fiber Optics Holdings Corp. is the parent company and sole shareholder of Hammer Wireless Corporation. The financial statements for Hammer Fiber Optics Holdings Corp. and its wholly-owned subsidiary are reported on a consolidated basis. All significant intercompany accounts and transactions have been eliminated.

 

The interim financial statements for the fiscal quarter ending April 30, 2018 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, 2017, as filed with the Securities and Exchange Commission (“the SEC”) at www.sec.gov.

 

NOTE 2 – 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”).

 

Reclassifications

 

Costs incurred during the three and nine-month periods ended April 30, 2017, and previously recorded as Cost of Sales, have been reclassified as Operations and Maintenance expenses in the comparable periods in 2018.

 

Use of estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Cash and cash equivalents

 

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.

 

Property and equipment

 

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. For network service equipment, the useful life is ten years. For furniture and fixtures, the useful life is five years. Leasehold Improvements are depreciated over six years. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

 

Impairment of long-lived assets

 

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that 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 to be 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 impairment losses.


7


 

 

HAMMER FIBER OPTICS HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2018

(UNAUDITED)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

Notes Receivable

 

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, they are recorded at amortized cost less any provision for impairment. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty is more likely than not to default.

 

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.

 

Capitalized software costs

 

Costs incurred during the application development stage for software programs are capitalized. These costs consist primarily of direct costs incurred for professional services provided by third parties and compensation costs of employees which relate to software developed for internal use during the application stage. Costs incurred in the preliminary project stage of development and the post-implementation stage are expensed in the periods when they are incurred. Capitalized software costs are included in property and equipment, net and are being amortized over their estimated useful life of five years.

 

Revenue recognition

 

The Company recognizes revenues and the related costs when a sales or service arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. Amounts invoiced or collected in advance of product delivery or providing services are recorded as unearned revenue or customer deposits. The company accrues for sales returns, bad debts, and other allowances based on its historical experience.

 

Revenue is recorded net of discounts provided to customers. Discounts applied during the three and nine month periods ended April 30, 2018 were $4,200 and $17,467, respectively.

 

The Company’s revenues consist primarily of subscription agreements for its broadband internet and voice-over-IP phone services. Residential broadband service delivered to customers over the Company’s hybrid fiber and wireless network in Atlantic County, New Jersey is the primary revenue source. Revenues are supplemented by phone and add-on services. Broadband services delivered via fiber optics to enterprise businesses account for the remaining sources of revenue. Services are billed monthly to subscribers on either a one- year or two-year contract for residential customers and three-year contracts for enterprise business customers. Revenue begins accruing as service is delivered at commencement of the customer’s service contract.


8


 

 

HAMMER FIBER OPTICS HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2018

(UNAUDITED)

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

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.

 

Fair value measurements

 

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

 

The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

 

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 — quoted prices in active markets for identical assets or liabilities

 

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable

 

Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions) The Company has no assets or liabilities valued at fair value on a recurring basis.

 

Consolidation of financial statements

 

Hammer Fiber Optics Holdings Corp. is the parent company and sole shareholder of Hammer Wireless Corporation. The financial statements for Hammer Fiber Optics Holdings Corp. and its wholly-owned subsidiary are reported on a consolidated basis. All significant intercompany accounts and transactions have been eliminated.

 

Basic and Diluted Earnings (Loss) per Common 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, 2018 and 2017, there were no common stock equivalents outstanding.

 

Recent accounting pronouncements

 

The Company does not expect the adoption of any recent accounting pronouncements to have a material impact on its financial statements.


9


 

 

HAMMER FIBER OPTICS HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2018

(UNAUDITED)

 

NOTE 3 – NOTES RECEIVABLE

 

During the fiscal year ended July 31, 2016, the Company entered into a loan agreement with MEK Investments Inc. for an aggregate amount of $235,000. The loan matures June 30, 2018 at which time the principal is due in its entirety, in addition to simple interest accrued at 3% per year.

 

The Company had entered into a loan agreement during the year ended July 2016 with Zena Capital, LLC for an aggregate amount of $1,000,000. Payments of $250,000 had been made against the loan however the loan was in default as of July 31, 2017. The Company recorded a reserve against the outstanding balance of $750,000 in July 2017. Payments totaling $289,000 were received during the nine months ended April 30, 2018 and were recorded as Other Income.

 

NOTE 4 – INDEFINITE LIVED INTANGIBLE ASSETS

 

The Company has $18,934 of recognized indefinite lived intangible assets, which consist of the ownership of Internet Protocol version 4 (IPv4) address blocks. These assets are not amortized and are evaluated routinely for potential impairment. If a determination is made that the intangible asset is impaired after performing the initial qualitative assessment, the asset’s fair value will be calculated and compared with the carrying value to determine whether an impairment loss should be recognized.

 

NOTE 5 – RELATED PARTY TRANSACTIONS

 

On October 9, 2016, the Company entered into a short-term loan agreement with a family member of a member of the Company’s Board of Directors. Under the agreement, the lender advanced $100,000 to the Company for the purpose of providing working capital. The loan carries an annual interest rate of 3%. The Company is currently in default on this loan. On September 15, 2016, the Company received $210,000 from a family member of a member of the Board of Directors, also for the purpose of working capital, and has recorded such amount as a deposit in anticipation of executing a loan agreement. As of April 30, 2018, the full $310,000 is due and outstanding.

 

During the fiscal year ended July 31, 2016, the Company entered into two promissory notes with a related party for an aggregate amount of $2,400,000 and $1,000,000, respectively. The $2,400,000 note matures on January 4, 2019. The terms consist of ten principal and interest payments due quarterly in the amount of $300,000 for total payments of $3,000,000. The Company is currently in default on this loan. To date, the Company has made payments on this note amounting to $725,831. The payments were applied to interest accrued as of the time of payment as well as to principal. The principal balance was $2,294,067 at April 30, 2018 and July 31, 2017 respectively. The interest accrued was $137,052 at April 30, 2018 and $69,594 at July 31, 2017 respectively.

 

The $1,000,000 note matured June 9, 2018 at which time the principal was due in its entirety, in addition to simple interest accrued at 3%. The principal balance was $1,000,000 at April 30, 2018 and July 31, 2017 respectively. The company is currently in default on this loan.

 

NOTE 6 – CONVERTIBLE DEBT

 

On February 12, 2018 the Company entered into an agreement for a convertible promissory note for the sum of $103,000. The note accrues interest at a rate of 12 percent per annum due at maturity. The note matures nine months from issuance date. Prepayment of the note is subject to a premium charge based on the amount of days prepaid before the maturity date. The conversion aspect of the note allows conversion into the Company’s common stock at a discount of 37 percent of the stock’s market price. The holder shall have the right after 180 days to convert all or part of the note at their discretion.

 

NOTE 7 – DEFERRED REVENUE

 

On February 5, 2018 the Company entered into a customer service agreement with a third party for the licensing of a designated channel on the Company’s TV media platform. The agreement covers the licensing and support services to be provided in perpetuity to the customer to display their own created media over the platform. The total amount of the agreement is $239,000 with 50% of the contract, or $119,500, collected by April 30, 2018 over several installment. Commencement of the work did not begin until the 50% retainer was received. The Company is set to the deliver the services in six months and will collect the balance upon receipt, however the customer retains the rights to prepay the final balance in advance. The Company has recorded the cumulative transaction of $119,500 as unearned revenue as the service has yet to be provided and the licensing has yet to take effect.


10


 

 

HAMMER FIBER OPTICS HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2018

(UNAUDITED)

 

NOTE 7 – DEFERRED REVENUE (CONTINUED)

 

On March 1, 2018 the Company entered into a service order agreement with a customer in the amount of $8,500. The service is schedule to be provided in July and work has not yet begun on the project. The Company has recorded unearned revenue for this transaction in the amount of $8,500 for the three months ended April 30, 2018.

 

NOTE 8 – STOCKHOLDERS’ EQUITY

 

Treasury Stock

 

In July 2016, certain shareholders of the Company contributed 9,291,670 restricted shares of their common stock to the Company’s wholly-owned subsidiary, Hammer Wireless Corporation (“Treasury Shares”), for the purpose of effecting acquisitions, joint ventures or other business combinations with third parties. According to ASC 810-10-45 Consolidations, these shares are accounted for as treasury stock.

 

During the year ended July 31, 2017, Hammer Wireless sold 749,277 of the treasury shares to third parties and contributed the proceeds to the Company. Since such contribution was an inter-company transaction, any impact on the financial statements is eliminated in the consolidation of these financial statements.

 

During the nine months ended April 30, 2018, the Company received cash of $2,136,609 from the sale of 438,247 Treasury Shares sold to third parties. Additionally, on September 18, 2017, the Company issued 74,000 treasury shares to third parties for services provided. The Company valued these shares using the closing quoted price of the Company’s common stock on the date of issuance ($12.75). This resulted in compensation expense of $943,500.

 

The Company also issued 63,300 Treasury Shares to third parties for services provided, on February 9, 2018. The Company valued these shares using the closing quoted price of the Company’s common stock on the date of issuance ($4.34). This resulted in compensation expense of $274,723.

 

As a result of these transactions, the Company has a balance of 7,966,846 treasury shares as of April 30, 2018.

 

Preferred Stock

 

During the year ended July 31, 2016, the Company issued an additional 759,619 Class A shares and 992,481 Class B shares for proceeds of $3,140,094. After the merger effected July 19, 2016, the Company had 60,503,341 common shares outstanding with a par value of $0.001 per share. The Class A share of HFOI have been converted to common stock and as a result the company currently has only one class of stock (common).

 

NOTE 9 – 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. 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.


11


 

 

HAMMER FIBER OPTICS HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2018

(UNAUDITED)

 

 

NOTE 10 - RESTATEMENT

 

This amended Form 10-Q for the quarterly period ended January 31, 2018 addresses an unrecorded Administrative and General Expense for treasury stock issued to third parties for services rendered. The effect of such misstatement for the nine months ended, and as of January 31, 2018, as described in Note 8, on the financial statements presented herein is as follows:

 

 

 

As

originally

reported

 

As

Adjusted

 

Effect of

change

 

 

 

 

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

Additional Paid-in Capital

$

13,038,932

$

13,980,120

$

941,188

Accumulated Deficit

$

(12,314,752)

$

(13,255,939)

$

(941,187)

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations

 

 

 

 

 

 

General and administrative expenses

$

2,659,242

$

3,602,742

$

943,500

Operations and Maintenance

$

300,327

$

298,014

$

(2,313)

Total Operating Expenses

$

3,809,470

$

4,750,657

$

941,187

Loss from Operations

$

(3,662,945)

$

(4,606,445)

$

(943,500)

Net loss

$

(3,638,393)

$

(4,579,580)

$

(941,187)

Loss per share - basic and diluted

$

(0.05)

$

(0.09)

$

(0.04)

 

 

 

 

 

 

 

Condensed Consolidated Statement of Cash Flows

 

 

 

 

 

 

Net loss

$

(3,361,357)

$

(4,579,580)

$

(1,218,223)

Treasury stock for services

$

-

$

1,218,223

$

1,218,223

 

NOTE 11–SUBSEQUENT EVENTS

 

Subsequent to April 30, 2018 the Company received cash of $10,001 from the sale of 6,667 Treasury Shares sold to third parties.


12


 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following Management’s Discussion and Analysis should be read in conjunction with Hammer Fiber Optics Holdings Corp. condensed unaudited financial statements and the related notes thereto. The Management’s Discussion and Analysis contains forward- looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read this Report completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this Report are made as of the date of this Report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward- looking statements, whether as a result of new information, future events or otherwise.

 

The following discussion should be read in conjunction with our audited financial statements for the year ended July 31, 2017 and the related notes thereto. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.

 

Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

 

Results of Operations

 

Three Months Ended April 30, 2018 Compared to the Three Months Ended April 30, 2017

 

Revenues for the three months ended April 30, 2018 and April 30, 2017 were $56,551 and $20,315, respectively. The Company began earning revenues in 2017 as a result of completing the initial portion of its network infrastructure necessary to offer services.

 

During the three months ended April 30, 2018, the Company incurred total operating expenses of $1,260,599 compared with $1,240,656 for the comparable period ended April 30, 2017. The general consistency between comparable periods consisted primarily of a reduction in equipment leasing costs and reduced technical support costs but an increase of operations and maintenance costs due to refinement and further development of the Company’s service platform paid through cash and stock awards as a service for consulting and operational support.

 

The Company recorded depreciation and amortization expense of $286,956 and $244,562 during the three months ended April 30, 2018 and April 30, 2017, respectively. The increase was the result of additional capital assets placed into service to further expand the company’s technology platform.

 

During the three months ended April 30, 2018 and April 30, 2017, interest expense was $94,154 and $68,108, respectively. The increase was the result of the Company issuing additional interest bearing debt during the current period.

 

The Company had entered into a loan agreement during the year ended July 2016 with Zena Capital, LLC for an aggregate amount of $1,000,000. Payments of $250,000 had been made against the loan however the loan was in default as of July 31, 2017. The Company recorded a reserve against the outstanding balance of $750,000 in July 2017. Payments totaling $174,000 were received during the three months ended April 30, 2018 and were recorded as Other Income.

 

Nine Months Ended April 30, 2018 Compared to the Nine Months Ended April 30, 2017

 

Net revenues for the nine months ended April 30, 2018 and April 30, 2017 were $146,525 and $58,329, respectively. The increase in net revenues between the comparable fiscal periods is a result of the Company’s recent initial offering of services and its growing customer base.

 

During the nine months ended April 30, 2018, the Company incurred total operating expenses of $4,750,657 compared to $3,590,871 for the nine months ended April 30, 2017. The increase consisted primarily of $1,218,223 for treasury stock issued to third parties for services (see Note 8). Otherwise, the general consistency between comparable periods results generally from management’s efforts to apply tighter controls on its operating expenses including a reduction of staff and technical support.


13


 

 

The Company recorded depreciation and amortization expense of $849,901 and $630,639 during the nine months ended April 30, 2018 and April 30, 2017, respectively. The increase was the result of additional capital assets placed into service to further expand the company’s technology platform.

 

Interest expense was $269,742 and $233,935 for the nine months ended April 30, 2018 and 2017, respectively. The increase was due to an increase in costs associated with financing of equipment purchases and related party debt.

 

Liquidity and Capital Resources

 

The Company is at risk of remaining a going concern. Its ability to remain a going concern is dependent upon the ability to 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.

 

Cash Flow from Operating Activities

 

During the nine months ended April 30, 2018, the Company used $2,211,484 in cash for operating activities, compared to $3,626,405 in cash used for operating activities during the comparable 2017 period. The primary reason for this decrease is a reduction in the cash used to pay accounts payable which was initially utilized for increased general and administrative expenses required for the Company to assume initial operations on Absecon Island in New Jersey.

 

Cash Flow from Investing Activities

 

During the nine months ended April 30, 2018, the Company’s investing activities consumed $567,521 of cash, compared to $473,607 for the nine months ended April 30, 2017. This increase results primarily from the Company’s continued expenditures for additional equipment for the continued expansion of technology and infrastructure in New Jersey.

 

Cash Flow from Financing Activities

 

During the nine months ended April 30, 2018, the Company received $2,252,205 in cash from financing activities compared with the net cash of $3,611,096 for the nine months ended April 30, 2017. This change was the result of a decrease in the volume of both debt and equity fund raising activity.

 

Going Concern

 

As at April 30, 2018, substantial doubt existed as to the Company’s ability to continue as a going concern as the Company has earned only minimal revenue, 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 presently held by the company’s wholly-owned subsidiary, Hammer Wireless Corporation, in order to continue to fund business operations. Any issuances of additional shares beyond those shares presently held by Hammer Wireless Corporation, may result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of shares held by Hammer Wireless Corporation or issue additional 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.


14


 

 

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 all 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 and our chief financial officer (who is acting as our principal executive officer, principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.

 

As of April 30, 2018, the end of the period covered by this report, we carried out an evaluation, under the supervision of our chief executive officer, with the participation of our principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The officers concluded that the disclosure controls and procedures were not effective as of the end of the period covered by this report.

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, 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, 2017. 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, 2018, our internal control over financial reporting was not effective.


15


 

 

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. 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

 

There have been no changes in our internal controls over financial reporting that occurred during the quarter ended April 30, 2018 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.


16


 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although the Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments.

 

Presently, we know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

 

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

 

There has been no change in our securities since the fiscal year ended July 31, 2017.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

N/A.

 

ITEM 5. OTHER INFORMATION

 

Please refer to our Current Reports on Form 8-K filed since August 19, 2016, which are incorporated by reference herein.

 

ITEM 6. EXHIBITS

 

Exhibit Number

 

Description of Exhibit

 

31.1

 

Certification of Principal Executive Officer Pursuant to Rule 13a-14

 

Filed herewith.

31.2

 

Certification of Principal Financial Officer Pursuant to Rule 13a-14

 

Filed herewith.

32.1

 

CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act

 

Filed herewith.

32.2

 

CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act

 

Filed herewith.

101.INS*

101.SCH*

101.CAL*

101.LAB*

101.PRE*

101.DEF*

 

XBRL Instance Document

XBRL Taxonomy Extension Schema Document

XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Labels Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document

 

Filed herewith. Filed herewith. Filed herewith. Filed herewith. Filed herewith. Filed herewith.


17


 

 

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.

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

HAMMER FIBER OPTICS HOLDINGS CORP.

 

 

 

 

 

 

Date: August 29, 2018

 

/s/ Mark Stogdill

 

 

Mark Stogdill

 

 

President and Principal Executive Officer

 

 

 

Date: August 29, 2018

 

/s/ Michael Cothill

 

 

Michael Cothill

 

 

Chairman and Principal Financial Officer


18