Stock-Based Compensation

3 Months Ended

Feb. 29, 2012

15.	Stock-Based Compensation

On May 31, 2010, the Company granted to each of its three independent directors an option to purchase 20,000 shares of common stock at an exercise price of US$2.02 per share. The options vested over one year in equal, quarterly installments on the last day of the Company’s fiscal quarter, beginning with the fiscal quarter ending August 31, 2010, subject to their continued service as a director.

On September 5, 2011, the Company granted another option to two of its three independent directors to purchase 20,000 shares of common stock and to one of its three independent directors to purchase 15,000 shares of common stock, all at an exercise price of US$0.39 per share. The options vested over one year in equal, quarterly installments on the last day of the Company’s fiscal quarter, beginning with the fiscal quarter ending August 31, 2011, subject to their continued service as a director. The Compensation Committee of the Board of Directors has determined the performance conditions have been met.

The fair value of the options is estimated using the Black-Scholes option pricing model. Expected volatility is based on historical volatility data of the Company’s stock. The expected term of stock options granted is based on historical data and represents the period of time that stock options are expected to be outstanding. The risk-free interest rate is based on a zero-coupon United States Treasury bond whose maturity period equals the expected term of the our options. The weighted average estimated grant date fair value for options granted to the independent directors was US$1.24 per share.

Weighted average assumptions used to estimate fair values of stock options on the date of grants are as follows:

	September 5, 2011
Expected dividend yield		-
Expected stock price volatility		182.07	%
Risk free interest rate		2.00	%
Expected life (years)		10 years

	May 31, 2010
Expected dividend yield		-
Expected stock price volatility		210.57	%
Risk free interest rate		3.29	%
Expected life (years)		10 years

The stock-based compensation, included in general and administrative expenses in the consolidated statements of income and other comprehensive income, was $3,400 and $18,274 for the three months ended February 29, 2012 and February 28, 2011, respectively.

The Company will issue new shares of common stock upon exercise of stock options. The following is a summary of stock option activity:

	Number of Options		Weighted Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value

Outstanding at November 30, 2010		60,000	$	2.02		9.5 years		-
Granted		55,000		0.39		10 years		-
Exercised		-		-		-		-
Cancelled and expired		-		-		-		-
Forfeited		-		-		-		-

Outstanding at November 30, 2011		115,000	$	1.24		9.1 years		-

Vested and expected to vest at February 29, 2012		100,000	$	1.37		8.9 years		-

Exercisable at February 29, 2012		100,000	$	1.37		8.9 years		-

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock. There were no options that were exercised during the three months ended February 29, 2012.

As of February 29, 2012, $1,457 of total unrecognized compensation costs related to non-vested options will be recognized through May 31, 2012.

The Company entered into a Terms of Services and Release Agreement with the Company’s CEO, a consulting firm, and Fortune Place Holdings Limited (“Fortune Place”), a British Virgin Islands corporation. The Company’s CEO is the sole director of Fortune Place. Pursuant to the terms of the agreement, the consulting firm would be entitled to receive equity consideration of 1,800,000 restricted shares of the Company held by Fortune Place for consulting services rendered to the Company, contingent upon the completion of all of the consulting services enumerated in the agreement. The filing of the Company’s Form 10-Q for the quarter ended February 28, 2011 represented the final item of the consulting services that the consulting firm was required to complete (“Completion Date”). As of the Completion Date, the fair value of shares transferred for the services rendered to the Company was valued at $1,386,000.

The Company issued 60,000 shares of common stock to an investors relations firm in consideration for consulting services rendered through the period ended on March 14, 2011. The fair value of the stock was $121,800.

- Definition

The entire disclosure for 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

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 10

-Section 50

-Paragraph 4

-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher AICPA

-Name Statement of Position (SOP)

-Number 93-6

-Paragraph 53

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Staff Accounting Bulletin (SAB)

-Number Topic 14

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 123R

-Paragraph 64, 65, A240

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 40

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 10

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 505

-SubTopic 50

-Section 50

-Paragraph 1

-URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 718

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901

+ Details

China Energy CORP 10-Q/A