Quarterly report pursuant to Section 13 or 15(d)

Note 8 - Derivative Liability

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Note 8 - Derivative Liability
6 Months Ended
Feb. 28, 2017
Disclosure Text Block [Abstract]  
Derivatives and Fair Value [Text Block]
Note 8 – Derivative Liability

The Company entered into convertible note agreements containing beneficial conversion features.  One of the features is a ratchet reset provision which allows the note holders to reduce the conversion price should the Company issue equity with an effective price per share that is lower than the stated conversion price in the note agreement (see note 10). The Company accounts for the fair value of the conversion feature in accordance with ASC 815, Accounting for Derivatives and Hedging and EITF 07-05, the embedded derivatives should be bundled and valued as a single, compound embedded derivative, bifurcate treated as a derivative liability. The Company is required to carry the embedded derivative on its balance sheet at fair value and account for any unrealized change in fair value as a component in its results of operations.

The Company recognized that the conversion feature embedded within its convertible debts is a financial derivative. The Generally Accepted Accounting Principles (GAAP) required that the Company’s embedded conversion option be accounted for at fair value. The following schedule shows the change in fair value of the derivative liabilities for the period ended February 28, 2017:

 
 
Derivative
 
 
 
Liability
 
Liabilities Measured at Fair Value
     
 
     
Balance as of August 31, 2016
 
$
254,952
 
 
       
Issuances
   
-
 
 
       
Revaluation
   
(67,072
)
 
       
Balance as of November 30, 2016
 
$
187,880
 
         
Issuances
   
360,709
 
         
Conversions / redemptions
   
(451,790
)
         
Revaluation
   
333,344
 
         
Balance as of February 28, 2017
 
$
430,143
 

The derivative liabilities incurred valued based upon the following assumptions and key inputs at February 28, 2017 and August 31, 2016:

 
February 28,
 
August 31,
 
Assumption
2017
 
2016
 
Expected dividends:
 
 
0
%
 
 
0
%
Expected volatility:
 
 
37.8% - 276.9
%
 
 
244.4
%
Expected term (years):
0.04 - 0.50 years
 
0.20 years
 
Risk free interest rate:
 
 
0.34% - 0.53
 
 
 
0.26
%
Stock price
 
$
1.25- 1.97
 
 
$
1.89