eBay 2000 Annual Report Download - page 84

eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Fair value disclosures
eBay calculated the fair value of each option grant on the date of grant using the Black-Scholes option
pricing model as prescribed by SFAS No. 123 using the following assumptions:
Year Ended
December 31,
1998 1999 2000
Risk-free interest rates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 4.9% 5.5% 4.9%
Expected lives (in years)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 3.0 3.0 3.0
Dividend yield ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 0% 0% 0%
Expected volatility ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 80% 100% 115%
Prior to eBay's initial public oÅering, the fair value of each option grant to employees of eBay was
determined using the minimum value method. Subsequent to the oÅering, the fair value was determined using
the Black-Scholes model. The eÅect of compensation cost on net income and earnings per share are as follows
(in thousands, except per share amounts):
Year ended December 31,
1998 1999 2000
Net income (loss):
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $7,273 $ 9,567 $ 48,294
Pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $6,497 $(41,357) $(90,677)
Net income (loss) per shareÌbasic:
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.07 $ 0.04 $ 0.19
Pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.06 $ (0.19) $ (0.36)
Net income (loss) per shareÌdiluted:
As reported ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.03 $ 0.04 $ 0.17
Pro formaÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.03 $ (0.19) $ (0.36)
1998 Employee Stock Purchase Plan
In July 1998, the Board adopted, and in August 1998 eBay's stockholders approved, the 1998 Employee
Stock Purchase Plan (the ""Purchase Plan'') and reserved 1,800,000 shares of common stock for issuance
thereunder. On each January 1, the aggregate number of shares reserved for issuance under the Purchase Plan
will be increased automatically by the number of shares purchased under the Purchase Plan in the preceding
calendar year. The aggregate number of shares reserved for issuance under the Purchase Plan shall not exceed
9,000,000 shares. The Purchase Plan became eÅective on September 24, 1998, the Ñrst business day on which
price quotations for eBay's common stock were available on the Nasdaq National Market. Employees are
generally eligible to participate in the Purchase Plan if they are customarily employed by eBay for more than
20 hours per week and more than Ñve months in a calendar year and are not (and would not become as a result
of being granted an option under the Purchase Plan) 5% stockholders of eBay. Under the Purchase Plan,
eligible employees may select a rate of payroll deduction between 2% and 10% of their W-2 cash
compensation subject to certain maximum purchase limitations. Each OÅering Period has a maximum
duration of two years (the ""OÅering Period'') and consists of four six-month Purchase Periods (each, a
""Purchase Period''), with the exception of the Ñrst Purchasing Period, which began on September 24, 1998
and ended on April 30, 1999 and two supplemental purchasing period to accommodate merged employees
which began on July 1, 1999 and August 1, 2000 ended on October 31, 1999 and October 31, 2000,
respectively. OÅering Periods and Purchase Periods generally begin on May 1 and November 1. The price at
which the common stock is purchased under the Purchase Plan is 85% of the lesser of the fair market value of
eBay's common stock on the Ñrst day of the applicable oÅering period or on the last day of that purchase
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