eBay 1998 Annual Report Download - page 67

eBAY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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and deferred tax liabilities and assets are based on the provisions of enacted tax law; the effects of future changes in
tax laws or rates are not anticipated. The measurement of deferred tax assets is reduced, if necessary, by the amount
of any tax benefits that, based on available evidence, are not expected to be realized.
Net income per share
The Company computes net income per share in accordance with SFAS No. 128, “Earnings per Share” and
SEC Staff Accounting Bulletin No. 98 (“SAB 98”). Under the provisions of SFAS No. 128 and SAB 98, basic net
income per share is computed by dividing the net income available to common stockholders for the period by the
weighted average number of common shares outstanding during the period. Diluted net income per share is
computed by dividing the net income for the period by the weighted average number of common and common
equivalent shares outstanding during the period. Common equivalent shares, composed of unvested restricted
Common Stock and incremental common shares issuable upon the exercise of stock options and warrants and upon
conversion of Series A and Series B Convertible Preferred Stock, are included in diluted net income per share to the
extent such shares are dilutive.
The following table sets forth the computation of basic and diluted net income per share for the periods
indicated, (in thousands, except per share amounts):
Year Ended December 31,
1996 1997 1998
Numerator:
Net income............................................................................................................ $ 148 $ 874 $ 2,398
Accretion of Series B Mandatorily Redeemable Convertible Preferred
Stock to redemption value ................................................................................. — (46) (46)
Net income available to common stockholders..................................................... $ 148 $ 828 $ 2,352
Denominator:
Weighted average shares....................................................................................... 30,600 61,200 89,473
Weighted average unvested common shares subject to repurchase
agreements ......................................................................................................... (24,225) (38,887) (39,578)
Denominator for basic calculation ........................................................................ 6,375 22,313 49,895
Weighted average effect of dilutive securities:
Series A Preferred Stock………………………………………………….. 12,345 15,088 11,037
Series B Preferred Stock............................................................................. — 6,372 8,054
Series B Preferred Stock warrants………………………………………... — — 1,098
Unvested common shares subject to
repurchase agreements ............................................................................ 24,225 38,887 39,578
Employee stock options.............................................................................. — — 4,928
Denominator for diluted calculation ..................................................................... 42,945 82,660 114,590
Net income per share:
Basic ..................................................................................................................... $ 0.02 $ 0.04 $ 0.05
Diluted .................................................................................................................. $ 0.00 $ 0.01 $ 0.02