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Table of Contents
estimated volatility of our common share price and the number of options that will be forfeited prior to vesting. Changes in these estimates and
assumptions can materially affect the determination of the fair value of share−based compensation and consequently, the related amount
recognized on our consolidated statements of operations. At June 30, 2006, there was $8.3 million of total unrecognized compensation cost
related to non−vested, share−based compensation arrangements. The cost is expected to be recognized over a weighted average period of 3.4
years.
Recent Accounting Pronouncements
In May 2005, the FASB issued Statement of Financial Accounting Standards, or SFAS, No. 154 (“SFAS 154”), “Accounting Changes and
Error Corrections,” which changes the requirements for the accounting and reporting of a change in accounting principle. SFAS 154 applies to all
voluntary changes in accounting principle as well as to changes required by an accounting pronouncement that does not include specific transition
provisions. SFAS 154 requires that changes in accounting principle be retrospectively applied. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005. We do not believe that the adoption of this statement will have a
material impact on our Consolidated Financial Statements.
In June 2006, the FASB issued FASB Interpretation, or FIN, No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes,” which
clarifies when tax benefits should be recorded in financial statements, requires certain disclosures of uncertain tax matters and provides guidance
on how any tax reserves should be classified in a balance sheet. FIN 48 is effective for fiscal years beginning after December 15, 2006. We do not
believe that the adoption of this interpretation will have a material impact on our Consolidated Financial Statements.
Results of Operations
The following table presents our historical operating results for the periods indicated as a percentage of revenue:
Year Ended June 30,
2006 2005 2004
As a percentage of revenue:
Revenue 100.0% 100.0% 100.0%
Cost of revenue 32.8% 40.2% 40.6%
Technology and development expense 10.3% 11.9% 14.5%
Marketing and selling expense 33.6% 35.6% 32.6%
General and administrative expense 10.9% 6.4% 6.8%
Loss on contract termination 0.0% 23.1% 0.0%
Income (loss) from operations 12.4% (17.2)% 5.5%
Other income (expenses), net 1.6% (0.1)% 0.2%
Interest expense 0.8% 0.4% 0.1%
Income (loss) from operations before income taxes 13.2% (17.7)% 5.6%
Income tax provision (benefit) 0.5% 0.1% (0.3)%
Net income (loss) 12.7% (17.8)% 5.9%
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