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Item 7. Management’s Discussion and Analysis

2025-02-04 compared with 2024-02-16 · 66 added, 70 removed, 16 unchanged (89% of the section changed)

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

MANAGEMENT'S DISCUSSION AND ANALYSIS

This Annual Report on Form 10-K 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 and the related notes that appear elsewhere in this annual report.

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

The company was incorporated on September 23, 2010 pursuant to the laws of the State of Nevada under the name of Recursos Montana S.A.

On March 6, 2015 the Company amended its Articles of Incorporation to change its name to "Tanaris Power Holding, Inc." On April 25, 2016, Tanaris Power Holdings, Inc., a Nevada corporation (the "Company" or "TPHX") entered into a Share Exchange Agreement (the "Share Exchange Agreement") with Hammer Fiber Optics Investments, Ltd., a Delaware corporation ("HFOI"), and the controlling stockholders of HFOI (the "HFOI Shareholders").

Pursuant to the Share Exchange Agreement, closed on July 19, 2016, the Company acquired 20,000,000 shares of common stock of HFOI from the HFOI shareholders and in exchange the Company issued to the HFOI Shareholders 50,000,000 (post-Merger) restricted shares of its common stock.

As a result of the Share Exchange Agreement, HFOI became a wholly owned subsidiary of the Company.

The Company was originally organized for the purpose of acquiring and developing mineral properties.

The Company had not established the existence of a commercially viable minable ore deposit and therefore did not reach the exploration stage.

As such, the company negotiated to dispose of the business of investing in minerals in favor of developing new business opportunities in the technology sector.

The company Hammer Fiber Optics Holdings Corp.

is now an alternative telecommunications carrier that is poised to position itself as a premier provider of diversified dark fiber networking solutions as well as high capacity broadband wireless access networks in the United States and abroad.

On September 11, 2018, Mark Stogdill, President and Chief Executive Officer and Executive Director of the Board of Directors of the Company resigned from his position as President and Chief Executive Officer of the Company.

Stogdill retains his position as a Director of the Board of Directors.

In combination with this change, Erik B.

Levitt was appointed the interim President and Chief Executive Officer, effective immediately, and later appointed the President and Chief Executive Officer on November 1, 2018.

On October 10, 2018 the Company announced the closure of the Atlantic City, NJ wireless broadband network as a result of the termination of the Master Spectrum Lease Agreement held by the Company subsidiary Hammer Fiber Optic Investments Ltd.

d/b/a Hammer Communications by Verizon Communications.

Verizon Communications had informed the Company of their intention to honor the terms of the lease agreement, then subsequently issued a notification to the Company that the spectrum lease for the 28 GHz spectrum will be prematurely terminated as of October 31, 2018.

The Company negotiated with Verizon to find a path forward and was offered a less desirable spectrum leasing arrangement.

After extensive engineering discussions it was determined that it was not feasible to pursue the alternative agreement proposed by Verizon.

As a result, the Company discontinued operations as of October 31, 2018.

On September 11, 2018, our board of directors approved stock purchase agreements with 1stPoint Communications LLC and its subsidiaries, Endstream Communications LLC, Open Data Centers LLC and Shelcomm Inc.

for the acquisition of all of the equity of the entities.

1stPoint and its subsidiaries possess CLEC licenses in Florida, New York State, and a nationwide CMRS (Commercial Mobile Radio Services) license.

The companies operate a data center facility in Piscataway, New Jersey.

The acquisition of 1stPoint Communications, LLC, Open Data Centers, LLC and Shelcomm, Inc.

closed on November 1, 2018.

Levitt was also elected as a member of the Board of Directors, effective immediately.

The acquisition of Endstream Communications, LLC closed on December 17, 2018.

On January 29, 2019 our board of directors approved a stock purchase agreement with American Network, Inc to acquire all of its equity.

The acquisition of American Network, Inc closed on September 1, 2019.

As of April 30, 2020 our board of directors approved the discontinuation of the operations of Open Data Centers LLC.

The operations of Open Data Centers, LLC were discontinued effective April 30, 2020 and the Company shut down its operations in its Piscataway, NJ data center.

On September 14, 2021, Erik B.

Levitt, President and Chief Executive Officer and Executive Director of the Board of Directors of the Company resigned from his position as Chief Executive Officer of the Company.

Levitt retains his position as an Executive Director of the Board of Directors and Principal Financial Officer as well as the Managing Member and Chief Executive Officer of 1stPoint Communications, LLC and Endstream Communications, LLC.

In combination with this change, Michael C.

Cothill was appointed the Executive Chairman, effective immediately.

On October 19, 2021 our board of directors approved a name change from Hammer Fiber Optics Holdings Corp to Hammer Technology Holdings.

The name change has not yet been made effective.

On October 25, 2021 our board of directors approved a share exchange agreement with Telecom Financial Services Limited ("TFS") for the acquisition one hundred percent (100%) of its stock.

TFS owns the intellectual property critical to the operations of the company's financial technology business unit as well as certain key supplier, marketing and operating agreements.

TFS has been renamed HammerPay [USA] Ltd.

On July 31, 2023 our board of directors approved the discontinuation of the operations of Hammer Wireless (SL) Limited, the company's data communications service in Sierra Leone.

The operations were discontinued in March 2020 and all assets have been written down.

Results of Operations

The Year Ended July 31, 2023 Compared to the Year Ended July 31, 2022

Net revenues from continuing operations for the year ended July 31, 2023 and 2022 were $3,256,611 and $2,602,115, respectively.

The increase in gross revenues were primarily due to growth in the messaging revenue from the Company's Over-the-Top ("OTT") business practice.

During the year ended July 31, 2023, the Company incurred total operating expenses from continuing operations of $3,846,078 compared with $3,149,840 for the comparable period ended in 2022.

The increase in operating costs was primarily due to expenses related to its increased revenues in its OTT business as well as expenses associated with new product development in the financial services segment on the HammerPay platform.

The Company recorded depreciation expense of $60,283 during the year ended July 31, 2023 compared to $65,487 in the comparable period in 2022, primarily due to efficiencies in the Company's telecommunications business unit.

During the year ended July 31, 2023, interest financing expense and expenses associated with warrants was $457,398 compared to $805,803 in the comparable period in 2022.

The increase was due primarily to the interest and financing expense associated with the notes payable used to fund the development and growth of the HammerPay application and the financial technology business unit.

For the Year Ended July 31, 2024 Compared to the Year Ended July 31, 2023

Cost of sales

Selling, general and administrative expenses

Depreciation and amortization expense

Total operating expenses

Net revenues for the year ended July 31, 2024 and 2023 were $3,279,946 and $3,256,611 respectively, an increase of approximately $23,335 or 0.7%.

The increase was primarily due to the expansion of the Company's Over-the-Top ("OTT") business segment which includes its SMS messaging and hosting business units.

During the year ended July 31, 2024, the Company incurred total operating expenses of $4,671,259 compared with $4,503,655, an increase of approximately $167,604 or 3.7%, for the comparable period ended July 31, 2023.

The increase in expenses is due to the expenses associated with the Company's diversification into the financial services markets and increased expenses associated with the expansion of the telecommunications business segment.

The Company recorded depreciation and amortization expense of $731,581 and $717,860 during the year ended July 31, 2024 and 2023, respectively.

During the year ended July 31, 2024 and 2023, interest expense was $86,043 and $20,618 respectively.

Other income (expense)

Interest expense

Warrant financing expenses

Financing expenses

Warrant adjustment to fair value

Other expenses

Total other income (expense)

During the year ended July 31, 2024, the Company incurred total other income of $158,300 primarily consisting of interest expense, warrant financing expenses, financing expense, and other expenses of $86,043, $164,525, $36,617, and $26,018, respectively.

These expenses are partially offset by other income in the twelve months ended July 31, 2024 of $293,753, which represents income from previously written-down customer accounts receivable and gain in fair value of warrant liability of $177,750.

During the year ended July 31, 2023 the Company incurred total other expenses of $317,175 consisting of interest expense, warrant financing expenses, financing expense, and other expenses of $20,618, $145,725, $255,532 and $175,559, respectively.

These expenses are partially offset by other income of $262,259 and a gain on fair value of warrant liability of $18,000.

During the twelve months ended July 31, 2024 the Company recorded a net loss from continuing operations of $1,233,013, compared to a loss of $1,564,219 in the same twelve-month period ended July 31, 2023.

The decrease in loss is due to a large decrease in the Company's total other expenses and selling, general, and administrative expenses year over year.

Liquidity and Capital Resources

We have financed our operations since inception primarily through notes payable from related parties, which have been disclosed herein under Related Party Transactions.

As of July 31, 2023, the Company had cash and cash equivalents of $66,688.

Net cash from operating activities was $-636,706 and $-451,955 for the year ended July 31, 2023 and July 31, 2022, respectively.

The increase was primarily due to the development activities related to the HammerPay application.

Net cash used in investing activities was $12,650 and $46,893 for the year ended July 31, 2023 and July 31, 2022, respectively.

The decrease was primarily due efficiencies in the Company's telecommunications business unit.

Net cash provided by financing activities was $233,134 and $904,152 for the year ended July 31, 2023 and July 31, 2022, respectively.

The decrease in cash provided by financing activities for the period ended July 31, 2023 when compared to the same period in 2022 was primarily due to reduced cash needs in the development of the HammerPay application.

The Company had cash and cash equivalents of $74,133 and $66,688 as of July 31, 2024 and 2023, respectively.

See the analysis below of the cash flow statement for further details pertaining to liquidity.

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities.

For these reasons, our auditors have included in their report on our audited financial statements for the fiscal years ended July 31, 2024 and 2023 an explanatory paragraph regarding factors that raise substantial doubt that we will be able to continue as a going concern.

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.

Net cash used in operating activities - continuing operations

Net cash used in operating activities - discontinued operations

Net cash used in investing activities

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash Flow from Operating Activities

During the year ended July 31, 2024 the Company's total cash increased by $7,445, compared to a decrease in cash of $416,222 in the period ended July 31, 2023.

Cash flow used in operating activities was $760,238, compared to $636,706 in the period ended July 31, 2023.

The increase in cash was partially due to a decrease in net loss in the period as well as decreases in accounts payables, an increase in commitment shares issued, and decreases in deferred revenues, partially offset by a decrease in non-cash interest expense.

Cash Flow from Investing Activities

During the twelve months ended July 31, 2024, the Company's investing activities used $19,719, compared to $12,650 used in investing activities during the twelve months ended July 31, 2023.

The increase was primarily due to an increase in the purchases of property and equipment as well as an increase in capitalized intangible assets during the period ended July 31, 2024.

Cash Flow from Financing Activities

During the year ended July 31, 2024, cash flow provided by financing activities was $787,402 compared with $233,134 provided during the year ended July 31, 2023.

The increase is primarily attributable to greater borrowings of notes payable and convertible notes payable - related parties during the period.

During the year ended July 31, 2024, the Company received approximately $492,474 more in proceeds from convertible notes payable - related parties as compared to the year ended July 31, 2023.

Going Concern

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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.

Contractual Obligations

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.

Selected Financial Data

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.

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.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP").

The preparation of financial statements in accordance with GAAP requires application of management's subjective judgments, often requiring estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

Our actual results may differ substantially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in "Note 3 - Summary of Significant Accounting Policies," to our consolidated financial statements included in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K, we believe that the following accounting policies require the application of significant judgments and estimates.

Warrant Fair Value

Our warrant fair value estimates are based on the Black Scholes model using quoted market prices and estimated volatility factors based on historical prices of the Company's common stock.

Intangible Assets

Our intangible assets, composed of intellectual property and customer contracts, were obtained through the Company's January 2022 acquisition of Telecom Financial Services, Ltd.

A valuation specialist was contracted to determine a purchase price allocation for the $4,230,000 paid for TFS.

Ultimately, it was determined that the technology platform is valued at approximately $3,867,222 and the customer contract at approximately $367,778.

These assets have useful lives of between 5 and 7 years and are amortized on a straight-line basis.

Periodically, the Company assesses its intangible assets for impairment.

Recently Issued Accounting Pronouncements

In the period from July 2023 through July 2024, the FASB has not issued any additional accounting standards updates that have a significant impact on the Company.

Management has evaluated other recently issued accounting pronouncements and does not believe that any of these pronouncements will have a significant impact on our consolidated financial statements and related disclosures.

Off-Balance Sheet Arrangements

We do not have any 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.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-K

Item 7. Management’s Discussion and Analysis