8x8 2011 Annual Report Download - page 38

Although we have achieved positive cash flows from operations in the fiscal year ended March 31, 2011, 2010 and 2009,
historical net losses and negative cash flows have been funded primarily through the issuance of equity securities and
borrowings. Based on our current expectations, we believe that our current cash and cash equivalents and short-term
investments, together with cash expected to be generated from future operations, will be sufficient to satisfy our expected
working capital and capital expenditure requirements for the next 12 months. Nevertheless, our future capital requirements
will depend on many factors, including the amount of revenue we generate, the timing and extent of spending to support
product development efforts, the expansion of sales and marketing activities, the timing of introductions of new services or
products, the costs to ensure access to our telecommunications services, the continuing market acceptance of our service and
products, the amount of future share repurchase programs, and the extent to which we use our cash to acquire other businesses.
However, if we do not meet our plan, we could be required, or might elect, to seek additional funding through public or private
equity or debt financing and additional funds may not be available on terms acceptable to us at all. We also might decide to
raise additional capital at such times and upon such terms as management considers favorable and in our interests, but we
cannot be assured that our capital-raising efforts will be successful.
Contractual Obligations
Future operating lease payments, capital lease payments and purchase obligations at March 31, 2011 for the next five years
were as follows (in thousands):
2012 2013 2014 2015 2016 Total
Capital leases $ 40 $ 7 $ - $ - $ - $ 47
Office leases 657 284 - - - 941
Purchase obligations
Third party customer support provider 2,158 - - - - 2,158
Third party network service providers 541 23 - - - 564
Open purchase orders 48 - - - - 48
$ 3,444 $ 314 $ - $ - $ - $ 3,758
Year Ending March 31,
In March 2007 and August 2009, we entered into a series of noncancelable capital lease agreements for office equipment
bearing interest at various rates. Assets under capital lease at March 31, 2011 totaled $156,000 with accumulated amortization
of $114,000.
On May 1, 2009, we entered into a three-year lease for a new headquarters facility in Sunnyvale, California that expires in
fiscal 2013. The facility leases include rent escalation clauses and require us to pay utilities and normal maintenance costs.
Rent expense is reflected in our consolidated financial statements on a straight-line basis over the term of the leases.
In the third quarter of 2010, we amended our contract with one of our third party customer support vendors containing a
minimum monthly commitment of approximately $430,000. The agreement requires a 150-day notice to terminate. At March
31, 2011, the total remaining obligation under the contract was $2.2 million.
We entered into contracts with multiple vendors for third party network service providers which expire on various dates in
fiscal 2012 and 2013. At March 31, 2011, the total remaining obligations under these contracts were $0.6 million.
At March 31, 2011, we had open purchase orders of $48,000, primarily related to inventory purchases from our contract
manufacturers. 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal while maximizing income without significantly
increasing risk. Some of the securities in which we invest may be subject to market risk. This means that a change in prevailing
interest rates may cause the principal amount of the investment to fluctuate. To minimize this risk, we may maintain our
portfolio of cash equivalents and investments in a variety of securities, including commercial paper, money market funds, debt
securities and certificates of deposit. The risk associated with fluctuating interest rates is limited to our investment portfolio
and we do not believe that a 10% change in interest rates would have a significant impact on our interest income.
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