Our Corporate History and Background

The Company was incorporated in the State of Nevada on September 23, 2010, under the name Recursos Montana S.A. The Company’s principal activity was as a pre-exploration stage company engaged in the acquisition and exploration of mineral properties then owned by the Company. During this time, the Company was deemed a “shell company” in the pre-exploration stage and was ultimately unable to commence exploration activities.

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 51% of the issued and outstanding common stock and cash consideration to Tanaris in the aggregate amount of $350,000. 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 a Share Exchange Agreement (the “Share Exchange Agreement”) with Hammer Fiber Optics Investments, Ltd., a Delaware corporation (“HFOI”), and the controlling stockholders of HFOI (the “HFOI Shareholders”). Pursuant to the Share Exchange Agreement, 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 became a wholly owned subsidiary of the Company. Hammer Fiber Optics Investments, Ltd. was formed in the State of Delaware on June 13, 2014.

On April 13, 2016, our board of directors approved a Plan of Merger (the “Plan of Merger”) under Nevada Revised Statutes (NRS) Section 92A.180 to merge (the “Merger”) with our wholly-owned subsidiary Hammer Fiber Optics Holdings Corp., a Nevada corporation, to effect a name change from Tanaris Power Holdings, Inc. to Hammer Fiber Optics Holdings Corp. The transaction was accounted for as a reverse merger. The Plan of Merger also provided for a 1 for 1,000 exchange ratio for shareholders of both the Company and Hammer Fiber Optics Holdings Corp., which had the effect of a 1 for 1,000 reverse split of our common stock. Articles of Mergerwere filed with the Secretary of State of Nevada on April 13, 2016 and, on April 14, 2016, this corporate action was submitted to FINRA for its review and approval.

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On May 3, 2016, the Financial Industry Regulatory Authority (“FINRA”) approved the merger with our wholly-owned subsidiary, Hammer Fiber Optics Holdings Corp. Accordingly, thereafter the Company’s name was changed and our shares of common stock began trading on the Over the Counter Bulletin Board (OTCBB) under our new ticker symbol “HMMR” as of May 27, 2016.

Current Operations

Hammer Fiber Optics Holdings Corp. is an alternative telecommunications carrier providing diversified fiber, wireless and data networking solutions, as well as high capacity broadband wireless access networks. Our goal is to provide managed network solutions to under-served markets in New Jersey, and other U.S. and international locations that provide carriers and other various communication providers, aggregators, enterprise and under-served residential broadband customers access to flexible, scalable and cutting-edge solutions ranging from data center colocation to broadband access and voice services.

In 2017, the Company introduced triple play services, consisting of telephone, internet and video, to the Company’s Atlantic City, Ventnor, Margate and Longport markets in New Jersey.  The Company is presently working towards several accretive acquisitions in the data center, VOIP switching and wireless spaces that will serve to augment existing and future services.  

Employees

We currently have 3 full-time employees.

You should carefully consider each of the risks and uncertainties described below and elsewhere in this Annual Report on Form 10-K, as well as any amendments or updates reflected in subsequent filings with the SEC. We believe these risks and uncertainties, individually or in the aggregate, could cause our actual results to differ materially from expected and historical results and could materially and adversely affect our business operations, results of operations, financial condition and liquidity. Further, additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our results and business operations.

Risks Associated with Our Business

Our operations and financial performance could be negatively impacted, if the markets for our products do not develop and expand as we anticipate.

The markets for our products and services are characterized by rapidly changing technologies, evolving industry or regulatory standards and new product introductions. Our success is dependent on the successful introduction of new products and services, or upgrades of current products and services, and our ability to compete with new technologies. The following factors related to our products, services and markets, if they do not continue as in the recent past, could have an adverse impact on our operations:

our ability to introduce leading products such optical fiber and cable and hardware and equipment, at competitive prices; 

our ability to develop new products in response to government regulations and laws; 

our ability to secure and retain adequate spectrum to facilitate ongoing operations and deployment of our services beyond our present geographic footprint. 

We rely on contract manufacturing of our products. Our inability to secure production sources meeting our quality, cost, working conditions and other requirements, or failures by our contractors to perform, could harm our sales and reputation.

We source our products from international manufacturers. As a result, we must locate and secure production that meets our demands. We depend on our manufacturers to maintain adequate financial resources and maintain sufficient development and manufacturing capacity. We do not have material long-term contracts with any of our manufacturers, and these manufacturers generally may unilaterally terminate their relationship with us at any time. Our dependence on contract manufacturers could subject us to a number of risks if these manufacturers do not meet our quality, cost, working conditions and other requirements or if they fail to materially perform, any of which could seriously harm our sales and reputation. Further, if we need to place greater demands on our current manufacturers due to increased customer demands, or seek additional or replacement manufacturers, we may be unable to do so on terms that are acceptable to us, if at all.

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Violation of labor laws and practices by our manufacturers and suppliers could harm our business.

We require our manufacturers and suppliers to operate in compliance with applicable laws and regulations. While the Company promotes ethical business practices, we do not control our manufacturers or suppliers or their labor practices. The violation of labor or other laws by any of our manufacturers or suppliers, or divergence of their labor practices from those generally accepted as ethical in the local markets, could interrupt or otherwise disrupt the shipment of our products, harm the value of our trademarks, damage our reputation or expose us to potential liability for their wrongdoings.

A privacy breach could damage our reputation and our relationship with our customers, expose the Company to litigation risk and adversely affect our business.

As part of our normal course of business, we collect, process and retain sensitive and confidential customer information. Despite security measures we have in place, our facilities and systems may be vulnerable to security breaches, acts of vandalism, computer viruses, misplaced or lost data, programming and/or human errors, or other similar events. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential information could severely damage our reputation and our relationships with our customers, expose the Company to risks of litigation and liability and adversely affect our business.

Our Articles of Incorporation exculpates our officers and directors from certain liability to our Company or our stockholders.

Our Articles of Incorporation contain a provision limiting the liability of our officers and directors for their acts or failures to act, except for acts involving intentional misconduct, fraud or a knowing violation of law. This limitation on liability may reduce the likelihood of derivative litigation against our officers and directors and may discourage or deter our stockholders from suing our officers and directors based upon breaches of their duties to our Company.

Our directors and named executive officers are also our principal stockholders, as such they will be able to exert significant influence over matters submitted to stockholders for approval, which could delay or prevent a change in corporate control or result in the entrenchment of management or the Board of Directors, possibly conflicting with the interests of other stockholders.

Our directors and named executive officers are also our principal stockholders as such they exert significant influence in determining the outcome of corporate actions requiring stockholder approval and otherwise control of our business. This control could have the effect of delaying or preventing a change in control or entrenching management or the Board of Directors, which could conflict with the interests of our other stockholders and, consequently, could adversely affect the market price of our common stock.

The Company’s independent auditors have issued a going concern opinion.

The Company’s ability to remain a going concern is highly dependent on its ability to raise sufficient debt and/or equity capital, among other things. No assurance can be given that the company will be successful in these efforts.

Information technology dependency and security vulnerabilities could lead to reduced revenue, liability claims, or competitive harm.

The Company is increasingly dependent on sophisticated information technology and infrastructure. Any significant breakdown, intrusion, interruption or corruption of these systems or data breaches could have a material adverse effect on our business.

We use electronic information technology (IT) in our manufacturing processes and operations and other aspects of our business. Despite our implementation of security measures, our IT systems are vulnerable to disruptions from computer viruses, natural disasters, unauthorized access, cyber-attack and other similar disruptions. A material breach in the security of our IT systems could include the theft of our intellectual property or trade secrets. Such disruptions or security breaches could result in the theft, unauthorized use or publication of our intellectual property and/or confidential business information, harm our competitive position, reduce the value of our investment in research and development and other strategic initiatives, or otherwise adversely affect our business. We have, from time to time, experienced incidents related to our IT systems, and expect that such incidents will continue, including malware and computer virus attacks, unauthorized access, systems failures and disruptions. We have measures and defenses in place against unauthorized access, but we may not be able to prevent, immediately detect, or remediate such events.

5

Business disruptions could affect our operating results

A significant portion of our development activities and certain other critical business operations are concentrated in a few geographic areas. A major earthquake, fire or other catastrophic event that results in the destruction or disruption of any of our critical facilities could severely affect our ability to conduct normal business operations and, as a result, our future financial results could be materially and adversely affected.

If we cannot attract more optical customers to purchase our products, we may not be able to increase or sustain our revenues.

Our future success will depend on our ability to migrate existing customers to our new products and our ability to attract additional customers. Some of our present customers are relatively new companies. The growth of our customer base could be adversely affected by:

customer unwillingness to implement our products and services; 

any delays or difficulties that we may incur in completing the development and introduction of our products or product enhancements or service enhancements; 

the overall satisfaction of our customers; 

new product and service introductions by our competitors; 

any failure of our products to perform as expected; or 

any difficulty we may incur in meeting customers’ expectations. 

Fluctuations in the economy affect the telecommunications industry, including broadband and Internet and may decrease demand for various products and services. Such a decrease may have an adverse effect on the demand in the fiber optic sector and negatively impact the growth of our customer base.

Risks Relating to Ownership of Our Securities

Our stock price may be volatile, which may result in losses to our shareholders.

The stock markets have experienced significant price and trading volume fluctuations, and the market prices of companies listed on the OTCPNK quotation system in which shares of our common stock are listed, have been volatile in the past and have experienced sharp share price and trading volume changes. The trading price of our common stock is likely to be volatile and could fluctuate widely in response to many factors, including the following, some of which are beyond our control:

variations in our operating results; 

changes in expectations of our future financial performance, including financial estimates by securities analysts and investors; 

changes in operating and stock price performance of other companies in our industry; 

additions or departures of key personnel; and 

future sales of our common stock. 

Domestic and international stock markets often experience significant price and volume fluctuations. These fluctuations, as well as general economic and political conditions unrelated to our performance, may adversely affect the price of our common stock.

Our common shares may become thinly traded and you may be unable to sell at or near ask prices, or at all.

We cannot predict the extent to which an active public market for trading our common stock will be sustained. The trading price of our common shares has historically been sporadically or “thinly-traded” meaning that the number of persons interested in purchasing our common shares at or near ask prices at any given time may be relatively small or non-existent.

This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community who generate or influence sales volume. Even if we came to the attention of such persons, those persons tend to be risk-averse and may be reluctant to follow, purchase, or recommend the purchase of shares of an unproven company such as ours until such time as we become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot provide any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.

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The market price for our common stock is particularly volatile given our status as a relatively small company, which could lead to wide fluctuations in our share price. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.

Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks can be negatively affected from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

We do not anticipate paying any cash dividends to our common shareholders.

We presently do not anticipate that we will pay dividends on any of our common stock in the foreseeable future. If payment of dividends does occur at some point in the future, it would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any common stock dividends will be within the discretion of our Board of Directors. We presently intend to retain any earnings after paying the interest for the preferred stock, if any, to implement our business plan; accordingly, we do not anticipate the declaration of any dividends for common stock in the foreseeable future.

Volatility in our common share price may subject us to securities litigation.

The market for our common stock is characterized by significant price volatility as compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management’s attention and resources.

The elimination of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights of our directors, officers and employees may result in substantial expenditures by our company and may discourage lawsuits against our directors, officers and employees.

Our Articles of Incorporation contain a specific provision that eliminates the liability of our directors and officers for monetary damages to our company and shareholders. Further, we are prepared to give such indemnification to our directors and officers to the extent provided for by Nevada law. We may also have contractual indemnification obligations under our employment agreements with our officers. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and shareholders.

Our business is subject to changing regulations related to corporate governance and public disclosure that have increased both our costs and the risk of noncompliance.

Because our common stock is publicly traded, we are subject to certain rules and regulations of federal, state and financial market exchange entities charged with the protection of investors and the oversight of companies whose securities are publicly traded. These entities, including the Public Company Accounting Oversight Board, the United States Security & Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), have issued requirements and regulations and continue to develop additional regulations and requirements in response to corporate scandals and laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. Our efforts to comply with these regulations have resulted in, and are likely to continue resulting in, increased general and administrative expenses and diversion of management time and attention from revenue-generating activities to compliance activities. Because new and modified laws, regulations and standards are subject to varying interpretations in many cases due to their lack of specificity, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices.

7

None

We maintain leased administrative offices in Point Pleasant Beach, NJ and a leased customer center in Ventnor, NJ. We do not have any policies regarding investments in real estate, securities or other forms of property. We do not own any real property.

We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.

We do not engage in mining operations and accordingly have no information to disclose concerning mine safety.

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ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES MARKET FOR COMMON EQUITY

Market Price and Dividends

Our common stock is currently quoted on the OTC Bulletin Board, under the symbol “HMMR.” Our common stock has been quoted on the OTC Bulletin Board since approximately August 30, 2016. Prior to that, our shares of common stock were quoted on the OTC Bulletin Board under the symbol “TPHX”. Because we are quoted on the OTC Bulletin Board, our securities may be less liquid, receive less coverage by security analysts and news media, and generate lower prices than might otherwise be obtained if they were listed on a national securities exchange.

The following table sets forth the high and low bid quotations for our common stock as reported on the OTC Bulletin Board for the periods indicated.

Note: High and Low prices reflected are through July 31, 2018.

Information for the periods referenced above has been furnished by the OTC Bulletin Board. The quotations furnished by the OTC Bulletin Board reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not reflect actual transactions.

As of July 31, 2018, there were 60,503,341 shares of common stock issued and 52,946,162 outstanding.

We have never declared or paid any cash dividends on our common stock nor do we intend to do so in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our board of directors and will depend upon our financial condition, operating results, capital requirements, any applicable contractual restrictions and such other factors as our board of directors deems relevant.

Re-Purchase of Equity Securities

None.

Securities Authorized for Issuance under Equity Compensation Plan

None.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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MANAGEMENT’S DISCUSSION AND ANALYSIS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements are not historical facts but rather are based on current expectations, estimates and projections. We may use words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “foresee,” “estimate” and variations of these words and similar expressions to identify forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or forecasted. You should read this Report completely and with the understanding that actual future results may be materially different from what we expect. The forward looking statements included in this Report are made as of the date of this Report and should be evaluated with consideration of any changes occurring after the date of this Report. We will not update forward-looking statements even though our situation may change in the future and we assume no obligation to update any forward- looking statements, whether as a result of new information, future events or otherwise.

The following discussion should be read in conjunction with our audited financial statements and the related notes that appear elsewhere in this annual report. 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 audited financial statements are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.

Overview

The company was incorporated on September 23, 2010 pursuant to the laws of the State of Nevada under the name of Recursos Montana S.A. On March 6, 2015 the Company amended its Articles of Incorporation to change its name to “Tanaris Power Holding, Inc.” On April 25, 2016, Tanaris Power Holdings, Inc., a Nevada corporation (the “Company” or “TPHX”) entered into a Share Exchange Agreement (the “Share Exchange Agreement”) with Hammer Fiber Optics Investments, Ltd., a Delaware corporation (“HFOI”), and the controlling stockholders of HFOI (the “HFOI Shareholders”). Pursuant to the Share Exchange Agreement, closed on July 19, 2016, the Company acquired 20,000,000 shares of common stock of HFOI from the HFOI shareholders and in exchange the Company issued to the HFOI Shareholders 50,000,000 (post-Merger) restricted shares of its common stock. As a result of the Share Exchange Agreement, HFOI became a wholly owned subsidiary of the Company.

The Company was originally organized for the purpose of acquiring and developing mineral properties. The Company had not established the existence of a commercially viable minable ore deposit and therefore did not reach the exploration stage. As such, the company negotiated to dispose of the business of investing in minerals in favor of developing new business opportunities in the technology sector. The company Hammer Fiber Optics Holdings Corp. is now an alternative telecommunications carrier that is poised to position itself as a premier provider of diversified dark fiber networking solutions as well as high capacity broadband wireless access networks in the United States and abroad.

On September 11, 2018 the Company entered into a stock purchase agreement with 1stPoint Communications, LLC (the “Seller”).  The purchase price for all of the Company Units is three million six hundred and forty-three thousand six hundred and forty-four (3,643,644) shares of the Company’s Common Stock from treasury stock.  Seventy five percent (75%) of the shares of the Company’s Common Stock to be issued are restricted securities, as defined in Rule 144 of the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended.

On September 11, 2018 the Company entered into a stock purchase agreement with Endstream Communications, LLC (the “Seller”). The purchase price for all of the Company Units is one million nine hundred and fifty-seven thousand one hundred and sixteen (1,957,116) shares of the Company’s Common Stock from treasury stock.  Seventy five percent (75%) of the shares of Buyer Common Stock to be issued are restricted securities, as defined in Rule 144 of the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended.  

On September 11, 2018 the Company entered into a stock purchase agreement with Shelcomm, Inc. (the “Seller”).  The purchase price for all of the Company Units is nine hundred thousand (900,000) shares of the Company’s Common Stock from treasury stock. The shares of the Company’s Common Stock to be issued are restricted securities, as defined in Rule 144 of the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended.

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On September 12, 2018 the Company entered into a stock purchase agreement with Open Data Centers, LLC (the “Seller”). The purchase price for all of the Company Units is two million nine hundred thirty thousand five hundred sixty-six (2,930,566) shares of the Company’s Common Stock from treasury stock.  The shares of the Company’s Common Stock to be issued are restricted securities, as defined in Rule 144 of the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended. The Company shall also pay Sellers a sum of $200,000 in Cash, delivered to the Sellers no later than January 10, 2019.  

The shares to be issued to the Sellers are intended to be comprised of a combination of shares currently held in treasury and shares intended to be forfeited, and therefore returned to the company as treasury stock prior to closing, by substantial related-party shareholders. The value of the shares issued to the Sellers will be based upon the closing price on the date the transaction is completed. All restricted shares are as defined under Rule 144 of Securities and Exchange Commission and are restricted for a period of twelve (12) months from the date of closing.  

On September 11, 2018, Mark Stogdill, President and Chief Executive Officer and Executive Director of the Board of Directors of the Company resigned from his position as President and Chief Executive Officer of the Company. Simultaneously, the Company announced that Mr. Stogdill was appointed as the Company’s new Chief Technology Officer effective immediately.  Mr. Stogdill retains his position as an Executive Director of the Board of Directors.  Mr. Stogdill’s employment agreement had been extended and amended to reflect his position as Chief Technology Officer.

In combination with this change, Erik B. Levitt was appointed President and Chief Executive Officer, effective immediately.  Mr. Levitt was also elected as a member of the Board of Directors, effective immediately.  

In connection with the appointment of Mr. Levitt as President & Chief Executive Officer, the Board of Directors approved an employment agreement with Mr. Levitt.

On October 10, 2018 the Company announced the closure of the Atlantic City, NJ wireless broadband network as a result of the termination of the Master Spectrum Lease Agreement held by the Company subsidiary Hammer Fiber Optic Investments Ltd. d/b/a Hammer Communications by Verizon Communications.  Verizon Communications had informed the Company of their intention to honor the terms of the lease agreement, then subsequently issued a notification to the Company that the spectrum lease for the 28 GHz spectrum will be prematurely terminated as of October 31, 2018. The Company negotiated with Verizon to find a path forward and was offered a less desirable spectrum leasing arrangement. After extensive engineering discussions it was determined that it was not feasible to pursue the alternative agreement proposed by Verizon. As a result, the Company is informing all affected customers that service operations and support will be discontinued as of October 31, 2018.  

Results of Operations

The Year Ended July 31, 2018 Compared to the Year Ended July 31, 2017

Net revenues for the year ended July 31, 2018 and 2017 were $455,609 and $87,692, respectively, as a result of an increase in subscriptions for internet, telephone and video services.

During the year ended July 31, 2018, the Company incurred total operating expenses of $5,585,438 compared with $5,030,734 for the comparable period in 2017. The increase in operating costs consisted primarily of $488,120 for labor and related employee costs and $66,584 for office and other administrative expenses.  The Company anticipates operating costs are expected to increase as network expansions are planned.

The Company recorded depreciation expense of $1,041,958 during the year ended July 31, 2018 compared to $872,103 in the comparable period in 2017. The increase was the result of additional capital assets placed into service to further expand the company’s technology platform.

During the year ended July 31, 2018, interest expense was $366,798 compared to $351,643 in the comparable period in 2017. The increase is attributable to an increase in the amount of related-party debt.

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Liquidity and Capital Resources

We have financed our operations since inception primarily through private placements of our common stock.  As of July 31, 2018, we had cash and cash equivalents of $3,441. 

Net cash used in operating activities was $3.0 million and $4.8 million for the year ended July 31, 2018 and July 31, 2017, respectively.  The decrease in cash used in operating activities for the period ended July 31, 2018 when compared to the same period in 2017 was primarily due to completion of our main network elements and a reduction in staffing to accommodate cash flow constraints.

Net cash used in investing activities was $0.28 million and $0.69 million for the year ended July 31, 2018 and July 31, 2017, respectively.  The decrease in cash used in investing activities for the period ended July 31, 2018 when compared to the same period in 2017 was primarily due to the purchase additional equipment for network redundancy. 

Net cash provided by financing activities was $2.7 million and $5.4 million for the year ended July 31, 2018 and July 31, 2017, respectively.  The decrease in cash provided by financing activities for the period ended July 31, 2018 when compared to the same period in 2017 was primarily the result of completing our service network from proceeds raised in prior periods. 

We have not attained profitable operations and are dependent upon obtaining financing to pursue any extensive activities.  For these reasons, our auditors have included in their report on our audited financial statements for the fiscal year ended July 31, 2018 an explanatory paragraph regarding factors that raise substantial doubt that we will be able to continue as a going concern.

Going Concern

As at July 31, 2018, substantial doubt existed as to the Company’s ability to continue as a going concern as the Company has earned only minimal revenue, 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.

Contractual Obligations

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Selected Financial Data

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

July 31, 2018 and 2017

Page

Reports of Independent Registered Public Accounting FirmsF-1 

Consolidated Balance SheetsF-2 

Consolidated Statements of OperationsF-3 

Consolidated Statements of Changes in Stockholders’ EquityF-4 

Consolidated Statements of Cash FlowsF-5 

Notes to Consolidated Financial StatementsF-6 

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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, 2018 and 2017, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the two-year period ended July 31, 2018 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of July 31, 2018 and 2017, and the results of its operations and its cash flows for each of the years in the two-year period ended July 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph Regarding 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 suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its 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.

/s/ Sadler, Gibb & Associates, LLC

We have served as the Company’s auditor since 2013.

Salt Lake City, UT

November 13, 2018

F-1

F-2

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

F-3

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

F-4

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

F-5

HAMMER FIBER OPTICS HOLDINGS CORP.

NOTES TO FINANCIAL STATEMENTS

JULY 31, 2018 and 2017

NOTE 1 – ORGANIZATION AND DESCRIPTION BUSINESS

Hammer Fiber Optics Holdings Corp. (“the Company”) is an alternative telecommunications carrier formed to provide high capacity broadband through a wireless access network. Hammer Fiber Optics Holdings Corp. is the parent company and sole shareholder of Hammer Wireless Corporation. The financial statements for Hammer Fiber Optics Holdings Corp. and its wholly-owned subsidiary are reported on a consolidated basis. All significant intercompany accounts and transactions have been eliminated.

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 became 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 provided 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.

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.

F-6

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 for any long-lived assets.

Notes Receivable

These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, they are recorded at amortized cost less any provision for impairment. Individually significant receivables are considered for impairment when they are past due or when other objective evidence is received that a specific counterparty is more likely than not to default.

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.

Revenue recognition

The Company recognizes revenues and the related costs when a sales or service arrangement exists, delivery and acceptance has occurred or service has been rendered, the price is fixed or determinable, and collection of the resulting receivable is reasonably assured. 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 have consisted primarily of subscription agreements for its broadband internet and voice-over-IP phone services. Residential broadband service delivered to customers over the Company’s hybrid fiber and wireless network in Atlantic County, New Jersey has been the primary revenue source. Revenues are supplemented by phone and add-on services. Broadband services delivered via fiber optics to enterprise businesses account for the remaining sources of revenue. Services have been billed monthly to subscribers on either a one- year or two-year contract for residential customers and three-year contracts for enterprise business customers. Revenue begins accruing as service is delivered at commencement of the customer’s service contract.

Revenue is recorded net of discounts provided to customers. Discounts applied during the years July 31, 2018 and 2017 were $22,314 and $14,364, respectively.

F-7

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 Hammer Fiber Optic Investments Ltd. 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 July 31, 2018 and 2017, there were no common stock equivalents outstanding.

Recent accounting pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers.  ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.  ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.  The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In addition, during 2016 the FASB has issued ASU 2016-08, ASU 2016-10 and ASU 2016-12, all of which clarify certain implementation guidance within ASU 2014-09, and ASU 2016-11, which rescinds certain SEC guidance effective upon an entity’s adoption of ASU 2014-09.  ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017.  Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein.  The standard can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption.  The Company is currently assessing the impact this standard will have on its consolidated financial statements.

F-8

The Company does not expect the adoption of any other recent accounting pronouncements to have a material impact on its financial statements.

Reclassifications

Certain prior period amounts have been reclassified to conform with current period presentation. In July 2016, certain shareholders of the Company contributed 9,291,670 restricted shares of their common stock to the Company’s wholly-owned subsidiary, Hammer Wireless Corporation, for the purpose of effecting acquisitions, joint ventures or other business combinations with third parties. Then, Hammer Wireless sold a portion of these restricted shares to third parties and contributed the proceeds to the Company. Since such contribution was an inter-company transaction, any impact on the financial statements is eliminated in the consolidation of these financial statements.  During fiscal year ended July 31, 2018 shares held by Hammer Wireless Corporation have been reclassified as Treasury Shares for the purposes of determining the number of outstanding shares of the company.  

In the fiscal year ended July 31, 2017, the Company reported loss of asset impairment of $750,000 related to a note receivable. In the fiscal year ended July 31, 2018, the Company recovered $289,000 related to this note receivable. Accordingly, the loss of asset impairment in fiscal 2017 has been reclassified to general and administrative expense in the statement of operations, and in fiscal 2018, we have reported the full recovery of bad debt of $289,000 in general and administrative expense.

Accounts Receivable

Accounts receivable are recorded at invoiced amount and generally do not bear interest. An allowance for doubtful accounts is established, as necessary, based on past experience and other factors which, in management's judgment, deserve current recognition in estimating bad debts. Such factors include growth and composition of accounts receivable, the relationship of the allowance for doubtful accounts to accounts receivable and current economic conditions. The determination of the collectability of amounts due from customer accounts requires the Company to make judgments regarding future events and trends. Allowances for doubtful accounts are determined based on assessing the Company’s portfolio on an individual customer and on an overall basis. This process consists of a review of historical collection experience, current aging status of the customer accounts, and the financial condition of the Company’s customers. As of July 31, 2018, the Company recorded an allowance for doubtful accounts of $23,002 based on historical collection activity for accounts older than 90 days.

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. 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 – NOTES RECEIVABLE

During the fiscal year ended July 31, 2016, the Company entered into a loan agreement with MEK Investments Inc. for an aggregate amount of $235,000. The loan matured June 30, 2018 at which time the principal was due in its entirety, in addition to simple interest accrued at 3% per year. As of July 31, 2018, the Company recorded bad debt expense for the full receivable balance, including accrued interest of $14,696.

The Company had entered into a loan agreement during the year ended July 31, 2016 with Zena Capital, LLC for an aggregate amount of $1,000,000. Payments totaling $250,000 had been made against the loan; however, the loan was in default as of July 31, 2017. The Company recorded an impairment loss for the full $750,000 in July 2017 after determining that the collectability of the note, as well, as the services to be rendered by Zena Capital, LLC, were no longer assured.  In 2018, the Company received payments totaling $289,000 as partial recovery of the outstanding loan balance. The partial recovery is reported in general and administrative expense on the Consolidated Statement of Operations. See also the “reclassifications” footnote related to the 2017 amounts.

F-9

NOTE 6 – PROPERTY AND EQUIPMENT

As of July 31, 2018, property and equipment consisted of the following:

As of July 31, 2017, property and equipment consisted of the following:

Depreciation expense was $1,041,958 and $872,103 for the years ended July 31, 2018 and 2017, respectively.

NOTE 7 – INDEFINITE LIVED INTANGIBLE ASSETS

The Company has $18,934 of recognized indefinite lived intangible assets, which consist of the ownership of Internet Protocol version 4 (IPv4) address blocks. 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 8 – RELATED PARTY TRANSACTIONS

On October 9, 2016, the Company entered into a short-term loan agreement with a family member of a member of the Company’s Board of Directors (BOD). Under the agreement, the lender advanced $100,000 to the Company for the purpose of providing working capital. The loan carries an annual interest rate of 3%. The Company is currently in default on this loan. On September 15, 2016, the Company received $210,000 from a family member of a member of the BOD, also for the purpose of working capital, and has recorded such amount as a deposit in anticipation of executing a loan agreement.  

On April, 9 2018, the Company received an additional $20,000 deposit from a family member of a member of the BOD. The amount was intended as additional working capital.  The Company anticipates execution of a loan agreement relative to this advance.

During the fiscal year ended July 31, 2016, the Company entered into two promissory notes with a Director for an aggregate amount of $2,400,000 and $1,000,000, respectively. The $2,400,000 note matures 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.

F-10

On June 19, 2018, a convertible promissory note that was entered into on February 12, 2018 by the Company for the sum of $103,000 was settled in full on the company’s behalf by a Director. The settlement included a prepayment penalty for a full settlement amount of $132,433. The difference between the carrying value of the loan and the full settlement amount ($29,433) was recorded as interest expense.

As of July 31, 2018, all of the related party payables are reported as current liabilities in the Consolidated Balance Sheet.

NOTE 9 – CONVERTIBLE DEBT

On February 12, 2018, the Company entered into an agreement for a convertible promissory note for the sum of $103,000. The note accrues interest at a rate of 12 percent per annum due at maturity.  The note matures nine months from the issuance date. Prepayment of the note is subject to a premium charge based on the amount of days prepaid before the maturity date.  The note allows conversion into the Company’s common stock at a discount of 37 percent of the stock’s market price. The holder shall have the right after 180 days to convert all or part of the note at their discretion. On June 19, 2018 the note was settled in full on the company’s behalf by a Director (see Note 8).

NOTE 10 – INCOME TAXES

The Company’s income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management’s best estimate of current and future taxes to be paid. The Company is subject to income taxes in the United States and numerous foreign jurisdictions.  Significant judgments and estimate are required in the determination of the consolidated income tax expense.

The reconciliation of income tax benefit at the U.S. statutory rate of 35% for the fiscal year ended July 31, 2017, to the Company’s effective tax rate is as follows:

The tax effects of temporary differences that give rise to the Company’s net deferred tax assets as of July 31, 2017 are as follows:

The reconciliation of income tax benefit at the federal and state statutory blended rates for the fiscal year ended July 31, 2018, to the Company’s effective tax rate is as follows:

The tax effects of temporary differences that give rise to the Company’s net deferred tax assets as of July 31, 2018 are as follows:

The Tax Cuts and Jobs Act of 2017 (the Act) reduced the statutory corporate federal income tax rate from 35% to 21% beginning in 2018. The blended tax rate for 2018 considered the tax laws enacted in 2017. The tax effect of temporary differences from net operating losses (“NOL”) has been reduced to reflect the newly enacted rate.

The Company has approximately $14,200,000 of NOL carried forward to offset taxable income in future years. The tax laws enacted in 2017 also changed the treatment of NOL. Prior to the change, NOL could be carried back up to two years and carried forward up to 20 years to offset taxable income. In the new tax law, the NOL that can be carried forward is limited to 80% of the taxable income, can no longer be carried back, but are allowed to be carried forward indefinitely. The new law will apply to NOL arising in tax years beginning December 31, 2017, hence, $3,000,000 of the NOL will be subject to the 80% limitation and will be carried forward indefinitely while $11,200,000 of the NOL will be carried forward for 20 years and will begin to expire in 2036.

F-11

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized.  The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.  Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

As of July 31, 2018 and 2017, the Company has no unrecognized income tax benefits.  The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items as a tax expense.  No interest or penalties have been recorded during the years ended July 31, 2018 and 2017.  As of July 31, 2018 and 2017, the Company did not have any amounts recorded pertaining to uncertain tax positions.

The tax years from 2015 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards.  The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities.

NOTE 11 – STOCKHOLDERS’ EQUITY

Treasury Stock

During the year ended July 31, 2018, the Company received cash of $2,600,651 from the sale of 800,914 treasury shares to various investors and a Directors.

Additionally, the Company issued 184,300 treasury shares to third parties for services provided during the year. The Company valued these shares using the closing quoted price of the Company’s common stock on the date of issuance. This resulted in an increase in the Company’s general and administrative expenses amounting to $1,259,347.

During the year ended July 31, 2017, the Company received cash of $5,203,003 from the sale of 749,277 Treasury Shares sold to third parties.  These transactions represent capital contributions and did not result in an increase in the number of shares outstanding.

As a result of these transactions, the Company has a balance of 7,557,179 and 8,542,393 in treasury shares as of July 31, 2018 and 2017, respectively.

NOTE 12 – COMMITMENTS AND LEASES

The Company is committed under numerous operating leases for its offices and various installations of operating equipment.  The office leases are commitments of 1 to 3 years and have extension of varying lives.  Equipment and installation locations have varying leases of between 3 and 5 years and also have varying renewal option of up to 5 years at time for 15 additional years.  The Company is also commited to long term technical agreements governed under service orders with several difference major telecommunications operators for access to dark fiber in conjunction with rack space and power at data centers.  Commitments on these technical agreements run from 5 to 10 years.

F-12

The future minimum lease payments are provided below.

Rent expense for the Company amounted to $830,145 and $873,000 for the fiscal years ended July 31, 2018 and 2017, respectively.

NOTE 13 – SUBSEQUENT EVENTS

Subsequent to July 31, 017, the Company received cash of $8,600 from the sale of 17,200 Treasury Shares sold to third parties. The Company also issued 110,000 shares of common stock for services to employees of the Company from Treasury Shares.  

On September 12, 2018 the Company entered into a stock purchase agreement with Open Data Centers, LLC (the “Seller”). The purchase price for all of the Company Units is two million nine hundred thirty thousand five hundred sixty-six (2,930,566) shares of the Company’s Common Stock from treasury stock.  The shares of the Company’s Common Stock to be issued are restricted securities, as defined in Rule 144 of the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended. The Company shall also pay Sellers a sum of $200,000 in Cash, delivered to the Sellers no later than January 10, 2019.  

On September 11, 2018 the Company entered into a stock purchase agreement with 1stPoint Communications, LLC (the “Seller”). The purchase price for all of the Company Units is three million six hundred and forty-three thousand six hundred and forty-four (3,643,644) shares of the Company’s Common Stock from treasury stock.  Seventy five percent (75%) of the shares of the Company’s Common Stock to be issued are restricted securities, as defined in Rule 144 of the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended.

On September 11, 2018 the Company entered into a stock purchase agreement with Endstream Communications, LLC (the “Seller”). The purchase price for all of the Company Units is one million nine hundred and fifty-seven thousand one hundred and sixteen (1,957,116) shares of the Company’s Common Stock from treasury stock.  Seventy five percent (75%) of the shares of Buyer Common Stock to be issued are restricted securities, as defined in Rule 144 of the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended.  

On September 11, 2018 the Company entered into a stock purchase agreement with Shelcomm, Inc. (the “Seller”).  The purchase price for all of the Company Units is nine hundred thousand (900,000) shares of the Company’s Common Stock from treasury stock. The shares of the Company’s Common Stock to be issued are restricted securities, as defined in Rule 144 of the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended.

The value of the shares issued to the Sellers will be based upon the closing price on the date the transaction is completed. All restricted shares are as defined under Rule 144 of Securities and Exchange Commission and are restricted for a period of twelve (12) months from the date of closing.  

F-13

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL STATEMENTS

None

Management’s Report on Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 , as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer (who is acting as our principal executive officer, principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.

As of July 31, 2018, we carried out an evaluation, under the supervision of our chief executive officer, with the participation of our principal accounting officer, of the effectiveness of the design and operation of our disclosure controls and procedures. The officers concluded that the disclosure controls and procedures were not effective as of the end of the period covered by this report.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Our management assessed the effectiveness of our internal control over financial reporting as of July 31, 2018. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework. Our management has concluded that, as of July 31, 2018, our internal control over financial reporting was not effective.

This annual report does not include an attestation report of our company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit our company to provide only management’s report in this annual report.

Inherent limitations on effectiveness of controls

Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the year ended July 31, 2018 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

None.

13

Identification of Executive Officers and Directors of the Company

^1. The number and percentage of shares beneficially owned is determined under rules promulgated by the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares, which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The entities or persons named in the table have sole voting and investment power with respect to all shares of common stock shown that are beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.

^2. On August 1, 2016, Michael Cothill was appointed as the Company’s Treasury and Chairman of the Company’s Board of Directors. The beneficial ownership of our Chairman, Michael Cothill, is held through Ambleside Trust, of which he is the Managing Member.  

^3. On August 1, 2016, Don McNeil was appointed as a Member of the Company’s Board of Directors. Mr. MacNeil’s beneficial ownership is through Centerline LLC, of which he is the Managing Member.

^4. On August 1, 2016, Michael Sevell was appointed as a Member of the Company’s Board of Directors. The beneficial ownership by our Director, Michael Sevell, is held personally and through Second Punch LLC and Forefront Investments LLC of which he is the Managing Member of both.

^5. On August 1, 2016, Mark Stogdill was appointed as the Company’s Chief Executive Officer and as a Member of the Company’s Board of Directors. The beneficial ownership by our Director, Mark Stogdill, is through Arradis Enterprises LLC of which he is the Managing Member.

^6. On August 1, 2016, Dennis W. Doll was appointed as a Member of the Company’s Board of Directors.

^7. On September 27 2017, Mr. Michael Adamcik was appointed Corporate Secretary.

14

Term of Office

Each director of the Company serves for a term of one year and until his successor is elected and qualified at the next Annual Shareholders’ Meeting, or until his death, resignation or removal. Each officer of the Company serves for a term of one year and until his successor is elected and qualified at a meeting of the Board of Directors.

Significant Employees

None.

Family Relationships

Mr. Adamcik, Corporate Secretary, is a brother-in-law of Mr. Doll, Director. Mr. Doll recuses himself with respect to any matters regarding the employment and compensation of Mr. Adamcik. There are no other family relationships among the Company’s officers, directors or persons nominated for such positions.

Involvement in Certain Legal Proceedings

During the past ten years no director, executive officer, promoter or control person of the Company has been involved in the following:

(1)A petition under the Federal bankruptcy laws or any state insolvency law which was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; 

(2)Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); 

(3)Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities: 

(i)Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; 

(ii)Engaging in any type of business practice; or 

(iii)Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; 

(4)Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity; 

(5)Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; 

(6)Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; 

(7)Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: 

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(i)Any Federal or State securities or commodities law or regulation; or 

(ii)Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or 

(iii)Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or 

(8)Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. 

Code of Ethics

The Company has not adopted any formal Code of Ethics.

Committees of the Board of Directors

The Company does not presently have a separately designated standing audit committee, compensation committee, nominating committee, executive committee or any other committees of our Board of Directors. The functions of those committees are undertaken by our Board of Directors as a whole. Mr. Doll, an independent Director, serves as Chairman of the Audit Committee and therefore presides at such meetings of the Committee.

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officer received total annual salary and bonus compensation in excess of $100,000.

^1. We have omitted certain columns in the summary compensation table pursuant to Item 402(a)(5) of Regulation S-K as no compensation was awarded to, earned by, or paid to any of the executive officers or directors required to be reported in that table or column in any fiscal year covered by that table.

^2. The “All Other Compensation” column is used to disclose the aggregate amount of all compensation that the company could not properly report in any other column of the Summary Compensation Table. It represents the value of a stock awarded to two of our executives as part of their recruitment to their respective positions. Compensation was based on the par value of the stock at issuance. See footnote 3 and 6 for details.

^3. Prior to his appointment as an Officer and Director on March 30, 2016, Michael Cothill was the Chairman and Director of our wholly owned subsidiary, Hammer Fiber Optic Investments Ltd. The “Other Compensation” set forth above is 4,350,000 shares issued at par value of $0.001.  Mr.

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^4. Cothill has an employment agreement with the company but opted to take a reduced compensation for year ending July 31, 2018 as reflected in Summary Compensation Table.

^5. Don MacNeil was a Director of our wholly owned subsidiary, Hammer Fiber Optic Investments Ltd. The “Other Compensation” set forth above is 500,000 shares issued at par value of $0.001.

^6. Michael Sevell was a Director of our wholly owned subsidiary, Hammer Fiber Optic Investments Ltd. He has not received compensation of any kind.

^7. Mark Stogdill was CEO and Director of our wholly owned subsidiary, Hammer Fiber Optic Investments Ltd. The “Other Compensation” set forth above is 15,000,000 shares issued at par value of $0.001. Mr. Stogdill has an employment agreement with the company but opted to take a reduced compensation for year ending July 31, 2018 as reflected in Summary Compensation Table.

^8. Mr. Doll was named a Director August 1, 2016 and serves as Chairman of the Audit Committee. He received no compensation for such services through the year ended July 31, 2018.

Option Grants

We have not granted any options or stock appreciation rights to our named executive officers or directors since inception. We do not have any stock option plans.

Management Agreements

We have executive contract agreements with our Chairman Michael Cothill and our CEO Mark Stogdill.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension, retirement or similar benefits to our directors or executive officers. We have no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that stock options may be granted at the discretion of the board of directors or a committee thereof.

Compensation Committee

We do not currently have a compensation committee of the board of directors or a committee performing similar functions. The board of directors as a whole participates in the consideration of executive officer and director compensation.

Indebtedness of Directors, Senior Officers, Executive Officers and Other Management

None of our directors or executive officers or any associate or affiliate of our company during the last two fiscal years is or has been indebted to our company by way of guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information regarding the beneficial ownership of our shares of common stock as of July 31, 2016 (i) each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock, (ii) each of our directors, (iii) each of our executive officers, and (iv) by all of our directors and executive officers as a group. Each person named in the table, has sole voting and investment power with respect to all shares shown as beneficially owned by such person and can be contacted at our executive office address.

Under Rule 13d-3 of the Exchange Act a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares.

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The number and percentage of shares beneficially owned is determined under rules promulgated by the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the individual has sole or shared voting power or investment power and also any shares, which the individual has the right to acquire within 60 days through the exercise of any stock option or other right. The entities or persons named in the table have sole voting and investment power with respect to all shares of common stock shown that are beneficially owned by them, subject to community property laws where applicable and the information contained in the footnotes to this table.

^1. Our CEO and Director, Mark Stogdill, is the Managing Member of Arradis Enterprises LLC.

^2. Helen Stogdill is the Managing Member of Pointwest Group LLC.

^3. Our Treasurer and Chairman, Michael Cothill, is the sole trustee of Ambleside Trust.

^4. Our Director, Michael Sevell, is the Managing Member of Second Punch LLC.

^5. Our Director, Michael Sevell, is the Managing Member of Forefront Investments LLC.

^6. Our Director, Don MacNeil, is the Managing Member of Centerline LLC.  

Related Party Transactions

None of the directors or executive officers of the Company, nor any person who owned of record or was known to own beneficially more than 5% of the Company’s outstanding shares of its common stock, nor any associate or affiliate of such persons or companies, has any material interest, direct or indirect, in any transaction that has occurred during the past two fiscal years, or in any proposed transaction, which has materially affected or will affect the Company other than as disclosed at Note 8 to the financial statements.

With regard to any future related party transaction, we plan to fully disclose any and all related party transactions in the following manner:

Disclosing such transactions in reports where required; 

Disclosing in any and all filings with the SEC, where required; 

Obtaining disinterested directors consent; and 

Obtaining shareholder consent where required. 

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Director Independence

For purposes of determining director independence, we have applied the definitions set out in NASDAQ Rule 5605(a)(2). The OTCBB on which shares of the Company’s Common Stock are quoted does not have any director independence requirements. The NASDAQ definition of “Independent Director” means a person other than an Executive Officer or employee or any other individual having a relationship, which, in the opinion of the Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

Under the definitions outlined it is our opinion that Dennis Doll, Donald MacNeil and Michael Sevell are independent directors.

Review, Approval or Ratification of Transactions with Related Persons

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

The company employs Pre-Approval Policies and Procedures Prior to engaging our accountants to perform a particular service, our board of directors obtains an estimate for the service to be performed. All of the services described above were approved by the board of directors in accordance with its procedures.

Below is the aggregate amount of fees billed for professional services rendered by our principal accountants with respect to our last two fiscal years:

All of the professional services rendered by principal accountants for the audit of our annual financial statements that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for last two fiscal years were approved by our board of directors.

Maintaining Principal Accountant’s Independence

Our Board of Directors has considered whether the provision of the services described herein are compatible with maintaining the principal accountant’s independence and believes that such services do not compromise that independence.

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PART IV ITEM 15 - EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements

1.Financial statements for our company are listed in the index under Item 8 of this document 

2.All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto. 

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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

HAMMER FIBER OPTICS HOLDINGS CORP. 

Date: November 13, 2018/s/ Mark Stogdill                                                          

Mark Stogdill 

Principal Executive Officer (during year ended 7/31/18) 

Date: November 13, 2018/s/ Michael Cothill                                                       

Michael Cothill 

Chairman and Principal Financial Officer 

Date: November 13, 2018/s/ Michael Sevell                                                        

Michael Sevell  

Director 

Date: November 13, 2018/s/ Dennis W. Doll                                                        

Dennis W. Doll 

Director 

Date: November 13, 2018/s/ Donald MacNeil                                                       

Donald MacNeil 

Director 

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