Audiovox 2009 Annual Report Download - page 80

Audiovox Corporation and Subsidiaries
Notes to Consolidated Financial Statements
February 28, 2009
(Dollars in thousands, except share and per share data)
The Company granted 197,250 options during October of 2008, which vest one-half on November 30, 2008 and one-half
on February 28, 2009, expire two years from date of vesting (November 30, 2010 and February 28, 2011, respectively),
have an exercise price equal to $4.83, the sales price of the Company’s stock on the day prior to the date of grant, have a
contractual term between 2.1 and 2.4 years and a grant date fair value of $1.44 per share determined based upon a
Black-Sholes valuation model (refer to the table below for assumptions used to determine fair value).
In addition, the Company issued 17,500 warrants during October of 2008 to purchase the Company’s common stock at
an exercise price of $4.83 per share as consideration for future legal services. The warrants vest one-half on November
30, 2008 and one-half on February 28, 2009, expire two years from date of vesting (November 30, 2010 and February
28, 2011, respectively), have an exercise price equal to $4.83, the sales price of the Company’s stock on the day prior to
the date of grant, have a contractual term between 2.1 and 2.4 years and a grant date fair value of $1.44 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 $26 for the year
ended February 28, 2009, 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 28, 2009.
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 29, 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 28, 2009.
The per share weighted-average fair value of stock options granted during the years ended February 28, 2009
and February 29, 2008 was $1.44 and $3.22, 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 28, February 29,
2009 2008
Expected dividend yield 0% 0%
Expected volatility 47.0% 47.0%
Risk-free interest rate 5.0% 4.6%
Expected life (years) 2.0 2.0 - 3.0
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.
The Company recognized stock-based compensation expense (before deferred income tax benefits) for awards granted
under the Company’s stock option plans in the following line items in the consolidated statement of operations for the
years ended February 28, 2009 and February 29, 2008:
Source: AUDIOVOX CORP, 10-K, May 14, 2009 Powered by Morningstar® Document Research℠