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© firaxissmooke dreamstime.com Embedded | October 10, 2014

Elektrobit Inc settles with IRS

Elektrobit Inc., a subsidiary of Elektrobit Corporation has entered into settlement with Internal Revenue Service (IRS) concerning tax treatment of impairment of receivables from TerreStar companies.
Elektrobit Inc., a subsidiary of Elektrobit Corporation has entered into settlement with Internal Revenue Service (IRS) concerning tax treatment of impairment of receivables from TerreStar companies booked in 2010. Initially IRS disallowed the deduction taken on Elektrobit Inc.'s federal income tax return. Elektrobit Inc. appealed the IRS decision to the IRS Office of Appeals that provided a proposal for a settlement. The parties have now accepted the proposal.

According to the proposal one half of the USD 13.3 million (EUR 10.5 million as per exchange rate of October 8, 2014) impairment booked in 2010, i.e. USD 6.6 million (EUR 5.2 million as per exchange rate of October 8, 2014) is deductible in 2010 taxation and another half is allowed for the tax year ended December 31, 2011 and/or subsequent years.

As a result from the approval of the proposal Elektrobit Inc. will pay IRS USD 1.4 million (EUR 1.1 million as per exchange rate of October 8, 2014) taxes including interests for fiscal year 2010 and at the same time will submit a carryback claim of USD 1,3 million (EUR 1.0 million as per exchange rate of October 8, 2014) for fiscal year 2011. The payment to IRS will happen on the fourth quarter of 2014 and carryback refund is estimated to be received at the latest by the end of 2015.

Elektrobit Inc. received on August 28, 2014 a cash payment of USD 1,075,000 (EUR 0.9 million as per exchange rate of October 8, 2014) as full and final satisfaction of its claim against TerreStar Networks Inc. (additional information provided in company's stock exchange release, published on August 29, 2014).

The settlement payment received in August formed the full and final satisfaction of Elektrobit Inc.'s laid and open claims against TerreStar companies in their reorganization cases. In consequence of receiving full and final settlement payment and finishing of tax appeal process, EB's activities related to TerreStar reorganization processes are expected to be concluded. EB will reverse the remaining EUR 0.3 million provision made for legal and consulting costs. The reversal of the provision and the EUR 0.9 million settlement payment will have together approximately EUR 1.2 million non-recurring positive effect on Elektrobit Corporation's third quarter 2014 operating result.

The above mentioned non-recurring items do not have effect on Elektrobit Corporation's financial outlook for 2014. EB will report the non-recurring items and tax items as part of its normal interim reporting.

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