Stamps.com 2002 Annual Report Download - page 53

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Table of Contents
STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SFAS No. 123, and as amended by SFAS No. 148, permits companies to recognize, as expense over the vesting period, the fair value of all
stock-based awards on the date of grant. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded
options, which have no vesting restrictions and are fully transferable. Because the Company’ s stock-based compensation plans have
characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect
the fair value estimate, management believes that the existing option valuation models do not necessarily provide a reliable single measure of
the fair value of awards from the plan. Therefore, as permitted, the Company applies the existing accounting rules under APB No. 25 and
provides pro forma net loss and pro forma loss per share disclosures for stock-based awards made during the year as if the fair value method
defined in SFAS No. 123, as amended, had been applied. Net loss and net loss per share for each of the three years ended December 31, 2002
would have increased to the following pro forma amounts (in thousands, except per share data):
2002 2000 1999
Net loss-as reported $ (6,847 )
$ (209,573 ) $ (212,949 )
Net loss-pro forma $ (9,498 )
$ (223,083 ) $ (215,401 )
Basic and diluted net loss per common share—as
reported
$ (0.14 )
$ (4.14 ) $ (4.54 )
Basic and diluted net loss per common share—pro
forma
$ (0.19 )
$ (4.40 ) $ (4.59 )
Under SFAS No. 123, the fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions:
2002 2001 2000
Expected dividend yield — — —
Risk-free interest rate 2.61 %
5.00 %
5.50 %
Expected volatility 30 %
100 %
142 %
Expected life (in years) 5 5 9
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock
price volatility. Because the Company’ s employee stock options have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the fair value estimates, in management’ s opinion the existing models
do not necessarily provide a reliable single measure of the fair value of the Company’ s options.
Website Development Costs
The Company develops and maintains its website. Costs associated with the operation of the website consist primarily of software and hardware
purchased from third parties, and the Company capitalizes those costs. These capitalized costs are amortized based on their estimated useful
life. Costs related to maintenance are not capitalized. Costs related to the development of website content are expensed as incurred.
F-10
2003. EDGAR Online, Inc.