HAMMER FIBER OPTICS HOLDINGS CORP - Quarter Report: 2019 January (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 January 31, 2019

[ ] 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 March 25, 2019, there were 60,503,341 shares of the registrant’s $.001 par value common stock issued and 48,282,993 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	13
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	15
ITEM 4.	CONTROLS AND PROCEDURES	15

PART II. OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	16
ITEM 1A.	RISK FACTORS	16
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	16
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	16
ITEM 4.	MINE SAFETY DISCLOSURES	16
ITEM 5.	OTHER INFORMATION	16
ITEM 6.	EXHIBITS	17

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

				January 31 2019
				Unaudited		July 31 2018

Assets
Current Assets
	Cash and cash equivalents		$	328,114	$	-
	Accounts receivable			654,994		-
	Security Deposits			262,447		-
	Prepaid expenses			16,124		-
		Total current assets		1,261,679		-

Property and equipment, net				193,987		-

Intangible assets				6,347,934		-

Other assets				220,717		-

Assets from Discontinued Operations				1,314,347		4,656,140

Total assets			$	9,338,664	$	4,656,140


Liabilities and Stockholders' Equity
Current Liabilities
	Accounts payable and accrued expenses		$	1,162,620	$	-
	Loans payable			376,137		-
	Rent concessions			132,678		-
	Deferred Revenue			204,537		-
		Total current liabilities		1,875,972		-

Liabilities from Discontinued Operations				8,339,471		4,169,360

Total Liabilities				10,215,443		4,169,360

Stockholders' Equity
Common stock, $0.001 par value, 250,000,000 shares authorized,
	60,503,341 shares issued; 53,135,762 and 52,946,162 outstanding
	as of July 31, 2018 and July 31, 2017, respectively			60,503		60,503
Treasury stock				-		-
Additional paid-in capital				20,666,398		14,617,719
Accumulated deficit				(21,603,680)		(14,191,442)
	Total stockholders' equity			(876,779)		486,780

Total Liabilities and Stockholders' equity			$	9,338,664	$	4,656,140

See accompanying notes to consolidated statements.

HAMMER FIBER OPTICS HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(UNAUDITED)

			For the Three Month Period Ended				For the Six Month Period Ended
			January 31				January 31
			2019		2018		2019		2018

Revenues		$	877,318	$	-	$	877,318	$	-

Cost of sales			708,849		-		708,849		-
Selling, general and administrative expenses			265,414		-		265,414		-
Depreciation expense			12,780		-		12,780		-
	Total operating expenses		987,043		-		987,043		-

Operating income (loss)			(109,725)		-		(109,725)		-

Other expenses			(12,792)		-		(12,792)		-

Loss Before Discontinued Operations			(122,517)		-		(122,517)		-

Income (loss) From Discontinued Operations			(6,776,296)		(1,019,505)		(7,289,721)		(3,457,143)

Net Income (loss)		$	(6,898,813)	$	(1,019,505)	$	(7,412,238)	$	(3,457,143)

Weighted average number of common shares outstanding - basic and diluted			48,282,993		60,503,341		48,282,993		52,234,788

Loss per common share - basic and diluted
	Continuing operations	$	-	$	-	$	-	$	-
	Discontinued operations		(0.14)		(0.02)		(0.15)		(0.07)
		$	(0.14)	$	(0.02)	$	(0.15)	$	(0.07)

See accompanying notes to consolidated statements.

HAMMER FIBER OPTICS HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

				For the Period Ended
				January 31
				2019		2018
OPERATING ACTIVITIES

Net income (loss)			$	(7,412,238)	$	(3,457,143)
Loss from discontinued operations				7,289,721		3,457,143
Adjustments to reconcile net income (loss) to net
	cash provided by operating activities of continuing operations:
		Depreciation expense		12,780		-
	Changes in operating assets and liabilities:
		Accounts receivable		(372,498)		-
		Prepaid expenses		265		-
		Accounts payable		291,299		-
		Deferred revenue		3,447		-
		Other Changes		5
		Rent concessions		-		-
Net cash provided by (used in) operating activities of continuing operations				(187,219)		-
Net cash provided by (used in) operating activities of discontinued operations				(3,479)		(1,789,480)
Net cash provided by (used in) operating activities				(190,698)		(1,789,480)

INVESTING ACTIVITIES

	Purchase of property and equipment			(48,929)		-
	Sale of Assets			550,000		-
	Acquisition of customer contracts			-		-
Net cash provided by (used in) investing activities of continuing operations				501,071		-
Net cash provided by (used in) investing activities of discontinued operations				-		(501,625)
Net cash provided by (used in) investing activities				501,071		(501,625)

FINANCING ACTIVITIES
	Repayment of loans			(110,128)		-
	Investments			19,889		-
Net cash provided by (used in) financing activities of continuing operations				(90,239)		-
Net cash provided by (used in) financing activities of discontinued operations				-		1,870,705
Net cash provided by (used in) financing activities				(90,239)		1,870,705

Net increase (decrease) in cash				220,134		(420,400)

Cash, beginning of period				107,980		528,380

Cash, end of period			$	328,114	$	107,980

SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES:
	Cash paid for interest		$	11,115	$	906

	Cash paid for taxes		$	106	$	-

See accompanying notes to consolidated statements.

HAMMER FIBER OPTICS HOLDINGS CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JANUARY 31, 2019

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

Hammer Fiber Optics Holdings Corp. (“the Company”) is a telecommunications company investing in the future of wireless technology. Hammer’s “Everything Wireless” go to market strategy includes the development of high-speed fixed wireless service using its wireless fiber platform, Hammer Wireless® AIR, Mobility, Over-the-Top services such as voice, SMS and video collaboration services, the construction of smart city networks and hosting services including cloud and colocation.

NOTE 2 – CORPORATE HISTORY AND BACKGROUND ON MERGER

The Company was originally incorporated in the State of Nevada on September 23, 2010, under the name Recursos Montana S.A. The Company’s principal activity was an exploration stage company engaged in the acquisition of mineral properties then owned by the Company.

On February 2, 2015, the Company entered into a Share Exchange Agreement with Tanaris Power Holdings, Inc., whereby the Company acquired 100% of Tanaris Power Holdings, Inc. issued and outstanding common stock in exchange for shares of the Company’s common stock equal to 51% of the issued and outstanding common stock of the Company. Tanaris Power Holdings, Inc. was the owner of certain rights in connection with the marketing and sale of smart lithium-ion batteries and battery technologies for various industrial vehicles markets and related applications. On March 6, 2015, the Company amended its Articles of Incorporation to change its name to Tanaris Power Holdings, Inc.

On April 25, 2016, Tanaris Power Holdings, Inc., a Nevada corporation entered into s Share Exchange Agreement (the “Share Exchange Agreement”) with Hammer Fiber Optics Investments, Ltd., a Delaware corporation (“HFOI”), and the controlling stockholders of HFOI (the “HFOI Shareholders”). Pursuant to the Share Exchange Agreement, the Company acquired 20,000,000 shares of common stock of HFOI from the HFOI shareholders (the “HFOI Shares”) and in exchange, the Company issued to the HFOI Shareholders 50,000,000 (post-Merger) restricted shares of its common stock (the “HMMR Shares”). As a result of the Share Exchange Agreement, HFOI shall become a wholly owned subsidiary of the Company.

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

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

In 2016 Hammer Fiber Optics Investments Ltd deployed its first beta network in Atlantic County, New Jersey. The network used a spectrum license agreement from Straightpath Communications, LLC. On January 17, 2018 Verizon Communications, LLC purchased Straightpath Communications, LLC and on July14 2018, Verizon terminated the spectrum license agreement effective October 31, 2018 despite communications that it would continue to honor the agreement. On October 31, 2018 the Company ceased operations of the network in Atlantic County and subsequently classified the subsidiary as a discontinued operation.

On November 1, 2018, the Company acquired Open Data Centers, LLC, 1stPoint Communications, LLC and its subsidiaries. 1stPoint and its subsidiaries possess CLEC licenses in Florida, New York State, and a nationwide CMRS (Commercial Mobile Radio Services) license. The companies operate data center facilities in Piscataway, New Jersey and Homewood, Alabama. On December 17, 2018, the Company closed the acquisition of Endstream Communications, LLC, a wholesale voice operator in the United States.

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 January 31, 2019 are unaudited. These financial statements are prepared in accordance with requirements for unaudited interim periods and consequently do not include all disclosures required to be in conformity with accounting principles generally accepted in the United States of America. The results of operations for the interim periods are not necessarily indicative of the results for the full year. In management's opinion, all adjustments necessary for a fair presentation of the Company's financial statements are reflected in the interim periods included and are of a normal recurring nature. These interim financial statements should be read in conjunction with the financial statements included in our Form 10-K, for the year ended July 31, 2018, as filed with the Securities and Exchange Commission (“the SEC”) at www.sec.gov.

Use of estimates

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

Cash and cash equivalents

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

Property and equipment

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

Impairment of long-lived assets

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

Indefinite lived intangible assets

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

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

Revenue recognition

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

Income taxes

The Company accounts for income taxes using the asset and liability method in accordance with ASC 740, “Accounting for Income Taxes”. The asset and liability method provides that deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

Fair value measurements

The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 — quoted prices in active markets for identical assets or liabilities

Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions) The Company has no assets or liabilities valued at fair value on a recurring basis.

Consolidation of financial statements

Hammer Fiber Optics Holdings Corp. is the parent company and sole shareholder of Hammer Wireless Corporation and its subsidiaries, 1stPoint Communications, LLC and its subsidiaries, which includes Shelcomm, Inc, Open Data Centers, LLC and Endstream Communications, LLC. The financial statements for Hammer Fiber Optics Holdings Corp. and its wholly-owned subsidiaries are reported on a consolidated basis. All significant intercompany accounts and transactions have been eliminated.

Basic and Diluted Earnings (Loss) per Common Share

The basic earnings (loss) per share are calculated by dividing the Company's net income available to common shareholders by the weighted average number of common shares during the year. The diluted earnings (loss) per share is calculated by dividing the Company's net income (loss) available to common shareholders by the diluted weighted average number of shares outstanding during the year. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. Diluted earnings (loss) per share are the same as basic earnings (loss) per share due to the lack of dilutive items in the Company. As of January 31 2019, 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 – DISCONTINUED OPERATIONS

Hammer Fiber Optics Investment Ltd ceased operations in the Atlantic County geographical market on October 31, 2018 when Verizon Communications, LLC terminated the spectrum lease agreement. The operations of Hammer Fiber Optics Investments, Ltd were classified as a discontinued operation. Reporting of the discontinued operation is in accordance with Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.

As part of the classification of discontinued operations, Hammer staff determined that the assets associated with Hammer Fiber Optics Investments Ltd were fully impaired, and therefore wrote down the following:

Capitalized Labor(1,128,336)

Radio Equipment(1,340,425)

Buildings and Structures(75,451)

Leasehold Improvements(13,371)

In addition, two major suppliers accelerated amounts due, in accordance with their agreements. The total value of those accelerated agreements was expensed in the quarter as expenses associated with discontinued operations.

Crown Castle Fiber FKA Lightower(1,544,621)

Zayo Group, LLC(2,561,370)

For further information please see NOTE 11 – Subsequent Events.

NOTE 5 – COMMITMENTS AND LEASES

Open Data Centers, LLC is committed to a long term operating leases for its facility in Piscataway, New Jersey. There are five more years remaining on the lease with two (2) four (4) year extensions.

The future minimum lease payments are provided below:

		Amount
For the year ended July 31, 2019	$	365,272.44
For the fiscal year ended July 31, 2020		376,230.72
For the fiscal year ended July 31, 2021		387,517.68
For the fiscal year ended July 31, 2022		399,143.16
For the fiscal year ended July 31, 2023		411,117.48
For the fiscal year ended July 31, 2024		423,450.96

1stPoint Communications, LLC is committed to a long term operating lease for its facility in Homewood, Alabama. The lease has been renewed for two (2) more years, effective 1 March 2019.

The future minimum lease payments are provided below:

		Amount
For the year ended July 31, 2019	$	8,526.40
For the fiscal year ended July 31, 2020		25,835.00
For the fiscal year ended July 31, 2021		8,782.20

All operating leases previously reported have been either terminated, or were accelerated by two major telecommunications operators.

NOTE 6 – GOING CONCERN

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

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

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

NOTE 7 – PROPERTY AND EQUIPMENT

As of January 31, 2019, property and equipment consisted of the following:

		Amount	Life

Computer and Telecom equipment	$	111,852	3 years
Building & Structures		82,135	3 years
Sub-total		193,987
Total	$	193,987

NOTE 8 – INDEFINITE LIVED INTANGIBLE ASSETS

The Company has $1,197,882 of recognized indefinite lived intangible assets, which consist of customer contract assets from acquisitions and goodwill. These assets are not amortized and are evaluated routinely for potential impairment. If a determination is made that the intangible asset is impaired after performing the initial qualitative assessment, the asset’s fair value will be calculated and compared with the carrying value to determine whether an impairment loss should be recognized.

NOTE 9 – RELATED PARTY TRANSACTIONS

During the fiscal year ended July 31, 2016, the Company entered into two promissory notes with a related party for an aggregate amount of $2,400,000 and $1,000,000, respectively. The $2,400,000 note matured on January 4, 2019. The terms consist of ten principal and interest payments due quarterly in the amount of $300,000 for total payments of $3,000,000. The Company is currently in default on this loan. To date, the Company has made payments on this note amounting to $725,831. The payments were applied to interest accrued as of the time of payment as well as to principal. The principal balance was $2,294,067 at July 31, 2018 and 2017. The interest accrued was $219,434 at July 31, 2018 and $69,594 at July 31, 2017, respectively.

The $1,000,000 note matured on June 9, 2018 at which time the principal became due in its entirety, in addition to simple interest accrued at 3%. The company is currently in default on this loan.

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

On January 4, 2019 the Board of Directors approved a one-time transaction to repurchase 13,000,000 shares of restricted Common Stock from substantial related party shareholders (See NOTE 9).

NOTE 10 – STOCKHOLDERS’ EQUITY

Treasury Stock

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

On January 4, 2019 the Company repurchased 13,000,000 shares of restricted Common Stock from substantial related-party shareholders. The shares of common stock were repurchased by the Company at $0.0001 per share. The repurchased shares were added to the Treasury stock of the Company and intend to be used for the purposes of effecting mergers, acquisitions, joint ventures, contractual relations and may be issued to investors under private placement agreements.

As a result of these transactions, the Company has a balance of 48,282,993 treasury shares as of January 31, 2019.

NOTE 11- ACQUISITIONS

On November 1, 2018, the Company acquired Open Data Centers, LLC, 1stPoint Communications, LLC and its subsidiaries. On December 17, 2018, the Company closed the acquisition of Endstream Communications, LLC, a wholesale voice operator in the United States. The purchase price is as follows:

Endstream Communications, LLC is 1,957,116 shares of the Company’s Common Stock from treasury stock

1stPoint Communications, LLC and its subsidiaries is 3,643,644 shares of the Company’s Common Stock from treasury stock

Open Data Centers, LLC is 2,930,566 shares of the Company’s Common Stock from treasury stock

The following table shows the preliminary allocation of the purchase price consideration to the acquired identifiable assets and liabilities assumed. The final purchase price allocation may vary based on final appraisals, valuations and analyses of the fair value of the acquired assets and assumed liabilities.

Total purchase price	$	2,403,571

Cash		84,815
Accounts receivable		336,919
Prepaid expenses		12,679
Fixed assets		137,161
Intangible assets		2,837,536
Other assets		217,363
Liabilities assumed		(1,222,902)
	$	2,403,571

NOTE 12 – SUBSEQUENT EVENTS

The following two amounts were accelerated pursuant to the terms and conditions of the agreements with the supplier:

Crown Castle Fiber FKA Lightower$1,544,621

Zayo Group, LLC$2,561,370

These agreements are not secured.

The following three parties have filed claims against Hammer Fiber Optics Investments Ltd and are not secured:

Calvi Electric$9209.69

Horizon Blue Cross$17,308.58

Bank of America$20,075.83

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 January 31, 2019 Compared to the Three Months Ended January 31, 2018

Net revenues for the three months ended January 31, 2019 and January 31, 2018 were $887,318 and $52,681, respectively. The Company earned revenues in the first quarter of year end 2019 through subscription sales of internet service from the Hammer Fiber Optic Investments Ltd. Subsidiary and in the second quarter from the sale of services from the 1stPoint Communications, Endstream Communications and Open Data Centers subsidiaries, which includes business Internet, Mobility, OTT services such as voice, video and collaboration services as well as hosting and colocation services.

During the three months ended January 31, 2019, the Company incurred total operating expenses of $987,043 compared with $1,099,646 for the comparable period ended January 31, 2018. The decrease in operating expenses is due to the substantial change in operations and the discontinuation of the Hammer Fiber Optics Investments Ltd subsidiary.

The Company recorded depreciation and amortization expense of $12,780 and $283,909 during the three months ended January 31, 2019 and January 31, 2018, respectively.

During the three months ended January 31, 2019 and January 31, 2018, interest expense was $11,115 and $89,305, respectively. The decrease is attributable to the substantial change in operations and the discontinuation of the Hammer Fiber Optics Investments Ltd subsidiary.

Six Months Ended January 31, 2019 Compared to the Six Months Ended January 31, 2018

Net revenues for the six months ended January 31, 2019 and January 31, 2018 were $887,043 and $89,974, respectively. The Company earned revenues in the first quarter of year end 2019 through subscription sales of internet service from the Hammer Fiber Optic Investments Ltd. Subsidiary. These revenues have now been classified as a component of discontinued operations. In the second quarter the net revenues increased from the consolidation of the 1stPoint, Endstream, Open Data Centers and Shelcomm subsidiaries.

During the six months ended January 31, 2019, the Company incurred total operating expenses of $987,043 compared with $3,490,059 for the comparable period ended January 31, 2018. The change in operating expenses are due to inclusion of the consolidated expenses from the 1stPoint, Endstream and Open Data Center subsidiaries and the classification of operating expenses as a component of the loss from discontinued operations.

The Company recorded depreciation and amortization expense of $12,780 and $562,945 during the three months ended January 31, 2019 and January 31, 2018, respectively. The decrease was due to a one time write-down of assets associated with discontinued operations.

During the three months ended January 31, 2019 and January 31, 2018, interest expense was $11,115 and $9,762, respectively. The increase is attributable to the increase in loans to 1stPoint Communications, LLC and the classification of any prior interest expense as a discontinued operation.

Liquidity and Capital Resources

The Company is at risk of remaining a going concern. Its ability to remain a going concern is dependent upon whether the company can raise debt and/or equity capital from third-party sources for both working capital and business development needs until such time as the Company may be substantially sustained as a going concern through cash flow from operations or the Company increases its cash flow from operations through sale of services in the newly announced markets of Dominica, Jamaica and Sierra Leone as well as increases in sales from the existing business units of 1stPoint Communications, Endstream Communications and Open Data Centers.

Cash Flow from Operating Activities

During the six months ended January 31, 2019, the Company used $187,219 in cash for operating activities, compared to $1,789,480 in cash used for operating activities during the comparable 2018 period. The primary reason for this decrease is the substantial change in operations and the reduced operating expenses associated with the operations of 1stPoint Communications, Endstream Communications and Open Data Centers.

Cash Flow from Investing Activities

During the three months ended January 31, 2019, the Company’s investing activities netted $501,070, compared to consuming $389,830 for the three months ended January 31, 2018. The primary reason for this increase was the substantial change in operations and reduced capital requirements of 1stPoint Communications, Endstream Communications and Open Data Centers and due to the sale of certain assets.

Cash Flow from Financing Activities

During the three months ended January 31, 2019, the Company consumed $90,238 in cash from financing activities compared with the net of $501,625 during the three months ended January 31, 2018. The change in investing activities is due to a reduction in treasury stock sold to third parties and repayments of loans.

Going Concern

As at January 31, 2019, doubt existed as to the Company’s ability to continue as a going concern as the Company has no certainty of earning additional revenues in the future, has a working capital deficit and an overall accumulated deficit since inception. The Company will require additional financing to continue operations either from management, existing shareholders, or new shareholders through equity financing and/or sources of debt financing. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Future Financings

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

Off-Balance Sheet Arrangements

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

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 to allow for timely decisions regarding required disclosure.

As of January 31, 2019, 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 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. Responsibilities, 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 January 31, 2019. 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 January 31, 2019, 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

Effective November 1, 2018 the management and accounting resources of the 1stPoint subsidiary assumed responsibility of our internal controls during the quarter ended January 31, 2019. The Company views this migration to have a positive material impact on our ability to maintain internal controls over financial reporting as 1stPoint has a separation in banking, day-to-day accounting and financial reporting responsibilities.

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.

See Note 11, “Subsequent Events” of our Notes to the Condensed Consolidated Financial Statements for information regarding our legal proceedings.

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

On January 9, 2019 the Company repurchased 13,000,000 shares of our common stock for an aggregate of $1,300 at a weighted-average price per share of $0.0001 from two substantial related-party shares. The terms and conditions of this repurchase are outlined in Note 10

Stockholders Equity in the Footnotes to the condensed consolidated Financial Statements.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. REMOVED AND RESERVED

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: March 25, 2019/s/ Michael Cothill

Michael Cothill

Chairman and Principal Financial Officer

Date: March 25, 2019/s/ Erik B. Levitt

Erik B. Levitt

Principal Executive Officer

Date: March 25, 2019/s/ Mark Stogdill

Mark Stogdill

Executive Director

Date: March 25, 2019/s/ Michael Sevell

Michael Sevell

Executive Director