TiVo 2003 Annual Report Download - page 60

Table of Contents
Research and Development
Research and development expenses consist primarily of employee salaries, related expenses, and consulting fees relating to the development of the
TiVo service platform and products that enable the TiVo service. Research and development costs are expensed as incurred.
Sales and Marketing
Sales and marketing expenses consist primarily of employee salaries and related expenses, media advertising, public relations activities, special
promotions, trade shows and the production of product related items, including collateral and videos. Additionally included are sales and marketing — related
parties expenses which consists of cash and non-cash charges related to the Company's agreements with DIRECTV, Philips, Maxtor, Sony, AOL Time
Warner ("AOL"), and Creative Artists Agency, LLC ("CAA"), all of which held stock in the Company.
Advertising
The Company expenses advertising costs as the services are provided. Advertising expenses were $455,000, $5.4 million, and $41.9 million for the
fiscal years ended January 31, 2004, 2003, and 2002, respectively. Fiscal years 2003 and 2002 included expenses related to AOL, National Broadcasting
Company, Inc. ("NBC"), and Discovery Communications, Inc. ("Discovery") media insertion orders that are classified as sales and marketing —related
parties expense.
Interest Expense and Other
Interest expense and other consists of cash and non-cash charges related to interest expense paid to related parties and non-related parties. Included in
interest expense are cash charges for coupon interest expense related to the convertible notes payable. Additionally included are cash charges for interest
expense payable to Comdisco (See Note 16. "Commitments and Contingencies"). Included in interest expense– related parties are cash charges for coupon
interest expense related to the convertible notes and cash charges for interest expense payable according to negotiated deferred payment schedules. Included
in non-cash interest expense is amortization of discount on the convertible notes payable and debt issuance costs. Included in other expenses are amortization
of warrants issued to Comdisco, letter of credit fees and tax penalties. The following table summarizes the components of interest expense and other:
Fiscal Year Ended January 31,
2004 2003 2002
(In thousands)
Cash interest expense $ 772 $ 2,000 $ 1,079
Cash interest expense – related parties 671 1,345 1,643
Total cash interest expense 1,443 3,345 2,722
Total non-cash interest expense 8,139 24,210 4,553
Total interest expense 9,582 27,555 7,275
Total other expenses 5 14 99
Total interest expense and other $ 9,587 $ 27,569 $ 7,374
Stock-Compensation
The Company has stock option plans and an Employee Stock Purchase Plan, under which officers, employees, consultants and non-employee directors
may be granted options to purchase shares of the Company's authorized but un-issued or reacquired common stock; and may also be granted restricted stock
and other stock awards. The Company's stock option plans are accounted for under the intrinsic value recognition and measurement principles of APB
Opinion No. 25, "Accounting for Stock Issued to Employees," and related Interpretations. During the fiscal year ended January 31, 2004, options to purchase
3,820,033 shares were granted under the stock option plans at exercise prices equal to the market price of the underlying common stock on the date of grant.
Options to purchase 58,000 shares were granted at exercise prices below the market price of the underlying common stock on the date of grant resulting in
$140,000 of deferred compensation and 35,000 shares were granted as a compensatory stock award resulting in $370,000 of deferred compensation. In
addition to the stock options granted during the
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