8x8 2003 Annual Report Download - page 30

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previously issued accounting guidance and disclosure requirements for certain guarantees. FIN45 requires an entity
to recognize an initial liability for the fair value of an obligation assumed by issuing a guarantee. The provision for
initial recognition and measurement of the liability will be applied on a prospective basis to guarantees
issued or modified after December 31, 2002. We do not expect FIN 45 to have a material impact on our
consolidated results of operations or financial position. We have included additional disclosures in accordance with
FIN 45 in the footnotes to the consolidated financial statements presented in Part II, Item 8 of this Report.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation, Transition and
Disclosure." SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. SFAS No. 148 also requires that disclosures of the
pro forma effect of using the fair value method of accounting for stock-based employee compensation be displayed
more prominently and in a tabular format. Additionally, SFAS No. 148 requires disclosure of the pro forma effect in
interim financial statements. The additional disclosure requirements of SFAS No. 148 are effective for fiscal years
ended after December 15, 2002. We will continue to account for stock-based compensation in accordance with
Accounting Principles Board Opinion No. 25. We have included additional disclosures in accordance with SFAS
No. 148 in the footnotes to the consolidated financial statements presented in Part II, Item 8 of this Report.
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, 2003, we had approximately $3.6 million in cash and cash equivalents and short-term investments.
The possibility that we will not be able to meet our obligations as and when they become due over the next twelve
months raises substantial doubt about our ability to continue as a going concern. Accordingly, we have been
pursuing, and will continue to pursue, the implementation of certain cost reduction strategies. Additionally, we are
seeking additional financing and evaluating financing alternatives in order to meet our cash requirements for fiscal
2004. 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
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 and they may experience significant dilution. 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 $4 million in the quarter ended March 31, 2003 and we ended the
period with an accumulated deficit of $149 million. In addition, we recorded operating losses of $12 million, $10.0
million and $74.5 million for the fiscal years ended March 31, 2003, 2002 and 2001, 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 significant revenue growth to achieve an operating profit. Given our history of fluctuating
revenues and operating losses, we cannot be certain that we will be able to achieve profitability on either a quarterly
or annual basis in the future.
We may not be able to maintain our listing on the Nasdaq SmallCap Market
In April 2002, we were notified by the Nasdaq staff that the bid price for our common stock must close at $1.00 per
share or more for a minimum of ten consecutive trading days during the ninety calendar day period ending July 9,
2002 or we might be delisted. As we were not in compliance under the Nasdaq National Market minimum bid price
listing standard by July 9, 2002, we transferred to and began trading on the Nasdaq SmallCap Market on July 26,
2002. As a result of our transfer to the Nasdaq SmallCap Market, our delisting determination was extended an
additional ninety days until October 7, 2002. Although our common stock did not achieve a closing bid price of