Classmates.com 2003 Annual Report Download - page 55

In November 2000, the Company acquired certain assets of Freeinternet.com, Inc. ("Freei") for approximately $4.7 million. Assets
acquired included the domain names "Freeinternet.com", "Freeinet.com" and "Freei.net", certain proprietary rights, certain fixed assets, and the
rights to market NetZero's service to Freei's users. The assets acquired have been included in the consolidated balance sheet of the Company at
their fair market value since the date of acquisition and were amortized generally over a two-year period. 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 Freei (see Note 4).
F-17
Juno Online Services, Inc.
On September 25, 2001, NetZero and Juno merged and became wholly-owned subsidiaries of United Online. The Merger was accounted
for under the purchase method in accordance with SFAS No. 141, and NetZero was the acquirer for financial accounting purposes. The primary
reasons for the Merger were to accelerate the Company's growth in pay subscribers, leverage NetZero's and Juno's operating and cost
infrastructures to create a lower cost structure for providing Internet access and to create a more attractive base of users for advertising
customers.
Under the terms of the merger agreement, entered into on June 7, 2001, NetZero common stockholders received 0.2000 of a share of
United Online common stock for each share of NetZero common stock they owned, and Juno common stockholders received 0.3570 of a share
of United Online common stock for each share of Juno common stock they owned. The purchase price of approximately $89.2 million,
including acquisition costs, was allocated to Juno's net assets based on their fair values. The excess of the purchase price over the estimated fair
values of the net assets acquired, including identifiable intangible assets, was recorded as goodwill. The fair value of the United Online
common stock issued was determined based on an average price per share of NetZero common stock on the dates surrounding the
announcement of the execution of the merger agreement. The fair value of the Juno options assumed was determined based on the Black-
Scholes option pricing model using a weighted average expected life of five years, 0% dividend, volatility of 120%, and a risk-free interest rate
of 5%. The following table summarizes the purchase price (in thousands):
The following table summarizes the net assets acquired in connection with the Merger (in thousands):
Fair value of common stock issued and options assumed
$
81,266
Acquisition costs
7,978
Total purchase price $
89,244
Asset Description
Estimated
Fair
Value
Estimated
Amortizable
Life
Weighted
Average
Amortizable
Life
Net tangible assets acquired:
Cash $
34,672
Other current assets
7,626
Other assets
6,906
Accounts payable and accrued liabilities
(19,460
)
Other liabilities
(11,240
)
Total net tangible assets acquired
18,504
Intangible assets acquired:
Pay subscribers and free users
53,700
1-
4 years
3.7 years
Software and technology
3,600
4-
5 years
4.5 years
Patents and trademarks
2,300
5-
7 years
6.0 years
Other
200
1 year
1 year
Total intangible assets acquired
59,800
Goodwill
10,940
Total purchase price $
89,244