HAMMER FIBER OPTICS HOLDINGS CORP - Quarter Report: 2018 October (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 31, 2018

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:

Commission file number 000-1539680

HAMMER FIBER OPTICS HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

NEVADA	98-1032170
(State or Other Jurisdiction of Incorporation of Organization)	(I.R.S. Employer Identification No.)

15 Corporate Place South, Suite 100#, Piscataway, NJ 08854

(Address of principal executive offices)

844-413-2600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ] (Not required)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer and “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	[ ]	Non-Accelerated Filer	[ ]
Accelerated Filer	[ ]	Smaller Reporting Company	[X]
Emerging Growth Company	[X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

As of December 14, 2018, there were 60,503,341 shares of the registrant’s $.001 par value common stock issued and 53,135,762 shares outstanding.

HAMMER FIBER OPTICS HOLDINGS CORP.

TABLE OF CONTENTS

Page

PART I. FINANCIAL INFORMATION

ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	12
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	14
ITEM 4.	CONTROLS AND PROCEDURES	14

PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	15
ITEM 1A.	RISK FACTORS	15
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	15
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	15
ITEM 4.	MINE SAFETY DISCLOSURES	15
ITEM 5.	OTHER INFORMATION	15
ITEM 6.	EXHIBITS	15

Special Note Regarding Forward-Looking Statements

Information included in this Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). This information may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Hammer Fiber Optics Holdings Corp. (the “Company”), to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

*Please note that throughout this Quarterly Report, and unless otherwise noted, the words "we," "our," "us," the "Company," "HMMR," or Hammer Fiber Optics Holdings Corp.

HAMMER FIBER OPTICS HOLDINGS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS			October 31, 2018		July 31, 2018
			(UNAUDITED)		Restated
Current Assets
Cash		$	1,150	$	3,441
Accounts Receivable, net			22,185		19,332
Other current assets			4,829		9,488
	Total current assets		28,164		32,261

Other Assets
Property and equipment, net			4,330,238		4,593,635
Intangible assets			18,934		18,934
Deposits			11,310		11,310
	Total other assets		4,360,482		4,623,879

TOTAL ASSETS		$	4,388,646	$	4,656,140

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable		$	174,710	$	256,243
Notes Payable – related party			230,000		230,000
Current portion of long-term notes payable - related parties			3,394,067		3,394,067
Accrued interest			382,474		289,050
	Total current liabilities		4,181,251		4,169,360

TOTAL LIABILITIES			4,181,251		4,169,360

STOCKHOLDERS' EQUITY
Common stock, $0.001 par value, 250,000,000 shares authorized,
60,503,341 shares issued at October 31, 2018 and July 31, 2018; 53,135,762 and 52,946,162 shares outstanding at October 31, 2018 and July 31, 2018, respectively.			60,503		60,503
Treasury stock			-		-
Shares to be issued			176,100		-
Additional paid-in capital			14,675,659		14,617,719
Accumulated deficit			(14,704,867)		(14,191,442)
	Total Stockholders' Equity		207,395		486,780

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY		$	4,388,646	$	4,656,140

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

HAMMER FIBER OPTICS HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

			For the Quarter Ended October 31,
			2018		2017

REVENUE		$	47,232	$	37,293

OPERATING EXPENSES
Operations and maintenance			5,597		2,207
General and administrative			195,686		2,109,169
Depreciation expense			263,397		279,036
	Total operating expenses		464,680		2,390,412

LOSS FROM OPERATIONS			(417,448)		(2,353,119)

OTHER INCOME AND EXPENSE
Interest expense			(95,977)		(86,284)
Interest income			-		1,765
	Total other income (expense)		(95,977)		(84,519)

NET LOSS		$	(513,425)	$	(2,437,638)

Weighted average number of common shares outstanding – basic and diluted			53,031,038		52,180,159

Loss per common share - basic and diluted		$	(0.01)	$	(0.05)

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

HAMMER FIBER OPTICS HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

		For the Quarter Ended
		October 31,
		2018		2017

Cash flows from operating activities:
Net loss	$	(513, 425)	$	(2,437,638)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		263,397		279,036
Services received paid with shares of stock		49,340		943,500
Changes in operating assets and liabilities
Accounts receivable		(2,853)		(7,565)
Other current assets		4,659		11,617
Accounts payable		(81,533)		(80,293)
Accrued interest		93,424		12,507
Net cash used in operating activities		(186,991)		(1,278,836)

Cash flows from investing activities:
Acquisition of property and equipment		-		(389,830)

Cash flows from financing activities:
Repayment of loans		-		(6,905)
Proceeds from sale of shares of treasury stock		184,700		1,398,508
Net cash provided by financing activities		184,700		1,391,603

Net change in cash		(2,291)		(277,063)
Cash at beginning of period		3,441		528,380
Cash at end of period	$	1,150	$	251,317

Supplemental disclosures of cash flows information:
Interest paid	$	2,553	$	75,000
Taxes paid	$	5,774	$	-

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

HAMMER FIBER OPTICS HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JULY 31, 2018 and 2017

NOTE 1 – ORGANIZATION AND DESCRIPTION OF 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 and Hammer Fiber Optic Investments Ltd. 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 shall become a wholly owned subsidiary of the Company.

On April 13, 2016, the Board of Directors (BOD) approved a Plan of Merger (the “Plan of Merger”) under Nevada Revised Statuses (NRS) Section 92A.180 to merge (the “Merger”) with our wholly-owned subsidiary HFO Holdings, a Nevada corporation, to effect a name change from Tanaris Power Holdings Inc. to Hammer Fiber Optics Holdings Corp. The Plan of Merger also provides for a 1 for 1,000 exchange ratio for shareholders of both the Company and the HRO Holdings, which had the effect of a 1 for 1,000 reverse split of the common stock. Articles of Merger were filed with the Secretary of State of Nevada on April 13, 2016 and, on April 14, 2016, this corporate action was submitted to Financial Industry Regulatory Authority (the “FINRA”) for its review and approval.

On May 3, 2016, the FINRA approved the merger with the wholly-owned subsidiary, HMMR Fiber Optics Holdings Corp. (“HFO Holdings”). Accordingly, thereafter, the Company’s name was changed and the shares of common stock began trading under new ticker symbol “HMMR” as of May 27, 2016. The merger was effected on July 19, 2016.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The interim financial statements for the fiscal quarter ending October 31, 2018 are unaudited. These financial statements are prepared in accordance with requirements for unaudited interim periods and consequently do not include all disclosures required to be in conformity with accounting principles generally accepted in the United States of America. The results of operations for the interim periods are not necessarily indicative of the results for the full year. In management's opinion, all adjustments necessary for a fair presentation of the Company's financial statements are reflected in the interim periods included and are of a normal recurring nature. These interim financial statements should be read in conjunction with the financial statements included in our Form 10-K, for the year ended July 31, 2018, as filed with the Securities and Exchange Commission (“the SEC”) at www.sec.gov.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents

Cash and cash equivalents include cash in banks, money market funds, and certificates of term deposits with maturities of less than three months from inception, which are readily convertible to known amounts of cash and which, in the opinion of management, are subject to an insignificant risk of loss in value.

Property and equipment

Property and equipment is stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. For network service equipment, and furniture and fixtures, the useful life is ten and five years, respectively. Leasehold Improvements are depreciated over six years. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.

Impairment of long-lived assets

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted cash flows to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. The Company has not recognized impairment losses.

Indefinite lived intangible assets

The Company reviews property, plant and equipment, inventory component prepayments and certain identifiable intangibles, excluding goodwill, for impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If property, plant and equipment, inventory component prepayments and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair value. The Company has not recorded any related impairment losses.

The Company does not amortize goodwill and intangible assets with indefinite useful lives, rather such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. The Company has not recorded any related impairment losses.

Revenue recognition

We adopted ASC 606 on August 1, 2018. Revenue is measured based on a consideration specified in a contract or agreement with a customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Incidental items that are immaterial in the context of the contract are recognized as expense. Unearned revenues are recorded when cash payments are received or due in advance of the performance of the services. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

The Company’s revenues consist 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 is 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 are 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 quarter ended October 31, 2018 and 2017 were $3,287 and $6,319, respectively.

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. 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 October 31, and July 31, 2018, there were no common stock equivalents outstanding.

Recent accounting pronouncements

In June 2018, the FASB issued ASU No. 2018-07, Compensation – Stock Compensation (Topic 718) (“ASU 2018-07”). ASU 2018-07 provides for improvements to nonemployee share-based payment accounting by expanding the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The awards will be measured at grant date, consistent with accounting for employee share-based payment awards. The measurement date has been redefined as the date at which the grantor and grantee reach a mutual understanding of the key terms and conditions of the award. The requirement to reassess classification of equity-classified awards upon vesting has been eliminated. We do not expect the adoption of this standard to have a material impact on the Company’s financial statements. The Company adopted ASU 2018-07 August 1, 2018.

In February 2016, FASB issued ASU No. 2016-02, Accounting Standards Update No. 2016-02, Leases (Topic 842). ASU 2016-02 provides for improvements for accounting guidance related to a leasing treatments on financial statements as a response to user input. The update maintains two classifications of leases, Financial lease and Operating leases. The Update is effective for fiscal years beginning after December 2015, 2018. The company has not yet adopted this standard but there may be impact to the presentation of the Company’s financial statements during the period of adoption.

NOTE 4 – 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.

The future minimum lease payments are provided below.

		Amount
For the fiscal year ended July 31, 2019	$	834,969
For the fiscal year ended July 31, 2020		820,464
For the fiscal year ended July 31, 2021		404,276
For the fiscal year ended July 31, 2022		1,197,956
For the fiscal year ended July 31, 2023 and thereafter

NOTE 5 – GOING CONCERN

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has consistently sustained losses since its inception. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the issuance of these financial statements. The Company’s continuation as a going concern is dependent upon, among other things, its ability to increase revenues, adequately control operating expenses and receive debt and/or equity capital from third parties. No assurance can be given that the Company will be successful in these efforts.

The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company intends to continue to address this condition by seeking to raise additional capital through the issuance of debt and/or the sale of equity until such time that ongoing revenues can sustain the business, at which time capitalization may be considered through other means.

NOTE 6 – PROPERTY AND EQUIPMENT

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

		Amount	Life

Computer and Telecom equipment	$	4,636,066	5 years
Building & Structures		119,416	10 years
Office equipment, furniture, fixtures		94,287	5-6 years
Computer software		79,952	3 years
Capitalized labor costs		1,880,554	5 years
Sub-total		6,810,275
Less: Accumulated depreciation and amortization		(2,216,640)
Total	$	4,593,635

Depreciation expense was $263,397 and $279,036 for the quarters ended October 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

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

For period ending October 31, 2018, 142,500 treasury shares were purchased by a Director of the Company, for cash of $142,500. As none of these shares were issued as of October 31, 2018, the full amount is reported in Shares to be issued, on the balance sheet (see also additional shares to be issued, as identified below in footnote 9). As of October 31, 2018, all of the related party payables are reported as current liabilities in the Consolidated Balance Sheet.

NOTE 9 – STOCKHOLDERS’ EQUITY

Treasury Stock

In July 2016, certain shareholders of the Company contributed 9,291,670 restricted shares of their common stock to the Company’s wholly-owned subsidiary, Hammer Wireless Corporation (“Treasury Shares”), for the purpose of effecting acquisitions, joint ventures or other business combinations with third parties. According to ASC 810-10-45 Consolidations, these shares are accounted for as treasury stock.

During the three months ended October 31, 2018, the Company received cash of $184,700 from the sale of 255,700 treasury shares. 96,000 of these shares were sold at $0.35 per share; 142,500 of these shares were sold at $1 per share; and 17,200 shares were sold at $0.50 per share. Additionally, the Company issued 110,000 treasury shares to third parties for services provided during the period ended October 31, 2018. The Company valued these shares using the closing quoted price of the Company’s common stock on the date of issuance. This resulted an increase in the Company’s general and administrative expenses amounting to $49,340 in the first quarter of fiscal year 2019. Of the 255,700 treasury shares sold for cash during the period, 238,500 were yet to be issued as of October 31, 2018 (total value of $176,100).

As a result of these transactions, the Company has a balance of 7,191,479 treasury shares as of October 31, 2018.

NOTE 10 –SUBSEQUENT EVENTS

On September 11, 2018 the Company entered into a stock purchase agreement with 1stPoint Communications, LLC (the “Seller”) for the purchase of their business. The acquisition was sought by the Company to complete ownership of key assets to support its hosted wireless services for entry into target markets. 1stPoint owns hosted carrier switching intellectual property for both voice and SMS, CLEC licenses in Florida and New York and a nationwide Commercial Mobile Radio Services license that will allow the company to move forward with its Everything Wireless integrated services strategy as well as hosting services that include cloud computing, virtual servers, virtual desktop and collaboration tools that will be used to advance the Company’s hosted services platform. The managing member of 1stPoint Communications, LLC is the new CEO of Hammer Fiber. Additionally, the agreement contains a buyback provision that expires 180 days from the closing date. The purchase price for all of the Company Units is three million seven hundred and four thousand five hundred and seventeen (3,704,517) 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 November 1, 2018, the Company completed the previously announced purchase of 1stPoint Communications, LLC, whereby the Company acquired all of the outstanding equity ownership interests in 1stPoint Communications (the “Acquisition”).

On September 11, 2018 the Company entered into a stock purchase agreement with Shelcomm, Inc. (the “Seller”) for the purchase of their business. Shelcomm offers Pocket Paging, VoIP telephone and messaging solutions that will be used to support the assets acquired by 1stPoint and Endstream and support future Smart City deployments as part of the Company’s Everything Wireless strategy. The Co-Chairman of Shelcomm, Inc. is the new CEO of Hammer Fiber; although, he has no management responsibilities with Shelcomm, Inc. Additionally, the agreement contains a buyback provision that expires 180 days from the closing date. The purchase price for all of the Company Units is one million (1,000,000) 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. On November 1, 2018, the Company completed the previously announced purchase of Shelcomm, Inc., whereby the Company acquired all of the outstanding equity ownership interests in Shelcomm (the “Acquisition”).

On September 12, 2018 the Company entered into a stock purchase agreement with Open Data Centers, LLC (the “Seller”) for the purchase of their business. The acquisition was a crucial component of the Company’s future hosted services and wireless services platform. Open Data Centers operates a brick-and-mortar colocation facility to support the development of new Company infrastructure and provides 24x7 remote network operations to help management the existing assets as well as the newly acquired 1stPoint and Endstream assets. The managing member of Open Data Centers, LLC is the new CEO of Hammer Fiber. Additionally, the agreement contains a buyback provision that expires 180 days from the closing date. 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 November 1, 2018, the Company completed the previously announced purchase of Open Data Centers, LLC whereby the Company acquired all of the outstanding equity ownership interests in Open Data Centers (the “Acquisition”).

On September 11, 2018 the Company entered into a stock purchase agreement with Endstream Communications, LLC (the “Seller”) for the purchase of their business. The acquisition will bring new cash flow to the Company and will support its wireless service strategy through the offering of voice and messaging services. Endstream offers global VoIP termination, Direct Inbound Calling and Calling Card services which will be utilized by the Company in projects contemplated both in the US and internationally. The managing member of Endstream Communications, LLC is the new CEO of Hammer Fiber. Additionally, the agreement contains a buyback provision that expires 180 days from the closing date. The purchase price for all of the Company Units is one million nine hundred and eighty-eight thousand six hundred and sixteen (1,988,617) 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. Due to control of certain communications licenses by Endstream, pursuant to section 214 of the Communications Act of 1934, Endstream required Commission consent from the Federal Communications Commission (“FCC”) to transfer control of Endstream to the Company. On November 18, 2018 the FCC approved the transfer of control of Endstream Communications, LLC effective December 17, 2018. The Company and Endstream plan to close the same day.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

The following discussion should be read in conjunction with our audited financial statements for the year ended July 31, 2017 and the related notes thereto. The discussions of results, causes and trends should not be construed to imply any conclusion that these results or trends will necessarily continue into the future.

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

Results of Operations

Three Months Ended October 31, 2018 Compared to the Three Months Ended October 31, 2017

Net revenues for the three months ended October 31, 2018 and October 31, 2017 were $47,232 and $37,293, respectively. The Company earned revenues in 2017 as a result of completing the initial portion of its network infrastructure necessary to offer services.

During the three months ended October 31, 2018, the Company incurred total operating expenses of $464,680 compared with $2,390,412 for the comparable period ended October 31, 2017. The change in expenses was to due to the fact bad debit was credited for the amount of a previously impaired receivable, a reduction in staff, a reduction in outside support, the completion of market development in New Jersey and reduction of marketing expenses for the period. The Company anticipates operating costs to decrease as a result. The Company also issued 110,000 shares of the Company’s common stock from treasury for services. The Company valued these shares using the closing quoted price of the Company’s common stock on the date of issuance. This resulted an increase in the Company’s general and administrative expenses amounting to $49,340 in the first quarter of fiscal year 2019. The change in operating expenses are due to the reduction of staff and the elimination of certain outside resources.

The Company recorded depreciation and amortization expense of $263,397 and $279,036 during the three months ended October 31, 2018 and October 31, 2017, respectively. The decrease was the result of additional capital assets placed into service to further expand the company’s technology platform.

During the three months ended October 31, 2018 and October 31, 2017, interest expense was $95,977 and $86,284, respectively. The increase is attributable to an increase in the amount of related-party debt.

Liquidity and Capital Resources

The Company is at risk of remaining a going concern. Its ability to remain a going concern is dependent upon the ability to raise debt and/or equity capital from third-party sources for both working capital and business development needs until such time as the Company may be substantially sustained as a going concern through cash flow from operations.

Cash Flow from Operating Activities

During the three months ended October 31, 2018, the Company used $186,991 in cash for operating activities, compared to $1,278,836 in cash used for operating activities during the comparable 2017 period. The primary reason for this decrease is a reduction of general and administrative expenses that was previously required for the Company to develop operations in the Absecon Island market in New Jersey.

Cash Flow from Investing Activities

During the three months ended October 31, 2018, the Company’s investing activities consumed no cash, compared to $389,830 for the three months ended October 31, 2017. The primary reason for this decrease was from the completion of infrastructure and equipment expenditures for the development of the New Jersey service market.

Cash Flow from Financing Activities

During the three months ended October 31, 2018, the Company netted $184,700 in cash from financing activities compared with the net increase of $1,391,603 during the three months ended October 31, 2017. The change in investing activities is due to a reduction in treasury stock sold to third parties.

Going Concern

As at October 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.

Future Financings

We will continue to rely on equity sales of our common shares presently held in Treasury in order to continue to fund business operations. Any issuances of additional shares beyond those shares presently held in Treasury, may result in dilution to existing stockholders. There is no assurance that we will achieve any additional sales of shares held in Treasury or issue additional equity securities or arrange for debt or other financing in amounts sufficient to fund our operations and other development activities.

Off-Balance Sheet Arrangements

We have no significant off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to stockholders.

Critical Accounting Policies

Our financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States, applied on a consistent basis. The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

Recently Issued Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are relevant to the company and are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

ITEM 3. 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.

ITEM 4. CONTROLS AND PROCEDURES

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 October 31, 2018, the end of the period covered by this report, we carried out an evaluation, under the supervision of our chief executive officer and executive staff, 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 October 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 (2013). Our management has concluded that, as of October 31, 2018, our internal control over financial reporting was not effective.

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 quarter ended October 31, 2018 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company may become subject to various legal proceedings that are incidental to the ordinary conduct of its business. Although the Company cannot accurately predict the amount of any liability that may ultimately arise with respect to any of these matters, it makes provision for potential liabilities when it deems them probable and reasonably estimable. These provisions are based on current information and legal advice and may be adjusted from time to time according to developments.

Presently, 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 director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

ITEM 1A. RISK FACTORS

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 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There has been no change in our securities since the fiscal year ended July 31, 2018.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

N/A.

ITEM 5. OTHER INFORMATION

Please refer to our Current Reports on Form 8-K filed since August 19, 2016, which are incorporated by reference herein.

ITEM 6. EXHIBITS

Exhibit Number	Description of Exhibit
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14	Filed herewith.
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14	Filed herewith.
32.1	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act	Filed herewith.
32.2	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act	Filed herewith.
101.INS* 101.SCH* 101.CAL* 101.LAB* 101.PRE* 101.DEF*	XBRL Instance Document XBRL Taxonomy Extension Schema Document XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Labels Linkbase Document XBRL Taxonomy Extension Presentation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith. Filed herewith. Filed herewith. Filed herewith. Filed herewith. Filed herewith.

Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

HAMMER FIBER OPTICS HOLDINGS CORP.

Date: December 18, 2018/s/ Mark Stogdill

Mark Stogdill

Executive Officer and Director

Date: December 18, 2018/s/ Michael Cothill

Michael Cothill

Chairman and Principal Financial Officer

Date: December 18, 2018/s/ Erik B. Levitt

Erik B. Levitt

Principal Executive Officer