Fair Value of Financial Instruments

9 Months Ended

Apr. 30, 2022

Note 5 – Fair Value of Financial Instruments

Under FASB ASC 820-10-5, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The standard outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. Under GAAP, certain assets and liabilities must be measured at fair value, and FASB ASC 820-10-50 details the disclosures that are required for items measured at fair value.

The Company has certain financial instruments that must be measured under the new fair value standard. The Company’s financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy. The three levels are as follows:

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2 - Inputs include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates, yield curves, etc.), and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market corroborated inputs).

Level 3 - Unobservable inputs that reflect our assumptions about the assumptions that market participants would use in pricing the asset or liability.

The following schedule summarizes the valuation of financial instruments at fair value on a recurring basis in the balance sheets as of April 30, 2022 and July 31, 2021, respectively:

	Fair Value Measurements at April 30, 2022
	Level 1		Level 2			Level 3
Assets
Cash	$	8,162	$	-		$	-
Total assets		8,162		-			-
Liabilities
Convertible judgments payable		-		6,582,399			-
Note payable, SBA loan		-		150,000			-
Total liabilities		-		6,732,399			-
	$	8,162	$	(6,732,399	)	$	-

	Fair Value Measurements at July 31, 2021
	Level 1		Level 2			Level 3
Assets
Cash	$	40,321	$	-		$	-
Total assets		40,321		-			-
Liabilities
Convertible judgments payable		-		15,591,498			-
Note payable, SBA loan		-		150,000			-
Total liabilities		-		15,741,498			-
	$	40,321	$	(15,741,498	)	$	-

The fair value of our convertible judgments payable is based on the fair market value of the underlying shares that are to be used to settle the judgments, and are considered Level 3 inputs as defined by ASC Topic 820-10-35. The fair value is based on the exit price using the Company’s common stock at the balance sheet dates. The fair value is greater than the amounts presented on the balance sheets as follows:

	April 30,		July 31,
	2022		2021

Fair value of convertible judgments payable	$	6,582,399	$	15,591,498
Historical value of convertible judgments payable on balance sheets		206,935		216,400

	$	6,375,464	$	15,375,098

There were no transfers of financial assets or liabilities between Level 1, Level 2 and Level 3 inputs for the nine months ended April 30, 2022 or the year ended July 31, 2021.

Halberd Corp 10-Q/A