Derivative Liability

12 Months Ended

Jul. 31, 2019

Notes to Financial Statements

Derivative Liability

Note 14 – Derivative Liability 

The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted and all additional convertible debentures and warrants are included in the value of the derivative. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion option and warrants and shares to be issued were recorded as derivative liabilities on the issuance date. The Company’s estimate of fair value used quoted market prices of the underlying financial instrument and valued the warrants using a multinomial lattice models.

The following table presents the activity for derivative liabilities measured at estimated fair value:

	Derivative Liability - Convertible Notes			Derivative Liability - Warrants			Derivative Liability - Downside Protection			Total
Balance as of August 1, 2017	$	—		$	—		$	—		$	—
Balance as of July 31, 2018		—			—			—			—
Additions during the year		5,178,241			353,464			6,424,338			11,956,043
Change in fair value		988,267			(28,214	)		(3,085,502	)		(2,125,449	)
Change due to exercise / redemptions		(2,010,312	)		—			—			(2,010,312	)
											—
Balance as of July 31, 2019	$	4,156,196		$	325,250		$	3,338,836		$	7,820,282