NOTE 10 - INCOME TAXES

The Company's income tax expense, deferred tax assets and liabilities, and liabilities for unrecognized tax benefits reflect management's best estimate of current and future taxes to be paid. The Company is subject to income taxes in the United States and numerous foreign jurisdictions. Significant judgments and estimate are required in the determination of the consolidated income tax expense. The reconciliation of income tax benefit at the U.S. statutory rate of 21% for the quarter ended January 31, 2022 and 2021, to the Company's effective tax rate is as follows:

		January 31,
		2022			2021
Income tax benefit provision at statutory rate	$	(26,828	)	$	(14,391	)
Change in valuation allowance		26,828			14,391
	$	-		$	-

The tax effects of temporary differences that give rise to the Company's net deferred tax assets as of January 31, 2022 and July 31, 2021 are as follows:

		January 31,			January 31,
		2022			2021
Net operating loss	$	(127,753	)	$	4,256,347
Valuation allowance		127,753			(4,256,347	)
	$	-		$	-

The Company has approximately $23,339,000 of NOL carried forward to offset taxable income in future years. The tax laws enacted in 2017 also changed the treatment of NOL. Prior to the change, NOL could be carried back up to two years and carried forward up to 20 years to offset taxable income. In the new tax law, the NOL that can be carried forward is limited to 80% of the taxable income, can no longer be carried back, but are allowed to be carried forward indefinitely. The new law will apply to NOL arising in tax years beginning December 31, 2017, hence, $3,000,000 of the NOL will be subject to the 80% limitation and will be carried forward indefinitely while $19,297,000 of the NOL will be carried forward for 20 years and will begin to expire in 2036.

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

As of January 31, 2022 and January 31, 2021, the Company has no unrecognized income tax benefits. The Company's policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items as a tax expense. No interest or penalties have been recorded during the quarters ended January 31, 2022 and January 31, 2021. As of January 31, 2022 and January 31, 2021, the Company did not have any amounts recorded pertaining to uncertain tax positions.

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

The State of New Jersey has opened an audit matter associated with Hammer Fiber Optics Investments, Ltd and the matter is currently under examination by the State of New Jersey. The subsidiary did not have any revenues, nor did it have any payroll during most of the period under review. The company has engaged outside accounting counsel to represent its subsidiary in these matters.