Table of Contents 
INFOSPACE, INC. 
  
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 
  
Years Ended December 31, 2001, 2000 and 1999 
The purchase price was allocated to the assets and liabilities assumed based on their estimated fair values as follows:  
  
  
   
(in thousands) 
  
Tangible assets acquired 
   
$ 
4,681   
Liabilities assumed 
   
  
(7,010 ) 
  
   
Net book value of net liabilities assumed 
   
  
(2,329 ) 
Fair value adjustments: 
   
     
  
Purchased technology, including in process research and development 
   
  
5,900   
Distribution agreements 
   
  
2,400   
Assembled workforce 
   
  
2,800   
  
   
Fair value of net assets acquired 
   
$ 
8,771   
  
   
Purchase price: 
   
     
  
Fair value of shares issued, including restricted stock 
   
$ 
88,772   
Fair value of options assumed 
   
  
23,589   
Fair value of net assets acquired 
   
  
(8,771 ) 
Fair value of restricted stock recorded as unearned compensation 
   
  
(2,239 ) 
Acquisition costs 
   
  
556   
  
   
Excess of purchase price over net assets acquired, allocated to goodwill 
   
$ 
101,907   
  
   
  
The $5.9 million value of purchased technology includes purchased in process research and development. GAAP requires purchased in 
process research and development with no alternative future use to be recorded and charged to expense in the period acquired. Accordingly, the 
results of operations for the year ended December 31, 2001, include the write off of $600,000 of purchased in process research and 
development. The remaining $5.3 million represents the purchase of core technology and existing products, which are being amortized over an 
estimated useful life of five years. The Company is amortizing the goodwill, assembled workforce and distribution agreements over an 
estimated life of five years.  
  
The Company also recorded $3.9 million of unearned compensation in conjunction with the acquisition of Locus Dialogue. $1.7 million of 
the unearned compensation relates to the intrinsic value of Locus Dialogue stock options replaced by the Company at the converted share value 
and share price. $2.2 million relates to the value of 253,175 restricted shares held by four Locus Dialogue employees. The restricted stock vests 
after the employee completes one year of employment with the Company and is recorded as compensation expense over the vesting period.  
  
Among the factors the Company considered in determining the amount of the allocation of the purchase price to in process research and 
development were various factors such as estimating the stage of development of each component of the technology, including the complexity 
and technical obstacles to overcome, estimating the amount of core technology leveraged into the in  process projects, estimating the expected 
life of each component, estimating cash flows resulting from the expected revenues, margins and operating expenses generated from each 
component, and discounting to present value the cash flows associated with the in process technologies. The Company utilized a rate of return 
of 35% to discount to present value the cash flows associated with the in process technologies. The discount rate was selected based on 
evaluation of the Company's weighted average cost of capital, the weighted average return on assets, the internal rate of return implied from 
this transaction, and management's assessment of the risk inherent in the future performance estimates utilized in the valuation.  
  
78  
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