Quarterly report pursuant to Section 13 or 15(d)

WARRANT LIABILITY

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WARRANT LIABILITY
9 Months Ended
May 31, 2019
Warrant Liabilities [Abstract]  
WARRANT LIABILITY

NOTE 11 - WARRANT LIABILITY

 

In June of 2018, the Company issued warrants to purchase 3,750 shares of its common stock to investors in a registered direct offering. The warrants have a term of five years from the date of issuance. The exercise price of the warrants is protected in the event the Company issues securities with a variable conversion or exercise price during the three-year period following the warrants’ issuance. Pursuant to ASC 815, the fair value of the warrants of $15,350 was recorded as a derivative liability on the issuance date.  The estimated fair values of the warrants were computed at issuance using an option pricing model.

 

The estimated fair value of the outstanding warrant liability was $7,410 and $14,430 as of May 31, 2019 and August 31, 2018, respectively.

 

Increases or decreases in the fair value of the derivative liability are included as a component of other income (expense) in the accompanying condensed consolidated statements of operations for the respective period. Accordingly, the changes to the derivative liability for warrants resulted in a decrease of $5,965 and $7,020 in warrant liability and a corresponding gain for the three and nine months ended May 31, 2019.

 

The estimated fair value of the warrants was computed as of May 31, 2019 and August 31, 2018 using the following assumptions:

 

    May 31,     August 31,  
    2019     2018  
Stock price volatility     69%     81%
Risk-free interest rates     1.93%     2.74%
Annual dividend yield     -%     -%
Term (years)     4.0       4.0  

 

In addition, as applicable management assessed the probabilities of future financing assumptions in the valuation models.