Enom 2010 Annual Report Download - page 60

Table of Contents
certain of our general and administrative expenses in the near term although its percentage of revenue will depend upon a variety of factors as listed above.
Amortization of Intangibles
We capitalize certain costs allocated to the purchase price of certain identifiable intangible assets acquired in connection with business combinations, to
acquire content and to acquire, including through initial registration, undeveloped websites. We amortize these costs on a straight-line basis over the related
expected useful lives of these assets, which have a weighted average useful life of approximately 5.3 years on a combined basis as of December 31, 2010. The
Company determines the appropriate useful life of intangible assets by performing an analysis of expected cash flows based on its historical experience of
intangible assets of similar quality and value. We currently estimate the useful life of our content to be five years. We expect amortization expense to increase
modestly in the near term, although its percentage of revenues will depend upon a variety of factors, such as the mix of our investments in content as
compared to our identifiable intangible assets acquired in business combinations.
Stock-based Compensation
Included in our operating expenses are expenses associated with stock based compensation, which are allocated and included in service costs, sales and
marketing, product development and general and administrative expenses. Stock-based compensation expense is largely comprised of costs associated with
stock options granted to employees and restricted stock issued to employees. We record the fair value of these equity-based awards and expense their cost
ratably over related vesting periods, which is generally four years. The determination of the fair value of these equity awards on the date of grant as discussed
in detail below in "—Critical Accounting Policies and Estimates." In addition, stock-based compensation expense includes the cost of warrants to purchase
common and preferred stock issued to certain non-employees.
As of December 31, 2010, we had approximately $23 million of unrecognized employee related stock-based compensation, net of estimated forfeitures,
that we expect to recognize over a weighted average period of approximately 3 years. In addition, we will recognize approximately $5.0 million in additional
stock-based compensation during the first quarter of 2011 related to awards granted to certain executive officers to acquire approximately 2.6 million of our
shares that vested in the first quarter of 2011 upon meeting an average closing price of our stock for a stipulated period of time subsequent to our initial public
offering. Further, we also expect to recognize approximately $30.8 million in additional stock-based compensation related to awards granted to certain
executive officers in August 2010 to acquire 5.8 million of our shares that began vesting upon the completion of our initial public offering on January 31,
2011. This expense will be recognized from January 31, 2011 over a weighted average period of 4.79 years. In future periods, our stock-based compensation
is expected to increase materially as a result of our existing unrecognized stock-based compensation and as we issue additional stock-based awards to
continue to attract and retain employees and non-employee directors.
Interest Expense
Interest expense principally consists of interest on outstanding debt and certain prepaid underwriting costs associated with our $100 million revolving
credit facility with a syndicate of commercial banks. As of December 31, 2010, we had no indebtedness outstanding under this facility.
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