8x8 1999 Annual Report Download

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8X8 INC /DE/
FORM 10-K
(Annual Report)
Filed 05/24/99 for the Period Ending 03/31/99
Address 3151 JAY STREET
SANTA CLARA, CA 95054
Telephone 4087271885
CIK 0001023731
Symbol EGHT
SIC Code
4813 - Telephone Communications, Except Radiotelephone
Industry Communications Services
Sector Services
Fiscal Year 03/31
http://www.edgar-online.com
© Copyright 2009, EDGAR Online, Inc. All Rights Reserved.
Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use.

Table of contents

  • Page 1
    .../ FORM 10-K (Annual Report) Filed 05/24/99 for the Period Ending 03/31/99 Address Telephone CIK Symbol SIC Code Industry Sector Fiscal Year 3151 JAY STREET SANTA CLARA, CA 95054 4087271885 0001023731 EGHT 4813 - Telephone Communications, Except Radiotelephone Communications Services Services 03/31...

  • Page 2
    ...INCORPORATION OR ORGANIZATION) 77-0142404 (IRS EMPLOYER IDENTIFICATION NO.) 2445 MISSION COLLEGE BLVD. SANTA CLARA, CA 95054 (408) 727-1885 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) SECURITIES REGISTERED PURSUANT TO SECTION...

  • Page 3
    DOCUMENT Proxy Statement for the 1999 Annual Meeting of Stockholders to be held on July 15, 1999 LOCATION IN FORM 10-K Part III

  • Page 4
    8X8, INC. INDEX PAGE ---PART I Item 1. Business...Item 2. Properties...Item 3. Legal Proceedings...Item 4. Submission of...Financial Disclosure...PART III Item 10. Directors and Executive Officers of the Registrant...Item 11. Executive Compensation...Item 12. Security Ownership of Certain Beneficial ...

  • Page 5
    ..., multimedia compression algorithms, network protocols and embedded system design. These products may be used in applications including voice-over-IP (VoIP), video monitoring and streaming, and videoconferencing. The company markets its products mainly to original equipment manufacturers...

  • Page 6
    ... lines to an IP network. The Company's VoIP products target OEM manufacturers of telephony equipment such as cable and DSL modems for residential applications and PBX equipment for business applications. The Company has recently organized into two business units. The first business unit, Broadband...

  • Page 7
    ...), long distance carriers and national public telephone companies. In contrast to voice networks, data networks, such as the Internet or the corporate LAN, utilize a "packet-switched" topology in which information between two communicating terminals (e.g. a PC downloading a page from a web server...

  • Page 8
    ...far has been to reduce the charges for long-distance voice calls, the ultimate success of IP communications will depend on its ability to provide services and features that exceed the capability of switched-circuit networks. These services and features will leverage the connectivity, scalability and...

  • Page 9
    ... semiconductor for - LAN audio communication systems IP phone calls. - Cable modem audio communication systems - DSL audio communication systems - Internet phone calls Symphony VoIP Module 4-line VoIP gateway for broadband - Cable modem peripheral device networks for IP telephony - DSL peripheral...

  • Page 10
    ... the audio codec, DTMF detection/ generation and echo cancellation routines. - Symphony -- The Symphony VoIP Module, announced in April 1999, is a four-line, VoIP gateway designed to be used in a variety of applications including telephony over cable and DSL networks as well as the emerging IP-PBX...

  • Page 11
    variety of residential applications. A black box about the size and shape of a video cassette tape, the RSM-1500 module connects to a standard telephone line and up to three in-store cameras (or to a multiplexer to connect additional cameras) and is fully compatible with existing CCTV systems. Using...

  • Page 12
    ..., complete documentation, video processor software and board-level software diagnostics. Application Software The Company sells its semiconductors with its proprietary application specific software to address the specific system requirements of various international audio, video and other telephony...

  • Page 13
    ... password. The ViaTV videophones are controlled through the touch-tone keypad of the user's telephone and menu driven instructions that appear on the video display screen. The VC105 videophone requires the use of a television as the display, while the VC150 videophone includes a built-in four-inch...

  • Page 14
    ... functions, bus control functions, and filtering and scaling algorithms. The Company's semiconductors contain interfaces to the external devices that comprise a typical digital multimedia communication system. These interfaces include digital video and/or audio ports, a programmable serial port (for...

  • Page 15
    ...on the RISC and manage user control, call negotiation, call progress and mixing and separation of audio, video and other data. - Audio and video codec routines that run on the DSP. - Digital communication and network protocols that interface to external communications networks such as POTS, ISDN and...

  • Page 16
    ... analog phones in a home. In addition, the Video Monitoring products connect to video input and display devices which allows video data to be transmitted across various networks. The Company's system design expertise includes design and testing for national and international regulatory requirements...

  • Page 17
    ...distributes sales and product literature and has an active public relations plan to encourage coverage of the Company's products and technology by the media. In relation to its RSM-1500 and ViaTV products, the Company has utilized advertising in print media and on television and radio, in some cases...

  • Page 18
    ... be used by other semiconductor manufacturers to their advantage. Video Monitoring and ViaTV Products The competitive factors in the market for the Company's RSM-1500 and ViaTV products include audio and video quality, acceptable phone line transmission rates, ability to connect and maintain stable...

  • Page 19
    ... Video Monitoring products. Research and development efforts relating to the Company's Broadband Telephony products are directed towards the addition of features, network protocols and audio enhancements to systems which include the Audacity semiconductor and Symphony VoIP module. To expand its line...

  • Page 20
    ... new form factors, network topologies and embedded systems that are designed to comply with new and emerging IP telephony standards.* The Company also intends to commit significant research and development resources to developing additional products for Video Monitoring applications, including the...

  • Page 21
    ...business and operating results. DISCONTINUATION OF VIATV PRODUCT LINE The Company announced in April 1999 that it would cease production of the ViaTV product line and withdraw from its distribution channels over the subsequent several quarters. In fiscal 1999 and 1998, ViaTV and revenues represented...

  • Page 22
    ... nor its Video Monitoring business have provided, nor are they expected to provide sufficient revenues to profitably operate the Company. To date, the Company has not sold any significant quantities of broadband telephony products. If the Company is not able to generate revenue selling into the...

  • Page 23
    ... basis. None of the Company's customers has entered into a long-term agreement requiring it to purchase the Company's products. Further, all of the Company's license and other revenues are nonrecurring. * This statement is a forward looking statement reflecting current expectations. There can be no...

  • Page 24
    ...need to occur. Telephone service providers must continue to invest in the deployment of high speed broadband networks to residential and commercial customers. IP networks must improve their QoS for real-time communications, managing effects such as packet jitter, packet loss and unreliable bandwidth...

  • Page 25
    ...prevail in these discussions and actions, or that other actions alleging infringement by the Company of third-party patents will not be asserted or prosecuted against the Company. On March 2, 1999, the Company was informed that the Lemelson Foundation Partnership filed a lawsuit in the United States...

  • Page 26
    ... QoS. The common standard for reliability of carrier-grade real-time voice communications is 99.999%, meaning that the network can be down for only a few minutes per year. In addition, such networks have imperceptible delay and consistently satisfactory audio quality. Emerging broadband IP networks...

  • Page 27
    ... defects or functional limitations. The Company sells products into markets that are extremely demanding of robust, reliable, fully functional products. Therefore delivery of products with production defects or reliability, quality or compatibility problems could significantly delay or hinder market...

  • Page 28
    ... of the Company's Broadband Telephony and Video Monitoring products will continue to place...located in an approximately 45,623 square foot facility in Santa Clara, California. This lease expires in May 2003. The Company also leases 2,663 square feet in London, England. This lease expires in July 1999...

  • Page 29
    ... Company could be subject to liabilities for such infringement, which could be material, and the Company could be required to refrain from using, manufacturing or selling certain products or using certain processes, either of which could have a material adverse effect on the Company's business and...

  • Page 30
    ... in the quarter ended June 30, 1996. To date, the Company has marketed its line of multimedia communication semiconductors and related technology to OEMs and distributors, mainly for videoconferencing and videophone applications. This product line includes the LVP, VCP and VCPex semiconductors. 26

  • Page 31
    ... In April 1999, the Company announced its Symphony VoIP Module, an integrated system product that is based on the Audacity semiconductor and that connects up to four analog telephone lines to an IP network. These products reflect the Company's recent efforts to develop Broadband Telephony technology...

  • Page 32
    ...in both MPEG semiconductor and math co-processor sales due to the discontinuation of such product lines in fiscal 1997. License and other revenues consist of technology licenses, including royalties required under such licenses, and nonrecurring engineering fees for services performed by the Company...

  • Page 33
    ... margins will be lower than the Company's historical gross margins, unless costs for Broadband Telephony semiconductors are also proportionately lower. In addition, the gross margins for the Company's Video Monitoring products are, and will continue to be, substantially lower than the gross margins...

  • Page 34
    ...the development of the Audacity Internet telephony processor, and the Symphony VoIP module. Lower research and development expenses during fiscal 1999 were due to decreases in profit sharing and incentive bonuses, nonrecurring ViaTV and Video Monitoring system design costs, and costs associated with...

  • Page 35
    ... in the expenses associated with promoting the ViaTV videophone product line.* However, the Company will likely need to increase sales and marketing personnel to support the IP telephony and video monitoring markets.* As a result, future selling, general and administrative costs may vary both in...

  • Page 36
    ... contingency planning activities, will be on-going throughout calendar year 1999.* Failure to address Year 2000 issues by the Company's customers, subcontract manufacturers, component suppliers, and other providers of goods and services could have a material adverse impact on the Company's business...

  • Page 37
    ...Video Monitoring...1999 on such investments were not significant. * This statement is a forward looking statement reflecting current expectations. There can be no assurance that the Company's actual future performance will meet the Company's current expectations. See "Manufacturing" commencing on page...

  • Page 38
    ... TO FINANCIAL STATEMENTS PAGE ---FINANCIAL STATEMENTS: Report of Independent Accountants...Consolidated Balance Sheets at March 31, 1999 and 1998...Consolidated...omitted because they are inapplicable, because the required information has been included in the financial statements or notes thereto, or ...

  • Page 39
    ...the Board of Directors and Stockholders of 8x8, Inc. In our opinion, the consolidated financial statements listed in the accompanying index present fairly, in all material respects, the financial position of 8x8, Inc. and its subsidiaries (the "Company") at March 31, 1999 and 1998 and the results of...

  • Page 40
    8X8, INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) ASSETS MARCH 31 1999 1998 Current assets: Cash and cash equivalents...Short-term investments...Accounts receivable, net...Inventory...Prepaid expenses and other current assets...Total current assets...Property...

  • Page 41
    8X8, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED MARCH 31 1999 1998 1997 26,189 $34,933 $ 12,... product revenues...Cost of license and other revenues...Total cost of revenues...Gross profit...Operating expenses: Research and development...Selling,...

  • Page 42
    ... loss on investments...Net loss...Total comprehensive loss...Balance at March 31, 1999...3,041,820 $ 3 COMMON STOCK SHARES AMOUNT 4,782,021 $ 5 ADDITIONAL PAID-IN CAPITAL ----------$11,155 DEFERRED COMPENSATION --- --- 2,188,265 20,000 2 -- 1,095 10 (1,078) -- --- --- 684,553...

  • Page 43
    Issuance of common stock upon exercise of options...Issuance of common stock...Issuance of Series D convertible noncumulative preferred stock...Deferred compensation related to stock options...Net and total comprehensive loss...Balance at March 31, 1997...Issuance of common stock upon initial public...

  • Page 44
    8X8, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) YEAR ENDED MARCH 31 1999 1998 1997 Cash flows from operating ...operating activities: Depreciation and amortization...Amortization of deferred compensation...Writedown of nonmarketable equity investment...Other...Changes in assets...

  • Page 45
    ... semiconductors, multimedia compression algorithms, network protocols and embedded system design. These products are used in applications including voice-over-IP, video monitoring and streaming, and videoconferencing. The Company markets its products mainly to original equipment manufacturers (OEMs...

  • Page 46
    8X8, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) sold by the distributor or retailer. When no rights of return exist, revenues generated by product...classification at each reporting date. At March 31, 1999 and 1998, ... are computed using the straight-line method, based upon the shorter...

  • Page 47
    ... material losses relating to any investment instruments. The Company sells its products to OEMs and distributors throughout the world. The Company... with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees." Accordingly, no compensation cost has been recognized ...

  • Page 48
    ... a dilutive effect. The numerators for each period presented are equal to the reported net income (loss). The reconciliation of the denominators used in computing basic and diluted per share amounts is as follows (in thousands): YEAR ENDED MARCH 31 1999 1998 1997 15,018 12,083 5,312 --------15,018...

  • Page 49
    ...software developed or obtained for internal use. The Company is required to adopt SOP 98-1 in fiscal 2000. The Company ...1999. Sanyo is one of the Company's stockholders and an executive of Sanyo is on the Company's Board of Directors. A representative of National Semiconductor Corporation (National...

  • Page 50
    ... ended March 31, 1998, and 1997, the Company's product revenues included $355,000 and $2,415,000, respectively, in sales to ASCII Corporation (ASCII). The Company terminated its distribution relationship with ASCII effective June 30, 1997. An executive of ASCII was a member of the Company's Board of...

  • Page 51
    ... STATEMENTS (CONTINUED) carryforwards for federal and state tax reporting purposes of approximately $2.4 million which begin expiring in 2009. Under applicable tax laws, the amount of and benefits from net operating losses and credits that can be carried forward may be impaired or limited in certain...

  • Page 52
    ... offering (the "Offering") of its common stock, selling 4,140,000 shares at $6.50 per share. Net proceeds to the Company were approximately $24.7...,000 shares. Effective November, 1997 this amount is to be increased annually on the first day of each of the Company's fiscal years in an amount equal to ...

  • Page 53
    ...equal to the fair market value of a share of the Company's common stock on the date of grant. Options granted to Outside Directors under the Director Plan have a ten year term, or shorter upon termination of an Outside Director's status... 31, 1999...Options exercisable at March 31, 1999... OPTIONS ...

  • Page 54
    8X8, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) Significant option groups outstanding at March 31, 1999 and related weighted average exercise price and contractual life information are as follows: OPTIONS OUTSTANDING WEIGHTED AVERAGE EXERCISE SHARES...an exercise price equal to the ...

  • Page 55
    ...1999. During fiscal 1999 and 1998, 187,491 and 70,560 shares were issued under the Purchase Plan, respectively. The Purchase Plan permits eligible employees to purchase common stock through payroll deductions at a price equal... Principles Board Opinion No. 25. Had compensation cost for the Company's stock ...

  • Page 56
    ...share amounts): YEAR ENDED MARCH 31 1999 1998 1997 Net income (loss): As reported...Pro forma...Basic income (loss) per share: As reported...Pro forma...Diluted income (loss) per share: As reported... up to the maximum allowed by the IRS from their compensation. Effective January 1, 1998, the Company...

  • Page 57
    ...low gross margins typical of a consumer electronics product made it unlikely that the consumer videophone business would be profitable in the foreseeable future. Therefore, the Company announced in April 1999 that it would cease production of the ViaTV product line and withdraw from its distribution...

  • Page 58
    ...(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED) QUARTER ENDED MARCH 31, DEC. 31, SEPT. 30, JUNE 30, MARCH 31, DEC. 31, SEPT. 30, JUNE 30, 1999 1998 1998 1998 1998 1997...(loss)...Operating expenses: Research and development...Selling, general and administrative...Total operating expenses...Income...

  • Page 59
    ... item is included above in Item 8. (a)(2) Financial Statement Schedules. The information required by this item is included above in Item 8. (a)(3) Exhibits. The documents listed on the Exhibit Index appearing at page 56 of this Report are filed herewith. Copies of the exhibits listed in the Exhibit...

  • Page 60
    ... the City of Santa Clara, State of California, on May 24, 1999. 8X8, INC. By: /s/ PAUL VOOIS Paul Voois, Chairman & Chief Executive Officer POWER OF ...GUY L. HECKER, JR Guy L. Hecker, Jr. /s/ WILLIAM TAI William Tai TITLE ----Chairman of the Board and Chief Executive Officer (Principal Executive...

  • Page 61
    ... Corporation and the Registrant. Warrant Number CS-01 issued by 8x8, Inc. to Stanford University on February 17, 1998. Fifth...Networks, Inc. and the Registrant. Subsidiaries of Registrant. Consent of Independent Accountants. Power of Attorney (see page...'s Report on Form 10-K dated May 7, 1998. 56

  • Page 62
    ... to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-30943 and 333-50519) of 8x8, Inc. of our report dated April 27, 1999, except for Note 10, which is as of May 13, 1999 appearing on page 35 of this Form 10-K. PricewaterhouseCoopers LLP San Jose, California May 24...

  • Page 63
    ARTICLE 5 THIS SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM 8X8, INC.'S CONSOLIDATED STATEMENTS OF OPERATIONS AND CONSOLIDATED BALANCE SHEETS INCLUDED IN THE COMPANY'S FORM 10-K FOR THE PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. ...