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Strategies & Market Trends : BFT: Will the tulip craze ever break down? -- Ignore unavailable to you. Want to Upgrade?

To: Pancho Villa who wrote (188)	3/27/1998 9:12:00 AM
From: Pancho Villa	Read Replies (1) \| Respond to of 650

From the 10K: P&L statement does not reflect the value of stock options granted to employees as an expense (which should be condsidered a period expense: salaries paid).The 1997, 1996 loss would have been greater if they did: based compansation for directors are not reported in the P&L statement:The Company has elected to follow APB No. 25, "Accounting for Stock Issued to Employees" and related Interpretations in accounting for its stock options because, as discussed below, the alternative fair value accounting provided for under SFAS No. 123, "Accounting for Stock-Based Compensation" requires use of option valuation models that were not developed for use in valuing stock options. Under APB No. 25, because the exercise price of the Company's stock options equals the market price of the Common Stock on the date of grant, no compensation expense is recognized. SFAS No. 123 requires the disclosure of pro forma net loss and loss per share information as if the Company had accounted for stock options under the fair value method prescribed by SFAS No. 123, which for 1997 is $45,783 and $2.94 per share, and for 1996 is $20,032 and $1.65 per share, respectively. In addition, the weighted-average fair value of stock options granted in 1997 and 1996 was $2.88 per share and $1.93 per share, respectively. The fair value for stock options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1997 and 1996: risk-free interest rate of 5.67% and 6.22%, respectively; no dividend yield; volatility factor of the expected market price of the Common Stock of 0.164 and 0.413, respectively; and a weighted-average expected life of the options of five years. Pro forma results under SFAS No. 123 in 1997 and 1996 are not likely to be representative of future pro forma results because, for example, options vest over several years and additional awards may be made in future years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options. So loss per share is actually larger than reported. Pancho