Blizzard 2005 Annual Report Download - page 84

The฀following฀tables฀summarize฀information฀about฀all฀employee฀and฀director฀stock฀options฀and฀warrants฀outstanding฀as฀of฀March฀31,฀2005฀(share฀amounts฀in฀thousands):
Outstanding Options Exercisable Options
Shares
Remaining Wtd.
Avg. Contractual
Life (in years)
Wtd. Avg.
Exercise Price Shares
Wtd. Avg.
Exercise Price
Range฀of฀exercise฀prices:
$฀ 1.33฀to฀$฀ 2.29 758 5.11 $ 1.49 755 $ 1.48
$฀ 2.31฀to฀$฀ 2.33 6,142 3.98 2.33 6,142 2.33
$฀ 2.35฀to฀$฀ 4.51 3,891 7.31 4.14 1,097 3.42
$฀ 4.56฀to฀$฀ 4.72 4,834 7.37 4.69 2,904 4.68
$฀ 4.72฀to฀$฀ 6.25 3,887 7.53 5.47 1,366 5.54
$฀ 6.25฀to฀$฀ 7.45 1,696 7.96 7.06 300 6.96
$฀ 7.54฀to฀$฀ 7.65 4,324 7.32 7.65 1,822 7.65
$฀ 7.73฀to฀$฀ 9.20 4,814 7.12 8.98 3,215 9.02
$฀ 9.22฀to฀$11.44 4,896 8.93 10.69 1,284 10.23
$11.45฀to฀$17.85 1,337 9.74 14.76 — —
36,579 7.05 $ 6.45 18,885 $ 5.22
Non-Employee Warrants
In฀prior฀years,฀we฀have฀granted฀stock฀warrants฀to฀third-parties฀in฀connection฀with฀the฀development฀of฀software฀and฀the฀acquisition฀of฀licensing฀rights฀for฀intellectual฀property.฀
The฀warrants฀generally฀vest฀upon฀grant฀and฀are฀exercisable฀over฀the฀term฀of฀the฀warrant.฀The฀exercise฀price฀of฀third-party฀warrants฀is฀generally฀greater฀than฀or฀equal฀to฀
their฀fair฀market฀value฀of฀our฀common฀stock฀at฀the฀date฀of฀grant.฀No฀third-party฀warrants฀were฀granted฀during฀ the฀year฀ended฀March฀31,฀2005.฀As฀of฀March฀31,฀2005,฀
702,000฀ third-party฀ warrants฀ to฀ purchase฀ common฀ stock฀ were฀ outstanding฀ with฀ a฀ weighted฀ average฀ exercise฀ price฀ of฀ $6.04฀ per฀ share.฀ No฀ third-party฀ warrants฀ were฀
granted฀during฀the฀year฀ended฀March฀31,฀2004.฀As฀of฀March฀31,฀2004,฀2,052,000฀third-party฀warrants฀to฀purchase฀common฀stock฀were฀outstanding฀with฀a฀weighted฀average฀
exercise฀price฀of฀$7.13฀per฀share.฀During฀the฀year฀ended฀March฀31,฀2003,฀we฀granted฀warrants฀to฀a฀third-party฀to฀purchase฀450,000฀shares฀of฀our฀common฀stock฀at฀
an฀exercise฀price฀of฀$9.92฀per฀share฀in฀connection฀with,฀and฀as฀partial฀consideration฀for,฀a฀license฀agreement฀that฀allows฀us฀to฀utilize฀intellectual฀property฀owned฀by฀the฀
third-party฀in฀conjunction฀with฀an฀Activision฀product.฀The฀warrants฀vested฀upon฀grant฀and฀have฀a฀three-year฀term.฀The฀fair฀value฀of฀the฀warrants฀was฀determined฀using฀
the฀Black-Scholes฀ pricing฀model,฀assuming฀a฀risk-free฀rate฀of฀4.18%,฀a฀volatility฀factor฀ of฀ 70%฀and฀expected฀ term฀as฀ noted฀above.฀ The฀ per฀share฀weighted฀average฀
estimated฀fair฀value฀of฀the฀third-party฀warrants฀granted฀during฀the฀year฀ended฀March฀31,฀2003฀was฀$4.85฀per฀share.฀As฀of฀March฀31,฀2003,฀2,646,000฀third-party฀warrants฀
to฀purchase฀common฀stock฀were฀outstanding฀with฀a฀weighted฀average฀exercise฀price฀of฀$4.69฀per฀share.
In฀ accordance฀ with฀EITF฀ 96-18,฀we฀measure฀ the฀ fair฀ value฀ of฀ the฀ securities฀ on฀ the฀ measurement฀ date.฀ The฀ fair฀value฀ of฀each฀ warrant฀ is฀ capitalized฀ and฀ amortized฀ to฀
expense฀when฀the฀related฀product฀is฀released฀and฀the฀related฀revenue฀is฀recognized.฀Additionally,฀as฀more฀fully฀described฀in฀Note฀1,฀the฀recoverability฀of฀capitalized฀software฀
development฀costs฀and฀intellectual฀property฀licenses฀is฀evaluated฀on฀a฀quarterly฀basis฀with฀amounts฀determined฀as฀not฀recoverable฀being฀charged฀to฀expense.฀In฀connection฀
with฀the฀evaluation฀of฀capitalized฀software฀development฀costs฀and฀intellectual฀property฀licenses,฀any฀capitalized฀amounts฀for฀related฀third-party฀warrants฀are฀additionally฀
reviewed฀for฀recoverability฀with฀amounts฀determined฀as฀not฀recoverable฀being฀amortized฀to฀expense.฀For฀the฀years฀ended฀March฀31,฀2005,฀2004฀and฀2003,฀$1.6฀million,฀
$0.2฀ million฀ and฀ $3.6฀ million,฀ respectively,฀ was฀ amortized฀ and฀ included฀ in฀ cost฀ of฀ sales—software฀ royalties฀ and฀ amortization฀ and/or฀ cost฀ of฀ sales—intellectual฀
property฀licenses.
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Activision, Inc. — 2005 Annual Report