DERIVATIVE LIABILITIES

6 Months Ended

Feb. 28, 2019

The Company analyzed the warrant and beneficial conversion features (“BCF”) for derivative accounting consideration under ASC 815, “Derivatives and Hedging,” and determined that the warrant was a derivative warrant liability and that the conversion options on convertible notes payable become derivatives at the point the holder’s option to convert becomes active and there is active trading of the Company’s stock.

The Company determined our derivative liabilities to be a Level 3 fair value measurement and used the Black-Scholes pricing model to calculate the fair value as of February 28, 2019 and August 31, 2018. The Black-Scholes model requires six basic data inputs: the exercise or strike price, time to expiration, the risk-free interest rate, the current stock price, the estimated volatility of the stock price in the future, and the dividend rate. Changes to these inputs could produce a significantly higher or lower fair value measurement. The fair value of each convertible note is estimated using the Black-Scholes valuation model.

The following weighted-average assumptions were used at February 28, 2019 and August 31, 2018:

	February 28,			August 31,
	2019			2018

Expected term	0.082-3.81 years			0.614-4.31 years
Expected average volatility	102.00%-124.39		%	85.45%-130.21		%
Expected dividend yield		0.00	%		0.00	%
Risk-free interest rate	2.44%-2.51		%	2.46%-2.74		%

The following table summarizes the balances of derivative liabilities:

	February 28,		August 31,
	2019		2018

Power Up Lending Group, LTD.	$	6,045	$	-
EMA Financial, LLC		-		49,134
Auctus Fund, LLC		2,303		-
Crown Bridge Partners, LLC - Warrant		136		7,086

Total derivative liabilities	$	8,484	$	56,220

The following table summarizes the change in derivative liabilities included in the balance sheet for the six months ended February 28, 2019:

Fair Value Measurements Using Significant Observable Inputs (Level 3)

Balance - August 31, 2018	$	56,220
Addition of new derivative liabilities as debt discounts, upon issuance of warrants and convertible notes		15,063
Addition of new derivative liabilities as debt discounts, upon holder's option becoming active		38,008
Reduction in derivative liabilities due to conversions of convertible notes to common stock		(3,410	)
Gain on change in fair value of derivative liabilities		(97,397	)

Balance - February 28, 2019	$	8,484

Poverty Dignified, Inc. 10-Q