8x8 1999 Annual Report Download - page 37

Cash used in operations of $6.5 million in fiscal 1998 reflected a $3.5 million increase in accounts receivable, a $11.6 million increase in
inventory, and a $522,000 increase in prepaid expenses and other assets. Cash used in operations was partially offset by net income of $3.7
million, increases of $2.1 million in deferred revenue, $1.2 million in accounts payable, $519,000 in accrued compensation, and noncash items,
including a deferred compensation charge of $1.3 million and depreciation and amortization of $901,000. Cash used in investing activities for
fiscal 1998 was primarily attributable to capital expenditures of approximately $1.0 million. Cash flows from financing activities in fiscal 1998
consisted primarily of $24.7 million in net proceeds from the sale of the Company's common stock in its initial public offering. For the year,
cash and cash equivalents increased by $18.0 million.
Cash used in operations of $4.3 million in fiscal 1997 reflected a net loss of $13.6 million, and a decrease in accounts payable of $4.2 million.
Cash used in operations was partially offset by cash provided by decreases in inventory and accounts receivable of $6.1 million and $2.6
million, respectively, and noncash items, including a deferred compensation charge of $4.5 million and depreciation and amortization of
$873,000. Cash provided by investing activities for fiscal 1997 was primarily attributable to net sales of short-term investments of $5.2 million
which was offset by capital expenditures of approximately $691,000. Cash flows from financing activities in fiscal 1997 consisted primarily of
proceeds from the sales of convertible noncumulative preferred stock and sales of common stock upon the exercise of stock options,
respectively. For the year, cash and cash equivalents increased by $4.1 million.
The Company believes that it will be able to fund planned expenditures and satisfy its cash requirements for at least the next twelve months
from cash flow from operations, if any, and existing cash balances. As of March 31, 1999, the Company had approximately $15.8 million in
cash and cash equivalents. However, the Company currently estimates that it will be required to raise additional financing at some point during
calendar year 2000.* The Company will be evaluating financing alternatives prior to that time. There also can be no assurance that the
Company will not seek to exploit business opportunities that will require it to raise additional capital from equity or debt sources to finance its
growth and capital requirements. In particular, the development and marketing of new products could require a significant commitment of
resources, which could in turn require the Company to obtain additional financing earlier than otherwise expected. There can be no assurance
that the Company will be able to obtain additional financing as needed on acceptable terms or at all.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company derives a significant portion of its revenues from customers in Europe and Asia. In order to reduce the risk from fluctuation in
foreign exchange rates, the majority of the Company's sales are denominated in U.S. dollars. In addition, all of the Company's arrangements
with its semiconductor foundry and assembly vendors, and with its subcontract manufacturers for its ViaTV and Video Monitoring systems, are
denominated in U.S. dollars. The Company also maintains a sales office in London, England, and as such the Company is exposed to market
risk from changes in exchange rates. The Company has not entered into any currency hedging activities. To date, the exposure to the Company
related to exchange rate volatility has not been significant, however, there can be no assurance that there will not be a material impact in the
future.
The Company also invests in certain money market and bond mutual funds. These securities, like all fixed income instruments, are subject to
interest rate risk and will decline in value if market interest rates increase. Consequently, the Company is exposed to fluctuations in rates on
these investments. All of the investments have been classified as available-for-sale at March 31, 1999. Unrealized losses on available-for-sale
investments were $193,000 at March 31, 1999. Realized losses during fiscal 1999 on such investments were not significant.
* This statement is a forward looking statement reflecting current expectations. There can be no assurance that the Company's actual future
performance will meet the Company's current expectations. See "Manufacturing" commencing on page 15, "Competition" commencing on
page 13 and "Factors That May Affect Future Results" commencing on page 17 for a discussion of certain factors that could affect future
performance.
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