8x8 2003 Annual Report Download - page 61

58
A reconciliation of the tax provision (benefit) to the amounts computed using the statutory U.S. federal income tax
rate of 34% is as follows (in thousands):
9. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its primary facility in Santa Clara, California under a non-cancelable operating lease agreement
that expires in November 2004. The Company also has leased facilities in Arizona, France and Canada. The facility
leases include rent escalation clauses, and require the Company to pay taxes, insurance, and normal maintenance
costs. At March 31, 2003, future minimum annual lease payments under non-cancelable operating leases, net of
sublease income, were as follows (in thousands):
Rent expense for the years ended March 31, 2003, 2002 and 2001, was $1.5 million, $1.5 million and $1.8 million,
respectively.
The Company subleases office space under operating lease agreements expiring at various dates through 2005. The
total future minimum rentals to be received under these noncancelable sublease agreements approximate $18,000 in
each of fiscal 2004, 2005 and 2006 and $12,000 in fiscal 2007.
Legal Proceedings
In November 2001, the Company settled a lawsuit that was filed against it in April 2001 in British Columbia,
Canada by Milinx Business Services, Inc. and Milinx Business Group, Inc (collectively, Milinx). The Company was
released of any further obligations to Milinx in exchange for returning a portion of the original license fee. As a
result of the settlement agreement, in fiscal 2002 the Company recognized $309,000 of previously deferred revenue
stemming from a March 2000 license agreement with Milinx.
The Company is also involved in various other legal claims and litigation that have arisen in the normal course of
the Company’s operations. While the results of such claims and litigation cannot be predicted with certainty, the
Company believes that the final outcome of such matters will not have a significant adverse effect on the
Year s Ended Marc h 3 1 ,
2003 2002 2001
Benefit at statutory rate................................................... $ (3,877) $ (3,090) $ (25,296)
State income taxes (benefit) before valuation
allowance, net of federal effect..................................... (684) 229 (3,909)
In-process research and development..........................
.
-- -- 1,551
N
on-deductible goodwill................................................. 523 259 --
Discount on issuance of Common Stock...................... -- 558 --
Research and development credits................................ -- (216) (1,162)
Change in valuation allowance......................................
.
4,030 2,302 29,027
N
on-deductible compensation.......................................
.
-- (4) 256
Foreign rate differences................................................... -- (30) 1
Other................................................................................... 8 7 (451)
$ -- $ 15 $ 17
YEAR ENDING MARCH 31,
2004..................................................................................................................
.
$544
2005..................................................................................................................
.
280
2006..................................................................................................................
.
37
Total minimum payments.................................................................... $ 861