8x8 2008 Annual Report Download - page 40

BENEFIT FROM INCOME TAXES
2008 2007 2006
Benefit from income taxes $ - $ - $ - $ - 0.0% $ - 0.0%
Percentage of total revenues 0.0% 0.0% 0.0%
2007 to 2008 2006 to 2007
(dollar amounts in thousands)
Year Ended March 31, Year-Over-Year Change
We had no provision for income taxes in any of the fiscal years ended March 31, 2008, 2007 and 2006.
At March 31, 2008, we had net operating loss carryforwards for federal and state income tax purposes of approximately $152.0
million and $97.6 million, respectively, that expire at various dates beginning in 2012 and continuing through 2028. In
addition, at March 31, 2008, we had research and development credit carryforwards for federal and state tax reporting purposes
of approximately $3.3 million and $2.9 million, respectively. The federal credit carryforwards will begin expiring in 2009
continuing through 2028, 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, 2008 and 2007, we had gross deferred tax assets of approximately $72.1 million and $73.2 million, respectively.
Because of uncertainties regarding the realization of deferred tax assets, we have applied a full valuation allowance as of
March 31, 2008 and 2007.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2008, we had $11.2 million of cash and cash equivalents and $3.4 million in investments in marketable
securities for a combined total of $14.6 million. By comparison, at March 31, 2007, we had $6.7 million in cash and cash
equivalents, and $5.2 million in investments for a combined total of $11.9 million. We currently have no borrowing
arrangements. Our cash and cash equivalents balance increased $4.5 million and the combined balance increased by $2.7
million during fiscal 2008. The increase in cash, cash equivalents and investments was primarily attributable to a $3.0 million
of cash from operating activities, including $1.2 million due to the sale of two patents, and $0.3 million of proceeds from
issuance of common stock under employee stock plans, partially offset by $0.7 million of capital expenditures, as discussed
below.
Although we have achieved positive cash flows from operations in the fiscal year ended March 31, 2008, historical net losses
and negative cash flows have been funded primarily through the issuance of equity securities and borrowings. We believe that
current cash, cash equivalents and investments will be sufficient to finance our operations for at least the next 12 months.
However, we 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 or terms
that are 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. In addition, any such
financing may be materially dilutive to our existing stockholders.
The following discussion of cash flows for the past three fiscal years provides information about our liquidity and changes in
financial condition during these periods.
Comparison of fiscal 2007 and 2008
Cash provided by operations of $3.0 million in fiscal 2008 compared with cash used by operations of $9.9 million in fiscal
2007, showed an improvement of $12.9 million. The decrease in cash used in operating activities was primarily due to a
decrease in the net loss of $10.0 million adjusted for non-cash items, including the change in the fair value of warrants of $1.6
million, depreciation and amortization of $0.1 million and stock-based compensation of $0.5 million.
Accounts receivable represented a use of cash of $1.2 million in fiscal 2008 compared with a use of cash of $0.1 million in
fiscal 2007. The increase in cash used by accounts receivable of $1.1 million in 2008 from the 2007 level was primarily due to
a $0.2 million increase with an existing retailer, royalty revenue of $0.3 million, shipment of equipment to new retailer of $0.2
million and signing of license agreement of $0.3 million.
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