Yahoo 1998 Annual Report Download - page 48

recorded as a purchase for accounting purposes and the majority of the purchase
price of approximately $1.4 million is being amortized over the three-year
estimated useful life of the technology acquired. Upon acquisition, the historical
financial results of NetControls, Inc. were de minimis.
Acquisition of Four11. On October 20, 1997, the Company completed the acquisition
of Four11 Corporation, a privately-held online communications and Internet direc-
tory company. Under the terms of the acquisition, which was accounted for as a
pooling of interests, the Company exchanged 6,022,880 shares of Yahoo! Common
Stock for all of Four11’s outstanding shares and assumed 593,344 options and
warrants to purchase Yahoo! Common Stock. All outstanding Four11 preferred
shares were converted into Four11 common stock immediately prior to the
acquisition. During the quarter ended December 31, 1997, the Company recorded a
one-time charge of $3.9 million for acquisition-related costs. These costs consisted
of investment banking fees, legal and accounting fees, redundancy costs, and
certain other expenses directly related to the acquisition.
Acquisition of Viaweb Inc. On June 10, 1998, the Company completed the acquisition
of all outstanding shares of Viaweb, a provider of software and services for hosting
online stores, through the issuance of 1,574,364 shares of Yahoo! Common Stock.
All outstanding options to purchase Viaweb common stock were converted into
options to purchase 244,504 shares of Yahoo! Common Stock. The acquisition was
accounted for as a purchase in accordance with the provisions of APB 16. Under
the purchase method of accounting, the purchase price is allocated to the assets
acquired and liabilities assumed based on their estimated fair values at the date
of the acquisition. Results of operations for Viaweb have been included with those
of the Company for periods subsequent to the date of acquisition.
The total purchase price of the acquisition was $48.6 million including acquisition
expenses of $1.8 million. The purchase price was allocated to the assets acquired
and liabilities assumed based on their estimated fair values as determined by the
Company and pursuant to discussions with the Staff of the Securities and
Exchange Commission (the “Staff”) as follows (in thousands):
In-process research and development $ 15,000
Purchased technology 15,000
Goodwill 24,332
Tangible assets acquired 571
Liabilities assumed (344)
Deferred tax liability (6,000)
$ 48,559
Among the factors considered in discussions with the Staff in determining the
amount of the allocation of the purchase price to in-process research and develop-
ment were various factors such as estimating the stage of development of each
in-process research and development project at the date of acquisition, estimating
cash flows resulting from the expected revenues generated from such projects, and
discounting the net cash flows, in addition to other assumptions. The remaining
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