Overstock.com 2005 Annual Report Download - page 104

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Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
21. INCOME TAXES (Continued)
At December 31, 2004 and 2005, the Company had net operating loss carryforwards of approximately $50.5 million and $58.0
million, respectively, which may be used to offset future taxable income. An additional $14.4 million of net operating losses are
limited under Internal Revenue Code Section 382 to $799,000 a year. These carryforwards begin to expire in 2019.
The income tax benefit differs from the amount computed by applying the U.S. federal income tax rate of 35% to loss before
income taxes for the following reasons (in thousands):
Year ended December 31,
2003 2004 2005
U.S. federal income tax benefit at statutory rate $ 4,042 $ 1,589 $ 8,702
State income tax benefit, net of federal expense 372 148 847
Stock compensation expense (384 ) (127 ) (25 )
Other (192 ) 525 389
Unrecognized benefit due to valuation allowance (3,838 )(2,135 )(9,135 )
Income tax benefit $ — $ — $ —
22. RELATED PARTY TRANSACTIONS
As indicated in Note 13, the Company sold shares of mandatorily redeemable convertible preferred stock in March 2002, for
which a deemed dividend was recorded as a result of the beneficial conversion feature. The total deemed dividend recorded for the
year ended December 31, 2002 was $6.6 million, of which $1.0 million is attributable to preferred shares purchased by Haverford
Internet, $1.2 million is attributable to preferred shares purchased by members of the board of directors, and $1.5 million is
attributable to preferred shares purchased by family members of management.
On occasion, Haverford-Valley, L.C. (an entity owned by the Company's president) and certain affiliated entities make travel
arrangements for our executives and pay the travel related expenses incurred by our executives on Company business. In 2003, 2004,
and 2005 we reimbursed Haverford-Valley L.C. $236,000, $256,000, and $274,000, respectively, for these expenses.
F-34