Agouron Pharmaceuticals (AGPH) Message Board

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Biotech / Medical : Agouron Pharmaceuticals (AGPH)

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To: biopicker who wrote (2251)	10/9/1997 9:27:00 AM
From: Biomaven	of 6136

NQ Options Tax Benefit I wasn't on the call, but I can clarify the general issues relating to the NQ options. When a NQ option is exercised, the spread at the time of exercise (the amount the option is in the money) is considered a compensation expense _for tax purposes only_. It is _not_ an expense for financial reporting purposes. In the case of AGPH, because they have so many deep-in-the-money options, they have an ongoing source of "expenses" for tax purposes. You should note that the tax benefit from these NQ options is already reflected in their diluted shares outstanding. When you calculate the dilutive effect of the options (which they are now doing because they are profitable) you use the potential NQ tax benefit to essentially "buy-back" some of the shares you assume are issued as a result of the options. Incidentally, in practice Incentive Stock Options (ISO's) are not much different from NQ's, because people usually sell the stock they get from the exercise immediately, creating what is known as a disqualifying disposition (DD). This DD is a deduction for the company, just like a NQ option. Peter

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