Stamps.com 2008 Annual Report Download - page 47

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In our SFAS 123R calculations, we use the Black-Scholes option valuation model, which requires us to make a number of
highly complex and subjective assumptions, including stock price volatility, expected term, risk-free interest rates and actual and
projected employee stock option exercise behaviors. For options granted, our assumption of expected volatility was based on the
historical volatility of our stock price for the period January 1, 2004 through the date of option grant. We base the risk-free
interest rate on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant.
The estimated expected life represents the weighted-average period the stock options are expected to remain outstanding and has
been determined based on an analysis of historical exercise behavior.
The following are the weighted average assumptions used in the Black-Scholes valuation model for the periods indicated:
Research and development
631
617
799
General and administrative
1,670
1,304
1,178
Total stock-based compensation expense $
3,344
$
2,707
$
2,638
The following table summarizes stock option activity related to our 1999 Stock Incentive Plan for 2008:
2008
2007
2006
Expected dividend yield
—
—
—
Risk-free interest rate
2.90
%
4.45
%
4.74
%
Expected volatility
51
%
48
%
49
%
Expected life (in years)
5
5
5
Expected forfeiture rate
17
%
16
%
15
%
Number of
Stock Options
(in Thousands)
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (in Years)
Aggregate
Intrinsic
Value
(in Thousands)
Outstanding at December 31, 2007
3,091
$
16.17
Granted
528
11.36
Exercised
(45
)
7.49
Forfeited or expired
(288
)
16.48
Balance at December 31, 2008
3,286
15.48
6.5
$
1,895
Exercisable at December 31, 2008
2,083
$
16.77
5.1
$
1,804
F-11
TABLE OF CONTENTS
STAMPS.COM INC.
NOTES TO FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies – (continued)
The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on our closing stock price of
$9.83 at December 31, 2008, representing the last trading day of 2008, which would have been received by award holders had all
award holders exercised their awards that were in-the-money as of that date.
The weighted average grant date fair value of options granted during the 2008, 2007 and 2006 were $5.28, $6.56 and $13.41
respectively. The total intrinsic value of options exercised during 2008, 2007 and 2006 were approximately $275,000, $769,000
and $11.5 million, respectively.
The following table summarizes the status of our nonvested stock options as of December 31, 2008:
Nonvested
Number of Weighted
Average