8x8 2007 Annual Report Download - page 26

corresponding increase in our liabilities for such fiscal quarter, in accordance with EITF 00-19, resulting in a reduction of our
stockholders’ equity on our balance sheet for such fiscal quarter and a decrease in net income on our income statement for such
fiscal quarter. If the fair value at the end of any fiscal quarter decreases, we will recognize a corresponding decrease in
expense for such fiscal quarter, as well as reflect a corresponding decrease in our liabilities for such fiscal quarter, in
accordance with EITF 00-19, resulting in an increase of our stockholders’ equity on our balance sheet for such fiscal quarter
and increase in net income on our income statement for such fiscal quarter. The amount we record as a liability under EITF
00-19 is not, nor do we intend for it to be an admission or stipulation of the amount that we would owe or be obligated to pay
the warrant holder in the event of an actual breach by us of the warrant terms. In fact, we have made no determination of the
amount of liability, if any, that we would owe to the warrant holder in the event of such a breach.
We may need to raise additional capital to support our future operations.
As of March 31, 2007, we had cash and cash equivalents and investments of approximately $11.9 million. Unless we achieve
and maintain profitability in the future, we will need to raise additional capital. We may not be able to obtain such additional
financing as needed on acceptable terms, or at all, which may require us to reduce our operating costs and other expenditures,
including reductions of personnel and capital expenditures. 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.
Our stock price has been highly volatile.
The market price of the shares of our common stock has been and is likely to continue to be highly volatile. It may be
significantly affected by factors such as:
• actual or anticipated fluctuations in our operating results;
• announcements of technical innovations;
• future legislation or regulation of the Internet and/or VoIP;
• loss of key personnel;
• new entrants into the VOIP service marketplace, including cable and incumbent telephone companies and other well-
capitalized competitors;
• new products or new contracts by us, our competitors or their customers;
• the perceived or real impact of events that negatively affect our direct competitors; and
• developments with respect to patents or proprietary rights, general market conditions, changes in financial estimates
by securities analysts, and other factors which could be unrelated to, or outside of, our control.
The stock market has from time to time experienced significant price and volume fluctuations that have particularly affected
the market prices for the common stocks of technology companies and that have often been unrelated to the operating
performance of particular companies. These broad market fluctuations may adversely affect the market price of our common
stock. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation
has often been initiated against the issuing company. If our stock price is volatile, we may also be subject to such litigation.
Such litigation could result in substantial costs and a diversion of management's attention and resources, which would disrupt
business and could cause a decline in our operating results. Any settlement or adverse determination in such litigation would
also subject us to significant liability.
We may not be able to maintain our listing on the NASDAQ Capital Market.
Our common stock trades on the NASDAQ Capital Market, which has certain compliance requirements for continued listing of
common stock. We have in the past been subject to delisting procedures due to a drop in the price of our common stock. If our
minimum closing bid price per share falls below $1.00 for a period of 30 consecutive trading days in the future, we may again
be subject to delisting procedures. As of the close of business on June 15, 2007, our common stock had a closing bid price of
approximately $1.39 per share. We must also meet additional continued listing requirements contained in NASDAQ
Marketplace Rule 4310(c)(2)(b), which requires that we have a minimum of $2,500,000 in stockholders' equity or $35,000,000
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