Derivative Instruments

12 Months Ended

Sep. 30, 2011

In connection with the issuance of the convertible promissory notes for $42,500, $25,000, $25,000, and $440,841, the Company has applied the guidance of Accounting Standards Codification, or ASC, Topic No. 815-40. Accordingly, the conversion features are accounted for as derivative liabilities at the date of issuance and adjusted to fair value through earnings at each reporting date. The fair value was estimated on the date of grant using a binomial option-pricing model using the following weighted-average assumptions: expected dividend yield of 0%; expected volatility of 320% to 849%; risk-free interest rate of 0.5%, and an expected holding period of 6 to 12 months. The resulting values, at the date of issuance, were allocated to the proceeds received and applied as a discount to the face value of the notes. The Company recorded derivative losses of $19,691, $10,212, $6,177, and $76,528 or a total of $112,608 , at inception of the respective convertible promissory notes; respective discounts of $42,500, $25,000, $25,000, and $440,841; and respective derivative liabilities of $62,191, $35,212, $31,176, and $517,370 at the dates of issuance. The Company also recorded respective changes in fair value of $5,668, $6,796, $6,877, and $nil or a total of $19,341 for the period ended September 30, 2011, resulting in derivative liabilities of $67,859, $42,008, $38,053, and $517,370 for the year ended September 30, 2011, and a total derivative expense of $131,949 for the year ended September 30, 2011.

The following table illustrates the fair value adjustments that were recorded related to the derivative financial instruments associated with the convertible debenture financings:

	Year Ended September 30, 2011
Derivative Liability	Inception	Fair Value Adjustments	Redemptions	Total

$42,500 Note	$ 62,191	$ 5,668	$ -	$ 67,859
$25,000 Note	35,212	6,796	-	42,008
$25,000 Note	31,176	6,877	-	38,053
$440,841 Notes	517,370	-	-	517,370
	$645,949	$19,341	$ -	$665,290

- Definition

The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items.

+ References

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+ Details

REVONERGY INC 10-K