Enom 2010 Annual Report Download - page 135

Table of Contents
Demand Media, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
(In thousands, except per share amounts)
13. Share-based Compensation Plans and Awards (Continued)
Company issued a fully-vested four-year warrant to purchase 375 shares of the Company's common stock at an exercise price of $12.00 per share. The
warrant terminates on the earlier of (i) June 30, 2014 or (ii) the closing of a change of control (as defined). In addition, BEI will receive certain royalties on
advertising revenue in excess of certain minimum royalty thresholds (as defined).
The warrant is being recognized as expense over the requisite service period, which is approximately four years, on a straight-line basis. The aggregate
value of the BEI warrant was approximately $1,880, of which $226 was recognized as expense during the year ended December 31, 2010. As of
December 31, 2010, $451 and $1,203 is included in prepaid expenses and other assets and other assets, respectively, in the accompanying balance sheet. The
BEI warrant fair value was determined using the Black-Scholes option pricing model considering the contractual life of 4 years; expected volatility of 57%;
and risk-free interest rate of 1.5%.
Stock-based Compensation Expense
Stock-based compensation expense related to all employee and non-employee stock-based awards was as follows:
Year ended December 31,
2008 2009 2010
Stock-based compensation included in
Service costs $ 532 $ 527 $ 868
Sales and marketing 1,526 1,611 2,379
Product development 875 1,504 1,692
General and administrative 3,037 4,094 4,750
Total stock-based compensation included in net loss 5,970 7,736 9,689
Income tax benefit related to stock-based compensation included in
net loss (1,142) — (372)
$ 4,828 $7,736 $9,317
Included in the table above are cash payments of $899, $565, and $360 related to the Pluck stock options for the years ended December 31, 2008, 2009,
and 2010, respectively. In addition, $420, $439 and $439 of expense related to the Livestrong Warrant are included in the table above, for the years ended
December 31, 2008, 2009 and 2010, respectively. Also included in the table above is $226 of expense related to the BEI warrant for the year ended
December 31, 2010.
During the years ended December 31, 2008, 2009 and 2010, $714, $700 and $899, respectively, of stock-based compensation expense related to stock
options was capitalized, primarily as part of internally developed software projects.
14. Common Stock
Each share of common stock has the right to one vote per share. Each restricted stock purchase right has the right to one vote per share and the right to
receive dividends or other distributions paid or made with respect to common shares, subject to restrictions for continued employment service.
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