XML 43 R18.htm IDEA: XBRL DOCUMENT v2.4.0.6
Share-based Compensation
 3 Months Ended
Dec. 31, 2011
Share-based Compensation [Text Block]

12.    Share-based Compensation

(i) Options

The Company grants share options to officers and employees and restricted shares of common stock to its non-employee directors as rewards for their services.

Stock Option Plan

In May 2005, the Board of Directors adopted the China BAK Battery, Inc. 2005 Stock Option Plan (the “Plan”). The Plan originally authorized the issuance of up to 4,000,000 shares of the Company’s common stock, pursuant to stock options granted under the Plan, or as grants of restricted stock. The exercise price of options granted pursuant to the Plan must be at least equal to the fair market value of the Company’s common stock at the date of the grant. Fair market value is determined at the discretion of the designated committee on the basis of reported sales prices for the Company’s common stock over a ten business day period ending on the grant date. The Plan will terminate on May 16, 2055. On July 28, 2008, the Company’s stockholders approved certain amendments to the Plan, including an amendment increasing the total number of shares available for issuance under the Plan to 8,000,000.

Pursuant to the Plan, the Company granted options to purchase 2,000,000 shares of common stock with an exercise price of US$6.25 per share on May 16, 2005. In accordance with the vesting provisions of the grants, the options became vested and exercisable under the following schedule:

    Percentage of   Initial
Number of Shares   Options Issued   Vesting Date
800,000   40%   July 1, 2007
600,000   30%   January 1, 2008
600,000   30%   July 1, 2008
2,000,000   100%    

Subsequent to the grant date, options to purchase 200,000 shares of common stock were forfeited because the optionees terminated their employment with the Company. In addition, on September 28, 2006, options to purchase a total of 1,400,000 shares of common stock were cancelled pursuant to the Termination and Release Agreements signed on that day.

Pursuant to the Plan, the Company also granted options to purchase 1,501,500 shares of the Company’s common stock with a weighted-average exercise price of US$3.28 per share on June 25, 2007. In accordance with the vesting provisions of the grants, the options will become vested and exercisable during the period from December 31, 2007 to February 9, 2012 according to each employee’s respective agreement.

A summary of share option plan activity for these options during the three months ended December 31, 2011 is presented below:

          Weighted     Weighted average        
    Number of     average exercise     remaining     Aggregate intrinsic  
    shares     price per share     contractual term     value (1)  
                         
Outstanding as of October 1, 2011   605,000   $  3.28              
Exercised   -     -              
Forfeited   -     -              
Cancelled   -     -              
                         
Outstanding as of December 31, 2011   605,500   $  3.28     1.5 years   $  -  
                         
Exercisable as of December 31, 2011   605,500   $  3.28     1.0 years   $  -  

(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on December 31, 2011 (US$0.63) in excess of the exercise price multiplied by the number of options outstanding or exercisable.

The weighted-average grant-date fair value of options granted during 2007 was US$2.15 per share. The Company recorded non-cash share-based compensation expense of US$24,884 for the three months ended December 31, 2010, in respect of share options granted on June 25, 2007, which was allocated to cost of revenues, sales and marketing expenses, general and administrative expenses and research and development expenses respectively. No non-cash share-based compensation expense was recorded for the three months ended December 31, 2011.

The fair value of the above option awards granted on June 25, 2007 was estimated on the date of grant using the Black-Scholes Option Valuation Model that uses the following assumptions:

Expected volatility   69.44%  
Expected dividends   Nil  
Expected life   4 - 10 years  
Risk-free interest rate   5.09%  

As of December 31, 2011, there were no unrecognized compensation costs related to non-vested share options.

Pursuant to the Plan, the Company also granted options to purchase 360,000 shares of common stock with an exercise price of US$4.30 per share on January 28, 2008. In accordance with the vesting provisions of the grants, the options will become vested and exercisable during the period from April 28, 2008 to January 28, 2011 according to each employee’s respective agreement.

A summary of share option plan activity for these options during the three months ended December 31, 2011 is presented below:

          Weighted     Weighted average        
    Number of     average exercise     remaining     Aggregate intrinsic  
    shares     price per share     contractual term     value (1)  
                         
Outstanding as of October 1, 2011   360,000   $  4.30              
Exercised   -     -              
Forfeited   -     -              
Cancelled   -     -              
                         
Outstanding as of December 31, 2011   360,000   $  4.30     1.1 years   $  -  
                         
Exercisable as of December 31, 2011   360,000   $  4.30     1.1 years   $  -  

(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on December 31, 2011 (US$0.63) in excess of the exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted on January 28, 2008 was US$3.59 per share. The Company recorded non-cash share-based compensation expense of US$12,057 for the three months ended December 31, 2010, in respect of share options granted on January 28, 2008, which was allocated to general and administrative expenses and research and development expenses respectively. No non-cash share-based compensation expense was recorded for the three months ended December 31, 2011.

The fair value of the above option awards granted on January 28, 2008 was estimated on the date of grant using the Black-Scholes Option Valuation Model that uses the following assumptions.

Expected volatility   120.23%  
Expected dividends   Nil  
Expected life   5 years  
Risk-free interest rate   3.59%  

As of December 31, 2011, there were no unrecognized compensation costs related to non-vested share options.

On May 29, 2008, the Compensation Committee of the Company’s Board of Directors recommended and approved the grant of options to purchase 1,080,000 shares of the Company’s common stock to Mr. Xiangqian Li and options to purchase 170,000 shares to five other employees, with an exercise price of US$4.18 per share. In accordance with the vesting provisions of the grants, the options will become vested and exercisable during the period from September 30, 2008 to May 29, 2012 according to each employee’s respective agreement.

A summary of share option plan activity for these options during the three months ended December 31, 2011 is presented below:

                Weighted        
          Weighted     average        
          average     remaining     Aggregate  
    Number of     exercise price     contractual     intrinsic  
    shares     per share     term     value (1)  
                         
Outstanding as of October 1, 2011   1,250,000   $  4.18              
Exercised   -     -              
Forfeited   -     -              
Cancelled   -     -              
                         
Outstanding as of December 31, 2011   1,250,000   $  4.18     1.9 years   $  -  
                         
Exercisable as of December 31, 2011   980,000   $  4.18     0.75 years   $  -  

(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on December 31, 2011 (US$0.63) in excess of the exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted on May 29, 2008 was US$2.36 per share. The Company recorded non-cash share-based compensation expense of US$71,456 and US$6,308 for the three months ended December 31, 2010 and 2011 respectively, in respect of share options granted on May 29, 2008, which was allocated to general and administrative expenses and research and development expenses respectively.

The fair value of the above option awards granted on May 29, 2008 was estimated on the date of grant using the Black-Scholes Option Valuation Model that uses the following assumptions.

Expected volatility   59.48%  
Expected dividends   Nil  
Expected life   5 years  
Risk-free interest rate   4.01%  

As of December 31, 2011, there were unrecognized compensation costs of US$10,216 related to the above non-vested share options. These costs are expected to be recognized over a weighted average period of 0.3 years.

On June 22, 2009, the Compensation Committee of the Company’s Board of Directors recommended and approved the grant of options to purchase 1,928,200 shares of the Company’s common stock to certain key employees, officers and consultants with an exercise price of US$2.81 per share. In accordance with the vesting provisions of the grants, the options will become vested and exercisable over five years in twenty equal quarterly installments on the first day of each fiscal quarter beginning on October 1, 2009.

A summary of share option plan activity for these options during the three months ended December 31, 2011 is presented below:

                Weighted        
          Weighted     average        
          average     remaining     Aggregate  
    Number of     exercise price     contractual     intrinsic  
    shares     per share     term     value (1)  
                         
Outstanding as of October 1, 2011   1,643,355   $  2.81              
Exercised   -     -              
Forfeited   -     -              
Cancelled   -     -              
                         
Outstanding as of December 31, 2011   1,643,355   $  2.81     4.4 years   $  -  
                         
Exercisable as of December 31, 2011   673,280   $  2.81     4.4 years   $  -  

(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on December 31, 2011 (US$0.63) in excess of the exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted on June 22, 2009 was US$2.46 per share. The Company recorded non-cash share-based compensation expense of US$287,740 and US$159,014 for the three months ended December 31, 2010 and 2011, respectively, in respect of share options granted on June 22, 2009, which was allocated to general and administrative expenses and research and development expenses respectively.

The fair value of the above option awards granted on June 22, 2009 was estimated on the date of grant using the Black-Scholes Option Valuation Model that uses the following assumptions.

Expected volatility   111.03%  
Expected dividends   Nil  
Expected life   7 years  
    %  
Risk-free interest rate   3.69  

As of December 31, 2011, there were unrecognized compensation costs of US$682,198 related to the above non-vested share options. These costs are expected to be recognized over a weighted average period of 1.2 years.

On June 26, 2009, the Compensation Committee of the Company’s Board of Directors recommended and approved the grant of options to purchase 75,000 shares of the Company’s common stock to certain key management with an exercise price of US$3.24 per share. In accordance with the vesting provisions of the grants, the options will become vested and exercisable over five years in twenty equal quarterly installments on the first day of each fiscal quarter beginning on October 1, 2009.

A summary of share option plan activity for these options during the three months ended December 31, 2011 is presented below:

          Weighted     Weighted average        
    Number of     average exercise     remaining     Aggregate intrinsic  
    shares     price per share     contractual term     value (1)  
                         
Outstanding as of October 1, 2011   75,000   $  3.24              
Exercised   -     -              
Forfeited   -     -              
Cancelled   -     -              
                         
Outstanding as of December 31, 2011   75,000   $  3.24     4.4 years   $  -  
                         
Exercisable as of December 31, 2011   26,250   $  3.24     4.4 years   $  -  

(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on December 31, 2011 (US$0.63) in excess of the exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted on June 26, 2009 was US$2.86 per share. The Company recorded non-cash share-based compensation expense of US$13,814 and US$8,709 for the three months ended December 31, 2010 and 2011, respectively, in respect of share options granted on June 26, 2009, which was allocated to research and development expenses.

The fair value of the above option awards granted on June 26, 2009 was estimated on the date of grant using the Black-Scholes Option Valuation Model that uses the following assumptions.

Expected volatility   113.58%  
Expected dividends   Nil  
Expected life   7 years  
Risk-free interest rate   3.51%  

As of December 31, 2011, there were unrecognized compensation costs of US$38,847 related to the above non-vested share options. These costs are expected to be recognized over a weighted average period of 1.0 years.

On April 8, 2010, the Compensation Committee of the Company’s Board of Directors recommended and approved the grant of options to purchase 100,000 shares of the Company’s common stock to certain key management with an exercise price of US$2.43 per share. In accordance with the vesting provisions of the grants, the options will become vested and exercisable in eight equal installments beginning on each quarter after September 30, 2011.

A summary of share option plan activity for these options during the three months ended December 31, 2011 is presented below:

          Weighted     Weighted average        
    Number of     average exercise     remaining     Aggregate intrinsic  
    shares     price per share     contractual term     value (1)  
                         
Outstanding as of October 1, 2011   100,000   $  2.43              
Exercised   -     -              
Forfeited   -     -              
Cancelled   -     -              
                         
Outstanding as of December 31, 2011   100,000   $  2.43     5.7 years   $  -  
                         
Exercisable as of December 31, 2011   25,000   $  2.43     5.7 years   $  -  

(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on December 31, 2011 (US$0.63) in excess of the exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted on April 8, 2010 was US$1.41 per share. The Company recorded non-cash share-based compensation expense of US$16,639 and US$10,516 for the three months ended December 31, 2010 and 2011 in respect of share options granted on April 8, 2010 which was allocated to research and development expense.

The fair value of the above option awards granted on April 8, 2010 was estimated on the date of grant using the Black-Scholes Option Valuation Model that uses the following assumptions.

Expected volatility   51.79%  
Expected dividends   Nil  
Expected life   7.5 years  
Risk-free interest rate   3.90%  

As of December 31, 2011, there were unrecognized compensation costs of US$33,632 related to the above non-vested share options. These costs are expected to be recognized over a weighted average period of 1.5 years.

On May 26, 2011, the Compensation Committee of the Company’s Board of Directors recommended and approved the grant of options to purchase 160,800 shares of the Company’s common stock to certain key management with an exercise price of US$1.28 per share. In accordance with the vesting provisions of the grants, the options will become vested and exercisable in twelve equal installments beginning on each quarter after September 30, 2011.

A summary of share option plan activity for these options during the three months ended December 31, 2011 is presented below:

          Weighted     Weighted average        
    Number of     average exercise     remaining     Aggregate intrinsic  
    shares     price per share     contractual term     value (1)  
                         
Outstanding as of October 1, 2011   160,800   $  1.28              
Exercised   -     -              
Forfeited   -     -              
Cancelled   -     -              
                         
Outstanding as of December 31, 2011   160,800   $  1.28     5.3 years   $  -  
                         
Exercisable as of December 31, 2011   26,800   $  1.28     5.3 years   $  -  

(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on December 31, 2011 (US$0.63) in excess of the exercise price multiplied by the number of options outstanding or exercisable.

The weighted average grant-date fair value of options granted on May 26, 2011 was US$0.65 per share. No non-cash share-based compensation expense was recorded for the three months ended December 31, 2010. The Company recorded non-cash share-based compensation expense of US$16,856 for the three months ended December 31, 2011 in respect of share options granted on May 26, 2011, which was allocated to general and administrative expenses.

The fair value of the above option awards granted on May 26, 2011 was estimated on the date of grant using the Black-Scholes Option Valuation Model that uses the following assumptions.

Expected volatility   50.90%  
Expected dividends   Nil  
Expected life   6.0 years  
Risk-free interest rate   3.06%  

As of December 31, 2011, there were unrecognized compensation costs of US$56,412 related to the above non-vested share options. These costs are expected to be recognized over a weighted average period of 2.4 years.

 (ii) Restricted Shares

Pursuant to the Plan, the Compensation Committee of the Company’s Board of Directors recommended and approved the grant of 500,000 restricted shares to Chief Executive Officer, Mr. Xiangqian Li with a fair value of US$2.81 per share on June 22, 2009. In accordance with the vesting schedule of the grant, the restricted shares will vest in twenty equal quarterly installments on the first day of each fiscal quarter beginning on October 1, 2009.

The Company recorded non-cash share-based compensation expense of US$91,575 and US$54,074 for the three months ended December 31, 2010 and 2011 respectively in respect of the restricted shares granted on June 22, 2009, which was allocated to general and administrative expenses.

As of December 31, 2011, there were unrecognized stock-based compensation costs of US$236,146 associated with these restricted shares granted to Mr. Xiangqian Li. These costs are expected to be recognized over a weighted-average period of 2.0 years.

As the Company itself is an investment holding company which is not expected to generate operating profits to realize the tax benefits arising from its net operating loss carried forward, no income tax benefits were recognized for such stock-based compensation cost under the Stock Option Plan for the three months ended December 31, 2010 and 2011.