8x8 2016 Annual Report Download - page 86

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14. GAIN ON SETTLEMENT OF ESCROW CLAIM
In December 2013, the Company settled an escrow claim for indemnification with the sellers of Contactual, Inc. Under the terms of the settlement, the Company
recorded a gain of $0.6 million in other income, net, in the consolidated statement of operations for the year ended March 31, 2014. Under the terms of the
Contactual merger agreement and the escrow agreement, each indemnifying seller paid his, her or its pro rata share of the obligations owed to the Company on
January 29, 2014. Upon receipt of the cash on January 29, 2014, the Company released the remaining escrow account balance to the sellers of Contactual Inc.
15. PATENT SALE
In June 2012, the Company entered into a patent purchase agreement and sold a family of patents to a third party for approximately $12.0 million plus a future
payment of up to a maximum of $3.0 million based on future license agreements entered into by the third party purchaser. In August 2014 and February 2013, the
third party entered into two separate license agreements with its customers; therefore, the Company earned an additional $1.0 million each under the patent
purchase agreement for fiscal 2015 and 2013. Under the terms and conditions of the patent purchase agreement, the Company has retained certain limited rights to
continue to use the patents. The patent purchase agreement contains representations and warranties customary for transactions of this type.
16. DISCONTINUED OPERATIONS
On September 30, 2013, the Company completed the sale of its dedicated server hosting business to IRC Company, Inc. ("IRC") and, as a result, no longer
provides dedicated server hosting services. In the transaction, IRC purchased 100% of the stock of Central Host, Inc., which had been wholly owned by the
Company and all of the assets specific to the dedicated server hosting business.
The Company sold its dedicated server hosting business for total consideration of $3.0 million in cash, which was received on October 1, 2013.
The dedicated server hosting business has been reported as discontinued operations. The results of operations of these discontinued operations are as follows:
Years Ended March 31,
2016 2015 2014
Revenue $ - $ - $ 1,430
Operating expense - - 922
Income before income taxes - - 508
Provision for income taxes - - 188
Income from discontinued operations - - 320
Gain on disposal of discontinued operations,
net of income tax provision of $456 - - 596
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