8x8 2007 Annual Report Download - page 64

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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):
2007 2006 2005
(Restated) (Restated)
Benefit at statutory rate $ (3,376) $ (7,906) $ (5,287)
State income tax benefit before valuatio
n
allowance, net of federal effec
t
(580) (1,356) (907)
Research and development credits 250 (501) (45)
Change in valuation allowance 3,582 9,648 6,704
Income from change in fair value of warrant liabilit
y
(1,488) (353) (1,513)
Release of income taxes previously accrued - - (203)
Compensation/option differences (14) (9) (332)
Prior year loss carryforward reductio
n
797 261 1,216
Non-deductible compensatio
n
720 94 2
Foreign rate differences (2) (8) (6)
Othe
r
111 130 168
$- $ - $ (203)
Years Ended March 31,
Undistributed earnings of our foreign subsidiaries are indefinitely reinvested in foreign operations. No provision has been made
for taxes that might be payable upon remittance of such earnings, nor is it practicable to determine the amount of this liability.
6. COMMITMENTS AND CONTINGENCIES
Guarantees
Indemnifications
In the normal course of business, the Company indemnifies other parties, including customers, lessors and parties to other
transactions with the Company, with respect to certain matters. The Company has agreed to hold the other party harmless
against losses arising from a breach of representations or covenants or intellectual property infringement or other claims made
against certain parties. These agreements may limit the time within which an indemnification claim can be made and the
amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors.
It is not possible to determine the maximum potential amount of the Company’s exposure under these indemnification
agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each
particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on
the Company’s operating results, financial position or cash flows. Under some of these agreements, however, the Company’s
potential indemnification liability might not have a contractual limit.
Product Warranties
The Company accrues for the estimated costs that may be incurred under its product warranties upon revenue recognition.
Changes in the Company’s product warranty liability, which is included in cost of product revenues in the consolidated
statements of operations, during the years ended March 31, 2007 and 2006 were as follows (in thousands):
2007 2006
Balance at beginning of yea
r
$ 301 $ 187
Accruals for warranties 331 576
Settlements (270) (375)
Changes in estimates (39) (87)
Balance at end of yea
r
$ 323 $ 301
Years Ended March 31,
62