Rosetta Stone 2010 Annual Report Download - page 63

Download and view the complete annual report

Please find page 63 of the 2010 Rosetta Stone annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 153

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153

Table of Contents
Research and development expenses without consideration of the stock compensation charge associated with the common stock grant to key employees
in connection with our initial public offering would have been $21.2 million, an increase of $2.9 million or 16% from the prior year. As a percentage of
revenue, research and development expenses would have decreased to 8% for the year ended December 31, 2009 from 9% for the prior year period.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2009 were $57.2 million, an increase of $17.6 million, or 45%, from the year
ended December 31, 2008. As a percentage of revenue, general and administrative expenses increased to 23% for the year ended December 31, 2009
compared to 19% for the year ended December 31, 2008. The dollar and percentage increases were primarily attributable to a stock compensation charge
related to common stock awarded to key employees in connection with our initial public offering resulting in a $13.4 million increase in general and
administrative expense. In addition, general and administrative expenses increased due to greater personnel related costs as we expanded our finance, legal,
information technology and other administrative functions to support the overall growth in our business. Personnel-related costs increased $4.2 million with a
corresponding increase in communications, training, recruitment, travel and other support costs of $0.6 million and new office space and equipment
depreciation costs of $0.9 million. Legal fees also increased $0.4 million related to intellectual property protection matters, and liability insurances for
directors and officers increased $0.3 million. This increase was partially offset by decreased professional service expenses of $1.5 million as we replaced
contract staff with employees and a decrease in bad debt expense $0.7 million during the year ended December 31, 2009 as a result of improved collection
efforts.
General and administrative expenses without consideration of the stock compensation charge associated with the common stock grant to key employees
in connection with our initial public offering would have been $43.8 million, an increase of $4.2 million or 11% from the prior year. As a percentage of
revenue, general and administrative expenses would have decreased to 17% for the year ended December 31, 2009 from 19% for the prior year period.
Stock-Based Compensation Charge
Included in each of the respective operating expense lines for the year ended December 31, 2009 is a portion of the $18.8 million charge related to the
total of 591,491 shares of common stock awarded to 10 of our key employees in April 2009. The following table presents the stock-based compensation
charge by operating expense line item:
Year Ended December 31,
2009 2008 Change % Change
(dollars in thousands)
Sales and marketing $ 377 $ — $ 377 100%
Research and development 5,033 — $ 5,033 100%
General and administrative 13,393 — 13,393 100%
Total $ 18,803 $ — $ 18,803 100%
Lease Abandonment Expenses
We incurred a lease abandonment benefit of $(8,000) for the year ended December 31, 2009; however, with respect to the year ended December 31,
2008, we incurred lease abandonment expense associated with the relocation of our headquarters of $1.8 million consisting of accrued exit costs and liabilities
under operating lease agreements.
60