STOCKHOLDERS' EQUITY

3 Months Ended

Dec. 31, 2012

Common Stock

From October 1, 2011 through September 30, 2012, the Company issued 491,740 shares of its restricted common stock to individuals at $1.00 per share for consideration totaling $491,740.

During the three months ended December 31, 2012 the Company issued 33,950 shares of its restricted common stock to individuals at $1.00 per share for cash consideration totaling $33,950.

Common Stock Options

The Company’s CEO receives common stock options equal to 5% of all equity transactions, as defined in his employment agreement, including common and preferred stock issuances. The options have immediate vesting terms and have a contractual life of ten years. The following table outlines common stock options granted to the CEO since inception:

Date Issued	Options issued		Exercise price per share		Fair Value
December 31, 2007		3,650,000	$	0.10	$	319,697
September 5, 2008		6,045,400	$	0.07		390,822
September 24, 2008		458,584	$	1.00		22,831
Year ended September 30, 2009		1,304,968	$	1.00		747,765
Year ended September 30, 2010		57,850	$	1.00		33,150
Year ended September 30, 2011		81,740	$	1.00		57,813
Year ended September 30, 2012		24,578	$	1.00		17,383
Threemonths ended December 31, 2012		1,696	$	1.00		1,200
Total issued since inception		11,624,816			$	1,590,661

The fair value of each option grant is estimated at the date of grant using the Black-Scholes pricing model with the following assumptions for grants during the three months ended December 31, 2012 and the period from October 1, 2006 (Inception) through December 31, 2012:

	December 31, 2012			Inception to December 31, 2012
Weighted average fair value of options granted	$	0.71		$	0.14
Dividend yield		0	%		0	%
Approximate risk-free interest rates		2.13	%		1.43	%
Estimated volatility		91	%		122	%
Expected termin years		5			5
Weighted average fair value of common stock	$	1.00		$	0.19

Compensation expense recognized in the accompanying consolidated statement of operations related to the Employee Options and CEO Options for the three months ended December 31, 2012 and 2011 and for the period from October 1, 2006 (inception) through December 31, 2012, were approximately $1,900, $2,000 and $1,508,000, respectively.

The following table summarizes information about common stock options granted, exercised, forfeited, vested and exercisable:

	Options		Weighted- Average Exercise Price
Outstanding at September 30, 2012		14,823,120		0.21
Granted		1,696		1.00
Forfeited		-		-
Exercised		-		-
Options exercisable – December 31, 2012		14,824,816	$	0.21
Options vested or expected to vest		14,824,816	$	0.21

On July 20, 2012, the Company extended the term of options issued prior to July 20, 2012 an additional three years from the date of vesting. As a result, the Company recorded approximately $1.1 million of stock based compensation during the fourth quarter of fiscal 2012.

The following is a summary of options outstanding and exercisable at December 31, 2012:

				Weighted-Average				Weighted-Average
Exercise		Options		Remaining		Options		Remaining
Price		Outstanding		Contractual Life		Exercisable		Contractual Life
$	0.07		6,045,400		8.7		6,045,400		8.7
$	0.10		6,850,000		8.0		6,850,000		8.0
$	1.00		1,929,416		9.1		1,929,416		9.1
$	0.20		14,824,816		8.4		14,824,816		8.4

Common Stock Warrants

On February 20, 2009, the Company issued a warrant to purchase 600,000 shares of the Company's common stock, to an individual as compensation for services rendered in connection with equity capital raising activities. Under the warrant the holder may purchase up to 600,000 shares of common stock for $1.00 per share. Holders of the Company's common stock warrants are generally protected from anti-dilution by adjustments for any stock dividends, stock splits, combinations or other recapitalization. On July 20, 2012 the Company extended the warrant expiration date for an additional three years.

For purposes of determining the fair value of the common stock warrant, the Company used the Black-Scholes option pricing model and the assumptions set forth in the table below.

The weighted average fair value of warrant issued (per common share)	$	0.43
Dividend yield		0	%
Approximate risk-free interest rate		1.81	%
Estimated volatility		70	%
Expected termin years		2.5

The fair value of the warrant was determined using the deemed fair value of the underlying common stock of $1.00 per common share at February 20, 2009. Because the Company's stock was not publicly traded, the Company used the average historical volatility rate for publicly traded companies that we reengaged in similar alternative fuel activities to those of the Company for a similar time period as the expected term of the warrant. The expected term of the warrant was derived as the midpoint between its five year contractual life and the date it became fully exercisability. The fair value of the warrant determined was included in additional paid-in capital as a transaction cost.

The Company reclassified the value of the warrants from paid in capital to derivative liability on October 1, 2009. The Company used the Black-Scholes option pricing model to determine the fair value of the warrants at the end of each accounting period. As of December 31, 2012, the fair value of the derivative liability was valued at $226,132, which resulted in other incomeof $6,170 for the three months ended December 31, 2012.

Mandatorily Convertible Preferred Stock

The Company’s restated certificate of incorporation filed on September 18, 2008 authorizes 10,000,000 shares of Preferred Stock with a par value of $0.0001 and a stated value of $10.00.

The holders of the Series A Preferred Stock (“Preferred Stock”) accrue dividends at the rate of 8% per share per annum. Dividends are cumulative, accrue on a quarterly basis commencing one year from the date of issuance (the "Commencement Date") and when declared will be paid with the Company's common stock at a conversion rate of $1.00 per common share. Dividends will accrue from the commencement date until the preferred shares have been converted into debt or common stock as described below. If dividends on the Series A Preferred Stock have not been paid or declared, the deficiency shall be paid or declared before any dividend is declared for common stock. Dividends in arrears do not bear interest. The Company has not declared any dividends on the Series A Preferred Stock outstanding. All of the accumulated dividends totaling $6,565,638 were converted into common stock in 2012.

Effective March 20, 2012, Oilcorp disposed off 100% of the preferred stock and its rights to Well Crown Investments Limited.

Effective March 1, 2012, Plant Offshore Group Limited converted their 1,017,878 shares of the Company preferred stock with the entitled 8% cumulative accrued dividends as of February 29, 2012, into 11,965,875 shares of the Company’s common stock. The conversion is based on the price of $1.00 per common stock as per the preferred stock subscription agreement.

Effective March 31, 2012, Well Crown Investments Limited converted their 2,211,166 shares of the Company preferred stock with the entitled 8% cumulative accrued dividends as of March 31, 2012, into 26,890,203 shares of the Company common stock. The conversion is based on the price of $1.00 per common stock as per the latest common stock subscription’s price and the lack of trading activity during a 10 days period.

- Definition

The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

+ References

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+ Details

Renewable Fuel Corp 10-Q