Yahoo 1997 Annual Report Download - page 27

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and June 30th. The price of the Common Stock purchased under the Purcha s e Pla n w ill be equa l t o 85% of
the low er of t h e fa ir market value of the Common Stock on the commenceme n t d a t e of e a ch s ix m on t h
offering period or the specified purchase da t e . Du rin g 1997, 134,215 s h a re s w e re p u rch a s e d a t p rice s of
$7.37 to $19.30 per share. There w ere no shares issued under the Purcha s e Pla n d u rin g 1996. At De ce m b e r
31, 1997, 315,785 shares w ere available under the Purchase Plan for future is s u a n ce .
Stock Com pe n s ation . Th e Com p a n y a ccou n t s for s t ock-b a s e d com p e n s a t ion in a ccord a n ce w it h t h e p rovi-
sions of APB 25. Ha d compensation expense been de t e rm in e d b a s e d on t h e fa ir va lu e a t t h e g ra n t d a t e s , a s
prescribed in SFAS 123, t h e Com p a n y’s net loss w ould have been $29,268,000, $5,131,000, a n d $801,000, a n d
basic and diluted loss per share w ould have been $0.67, $0.13, and $0.03 for the ye a rs e n d e d De ce m b e r 31,
1997, 1996, and 1995, respectively. Prior t o t h e Com p a n y’s in it ia l p u b lic offe rin g , t h e fa ir va lu e of e a ch op t ion
grant w as d e t e rmined on the date of grant using the minimum value m e t h od . Su b s e q u e n t t o t h e offe rin g , t h e
fair value w as determined using the Black-Scholes model. The w eighted ave ra g e fa ir m a rke t va lu e of a n
option granted during 1997, 1996, and 1995 w as $17.34, $3.16, and $0.01, respectively. Exce p t for t h e vola t ilit y
assumption w hich w a s on ly u s e d u n d e r t h e Bla ck-Sch ole s m od e l, the follow ing ra n g e of a ssumptions w as
used to perform the calculations: expecte d life of 36 m on t h s in 1997 a n d 30 m on t h s in 1996 a n d 1995; in t e re s t
rate ranges of 5.6% to 6.6% during 1997, 5.1% to 6.5% during 1996, and 5.3% to 6.0% during 1995; volatility
of 59% in 1997, 53% in 1996, and it w as n ot a p p lica ble in 1995; and no dividend yield for the three ye a rs
ended December 31, 1997. Because a d d it ion a l s t ock op t ion s a re e xp e ct e d t o b e g ra n t e d e a ch ye a r, t h e a b ove
pro forma disclosures are not representa t ive of p ro form a e ffe ct s on re p orted fin a n cia l re s u lt s for fu t u re ye a rs .
NOTE 7 In com e Tax e s
No provision for federal and state income ta xe s h a s b e e n re cord e d a s t h e Com p a n y h a s in cu rre d n e t op e ra t -
ing losses through December 31, 1997. The follow ing table sets forth the primary components of deferred
tax assets:
Decemb er 31,
1997 1996 1995
Net operating loss and credit carryforw ards $ 23,966,000 $ 3,421,000 $ 144,000
Nondeductible reserves and expe n s e s 3,232,000 1,382,000 134,000
Other – 86,000 –
Gross deferred tax assets 27,198,000 4,889,000 278,000
Va lu a t ion a llow ance (27,198,000) (4,889,000) (278,000)
$ – $ –$ –
At December 31, 1997, 1996, and 1995, the Company fully reserve d it s d e fe rre d t a x a s s e t s . Th e Com p a n y
believes sufficient uncertainty exists regarding the re a liza b ilit y of t h e d e fe rre d t a x a s s e t s s u ch t h a t a fu ll
The follow ing t a b le s u m m a rizes information about fixed stock options outstanding as of
December 31, 1997:
Option s Outs tan din g Option s Ex ercis able
Weig hte d
Av erag e
Remaining Weig hte d Weig hte d
Ran ge of Num be r Con tractual Av erag e Num be r Av e rag e
Exercise Price s Outs tan din g Life in Ye ars Ex ercis e Price Exercisable Ex e rcis e Price
$ 0.01 - $ 0.01 2,496,770 7.6 $ 0.01 744,314 $ 0.01
$ 0.13 - $ 0.22 361,352 8.0 $ 0.14 98,561 $ 0.16
$ 0.67 - $ 1.00 954,757 8.2 $ 0.79 284,718 $ 0.78
$ 2.33 - $ 4.00 313,424 8.2 $ 3.43 77,753 $ 3.57
$ 4.67 - $ 6.67 1,229,040 8.2 $ 5.56 326,156 $ 5.18
$ 11.33 - $ 13.92 2,151,934 8.8 $ 12.46 442,289 $ 12.35
$ 17.75 - $ 26.50 1,335,751 9.4 $ 22.61 – $–
$ 32.33 - $ 43.13 628,375 9.7 $ 38.82 – $ –
$ 46.00 - $ 55.75 2,104,320 9.9 $ 52.75 – $ –
11,575,723 1,973,791
Options to purchase 830,040 and 101,250 shares w ere vested at Dece m b e r 31, 1996 a n d 1995, re s p e ct ive ly.
During the period from January 1996 through April 1996, the Company granted options to purcha s e a n
aggregate of 3,450,702 shares of Common Stock at exe rcis e p rice s ra n g in g from $0.13 t o $6.67 p e r s h a re .
Based in part on a n independent appraisal obtaine d b y t h e Com p a n y's Boa rd of Dire ct ors , $625,000 of com -
pensation expense relating to ce rtain options is to be re cog n ize d ove r t h e fou r-year vesting periods of the
options, of w hich , $156,000 w a s re cog n ize d in b ot h 1997 a n d 1996. Du rin g 1995, t h e Com p a n y g ra n t e d
options to purchase 441,600 shares of Common Stock to consultants in exchange for se rvice s a t a n e xe rcis e
price of $0.01 per share. The Company recorded e xp e n s e t ot a lin g $75,000 re la t e d t o t h e s e op t ion s b a s e d on
the estimated fair value of the s e rvice s re ce ive d . Pu rs u a n t t o t h e a cq u is it ion of Fou r11, t h e Com p a n y w ill
record $2,168,000 of compensation expense rela t e d t o ce rtain s t ock op t ion s is s u e d b e low fair ma rke t va lu e
betw een Au g u s t 1996 a nd September 1997, of w hich t h e Com p a ny recorded $1,059,000 and $8,000 during
the years ended Decembe r 31, 1997 a n d 1996, re s p e ct ive ly. Th e re m a in in g $1,101,000 w ill b e re cog n ize d ove r
the remainder of the four-ye a r ve s t in g p e riods of the options.
Employ e e Stock Purchas e Plan . Effe ct ive Ma rch 6, 1996, t h e Com p a n y’s Board of Directors adopte d t h e
Employee Stock Purchase Plan (the “Purchase Plan”), w hich provides for the issuance of a ma xim u m of
450,000 shares of Common Stock. Eligible employees can have u p t o 15% of t h e ir e a rn in g s w ithhe ld , u p t o
cert a in m a xim u m s , t o b e used to purchase shares of the Company’s Common Stock on every December 31st