8x8 2009 Annual Report Download - page 44

Contractual Obligations
Future operating lease payments, net of sublease income, capital lease payments and purchase obligations at March 31, 2009
for the next five years were as follows (in thousands):
2010 2011 2012 2013 2014 Total
Capital leases $ 42 $ 26 $ 22 $ - $ - $ 90
Office leases 206 - - - - 206
License fee 550 250 800
Purchase obligations
Third party customer support provider 2,457 - - - - 2,457
Open purchase orders 2,132 - - - - 2,132
$ 5,387 $ 276 $ 22 $ - $ - $ 5,685
Year Ending March 31,
In April 2005, June 2006 and March 2007, we entered into a series of noncancelable five year capital lease agreements for
office equipment bearing interest at various rates. Assets under capital lease at March 31, 2009 totaled $182,000 with
accumulated amortization of $102,000.
We lease our primary facility in Santa Clara, California under a non-cancelable operating lease that expires in fiscal 2010. We
also have a leased facility in France. On May 1, 2009, we entered into a three year lease for a new primary facility in
Sunnyvale, California. The facility leases include rent escalation clauses and require us to pay utilities and normal maintenance
costs. Rent expense is reflected in our consolidated financial statements on a straight-line basis over the term of the leases.
We entered into a new contract with one of our third party customer support vendors containing a minimum monthly
commitment of approximately $491,000. The agreement requires 150 day notice to terminate. The total remaining obligation
under the contract is $2.5 million.
At March 31, 2009 we had open purchase orders related to our contract manufacturers and other contractual obligations of
approximately $2.1 million primarily related to inventory purchases. These purchase commitments are reflected in our
consolidated financial statements once goods or services have been received or at such time when we are obligated to make
payments related to these goods or services.
Subsequent to year end, in April 2009, the Company entered into a license and settlement agreement. The agreement requires
the Company to pay eight quarterly payments over the next two years. The total remaining obligation under the contract is
$0.8 million
At March 31, 2009, we had a $21,000 liability related to warrants issued to two investors in an equity financing transaction in
fiscal 2006. The warrants expire in December 2010. We account for these warrants as liabilities because of the possibility,
however likely or unlikely, that we would be unable to deliver registered shares upon a future exercise of these warrants. The
required accounting for a warrant with an assumed "net cash settlement" provision under EITF 00-19 is to estimate the fair
value on the date of issuance and to record a liability equal to that value with subsequent changes in the fair value recorded as
income or expense at the end of each reporting period under EITF 00-19 . The amount we record as a liability under EITF 00-
19 is not, nor do we intend for it to be, an admission or stipulation of the amount that we would owe or be obligated to pay the
warrant holder in the event that we are unable to deliver registered shares to the warrant holder. In fact, we have made no
determination of the amount of liability, if any, that we would owe to the warrant holder in the event of such a breach.
RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards
(SFAS) No. 157, "Fair Value Measurements" ("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles (GAAP) and expands disclosures about fair value
measurements. SFAS No. 157 applies to other accounting pronouncements that require or permit fair value measurements, but
does not require any new fair value measurements. The adoption of SFAS No. 157 did not have a material effect on our
condensed consolidated results of operations and financial condition.
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