HAMMER TECHNOLOGY HOLDINGS CORP. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA July 31, 2024 and 2023 Report of Independent Registered Public Accounting Firm F-1 Consolidated Balance Sheets F-2 Consolidated Statements of Operations F-3 Consolidated Statements of Changes in Stockholders' Equity F-4 Consolidated Statements of Cash Flows F-5 Notes to Consolidated Financial Statements F-6 13 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders of Hammer Fiber Optics Holdings Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Hammer Fiber Optics Holdings Corp. (“the Company”) as of July 31, 2024 and 2023, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the two-year period ended July 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of July 31, 2024 and 2023 and the results of its operations and its cash flows for each of the years in the two-year period ended July 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, the Company has consistently sustained losses since its inception. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Emphasis of a Matter - Restatement of Previously Issued Financial Statements As discussed in Note 5 to the financial statements, the Company has restated its previously issued financial statements for the year ended July 31, 2023, as the Company performed an evaluation of its accounting in relation to intangible assets subject to amortization, and updated the allowance for uncollectable accounts to confirm to the guidance in ASU No. 2016-13. Our opinion on the financial statements as of July 31, 2023 is not modified with respect to this matter. Critical Audit Matters C ritical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there were no critical audit matters. Fruci & Associates II, PLLC - PCAOB ID #0 5525 We have served as the Company's auditor since 2022. Spokane, Washington February 4, 2025 F-1 HAMMER TECHNOLOGY HOLDINGS CORP. CONSOLIDATED BALANCE SHEETS July 31, July 31, 2024 2023 (as restated) ASSETS Current Assets Cash and cash equivalents $ 74,133 $ 66,688 Accounts receivable, net 110,894 139,920 Security deposits 7,316 7,316 Prepaid expenses 13,923 18,675 Total current assets 206,266 232,599 Property and equipment, net 51,043 89,712 Intangible assets, net 2,779,520 3,418,793 Total assets $ 3,036,829 $ 3,741,104 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $ 993,761 $ 1,205,995 Notes payable 108,603 92,693 Convertible notes payable 682,000 612,000 Convertible notes payable - related parties 1,510,093 738,600 Warrant liabilities 18,000 195,750 Unissued Stock - 105,925 Deferred revenue 141,156 172,900 Current liabilities from discontinued operations 544,533 545,994 Total current liabilities 3,998,146 3,669,858 Total liabilities 3,998,146 3,669,858 Commitments and contingencies Stockholders' Equity Common stock, $ 0.001 par value, 250,000,000 shares authorized 63,155,947 and 62,205,947 shares issued; 61,402,612 and 60,452,612 shares outstanding at July 31, 2024 and July 31, 2023, respectively 63,156 62,206 Additional paid-in capital 28,007,940 27,808,440 Accumulated deficit ( 29,032,413 ) ( 27,799,400 ) Total Stockholder's Equity ( 961,317 ) 71,246 Total Liabilities and Stockholders' Equity $ 3,036,829 $ 3,741,104 The accompanying notes are an integral part of these consolidated financial statements. F-2 HAMMER TECHNOLOGY HOLDINGS CORP. CONSOLIDATED STATEMENT OF OPERATIONS For the Years Ended July 31, 2024 2023 (as restated) Revenues $ 3,279,946 $ 3,256,611 Cost of sales 2,398,667 2,426,456 Gross margin 881,279 830,155 Selling, general and administrative expenses 1,541,011 1,359,339 Depreciation expense 731,581 717,860 Total operating expenses 2,272,592 2,077,199 Loss from operations ( 1,391,313 ) ( 1,247,044 ) Other income (expense) Other income 293,753 262,259 Interest expense ( 86,043 ) ( 20,618 ) Warrant financing expense ( 164,525 ) ( 145,725 ) Financing expenses ( 36,617 ) ( 255,532 ) Change in fair value of warrant liabilities 177,750 18,000 Other expenses ( 26,018 ) ( 175,559 ) Total other income (expense) 158,300 ( 317,175 ) Income (loss) before discontinued operations ( 1,233,013 ) ( 1,564,219 ) Income (loss) from discontinued operations - ( 1,013,600 ) Net loss $ ( 1,233,013 ) $ ( 2,577,819 ) Weighted average number of common shares outstanding - basic and diluted 62,755,125 62,205,947 Basic and diluted loss per share Continuing operations $ ( 0.02 ) $ ( 0.03 ) Discontinued operations $ 0.00 $ ( 0.01 ) Total $ ( 0.02 ) $ ( 0.04 ) The accompanying notes are an integral part of these consolidated financial statements. F-3 HAMMER TECHNOLOGY HOLDINGS CORP. CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT) For the years ended July 31, 2024 and 2023 Additional Total Common Stock Treasury Stock Paid-in Accumulated Stockholders' Shares Amount Shares Amount Capital Deficit Equity Balance, July 31, 2022 (as restated) 61,565,841 $ 61,566 1,753,335 $ - $ 27,564,129 $ ( 25,221,581 ) $ 2,404,114 Conversion shares issued 640,106 640 - - 244,311 - 244,951 Net loss for the year - - - - - ( 2,577,819 ) ( 2,577,819 ) Balance, July 31, 2023 (as restated) 62,205,947 $ 62,206 1,753,335 $ - $ 27,808,440 $ ( 27,799,400 ) $ 3,129,432 Commitment shares issued 950,000 950 - - 199,500 - 200,450 Net loss for the year - - - - - ( 1,233,012 ) ( 1,233,012 ) Balance, July 31, 2024 63,155,947 $ 63,156 1,753,335 $ - $ 28,007,940 $ ( 29,032,413 ) $ ( 961,317 ) The accompanying notes are an integral part of these consolidated financial statements. F-4 HAMMER TECHNOLOGY HOLDINGS CORP. CONSOLIDATED STATEMENT CASH FLOWS For the Years Ended July 31, 2024 2023 (as restated) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 1,233,013 ) $ ( 2,577,819 ) Loss from discontinued operations - 1,013,600 Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation expense 731,581 717,860 Warrant adjustment to Fair Value ( 177,750 ) ( 18,000 ) Commitment shares issued 94,525 - Noncash interest and financing expense 70,000 227,872 Write-down of intangible assets - 57,875 Changes in operating assets and liabilities: Accounts receivable 29,026 ( 21,986 ) Security deposits - 3,766 Prepaid expenses 4,752 ( 3,929 ) Accounts payable ( 247,615 ) ( 117,821 ) Deferred revenue ( 31,744 ) ( 148,174 ) Net cash provided by (used in) operating activities continuing operations ( 760,238 ) ( 866,756 ) Net cash provided by (used in) operating activities- discontinued operations - 230,050 Net cash used in operating activities ( 760,238 ) ( 636,706 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 19,719 ) ( 12,650 ) Net cash provided by (used in) investing activities- continuing operations ( 19,719 ) ( 12,650 ) Net cash provided by (used in) investing activities- discontinued operations - - Net cash used investing activities ( 19,719 ) ( 12,650 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes payable ( 106,490 ) ( 168,284 ) Proceeds from notes payable 893,892 401,418 Net cash provided by (used in) financing activities- continuing operations 787,402 233,134 Net cash provided by (used in) financing activities- discontinued operations - - Net cash provided by financing activities 787,402 233,134 Effect of foreign currency on cash - - Net increase (decrease) in cash 7,445 ( 416,222 ) Cash and cash equivalent, beginning of period 66,688 482,910 Cash and cash equivalent, end of period $ 74,133 $ 66,688 SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES: Cash paid for interest $ 21,756 $ 20,618 Cash paid for taxes $ 800 $ 1,415 Commitment shares issued $ 200,450 $ 244,311 The accompanying notes are an integral part of these consolidated financial statements. F-5 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS Hammer Technology Holdings Corp (OTCPK:HMMR) is a company focused on sustainable shareholder value investing in both financial services technology and wireless telecommunications infrastructure. Hammer's financial technologies business is focused on providing digital stored value technology via its HammerPay mobile payments platform to enable digital commerce between consumers and branded merchants across the developing world, ensuring Swift, Safe and Secure encrypted remittances and banking transactions. Hammer's "Everything Wireless" go to market strategy for its telecommunications business includes the development of high speed fixed wireless service for residential, small business and enterprise clients using its wireless fiber platform, Hammer Wireless AIR®, mobility networks including 4G/LTE, Over-the-Top services such as voice, SMS and collaboration services and hosting services. NOTE 2 - CORPORATE HISTORY AND BACKGROUND ON MERGER The Company was originally incorporated in the State of Nevada on September 23, 2010, under the name Recursos Montana S.A. The Company's principal activity was an exploration stage company engaged in the acquisition of mineral properties then owned by the Company. On February 2, 2015, the Company entered into a Share Exchange Agreement with Tanaris Power Holdings, Inc., whereby the Company acquired 100 % of Tanaris Power Holdings, Inc. issued and outstanding common stock in exchange for shares of the Company's common stock equal to 51 % of the issued and outstanding common stock of the Company. Tanaris Power Holdings, Inc. was the owner of certain rights in connection with the marketing and sale of smart lithium-ion batteries and battery technologies for various industrial vehicles markets and related applications. On March 6, 2015, the Company amended its Articles of Incorporation to change its name to Tanaris Power Holdings, Inc. On April 25, 2016, Tanaris Power Holdings, Inc., a Nevada corporation entered into s Share Exchange Agreement (the "Share Exchange Agreement") with Hammer Fiber Optics Investments, Ltd., a Delaware corporation ("HFOI"), and the controlling stockholders of HFOI (the "HFOI Shareholders"). Pursuant to the Share Exchange Agreement, the Company acquired 20,000,00 0 shares of common stock of HFOI from the HFOI shareholders (the "HFOI Shares") and in exchange, the Company issued to the HFOI Shareholders 50,000,000 (post-Merger) restricted shares of its common stock (the "HMMR Shares"). As a result of the Share Exchange Agreement, HFOI shall become a wholly owned subsidiary of the Company. On April 13, 2016, the Board of Directors (BOD) approved a Plan of Merger (the "Plan of Merger") under Nevada Revised Statuses (NRS) Section 92A.180 to merge (the "Merger") with our wholly-owned subsidiary HFO Holdings, a Nevada corporation, to effect a name change from Tanaris Power Holdings Inc. to Hammer Fiber Optics Holdings Corp. The Plan of Merger also provides for a 1 for 1,000 exchange ratio for shareholders of both the Company and HRO Holdings, which had the effect of a 1 for 1,000 reverse split of the common stock. Articles of Merger were filed with the Secretary of State of Nevada on April 13, 2016 and, on April 14, 2016, this corporate action was submitted to Financial Industry Regulatory Authority (the "FINRA") for its review and approval. On May 3, 2016, the FINRA approved the merger with the wholly-owned subsidiary, HMMR Fiber Optics Holdings Corp. ("HFO Holdings"). Accordingly, thereafter, the Company's name was changed and the shares of common stock began trading under new ticker symbol "HMMR" as of May 27, 2016. The merger was effective on July 19, 2016. In 2016 Hammer Fiber Optics Investments Ltd deployed its first beta network in Atlantic County, New Jersey. The network used a spectrum license agreement from Straightpath Communications, LLC. On January 17, 2018 Verizon Communications, LLC purchased Straightpath Communications, LLC and on July14 2018, Verizon terminated the spectrum license agreement effective October 31, 2018 despite communications that it would continue to honor the agreement. On October 31, 2018 the Company ceased operations of the network in Atlantic County and subsequently classified the subsidiary as a discontinued operation. On November 1, 2018, the Company acquired Open Data Centers, LLC, 1stPoint Communications, LLC and its subsidiaries. 1stPoint and its subsidiaries possess CLEC licenses in Florida, New York State, and a nationwide CMRS (Commercial Mobile Radio Services) license. The companies operate data center facilities in Piscataway, New Jersey and Homewood, Alabama. On December 17, 2018, the Company closed the acquisition of Endstream Communications, LLC, a wholesale voice operator in the United States. F-6 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 2 - CORPORATE HISTORY AND BACKGROUND ON MERGER (CONTINUED) 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 December 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 December 30, 2020 and the Company shut down its operations in its Piscataway, NJ data center. As of April 30, 2020 our board of directors approved the discontinuation of the operations of Open Data Centers LLC. The operations of Open Data Centers, LLC were discontinued effective April 30, 2020 and the Company shut down its operations in its Piscataway, NJ data center. On October 25, 2021 our board of directors approved a share exchange agreement with Telecom Financial Services Limited ("TFS") for the acquisition one hundred percent ( 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. The acquisition of TFS closed on January 3, 2022. 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. On August 7, 2024, the Company authorized and executed a Purchase Agreement with Viper Networks, Inc. with the intention to sell the Company's telecommunications assets to Viper. The assets include 1st Point Communications LCC, and all its subsidiaries, Endstream Communications LLC, American Networks Inc., and 10 % ownership in Wikibuli Inc. in exchange for 2,500,000 (2.5 Million) shares of the Company's common stock. The transaction closed on November 1, 2024. With the divestiture of the telecommunications assets, the Company has begun to concentrate its efforts on its fintech initiatives. HammerPay is a scalable, mobile-first financial services technology platform featuring an advanced digital wallet and neo-banking system, designed for global deployment in both developed and emerging markets. On July 31, 2024, the Board approved a resolution to amend the Articles of Incorporation to change the Company's name to Hammer Technology Holdings Corp. The Board believes that the name change better reflects the nature of the Company's ongoing business operations. The majority vote of shareholders approved the name change by written consent in lieu of a meeting on September 1, 2024. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). 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 depreciated over their respective lease terms. Expenditures for additions and improvements are capitalized. Repairs and maintenance are expensed as incurred. F-7 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. Intangible Assets Our intangible assets with finite lives, including customer lists and internal-use software, are amortized over their estimated useful lives. We assess all amortizable intangible assets and other long-lived assets for impairment whenever circumstances or changes suggest the asset's carrying amount may not be recoverable. If impairment indicators are present, we evaluate recoverability by comparing the carrying amount of the asset group to its anticipated net undiscounted cash flows. Should these cash flows be less than the carrying amount, we proceed to determine the asset's fair value and record any necessary impairment. Each year, we also re-evaluate the useful life of these intangible assets to decide if adjustments to their remaining useful lives are warranted based on current events and conditions. The Company did not recognize any intangible asset impairment charges during the years ended July 31, 2024 or 2023. As of July 31, 2024, the Company had a total of $ 2,779,520 of net intangible assets with finite useful lives, which consisted of customer contracts of $ 2,440,050 and internal-use software in the aggregate of $ 339,470 . As of July 31, 2023, the Company had a total of $ 3,418,793 of net intangible assets with finite useful lives, which consisted of customer contracts of $ 2,991,858 and internal-use software in the aggregate of $ 426,935 . Revenue recognition The Company accounts for revenues under Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers" (Topic 606), which we adopted on August 1, 2018, using the modified retrospective approach. This standard update, along with related subsequently issued updates, clarifies the principles for recognizing revenue and develops a common revenue standard for GAAP. The Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company applies the five-step model to arrangements that meet the definition of a contract under Topic 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company evaluates the goods or services promised within each contract related performance obligation and assesses whether each promised good or service is distinct. The Company recognizes as revenue, the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. 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. The Company's revenues are derived from its subsidiaries, 1stPoint Communications, LLC, Endstream Communications, LLC and Shelcomm, Inc. 1stPoint's and Shelcomm's revenues are derived from retail web and voice hosting services as well as carrier hosting services. These are contracted agreements which are billed monthly, and revenues are recognized in the period. In some cases customers sign longer term agreements (up to two years) and prepay for those services. Revenues are recognized in the period the services are delivered. Endstream's revenue is derived from post-paid and pre-paid wholesale voice services and billed on a usage basis. Revenues are recognized in the period in which the services are delivered. Accounts Receivable On August 1, 2023, the Company adopted ASC 326, " Financial Instruments - Credit Losses ". In accordance with ASC 326, an allowance is maintained for estimated forward-looking losses resulting from the possible inability of customers to make the required payments (current expected losses). The amount of the allowance is determined principally on the basis of past collection experience and known financial factors regarding specific customers. F-8 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Management periodically assesses the Company's accounts receivable and, if necessary, establishes an allowance for estimated uncollectible amounts. Any required allowance is based on specific analysis of past due accounts and also considers historical trends of write-offs. As of July 31, 2024 and 2023, the Company's allowance for estimated uncollectible amounts was $ 136,299 and $ 120,713 . Income taxes The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, "Accounting for Income Taxes". The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. As of July 31, 2023, the Company did not have any amounts recorded pertaining to uncertain tax positions. Fair value measurements The Company adopted the provisions of ASC Topic 820, "Fair Value Measurements and Disclosures", which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement 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. Level 3 - Unobservable inputs reflecting management's assumptions about the inputs used in pricing the asset or liability. Financial assets and liabilities (including warrants) approximate fair value. F-9 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair Value Measurements at July 31, 2024 using: July 31, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Warrant Liabilities $ 18,000 - - 18,000 Fair Value Measurements at July 31, 2023 using: July 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Warrant Liabilities $ 195,750 - - 195,750 The warrant liabilities are measured at fair value using quoted market prices and estimated volatility factors based on historical prices for the Company's common stock and are classified within Level 3 of the valuation hierarchy. The following table provides a summary of changes in fair value of the Company's Level 3 financial liabilities as of July 31, 2024 and 2023: For the Year Ended July 31, 2024 July 31, 2023 Beginning Balance $ 195,750 $ 213,750 Change in fair value of warrant liabilities ( 177,750 ) ( 35,862 ) Balance as of July 31, $ 18,000 $ 195,750 The below table shows the Black-Scholes option-pricing model inputs used by the Company to value the derivative liability at each measurement date: July 31, 2024 July 31, 2023 Stock Price $ 0.04 $ 0.45 Risk-free interest rates 4.10 % 4.51 % Expected life (in years) 2.53 3.53 Expected volatility 868 % 114 % Dividend yield 0 % 0 % Consolidation of financial statements Hammer Technology Holdings Corp. is the parent company and sole shareholder of Hammer Wireless Corporation and its subsidiaries, 1stPoint Communications, LLC and its subsidiaries (which includes Shelcomm, Inc), Endstream Communications, LLC, American Network Inc. and HammerPay [USA], Ltd. The financial statements for Hammer Technology Holdings Corp. and its wholly-owned subsidiaries are reported on a consolidated basis. All significant intercompany accounts and transactions have been eliminated. Its subsidiaries, Hammer Fiber Optics Investments, Ltd., Hammer Wireless - SL, Ltd and its former subsidiary Open Data Centers, LLC, are discontinued and are considered discontinued operations. Open Data Centers, LLC was dissolved on December 30, 2020. F-10 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Foreign currency translation and other comprehensive loss We transact business in various foreign currencies including the Euro and the Leone. In general, The functional currency of Hammer Wireless - SL, Ltd., the Company's Sierra Leone subsidiary, is the Sierra Leonean Leone. Consequently, revenues and expenses of operations outside the United States are translated into USD Dollars using the weighted-average exchange rates on the period end date and assets and liabilities of operations outside the United States are translated into US Dollars using the change rate on the balance sheet dates. The effects of foreign currency translation adjustments amounted to approximately $ 54,000 and are reported in the Company's Consolidated Statement of Comprehensive Income (Loss) and Consolidated Statements of Stockholders' Equity (Deficit). On July 31, 2023, the Board of Directors approved the discontinuation of the Hammer Wireless - SL, Ltd, subsidiary. Prior period reclassifications We have reclassified certain amounts in prior periods to conform with current year's presentation. Notes payable, convertible notes payable, and convertible notes payable - related parties which were reported within loans payable at July 31, 2023 have been reclassified into their own lines within the consolidated balance sheet. Basic and diluted loss per share The basic earnings (loss) per share are calculated by dividing the Company's net income available to common shareholders by the weighted average number of common shares during the year. The diluted earnings (loss) per share is calculated by dividing the Company's net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. The following table sets forth the number of potential shares of common stock that have been excluded from basic net loss per share because their effect was anti-dilutive for the years ended: July 31, 2024 July 31, 2023 Warrants 450,000 450,000 Convertible Promissory Notes 1,355,113 1,070,858 Convertible Promissory Notes - Related Parties 44,310,226 2,052,123 Total 46,115,339 3,572,981 F-11 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recent accounting pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes how entities will measure credit losses for most financial assets, including accounts receivable. ASU No. 2016-13 will replace today's "incurred loss" approach with an "expected loss" model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December 15, 2022, for SEC filers that are eligible to be smaller reporting companies under the SEC's definition, as well as private companies and not-for-profit entities. In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. On August 1, 2023, the Company adopted ASC 326, " Financial Instruments - Credit Losses ". the adoption did not have a material impact on Company's consolidated financial statements. In August 2020, the FASB issued ASU 2020-06, " Debt with Conversion and other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity ' s Own Equity (Subtopic 815-40) " (" ASU 2020-06 ") . The purpose of ASU 2020-06 is to address issues identified as a result of the complexity associated with applying generally accepted accounting principles (" GAAP ") for certain financial instruments with characteristics of liabilities and equity. The amendments in ASU 2020-06 are effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2023. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020. The Company adopted ASU 2020-06 on August 1, 2023, and the impact was considered immaterial on Company's consolidated financial statements. Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and provide in interim periods all disclosures about a reportable segment's profit or loss and assets that are currently required annually. Additionally, it requires a public entity to disclose the title and position of the Chief Operating Decision Maker (CODM). The ASU does not change how a public entity identifies its operating segments, aggregates them, or applies the quantitative thresholds to determine its reportable segments. The new standard is effective for us for fiscal year ending July 31, 2025 and interim periods beginning in October 2025, with early adoption permitted. We expect this ASU to only impact our disclosures, which will be made on a retrospective basis, with no impacts to our results of operations, cash flows and financial condition. Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which focuses on the rate reconciliation and income taxes paid. This ASU requires disclosure, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, the ASU requires disclosure of income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. The new standard is effective for the Company for 2025, with early adoption permitted. An entity may apply the amendments in this ASU prospectively by providing the revised disclosures for the period ending December 31, 2025 and continuing to provide the pre-ASU disclosures for the prior periods, or may apply the amendments retrospectively by providing the revised disclosures for all periods presented. We expect this ASU to only impact our disclosures with no impacts to our results of operations, cash flows, and financial condition. 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. F-12 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 4 - GOING CONCERN The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has consistently sustained losses since its inception. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The Company's continuation as a going concern is dependent upon, among other things, its ability to increase revenues, adequately control operating expenses and receive debt and/or equity capital from third parties. No assurance can be given that the Company will be successful in these efforts. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company intends to continue to address this condition by seeking to raise additional capital through the issuance of debt and/or the sale of equity until such time that ongoing revenues can sustain the business, at which time capitalization may be considered through other means. NOTE 5 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS Subsequent to the Company's filing of its Annual Report on Form 10-K for the year ended July 31, 2023, with the Securities and Exchange Commission on February 16, 2024 and amended on May 8, 2024, the Company performed an evaluation of its accounting in relation to intangible assets subject to amortization. Management determined that the Original and Amended Form 10-K do not give effect to certain expenses identified. Accordingly, the Company restates its consolidated financial statements in this Form 10-K as outlined further below. Upon review of the Company's previously filed 10-K, the following errors were discovered and recorded: 1. In accordance with ASU No. 2016-13, the Company has re-evaluated its measurement of credit losses pertaining to its accounts receivable and noted that its allowance for uncollectable accounts should be increased by $ 98,900 as of July 31, 2022. The Balance Sheet has been updated to properly reflect such impairment as of July 31, 2023. 2. The Company evaluated its intangible assets with indefinite lives as of July 31, 2024 and deemed it appropriate to impair all assets relating to the telecommunications industry that would be divested following the agreement with Viper Networks, as detailed in Note 2 and Note 18. The Balance Sheet has been updated to properly reflect such impairment as of July 31, 2023. There has been no effect on the Statement of Operations, Statement of Changes in Stockholder Equity (Deficit), or the Statement of Cash Flows for the year ended July 31, 2023. 3. Amortization expense associated with two intangible assets, software and customer contracts, had not been amortized in accordance with ASC 350-30-35. The Statement of Operations and the Statement of Cash Flows for the period ended July 31, 2023 have been updated to properly reflect the amortization expense of intangible assets. F-13 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 5 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED) The following table sets forth the effects of the adjustments on affected items within the Company's previously reported consolidated balance sheets for the year ended July 31, 2023: July 31, July 31, 2023 Adjustments 2023 (as restated) ASSETS Current Assets Cash and cash equivalents $ 66,688 $ - $ 66,688 Accounts receivable, net 238,820 ( 98,900 ) (1) 139,920 Security deposits 7,316 - 7,316 Prepaid expenses 18,675 - 18,675 Total current assets 331,499 ( 98,900 ) 232,599 Property and equipment, net 89,712 - 89,712 Intangible assets, net 7,406,827 ( 3,988,034 ) (2,3) 3,418,793 Total assets $ 7,828,038 $ ( 4,086,934 ) $ 3,741,104 Current Liabilities Accounts payable and accrued expenses $ 1,205,995 $ - $ 1,205,995 Notes payable 92,693 - 92,693 Convertible notes payable 612,000 - 612,000 Convertible notes payable - related parties 738,600 - 738,600 Warrant liabilities 195,750 - 195,750 Unissued Stock 105,925 - 105,925 Deferred revenue 172,900 - 172,900 Current liabilities from discontinued operations 545,994 - 545,994 Total current liabilities 3,669,858 - 3,669,858 Total liabilities $ 3,669,858 $ - $ 3,669,858 Commitments and contingencies Stockholders' Equity Common stock, $0.001 par value, 250,000,000 shares authorized 63,155,947 and 62,205,947 shares issued; 61,402,612 and 60,452,612 shares outstanding at July 31, 2024 and July 31, 2023, respectively $ 62,206 $ - $ 62,206 Additional paid-in capital 27,808,440 - 27,808,440 Accumulated deficit ( 23,712,466 ) ( 4,086,934 ) (1,2,3) ( 27,799,400 ) Total Stockholder's Equity 4,158,180 ( 4,086,934 ) 71,246 Total Liabilities and Stockholders' Equity $ 7,828,038 $ ( 4,086,934 ) $ 3,741,104 F-14 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 5 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED) The following table sets forth the effects of the adjustments on affected items within the Company's previously reported consolidated statement of operations for the year ended July 31, 2023: For the Year Ended July 31, 2023 Adjustments July 31, 2023 (As Filed) (As Amended) Revenues $ 3,256,611 $ - $ 3,256,611 Costs and expenses: Cost of sales 2,426,456 - 2,426,456 Selling, general and administrative expenses 1,359,339 - 1,359,339 Depreciation expense 60,283 657,577 (3) 717,860 Total operating expenses 3,846,078 657,577 4,503,655 Operating loss ( 589,467 ) ( 657,577 ) ( 1,247,044 ) Other income (expense) Other income 262,259 - 262,259 Interest expense ( 20,618 ) - ( 20,618 ) Warrant adjustment to fair value ( 145,725 ) - ( 145,725 ) Financing expenses ( 255,532 ) - ( 255,532 ) Change in fair value of warrant liabilities 18,000 - 18,000 Other expenses ( 175,559 ) - ( 175,559 ) Total other expenses ( 317,175 ) - ( 317,175 ) Income (loss) Before Discontinued Operations ( 906,642 ) ( 657,577 ) (3) ( 1,564,219 ) Income (loss) From Discontinued Operations ( 1,013,600 ) - ( 1,013,600 ) Net loss $ ( 1,920,242 ) $ ( 657,577 ) $ ( 2,577,819 ) Weighted average number of common shares outstanding - basic and diluted 62,205,947 - 62,205,947 Loss per share- basic and diluted Continuing operations ( 0.01 ) - ( 0.03 ) Discontinued operations ( 0.02 ) - ( 0.01 ) Total $ ( 0.03 ) $ - $ ( 0.04 ) F-15 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 5 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS (CONTINUED) The following table sets forth the effects of the adjustments on affected items within the Company's previously reported consolidated statements of cash flows for the year ended July 31, 2023: July 31, July 31, 2023 Adjustments 2023 (As Filed) (As Restated) CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ ( 1,920,242 ) $ ( 657,577 ) (3) $ ( 2,577,819 ) Loss from discontinued operations 1,013,600 - 1,013,600 Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation expense 60,283 657,577 (3) 717,860 Warrant adjustment to fair value ( 18,000 ) - ( 18,000 ) Noncash interest expense 227,872 - 227,872 Write-down of intangible assets 57,875 - 57,875 Changes in operating assets and liabilities: - Accounts receivable ( 21,986 ) - ( 21,986 ) Security deposits 3,766 - 3,766 Prepaid expenses ( 3,929 ) - ( 3,929 ) Accounts payable ( 117,821 ) - ( 117,821 ) Deferred revenue ( 148,174 ) - ( 148,174 ) Net cash used in operating activities - continuing operations ( 866,756 ) - ( 866,756 ) Net cash provided by (used in) operating activities - discontinued operations 230,050 - 230,050 Net cash used in operating activities ( 636,706 ) - ( 636,706 ) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment ( 12,650 ) - ( 12,650 ) Net cash used in operating activities - continuing operations ( 12,650 ) - ( 12,650 ) Net cash used in operating activities - discontinued operations - - - Net cash used in investing activities ( 12,650 ) - ( 12,650 ) CASH FLOWS FROM FINANCING ACTIVITIES Repayment of notes payable ( 168,284 ) - ( 168,284 ) Proceeds from notes payable 401,418 - 401,418 Net cash provided by financing activities - continuing operations 233,134 - 233,134 Net cash provided by financing activities - discontinued operations - - - Net cash used in financing activities 233,134 - 233,134 Effect of foreign currency on cash - - - Net increase (decrease) in cash ( 416,222 ) - ( 416,222 ) Cash, beginning of period 482,910 - 482,910 Cash, end of period $ 66,688 - $ 66,688 SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES: Cash paid for interest $ 20,618 $ - $ 20,618 Cash paid for taxes $ 1,415 $ - $ 1,415 Shares issued for debt conversion $ 244,311 $ - $ 244,311 The specific explanations for the items noted above in the restated financial statements are as follows: 1. Per review of its accounts receivable balance, the Company has deemed it appropriate to reserve a total of $ 98,900 in its allowance for uncollectible accounts. 2. Following a divestiture of the telecommunications subsidiaries, as described in Note 18, the Company impaired all intangible assets with indefinite lives that contributed to the Company's conduction of business in this sector as of July 31, 2022. 3. After reexamination of the useful lives of the Company's intangible assets, it has been determined that a portion of such assets are subject to amortization and should be segregated and such amortization expensed. F-16 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 6 - DISCONTINUED OPERATIONS Hammer Fiber Optics Investment Ltd ceased operations in the Atlantic County geographical market on October 31, 2018 when Verizon Communications, LLC terminated the spectrum lease agreement. The operations of Hammer Fiber Optics Investments, Ltd were classified as a discontinued operation. Reporting of the discontinued operation is in accordance with Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Open Data Centers, LLC ceased operations at its sole location in Piscataway, NJ on May 1, 2020. The operations of Open Data Centers, LLC were classified as a discontinued operation. Reporting of the discontinued operation is in accordance with Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. As of July 31, 2024 and 2023, there were $ 544,533 and $ 545,994 , respectively, of accounts payables for discontinued operations that remain on the books. NOTE 7 - PROPERTY AND EQUIPMENT As of July 31, 2024 and 2023, property and equipment consisted of the following: July 31, July 31, 2024 2023 Life Computer, Telecom equipment & Software $ 1,289,621 $ 1,274,303 5 years Less: Accumulated depreciation ( 1,238,578 ) ( 1,184,318 ) Total $ 51,043 $ 89,712 NOTE 8 - INDEFINITE LIVED INTANGIBLE ASSETS As of July 31, 2024 and July 31, 2023, respectively, the Company had $ 2,959,286 of recognized indefinite lived intangible assets, which consist of customer contract assets from acquisitions and costs capitalized. 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. The Company did not recognize any intangible asset impairment charges during the years ended July 31, 2024 or 2023. Other Intangible Assets The following table displays the composition of Other intangible assets, net as well as the respective amortization period: 2024 2023 At July 31, Useful Life Gross Amount Accumulated Amortization Net Amount Gross Amount Accumulated Amortization Net Amount Customer contracts 7 $ 3,862,657 $ 1,422,607 $ 2,440,050 $ 3,862,657 $ 870,799 $ 2,991,858 Software 5 618,804 279,334 339,470 584,884 157,949 426,935 Total $ 4,481,461 $ 1,701,941 $ 2,779,520 $ 4,447,541 $ 1,028,748 $ 3,418,793 The amortization expense for Other intangible assets was as follows: Years 2024 $ 673,193 2023 657,577 2022 371,171 F-17 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 8 - INDEFINITE LIVED INTANGIBLE ASSETS (CONTINUED) Estimate annual amortization expense for Other intangible assets is as follows: Years 2025 $ 675,569 2026 675,569 2027 623,388 2028 569,800 2029 239,602 NOTE 9 - NOTES PAYABLE On April 1, 2024, 1stPoint Communications entered into a financing agreement with a financial institution in the amount of $ 62,400 . As of July 31, 2024, the principal amount remaining under this financial agreement was $ 35,880 . On March 20, 2023, 1stPoint Communications entered into a financing agreement with a financial institution in the amount of $ 58,000 and $ 2,320 in transaction fees. As of July 31, 2024 and 2023 the principal remaining under this financial agreement was $ 0 and $ 17,234 . The balance was paid in full on October 6, 2023. On January 5, 2022, the Company entered into a convertible note with a related party in the amount of $ 29,253 . The amount will convert into Common Stock at the Company's option and bears interest at a rate of 6 % annually, to be expensed at the time of conversion. The interest on this note has been forgiven by all parties. As of July 31, 2024 and 2023, the balance of this note was $ 24,253 . During the fiscal year 2022, the Company entered into a non-interest bearing loan with a financial institution in the amount of $ 10,972 . As of July 31, 2024 and 2023 the principal remaining was $ 10,972 . On February 26, 2021, Endstream Communications entered into a financing agreement with a financial institution in the amount of $ 40,000 . The amount was refinanced on March 25, 2022 and again on November 16, 2022 in the amount of $ 141,750 . The amount was refinanced once more during the year ended July 31, 2024 in the amount of $ 50,379 . As of July 31, 2024 and 2023 the principal remaining was $ 37,498 and $ 40,234 . As of July 31, 2024 and 2023, notes payable consisted of the following: July 31, 2024 July 31, 2023 Notes payable $ 108,603 $ 92,693 Less: current portion, net ( 108,603 ) ( 92,693 ) Long-term notes payable, net $ - $ - F-18 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 10 - RELATED PARTY CONVERTIBLE DEBT On August 22, 2019, the Company entered into a convertible note with a related party in the amount of $ 12,000 . $ 4,500 has been repaid. The amount will convert into Common Stock at the Company's option and bears interest at a rate of 6 % annually, to be expensed at the time of conversion. The interest on this note has been forgiven by all parties. As of July 31, 2024 and 2023, the balance of this note was $ 7,500 . On August 24, 2019, the Company entered into a convertible note with two related parties (who were former partners in 1stPoint Communications, LLC) in the amounts of $ 12,000 and $ 6,000 respectively. Both notes bear interest at a rate of 6 % annually and any interest may be accrued as either cash or stock at the option of the Company. The interest on this note has been forgiven by all parties. As of July 31, 2024 and 2023, the balances of these notes were $ 12,000 and $ 6,000 for both periods. On March 24, 2020, the Company entered into a convertible note with the Chief Financial Officer in the amount of $ 43,000 . The amount will convert into Common Stock at the Company's option and bears interest at a rate of 6 % annually, to be expensed at the time of conversion. The interest on this note has been forgiven by all parties. As of July 31, 2024 and 2023, the balance of this note was $ 43,000 . On April 20, 2020, the Company entered into a convertible note with the Chief Financial Officer in the amount of $ 36,300 with an original maturity date of April 20, 2024. The amount will convert into Common Stock at the Company's option and bears interest at a rate of 6 % annually, to be expensed at the time of conversion. The interest on this note has been forgiven by all parties. As of July 31, 2024 and 2023, the balance of this note was $ 36,300 . On September 1, 2020, the Company entered into a promissory note for the sum of $ 100,000 with a non-executive director. The amount will convert into Common Stock at the Company's option and bears interest at a rate of 6 % annually, to be expensed at the time of conversion. The interest on this note has been forgiven by all parties. The note has been amended several times, with a total increase in funding of $ 61,300 . As of July 31, 2024 and 2023, the balance of this note was $ 161,300 . On February 26, 2021, the Company entered into a convertible note with a related party in the amount of $ 25,000 . The note bears interest at a rate of 6 %, compounded monthly and payable upon repayment or conversion. Interest has been waived by the lender. The note has been amended several times, with a total increase in funding of $ 1,218,993 . As of July 31, 2024 and 2023, the balance of this note was $ 1,243,993 and $ 472,500 , respectively. As of July 31, 2024 and 2023, all of the related party payables are reported as current liabilities in the Consolidated Balance Sheet and all interest and maturity dates have been waived by the holders of all promissory notes from all related parties. All related party convertible notes, with the exception of the August 22, 2019, September 1, 2020, and January 5, 2022 notes, have conversion terms of a 20% discount to market on the date of the proposed conversion, at the option of the Company or lender. The August 22, 2019, September 1, 2020, and January 5, 2022 notes have no conversion price explicitly stated. As of July 31, 2024 and 2023, related parties convertible debt consisted of the following: July 31, 2024 July 31, 2023 Convertible notes payable - related parties $ 1,510,093 $ 738,600 Less: current portion, net ( 1,510,093 ) ( 738,600 ) Long-term convertible notes payable - related parties, net $ - $ - NOTE 11 - CONVERTIBLE DEBT On February 11, 2022, the Company entered into a Securities Purchase Agreement (the "Mast SPA") by and between the Company and Mast Hill Fund, L.P. ("Mast"). Pursuant to the terms of the Mast SPA, the Company agreed to sell to Mast and Mast agreed to purchase from the Company, a promissory note in the aggregate principal amount of $ 550,000 (the "Mast Note"), convertible into shares of the Company's common stock upon the terms and subject to the limitations and conditions set forth in the Mast Note. The Mast Note has an original issue discount of $ 55,000 , resulting in gross proceeds to the Company of $ 495,000 . Mast has piggyback registration rights pursuant to the terms of the Mast SPA. Mast Hill converted approximately $ 72,148 in interest and $ 1,750 in fees totaling approximately $ 73,897 into that number of shares of common stock on March 23, 2023. The Company entered into the First Amendment to the Mast Note as of March 6, 2023, through which both parties agreed to increase the principal balance of the note by $ 62,000 . As of July 31, 2024 and 2023, the balance of the Mast Note was $ 682,000 and $ 612,000 , respectively. F-19 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 11 - CONVERTIBLE DEBT (CONTINUED) Pursuant to the terms of the Mast SPA, the Company also agreed to issue (i) a common stock purchase warrant to purchase 150,000 shares of Company common stock at an exercise price of $ 3.00 , subject to adjustment as set forth therein (the "Mast First Warrant"), (ii) a common stock purchase warrant to purchase 150,000 shares of Company common stock at an exercise price of $ 1.50 , subject to adjustment as set forth therein (the "Mast Second Warrant" and together with the Mast First Warrant, the "Mast Warrants"), and (iii) 475,000 shares of Company common stock to Mast as additional consideration for the purchase of the Mast Note. On April 4, 2024, the Company entered into the Second Amendment to the Mast Note, effectively increasing the principal balance of the note by $ 70,000 and extending the maturity date of the note to February 11, 2025 . The terms of the amendment also included the issuance of 475,000 shares of the Company's common stock issued during the quarter ended April 30, 2024. The fair value of the common stock issued was determined using the stock price as of the date of the Second Amendment to the Mast Note at $ 0.199 per share or $ 94,525 in total. Such common stock shares issued are being accounted for as debt discount and recognized as financing expense for the year ended July 31, 2024. The Mast Note bears interest at a rate of 12 % per annum and matures on February 11, 2025 . Any amount of principal or interest on the Mast Note which is not paid when due will bear interest at a rate of the lesser of (i) 16 % per annum and (ii) the maximum amount permitted by law. The Mast Note may not be prepaid in whole or in part except as provided in the Mast Note by way of conversion at Mast's option. Mast has the right at any time to convert all or any part of the outstanding and unpaid principal amount and interest of the Mast Note into common stock, subject to a 4.99 % equity blocker, at a conversion price of $ 0.58 per share; provided, however, that Mast is entitled to deduct $ 1,750 from the conversion amount in each case to cover Mast's fees associated with conversion. Mast's right to exercise each of the Mast Warrants is subject to a 4.99 % equity blocker. Each of the Mast Warrants expires on the five-year anniversary of issuance. The foregoing description of the Mast SPA, the Mast Note and the Mast Warrants does not purport to be complete and is qualified in its entirety by reference to the Mast SPA, the Mast Note, the First Mast Warrant and the Second Mast Warrant, copies of which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4 to Form 8-K filed on February 23, 2022. On February 17, 2022, the Company entered into a Securities Purchase Agreement (the "Talos SPA") by and between the Company and Talos Victory Fund, LLC ("Talos"). Pursuant to the terms of the Talos SPA, the Company agreed to sell to Talos, and Talos agreed to purchase from the Company, a promissory note in the aggregate principal amount of $ 275,000 (the "Talos Note"), convertible into shares of the Company's common stock upon the terms and subject to the limitations and conditions set forth in the Talos Note. The Talos Note has an original issue discount of $ 27,500 , resulting in gross proceeds to the Company of $ 247,500 . Talos has piggyback registration rights pursuant to the terms of the Talos SPA. Pursuant to the terms of the Talos SPA, the Company also agreed to issue (i) a common stock purchase warrant to purchase 75,000 shares of Company common stock at an exercise price of $ 3.00 , subject to adjustment as set forth therein (the "Talos First Warrant"), (ii) a common stock purchase warrant to purchase 75,000 shares of Company common stock at an exercise price of $ 1.50 , subject to adjustment as set forth therein (the "Talos Second Warrant" and together with the Talos First Warrant, the "Talos Warrants"), and (iii) 237,500 shares of Company common stock to Talos as additional consideration for the purchase of the Talos Note. Talos converted the note into 512,696 shares of HMMR common stock on October 4, 2022. As of July 31, 2024 and 2023, convertible debt consisted of the following: July 31, 2024 July 31, 2023 Convertible debt $ 627,000 $ 557,000 Original issue discount $ 55,000 $ 55,000 Less: current portion, net ( 682,000 ) ( 612,000 ) Long-term convertible debt, net $ - $ - NOTE 12 - INCOME TAXES T he difference between the actual income tax rate versus the tax computed at the Federal Statutory Rate follows: July 31, 2024 July 31, 2023 Federal rate 21.0 % 21.0 % State net of federal 6.2 % 0.0 % Non-taxable change in fair value of warrant - 3.0 % 0.0 % Other permanent items - 3.2 % 0.0 % Valuation allowance ( 21.0 ) % ( 21.0 ) % Effective income tax rate 0.0 % 0.0 % The Company did not have any material uncertain tax positions. The Company’s policy is to recognize interest and penalties accrued related to unrecognized benefits as a component income tax expense (benefit). The Company did not recognize any interest or penalties, nor did it have any interest or penalties accrued as of July 31, 2024 and July 31, 2023. Deferred income tax assets and (liabilities) consist of the following: July 31, 2024 July 31, 2023 Deferred tax assets (liabilities) Net operating loss carryforward $ 1,032,100 $ 791,347 Intangibles 109,946 56,222 Depreciation 1,851 — Total deferred tax assets 1,143,898 847,569 Valuation allowance ( 1,143,898 ) ( 847,569 ) Net deferred taxes $ — $ — The Company has approximately $ 3.8 million of Federal Net Operating Loss carry forwards. These carry forward do not have an expiration date, and the full amount is subject to an 80 % limitation on the current year’s taxable income. The Company has approximately $ 3.8 million of State Net Operating Loss carry forwards to offset future taxable income in the states in which it currently operates. These carryforwards start expiring in 2029. Internal Revenue Code Section 382 limits the ability to utilize net operating losses if a 50% change in ownership occurs over a three-year period. Such limitation of the net operating losses may have occurred, but we have not analyzed it at this time as the deferred tax asset is fully reserved. During the twelve months ended July 31, 2023, the valuation allowance increased by $ 296,329 The tax periods ending July 31, 2021 through 2023 are open for examination. F-20 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 13 - STOCKHOLDERS' EQUITY Common Stock On April 4, 2024, the Company entered into the Second Amendment to the Mast Note, which included the issuance of 475,000 shares of the Company's common stock issued during the quarter ended April 30, 2024 (see Note 11). On March 6, 2023, Mast Hill amended the terms of its promissory note, which included the issuance of 475,000 shares of the Company's common stock issued during the quarter ended October 31, 2023. On March 23, 2023, Mast Hill converted the promissory convertible note into 127,410 shares of the Company's common stock (See Note 11). Treasury Stock The balance of Company Treasury Stock was unchanged during the period. NOTE 14 - COMMITMENTS AND LEASES Hammer does not currently have any material long-term lease obligations. All leases are currently month-to-month and have no obligations pursuant to ASC 842. There are two month-to-month tenancy agreements for office space which are less than $ 2,000 per month. NOTE 15 - CLAIMS 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. The following parties have filed claims against Hammer Fiber Optics Investments Ltd and are not secured: Calvi Electric v. Hammer Fiber Optics Inv, Ltd. $ 9,210 Horizon Blue Cross v. Hammer Fiber Optics Inv, Ltd. $ 17,309 In the matter of Cross River Fiber vs. Hammer Fiber Optics Investments, Ltd., the related party has paid its obligations and the matter is now considered closed. The claims by Calvi Electric and Horizon Blue Cross have not advanced. NOTE 16 - WARRANTS On February 11, 2022, the Company issued a purchase warrant to Mast Hill Fund, L.P. for 150,000 shares of the Company's common stock in conjunction with convertible debt. The warrants are exercisable for 5 years at $ 1.50 per share. The warrants were evaluated for purposes of classification between liability and equity. Because the warrants were issued in conjunction with a debenture the warrants have been considered debt pursuant to ASC 820 Topic 10. On February 11, 2022, the Company issued a purchase warrant to Mast Hill Fund, L.P. for 150,000 shares of the Company's common stock in conjunction with convertible debt. The warrants are exercisable for 5 years at $ 3.00 per share. The Company determined the Warrants should be classified as a liability as the warrants are redeemable for cash in the event of a fundamental transaction, as defined in the warrant agreement, which includes a change in control. On February 17, 2022, the Company issued a purchase warrant to Talos Victory Fund, LLC for 75,000 shares of the Company's common stock in conjunction with convertible debt. The warrants are exercisable for 5 years at $ 1.50 per share. The warrants were evaluated for purposes of classification between liability and equity. Because the warrants were issued in conjunction with a debenture the warrants have been considered debt pursuant to ASC 820 Topic 10. On February 17, 2022, the Company issued a purchase warrant to Talos Victory Fund, LLC for 75,000 shares of the Company's common stock in conjunction with convertible debt. The warrants are exercisable for 5 years at $ 3.00 per share. The warrants were evaluated for purposes of classification between liability and equity. Because the warrants were issued in conjunction with a debenture the warrants have been considered debt pursuant to ASC 820 Topic 10. F-21 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 16 - WARRANTS (CONTINUED) The Black Scholes model was used to determine the fair price of the warrants, including the use of the share price, exercise price, term, volatility, risk free interest rate and the dividend rate. The warrants were priced in each quarter and the carrying cost of the warrant adjusted in accordance with the model. Weighted Weighted Average Average Contractual Number of Exercise Term Warrants Price (Years) Balance outstanding at July 31, 2022 - Granted 450,000 $ 2.25 5.00 Exercised - - - Expired/Canceled - - - Balance outstanding at July 31, 2023 450,000 $ 2.25 3.54 Granted - - - Exercised - - - Expired/Canceled - - - Balance outstanding at July 31, 2024 450,000 $ 2.25 2.54 Exercisable at July 31, 2024 450,000 $ 2.25 2.54 The fair values of warrants granted during the years ended July 31, 2024 and 2023 were estimated using Black-Scholes option-pricing model with the following assumptions: July 31, 2024 2023 Exercise Price $ 1.50 - $ 3.00 $ 1.50 - $ 3.00 Risk-free interest rates 4.05 % - 4.90 % 3.45 % - 4.16 % Expected life (in years) 2.54 3.54 Expected volatility 113 % - 868 % 227 % - 248 % Dividend yield 0 % 0 % NOTE 17 - OTHER INCOME (EXPENSE) AND DISCONTINUED AND CONTINUING OPERATIONS Discontinued Operations During the fiscal year ending July 31, 2023, the Company recognized losses from the discontinued operations of two entities, Hammer Fiber Optics Investments, Ltd. and Hammer Wireless [SL] Ltd. The remaining assets of the operations of Hammer Fiber Optics Investments, Ltd in Atlantic County, NJ have been written down and considered a loss from discontinued operations. The loss from discontinued operations was $ 967,543 . This is a one-time write-down and will not recur. The remaining assets of the operations of Hammer Wireless [SL] Ltd in Sierra Leone have been written down and considered a loss from discontinued operations. The loss from discontinued operations was $ 46,057 . This is a one-time write-down and will not recur. Other Income Management evaluated the deferred revenue of the 1stPoint Communications, LLC business unit and determined that certain revenues had not been reflected in prior periods due to changes in the underlying systems relating to its web hosting business. As a result, management adjusted the deferred revenue from prior periods as Other Income. Adjustments to the periods were considered revenues. The Other Income totaled approximately $ 293,753 and $ 262,259 for July 31, 2024 and 2023, respectively. F-22 HAMMER TECHNOLOGY HOLDINGS CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 31, 2024 NOTE 17 - OTHER INCOME (EXPENSE) AND DISCONTINUED AND CONTINUING OPERATIONS (CONTINUED) On October 4, 2022, Talos Fund exercised its right to convert the principal and accrued interest from its promissory note in the amount of $ 297,364 at $ 0.58 per share of the Company's common stock. The conversion price was above the market price at closing of $ 0.355 per share. Therefore, the Company recognized a gain of $ 115,357 on conversion as of the fiscal year end July 31, 2023. On March 23, 2023 Mast Hill exercised its rights to convert interest expense and transactions fees in the amount of $ 73,898 at $ 0.58 per share of the Company's common stock. The conversion price was above the market price at closing of $ 0.489 per share. Therefore the Company recognized a gain of $ 11,467 on conversion as of the fiscal year end July 31, 2023. Financing Expenses During the fiscal year ended July 31, 2024, the Company recognized financing expenses associated with notes payable to Synergy Finance of $ 22,420 and $ 14,197 to Forward Financing. During the fiscal year ended July 31, 2023, the Company recognized financing expenses associated with notes payable to Synergy Finance of $ 18,804 and $ 27,599 to Forward Financing. During the fiscal years ended July 31, 2024 and 2023, the Company recognized $ 164,525 and $ 209,130 in financing expenses associated with the Mast Hill note and Talos convertible notes. Other Expenses During the fiscal year ended July 31, 2024, the Company recognized a loss on the writedown of assets in association with the discontinuation of the Hammer Wireless SL business unit. 1stPoint and Endstream recognized a loss of $ 4,134 and $ 21,884 respectively. During the fiscal year ended July 31 ,2023, the Company recognized a loss of $ 170,368 on currency exchange in association with the discontinuation of the Hammer Wireless SL business unit. 1stPoint and Endstream recognized a loss of $ 3,771 and $ 6 respectively. NOTE 18 - SUBSEQUENT EVENTS The Company has completed an evaluation of all subsequent events through February 4, 2025, the date the financial statements were issued. Except as described below, the Company has concluded that no subsequent event has occurred that requires disclosure. Management has reviewed the subsequent events and there is no material impact on the current financial statements or the valuation of the business. On August 7, 2024, the Company authorized and executed a Purchase Agreement with Viper Networks Inc. with the intention to sell the Company's telecommunication assets to Viper. The assets include 1st Point Communications LLC., and all its subsidiaries, Endstream Communications LLC, American Networks Inc., and 10 % ownership in Wikibuli Inc. Viper is acquiring these assets in exchange for 2,500,000 ( 2.5 million) shares of the Company's common stock. Substantially all of the Company's revenue recognized to date has been generated by End Stream Communications, LLC and 1st Point Communications LLC and its subsidiaries. The transaction closed on November 1, 2024. On August 29, 2024, the Company entered into and closed a loan agreement with one of our members of the Board of Directors, pursuant to which the Board Member loaned the Company an aggregate principal amount of $ 791,546 . The Loan has an interest rate of 6 %. The Loan has a six-month maturity date and the principal and accrued interest are due in full on March 1, 2025. The Company used the proceeds of the Loan to pay off in full satisfaction the promissory note the Company previously issued to Mast Hill Fund L.P. On September 1, 2024, the Company obtained shareholder approval for the Purchase Agreement with Viper Networks Inc. and to change the name of the reporting entity, Hammer Fiber Optics Holdings Corp., to Hammer Technologies Holdings Corp. F-23 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL STATEMENTS None.