Classmates.com 2003 Annual Report Download - page 54

report the change in accounting as a cumulative-effect adjustment in accordance with APB Opinion No. 20, Accounting Changes and SFAS
No. 3,
Reporting Accounting Changes in Interim Financial Statements , with early application of this consensus permitted. The adoption of
EITF Issue No. 00-21 in the September 2003 quarter did not have a material impact on the Company's financial position, results of operations
or cash flows.
In January 2003, the FASB issued Interpretation ("FIN") No. 46, Consolidation of Variable Interest Entities . Until this interpretation, a
company generally included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN
No. 46 requires a variable interest entity, as defined, to be consolidated by a company if that company is subject to a majority of the risk of loss
from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns. FIN No. 46 is effective for reporting
periods ending after December 15, 2003. The adoption of FIN No. 46 in the December 2003 quarter did not have any impact on the Company's
financial position, results of operations or cash flows.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and
Equity
. SFAS No. 150 changes the accounting guidance for certain financial instruments that, under previous guidance, could be classified as
equity or "mezzanine" equity by now requiring those instruments to be classified as liabilities (or assets in some circumstances) on the balance
sheet. Further, SFAS No. 150 requires disclosure regarding the terms of those instruments and settlement alternatives. SFAS No. 150 is
generally effective for all financial instruments entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the
first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 in the September 2003 quarter did not have any impact on
the Company's financial position, results of operations or cash flows.
In December 2003, the SEC issued SAB No. 104. SAB No. 104 revises or rescinds portions of the interpretative guidance included in
Topic 13 of the codification of staff accounting bulletins in order to make this interpretive guidance consistent with current authoritative
accounting and auditing guidance and SEC rules and regulations. It also rescinds the Revenue Recognition in Financial Statements Frequently
Asked Questions and Answers document issued in conjunction with Topic 13. Selected portions of that document have been incorporated into
Topic 13. The adoption of SAB No. 104 in the December 2003 quarter did not have any impact on the Company's financial position, results of
operations or cash flows.
F-16
2. ACQUISITIONS
Simpli.com, Inc.
In August 2000, the Company acquired Simpli.com, Inc. ("Simpli") in a stock and cash transaction. Simpli was a targeted marketing
infrastructure and search technology company. Pursuant to the terms of the agreement, the Company issued approximately 750,000 shares of
common stock and paid $2.6 million in cash. The transaction was accounted for under the purchase method and, accordingly, the results of
operations of Simpli have been included in the consolidated results of the Company since the date of acquisition. The excess of the purchase
price over the fair value of net liabilities acquired amounted to approximately $23.5 million. The excess purchase price was comprised of
approximately $8.7 million of goodwill, $8.4 million of deferred stock-based charges and $6.4 million of identifiable intangible assets all of
which were being amortized over periods ranging from two-to-three years. During fiscal 2001, the Company identified indications of possible
impairment of its long-lived assets, principally goodwill and other acquired intangible assets, related to the acquisition of Simpli (see Note 4).
In April 2002, the Company sold the remaining assets related to the Simpli acquisition for a 9.9% equity interest in the acquiring
company, which was valued at $0.8 million and resulted in a loss of $0.7 million. In June 2003, the Company's equity interest in the acquiring
company was sold for $0.8 million.
RocketCash Corporation
In September 2000, the Company acquired RocketCash Corporation ("RocketCash"), an online commerce company, in a stock-for-stock
transaction. Pursuant to the terms of the agreement, the Company issued approximately 1.5 million shares of common stock and options to
purchase common stock. The transaction was accounted for under the purchase method and, accordingly, the results of operations of
RocketCash have been included in the consolidated results of the Company since the date of acquisition. The excess of the purchase price over
the fair value of net liabilities acquired amounted to approximately $30.2 million. The excess purchase price was comprised of approximately
$18.1 million of goodwill, $9.0 million of identifiable intangible assets and $3.1 million of deferred stock-based charges all of which were
being amortized over periods ranging from two-to-
four years. During fiscal 2001, the Company identified indications of possible impairment of
its long-lived assets, principally goodwill and other acquired intangible assets, related to the acquisition of RocketCash (see Note 4).
In August 2001, the Company completed the sale of substantially all of the remaining assets related to the RocketCash acquisition. The
transaction resulted in net cash proceeds to the Company of approximately $1.2 million and a gain on sale of approximately $1.0 million.
Freeinternet.com, Inc.