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EX-32.1 - EXHIBIT 32.1 SECTION 906 CERTIFICATION - HAMMER FIBER OPTICS HOLDINGS CORPf10q013117_ex32z1.htm
EX-32.2 - EXHIBIT 32.2 SECTION 906 CERTIFICATION - HAMMER FIBER OPTICS HOLDINGS CORPf10q013117_ex32z2.htm
EX-31.2 - EXHIBIT 31.2 SECTION 302 CERTIFICATION - HAMMER FIBER OPTICS HOLDINGS CORPf10q013117_ex31z2.htm
EX-31.1 - EXHIBIT 31.1 SECTION 302 CERTIFICATION - HAMMER FIBER OPTICS HOLDINGS CORPf10q013117_ex31z1.htm


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________


FORM 10-Q

____________________

 


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


For the quarterly period ended January 31, 2017


      .TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE 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 of incorporation)

 

(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)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  X . No      .


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). 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 definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.


Large Accelerated Filer      . Accelerated Filer      . Non-Accelerated Filer      . Smaller Reporting Company  X .


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


As of February 28, 2017, there were 60,503,341 shares of the registrant’s $0.001 par value common stock issued and outstanding.








HAMMER FIBER OPTICS HOLDINGS CORP.


TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

 

Page

 

 

PART I. FINANCIAL INFORMATION

 

 

 

ITEM 1.

FINANCIAL STATEMENTS

3

ITEM 2.

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

9

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

11

ITEM 4.

CONTROLS AND PROCEDURES

11

 

 

PART II. OTHER INFORMATION

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

12

ITEM 1A.

RISK FACTORS

12

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

12

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

12

ITEM 4.

MINE SAFETY DISCLOSURES

12

ITEM 5.

OTHER INFORMATION

12

ITEM 6.

EXHIBITS

12

 

 




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.





2





Hammer Fiber Optics Holdings Corp.

Condensed Consolidated Balance Sheets

 

 

 


January 31, 2017

 

July 31, 2016

ASSETS

 

(Unaudited)

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 Cash

$

228,934

$

563,754

 Other current assets

 

33,974

 

82,011

 Note receivable, short-term

 

750,000

 

815,000

 

Total current assets

 

1,012,908

 

1,460,765

 

 

 

 

 

 

Other Assets

 

 

 

 

 Property and equipment, net

 

5,252,476

 

5,122,383

 Intangible assets

 

18,934

 

18,934

 Notes receivable, long-term

 

235,000

 

235,000

 Other

 

3,521

 

-

 

Total other assets

 

5,509,931

 

5,376,317

 

 

 

 

 

 

TOTAL ASSETS

$

6,522,839

$

6,837,082

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 Accounts payable

$

101,867

$

651,215

 Deposit - related party

 

210,000

 

-

 Current portion of long-term notes payable

 

20,926

 

28,040

 Current portion of notes payable - related party

 

1,743,384

 

933,333

 Accrued interest

 

171,762

 

7,617

 

Total current liabilities

 

2,247,939

 

1,620,205

 

 

 

 

 

 

 Notes payable

 

-

 

14,022

 Notes payable - related party

 

1,651,183

 

2,361,234

TOTAL LIABILITIES

 

3,899,122

 

3,995,461

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

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

60,503,341 and 60,503,341 shares issued and outstanding, respectively

 

60,503

 

60,503

 Additional paid-in capital

 

7,675,934

 

5,422,284

 Accumulated deficit

 

(5,112,720)

 

(2,641,166)

 

Total Stockholders' Equity

 

2,623,717

 

2,841,621

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$

6,522,839

$

6,837,082

 

 

 

 

 

 

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





3




Hammer Fiber Optics Holdings Corp.

Condensed Consolidated Statements of Operations

(Unaudited)

 

 

 


Three Months Ended

January 31,

 

Six Months Ended

January 31,

 

 

 

2017

 

2016

 

2017

 

2016

 

 

 

 

 

 

 

 

 

 

REVENUE

$

38,014

$

-

$

38,014

$

-

 

 

 

 

 

 

 

 

 

 

COST OF SALES

 

19,863

 

-

 

19,863

 

-

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

18,151

 

-

 

18,151

 

-

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 General and administrative

 

1,106,547

 

264,880

 

1,944,275

 

434,679

 Depreciation expense

 

251,087

 

-

 

386,077

 

-

 

Total operating expenses

 

1,357,634

 

264,880

 

2,330,352

 

434,679

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

(1,339,483)

 

(264,880)

 

(2,312,201)

 

(434,679)

 

 

 

 

 

 

 

 

 

 

OTHER INCOME AND EXPENSE

 

 

 

 

 

 

 

 

 

Interest expense

 

(86,516)

 

(24)

 

(165,827)

 

(3,370)

 

Interest income

 

3,523

 

-

 

3,526

 

-

 

Other Income

 

-

 

-

 

2,948

 

-

 

Total other income (expense)

 

(82,993)

 

(24)

 

(159,353)

 

(3,370)

 

 

 

 

 

 

 

 

 

 

NET LOSS

$

(1,422,476)

$

(264,904)

$

(2,471,554)

$

(438,049)

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding - basic and diluted

 

60,503,341

 

75,000,000

 

60,503,341

 

75,000,000

 

 

 

 

 

 

 

 

 

 

Loss per common share - basic and diluted

$

(0.02)

$

(0.00)

$

(0.04)

$

(0.00)

 

 

 

 

 

 

 

 

 

 

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





4




Hammer Fiber Optics Holdings Corp.

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended January 31

                                                              (Unaudited)

 

 

 

 

 

 

2017

 

2016

 Cash flows from operating activities:

 

 

 

 

 Net loss

$

(2,471,554)

$

(438,049)

 Adjustments to reconcile net loss to net cash  

 

 

 

 

 used in operating activities:

 

 

 

 

   Depreciation expense

 

386,076

 

15,313

   Increase in Other Current Assets

 

44,516

 

(26,865)

   Increase in Accounts Payable

 

(549,348)

 

-

   Deposit - related party

 

210,000

 

-

   Accrued interest

 

164,145

 

148

 Net cash used in operating activities

 

(2,216,165)

 

(449,453)

 

 

 

 

 

 Cash flows from investing activities:

 

 

 

 

   Acquisition of property and equipment

 

(516,169)

 

(270,507)

   Capitalized expenses

 

-

 

(1,264,618)

   Proceeds from notes receivable

 

65,000

 

-

 Net cash used in investing activities

 

(451,169)

 

(1,535,125)

 

 

 

 

 

 Cash flows from financing activities:

 

 

 

 

   Proceeds from loans payable

 

100,000

 

500

   Repayment of loans payable

 

(21,136)

 

(80,500)

   Proceeds from notes payable

 

-

 

2,400,000

   Proceeds from subscription of shares held by subsidiary

 

2,253,650

 

1,762,349

 Net cash provided by financing activities

 

2,332,514

 

4,082,349

 

 

 

 

 

 Net change in cash

 

(334,820)

 

2,097,771

 Cash at beginning of period

 

563,754

 

1,384,527

 Cash at end of period

$

228,934

$

3,482,298

 

 

 

 

 

 Supplemental disclosures of cash flows information:

 

 

 

 

       Interest paid

$

960

$

-

 

 

 

 

 

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





5




HAMMER FIBER OPTICS HOLDINGS CORP.


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2017

(Unaudited)



NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS


Hammer Fiber Optics Holdings Corp. (“the Company”) (formerly Tanaris Power Holdings, Inc.) is an alternative telecommunications carrier formed to provide high capacity broadband through a wireless access network.


The interim financial statements for the fiscal quarter ending January 31, 2017 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/A, for the year ended July 31, 2016, as filed with the Securities and Exchange Commission (“the SEC”) at www.sec.gov.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Basis of presentation


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 accompanying financial statements and related notes for the period ended January 31, 2017 and for the preceding fiscal year, have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

 

Use of estimates


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


Cash and cash equivalents


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


Property and equipment


Property and equipment is stated at cost less accumulated depreciation. Depreciation is recorded on a straight-line basis over the useful lives of the assets. For furniture and fixtures, the useful life is five years, leasehold improvements are capitalized and depreciated over their respective lease terms. 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 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.




6




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. 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.


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 now being amortized over their estimated useful life of five years.


Revenue recognition


The Company’s revenues consist primarily of subscription agreements for its broadband internet, phone and video services. Services are monthly to subscribers.  Revenue is recognized after service is provided.


Research and development costs


Research and development costs are expensed as incurred.


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 January 31, 2017, the Company did not have any amounts recorded pertaining to uncertain tax positions.


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 there are any other new accounting pronouncements that have been issued that may have a material impact on its financial position or results of operations.


Basic and Diluted Loss per Share


Basic loss per share is computed on the basis of the weighted average number of shares outstanding during the period presented. The company has no common stock equivalents. The presentation of fully diluted loss per share is therefore consistent with the calculation of the basic loss per share.



7




Reclassifications


Certain prior period amounts have been reclassified to conform to current period presentation.


NOTE 3 – NOTES RECEIVABLE


During fiscal period ending July 31, 2016 the Company entered into a loan agreement with Zena Capital LLC for the aggregate amount of $1,000,000. The agreement requires repayment of the loan at a rate of $185,000 per month for 5 months with a final payment of $75,000 in month 6 plus accumulated interest. As of January 31, 2017, two payments have been received. A payment of $185,000 was received in July 2016 and a payment of $65,000 was received in December 2016, leaving an outstanding balance of $750,000 at January 31, 2017. The note however, is in default. The loan is collateralized by Hammer common stock issued in the name of Zena Capital LLC having value greater than the outstanding loan balance. Such stock is being held in escrow for the benefit of Hammer until the loan is fully repaid. The Company believes the outstanding balance is fully collectible and therefore, a reserve against this receivable has not been recorded.


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%.


NOTE 4 – 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 is for a period of 6 months and shall accumulate interest at an annual rate of 3%.  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.


During the fiscal year ended July 31, 2016, the Company entered into two promissory notes with a related party (“Lender”) for an aggregate amount of $2,400,000 and $1,000,000, respectively. The $2,400,000 note matures on December 31, 2018. 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.


The $1,000,000 note matures June 9, 2018 at which time the principal is due in its entirety, in addition to simple interest accrued at 3%.


NOTE 5 – STOCKHOLDERS’ EQUITY


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, for the purpose of effecting acquisitions, joint ventures or other business combinations with third parties. Then, Hammer Wireless sold a portion of these restricted 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.


NOTE 6 – GOING CONCERN

 

Until such time that revenues can sustain the operations, the Company will need additional working capital to fund any future projects and ongoing operations. 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 and its ability to receive 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.


NOTE 7 – SUBSEQUENT EVENTS


In Accordance with ASC 855-10, Company management has evaluated all events that have occurred subsequent to January 31, 2017 and has determined there are no material transactions to be reported.



8




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


The following Management's Discussion and Analysis should be read in conjunction with Hammer Fiber Optics Holdings Corp., financial statements and the related notes thereto. The Management's Discussion and Analysis contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect,” and the like, and/or future-tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements in this Report on Form 10-Q. The Company’s actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Report on Form 10-Q.


The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and other financial data included elsewhere in this report. See also the notes to our condensed consolidated financial statements and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K/A for the year ended July 31, 2016, filed with the SEC at www.sec.gov.

 

Results of Operations – Three Months Ended January 31, 2017


During the three months ended January 31, 2017, the Company began providing voice and data services to customers on Absecon Island in New Jersey.  Operating revenues of $38,014 have therefore been recorded for the three months ended January 31, 2017.


During the three months ended January 31, 2017, the Company incurred general and administrative expenses and other operating expenses of $1,357,634 compared to $264,880 for the three months ended January 31, 2016. The increase in expenses is due to the increase in the Company’s general business activities as the company has begun to add customers and therefore, recognize additional costs associated with such increased activity. The increase in operating costs consisted primarily of $272,371 for leased equipment, $171,463 for labor and related employee costs, $163,452 for third party consulting fees, $161,388 for technical support, $34,174 for increased vehicle costs, $20,152 for increased advertising and promotional costs and $20,652 for professional fees.


The Company recorded depreciation expense of $251,087 as a result of capital assets placed into service.


Interest expense increased $86,492 for costs associated with financing of equipment purchases and related party debt.


Net loss for the three months ended January 31, 2017 was $1,422,476 or $.02 per share compared to $264,904 or $.00 per share for the three months ended January 31, 2016.


Results of Operations – Six Months Ended January 31, 2017


Revenues for the six months ended January 31, 2017 are equal to the revenues of $38,014 for the three month period due to the Company providing initial services to customers during the three months ended January 31, 2017.


During the six months ended January 31, 2017, the Company incurred general and administrative expenses and other operating expenses of $2,330,352 compared to $434,679 for the six months ended January 31, 2016. The increase in expenses is due to the increase in the Company’s general business activities as the company has begun to add customers and therefore, recognize additional costs associated with such increased activity. The increase in operating costs consisted primarily of $447,834 for leased equipment, $385,749 for labor and related employee costs, $373,934 for third party consulting fees, $275,069 for technical support, $41,274 for increased vehicle costs, $40,112 for increased advertising and promotional costs and $32,464 for professional fees. The remaining variance was comprised primarily of various miscellaneous net cost reductions of approximately $86,000.


The Company recorded depreciation expense of $386,077 as a result of capital assets placed into service.


Interest expense increased $162,457 for costs associated with financing of equipment purchases and related party debt.


Net loss for the six months ended January 31, 2017 was $2,471,554 or $0.04 per share compared to $438,049 or $0.00 per share for the three months ended January 31, 2016.



9




Liquidity and Capital Resources


As indicated in Note 6 to the financial statements, 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 six months ended January 31, 2017, the Company used $2,216,165 in cash for operating activities, compared to $449,453 in cash used for operating activities during the comparable 2016 period. The primary reason for this increase was the increase in general and administrative expenses required to prepare the company for initial operations on Absecon Island in New Jersey.


Cash Flow from Investing Activities


During the six months ended January 31, 2017, the Company’s investing activities consumed $451,169 of cash, compared to $1,535,125 for the six months ended January 31, 2016 This decrease resulted primarily from a reduction in expenditures required to construct infrastructure on Absecon Island in New Jersey. Such infrastructure investments were substantially incurred to construct and install assets in the prior six month period to service the customer base for which service was initially provided during the three months ended January 31, 2017.


Cash Flow from Financing Activities


During the six months ended January 31, 2017, the Company received $2,332,514 in cash from financing activities compared with proceeds of $4,082,349 received during the six months ended January 31, 2016. This change was the result of a decrease in the volume of both debt and equity fundraising activity.


Going Concern


We have not attained profitable operations and are dependent upon obtaining additional debt and/or equity capital from third-party sources to sustain operations or to pursue acquisitions and other business development activities. For these reasons, there is substantial doubt of our ability 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.


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.




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We regularly evaluate the accounting policies and estimates that we use to prepare our financial statements. A summary of these policies is included in the notes to our financial statements. In general, management's estimates are based on historical experience, on information from third party professionals, and on various other assumptions that are believed to be reasonable under the facts and circumstances. Actual results could differ from those estimates made by management.


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


Disclosure Controls and Procedures


Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Accounting Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of January 31, 2017 (the “Evaluation Date”). Based on that evaluation, the Chief Executive Officer and Chief Accounting Officer have concluded that these disclosure controls and procedures were not effective as of the Evaluation Date as a result of the material weaknesses in internal control over financial reporting.


Disclosure controls and procedures are those controls and procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Accounting Officer, to allow timely decisions regarding required disclosure.


Notwithstanding the assessment that our internal control over financial reporting was not effective and that there were material weaknesses as noted below, we believe that our financial statements contained in our Quarterly Report on Form 10-Q for the quarter ended January 31, 2017 fairly present our financial condition, results of operations and cash flows in all material respects.


Material Weaknesses


Management assessed the effectiveness of our internal control over financial reporting as of Evaluation Date and identified the following material weaknesses:


1.

Certain entity level controls establishing a “tone at the top” were considered material weaknesses. In connection with ongoing efforts to improve the quality of internal controls over financial reporting and overall corporate governance, on January 11, 2017 the Board of Directors formed a separate Audit Committee, a function previously performed by the full Board. The committee is comprised of two independent Directors experienced in matters of accounting and financial reporting.


2.

The Company does not have a whistleblower policy in effect due to the relatively small size of the organization. Such a policy will be given future consideration.


3.

Due to the significant number and magnitude of out-of-period adjustments identified during the year-end closing process, management has concluded that the controls over the period-end financial reporting process were not operating effectively. A material weakness in the period-end financial reporting process could result in us not being able to meet our regulatory filing deadlines and, if not remediated, has the potential to cause a material misstatement or to miss a filing deadline in the future. Management override of existing controls is possible given the small size of the organization and lack of personnel.



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4.

Although plans are in place, and progress is being made, the system to review and monitor internal control over financial reporting is not yet fully implemented. We maintain an insufficient complement of personnel to carry out ongoing monitoring responsibilities and ensure effective internal control over financial reporting.


Changes in Internal Controls


There were no changes in our internal control over financial reporting during the quarter ended January 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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, 2016.


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*

XBRL Instance Document

 

Filed herewith.

101.SCH*

XBRL Taxonomy Extension Schema Document

 

Filed herewith.

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

 

Filed herewith.

101.LAB*

XBRL Taxonomy Extension Labels Linkbase Document

 

Filed herewith.

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

 

Filed herewith.

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document

 

Filed herewith.




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*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: March 22, 2017

 

/s/ Mark Stogdill

 

 

Mark Stogdill

 

 

President and Principal Executive Officer

 

 

 

Date: March 22, 2017

 

/s/ Michael Cothill

 

 

Michael Cothill

 

 

Chairman and Principal Financial Officer





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