XML 22 R12.htm IDEA: XBRL DOCUMENT

NOTE 6 - CONVERTIBLE DEBT

9 Months Ended

Apr. 30, 2022

NOTE 6 - CONVERTIBLE DEBT

Convertible debt as of April 30, 2022, and July 31, 2021, consisted of the following:

Description April 30, 2022 July 31, 2021

Convertible note agreement dated November 1, 2013, in the amount of $30,000 payable and due on demand bearing interest at 12% per annum. Principal and accrued interest is convertible at $.002250 per share. $ 11,041 $ 11,041

Convertible note agreement dated February 20, 2018, in the amount of $1,034,000 payable and due on demand bearing interest at 10% per annum. Principal and accrued interest is convertible at $.028712 per share. $ 1,034,000 $ 1,034,000

Convertible note agreement dated March 13, 2019, in the amount of $800,000 payable and due on March 20, 2020, bearing interest at 24% per annum. $ 800,000 $ 800,000

Convertible note agreement dated June 28, 2019, in the amount of $300,000 payable and due on June 28, 2020, bearing interest at 20% per annum. $ 300,000 $ 300,000

Convertible note agreement dated August 6, 2019, in the amount of $31,500 payable and due on August 6, 2020, bearing interest at 20% per annum. $ 31,500 $ 31,500

Convertible note agreement dated August 19, 2019, in the amount of $3,800 payable and due on August 19, 2020, bearing interest at 24% per annum. $ 3,800 $ 3,800

Convertible note agreement dated September 4, 2019, in the amount of $36,500 payable and due on September 4, 2020, bearing interest at 20% per annum. $ 36,500 $ 36,500

Convertible note agreement dated December 4, 2019, in the amount of $95,000 payable and due on December 4, 2020, bearing interest at 12% per annum. $ 147,500 $ 147,500

Convertible note agreement dated April 15, 2020, in the amount of $31,500 payable at April 15, 2021, bearing interest at 10% per annum, net of discount. $ 15,887 $ 15,877

Convertible note agreement dated December 2, 2020, in the amount of $40,000 payable and due on December 2, 2021, bearing interest at 12% per annum. $ 40,000 $ 40,000

Convertible note agreement dated April 6, 2021, in the amount of $53,000 payable and due on April 6, 2022, bearing interest at 12% per annum. $ —   $ 53,000

Convertible note agreement dated April 7, 2021, in the amount of $111,555 payable and due on April 7, 2022, bearing interest at 10% per annum. $ 111,555 $ 111,555

Convertible note agreement dated April 12, 2021, in the amount of $43,000 payable and due on April 12, 2022, bearing interest at 12% per annum. $ 29,500 $ 43,000

Convertible note agreement dated April 20, 2021, in the amount of $43,750 payable and due on April 7, 2022, bearing interest at 12% per annum.   $ 65,625 $ 43,750

Convertible note agreement dated August 5, 2021, in the amount of $500,000 payable and due on August 5, 2022, non-interest bearing. $ 500,000 $ —

Convertible note agreement dated August 10, 2021, in the amount of $150,000 payable and due on August 10, 2022, non-interest bearing. $ 150,000 $ —

Convertible note agreement dated August 23, 2021, in the amount of $200,000 payable and due on August 23, 2022, bearing interest at 12% per annum .   $ 200,000 $ —

Convertible note agreement dated December 14, 2021, in the amount of $78,750 payable and due on December 14, 2022, bearing interest at 12% per annum. $ 78,750 $ —

Convertible note agreement dated December 30, 2021, in the amount of $53,750 payable and due on December 30, 2022, bearing interest at 12% per annum .   $ 53,750 $ —

Convertible notes total:
$ 3,051,233 $ 2,631,533

The Company amortizes the discounts arising from on-issuance discounts and derivative liabilities (see discussion below) over the term of the convertible promissory notes using the straight-line method which is similar to the effective interest method. During the nine months ended April 30, 2022, the Company amortized $311,359 to interest expense. As of April 30, 2022, discounts of $69,682 remained for which will be amortized through December 2022.

Derivative liabilities

Certain of the Company’s convertible notes are convertible into a variable number of shares of common stock for which there is not a floor to the number of common shares the Company might be required to issue. Based on the requirements of ASC 815 Derivatives and Hedging, the conversion feature represented an embedded derivative that is required to be bifurcated and accounted for as a separate derivative liability. The derivative liability is originally recorded at its estimated fair value and is required to be revalued at each conversion event and reporting period. Changes in the derivative liability fair value are reported in operating results each reporting period. The Company uses the Black-Scholes option pricing model for the valuation of its derivative liabilities as further discussed below. There are no material differences between using the Black-Scholes option pricing model for these estimates as compared to the Binomial Lattice model.

As of July 31, 2021, the Company had existing derivative liabilities of $529,171 related to four convertible notes. During the nine months ended April 30, 2022, approximately $192,000 in principal and accrued interest of the outstanding convertible notes were converted into 67,422,926 shares of common stock. At each conversion date, the Company recalculated the value of the derivative liability associated with the convertible note recording a gain (loss) in connection with the change in fair market value. In addition, the pro-rata portion of the derivative liability as compared to the portion of the convertible note converted was reclassed to additional paid-in capital. During the nine months ended April 30, 2022, the Company recorded $726,631 to additional paid-in capital for the relief of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: conversion prices ranging from $0.0007 to $0.0062, the closing stock price of the Company's common stock on the dates of valuation ranging from $0.001 to $0.012, an expected dividend yield of 0%, expected volatility ranging from 219% to 285%, risk-free interest rates ranging from 0.1% to 0.27%, and expected terms ranging from 0.38 to 0.5 years.

During the nine months ended April 30, 2022, two new notes with a variable-rate conversion feature were issued. The Company valued the conversion features on the date of issuance resulting in initial liabilities totaling $71,111. Since the fair value of the derivative was in excess of the proceeds received for one of these notes, a full discount to the convertible notes payable and a day one loss on derivative liabilities of $11,942 was recorded during the nine months ended April 30, 2022. The Company valued the conversion feature using the Black-Scholes option pricing model with the following assumptions: conversion prices of $0.01 to $0.01, the closing stock price of the Company's common stock on the dates of valuation ranging from $0.002 to $0.013, an expected dividend yield of 0%, expected volatilities ranging from 222%-290%, risk-free interest rate ranging from 0.26% to 0.38%, and expected terms of one year.

On April 30, 2022, the derivative liabilities on these convertible notes were revalued at $69,682 resulting in a gain of $160,507 for the nine months ended April 30, 2022, related to the change in fair value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: conversion prices ranging from $0.0008 to $0.01, the closing stock price of the Company's common stock on the date of valuation of $0.004, an expected dividend yield of 0%, expected volatility of 297%, risk-free interest rate of 0.78%, and an expected term ranging from 0.21 to 0.91 years.