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, 2019, filed with the
SEC on November 14, 2019.
Results of Operations
Three Months Ended October 31, 2020 Compared to the Three Months Ended October
31, 2019
Net revenues for the three months ended October 31, 2020 and October 31, 2019
were $484,842 and $533,515, respectively, a decrease of 9.12%. The decrease was
due to the management's decision to terminate Endstream Communications Toll Free
Termination business.
As of November 1, 2019, Endstream Communications has exited the Toll-Free
Termination business and is repositioning itself to provide voice termination
services in Hammer's markets in the Caribbean (such as Dominica) as well as its
direct routes to Guyana and Bermuda and Africa. Since that time Endstream has
built its new interconnection in Dominica and has begun sales in the market.
During the three months ended October 31, 2020, the Company incurred total
operating expenses of $512,670 compared with $579,543, a decrease of 11.53%, for
the comparable period ended October 31, 2019. The change in expenses was to due
to the discontinuation of the Toll Free Termination business of Endstream
Communications.
Operating loss decreased to $27,828 during the three months ended October 31,
2020. Although loss after taking into account the discontinuation of Open Data
Centers was $46,028 as adjusted, last year the company reported a loss of
$139,864, a decrease of 80.1%
The Company recorded depreciation and amortization expense of $12,255 and
$10,934 during the three months ended October 31, 2020 and October 31, 2019,
respectively. During the three months ended October 31, 2020 and October 31,
2019, interest expense was $8,653 and $3,459 respectively.
During the three months ended October 31, 2020 and October 31, 2019, the Company
has losses of $12,662 and $90,491, respectively, on the operations of its'
discontinued operations of Open Data Centers, LLC and Hammer Fiber Optics
Investment Ltd
.
Liquidity and Capital Resources
The Company is at risk of remaining a going concern. Its ability to remain a
going concern is dependent upon whether the company can raise debt and/or equity
capital from third-party sources for both working capital and business
development needs until such time as the Company may be substantially sustained
as a going concern through cash flow from operations or the Company increases
its cash flow from operations through sale of services in the ongoing business
units, Endstream Communications, 1stPoint Communications, Open Data Centers and
its new markets.
Cash Flow from Operating Activities
During the three months ended October 31, 2020, the Company increased cash for
operating activities by $16,019, compared to a decrease in cash of $17,034 in
the period ended October 31, 2019.
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Cash Flow from Investing Activities
During the nine months ended October 31, 2020, the Company's investing
activities used $222, compared to $14,989 provided by investing activities
during the six months ended October 31, 2019.
Cash Flow from Financing Activities
During the nine months ended October 31, 2020, the Company netted $87,076 in
cash from financing activities compared with $28,143 used during the three
months ended October 31, 2020. The majority of the financing activities was to
settle a claim against 1stPoint Communications, LLC, which has been resolved.
Going Concern
As of October 31, 2020, doubt existed as to the Company's ability to continue as
a going concern as the Company has no certainty of earning additional revenues
in the future, has a working capital deficit and an overall accumulated deficit
since inception. The Company will require additional financing to continue
operations either from management, existing shareholders, or new shareholders
through equity financing and/or sources of debt financing. These factors raise
substantial doubt regarding the Company's ability to continue as a going
concern. The financial statements do not include any adjustments to the
recoverability and classification of recorded asset amounts and classification
of liabilities that might be necessary should the Company be unable to continue
as a going concern.
Future Financings
We will continue to rely on equity sales of our common shares in order to
continue to fund business operations. Issuances of additional shares may result
in dilution to existing stockholders. There is no assurance that we will achieve
any additional sales of equity securities or arrange for debt or other financing
in amounts sufficient to fund our operations and other development activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
stockholders.
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance
with accounting principles generally accepted in the United States, applied on a
consistent basis. The preparation of financial statements in conformity with
U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods.
Recently Issued Accounting Pronouncements
The Company has implemented new accounting pronouncements that are relevant to
the company and are in effect. These pronouncements did not have any material
impact on the financial statements unless otherwise disclosed, and the Company
does not believe that there are any other new accounting pronouncements that
have been issued that might have a material impact on its financial position or
results of operations.
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