Rosetta Stone 2010 Annual Report Download - page 66

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Table of Contents
period totaled $27.6 million. A decrease in amortization resulting from the full amortization of intangible assets in January 2009 was partially offset by
increases in depreciation on tangible assets associated with the expansion of the business. The increase in stock-based compensation expense was primarily
the result of $18.5 million in non cash expense associated with the issuance of common stock to key employees in April 2009. Additionally, a $10.3 million
increase in deferred revenue resulting from greater sales of subscription licenses contributed to net cash provided by operations.
Net cash provided by operating activities was $18.3 million for the year ended December 31, 2008. Net cash provided by operating activities was
primarily generated from net income as adjusted for depreciation and amortization and stock compensation expense. Net income totaled $13.9 million for the
year ended December 31, 2008. Depreciation, amortization and stock compensation expense for the period totaled $8.7 million. Increases in deferred revenue
resulting from greater sales of subscription licenses also contributed to net cash provided by operations; the increase represented $3.1 million for the year
ended December 31, 2008. As a result of the growth in our retail channel and institutional sales, accounts receivable increased by $16.5 million. This increase
in accounts receivable was offset in part by increases in net liabilities associated with the expansion of our business.
Net Cash Used In Investing Activities
Net cash used in investing activities was $14.9 million, $8.6 million, and $7.0 million for the years ended December 31, 2010, 2009 and 2008,
respectively. Our investing activities during these periods primarily related to the purchase of property and equipment associated with the expansion of our
information technology systems and our facilities as a result of our growth and international expansion, and the purchase of short-term investments.
Net Cash Used In Financing Activities
Net cash provided by financing activities was $3.4 million for the year ended December 31, 2010 compared to $32.0 million for the year ended
December 31, 2009. Net cash provided by financing activities during the year ended December 31, 2010 primarily related to net proceeds received from stock
option exercises. Net cash provided by financing activities during the year ended December 31, 2009 primarily related to $49.0 million in net proceeds from
our initial public offering, offset by the $9.9 million payment of the balance outstanding under our revolving credit facility with Wells Fargo and the
$7.9 million payment of taxes associated with the common stock grant to some of our key employees.
Net cash used in financing activities was $4.6 million for the year ended December 31, 2008. Net cash used in financing activities during this period was
primarily related to principal payments on our long-term debt. Additionally, for the year ended December 31, 2008, net cash used in financing activities also
included payments associated with our planned initial public offering.
We believe our current cash and cash equivalents, short term investments and funds generated from our operations will be sufficient to meet our working
capital and capital expenditure requirements through 2011. Thereafter, we may need to raise additional funds through public or private financings or increased
borrowings to develop or enhance products, to fund expansion, to respond to competitive pressures or to acquire complementary products, businesses or
technologies. If required, additional financing may not be available on terms that are favorable to us, if at all. If we raise additional funds through the issuance
of equity or convertible debt securities, the percentage ownership of our stockholders will be reduced and these securities might have rights, preferences and
privileges senior to those of our current stockholders. No assurance can be given that additional financing will be available or that, if available, such financing
can be obtained on terms favorable to our stockholders and us.
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