8x8 2003 Annual Report Download - page 48

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8X8, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
8x8, Inc., or 8x8, and its subsidiaries (collectively, the Company) develop and market communication technology
for internet protocol or, IP, telephony and video applications. The Company was incorporated in California in
February 1987, and in December 1996 was reincorporated in Delaware. In August 2000, the Company changed its
name from 8x8, Inc. to Netergy Networks, Inc. The Company changed its name back to 8x8, Inc. in July 2001.
During the fiscal year ended March 31, 2001, 8x8 formed two subsidiaries, Netergy Microelectronics, Inc. (Netergy)
and Centile, Inc. (Centile) and reorganized its operations more clearly along its three product lines.
• Within the parent company, 8x8 offers the Packet8 service that enables broadband internet users to add digital
telephone service to their high-speed internet connection. In addition, 8x8 offers videophones for use on both
traditional telephony networks and in conjunction with the Packet8 service;
• Netergy provides voice and video semiconductors and related communication software to original equipment
manufacturers (OEMs) of telephones, terminal adapters, and other edge devices and to other semiconductor
companies. Netergy's technologies are used to make IP telephones and to voice-enable cable and digital
subscriber line modems, wireless devices, and other broadband technologies; and
• Centile develops and markets hosted iPBX solutions that allow service providers to offer to small and medium-
sized businesses over broadband networks the features and functions that a user commonly expects to find in a
typical business phone system. A hosted iPBX solution is a software application that implements the
functionality of a business phone system over the same data connection that a business uses for connection to
the internet. The phone system software runs on servers that are located at a central data center so that the only
phone system equipment that is required at the customer site are telephones. The phone system can also be
accessed and controlled from any web browser on the internet.
LIQUIDITY
The possibility that the Company will not be able to meet its obligations as and when they become due over the next
twelve months raises substantial doubt about the Company’s ability to continue as a going concern. Accordingly, the
Company has been pursuing, and will continue to pursue, the implementation of certain cost reduction strategies.
Additionally, the Company plans to seek additional financing and evaluate financing alternatives during the next
twelve months in order to meet its cash requirements for fiscal 2004. The Company has sustained net losses and
negative cash flows from operations since fiscal 1999 that have been funded primarily through the issuance of equity
securities and borrowings. Management expects to experience negative cash flows for the foreseeable future and
such losses may be substantial. There is no assurance that the Company will be able to obtain financing on terms
favorable to the Company, or at all. Failure to increase revenues, to manage net operating expenses and to raise
additional financing through public or private equity financing or other sources of financing may result in the
Company not achieving its longer term business objectives. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
FISCAL YEAR
Effective beginning in fiscal 2001, the Company changed its fiscal year from a year ending on the Thursday closest
to March 31 to a year ending on March 31. Fiscal 2001 was 52 weeks and 2 days, while fiscal 2002 and fiscal 2003
were each 52 weeks.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of 8x8 and its subsidiaries. All material intercompany
accounts and transactions have been eliminated.