8x8 2011 Annual Report Download - page 55

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The Company's income (loss) before income taxes included $3,000, $38,000 and $38,000 of foreign subsidiary income for the
fiscal years ended March 31, 2011, 2010 and 2009, respectively.
Deferred tax assets were comprised of the following (in thousands):
2011 2010
Research and development credit carryforwards $ 2,196 $ 2,517
Net operating loss carryforwards 57,484 57,714
Inventory valuatio
n
133 95
Reserves and allowances 1,392 1,817
Fixed assets and intangibles 4,279 6,548
65,484 68,691
Valuation allowance (65,484) (68,691)
Total $ - $ -
March 31,
Because of uncertainties regarding the realization of deferred tax assets, management has applied a full valuation allowance as
of March 31, 2011 and 2010.
At March 31, 2011, the Company had net operating loss carryforwards for federal and state income tax purposes of
approximately $153.4 million and $89.9 million, respectively, which expire at various dates beginning in 2012 and continuing
through 2031. The net operating loss carryforwards include approximately $10.0 million resulting from employee exercises of
non-qualified stock options or disqualifying dispositions, the tax benefits of which, when realized, will be accounted for as an
addition to additional paid-in capital rather than as a reduction of the provision for income taxes. In addition, at March 31,
2011, the Company had research and development credit carryforwards for federal and state tax reporting purposes of
approximately $1.5 million and $2.7 million, respectively. The federal credit carryforwards will expire at various dates
beginning in 2021 and continuing through 2031, while the California credits will carry forward indefinitely.
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):
2011 2010 2009
Tax provision (benefit) at statutory rate $ 2,226 $ 1,320 $ (835)
State income taxes before valuation allowance,
net of federal effec
t
372 298 20
Research and development credits (128) (112) (100)
Change in valuation allowance (2,147) (1,536) 395
Income from change in fair value of warrant liabilit
y
(57) 50 (107)
Compensation/option differences (291) (20) (5)
Non-deductible compensation 75 51 674
Othe
r
5 (48) 3
$55 $ 3 $ 45
Years Ended March 31,
53