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To: Elroy who wrote (2794)	3/2/2007 1:55:44 PM
From: Casaubon	Respond to of 20435

IMO, you have to count option grants as fully dilutive the day they are issued (this isn't quite accurate because some people leave the company and those option grants will never vest, and therefore won't be dilutive). The option grants are a labor cost on the books and I believe Black-Scholes is the common method for expensing them (so it doesn't matter that they are below the strike price). The company actually makes some money when employees exercise thier options, because the employees buy out the option from the company. Therefore, the grant price is the cost basis for the employee and the company pockets that money.