Note 34 - Share-based compensation expenses

12 Months Ended

Dec. 31, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

34.   Share-based compensation expenses

On June 17, 2009, the Company entered into a one-year agreement to engage J and M Group, LLC (“J&M”) to provide investor relations services. As additional compensation, the Company issued J&M 120,000 shares of the Company’s common stock. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering.  These shares were valued at $0.15 per share, the closing bid price of the Company’s common stock on the date of grant and the related compensation expenses were amortized over the requisite service period.  Total compensation expenses recognized for the year ended December 31, 2011 and 2010 was US$nil and US$9,000, respectively.

On July 1, 2009, the Company entered into a one-year agreement to engage Hayden Communications International, Inc. (“HCI”) to provide investor relations services. As additional compensation, the Company issued HCI 80,000 shares of the Company’s common stock. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering.  These shares were valued at $1.75 per share, the closing bid price of the Company’s common stock on the date of grant and the related compensation expenses were amortized over the requisite service period.  Total compensation expenses recognized for the year ended December 31, 2011 and 2010 was US$nil and US$70,000, respectively.

On July 1, 2010, the Company entered into a six-month agreement to engage Chesapeake Group Inc. (“Chesapeake”) to provide investor relations services. As compensation, the Company issued Chesapeake 30,000 restricted shares of the Company’s common stock. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering.  These shares were valued at $3.70 per share, the closing bid price of the Company’s common stock on the date of grant and the related compensation expenses were amortized over the requisite service period. Total compensation expenses recognized for the year ended December 31, 2011 and 2010 was US$nil and US$111,000, respectively.

On July 12, 2010, the Company renewed the investor relations service contract with Hayden Communications International, Inc. (“HCI”) for an18-month service contract commencing July 12, 2010.  As additional compensation, the Company issued HCI 60,000 restricted shares of the Company’s common stock. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering. These shares were valued at $3.80 per share, the closing bid price of the Company’s common stock on the date of grant and the related compensation expense were amortized over the requisite service period.  Total compensation expenses recognized for the year ended December 31, 2011 and 2010 was US$152,000 and US$70,000, respectively.

On November 30, 2009, the Company granted one 5-year options to each of its three independent directors, Mr. Douglas MacLellan, Mr. Mototaka Watanabe and Mr. Zhiqing Chen, to purchase in the aggregate 54,000 shares of the Company’s common stock at an exercise price of US$5.00 per share, in consideration of their services to the Company. These options vest quarterly at the end of each 3-month period, in equal installments over the 24-month period from the date of grant.  However, upon a change of control, the option shall automatically become fully vested and exercisable as of the date of such changes of control. The company utilized Black-Scholes option pricing model to gauge the grant date fair value of these options.  The related compensation expenses were amortized over its vesting period. Total compensation expenses recognized for these options for the year ended December 31, 2011 and 2010 was US$141,480 and US$77,220, respectively.

The Company estimated the fair value of these common stock options granted on November 30, 2009 using the Black-Scholes option pricing model based on the following assumptions:

Underlying stock price	$5.00
Expected term (years)	3.00
Risk-free interest rate	1.10%
Dividend yield	-
Expected Volatility	150%
Exercise price of the option	$5.00
Value per option	$4.05

Underlying stock price is the closing bid price of the Company’s common stock on the date of grant.  As the three individuals receiving options are non-employee executive directors, the Company believes that forfeitures are highly unlikely, and termination is not applicable. As such, the Company developed a weighted-average expected term at 3 years based on analysis of the vesting schedule and exercise assumptions.  The risk-free interest rate is based on the 3 year U.S. Treasury rate. The dividend yield is calculated based on management’s estimate of dividends to be paid on the underlying stock. The expected volatility is calculated using historical data obtained from an appropriate index due to lack of liquidity of the Company’s underlying stock.  Exercise price of the option is the contractual exercise price of the option.

On November 30, 2011, under the Company’s 2011 Omnibus Securities and Incentive Plan, adopted by the stockholders of the Company at its annual meeting held on June 15, 2011, the Company issued its management, employees and directors in the aggregate of 2,000,000 restricted shares of the Company’s common stock for the services they provided to the Company. The restricted stock is subject to a strict lock-up for an initial six-month period. Following the initial six-month period, the restricted stock will continue to be locked up until the earlier of (i) the date upon which the closing price of the Company's common stock equals or exceeds $2.50 for five consecutive trading days, and (ii) November 30, 2013. In addition, the restricted stock is subject to forfeiture upon an employee's cessation of employment at the discretion of the Company. The restricted stock was fully vested upon issuance and was valued at $1.14 per share, the closing bid price of the Company’s common stock on the date of grant. Total compensation cost recognized for the year ended December 31, 2011 was US$2,280,000.

On November 30, 2011, under the Company’s 2011 Omnibus Securities and Incentive Plan, the Company also issued its management, employees and directors in the aggregate of 885,440 options to purchase up the same number of the company’s common stock at an exercise price of US$1.20 per share. These options were fully vested and exercisable upon issuance and subject to forfeiture upon an employee's cessation of employment at the discretion of the Company. Total compensation expenses recognized for these options for the year ended December 31, 2011 was US$328,000.

The Company estimated the fair value of these options granted on November 30, 2011 using the Black-Scholes option pricing model based on the following assumptions:

Adjusted underlying stock price	$1.037
Expected term (years)	5.00
Risk-free interest rate	0.95%
Dividend yield	-
Expected Volatility	46.73%
Exercise price of the option	$1.20
Value per option	$0.37

Adjusted underlying stock price is based on the closing bid price of the Company common stock on the grant date, after adjustment for the 2,000,000 restricted shares award issued on November 30, 2011. Expected tenor are used when estimates of the expected lives of the options, based on vesting schedule and exercise assumptions, which has taken into account of early exercise behavior of the option holders. Yield-to-maturities in continuous compounding of the United States Government Bonds with the time-to-maturities same as the expected tenor of the options of 5 year are adopted as the risk-free rate. Average/median of industry annualized historical stock price volatility from an appropriate index as at the grant date is deemed to be appropriate to serve as the expected volatility of the stock price of the Company. The dividend yield is calculated based on management’s estimate of dividends to be paid on the underlying stock. Exercise price of the option is the contractual exercise price of the option.

Options issued and outstanding at December 31, 2011 and their movements during the year then ended are as follows:

	Option Outstanding						Option Exercisable
	Number of underlying shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number of underlying shares		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
Balance, January 1, 2011		54,000		3.92	$	5.00		27,000		3.92	$	5.00
Granted/Vested		885,440		10.00	$	1.20		912,440		9.80	$	1.31
Forfeited		-						-
Exercised		-						-
Balance, December 31, 2011		939,440		9.51	$	1.42		939,440		9.51	$	1.42

Other information relative to option activity during the years ended December 31, 2011 and 2010 is as follows (in thousands, except weighted average grant date fair value):

	Year ended December 31,
	2011		2010
Weighted average grant date fair value of stock options granted	$	0.37	$	4.05
Aggregate grant date fair value of stock options vested		437		109
Aggregate intrinsic value for options granted		-		-
Aggregate intrinsic value for options exercisable		-		-

The aggregate unrecognized share-based compensation expenses as of December 31, 2011 and 2010 is approximately US$6,000 and US$299,000, respectively.