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Share-based Compensation | 12 Months Ended
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Sep. 30, 2012
Share-based Compensation [Text Block] |
21 | Share-based Compensation
| (i) Options
| The Company grants share options to officers and employees and, in the past, has issued restricted ordinary shares 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 authorizes the issuance of up to 4,000,000 shares of the Company’s common stock. The exercise price of the options granted, pursuant to the Plan, must at least be equal to the fair market value of the Company’s common stock at the date of the grant. The Plan will terminate on May 16, 2055. On July 28, 2008, the Company’s stockholders approved certain amendments to the Plan, including increasing the total number of shares available for issuance under the Plan to 8,000,000.
Pursuant to the Plan, the Company issued 2,000,000 options 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
| Numbers of share |  | 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 issued 1,501,500 options 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 June 30, 2007 to February 9, 2012 according to each employee’s respective agreement. A summary of share option plan activity for these options during the year ended September 30, 2012 is presented below:
|  |  |  |  |  | Weighted |  |  | Weighted |  |  |  |
|  |  |  |  |  | average |  |  | average |  |  | Aggregate |
|  |  | Number of |  |  | exercise |  |  | remaining |  |  | intrinsic |
|  |  | shares |  |  | price per share |  |  | contractual term |  |  | value (1) |
| Outstanding as of October 1, 2011 |  | 605,000 |  | $ | 3.29 |  |  |  |  |  |  |
| Exercised |  | - |  |  | - |  |  |  |  |  |  |
| Forfeited |  | - |  |  | - |  |  |  |  |  |  |
| Cancelled |  | - |  |  | - |  |  |  |  |  |  |
| Outstanding as of September 30, 2012 |  | 605,000 |  | $ | 3.29 |  |  | 0.6 years |  | $ | - |
| Exercisable as of September 30, 2012 |  | 605,000 |  | $ | 3.29 |  |  | 0.6 years |  | $ | - |
| (1) Aggregate intrinsic value represents the value of the Company’s closing stock price on September 30, 2012 (US$0.61) 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$73,833 and nil for the years ended September 30, 2011 and 2012 in respect of share options granted in June 2007, which was allocated to cost of revenues, sales and marketing expenses, general and administrative expenses and research and development expenses respectively.
| 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 following assumptions.
| Expected volatility |  | 69.44% |
| Expected dividends |  | nil |
| Expected life |  | 4 - 10 years |
| Risk-free interest rate |  | 5.09% |
As of September 30, 2012, there were no unrecognized compensation costs related to non-vested share options. Pursuant to the Plan, the Company also issued 360,000 options 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 year ended September 30, 2012 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 |  | 360,000 |  | $ | 4.30 |  |  |  |  |  |  |
| Exercised |  | - |  |  | - |  |  |  |  |  |  |
| Forfeited |  | - |  |  | - |  |  |  |  |  |  |
| Cancelled |  | - |  |  | - |  |  |  |  |  |  |
| Outstanding as of September 30, 2012 |  | 360,000 |  | $ | 4.30 |  |  | 0.1 years |  | $ | - |
| Exercisable as of September 30, 2012 |  | 360,000 |  | $ | 4.30 |  |  | 0.1 years |  | $ | - |
(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on September 30, 2012 (US$0.61) 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$14,812 and nil for the years ended September 30, 2011 and 2012 respectively in respect of share options granted on January 28, 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 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 September 30, 2012, 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 year ended September 30, 2012 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 September 30, 2012 |  | 1,250,000 |  | $ | 4.18 |  |  | 0.0 years |  | $ | - |
| Exercisable as of September 30, 2012 |  | 1,250,000 |  | $ | 4.18 |  |  | 0.0 years |  | $ | - |
(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on September 30, 2012 (US$0.61) 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$156,166 and US$16,525 for the years ended September 30, 2011 and 2012 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 September 30, 2012, there were no unrecognized compensation costs related to non-vested share options. 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 year ended September 30, 2012 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 September 30, 2012 |  | 1,643,355 |  | $ | 2.81 |  |  | 3.7 years |  | $ | - |
| Exercisable as of September 30, 2012 |  | 1,068,181 |  | $ | 2.81 |  |  | 3.7 years |  | $ | - |
(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on September 30, 2012 (US$0.61) 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$907,221 and US$516,854 for the years ended September 30, 2011 and 2012 respectively in respect of share options granted on June 22, 2009, which was allocated to cost of revenues, sales and marketing expenses, 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 September 30, 2012, there were unrecognized compensation costs of US$324,355 related to the above non-vested share options. These costs are expected to be recognized over a weighted average period of 2.25 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 year ended September 30, 2012 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 |  | 75,000 |  | $ | 3.24 |  |  |  |  |  |  |
| Exercised |  | - |  |  | - |  |  |  |  |  |  |
| Forfeited |  | 75,000 |  |  | - |  |  |  |  |  |  |
| Cancelled |  | - |  |  | - |  |  |  |  |  |  |
| Outstanding as of September 30, 2012 |  | - |  | $ | - |  |  | - |  | $ | - |
| Exercisable as of September 30, 2012 |  | - |  | $ | - |  |  | - |  | $ | - |
(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on September 30, 2012 (US$0.61) 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$44,492 and US$15,136 for the years ended September 30, 2011 and 2012 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 September 30, 2012, there were no unrecognized compensation costs related to non-vested share options 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, 2010. A summary of share option plan activity for these options during the year ended September 30, 2012 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 |  | 100,000 |  | $ | 2.43 |  |  |  |  |  |  |
| Exercised |  | - |  |  | - |  |  |  |  |  |  |
| Forfeited |  | - |  |  | - |  |  |  |  |  |  |
| Cancelled |  | - |  |  | - |  |  |  |  |  |  |
| Outstanding as of September 30, 2012 |  | 100,000 |  | $ | 2.43 |  |  | 5.0 years |  | $ | - |
| Exercisable as of September 30, 2012 |  | 50,000 |  | $ | 2.43 |  |  | 5.0 years |  | $ | - |
(1) Aggregate intrinsic value represents the value of the Company’s closing stock price on September 30, 2012 (US$0.61) 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$47,842 and US$35,445 for the years ended September 30, 2011 and 2012, respectively 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 September 30, 2012, there were unrecognized compensation costs of US$8,703 related to the above non-vested share options. These costs are expected to be recognized over a weighted average period of 0.8 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 year ended September 30, 2012 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 |  | 160,800 |  | $ | 1.28 |  |  |  |  |  |  |
| Exercised |  | - |  |  | - |  |  |  |  |  |  |
| Forfeited |  | 160,800 |  |  | - |  |  |  |  |  |  |
| Cancelled |  | - |  |  | - |  |  |  |  |  |  |
| Outstanding as of September 30, 2012 |  | - |  | $ | - |  |  | - |  | $ | - |
| Exercisable as of September 30, 2012 |  | - |  | $ | - |  |  | - |  | $ | - |
| (1) Aggregate intrinsic value represents the value of the Company’s closing stock price on September 30, 2012 (US$0.61) 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. The Company recorded non-cash share-based compensation expense of US$32,044 and US$44,602 for the years ended September 30, 2011and 2012, respectively 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 September 30, 2012, there were no unrecognized compensation costs related to the above non-vested share options. (ii) Restricted Shares Pursuant to the Plan and in accordance with the China BAK Battery, Inc. Compensation Plan for Non-Employee Directors, the Company granted 5,000 restricted shares to each of the existing elected independent directors with a fair value of US$1.68 per share on July 1, 2010. The eligible directors shall vest in their rights under the restricted shares according to the following schedule:
| (i) | 25% of the restricted shares granted will immediately vest on the grant date; and
| (ii) | The remaining 75% of the restricted shares will vest in three equal quarterly installments on the last day of each subsequent quarter or in three equal quarterly installments on the last day of each calendar quarter beginning on the last day of the first full calendar quarter after the grant date.
The Company recorded non-cash share-based compensation expense of US$6,854 for the years ended September 30, 2011, in respect of the restricted shares granted in July 1, 2010, which was allocated to general and administrative expenses. The first and second 25% of the restricted shares were already issued as fully paid shares of common stock to the Company’s three independent directors on August 4, 2010 and October 6, 2010. According to the resolution of Compensation Committee on December 28, 2010, the third and fourth 25% of the restricted shares were cancelled. As of September 30, 2012, there were no unrecognized compensation costs associated with these restricted shares granted to non-employee directors. 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$300,890 and US$175,524 for the year ended September 30, 2011 and 2012 respectively in respect of the restricted shares granted on June 22, 2009, which was allocated to general and administrative expenses. As of September 30, 2012, there were unrecognized stock-based compensation costs of US$114,696 associated with these restricted shares granted to Mr. Xiangqian Li. These costs are expected to be recognized over a weighted-average period of 1.3 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 stock option plan for the years ended September 30, 2011 and 2012.

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- Definition The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Also includes disclosure of compensation-related costs for equity-based compensation which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details, and employee stock purchase plan details. + References No definition available. + Details
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