Note 10 - Derivative Liability

9 Months Ended

May. 31, 2015

NOTE 10—DERIVATIVE LIABILITY

Effective July 31, 2009, the Company adopted ASC 815 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. The exercise price of certain warrants granted during the period ended February 15, 2015 are variable and subject to the fair value of the Company’s common stock on the date of exercise. As a result, the Company has determined that the exercise feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the exercise feature of the instruments to be recorded as a derivative liability.

ASC 815 requires Company management to assess the fair market value of derivatives at each reporting period and recognize any change in the fair market value as items of other income or expense. The Company’s only asset or liability measured at fair value on a recurring basis is its derivative liability associated with these warrants.

At origination and subsequent revaluations, the Company valued the derivative liability using the Black-Scholes options pricing model under the following assumptions:

			May 31 2015

Risk-free interest rate			0.25% – 1.61%
Expected options life			0.21 – 5.00
Expected dividend yield			-
Expected price volatility			47% – 152%

During the period ended May 31, 2015, the Company’s derivative liability increased from $-0- to $1,067,472 and recognized a gain on derivative liability in conjunction with settlement of convertible notes payable, additions of new derivative liabilities and subsequent revaluations of existing derivative liabilities of $1,496,437.

During the year ended August 31, 2014, the Company’s derivative liability decreased from $604,553 to $-0- and recognized a gain on derivative liability of $604,553 in conjunction with settlement of convertible notes payable, additions of new derivative liabilities and subsequent revaluations of existing derivative liabilities.

- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

+ References

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+ Details

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