Audiovox 2008 Annual Report Download - page 74

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Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements, continued
February 29, 2008
(Dollars in thousands, except share and per share data)
Year Ended
November 30,
2005
Net loss:
As reported $ (9,591)
Stock based compensation expense (490)
Pro-forma $ (10,081)
Net loss per common share (basic and diluted):
As reported $ (0.43)
Pro-forma $ (0.45)
The Company granted 257,500 stock options during August 2007, which vest one-third on August 31, 2007, one-third on
November 30, 2007, and one-third on February 28, 2008, expire three years from date of vesting (August 31, 2010,
November 30, 2010, and February 28, 2011, respectively), have an exercise price equal to $1.00 above the lowest sales
price of the Company’s stock on the day prior to the date of grant ($10.90), have a contractual term between 2 years and
3.7 years and a grant date fair value of $3.26 per share determined based upon a Black-Sholes valuation model (refer to
the table below for assumptions used to determine fair value). In connection with this option grant, there were also
15,000 options granted to an outside director that expire on September 9, 2009, which have a contractual life of 2.1 years
and a grant date fair value of $2.57 per share.
In addition, the Company issued 17,500 warrants to purchase the Company’s common stock at an exercise price of
$10.90 per share as consideration for past legal services rendered. The warrants are exercisable immediately, expire three
years from date of issuance and have a fair value on issuance date of $3.26 per warrant determined based upon a
Black-Sholes valuation model (refer to the table below for assumptions used to determine fair value). Accordingly, the
Company recorded additional legal expense in the amount of approximately $57 during the year ended February 29,
2008, representing the fair value of the warrants issued. These warrants are included in the outstanding options and
warrant table below and considered exercisable at February 29, 2008.
The Company granted 105,000 stock options during the year ended February 28, 2007, which vested immediately, had
exercise prices equal to the fair market value of the stock on the date of grant and a contractual term of two years. The
per share fair value of stock options granted during the year ended February 28, 2007 was $4.15 and $3.75.
The per share weighted-average fair value of stock options granted during the years ended February 29, 2008
and February 28, 2007 was $3.22 and $4.11, respectively on the date of grant.
The fair value of stock options and warrants on the date of grant, and the assumptions used to estimate the fair value of
the stock options and warrants using the Black-Sholes option valuation model granted during the year was as follows:
Year Year
Ended Ended
February 29, February 28,
2008 2007
Expected dividend yield 0% 0%
Expected volatility 47.0% 49.8%
Risk-free interest rate 4.6% 4.7%
Expected life (years) 2.0 - 3.0 2.0
The expected dividend yield is based on historical and projected dividend yields. The Company estimates expected
volatility based primarily on historical daily price changes of the Company’s stock equal to the expected life of the
option. The risk free interest rate is based on the U.S. Treasury yield in effect at the time of the grant. The expected
option term is the number of years the Company estimates the options will be outstanding prior to exercise based on
employment termination behavior.
F-20
Source: AUDIOVOX CORP, 10-K, May 14, 2008