8x8 2005 Annual Report Download - page 26

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LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2005, we had $22.5 million of cash and cash equivalents, $0.3 million in restricted cash, and
$9 million in investments in marketable securities for a combined total of $31.8 million. In comparison, at March
31, 2004, we had $13.2 million in cash and cash equivalents, $0.8 million in restricted cash and no investments for a
combined total of $14 million. We currently have no borrowing arrangements. Our cash and cash equivalents
balance increased $9.3 million and the combined balance increased by $17.8 million during fiscal 2005. The
increase was primarily attributable to $35.7 million of net proceeds from financing activities, partially offset by
$16.5 million used for operating activities, as discussed below. Our restricted cash balance decreased by $0.3
million, as adjusted for $0.3 million of restricted cash recorded on other assets on our consolidated balance sheet,
due to termination of agreements requiring letters of credit. The remaining amount is pledged as collateral for a
stand-by letter of credit issued by our primary bank.
Cash used in operations of $16.5 million in fiscal 2005 was primarily attributable to the net loss of $19.1 million,
adjusted for $0.2 million of non-cash depreciation and amortization, a $0.5 million increase in accounts receivable, a
$1.5 million increase in inventory and a $1.8 million increase in deferred cost of goods sold. Cash used in
operations was partially offset by a $2.1 million increase in deferred revenue, a $3.6 million increase in accounts
payable and a $0.5 million increase in accrued compensation and other accrued liabilities. The increase in accounts
receivable was primarily attributable to our development of the retail and distributor channels in fiscal 2005
combined with an increase in subscribers in fiscal 2005, and the increase in inventory was primarily attributable to
the growth of the Packet8 service and ramping of production for desktop terminal adapters. The increases in
deferred cost of goods sold and deferred revenue were primarily attributable to the growth in subscribers in fiscal
2005 and the retail and distributor channels that we did not have in fiscal 2004. The increase in accounts payable
was attributable to timing and an increase in payables for inventory and service provider costs.
Cash used in investing activities of $10.3 million for fiscal 2005 was primarily attributable to $1.6 million of
purchases of fixed assets and purchases of investments of $9.7 million, partially offset by a net $0.3 million decrease
in cash classified as restricted cash due to the termination of agreements requiring letters of credit and $0.6 million
of proceeds received from maturities of investments. The purchases of fixed assets were primarily attributable to
equipment required by the growth of the Packet8 subscriber base and expenditures for financial application and
customer relationship management software and implementation fees.
Cash provided by financing activities of approximately $36.2 million in fiscal 2005 consisted primarily of $35.7
million of net proceeds received from common stock offerings completed in June and October 2004 and March
2005, and $0.4 million of proceeds received from the sale of our common stock to employees through our employee
stock purchase and stock option plans.
Cash used in operations of $1.6 million in fiscal 2004 was primarily attributable to the net loss of $3 million,
adjusted for $1.3 million of stock compensation expense, the $790,000 gain on the sale of Centile Europe and
$565,000 of depreciation and amortization, a decrease in accrued compensation of $258,000, a decrease in warranty
liability of $234,000, a $249,000 decrease in other accrued liabilities, and a $91,000 decrease in other assets. Cash
used in operations was partially offset by a $682,000 decrease in accounts receivable, a $325,000 decrease in
inventory, and a $263,000 increase in accounts payable. Cash used in investing activities in fiscal 2004 was
primarily attributable to $800,000 of cash classified as restricted cash to support standby letters of credit with certain
vendors and proceeds from the sale of fixed assets of $79,000, partially offset by the receipt of $398,000 of net
proceeds from the sale of Centile Europe SA, and net sales of marketable equity securities and mutual funds of
$208,000. Cash provided by financing activities in fiscal 2004 consisted of $11.7 million of proceeds resulting
from the sale of common stock: i) to investors in private placement transactions in July and November 2003 (the
“Private Placements”), ii) through exercise of warrants issued in the Private Placements, and iii) to employees
through our employee stock option plans.