Quarterly report pursuant to Section 13 or 15(d)


6 Months Ended
Feb. 29, 2020
Derivative Liability [Abstract]  



The short-term convertible note issued to several lenders, disclosed in note 13(m)(n)(p)(q) above have conversion rights that are linked to the Company’s stock price, typically at a factor ranging from 70% to 75% of an average stock price over a period ranging from 15 to 30 days. The number of shares issuable upon conversion of these convertible notes is therefore not determinable until conversion takes place. In order to estimate the potential impact of the conversion of these convertible notes, we calculate what the expected gain or loss would amount to based on a Black Scholes valuation model which takes into account the following factors:

  • Historical share price volatility;
  • Maturity dates of the underlying securities being valued;
  • Risk free interest rates; and
  • Expected dividend policies of the Company.

This expected gain or loss gives rise to a derivative liability which is recorded as a gain or loss in the statement of loss and comprehensive loss with a corresponding liability recorded on the balance sheet.


The value of the derivative financial liabilities above was re-assessed at February 29, 2020 and a total of $695,432 was charged to the unaudited condensed consolidated statement of loss and comprehensive loss. The value of the derivative liability will be re-assessed at each financial reporting period, with any movement thereon recorded in the statement of loss and comprehensive loss in the period in which it is incurred.


The following assumptions were used in the Black-Scholes valuation model:


Six months
February 29,

Conversion price     CAD$0.095 to CAD$0.25  
Risk free interest rate     1.38 to 2.12 %
Expected life of derivative liability    

6 to 9 months

Expected volatility of underlying stock     93.9 to 108.7 %
Expected dividend rate     0 %


The movement in derivative liability is as follows:


February 29,

Opening balance   $  
Derivative financial liability arising from convertible notes     358,853  
Fair value adjustment to derivative liability     659,885  
    $ 1,018,738