Table of Contents
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years Ended December 31, 2001, 2000 and 1999
a pledge of 184,376 of the officer's shares of the Company's common stock. The pledged shares were valued at $378,000 at December 31,
2001. The note has full recourse against Ms. Strom's personal assets. The Company has taken legal action to collect on the outstanding
amounts due. A valuation allowance of $8.5 million was recorded on December 31, 2001, which represents the outstanding note and interest
due less the value of the secured shares and other known assets of Ms. Strom. At December 31, 2001 and 2000, accrued interest on this note
was $1.6 million and $889,000 respectively.
On December 22, 2000, the Company loaned Rick Thompson, a former officer of the Company, $1.4 million. The loan is not secured. The
Company has taken legal action to ensure the full repayment of this loan. No valuation allowance has been recorded at December 31, 2001, as
the amount is considered fully collectible. This note balance is outstanding at December 31, 2001.
In October 2000, the Company loaned one of the Company's executive officers $4.0 million. The promissory note matured on December
31, 2001. The note was secured by a pledge of 200,000 shares of the Company's common stock, valued at $410,000 on the date of maturity.
The terms of the note provided, however, that if this officer remained employed by the Company through December 31, 2001, then the
Company would require only the collateral securing the note for repayment. In the event that the collateral was insufficient to repay the note
and accrued interest at maturity, and the officer had remained employed by the Company through the maturity date, then the Company would
forgive the difference between the fair market value of the collateral and the principal plus accrued interest and make a cash distribution to the
officer sufficient to cover his resulting tax liability from the forgiveness of the debt. Since this officer remained employed by the Company
through the maturity date, the Company has written off the entire amount of the note, plus accrued interest, less the value of the collateral, and
has accrued the related tax liability. The Company recorded a charge of $1.5 million in 2001 and a charge of $3.1 million in 2000. The charges
were recorded in SGA expense on the Statement of Operations. No balance is outstanding at December 31, 2001.
Note 4: Loss on Investments
The Company has invested in equity instruments of public and privately held technology companies for business and strategic purposes.
The Company does not exercise significant influence over the operating or financial policies of any of these companies. These investments are
recorded as long term assets. As of December 31, 2001, the Company's publicly held and privately held investments were $8.7 million and
$38.4 million, respectively. As of December 31, 2000, the Company's and the Venture Fund's publicly held and privately held investments
were $24.0 million and $97.6 million, respectively.
The Company also holds warrants in public and privately held technology companies for business and strategic purposes. Some of these
warrant agreements were issued in conjunction with equity investments. Additionally, some were issued in conjunction with a business
agreement and contain certain provisions that require the Company to meet specific performance criteria under the agreement in order for the
warrants to vest. When the Company meets its performance obligations it records revenue equal to the fair value of the warrants. The fair value
of each warrant is calculated using the Black Scholes options pricing model using a risk free interest rate applicable to the date of the warrant
valuation, a zero percent dividend yield, the volatility in stock price of the company issuing the warrant, if available, or a peer group volatility
if not available, and the life of the warrant. The Company recorded revenue in the amount of $14.0 million in 2001 for vesting in warrants and
stock, including $6.8 million from the amortization of previously unearned deferred warrant revenue. The Company recorded $22.1 million and
$3.2 million for vesting in performance warrants and stock for the years ended December 31, 2000 and 1999, respectively. At December 31,
2001, the Company held warrants