9. Equity

On June 7, 2013, the Company issued 250,000 shares to a third-party consultant for consulting services. The consulting service period is from June 8, 2013 to June 8, 2014. The company will issue another 250,000 shares to this consultant on November 1, 2013. The fair value of this compensation is based on the closing stock price on the date at which the Consultant’s performance is complete. $289,167 and $356,667 of stock compensation expense was recognized for services provided for the three and nine months ended September 30, 2013.

On June 7, 2013, the Company also issued warrants to purchase 200,000 shares with an exercise price of $1.50 to this Consultant. All of these warrants are exercisable on or after December 1, 2013 and on or before the three year anniversary of the issuance of these warrants.

The warrants do not meet the conditions for equity classification pursuant to ASC 815, “Derivatives and Hedging”. Therefore, these warrants were classified as a long-term liability. The fair value of the warrants was calculated using the Black-Scholes options pricing model using the following assumptions: volatility 147%, risk free interest rate at 0.63% on September 30, 2013, and expected term of 3.25 years. The fair value of these warrants was calculated at $102,836 at the grant date and $363,225 on September 30, 2013. The change in fair value of these warrants is recorded as other income/expense. The related amortization of share-based compensation expense was $25,709 and $34,279 for the three and nine months ended September 30, 2013.

These warrants are not included in diluted weighted average shares calculation for the three and nine months ended September 30, 2013 because it was anti-dilutive.

Pursuant to the terms of the Company’s 2009 Equity Incentive Plan (the “2009 Plan”), on September 25, 2013, the Company’s Board of Directors approved and adopted the following changes to the executive and independent director compensation: (i) Independent director equity compensation – the Board granted to each independent director shares of the Company’s common stock in the amounts equivalent to each independent director’s annual cash fee, i.e. Wen Jiang and Yudong Hou - $15,000, respectively, and Zhenyu Wu - $18,000, and (ii) Executive management equity compensation – the Board granted to An Fengbin, the Company’s CEO, and Wang Hao, the Company’s CFO, shares of the Company’s common stock in the amounts equivalent to their respective annual base salaries, i.e. An Fengbin - $150,000, and Wang Hao - $75,000. The stock price on the grant date was $0.69 per share, which represents the average closing price of the Company’s common stock over the 30 day period preceding the grant date. All of which stock grants to vest as follows: ½ of each such grant vesting on the date of the grant and the remaining ½ - 6 months from the grant date. $136,500 of stock compensation expense was recognized for services provided for the three and nine months ended September 30, 2013.