Derivatives	9 Months Ended
May 31, 2017
Notes to Financial Statements
Note 9 - Derivatives	In connection with convertible notes payable, Series C preferred stock and warrant liability, the Company records derivative liabilities for the conversion features within these instruments. The derivative liabilities are valued on the date the convertible note payable become convertible and revalued at each reporting period. During the nine months ended May 31, 2017, the Company recorded additional derivative liabilities related to the Series C preferred stock and warrant liability due to the Company being potentially in excess of their authorized shares if all convertible instruments being converted. During the nine months ended May 31, 2016, the Company didn't record any additional derivative liabilities as no new convertible notes were issued. On December 6, 2016, the Company calculated the derivative liability in connection with the Series C preferred stock conversion feature to be $845,235. The offset of the derivative liability was recorded as a debit to additional paid-in capital. The Company used the following assumptions within the Black-Scholes pricing model to value derivative liability: exercise price of $0.08, the closing stock price of the Company's common stock on the date of valuation of $0.04, an expected dividend yield of 0%, expected volatility of 260%, risk-free interest rate of 1.12% and an expected term of 2.0 years. See Note 10 for additional information. On December 6, 2016, the Company calculated the derivative liability in connection with the warrant liability conversion feature to be $51,273. The offset of the derivative liability was recorded as a debit to the change in fair value of derivatives as the warrant is currently exercisable into common stock. The Company used the following assumptions within the Black-Scholes pricing model to value derivative liability: exercise price of $0.068, the closing stock price of the Company's common stock on the date of valuation of $0.04, an expected dividend yield of 0%, expected volatility of 322%, risk-free interest rate of 1.12% and an expected term of 3.39 years. See Note 10 for additional information. On May 31, 2017, the derivative liabilities were revalued at $3,035,645 resulting in a loss of $1,681,239 related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: exercise prices ranging from of $0.0019 to $0.046, the closing stock price of the Company's common stock on the date of valuation $0.0043, an expected dividend yield of 0%, expected volatility ranging from 312% to 633%, risk-free interest rates ranging from 0.49% to 1.28%, and an expected term ranging from of 0.5 to 2.91 years. On May 31, 2016, the derivative liabilities were revalued at $460,789 resulting in a gain of $438,067 related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: exercise prices ranging from of $0.04 to $0.072, the closing stock price of the Company's common stock on the date of valuation $0.08, an expected dividend yield of 0%, expected volatility ranging from 63% to 134%, risk-free interest rates ranging from 0.49% to 0.62%, and an expected term ranging from 0.5 to 0.92 years.

Derivatives

9 Months Ended

May 31, 2017

In connection with convertible notes payable, Series C preferred stock and warrant liability, the Company records derivative liabilities for the conversion features within these instruments. The derivative liabilities are valued on the date the convertible note payable become convertible and revalued at each reporting period. During the nine months ended May 31, 2017, the Company recorded additional derivative liabilities related to the Series C preferred stock and warrant liability due to the Company being potentially in excess of their authorized shares if all convertible instruments being converted. During the nine months ended May 31, 2016, the Company didn't record any additional derivative liabilities as no new convertible notes were issued.

On December 6, 2016, the Company calculated the derivative liability in connection with the Series C preferred stock conversion feature to be $845,235. The offset of the derivative liability was recorded as a debit to additional paid-in capital. The Company used the following assumptions within the Black-Scholes pricing model to value derivative liability: exercise price of $0.08, the closing stock price of the Company's common stock on the date of valuation of $0.04, an expected dividend yield of 0%, expected volatility of 260%, risk-free interest rate of 1.12% and an expected term of 2.0 years. See Note 10 for additional information.

On December 6, 2016, the Company calculated the derivative liability in connection with the warrant liability conversion feature to be $51,273. The offset of the derivative liability was recorded as a debit to the change in fair value of derivatives as the warrant is currently exercisable into common stock. The Company used the following assumptions within the Black-Scholes pricing model to value derivative liability: exercise price of $0.068, the closing stock price of the Company's common stock on the date of valuation of $0.04, an expected dividend yield of 0%, expected volatility of 322%, risk-free interest rate of 1.12% and an expected term of 3.39 years. See Note 10 for additional information.

On May 31, 2017, the derivative liabilities were revalued at $3,035,645 resulting in a loss of $1,681,239 related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: exercise prices ranging from of $0.0019 to $0.046, the closing stock price of the Company's common stock on the date of valuation $0.0043, an expected dividend yield of 0%, expected volatility ranging from 312% to 633%, risk-free interest rates ranging from 0.49% to 1.28%, and an expected term ranging from of 0.5 to 2.91 years. On May 31, 2016, the derivative liabilities were revalued at $460,789 resulting in a gain of $438,067 related to the change in fair market value of the derivative liabilities. The derivative liabilities were revalued using the Black-Scholes option pricing model with the following assumptions: exercise prices ranging from of $0.04 to $0.072, the closing stock price of the Company's common stock on the date of valuation $0.08, an expected dividend yield of 0%, expected volatility ranging from 63% to 134%, risk-free interest rates ranging from 0.49% to 0.62%, and an expected term ranging from 0.5 to 0.92 years.

Total Sports Media, Inc. 10-Q