Incredimail 2009 Annual Report Download - page 36

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Fixed or determinable fee
: Fees are determinable at the time of sale. Customers are charged immediately through credit cards. In
addition, the fees are subject to a refund policy period, currently up to 30 days.
Collection is probable
: We are subject to a minimal amount of collection risk related to software sold to our customers as these are
obtained through credit card sales.
Revenues from licensing The Gold Gallery
content database are recognized over the term of the licensing period. We offer one year,
two year and lifetime licenses for The Gold Gallery content database for a one-
time, upfront payment. The different term licenses constituted
less than 5% of our revenues in 2009. Our estimation of the lifetime usage of The Gold Gallery
is six years and is based on historical data
collected. We continually track usage patterns, and as we gather more user information, we may update this estimated useful life. If the lifetime
usage of The Gold Gallery is demonstrated to be shorter or longer than the current
estimate, we would recognize revenues earlier or later. Based
on our current revenue streams, such an adjustment would not have a significant effect on our revenues.
Revenues from our JunkFilter Plus solution are recognized over the one year term of the license.
Our deferred revenue consists of the unamortized balance of The Gold Gallery and the JunkFilter Plus
license fees, which totaled $3.9
million as of December 31, 2009, of which $2.3 million was classified as short-term deferred revenues and the balance as long-
term deferred
revenue on our balance sheet .
With regard to arrangements involving multiple elements, our revenues are allocated to the different elements in the arrangement under
the "relative fair value method" when Vendor Specific Objective Evidence ("VSOE") of fair value exists for all elements. Under the relative fair
value method, we recognize and defer revenue proportionally based on the fair value of its delivered and undelivered elements, when the basic
criteria in ASC 985-605 have been met. Any discount in the arrangement is allocated pro rata to the different elements in the arrangements.
Collaboration arrangements are established with other websites who use our brand name Incredi
and to whom we refer users. Under the
agreement the collaborators provide their products and services and manage, host and maintain the websites that provide games or matchmaking
services to Internet users, using our Incredi brand for the domain names IncrediGames.com and IncrediMailPersonals.com and our website’
s
graphical external envelop. We promote these websites, among other things, through promotions on our website and email client. In
consideration for our brand and promotional activity, we are entitled to share the net or gross revenues, (as provided in each agreement),
generated from these websites, including subscription and advertising fees. Revenues from these collaboration arrangements are recognized
when earned and based on reports received from the collaborating party.
Stock
-Based Compensation
On January 1, 2006, we adopted ASC 718, "Compensation –
Stock Compensation", (formerly SFAS No. 123(R)) which requires the
measurement and recognition of compensation expense based on estimated fair values for all share-
based payment awards made to employees
and directors. As of December 31, 2009, the total compensation cost, related to options granted to employees, not yet recognized, amounted to
$1.2 million. This cost is expected to be recognized over a weighted average period of 2.2 years. Our stock-
based compensation to employees
was allocated as follows (in thousands):
Determining the appropriate fair value model and calculating the fair value of stock-
based awards, which includes estimating stock
price volatility, forfeiture rates expected lives and dividend yield, requires judgment and could materially impact our operating results.
Year Ended December 31,
2007
2008
2009
Cost of revenues
$
11
$
16
$
20
Research and development
79
293
169
Selling and marketing
60
137
161
General and administrative
524
584
322
Other charges
-
135
-
31