TiVo 2004 Annual Report Download - page 66

Table of Contents
Index to Financial Statements
The fair value of stock options issued to employees and non-employee directors and Employee Stock Purchase Plan ("ESPP") offerings were estimated
using the Black Scholes Option-pricing model assuming no expected dividends and the following weighted average assumptions:
ESPP Stock Options
Fiscal year ended January 31,
2005
2004 2003 2005 2004 2003
Expected life (in years) 0.5 0.5 0.5 3.6 4.0 4.0
Volatility 58% 52% 50% 54% 51% 50%
Average risk free interest rate 1.76% 1.38% 1.94% 3.31% 2.45% 4.09%
The Black Scholes Option-pricing model requires the input of highly subjective assumptions, including the option's expected life and the expected price
volatility of the underlying stock.
Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes."
The Company assesses the likelihood that deferred tax assets will be recovered from future taxable income. To the extent the Company believes that, based
upon all the available positive and negative evidence, it is not likely that the Company will realize the benefit of a deferred tax asset in the future, the
Company establishes a valuation allowance. The Company considers future taxable income and ongoing prudent and feasible tax planning strategies in
assessing the amount of the valuation allowance. Adjustments may be required in the future if it is determined that the amount of deferred tax assets to be
realized is greater or less than the amount recorded. The Company has established a 100% valuation allowances on its net deferred tax assets.
Net Loss Per Common Share
Basic and diluted net loss per common share is calculated in accordance with SFAS No. 128, "Earnings Per Share." Basic net loss per common share is
computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding excluding repurchasable
common stock and unvested restricted stock outstanding of 574,445 shares, 655,044 shares, and 524,268 shares for the fiscal years ended January 31, 2005,
2004, and 2003, respectively. The net loss attributable to common stockholders is calculated by deducting the Series A redeemable convertible preferred stock
dividend, accretion to redemption value of Series A redeemable convertible preferred stock, and the repurchasable common stock from the net loss.
The weighted average number of shares outstanding used in the computation of basic and diluted net loss per share does not include the effect of the
following potentially outstanding common stock. The effect of these potentially outstanding shares were not included in the calculation of diluted net loss per
share because the effect would have been antidilutive:
Number of shares
Fiscal Year Ended January 31,
2005 2004 2003
Repurchasable common stock 528,683 546,662 524,268
Unvested restricted stock outstanding 45,762 108,382 —
Number of common shares issuable for convertible notes payable — 2,619,048 5,125,313
Options to purchase common stock 15,567,273 13,213,370 11,438,096
Potential shares to be issued from ESPP 241,717 227,517 235,918
Warrants to purchase common stock 4,838,644 5,504,781 5,800,209
Total 21,222,079 22,219,760 23,123,804
Comprehensive Loss
The Company has no material components of other comprehensive income or loss and, accordingly, the Comprehensive Loss is the same as the net loss
for all periods presented.
Fair Value of Financial Instruments
Carrying amounts of certain of the Company's financial instruments including cash and cash equivalents, accounts receivable, accounts payable and
accrued expenses approximate their fair value because of their short maturities. Available-for-sale marketable securities are reported at their fair value based
on quoted market prices. Because there was no active public market for the Company's
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