8x8 2009 Annual Report Download - page 43

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At March 31, 2009 and 2008, we had gross deferred tax assets of approximately $71.4 million and $72.1 million, respectively.
Because of uncertainties regarding the realization of deferred tax assets, we have applied a full valuation allowance as of
March 31, 2009 and 2008.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2009, we had $16.4 million of cash and cash equivalents. By comparison, at March 31, 2008, we had
$11.2 million in cash and cash equivalents, and $3.4 million in investments for a combined total of $14.6 million. We
currently have no borrowing arrangements. Our cash and cash equivalents balance increased $5.2 million and the combined
balance increased by $1.8 million during fiscal 2009. The increase in cash, cash equivalents and investments was primarily
attributable to a $2.3 million of cash from operating activities, and $0.4 million of proceeds from issuance of common stock
under employee stock plans, partially offset by $0.8 million of capital expenditures, as discussed below.
Net cash provided by operating activities for fiscal 2009 was $2.3 million, compared with $3.0 million provided by operating
activities for fiscal 2008.
The net cash provided by operating activities for fiscal 2009 resulted primarily from a net loss of $2.5 million, a $3.3 million
adjustment for stock compensation, which includes $2.4 million due to the acceleration of unvested employee stock options in
January 2009, a $1.3 million adjustment for depreciation, a $1.0 million reduction in accounts receivable related to the payment
by nationwide retailers and software licensing and royalty customers, a $0.8 million reduction in deferred cost of goods sold
primarily related to sell thru of equipment by retailers and net retailer returns, a $1.3 million increase in other current and
noncurrent liabilities primarily due to a license and settlement agreement, a $0.6 million provision for inventory primarily due
to $0.5 million of excess inventory related to our business services analog phone, a $0.4 million provision for doubtful
accounts primarily related to royalty revenue, and a $0.2 million write off of our legacy billing system recorded as other
adjustments to reconcile net loss to net cash provided by operating activities. This was reduced by a $1.4 million increase in
inventory due to the procurement of the new business IP phones launched in July 2008, timing of receipt of inventory and net
retailer returns, a reduction of $1.3 million due to payment of accrued sales tax, a net $0.2 million increase in accrued taxes, a
$0.9 million decrease in deferred revenue related to cash collections of $4.3 million from annual service plans in which the
customer pre-pays for 12 months of service offset by a $4.5 million recognition of deferred annual plan revenue, a $0.7 million
reduction related to sell thru of equipment by retailers and net retailer returns, and a $0.4 million increase in other current and
noncurrent assets primarily related to acquired product rights.
The net cash provided by operating activities for fiscal 2008 resulted primarily from a $1.0 million decrease in inventory due to
lower inventory levels of customer premise equipment (CPE), a $0.8 million increase in accrued taxes, a $1.7 million increase
in deferred revenue related to cash collections of $4.7 million from annual plan subscriptions primarily due to the transition of
a competitor's former customers to the 8x8 residential annual plan service offset by recognition of $3.1 million of annual plan
revenue, net of $0.7 million non-cash items including depreciation and amortization, stock compensation expense, and change
in fair value of warrant liability. This was reduced by a $1.2 million increase in accounts receivable primarily due to retailer
transactions.
Although we have achieved positive cash flows from operations in the fiscal year ended March 31, 2009 and 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.