8x8 2005 Annual Report Download - page 67

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For the purposes of the disclosure above, the fair value of each of the Company's option grants, excluding those
options issued under the Netergy and Centile Plans, has been estimated on the date of grant using the Black-Scholes
pricing model with the following assumptions:
The fair value of grants under the Netergy and Centile stock option plans, for purposes of the 2003 pro forma
disclosures, have also been estimated on the date of grant using the Black-Scholes pricing model using the weighted
average assumptions noted below. The expected volatility factors for the Netergy and Centile plans reflect the fact
that the underlying shares of Netergy and Centile are not publicly traded and therefore the Company's overall
volatility factor was reduced by 50% for these plans. The various risk free interest rates used in the computations
reflect the different rates in effect at the respective grant dates.
For the purpose of providing pro forma disclosures for the fiscal years during which the Purchase Plan was in effect,
the estimated fair value of stock purchase rights granted under the Purchase Plan were estimated using the Black-
Scholes pricing model with the following weighted-average assumptions:
Officer Bonus
In February 2005, the Board approved a bonus program for two of the Company's officers. Under the terms of the
bonus program, each of the officers will be entitled to receive 100,000 shares of common stock if the Company's
operations, excluding certain transactions, are cash flow positive on an operating basis for the quarter ending
September 30, 2005. In addition, each of the officers will be entitled to a cash bonus of $200,000 if the Company is
cash flow positive for the quarter ending September 30, 2005, as adjusted for the potential payment of such bonuses
subsequent to September 30, 2005.
Year Ended Mar c h 3 1 ,
2005 2004 2003
Expected volatility.................................................................
.
142% 174% 162%
Expected dividend yield........................................................ -- -- --
Risk-free interest rate............................................................
.
3.7% to 4.3% 2.5% to 3.6% 2.8% to 4.7%
Weighted average expected option term...........................
.
5 years 4.9 years 5.1 years
Weighted average fair value of options
granted..................................................................................
.
$2.11$2.02$0.45
Ye ar Ende d
March 31,
2003
Expected volatility.................................................................
.
81%
Expected dividend yield........................................................ 0.0%
Risk-free interest rate............................................................
.
2.8% to 4.8%
Weighted average expected option term...........................
.
5.16 years
Netergy weighted average fair value
of options granted...............................................................
.
$0.34
Centile weighted average fair value
of options granted...............................................................
.
$0.29
Ye ar Ende d
March 31, March 31,
2005 2003
Expected volatility.................................................................
.
141% 162%
Expected dividend yield........................................................ 0.0% 0.0%
Risk-free interest rate............................................................
.
1.79% 1.53%
Weighted average expected rights term............................. 0.5 years 1.25 years
Weighted average fair value of rights
granted..................................................................................
.
$0.33$0.30