LIQUIDITY AND CAPITAL RESOURCES
From inception through our initial public offering in August 1999, we financed
our operations primarily through approximately $64.6 million in private sales of
mandatorily redeemable preferred stock, all of which automatically converted to
common stock upon consummation of our initial public offering on August 16,
1999. At December 31, 1999, we had cash and cash equivalents of $21.6 million,
short-term investments of $18.0 million and working capital of $33.2 million.
We have had significant negative cash flows from operating activities to date.
Net cash used in operating activities for fiscal years 1999 and 1998 were $15.9
million and $16.6 million, respectively. Net cash used in operating activities
in each of these periods was primarily the result of significant expenditures
for product development, sales and marketing and infrastructure expenses. Our
net accounts receivable increased $0.3 million, to $6.5 million at December 31,
1999 from $6.2 million at December 31, 1998. This increase was primarily
attributable to increased customer sales in the fourth quarter of 1999.
Net cash used in investing activities consists primarily of the purchase of
short-term investments, specifically three to six month government securities
and capital expenditures for computer equipment, purchased software, office
equipment, furniture, fixtures and leasehold improvements. Capital expenditures
for property and equipment for the year ended December 31, 1999 aggregated $4.4
The increase in cash and cash equivalents and working capital at December 31,
1999 was largely the result of the receipt of proceeds from our initial public
offering in August 1999 in the amount of $47.1 million.
As of December 31, 1999, we also had commitments under noncancelable operating
leases of $57.7 million and under noncancelable capital leases of $1.0 million.
UGO Networks is obligated to pay to us $23.9 million of our $57.7 million
operating lease obligation pursuant to a sublease agreement. See Notes 12 and 13
of Notes to Consolidated Financial Statements.