This excerpt taken from the CYPB 10-K filed Mar 16, 2005.
Accounting for Certain Transactions Involving Stock CompensationAn Interpretation of APB Opinion No. 25, the shares underlying the options are accounted for as variable, and the intrinsic value of the options to purchase common stock are re-measured at the end of each period for the term of the option and amortized over the vesting period. During the years ended December 31, 2004 and 2002, the Company recorded a compensation benefit of $699,033 and $688,376, respectively, as the intrinsic value of the common stock underlying the options declined due to a decline in the Companys stock price. In contrast, the Company recorded stock compensation expense of $5,879,277 for the year ended December 31, 2003 to reflect in an increase in the intrinsic value of the common stock underlying the options due to an increase in the Companys stock price during this period.
CYPRESS BIOSCIENCE, INC.