Overstock.com 2003 Annual Report Download - page 57

Weighted average common shares outstanding—basic 10,998 13,108 16,198
Effective of dilutive securities:
Warrants — — —
Employee stock options — — —
Weighted average common shares outstanding—diluted 10,998 13,108 16,198
Earnings (loss) per common share—basic: $ (1.29) $ (0.88) $ (0.75)
Earnings (loss) per common share—diluted: $ (1.29) $ (0.88) $ (0.75)
The stock options and warrants outstanding were not included in the computation of diluted earnings per share because to do so would have been
antidilutive. The number of shares of stock options and warrants outstanding at each year-end was 2,283 shares, 2,535 shares and 2,849 shares for 2001, 2002
and 2003, respectively.
Internal use software
The Company expenses all costs incurred for the development of internal use software that relate to the planning and post implementation phases of the
development. Direct costs incurred in the development phase are capitalized and recognized over the software's estimated useful life of 3 years. There were no
website development costs or software costs capitalized in 2002 and 2003. Research and development costs and other computer software maintenance costs
related to software development are expensed as incurred.
Advertising expense
The Company recognizes advertising expenses in accordance with SOP 93-7 Reporting on Advertising Costs. As such, the Company expenses the costs
of producing advertisements at the time production occurs, and expenses the cost of communicating advertising in the period during which the
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advertising space or airtime is used. Internet advertising expenses are recognized based on the terms of the individual agreements, which is generally:
1) during the period customers are acquired; or 2) based on the number of clicks generated during a given period over the term of the contract. Advertising
expenses totaled $4,802, $7,043 and $18,552 during the years ended December 31, 2001, 2002 and 2003, respectively.
Foreign currency translation
One of the Company's subsidiaries is located in Mexico where that subsidiary's local currency is considered its functional currency. All of that
subsidiary's assets and liabilities are translated into U.S. dollars at exchange rates existing at the balance sheet dates, revenue and expenses are translated at
weighted average exchange rates, and stockholders' equity is recorded at historical exchange rates. The resulting foreign currency translation adjustments are
recorded as a separate component of stockholders' equity in the consolidated balance sheets as part of accumulated other comprehensive income (loss).
Transaction gains and losses are included in other income (expense) in the consolidated financial statements and have not been significant for any periods
presented.
Recently issued accounting pronouncements
The Financial Accounting Standards Board issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities
and Equity. SFAS 150 establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and
equity. The provisions of SFAS 150 are effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist
as of the beginning of the first interim financial reporting period beginning after June 15, 2003. The adoption of this standard did not have a material effect on
the Company's financial statements.
3. PUBLIC OFFERINGS
On June 4, 2002, the Company closed its initial public offering, pursuant to which it sold 2,155 shares of its common stock, and a selling shareholder
sold 845 shares of common stock at a price of $13.00 per share. The offering resulted in proceeds to the Company of approximately $24,880, net of $2,014 of
issuance costs. As part of the offering, the Company granted the underwriter the right to purchase up to 450 additional shares within thirty days after the
offering to cover over-allotments. On June 27, 2002, the underwriter purchased an additional 101 shares of stock for $1,260. At the closing of the offering, all
issued and outstanding shares of the Company's redeemable convertible preferred stock were automatically converted into common stock on a 1:1 basis.
As part of the initial public offering, the Company paid $439 of selling costs on behalf of the selling shareholder. This amount was recorded in other
income (expense) in the statement of operations for the year ended December 31, 2002.
In February 2003, the Company closed its follow-on public offering, pursuant to which it sold 1,725 shares of common stock, with proceeds to the
Company of approximately $23,968, net of $613 of issuance costs. The number of shares issued includes 225 additional shares that the Company granted the
underwriter the right to purchase to cover any over-allotments
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