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EQUITY
 6 Months Ended
Jun. 30, 2012
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
11. EQUITY

 

Common Shares

 

On March 8, 2011, Dehaier issued 10,000 unregistered common shares to an investment relations firm. The fair value of the shares on the issuance date based on the closing price was $59,300.

 

On November 16, 2011, Dehaier issued 50,000 unregistered common shares to a consulting firm. The fair value of the shares on the issuance date based on the closing price was $84,250.

 

On January 9, 2012, Dehaier issued 5,000 restrict unregistered common shares to an independent contractor. The fair value of the shares on the issuance date based on the closing price was $11,000.

 

On April 5, 2012, Dehaier issued 5,000 restrict unregistered common shares to an independent contractor. The fair value of the shares on the issuance date based on the closing price was $12,000.

 

Statutory Surplus Reserves

 

A PRC company is required to make appropriations to statutory surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve is required to be at least 10% of the after tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entity’s’ registered capital. 

 

The statutory surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of shares currently held by them, provided that the remaining statutory surplus reserve balance after such issue is not less than 25% of the registered capital.

 

Since Dehaier is a British Virgin Islands’ company, it will not be subject to the statutory surplus reserve provisions. BDL is a joint-venture company and the statutory surplus reserve provisions will be determined by its board of directors. As of June 30, 2012, BDL’s board of directors has not yet made such determination. Therefore, no amount was allocated to the statutory surplus reserve account.

 

BTL appropriated 10% of its net profits as statutory surplus reserve, which is included as part of the non-controlling interest in the equity section. For the six months ended June 30, statutory surplus reserve activity was as follows:  

 

    For the six months ended
June 30, 2012		  
    US$  
Balance at December 31, 2011     74,469  
Addition to statutory reserves     (748 )
Balance at June 30, 2012     73,721  

 

Stock Option Plan

 

Under the employee stock option plan, the Company’s stock options expire five years from the date of grant. On December 29, 2011, the Company entered into five-year agreements with its employees and directors. In connection with their services, the Company issued an aggregate of 450,000 options to acquire the Company’s common shares at an exercise price of $1.45 per share. The options vest in equal annually installments over the five years of the agreements. As of December 29, 2011, none of the 450,000 options have been fully vested.

 

The Company valued the stock options using the Black-Scholes model with the following assumptions:

 

    Expected
Terms
(years)		     Expected
Volatility		     Dividend
Yield		     Risk Free
Interest Rate		     Grant Date
Fair Value		  
Employees     5       126 %     0 %     0.83 %     1.45  
Directors and officers     5       126 %     0 %     0.83 %     1.45  

 

The following is a summary of the option activity:

 

Stock options   Shares     Weighted Average
Exercise Price		     Aggregate
Intrinsic Value		  
Outstanding as of December 31, 2011     450,000     $ 1.45          
Granted     -                  
Forfeited     -                  
Exercised     -                  
Outstanding as of June 30, 2012     450,000     $ 1.45     $ 400,500  

 

Following is a summary of the status of options outstanding and exercisable at June 30, 2012:

 

Outstanding options     Exercisable options  
Average
Exercise
price		     Number     Average remaining
contractual life
(years)		     Average
Exercise
price		     Number     Average remaining
contractual life
(years)		  
$ 1.45       450,000       9.5     S  1.45       90,000       9.5  

 

For the six and three months ended June 30, 2012 and 2011, the Company recognized $54,780, $0, $27,390 and $0, respectively, as compensation expense under its stock option plan.