NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2019
Unaudited
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Hammer Fiber Optics Holdings Corp. (“the Company”) is a telecommunications company investing in the future of wireless technology. Hammer’s “Everything Wireless” go to market strategy includes the development of high-speed fixed wireless service using its wireless fiber platform, Hammer Wireless® AIR, Mobility, Over-the-Top services such as voice, SMS and video collaboration services, the construction of smart city networks and hosting services including cloud and colocation.
Employees
We currently have 19 full-time employees and 1 part-time employee.
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 20,000,000 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 the 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 effected 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.
6
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2019
Unaudited
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”). The interim financial statements for the fiscal quarter ending April 30, 2019 are unaudited. These financial statements are prepared in accordance with requirements for unaudited interim periods and consequently do not include all disclosures required to be in conformity with accounting principles generally accepted in the United States of America. The results of operations for the interim periods are not necessarily indicative of the results for the full year. In management's opinion, all adjustments necessary for a fair presentation of the Company's financial statements are reflected in the interim periods included and are of a normal recurring nature. These interim financial statements should be read in conjunction with the financial statements included in our Form 10-K, for the year ended July 31, 2018, as filed with the Securities and Exchange Commission (“the SEC”) at www.sec.gov.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and cash equivalents
Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.
Property and equipment
Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. For network service equipment, and furniture and fixtures, the useful life is ten and five years, respectively. Leasehold Improvements are depreciated over six years. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.
Impairment of long-lived assets
The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted cash flows to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company has not recognized impairment losses.
Indefinite lived intangible assets
The Company reviews property, plant and equipment, inventory component prepayments and certain identifiable intangibles, excluding goodwill, for impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If property, plant and equipment, inventory component prepayments and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value. The Company has not recorded any related impairment losses.
The Company does not amortize goodwill and intangible assets with indefinite useful lives, rather such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company has not recorded any related impairment losses.
7
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2019
Unaudited
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue recognition
We adopted ASC 606 on August 1, 2018. Revenue is measured based on a consideration specified in a contract or agreement with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Incidental items that are immaterial in the context of the contract are recognized as expense. Unearned revenues are recorded when cash payments are received or due in advance of the performance of the services. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
Income taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.
Fair value measurements
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions) The Company has no assets or liabilities valued at fair value on a recurring basis.
Consolidation of financial statements
Hammer Fiber Optics Holdings Corp. is the parent company and sole shareholder of Hammer Wireless Corporation and its subsidiaries, 1stPoint Communications, LLC and its subsidiaries, which includes Shelcomm, Inc, Open Data Centers, LLC and Endstream Communications, LLC. The financial statements for Hammer Fiber Optics Holdings Corp. and its wholly-owned subsidiaries are reported on a consolidated basis. All significant intercompany accounts and transactions have been eliminated.
Basic and Diluted Earnings (Loss) per Common Share
The basic earnings (loss) per share are calculated by dividing the Company's net income available to common shareholders by the weighted average number of common shares during the year. The diluted earnings (loss) per share is calculated by dividing the Company's net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company. As of April 30, 2019, and July 31, 2018, there were no common stock equivalents outstanding.
8
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2019
Unaudited
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent accounting pronouncements
In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718) (“ASU 2018-07”). ASU 2018-07 provides for improvements to nonemployee share-based payment accounting by expanding the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The awards will be measured at grant date, consistent with accounting for employee share-based payment awards. The measurement date has been redefined as the date at which the grantor and grantee reach a mutual understanding of the key terms and conditions of the award. The requirement to reassess classification of equity-classified awards upon vesting has been eliminated. We do not expect the adoption of this standard to have a material impact on the Company’s financial statements. The Company adopted ASU 2018-07 August 1, 2018.
In February 2016, FASB issued ASU No. 2016-02, Accounting Standards Update No. 2016-02, Leases (Topic 842). ASU 2016-02 provides for improvements for accounting guidance related to leasing treatments on financial statements as a response to user input. The update maintains two classifications of leases, Financial lease and Operating leases. The Update is effective for fiscal years beginning after December 2015, 2018. The company has not yet adopted this standard but there may be impact to the presentation of the Company’s financial statements during the period of adoption.
NOTE 4 – 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.
NOTE 5 – COMMITMENTS AND LEASES
Open Data Centers, LLC is committed to long term operating leases for its facility in Piscataway, New Jersey. There are five more years remaining on the lease with two (2) four (4) year extensions.
The future minimum lease payments are provided below:
|
|
Amount
|
For the year ended July 31, 2019
|
$
|
365,272.44
|
For the fiscal year ended July 31, 2020
|
|
376,230.72
|
For the fiscal year ended July 31, 2021
|
|
387,517.68
|
For the fiscal year ended July 31, 2022
|
|
399,143.16
|
For the fiscal year ended July 31, 2023
|
|
411,117.48
|
For the fiscal year ended July 31, 2024
|
|
423,450.96
|
1stPoint Communications, LLC is committed to a long term operating lease for its facility in Homewood, Alabama. The lease has been renewed for two (2) more years, effective 1 March 2019.
The future minimum lease payments are provided below:
|
|
Amount
|
For the year ended July 31, 2019
|
$
|
3,120.60
|
For the fiscal year ended July 31, 2020
|
|
25,835.00
|
For the fiscal year ended July 31, 2021
|
|
8,782.20
|
All operating leases previously reported have been either terminated, or were accelerated by two major telecommunications operators.
9
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2019
Unaudited
NOTE 6 – 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 7 – PROPERTY AND EQUIPMENT
As of April 30, 2019, property and equipment consisted of the following:
|
|
Amount
|
|
Life
|
Computer and telecommunication equipment
|
$
|
124,183
|
|
3 years
|
Building and structures
|
|
78,253
|
|
3 years
|
|
|
|
|
|
Sub-total
|
|
202,436
|
|
|
Total
|
$
|
202,436
|
|
|
NOTE 8 – INDEFINITE LIVED INTANGIBLE ASSETS
The Company has $1,197,882 of recognized indefinite lived intangible assets, which consist of customer contract assets from acquisitions and goodwill. These assets are not amortized and are evaluated routinely for potential impairment. If a determination is made that the intangible asset is impaired after performing the initial qualitative assessment, the asset’s fair value will be calculated and compared with the carrying value to determine whether an impairment loss should be recognized.
NOTE 9 – RELATED PARTY TRANSACTIONS
During the fiscal year ended July 31, 2016, the Company entered into two promissory notes with a related party for an aggregate amount of $2,400,000 and $1,000,000, respectively. The $2,400,000 note matured on January 4, 2019. The terms consist of ten principal and interest payments due quarterly in the amount of $300,000 for total payments of $3,000,000. The Company is currently in default on this loan. To date, the Company has made payments on this note amounting to $725,831. The payments were applied to interest accrued as of the time of payment as well as to principal. The principal balance was $2,294,067 at July 31, 2018 and 2017. The interest accrued was $219,434 at July 31, 2018 and $69,594 at July 31, 2017, respectively.
The $1,000,000 note matured on June 9, 2018 at which time the principal became due in its entirety, in addition to simple interest accrued at 3%. The company is currently in default on this loan.
As of October 31, 2018, all of the related party payables are reported as current liabilities in the Consolidated Balance Sheet.
On January 4, 2019 the Board of Directors approved a one-time transaction to repurchase 13,000,000 shares of restricted Common Stock from substantial related party shareholders (See NOTE 10).
10
HAMMER FIBER OPTICS HOLDINGS CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS APRIL 30, 2019
Unaudited
NOTE 10 – STOCKHOLDERS’ EQUITY
Treasury Stock
In July 2016, certain shareholders of the Company contributed
9,291,670 restricted shares of their common stock to the Company’s wholly-owned subsidiary, Hammer Wireless Corporation (“Treasury Shares”), for the purpose of effecting acquisitions, joint ventures or other business combinations with third parties. According to ASC 810-10-45 Consolidations, these shares are accounted for as treasury stock.
On January 4, 2019 the Company repurchased 13,000,000 shares of restricted Common Stock from substantial related-party shareholders. The shares of common stock were repurchased by the Company at $0.0001 per share. The repurchased shares were added to the Treasury stock of the Company and intend to be used for the purposes of effecting mergers, acquisitions, joint ventures, contractual relations and may be issued to investors under private placement agreements.
The Company issued $125,000 of Treasury stock to an employee as shares for services, in settlement of an existing employment agreement. The award date for this stock issued was April 18, 2019 and the Company valued the transaction at the closing price of $0.549 for the stock on that date.
As a result of these transactions, the Company has a balance of 48,409,396 treasury shares as of April 30, 2019.
NOTE 11- ACQUISITIONS
On November 1, 2018, the Company acquired Open Data Centers, LLC, 1stPoint Communications, LLC and its subsidiaries. On December 17, 2018, the Company closed the acquisition of Endstream Communications, LLC, a wholesale voice operator in the United States.
The purchase price is as follows:
Endstream Communications, LLC is 1,957,116 shares of the Company’s Common Stock from treasury stock
1stPoint Communications, LLC and its subsidiaries is 3,643,644 shares of the Company’s Common Stock from treasury stock
Open Data Centers, LLC is 2,930,566
shares of the Company’s Common Stock from treasury stock
The following table shows the preliminary allocation of the purchase price consideration to the acquired identifiable assets and liabilities
assumed
. The final purchase price allocation may vary based on final appraisals, valuations and analyses of the fair value of the acquired assets and assumed liabilities.
Total purchase price
|
$
|
2,403,571
|
|
|
|
Cash
|
|
84,815
|
Accounts receivable
|
|
336,919
|
Prepaid expenses
|
|
12,679
|
Fixed assets
|
|
137,161
|
Intangible assets
|
|
2,837,536
|
Other assets
|
|
217,363
|
Liabilities assumed
|
|
(1,222,902)
|
|
|
2,403,571
|
11
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management’s Discussion and Analysis should be read in conjunction with Hammer Fiber Optics Holdings Corp. condensed unaudited financial statements and the related notes thereto. The Management’s Discussion and Analysis contains forward- looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read this Report completely and with the understanding that actual future results may be materially different from what we expect. The forward-looking statements included in this Report are made as of the date of this Report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward- looking statements, whether as a result of new information, future events or otherwise.
The following discussion should be read in conjunction with our audited financial statements for the year ended July 31, 2017 and the related notes thereto. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.
Our financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Results of Operations
Three Months Ended April 30, 2019 Compared to the Three Months Ended April 30, 2018
Net revenues for the three months ended April 30, 2019 and April 30, 2018 were $1,071,212 and $56,550, respectively. The Company earned revenues in the third quarter of year end 2019 through the sale of services from the 1stPoint Communications, Endstream Communications and Open Data Centers subsidiaries, which includes business Internet, Mobility, OTT services such as voice, video and collaboration services as well as hosting and colocation services.
During the three months ended April 30, 2019, the Company incurred total operating expenses of $1,139,137 compared with $1,262,912 for the comparable period ended April 30, 2018. The decrease in operating expenses is due to the substantial change in operations and the discontinuation of the Hammer Fiber Optics Investments Ltd subsidiary.
The Company recorded depreciation and amortization expense of $14,815 and $286,956 during the three months ended April 30, 2019 and April 30, 2018, respectively. The change was due to the substantial change in operations and writing down assets associated with the discontinued operations.
During the three months ended April 30, 2019 and April 30, 2018, interest expense was $9,958 and $94,154, respectively. The decrease is attributable to the substantial change in operations and the discontinuation of the Hammer Fiber Optics Investments Ltd subsidiary.
Nine Months Ended April 30, 2019 Compared to the Nine Months Ended April 30, 2018
Net revenues for the nine months ended April 30, 2019 and April 30, 2018 were $1,948,530 and $146,525, respectively. The Company earned revenues in the first quarter of year end 2018 through subscription sales of internet service from the Hammer Fiber Optic Investments Ltd. Subsidiary, now classified as a discontinued operation. The increase in net revenues for the third quarter of 2019 are from the consolidation of the 1stPoint, Endstream, Open Data Centers and Shelcomm subsidiaries.
During the nine months ended April 30, 2019, the Company incurred total operating expenses of $2,126,180 compared with $3,532,435 for the comparable period ended April 30, 2018. The decrease in operating expenses are due to inclusion of the consolidated expenses from the 1stPoint, Endstream and Open Data Center subsidiaries and the classification of operating expenses as a component of the loss from discontinued operations.
The Company recorded depreciation and amortization expense of $12,780 and $849,901 during the three months ended April 30, 2019 and April 30, 2018, respectively. The decrease was due to a one-time write-down of assets associated with discontinued operations.
12
During the nine months ended April 30, 2019 and April 30, 2018, interest expense was $22,750 and $269,742, respectively. The decrease is attributable
to the classification of any prior interest expense as a discontinued operation and an increase in loans to 1stPoint Communications, LLC.
Liquidity and Capital Resources
The Company is at risk of remaining a going concern. Its ability to remain a going concern is dependent upon whether the company can raise debt and/or equity capital from third-party sources for both working capital and business development needs until such time as the Company may be substantially sustained as a going concern through cash flow from operations or the Company increases its cash flow from operations through sale of services in the newly announced markets of Dominica, Jamaica and Sierra Leone as well as increases in sales from the existing business units of 1stPoint Communications, Endstream Communications and Open Data Centers.
Cash Flow from Operating Activities
During the nine months ended April 30, 2019, the Company used $346,916 in cash for operating activities, compared to $2,211,484 in cash used for operating activities during the comparable 2018 period. The primary reason for this decrease is the substantial change in operations and the reduced operating expenses associated with the operations of 1stPoint Communications, Endstream Communications and Open Data Centers.
Cash Flow from Investing Activities
During the three months ended April 30, 2019, the Company’s investing activities netted $477,806, compared to consuming $567,521 for the nine months ended April 30, 2018. The primary reason for this decrease was the substantial change in operations and reduced capital requirements of 1stPoint Communications, Endstream Communications and Open Data Centers and due to the sale of certain assets.
Cash Flow from Financing Activities
During the three months ended April 30, 2019, the Company consumed $177,885 in cash from financing activities compared with the net of $2,252,205 during the nine months ended April 30, 2018. The change in investing activities is due to a reduction in treasury stock sold to third parties and repayments of loans.
Going Concern
As at April 30, 2019, doubt existed as to the Company’s ability to continue as a going concern as the Company has no certainty of earning additional revenues in the future, has a working capital deficit and an overall accumulated deficit since inception. The Company will require additional financing to continue operations either from management, existing shareholders, or new shareholders through equity financing and/or sources of debt financing. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
Future Financings
We will continue to rely on equity sales of our common shares presently held in Treasury in order to continue to fund business operations. Any issuances of additional shares beyond those shares presently held in Treasury, may result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of shares held in Treasury or issue additional equity securities or arrange for debt or other financing in amounts sufficient to fund our operations and other development activities.
Off-Balance Sheet Arrangements
We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.
13
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States, applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are relevant to the company and are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.