8x8 1999 Annual Report Download - page 51

8X8, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
carryforwards for federal and state tax reporting purposes of approximately $2.4 million which begin expiring in 2009. Under applicable tax
laws, the amount of and benefits from net operating losses and credits that can be carried forward may be impaired or limited in certain
circumstances. Events which may cause limitations in the amount of net operating loss carryforwards that the Company may utilize in any one
year include, but are not limited to, a cumulative ownership change of more than 50% over a three year period.
A reconciliation of the tax (benefit) provision to the amounts computed using the statutory U.S. federal income tax rate of 34% is as follows (in
thousands):
In August 1995, the Internal Revenue Service (the "IRS") asserted a deficiency against the Company for the taxable year 1992 in the amount of
approximately $1,365,000, together with a penalty in the amount of approximately $273,000 plus accrued interest. The IRS alleged that as of
March 31, 1992, the Company had accumulated earnings beyond the reasonable needs of the Company's business. The Company did not make
any payments and in accordance with IRS procedures formally protested this assessment on October 30, 1995. In May 1997, the Company
received a notice from the IRS indicating it had fully reversed the August 1995 notice of deficiency. As a result, the Company reversed
approximately $1.0 million of its income tax liability during the first quarter of fiscal 1998.
NOTE 5 -- COMMITMENTS AND CONTINGENCIES:
The Company leases its primary facility under a noncancelable operating lease agreement that expires in May 2003. This agreement provides
for annual increments of rent in predetermined amounts and requires the Company to pay property taxes, insurance and normal maintenance
costs.
Future minimum lease payments under non-cancelable operating leases are as follows (in thousands):
Rent expense for all operating leases for the years ended March 31, 1999, 1998 and 1997 was $890,000, $1,075,000 and $717,000,
respectively.
The Company is a party to certain patent infringement matters and claims which have arisen in the normal course of the Company's operations.
While the results of such litigation and claims cannot be predicted with certainty, the Company believes that the final outcome of such matters
will not have a
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YEAR ENDED MARCH 31,
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1999 1998 1997
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(Benefit) provision at statutory rate..................... $(6,572) $ 933 $(4,567)
State income taxes (benefit) before valuation allowance,
net of federal effect................................... (729) 160 (344)
Reversal of previously accrued income taxes payable....... -- (1,018) --
Research and development credits.......................... (483) (385) (373)
Valuation allowance....................................... 7,712 (995) 4,012
Non-deductible compensation............................... 165 504 1,525
Other..................................................... (93) (181) (71)
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(Benefit) provision for income taxes...................... $ -- $ (982) $ 182
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YEAR ENDING MARCH 31,
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2000........................................................ $1,043
2000........................................................ 1,058
2002........................................................ 1,136
2003........................................................ 1,173
2004........................................................ 196
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Total minimum payments............................ $4,606
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