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These excerpts taken from the CAVM 10-K filed Mar 10, 2008. Estimation
of Fair Value of Warrants to Purchase Convertible Preferred
Stock
On July 1, 2005, we adopted FASB Staff Position
150-5,
Issuer’s Accounting under FASB Statement No. 150
for Freestanding Warrants and Other Similar Instruments on
Shares That Are Redeemable, or
FSP 150-5.
FSP 150-5
provides that the warrants we have issued to purchase shares of
our convertible preferred stock are subject to the requirements
in
FSP 150-5,
which requires us to classify these warrants as current
liabilities and to adjust the value of these warrants to their
fair value at the end of each reporting period. At the time of
adoption, we recorded a charge in the amount of $100,000 for the
cumulative effect of this change in accounting principle, to
reflect the estimated increase in fair value of these warrants
as of that date. We recorded $573,000, $467,000 and $411,000
warrant revaluation expense for the years ended
December 31, 2007, 2006 and 2005, respectively.
Upon our initial public offering in May 2007, all outstanding
warrants to purchase mandatorily redeemable convertible
preferred stock converted to warrants to purchase common stock.
As a result, the aggregate fair value of these warrants have
been reclassified from current liabilities to additional paid-in
capital.
Estimation of Fair Value of Warrants to Purchase Convertible Preferred Stock On July 1, 2005, we adopted FASB Staff Position 150-5, Issuer’s Accounting under FASB Statement No. 150 for Freestanding Warrants and Other Similar Instruments on Shares That Are Redeemable, or FSP 150-5. FSP 150-5 provides that the warrants we have issued to purchase shares of our convertible preferred stock are subject to the requirements in FSP 150-5, which requires us to classify these warrants as current liabilities and to adjust the value of these warrants to their fair value at the end of each reporting period. At the time of adoption, we recorded a charge in the amount of $100,000 for the cumulative effect of this change in accounting principle, to reflect the estimated increase in fair value of these warrants as of that date. We recorded $573,000, $467,000 and $411,000 warrant revaluation expense for the years ended December 31, 2007, 2006 and 2005, respectively. Upon our initial public offering in May 2007, all outstanding warrants to purchase mandatorily redeemable convertible preferred stock converted to warrants to purchase common stock. As a result, the aggregate fair value of these warrants have been reclassified from current liabilities to additional paid-in capital. | EXCERPTS ON THIS PAGE:
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