8x8 1999 Annual Report Download - page 35

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and promotion of the Company's ViaTV videophone product line.
In April 1999, the Company announced that it would cease production of the ViaTV videophone product line and withdraw from its
distribution channels over the next several quarters. As a result, the Company expects decreases in the expenses associated with promoting the
ViaTV videophone product line.* However, the Company will likely need to increase sales and marketing personnel to support the IP
telephony and video monitoring markets.* As a result, future selling, general and administrative costs may vary both in absolute dollars and as
a percentage of total revenues.*
The non-cash compensation expense recognized on certain stock option grants and charged to selling, general and administrative decreased to
$159,000 in fiscal 1999 from $741,000 in fiscal 1998 and $3.1 million in fiscal 1997.
Other Income, Net
Other income, net, consists primarily of interest earned on cash equivalents and short-term investments. In fiscal 1999, 1998 and 1997, other
income, net, was approximately $1.0 million, $1.5 million, $120,000, respectively. Compared to fiscal 1998, the decrease in interest income
earned in fiscal 1999 is due primarily to lower average cash equivalents and short-term investment balances as compared to fiscal 1998.
(Benefit) Provision for Income Taxes
resulted from the reversal of approximately $1.0 million of the Company's income tax liability in the first quarter of fiscal 1998 upon notice
from the Internal Revenue Service that it had reversed a previously asserted deficiency related to the taxable year 1992.
At March 31, 1999, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $19.9
million and $7.1 million, respectively, which expire at various dates beginning in 2005. In addition, at March 31, 1999, the Company had
research and development credit carryforwards for federal and state tax reporting purposes of approximately $2.4 million which begin expiring
in 2009. Under the ownership change limitations of the Internal Revenue Code of 1986, as amended, the amount and benefit from the net
operating losses and credit carryforwards may be impaired or limited in certain circumstances.
At March 31, 1999, the Company had deferred tax assets of approximately $15.5 million. The weight of available evidence indicates that it is
more likely than not that the Company will not be able to realize its deferred tax assets and thus a full valuation reserve has been recorded at
March 31, 1999.
Year 2000
Many currently installed computer systems and software products are coded to accept only two digit entries in the date code field. As the Year
2000 approaches, these code fields will need to accept four digit entries to distinguish years beginning with "19" from those beginning with
"20." The Company is assessing the readiness of its products, internal computer systems, and third-party equipment and software utilized by
the Company to handle Year 2000 issues. Based upon the Company's assessments, all of the Company's products are Year 2000 compliant.
With regard to the Company's internal computer systems, the Company completed its implementation of an enterprise-wide database and
information management system that is Year 2000 compliant during the quarter ended March 31, 1999. The total cost of the system
implementation project was approximately $1.6 million. The Company does not believe that the incremental project cost
* This statement is a forward looking statement reflecting current expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. See "Manufacturing" commencing on page 15, "Competition" commencing on
page 13 and "Factors That May Affect Future Results" commencing on page 17 for a discussion of certain factors that could affect future
performance.
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