LeapFrog 2010 Annual Report Download - page 76
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LEAPFROG ENTERPRISES, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
The assumptions used in the Black-Scholes option valuation model and the weighted average grant date fair
value per share for the three years ended December, 31, 2010, 2009 and 2008 were as follows:
2010 2009 2008
Estimate of fair value for total awards using Black-Scholes ........... $2,169 $2,497 $50,336 *
Expected term (years) ........................................... 5.64 6.12 4.95
Volatility ..................................................... 56.5% 51.8% 41.1%
Risk-free interest rate ........................................... 2.3% 2.5% 3.1%
Expected dividend yield ......................................... — % — % — %
* Fair value in 2008 includes $33,433 for options granted in June 2008 pursuant to the stock option exchange
program.
There were no stock options grants valued using a Monte-Carlo simulation during the fiscal year ended
December 31, 2010 and 2008. During the second quarter of 2009, the Company granted options to certain
executives and board members to purchase an aggregate of 2,705 shares of its Class A common stock that vest
based upon a service condition and a market condition, the fair value of which was $12,955, estimated using the
Monte-Carlo simulation with the expected term of 3.25 years, volatility of 55.0%, risk-free interest rate of 1.52%
and zero expected dividend yield.
RSUs and RSAs:
RSAs and RSUs are payable in shares of the Company’s Class A common stock. The fair value of these stock-
based awards is equal to the closing market price of the Company’s stock on the date of grant. The grant date fair
value is recognized on a straight-line basis in compensation expense over the vesting period of these stock-based
awards, which is generally four years.
With regard to RSUs, a forfeiture assumption of approximately 20% is currently being used. A zero forfeiture
rate is used for RSAs. These assumptions reflect historical and expected future forfeiture rates.
Non-Employee Stock-Based Awards:
Stock-based compensation arrangements to non-employees are accounted for using a fair value approach. The
compensation costs of these arrangements are subject to re-measurement over the vesting terms.
66