8x8 1998 Annual Report Download - page 44

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8X8, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 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 April 1999. 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 as of March 31, 1998 are as follows (in thousands):
Rent expense for all operating leases for the years ended March 31, 1998, 1997 and 1996 was $1,075,000, $717,000 and $767,000,
respectively.
From time to time, the Company receives notices from third parties asserting claims against the Company or threatening the commencement of
legal proceedings against the Company. While the outcome of any resulting settlement negotiations or legal proceedings cannot be predicted
with certainty, the management of the Company does not believe that any of the assertions of claims or threats received to date will have a
material adverse effect on the Company's business, operating results or financial condition.
39
YEAR ENDED MARCH 31,
-----------------------------
1998 1997 1996
------- ------- -------
(Benefit) provision at statutory rate......... $ 933 $(4,567) $(1,087)
State income taxes before valuation allowance,
net of federal benefit...................... 160 (344) (177)
Reversal of previously accrued income taxes
payable..................................... (1,018) -- --
Research and development credits.............. (600) (373) (243)
Valuation allowance........................... (995) 4,012 1,414
Non-deductible compensation................... 504 1,525 --
Other......................................... 34 (71) 113
------- ------- -------
(Benefit) provision for income taxes.......... $ (982) $ 182 $ 20
======= ======= =======
YEAR ENDED MARCH 31,
--------------------
1999........................................................ $1,038
2000........................................................ 80
------
Total minimum payments............................ $1,118
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