8x8 2000 Annual Report Download - page 34

Interest Expense
Interest expense of $391,000 included interest charges associated with the convertible subordinated debentures issued in December 1999, as
well as the amortization of the related debt discount and debt issuance costs.
(Benefit) Provision for Income Taxes
The provision of $120,000 for the year ended March 31, 2000 represents certain foreign taxes. There was no tax provision for the year ended
March 31, 1999 due to the net losses incurred. The tax benefit for the year ended March 31, 1998 resulted from the reversal of approximately
$1.0 million of our income tax liability in the first quarter of fiscal 1998 upon notice from the Internal Revenue Service that it had reversed a
previously asserted deficiency related to the taxable year 1992.
At March 31, 2000, we had net operating loss carryforwards for federal and state income tax purposes of approximately $35.7 million and
$13.1 million, respectively, which expire at various dates beginning in 2005. In addition, at March 31, 2000, we had research and development
credit carryforwards for federal and state tax reporting purposes of approximately $1.7 million and $1.2 million, respectively. The federal credit
carryforwards will begin expiring in 2010 while the California credit will carryforward indefinitely. Under the ownership change limitations of
the Internal Revenue Code of 1986, as amended, the amount and benefit from the net operating losses and credit carryforwards may be
impaired or limited in certain circumstances.
At March 31, 2000, we had gross deferred tax assets of approximately $18.6 million. The weight of available evidence indicates that it is more
likely than not that we will not be able to realize our deferred tax assets and thus a full valuation reserve has been recorded at March 31, 2000.
Year 2000 Impact
We have not experienced any problems with our computer systems or our products relating to their inability to recognize appropriate dates
related to the year 2000. We are also not aware of any material problems with our clients or vendors. Accordingly, we do not anticipate
incurring material expenses or experiencing any material operational disruptions as a result of any year 2000 issues.
Liquidity and Capital Resources
As of March 31, 2000, we had cash and cash equivalents totaling $48.6 million, representing an increase of $32.8 million from March 31,
1999. We currently have no bank borrowing arrangements.
Cash used in operations of $4.1 million in fiscal 2000 reflected a net loss of $24.8 million, a decrease in deferred revenue of $3.4 million, and a
non-cash adjustment for a gain on sale of investments, net, of $1.7 million. Cash used in operations was partially offset by cash provided by a
decrease in accounts receivable of $3.5 million, a decrease in inventory of $2.5 million, and non-cash items, including depreciation and
amortization of $1.7 million, amortization of intangibles of $614,000, in-process research and development of $10.1 million, and discount on
issuance of common stock of $7.4 million. Cash provided by investing activities in fiscal 2000 is attributable to proceeds from the sale of an
investment of $1.9 million, offset by acquisitions of property and equipment of $1.7 million and cash paid for acquisitions, net, of $149,000.
Cash flows from financing activities in fiscal 2000 consisted primarily of proceeds from the sale of convertible subordinated debentures of $7.5
million and sales of the Company's common stock totaling $29.8 million, offset by debt issuance costs of $617,000. For the year, cash and cash
equivalents increased $32.8 million.
Cash used in operations of $10.4 million in fiscal 1999 reflected a net loss of $19.2 million, an increase in accounts receivable of $1.4 million,
and a decrease in accounts payable of $708,000. Cash used in operations was partially offset by cash provided by a decrease in inventory of
$8.8 million, an increase in deferred revenue of $1.6 million, and non-cash items, including a deferred compensation charge of $416,000 and
depreciation and amortization of $967,000. Cash used in investing activities in fiscal 1999 is primarily attributable to capital expenditures of
$1.8 million. Cash flows from financing activities in fiscal 1999 consisted primarily of net proceeds from the repayment of stockholders' notes
receivable and sales of the Company's common stock upon the exercise of employee stock options. For the year, cash and cash equivalents
decreased by $10.9 million.
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