Annual report pursuant to Section 13 and 15(d)

DERIVATIVE LIABILITY AND FAIR VALUE MEASUREMENTS

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DERIVATIVE LIABILITY AND FAIR VALUE MEASUREMENTS
12 Months Ended
Aug. 31, 2019
Derivative Liability And Fair Value Measurements [Abstract]  
DERIVATIVE LIABILITY AND FAIR VALUE MEASUREMENTS

NOTE 9 – DERIVATIVE LIABILITY AND FAIR VALUE MEASUREMENTS

 

The Company recognized a derivative liability related to the purchase price protection clause associated with the Series D and Series E private offerings (Note 5). Additional units would be issued to the unit holder if the Company should issue common stock or the equivalent at a share price less than $6.00 per share (Series D) or a share price less than $7.60 (Series E). In accordance with ASC 815-10- Derivatives and Hedging we measured the derivative liability using a Monte Carlo pricing model. Accordingly, at the end of each quarterly reporting date, the derivative fair market value is re-measured and adjusted to current market value.

 

Changes in the fair value of the warrant liability were as follows:

 

Fair value – August 31, 2018

 

$ -

 

 

 

 

 

 

Reclass of warrant derivative liability from equity

 

 

1,035,600

 

Change in fair value for the period of warrant derivative liability

 

 

(1,006,099 )

Fair value – August 31, 2019

 

 

29,501

 

 

As of August 31, 2019, there is no derivative liability associated with Series D shares as they are freely tradable.

 

The Monte Carlo pricing model was used to estimate the fair value of the derivative liability and reflected the following assumptions:

 

 

 

Year Ended

August 31,

2019

 

 

Year Ended

August 31,

2018

 

Assumptions for Pricing Model:

 

 

 

 

 

 

Expected term in years

 

 

0.46

 

 

 

-

 

Volatility

 

 

127 %

 

 

-

 

Risk-free interest rate

 

1.42%-2.10

 %

 

 

-

 

Expected annual dividends

 

 

0 %

 

 

-