STOCK WARRANTS AND OPTIONS

9 Months Ended

Apr. 30, 2012

8. STOCK WARRANTS AND OPTIONS

In April 2011 the company issued 975,000 warrants to purchase 975,000 shares of common stock to its directors and key employees for their services. The warrants had a term of two years and a strike price of $0.50 per share. The warrants were valued at $363,328 using the Black Scholes valuation method using the following factors; risk free interest rate of .85%, strike prices of $0.50, market price of $0.495, volatility of 163% , and no yield. The value of the warrants was expensed as compensation expense in the year ended July 31, 2011.

In June 2011 the company issued 100,000 warrants to purchase 100,000 shares of common stock to a director for his services. The warrants had a term of two years and a strike price of $0.50 per share. The warrants were valued at $115,865 using the Black Scholes valuation method using the following factors; risk free interest rate of .85%, strike prices of $0.50, market price of $1.35, volatility of 163% , and no yield. The value of the warrants was expensed as compensation expense in the year ended July 31, 2011.

During the year ended July 31, 2011, the Company issued 1,300,000 warrants to purchase 1,300,000 shares of common stock for services. The warrants have terms ranging from 2 to 5 years and strike prices ranging from $0.25 to $1.35.

During the year ended July 31, 2011, a total of 1,225,000 warrants were exercised. 400,000 warrants (200,000 at $0.10 and 200,000 at $0.20) were exercised in return for the forgiveness of $56,000 of accounts payable and $4,000 of notes payable. 825,000 warrants were exercised in a cashless exercise for 609,744 shares of common stock.

During the quarter ended October 31, 2011, the Company issued 500,000 shares of common stock and 500,000 warrants with a term of two years and at an exercise price of $1.00/share to Caravan Trading LLC as part of the Feedstock Supply Agreement for e-biofuels, The common stock was valued at fair market value on the day of the agreement of $0.85 for a total of $425,000. The warrants were valued at $313,135 using the Black Scholes valuation method using the following factors; risk free interest rate of .30%, strike prices of $1.00, market price of $0.85, volatility of 164.86% , and no yield. The total of $738,135 was capitalized as prepaid expense on E-biofuel’s books and was to be amortized over the two-year agreement. See Note 9 for further details.

During the quarter ended October 31, 2011, the Company issued 50,000 warrants with a term of five years and an exercise price of $1.05/share for consulting services, The warrants were valued at $51,682 using the Black Scholes valuation method using the following factors; risk free interest rate of .99%, strike prices of $1.05, market price of $1.10, volatility of 166.10%, and no yield. The $51,682 was capitalized as prepaid expense and will be amortized over the six-month period of the agreement. As of April 30, 2012, $37,326 has been expensed and $14,356 is in prepaid expenses.

During the quarter ended October 31, 2011, the Company issued 2,542,001 warrants in relation to the September stock financing. The warrants have a term of five years and the strike price has been reduced from the original issuance of $1.00 to $0.14/shares as a result of the Settlement and Release Agreement dated April 30, 2012. (See note 9 for further details.)

During the nine months ended April 30, 2012, 800,000 warrants (400,000 at $0.10 and 400,000 at $0.20) were exercised in a cash-less exercise into 611,764 shares of common stock. Also during the nine months ended April 30, 2012, 400,000 options with a strike price of $0.20 expired.

In May 2012, subsequent to quarter-end, the Company issued 600,000 warrants to its Board members at a strike price of $0.15/share.

The following schedule summarizes pertinent information with regard to the stock warrants for the nine months ended April 30, 2012 and the year ended July 31, 2011:


	April 30,2012				July 31, 2011
	Weighted Average Shares-Exercise Outstanding-Price				Weighted Average Shares-Exercise Outstanding-Price
Beginning of period		3,325,000	$	0.558		2,200,000	$	0.154
Granted		3,092,001		1.00		2,350,000		0.74
Exercised		800,000		0.15		1,225,000		0.186
Forfeited		—		—		—		—
Expired		400,000		0.20		—		—

End of period		5,217,001		0.49		3,325,000	$	0.558

Exercisable		5,217,001		—		3,325,000		—

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

+ References

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+ Details

IMPERIAL PETROLEUM INC 10-Q