7. Derivative Liabilities

12 Months Ended

Sep. 30, 2018

Notes

7. Derivative Liabilities

7.     Derivative Liabilities

The Company records the fair value of the conversion price of the convertible debentures disclosed in Note 5 in accordance with ASC 815, Derivatives and Hedging. The fair value of the derivatives was calculated using a multi-nominal lattice model. The fair value of the derivative liabilities is revalued on each balance sheet date with corresponding gains and losses recorded in the consolidated statement of operations. For the year ended September 30, 2018, the Company recorded a loss on the change in fair value of derivative liability of $165,961 (2017 - $nil). As at September 30, 2018, the Company recorded a derivative liability of $800,973 (2017 - $nil).

The following inputs and assumptions were used to value the derivative liabilities outstanding during the years ended September 30, 2018 and 2017, assuming no dividend yield:

	September 30, 2018	September 30, 2017
Expected volatility	133-156%	–
Risk free rate	2.59%	–
Expected life (in years)	0.5-1.0	–

A summary of the activity of the derivative liability is shown below:

	$
Balance, September 30, 2017	–
Derivative additions associated with convertible notes	1,035,610
Decrease in fair value of derivatives	(234,637)
Balance, September 30, 2018	800,973

During the years ended September 30, 2018 and 2017, the Company recorded a day-one loss related to the derivatives associated with issuance of convertible notes of $400,598 and $0, respectively. The amounts were recorded in the account named “change in derivative liability” on the income statement.