Rosetta Stone 2011 Annual Report Download - page 54

Table of Contents
The following table sets forth a summary of stock option grants since the date of plan inception, through the date of this Annual Report on Form 10-K:
Grant Date Number of
Options Granted Exercise Price
Common Stock
Fair Value
Per Share
at Grant
Date
2006 1,704,950 $3.85 - $3.85 $4.57 - $5.92
2007 436,254 3.85 - 11.19 6.35 - 11.30
2008 402,805 10.36 - 17.49 10.36 - 17.49
2009 472,589 16.74 - 22.30 16.74 - 22.30
2010 593,017 17.10 - 25.99 17.10 - 25.99
2011 698,327 6.88 - 20.91 6.88 - 20.91
Stock-based Compensation Expense in Connection with Executive Stock Grants and IPO Option and Restricted Stock Grants
We made stock grants, restricted stock grants and stock option grants to our employees on April 15, 2009. In connection with these grants, we recorded
an aggregate expense of approximately $18.5 million in the second quarter of 2009, and an additional $6.3 million that will be recorded over the four-year
vesting period of the stock options and restricted stock grants.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable consist of amounts due to us from our normal business activities. We provide an allowance for doubtful accounts to reflect the
expected non-collection of accounts receivable based on past collection history and specific risks identified.
Intangible Assets
Intangible assets consist of acquired technology, including developed and core technology, customer related assets, trade name and trademark and other
intangible assets. Those intangible assets with finite lives are recorded at cost and amortized on a straight line basis over their expected lives in accordance
with Accounting Standards Codification topic 350, Goodwill and Other Intangible Assets ("ASC 350"). On an annual basis, we review our indefinite lived
intangible assets for impairment based on the fair value of indefinite lived intangible assets as compared to the carrying value in accordance with ASC 350. In
the event the carrying value exceeds the fair value of the assets, the assets are written down to their fair value. There has been no impairment of intangible
assets during any of the periods presented.
Goodwill
The value of goodwill is primarily derived from the acquisition of Rosetta Stone Ltd. (formerly known as Fairfield & Sons, Ltd.) in January 2006 and the
acquisition of certain assets of SGLC International Co. Ltd ("SGLC") in November 2009. We test goodwill for impairment annually on June 30 of each year
at the reporting unit level using a fair value approach, in accordance with the provisions of Accounting Standards Codification topic 350, Intangibles—
Goodwill and Other
("ASC 350") or more frequently, if impairment indicators arise. Such indication occurred during the fourth quarter of 2011 when the fair value of the
Company's publicly traded common stock declined; however, after performing Step I of the impairment test under ASC 350 as of December 31, 2011, no
impairment was identified as the fair value was greater than the carrying value of each reporting unit. The Company will continue to review indicators and it
is possible an impairment charge may need to be recorded if trends do not reverse.
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