8x8 2002 Annual Report Download - page 32

March 31, 2002 was $1.5 million. Upon adoption of these standards in the first quarter of fiscal 2003, the $11,000
remaining balance of the workforce intangible asset acquired in conjunction with our acquisition of Odisei will be
reclassified as goodwill. Goodwill will no longer be amortized, but will be subject to impairment tests on at least an
annual basis or upon the occurrence of triggering events, if earlier, to identify potential goodwill impairment and
measure the amount of goodwill impairment loss to be recognized, if any. An impairment loss is recognized when the
carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill. After a goodwill
impairment loss is recognized, the adjusted carrying amount of the goodwill will be its new accounting basis. The first
step of the goodwill impairment test should be performed by September 30, 2002. If an impairment is indicated, the
second step of the impairment test must be completed no later than March 31, 2003. We will be required to determine if
any reclassification of some portion of the goodwill to intangible assets will be required. We anticipate that our
operating segments will comprise our reporting units, and, accordingly, annual impairment tests would be performed at
the operating segment level. Based on acquisitions completed as of June 30, 2001, application of the goodwill non-
amortization provisions of SFAS No. 142 is expected to result in a decrease in operating expenses of approximately
$707,000 for fiscal 2003.
On October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-
Lived
Assets." SFAS No. 144 supercedes SFAS No. 121, "Accounting for the Impairment of Long-
Lived Assets and for
Long-Lived Assets to Be Disposed Of." SFAS No. 144 applies to all long-
lived assets (including discontinued
operations) and consequently amends Accounting Principles Board Opinion No. 30. SFAS No. 144 develops one
accounting model for long-lived assets that are to be disposed of by sale. SFAS No. 144 requires that long-
lived assets
that are to be disposed of by sale be measured at the lower of book value or fair value less cost to sell. Additionally,
SFAS No. 144 expands the scope of discontinued operations to include all components of an entity with operations that
(i) can be distinguished from the rest of the entity and (ii) will be eliminated from the ongoing operations of the entity
in a disposal transaction. SFAS No. 144 is effective for the Company for all financial statements issued in fiscal 2003.
The adoption of SFAS No. 144 is not expected to have a material impact on our results of operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
We will need to raise additional capital to support our operations, and failure to do so in a timely manner may
cause us to implement additional cost reduction strategies
As of March 31, 2002, we had approximately $12.4 million in cash and cash equivalents. Although we believe that our
current cash and cash equivalents will satisfy our expected working capital and capital expenditure requirements
through at least the next twelve months, our business may change in ways we do not currently anticipate requiring us to
raise additional funds to support our operations earlier than otherwise expected. Accordingly, we will be seeking
additional financing during the next twelve months in order to meet our cash requirements in fiscal 2004. We may also
seek to explore business opportunities, including acquiring or investing in complementary businesses or products that
will require additional capital from equity or debt sources. Additionally, the development and marketing of new
products could require a significant commitment of resources, which could in turn require us to obtain additional
financing earlier than otherwise expected. We may not be able to obtain additional financing as needed on acceptable
terms, or at all, which may require us to further reduce our operating costs and other expenditures, including additional
reductions of personnel and suspension of salary increases and capital expenditures. Alternatively, or in addition to
such potential measures, we may elect to implement other cost reduction actions as we may determine are necessary
and in our best interests, including the possible sale or cessation of certain of our business segments. Any such actions
undertaken might limit our opportunities to realize plans for revenue growth and we might not be able to reduce our
costs in amounts sufficient to achieve break-
even or profitable operations. If we issue additional equity or convertible
debt securities to raise funds, the ownership percentage of our existing stockholders would be reduced. New investors
may demand rights, preferences or privileges senior to those of existing holders of our common stock. If we are not
successful in these actions we may be forced to cease operations.
We have a history of losses and we are uncertain as to our future profitability
We recorded an operating loss of approximately $10.0 million in the fiscal year ended March 31, 2002 and we ended
the period with an accumulated deficit of $137.3 million. In addition, we recorded operating losses of $74.5 million and
$27.1 million for the fiscal years ended March 31, 2001 and 2000, respectively. We expect that we will continue to
incur operating losses for the foreseeable future, and such losses may be substantial. We will need to generate