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PROMISSORY NOTES PAYABLE

12 Months Ended

Jul. 31, 2021

8. PROMISSORY NOTES PAYABLE

CONVERTIBLE NOTES PAYABLE

On June 9, 2020, the Company issued a short-term unsecured convertible promissory note for $25,000, with interest at 12% interest per annum and maturing on September 7, 2020. The unsecured convertible promissory note was convertible into shares of common stock of the Company at $0.20 per share, which was in excess of the closing market price of the Company’s common stock on June 9, 2020, of $0.07 per share. On August 31, 2020, the principal balance of the unsecured convertible promissory note of $25,000, plus accrued interest payable of $682, was repaid through conversion into 128,410 shares of common stock.

On July 8, 2021, the Company entered into a securities purchase agreement with a lender pursuant to which the Company sold a convertible note payable in the principal amount of $128,750 for net cash proceeds of $125,000, after the deduction of legal and due diligence fees. The convertible note is due one year from issuance, pays interest at the rate of 10% per annum, unless in default, upon which the interest rate would increase to 22% and the amount required to be paid to satisfy the obligation in full would increase to 150% of the sum of the principle, accrued interest and default interest depending upon the nature of the default.

The convertible note gives the Company the right to prepay the note within the first 180 days from issuance at prepayment rates ranging from 110% to 125% of the then outstanding principal and interest balance. At any time during the period beginning 180 days from the origination date to the maturity date or date of default, the holder can convert all or any part of the outstanding balance into common stock at a conversion price per share equal to 65% of the lowest daily volume weighted average price of the Company’s common stock during the 10 trading days prior to the date of conversion.

The Company evaluated the embedded conversion feature and concluded that it was required to be bifurcated and accounted for as a derivative liability due to the lack of explicit limit on the number of shares that may be required to be issued to settle the instrument. Accordingly, the fair value of the embedded conversion feature at inception was reflected as a derivative liability in the balance sheet at July 31, 2021, with a resulting discount applied to the note payable. At inception, the fair value of the conversion feature was deemed to be $50,507 as determined using a Stock Path Monte Carlo Simulation model. The key assumptions used in this valuation included: (1) dividend yield of 0%, (2) expected volatility of 100.00%, (3) risk-free interest rate of 0.07%, (4) expected life of 1 year, and (5) the quoted market price of $0.29 for our common stock.

At July 31, 2021, the embedded conversion feature had a fair value of $50,630, resulting in the recognition of a loss on the value of the derivative of $123 in the statement of operations. The key assumptions used in this valuation included: (1) dividend yield of 0%, (2) expected volatility of 100.00%, (3) risk-free interest rate of 0.07%, (4) expected life of 0.94 year, and (5) the quoted market price of $0.21 for our common stock.

A roll forward of the embedded conversion feature derivative liability for July 8, 2021, through July 31, 2021, is as follows:


Beginning balance, July 8, 2021	$	50,507
Increase in fair value during period		123
Ending balance, July 31, 2021	$	50,630

At inception, the convertible note had a debt discount of $50,507 which will be amortized to interest expense over the term of the note. The remaining debt discount at July 31, 2021, related to the convertible note was $47,324.

SHORT-TERM NOTES PAYABLE

On October 29, 2020, the Company issued a short-term unsecured promissory note to Daniel Crosser, who is an approximate 13% shareholder of the Company, for $100,000, with interest at 10% per annum. The note was scheduled to mature on April 29, 2021, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. On April 29, 2021, the maturity date of this note was extended to July 31, 2021. On July 31, 2021, the maturity date of this note was extended to November 30, 2021. On November 30, 2021, the maturity date of this note was extended to April 30, 2022. As of July 31, 2021, accrued interest related to the unsecured promissory note was $7,639. This note was paid in full on March 15, 2022.

On November 10, 2020, the Company issued a short-term unsecured promissory note to Mr. Crosser, for $200,000, with interest at 5% per annum. The note was scheduled to mature on February 8, 2021, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. On February 8, 2021, the maturity date of this note was extended to June 30, 2021. On June 30, 2021, the maturity date of this note was extended to November 30, 2021. On November 30, 2021, the maturity date of this note was extended to April 30, 2022. As of July 31, 2021, accrued interest related to the unsecured promissory note was $7,264. As of the date of the filing of this Form 10-K this note is in default.

On December 10, 2020, the Company issued a short-term unsecured promissory note to Mr. Crosser, for $160,000, with interest at 5% per annum. The proceeds under this promissory note were received by the Company in November 2020. The note was scheduled to mature on March 10, 2021, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. On February 26, 2021, the maturity date of this note was extended to June 30, 2021. On June 30, 2021, the maturity date of this note was extended to November 30, 2021. On November 30, 2021, the maturity date of this note was extended to April 30, 2022. As of July 31, 2021, accrued interest related to the unsecured promissory note was $5,540. As of the date of the filing of this Form 10-K this note is in default.

On December 21, 2020, the Company issued a short-term promissory note to Mr. Crosser for $40,000, without interest, with a scheduled maturity date of January 31, 2021. On January 31, 2021, the maturity date of this note was extended to June 30, 2021. On June 30, 2021, the maturity date of this note was extended to November 30, 2021. On November 30, 2021, the maturity date of this note was extended to April 30, 2022. As of the date of the filing of this Form 10-K this note is in default.

On December 23, 2020, the Company issued a short-term promissory note to John Morgan, a director of the Company, for $20,000, without interest. The note was repaid on January 7, 2021.

Between December 15, 2020, and December 26, 2020, the Company’s subsidiary Mistress Movie LLC issued six short-term promissory notes to Cross Entertainment, LLC, an entity controlled by Michael Witherill, aggregating $170,000, without interest, with a scheduled maturity date of February 28, 2021. Mr. Witherill is the sole member and manager of Cross Entertainment, LLC, and is president and a director of the Company. As of January 31, 2021, $60,000 had been repaid and the remaining principal amount of $110,000 was due on these notes. On February 26, 2021, the maturity date of the $110,000 principal amount of the notes were extended to June 30, 2021. On June 30, 2021. the maturity date of the note was extended to June 30, 2022. As of the date of the filing of this Form 10-K the remaining principal balance of these notes is $86,679.

On December 26, 2020, the Company issued a short-term promissory note to Cross Entertainment, LLC, for $110,000, without interest, with a scheduled maturity date of June 30, 2021. The Company received proceeds of $10,000 on this note through April 30, 2021. On January 31, 2021, the principal balance of the note dated January 7, 2021, of $85,000 was transferred to this note as described below. As of April 30, 2021, principal amount of $95,000 was due on this note. On June 30, 2021, the maturity date of this note was extended to December 31, 2021. The Company repaid this note in full on August 9, 2021.

On January 5, 2021, the Company issued a short-term promissory note to Lawrence M. Silver, who is an approximate 11% shareholder of the Company, for $70,000, without interest, with a scheduled maturity date of January 31, 2021. On January 31, 2021, the maturity date of this note was extended to June 30, 2021. The Company repaid this note in full on May 5, 2021.

On January 7, 2021, the Company issued a short-term promissory note to Cross Entertainment, LLC, for $145,000, without interest, with a scheduled maturity date of January 31, 2021. Proceeds on this note were $145,000, of which $60,000 was repaid and the balance of $85,000 was transferred a note dated December 26, 2020, as described above. As of July 31, 2021, the note was paid off.

On January 29, 2021, the Company issued a short-term promissory note to Cross Entertainment, LLC, for $85,000, without interest, with a scheduled maturity date of February 28, 2021. On February 26, 2021, the maturity date of this note was extended to June 30, 2021. As of July 31, 2021, principal of $7,000 was due on this note. On June 30, 2021, the maturity date of this note was extended to August 31, 2021. The Company repaid this note in full on August 9, 2021.

On February 11, 2021, the Company issued a short-term promissory note to Mr. Silver for $100,000, without interest, with a scheduled maturity date of June 30, 2021. The Company repaid $50,000 on this note on May 6, 2021. On June 30, 2021, the maturity date of this note was extended to November 30, 2021. On November 30, 2021, the maturity date of this note was extended to March 31, 2022. The Company repaid this note in full on February 8, 2022.

On April 20, 2021, the Company issued a short-term promissory note to Cross Entertainment, LLC, for $1,500, without interest, with a scheduled maturity date of May 20, 2021. The note was repaid on April 21, 2021.

On April 21, 2021, the Company issued a short-term unsecured promissory note to Mr. Crosser, for $15,000, with interest at 10% per annum. The note was scheduled to mature on May 21, 2021, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. On May 21, 2021, the maturity date of this note was extended to July 31, 2021. On July 31, 2021, the maturity date of this note was extended to November 30, 2021. On November 30, 2021, the maturity date of this note was extended to April 30, 2022. As of July 31, 2021, accrued interest related to the unsecured promissory note was $421. As of the date of the filing of this Form 10-K this note is in default.

On May 3, 2021, the Company issued a short-term unsecured promissory note to Mr. Crosser, for $15,000, with interest at 10% per annum. The note was scheduled to mature on November 3, 2021, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. On July 31, 2021, the maturity date of this note was extended to November 3, 2021. On November 3, 2021, the maturity date of this note was extended to April 30, 2022. As of July 31, 2021, accrued interest related to the unsecured promissory note was $371. As of the date of the filing of this Form 10-K this note is in default.

On May 6, 2021, the Company issued a short-term promissory note to Cross Entertainment, LLC, for $70,000, without interest, with a scheduled maturity date of July 31, 2021. On July 31, 2021, the maturity date of this note was extended to December 31, 2021. The note was repaid on September 22, 2021.

On May 11, 2021, the Company issued a short-term promissory note to Cross Entertainment, LLC, for $25,000, without interest, with a scheduled maturity date of June 30, 2021. On June 30, 2021, the maturity date of the note was extended to December 31, 2021. The note was repaid on September 30, 2021.

On May 12, 2021, the Company issued a short-term promissory note to Cross Entertainment, LLC, for $50,000, without interest, with a scheduled maturity date of June 30, 2021. On June 30, 2021, the maturity date of this note was extended to December 31, 2021. The note was repaid on September 22, 2021.

On May 13, 2021, the Company issued a short-term promissory note to Cross Entertainment, LLC, for $13,000, without interest, with a scheduled maturity date of June 30, 2021. On June 30, 2021, the maturity date of this note was extended to December 31, 2021. The note was repaid on September 22, 2021.

On May 28, 2021, the Company issued a short-term unsecured promissory note to Mr. Crosser, for $35,000, with interest at 10% per annum. The note was scheduled to mature on July 31, 2021, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. On July 31, 2021, the maturity date of the note was extended to November 30, 2021. On November 30, 2021, the maturity date of the note was extended to April 30, 2022. As of July 31, 2021, accrued interest related to the unsecured promissory note was $622. As of the date of the filing of this Form 10-K this note is in default.

On June 2, 2021, the Company issued a short-term unsecured promissory note to Mr. Silver, for $90,933, with interest at 10% per annum. The note matures July 31, 2021, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. On July 31, 2021, the maturity date of the note was extended to October 31, 2021. The note was repaid October 19, 2021. As of July 31, 2021, accrued interest related to the unsecured promissory note was $1,490.

On June 14, 2021, the Company issued a short-term unsecured promissory note to Mr. Crosser, for $25,000, with interest at 10% per annum. The note was scheduled to mature on July 31, 2021, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. On July 31, 2021, the maturity date of the note was extended to November 30, 2021. On November 30, 2021, the maturity date of the note was extended to April 30, 2022. As of July 31, 2021, accrued interest related to the unsecured promissory note was $326. As of the date of the filing of this Form 10-K this note is in default.

On June 15, 2021, Mistress Movie LLC, a wholly owned subsidiary of Rivulet Films, issued a short-term unsecured promissory note to Michael Witherill, a related party, for $1,394, without interest, with a scheduled maturity date of December 31, 2021. On December 31, 2021, the maturity date, the note was extended to June 30, 2022. This note was paid in full on May 3, 2022.

On June 15, 2021, and June 30, 2021, the Company executed Promissory Notes payable to Mark Williams, for $50,000 each. The notes were scheduled to mature on December 15, 2021, and December 30, 2021, respectively. Each of the notes is unsecured, bears interest at a rate of 10% per annum, and the unpaid balance may be accelerated upon an event of default thereunder. On December 15, 2021, and December 30, 2021, respectively, the maturity date of the notes was extended to March 31, 2022. On March 31, 2021, the maturity dates of the notes were extended to April 30, 2022. As of July 14, 2021, $10,000 has been paid on the note dated June 15, 2021. As of July 31, 2021, accrued interest related to the unsecured promissory notes was $1,022. As of the date of the filing of this Form 10-K this note is in default.

On June 17, 2021, and June 18, 2021, Good News Productions, LLC, a wholly owned subsidiary of Rivulet Films, executed promissory notes payable to Mark Williams for $50,000 and $35,000, respectively. The notes were scheduled to mature on December 17, 2021, and December 18, 2021, respectively. Each of the notes is unsecured, bears interest at a rate of 10% per annum, and the unpaid balance may be accelerated upon an event of default thereunder. On December 17, 2021, and December 18,2021, respectively, the maturity dates of the notes was extended to March 31, 2022. On March 31, 2021, the maturity dates of the notes were extended to April 30, 2022. As of July 31, 2021, accrued interest related to the unsecured promissory note was $1,029. As of the date of the filing of this Form 10-K this note is in default.

On June 29, 2021, PBP Productions LLC, a wholly owned subsidiary of Rivulet Films, issued a short-term unsecured promissory note to Michael Witherill, a related party, for $2,071, without interest, with a scheduled maturity date of December 31, 2021. On December 31, 2021, the maturity date of the note was extended to June 30, 2022. This note was paid in full on May 3, 2022.

On June 30, 2021, Mistress Movie LLC, a wholly owned subsidiary of Rivulet Films, and Cross Entertainment, L.L.C. entered into five amendments to promissory notes. The amendments extend the maturity dates of promissory notes in the aggregate amount of $110,000 from June 30, 2021, to June 30, 2022. All other provisions of the promissory notes remain the same.

On June 30, 2021, the Company issued a short-term promissory note to Aaron Klusman, a related party, for $40,000, without interest, with a scheduled maturity date of July 15, 2021. The note was repaid on July 13, 2021.

On July 1, 2021, the Company executed a Promissory Note payable to Rachelle Strole, an individual, for $100,000, with a maturity date of July 9, 2021. The note is unsecured, bears no interest, accrue interest at a rate of 15% in the event of a default, and the unpaid principal and accrued interest may be accelerated upon an event of default thereunder. The note was repaid on July 22, 2021.

On July 6, 2021, the Company executed a promissory note payable to Rachelle Strole, an individual, for $400,000. The note is unsecured, bears no interest, accrues interest at a rate of 15% in the event of a default, and the unpaid principal and accrued interest may be accelerated upon an event of default thereunder. The $400,000 note matured on July 31, 2021, and remains unpaid and, as a result, is currently in default. Ms. Strole filed suit against the Company on October 7, 2021, for the outstanding balance of this note. See Note 14.

On July 15, 2021, the Company issued a short-term promissory note to Michael Witherill, a related party, for $9,138, without interest, with a scheduled maturity date of March 31, 2022. On November 23, 2021, the note was transferred to the multiple advance promissory noted dated November 23, 2021, as described in Note 14.

On July 21, 2021, the Company issued a short-term promissory note to Aaron Klusman, a related party, for $40,000, without interest, with a scheduled maturity date of September 21, 2021. On September 21, 2021, the maturity date of the note was extended to February 28, 2022. On October 10, 2021, $15,000 of principle was repaid. On October 21, 2021, $15,000 of principle was repaid. The remaining balance of $10,000 was transferred to the multiple advance promissory noted dated November 23, 2021, as described in Note 14.

On July 22, 2021, the Company issued a short-term promissory note to Michael Witherill, a related party, for $50,000, without interest, with a scheduled maturity date of February 28, 2022. On November 23, 2021, the note was transferred to the multiple advance promissory noted dated November 23, 2021, as described in Note 14.

LONG-TERM NOTES PAYABLE

On September 16, 2020, the Company issued a two-year unsecured convertible promissory note payable for $100,000, with interest at 5% per annum and maturing on September 15, 2022. The note was originally convertible into shares of common stock of the Company at $0.80 per share, which was above the closing market price of the Company’s common stock of $0.26 per share on September 16, 2020.

This note was amended on December 15, 2020, to make it convertible into shares of common stock of the Company at $0.40 per share, which was below the closing market price of the Company’s common stock of $0.59 per share on December 15, 2020.

As a result of the December 15, 2020, amendment to this convertible promissory note payable, the Company recognized a beneficial conversion feature on such date to recognize the difference between the closing market price of the common stock and the amended conversion price, which resulted in the Company recording a loss aggregating $48,010. If the closing price of the Company’s common stock reaches $0.60 per share or greater (decreased from $1.20 per share as part of the December 15, 2020, amendment to the note), the outstanding principal and all accrued interest on this note shall automatically convert into common stock at the specified conversion rate. As of July 31, 2021, accrued interest payable related to the unsecured convertible promissory note payable was $4,356.

On October 26, 2020, Rivulet Films issued a multiple advance promissory note (the “Note”) to Mr. Silver, for $1,000,000, with interest at 10% per annum. The Note matures on October 6, 2022, with the principal balance outstanding, plus accrued but unpaid interest, being due and payable on the maturity date. The Note is secured by a first lien security interest on all of the assets of Rivulet Films (including its equity interest in PBP Productions LLC), personal guarantees of the Company’s officers, Michael Witherill and Aaron Klusman, and a corporate guarantee of the Company. Rivulet Films is required to use borrowings under the Note primarily to pay production costs associated with the movie production currently entitled “Please Baby Please.” Borrowings under this Note may be repaid at any time and reborrowed until the maturity date. Rivulet Films is required to apply any other funds received by it for the purpose of film financing and then any excess proceeds to pay any principal and interest owing under this Note. As of July 31, 2021, principal borrowings outstanding under the Note were $1,000,000, and related accrued interest was $77,722, which has been capitalized as project development costs (see Note 7). As of the date of the filing of this Form 10-K, the remaining principal balance of this note is $425,000 and this note is in default.