8x8 2011 Annual Report Download - page 37

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35
At March 31, 2011, we had net operating loss carryforwards for federal and state income tax purposes of approximately $153.4
million and $89.9 million, respectively, that expire at various dates beginning in 2012 and continuing through 2031. In
addition, at March 31, 2011, we had research and development credit carryforwards for federal and state tax reporting purposes
of approximately $1.5 million and $2.7 million, respectively. The federal credit carryforwards will begin expiring in 2021
continuing through 2031, while the California credit will carry forward 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, 2011 and 2010, we had gross deferred tax assets of approximately $65.5 million and $68.7 million, respectively.
Because of uncertainties regarding the realization of deferred tax assets, we have applied a full valuation allowance as of
March 31, 2011 and 2010.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2011, we had $18.4 million of cash and cash equivalents and investments. By comparison, at March 31, 2010,
we had $18.1 million in cash and cash equivalents. We currently have no borrowing arrangements.
2010 to 2011
Net cash provided by operating activities for fiscal 2011 was $8.6 million, compared with $2.5 million provided by operating
activities for fiscal 2010. Cash used in or provided by operating activities has historically been affected by:
• the amount of net income;
• sales of subscriptions;
• changes in working capital accounts, particularly in deferred revenue due to timing of annual plan renewals;
• add-backs of non-cash expense items such as depreciation and amortization; and
• the expense associated with stock-based awards.
Net cash used in investing activities was $5.4 million in fiscal 2011, compared with $0.9 million used in investing activities in
fiscal 2010. The increase in cash used in investing activities during fiscal 2011 is primarily related to the acquisition of
investments ($2.0 million), the acquisition of Central Host in May 2010 ($1.0 million), a strategic investment in Stonyfish in
April 2010 ($0.3 million) and the purchase of additional equipment ($2.1 million) related to the build-out of our new East
Coast data center and growth in our data centers on the West Coast for voice and managed hosting services.
Net cash used in financing activities was $4.8 million in fiscal 2011, compared with $0.1 million provided by financing
activities in fiscal 2010. Our financing activities for fiscal 2011 used cash of $7.7 million for the repurchase of shares of
common stock under our share repurchase plan and $0.5 million for the buyout of employee stock options under the existing
provisions of our 1996 Stock Plan and 1999 Nonstatutory Stock Option Plan. The use of cash in financing activities in fiscal
2011 was partially offset by $3.4 million in cash provided by the issuance of common stock under our Purchase Plans, the
issuance of shares related to the exercise of warrants, and the issuance of restricted shares.
2009 to 2010
Net cash provided by operating activities for fiscal 2010 was $2.5 million, compared with $2.3 million provided by operating
activities for fiscal 2009. The increase in cash flow was primarily due to a decline in third party network service expenses and a
decline in stock-based compensation expense, offset partially by discounting of equipment sold to business service customers
during fiscal 2010.
Net cash used in investing activities was $0.9 million in fiscal 2010, compared with $2.6 million provided by investing
activities in fiscal 2009. The decrease in cash flow from investing activities during fiscal 2010 is primarily related to the
investment of operating cash balances.
Our financing activities for fiscal 2010 provided cash of $0.4 million from the issuance of common stock under our Purchase
Plans which was offset by $0.2 million used to repurchase shares of common stock under our share repurchase plan. Our
financing activities for fiscal 2009 provided cash of $0.4 million from the issuance of common stock under the Employee Stock
Purchase Plan.