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EX-32 - CERTIFICATION - Alternative Energy Partners, Inc.exhibit32.htm
EX-31 - PRINCIPAL ACCOUNTING OFFICER CERTIFICATION - Alternative Energy Partners, Inc.exhibit312.htm
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v2.4.0.6
Other Liabilities
12 Months Ended
Jul. 31, 2012
Other Liabilities:  
Schedule of Forward Contracts Indexed to Issuer's Equity

The Company has various convertible instruments outstanding more fully described in Note 8. Because the number of shares to be issued upon settlement cannot be determined under these instruments, the Company cannot determine whether it will have sufficient authorized shares at a given date to settle any other of its share-settleable instruments. As a result, under ASC 815-15 “Derivatives and Hedging”, all other share-settleable instruments must be classified as liabilities.

 

Embedded Derivative Liabilities in Convertible Notes

 

During the year ended July 31, 2012, the Company recognized new derivative liabilities of $105,977 as a result of convertible debt issuances having embedded conversion options. The fair value of these derivative liabilities exceeded the principal balance of the related notes payable by $43,969, and was recorded as a loss on derivatives for the year ended July 31, 2012.

 

As a result of conversion of notes payable described in Note 8, the Company reclassified $164,399 of derivative liabilities to equity and the change in fair value of derivatives was $58,422.

 

As all of the convertible debt with embedded conversion options had been fully converted as of July 31, 2012, the fair value of the Company’s derivative liabilities was $0 and $58,422 was recognized as a gain on derivatives due to change in fair value of the liability during the year ended July 31, 2012.

 

The following table summarizes the derivative liabilities included in the consolidated balance sheet:

 

  

Fair Value

Measurements Using Significant

Unobservable

Inputs (Level 3)

Derivative Liabilities:

  

 

 

Balance at July 31, 2011

  

$

ASC 815-15 additions

  

 

 105,977

Change in fair value

  

 

58,422

ASC 815-15 deletions

  

 

(164,399)

Balance at July 31, 2012

  

 

The following table summarizes the derivative gain or loss recorded as a result of the derivative liabilities above:

 

  

Included in Other Income (Expense) on Consolidated Statement of Operations

Gain/(Loss) on Derivative Liability:

  

 

 

Change in fair value of derivatives

  

$

58,422

Derivative expense

  

 

 (43,969)

Total for year ended July 31, 2012

  

 14,453

 

The fair values of derivative instruments were estimated using the Binomial pricing model based on the following weighted-average assumptions:

 

 

  

Convertible Debt Instruments

Risk-free rate

  

 

0.19% - 0.27% 

Expected volatility

  

 

100% - 300%

Expected life

  

 

 9 months – 12 months