8x8 2004 Annual Report Download - page 46

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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
and services 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. The Company formed two subsidiaries in fiscal 2001, Centile, Inc. and Netergy Microelectronics, Inc.
The Company offers the Packet8 broadband voice over Internet protocol, or VoIP, and video communications
service, Packet8 Virtual Office service and videophone equipment and services. The Packet8 voice and video
communications service (Packet8) enables broadband internet users to add digital voice and video communications
services to their high-speed internet connection. Customers can choose a direct-dial phone number from any of the
rate centers offered by the service, and then use an 8x8-supplied terminal adapter to connect any telephone to a
broadband internet connection and make or receive calls from a regular telephone number. All Packet8 telephone
accounts come with voice mail, caller ID, call waiting, call waiting caller ID, call forwarding, hold, line-alternate, 3-
way conferencing, web access to account controls, and real-time online billing. In addition, 8x8 offers a videophone
for use with the Packet8 service.
In fiscal 2004 substantially all of the Company’s revenues were generated from the sale, license and provision of
VoIP products, services and technology. Prior to fiscal 2004, the Company was focused on its VoIP semiconductor
business (through its subsidiary Netergy Microelectronics, Inc.) and hosted iPBx solutions business (through its
subsidiary Centile, Inc.). In late fiscal 2003, the Company began to devote more of its resources to the promotion,
distribution and development of the Packet8 voice and video communications service than to its existing
semiconductor business or hosted iPBX solutions business. The Company completed several transactions during
fiscal 2004 to license and sell technology and assets of these businesses, including the sale of its hosted iPBX
research and development center in France, the sale and license of its next generation video semiconductor
development effort, and the license of technology and manufacturing rights for its VoIP semiconductor products to
other semiconductor companies. In addition, during January 2004, the Company announced the end of life of its
VoIP semiconductor products, and began accepting last time buy orders from customers. The Company continues
to own the voice and video technology related to the semiconductor and IP PBX businesses, utilizes this technology
in the Packet8 service offering, and continues to sell or license this technology when the opportunity is in its best
interest.
The Company’s fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in these notes to
the consolidated financial statements refers to the fiscal year ending March 31 of the calendar year indicated (for
example, fiscal 2004 refers to the fiscal year ended March 31, 2004).
LIQUIDITY
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 believes that current cash
and cash equivalents will be sufficient to finance the Company's operations for the next twelve months. However,
the Company continually evaluates its cash needs and may pursue additional equity or debt financing in order to
achieve the Company's overall business objectives. There can be no assurance that such financing will be available,
or, if available, at a price that is acceptable to the Company. Failure to generate sufficient revenues, raise additional
capital or reduce certain discretionary spending could have an adverse impact on the Company's ability to achieve
its longer term business objectives.