Derivative Liability	9 Months Ended
May 31, 2014
Notes to Financial Statements
Note - 7 Derivative Liability	Effective July 31, 2009, the Company adopted ASC 815-40 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. The Company borrowed $1,000,000 on March 21, 2014. This note is convertible at the holder’s option at $0.84 per share, as valued on May 31, 2014. Additionally, the Company issued 5,555,556 warrants to purchase shares of the Company’s common stock at an exercise price of $0.84 per warrant, as valued on May 31, 2014, expiring 6 years from the date of issuance. The conversion price of the debt and the exercise price of the warrants are subject to a “reset” provision in the event the Company subsequently issues common stock at a price lower than the effective conversion price of the conversion option or warrant exercise price. If these provisions are triggered, the conversion price of the debt and exercise price of the warrants will be reduced. As a result, the conversion option and warrants are not considered to be solely indexed to the Company’s own stock and are not afforded equity treatment. The fair values of the conversion option of the debt and warrants, at May 31, 2014, were $8,191 and $4,602,640, respectively, and have been recognized as derivative liabilities on the dates of issuance with all future changes in the fair value of these derivatives being recognized in earnings in the Company’s statement of operations under the caption “Other income (expense) – Gain (loss) on derivative liability” until such time as the debt is converted or the warrants are exercised or expire.

Derivative Liability

9 Months Ended

May 31, 2014

Effective July 31, 2009, the Company adopted ASC 815-40 which defines determining whether an instrument (or embedded feature) is solely indexed to an entity’s own stock. The Company borrowed $1,000,000 on March 21, 2014. This note is convertible at the holder’s option at $0.84 per share, as valued on May 31, 2014. Additionally, the Company issued 5,555,556 warrants to purchase shares of the Company’s common stock at an exercise price of $0.84 per warrant, as valued on May 31, 2014, expiring 6 years from the date of issuance.

The conversion price of the debt and the exercise price of the warrants are subject to a “reset” provision in the event the Company subsequently issues common stock at a price lower than the effective conversion price of the conversion option or warrant exercise price. If these provisions are triggered, the conversion price of the debt and exercise price of the warrants will be reduced. As a result, the conversion option and warrants are not considered to be solely indexed to the Company’s own stock and are not afforded equity treatment.

The fair values of the conversion option of the debt and warrants, at May 31, 2014, were $8,191 and $4,602,640, respectively, and have been recognized as derivative liabilities on the dates of issuance with all future changes in the fair value of these derivatives being recognized in earnings in the Company’s statement of operations under the caption “Other income (expense) – Gain (loss) on derivative liability” until such time as the debt is converted or the warrants are exercised or expire.