8x8 1999 Annual Report Download - page 28

MANAGEMENT OF GROWTH AND CHANGE; DEPENDENCE ON KEY PERSONNEL
The development and marketing of the Company's Broadband Telephony and Video Monitoring products will continue to place a significant
strain on the Company's limited personnel, management and other resources. The Company's ability to manage any future growth effectively
will require it to successfully attract, train, motivate, retain and manage employees, particularly key engineering and managerial personnel, to
effectively integrate new employees into its operations and to continue to improve its operational, financial and management systems. The
Company's failure to manage its growth and changes in its business effectively and to attract and retain key personnel could have a material
adverse effect on the Company's business and operating results.
Further, the Company is highly dependent on the continued service of and its ability to attract and retain qualified technical, marketing, sales
and managerial personnel. The competition for such personnel is intense, particularly in the San Francisco Bay area where the Company is
located. The loss of any such person or the failure to recruit additional key technical and sales personnel in a timely manner would have a
material adverse effect on the Company's business and operating results. There can be no assurance that the Company will be able to continue
to attract and retain the qualified personnel necessary for the development of its business. The Company currently does not have employment
contracts with any of its employees and does not maintain key person life insurance policies on any of its employees.
POTENTIAL VOLATILITY OF STOCK PRICE
The market price of the shares of the Company's common stock has been and is likely to be highly volatile. It may be significantly affected by
factors such as: (1) actual or anticipated fluctuations in the Company's operating results; (2) announcements of technical innovations; (3) loss
of key personnel;
(4) new products or new contracts by the Company, its competitors or their customers; (5) governmental regulatory action; (6) 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 the control of, the Company. 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 the
Company's 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. There can be no assurance that such litigation will not occur in the future with
respect to the Company. Such litigation could result in substantial costs and a diversion of management's attention and resources, which would
have a material adverse effect on the Company's business and operating results. Any settlement or adverse determination in such litigation
would also subject the Company to significant liability, which would have a material adverse effect on the Company's business and financial
condition.
ITEM 2. PROPERTIES
The Company's principal operations are 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 and the Company has no option to
extend the lease. The Company's existing facilities are adequate to meet its current needs.
ITEM 3. LEGAL PROCEEDINGS
On March 2, 1999, the Company was informed that the Lemelson Foundation Partnership filed a lawsuit in the United States District Court in
Phoenix, Arizona on February 26, 1999, against the Company and eighty-seven other United States semiconductor and electronics companies
for alleged infringement of patent rights claimed to be owned by the Lemelson Medical Foundation. Litigation may be necessary in the future
to determine the validity and scope of the claimed proprietary rights of the Lemelson Medical Foundation, or to defend against the alleged
claims of infringement. Such litigation could result in substantial costs and
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