8x8 2004 Annual Report Download - page 26

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As of March 31, 2003, we had cash and cash equivalents approximating $3.4 million, compared to $12.4 million at
March 31, 2002. Cash used in operations of $8.8 million in fiscal 2003 primarily resulted from the net loss of $11.4
million, a $249,000 decrease in accrued compensation, a $1.9 million decrease in deferred revenue, and a $71,000
increase in accounts receivable. Cash used in operations was partially offset by a $298,000 decrease in inventory and
non-cash items, including depreciation and amortization of $1.8 million, $2.3 million for the non-cash portion of
restructuring and asset impairment charges, and $83,000 related to the provision for inventory. Cash used in
investing activities in fiscal 2003 was attributable to purchases of short-term investments of $208,000 and capital
expenditures of $137,000, partially offset by proceeds from the sale of equipment of $42,000. Cash provided by
financing activities during fiscal 2003 consisted of proceeds of $89,000 resulting from the sale of our common stock
to employees through our employee stock purchase and stock option plans.
As of March 31, 2002, we had cash and cash equivalents approximating $12.4 million, compared to $24.1 million at
March 31, 2001. Cash used in operations of $7.9 million in fiscal 2002 reflected a net loss of $9.1 million, a
decrease in accounts payable of $839,000, a decrease in accrued compensation of $610,000, a decrease of $579,000
in other accrued liabilities, a $3.5 million decrease in deferred revenue and a non-cash extraordinary gain of
$779,000 due to redemption of the convertible subordinated debentures. Cash used in operations was partially offset
by a decrease in accounts receivable of $1.7 million, a $501,000 decrease in inventory, a $1.6 million decrease in
other current assets, and non-cash items including depreciation and amortization of $3.9 million. Cash provided by
investing activities in fiscal 2002 was attributable to proceeds from the sale of an investment in marketable equity
securities of $543,000 and proceeds from the sale of equipment of $116,000, partially offset by capital expenditures
of $172,000. Cash used in financing activities during fiscal 2002 consisted of the $4.6 million payment associated
with the redemption of the convertible subordinated debentures and certain costs incurred in connection with the
redemption, offset partially by proceeds of $335,000 resulting from the sale of our common stock to employees
through our employee stock purchase and stock option plans.
At March 31, 2004, we had open purchase orders related to our contract manufacturers and other contractual
obligations of approximately $2.6 million primarily related to inventory purchases. These purchase commitments
are reflected in our consolidated financial statements once goods or services have been received or at such time
when we are obligated to make payments related to these goods or services. At March 31, 2004, future minimum
annual lease payments under noncancelable operating leases, net of sublease income, were as follows (in thousands):
YEAR ENDING MARCH 31,
2005..................................................................................................................
.
216
2006..................................................................................................................
.
2
Total minimum payments.................................................................... $ 218
We have sustained net losses and negative cash flows from operations since fiscal 1999 that have been funded
primarily through the issuance of equity securities and borrowings. Management believes that current cash and cash
equivalents will be sufficient to finance our operations for the next twelve months. However, continually evaluate
our cash needs and may pursue additional equity or debt financing in order to achieve our overall business
objectives. There can be no assurance that such financing will be available, or, if available, at a price that is
acceptable to us. Failure to generate sufficient revenues, raise additional capital or reduce certain discretionary
spending could have an adverse impact on our ability to achieve our longer term business objectives.
RELATED PARTY TRANSACTIONS
During the fourth quarter of fiscal 2000, we sold 3.7 million shares of its common stock to STMicroelectronics NV
(STM) at a purchase price of $7.50 per share and received net proceeds of $27.7 million. In December 2003, STM’s
representative on our Board resigned and STM subsequently began to sell on the open market shares of our common
stock that it was holding. As a result, STM ceased to be a related party of the Company as of December 31, 2003.
During the first nine months of fiscal 2004, we purchased approximately $150,000 of semiconductors from a
subsidiary of STM and we paid a subsidiary of STM $237,500 for non-recurring engineering services. During fiscal
2003, such purchases approximated $550,000. As of March 31, 2003, we had recorded liabilities to STM of
$392,000 for semiconductor purchases and purchase commitments and engineering services.
In March 2002, 8x8’s board of directors (the Board) authorized us to open securities trading accounts with two