Derivative Instruments and Hedging Activities

12 Months Ended

Aug. 31, 2017

Derivative Instruments and Hedging Activities:

Derivative Instruments and Hedging Activities Disclosure

DERIVATIVE LIABILITIES

The Company accounts for the embedded conversion features included in its convertible instruments as derivative liabilities. The aggregate fair value of derivative liabilities at August 31, 2017, 2016 and 2015 amounted to $740,953, $1,517,811 and $408,053 respectively.  At each measurement date, the fair value of the embedded conversion features was based on the lattice binomial method using the following assumptions:

	Years Ended August 31,
	2017	2016	2015
Effective Exercise price	0.0095 – 0.00152	0.00005 – 0.0001	0.013 – 0.0208
Effective Market price	0.0019	0.0001	0.026
Volatility	85%	248%	208%
Risk-free interest	1.13%	0.45%	0.27%
Terms	365 days	365 days	365 days
Expected dividend rate	0%	0%	0%

Changes in the derivative liabilities during the years ended August 31, 2017, 2016 and 2015 are as follows:

Balance at September 1, 2014	$      305,207
Embedded conversion features at issuance	150,646
Changes in fair value of derivative liabilities	(47,800)
Balance, August 31, 2015	$      408,053
Balance at September 1, 2015	$      408,053
Embedded conversion features at issuance	102,751
Changes in fair value of derivative liabilities	1,007,007
Balance, August 31, 2016	$   1,517,811
Balance at September 1, 2016	$   1,517,811
Embedded conversion features at issuance	-
Changes in fair value of derivative liabilities	(776,858)
Balance, August 31, 2017	$      740,953