8x8 2000 Annual Report Download

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8X8 INC /DE/
FORM 10-K
(Annual Report)
Filed 06/28/00 for the Period Ending 03/31/00
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
    8X8 INC /DE/ FORM 10-K (Annual Report) Filed 06/28/00 for the Period Ending 03/31/00 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 ...

  • Page 2
    ...) 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 12(b) OF THE ACT: NONE...

  • Page 3
    held on August 14, 2000.

  • Page 4
    ... Statements...Consolidated Quarterly Financial Data...Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure...PART III Item 10. Directors and Executive Officers of the Registrant...Item 11. Executive Compensation...Item 12. Security Ownership of Certain...

  • Page 5
    ... exclusively for Internet protocol (IP) telephony applications. The Company has two lines of products: Advanced Telephony Solutions and Network Communications Technologies. The Solutions products include network software and appliances that allow service providers to build IP-based telephone...

  • Page 6
    ... exchange (PBX) services to business customers over any broadband IP connection, including DSL, cable, T1/E1, frame relay and broadband wireless. The ATS makes use of the Companies embedded IP telephony products, including the Netergy Media Hub, semiconductors and embedded IP telephony software. 3

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

  • Page 8
    ... recently circuit-switched networks for real-time voice and video communications have been completely separate from packet-switched data networks. For example, a typical residential customer uses a different service provider and a different network for Internet access and for telephone calls. Most...

  • Page 9
    ...miles away from the customer enterprise premise and connected to it by only a single broadband IP link. The Netergy iPBX solution was designed to address the shortcomings of traditional Centrex service offerings in a number of ways. First, the use of an IP network allows the iPBX to scale easily and...

  • Page 10
    ...: call hold, call transfer, three-way conferencing, multi-line phone support, paging, hunt groups, voicemail (optional, includes interactive voice response menuing and automated call distribution), direct inbound dialing, and more. Each Netergy iPBX Server can be custom configured for each customer...

  • Page 11
    ... to the IP network. The Netergy Auto Discovery mechanism automatically configures the Media Hub. The customer then uses Administrator to assign extension numbers, associate user names and create a voicemail account for each line. Administrator also allows the customer to define hunt groups, set user...

  • Page 12
    ... IP phones. Communication protocol and vocoder software for Audacity processors and other industry standard DSPs. 4-line VoIP gateway for broadband networks. APPLICATIONS Low density analog/IP gateways - Cable modem audio communication systems - DSL audio communication systems - Cable modem audio...

  • Page 13
    ...-line, VoIP gateway designed to be used in a variety of applications including telephony over cable and DSL networks as well as the emerging iPBX segment. About the size of a video cassette tape, the Media Hub uses the Audacity ITP to deliver four independent voice telephone lines over broadband IP...

  • Page 14
    ... line is the Netergy iPBX Server Software package. This PBX software was designed specifically to allow telephone companies to offer PBX functionality as a service over broadband IP networks. The PBX software uses an IP network for both its switching fabric and media connections, providing the call...

  • Page 15
    ... controls. To allow it to interface to a variety of different telephone sets, PSTN gateways and softswitches, the iPBX uses hardware drivers that support various industry standard and proprietary call setup and teardown protocols. Currently, the iPBX supports session initiation protocol (SIP), media...

  • Page 16
    ...complex software programs required to make voice calls over IP networks, including the Internet. Vocoders format and compress digital audio signals and serve as the interface between the old phone networks and new VoIP networks. Developing and establishing interoperability for VoIP software requires...

  • Page 17
    ... from the Company's headquarters in Santa Clara, California, to support sales in North America. The Company uses a combination of employees and outside contractors to provide the business modeling tools, sales presentations, product literature and technical publications (white papers) necessary to...

  • Page 18
    ... VoIP firmware to STMicroelectronics and to Alcatel Microelectronics. The Company is also selling its Media Hub system technology through partners such as AG Communications to establish initial market presence. The Company sells its LVP semiconductors and related software and reference board designs...

  • Page 19
    ... Electronics in South Korea, Integrated Packaging Assembly Corporation in San Jose, California, and Digital Testing Services in Santa Clara, California, for packaging and testing of its semiconductors. The Company does not have long term purchase agreements with its subcontract manufacturers or its...

  • Page 20
    .... To expand its line of telephony products, the Company is developing new form factors, network topologies and embedded systems that are designed to comply with new and emerging IP telephony standards. Future software developments may focus on emerging audio and video telephony standards and...

  • Page 21
    ... of high speed broadband networks to residential and commercial customers. IP networks must improve quality of service for real-time communications, managing effects such as packet jitter, packet loss and unreliable bandwidth, so that toll-quality service can be provided. IP telephony equipment must...

  • Page 22
    ...selling prices or gross margins for our IP telephony semiconductors similar to those that we have historically commanded for our videoconferencing semiconductors. In addition, the gross margins for our Media... number of reasons, including changes in specific customer requirements or international ...

  • Page 23
    ... of performance and reliability and lower cost, take advantage of technological advancements and changes, and respond to new customer requirements. Our success in designing, developing, manufacturing and selling such products will depend on a variety of factors, including: - the identification of...

  • Page 24
    ... per year. In addition, such networks have imperceptible delay and consistently satisfactory audio quality. Emerging broadband IP networks such as LANs, WANs and the Internet, or emerging last mile technologies such as cable, DSL and wireless local loop will not be used for telephony unless such...

  • Page 25
    ...doing business. The increasing growth of the broadband IP telephony market and popularity of broadband IP telephony products and services heighten the risk that governments will seek to regulate broadband IP telephony and the Internet. In addition, large, established telecommunications companies may...

  • Page 26
    ...and tested by independent third parties in foreign countries. International sales and manufacturing are subject to a number of risks, including general economic conditions in regions such as Asia, changes in foreign government regulations and telecommunications standards, export license requirements...

  • Page 27
    ...IP...San Francisco Bay area where we are located...customers; - governmental regulatory action; and - developments with respect to patents or proprietary rights, general market conditions, changes... securities class action litigation...located in a 45,623 square foot facility in Santa Clara, California. Design...

  • Page 28
    ...The Company effected its initial public offering on July 2, 1997 under the name 8x8, Inc.. From that date through April 3, 2000 the Company's common stock was traded on the Nasdaq National Market under the symbol "EGHT." Starting April 4, 2000 the Company's common stock has been traded on the Nasdaq...

  • Page 29
    ... model. The RSM-1600 module enables real-time remote video monitoring over POTS lines. Its target market is primarily owners of small businesses such as convenience stores and restaurants who need the ability to view their premises from any remote location in the world at any time. Other products in...

  • Page 30
    ... services to business customers over any broadband IP connection, including DSL, cable, T1/E1, frame relay and broadband wireless. The ATS makes use of our embedded IP telephony products, including the Netergy Media Hub, semiconductors and embedded IP telephony software. In March 2000, 8x8 announced...

  • Page 31
    ... consist of technology licenses, including royalties required under such licenses, and nonrecurring engineering fees for services performed by us for our customers. License and other revenues were $4.6 million in fiscal 2000, a decrease of $900,000 from the $5.5 million reported in fiscal 1999, 28

  • Page 32
    ... fiscal 2000 compared to fiscal 1999 is due to an increase in higher margin multimedia communication semiconductor and video monitoring system revenues as a percentage of total revenues and due to significantly higher gross margins realized on sales of our ViaTV products as we were able to sell such...

  • Page 33
    ...T2 processor and Media Hub products. Lower research and development expenses during fiscal 1999 as compared to fiscal 1998 were due to decreases in profit sharing and incentive bonuses, non-recurring ViaTV and video monitoring system design costs, and costs associated with materials and tooling used...

  • Page 34
    ... federal and state tax reporting purposes of approximately $1.7 million and $1.2 million, respectively. The federal credit carryforwards will begin expiring in 2010 while the California credit will carryforward indefinitely. Under the ownership change limitations of the Internal Revenue Code of 1986...

  • Page 35
    ... and assembly vendors, and with our primary subcontract manufacturer for our Media Hub systems, are denominated in U.S. dollars. We have subsidiaries in Europe, and as such we are exposed to market risk from changes in exchange rates. We have not entered into any currency hedging activities. To date...

  • Page 36
    ...United States, which require that we plan...used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP San Jose, California May 10, 2000...

  • Page 37
    8X8 INC. CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) MARCH 31 2000 1999 ASSETS Current assets: Cash...March 31, 2000 and 15,425,752 shares at March 31, 1999...Additional paid-in capital...Notes receivable from stockholders...Deferred compensation...Accumulated other...

  • Page 38
    8X8, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) YEAR ENDED MARCH 31 2000... expenses: Research and development...Selling, general and administrative...In...provision for income taxes...Net income (loss)...Net income (loss) per share: Basic...Diluted...Shares used ...

  • Page 39
    ...Repayment of notes receivable from stockholders...Repurchase of common stock.. Deferred compensation related to stock options...Realized loss on investments...Net loss...Total comprehensive loss...Balance at March 31, 2000... PREFERRED STOCK SHARES AMOUNT 3,726,373 $4 COMMON STOCK SHARES AMOUNT...

  • Page 40
    ... of notes receivable from stockholders...Repurchase of common stock.. Deferred compensation related to stock options...Realized loss on investments...Net loss...Total comprehensive loss...Balance at March 31, 2000... ----------$(13,402) -------$ 6,041 -- 24,679 -- 597 --- -17 --- 162...

  • Page 41
    ... cash used in operating activities: Depreciation and amortization...Amortization of deferred compensation...Amortization of intangibles...Amortization of debt discount...In-process research and development...Discount on issuance of common stock...Gain on sale of investments, net...Other...Changes in...

  • Page 42
    ... it would change its name, subject to shareholder approval, to Netergy Networks, Inc. The Company is a leading developer of digital communications products and technologies, including highly integrated Internet protocol (IP) telephony solutions marketed to telephone service providers, semiconductors...

  • Page 43
    ... the respective assets as follows: Machinery and computer equipment...Furniture and fixtures...Licensed software...Leasehold improvements...3 years 5 years 3 years Shorter of lease term or useful life of the asset GOODWILL AND OTHER INTANGIBLES Goodwill and other intangibles acquired in connection...

  • Page 44
    ... cash flow analysis, based on the incremental borrowing rate currently available to the Company for a loan with similar terms and maturity. ACCOUNTING FOR STOCK-BASED COMPENSATION The Company accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting...

  • Page 45
    ... establishes standards for the way companies report information about operating segments in annual financial statements. It also establishes standards for related disclosures about products and services, geographical areas and major customers. In accordance with the provisions of FAS 131, beginning...

  • Page 46
    ...stock option or award, and (d) the accounting for an exchange of stock compensation awards in a business combination. In general, FIN 44 is effective July 1, 2000.... to revenue recognition issues in financial statements. The Company is required to adopt SAB 101 by no later than the fourth quarter...

  • Page 47
    ..., that develops software for managing voice-over IP networks. The consolidated ...rates for the business as a whole, characteristics of the potential market for the technology and the anticipated life of the technology. Projected annual revenues for the inprocess research and development projects...

  • Page 48
    ..."). 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 Directors until May 27, 1997. During fiscal 2000 and 1999, the Company paid a member of the Board of Directors approximately $41,000 and $85,000...

  • Page 49
    ...The federal credit carryforwards will begin expiring in 2010 while the California credit will carryforward indefinitely. 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 circumstances. Events...

  • Page 50
    ... TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A reconciliation of the tax (benefit) provision to the amounts computed using the statutory U.S. federal income tax rate of 34% is as follows (in thousands): YEAR ENDED MARCH 31 2000 1999 1998 8,408) $(6,572) $ 933 (251) 3,434 2,176 -(338) 3,125...

  • Page 51
    ...annual increments of rent in predetermined amounts and requires..., 2000, 1999...stock, selling 4,140,...options to officers of the Company at prices equal to the fair market value of the stock at the grant dates. Options generally vest over periods ranging from two to four years. Vesting for certain options...

  • Page 52
    ... the number of shares of ...provision resulted in an increase of 771,287 and 764,680 shares issuable under the 1996 Plan during the fiscal years ended March 31, 2000 and 1999, respectively. The 1996 Plan provides for granting incentive and nonstatutory stock options to employees at prices equal...

  • Page 53
    ...2000...Options exercisable at March 31, 2000... Significant option groups outstanding at March 31, 2000 and related weighted average exercise price and contractual life information are as follows: OPTIONS...2,107,000 options in exchange for grants of new options with an exercise price equal to the then...

  • Page 54
    ...options granted to non-officer employees in fiscal 2000. The Company recognized $161,000, $416,000 and $1,265,000 of said amounts as compensation expense in the fiscal years ended March 31, 2000... meet certain eligibility requirements. At the start of each fiscal year, the number of shares of common...

  • Page 55
    ...rate...Weighted average expected option term...Weighted average fair value of options granted... CERTAIN PRO FORMA DISCLOSURES The Company accounts for its stock plans in accordance with the provisions of Accounting Principles Board Opinion No. 25. Had compensation...Plan during fiscal 2000 and 1999, ...

  • Page 56
    ...,144 Broadband Communications...Video Monitoring...Corporate and Other...8x8 results for nine months ended March 31, 2000...8x8 results for three months ended June 30, 1999...8x8 results for fiscal year ended March 31, 2000... There are no intersegment revenues between the two reportable segments...

  • Page 57
    ... the ViaTV product line and withdraw from its distribution channels over the ...2000. Also, on May 19, 2000, the Company entered into an agreement with Interlogix, Inc. ("Interlogix") whereby the Company agreed to sell certain assets and license certain technology related to the Company's video...

  • Page 58
    ... ---------$ 255 86 (200) WRITE-OFFS/ RECOVERIES OF UNCOLLECTIBLE ACCOUNTS 19 10 44 DESCRIPTION ----------Allowance for doubtful accounts: March 31, 1998...March 31, 1999...March 31, 2000... BALANCE AT BEGINNING PERIOD ---------$374 610 686 BALANCE AT END OF PERIOD ---------$610 686 442 54

  • Page 59
    ...," "Additional Information -- Executive Officers" and "Additional Information -- Section 16(a) Beneficial Ownership Reporting Compliance" and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is included in the 2000 Proxy Statement under the...

  • Page 60
    ...8-K, pursuant to Item 5, to report that the Company had entered into an agreement on May 19, 2000 to acquire UForce, Inc., a developer of IP-based software applications (such as voicemail and unified messaging) based in Montreal, Canada. UForce also develops a service creation environment (SCE) that...

  • Page 61
    ... corporation, has duly caused this Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Clara, State of California, on June 28, 2000. 8X8, INC. By: /s/ PAUL VOOIS Paul Voois, Chairman & Chief Executive Officer POWER OF ATTORNEY KNOW ALL...

  • Page 62
    ... 8x8, Inc., Odisei S.A. and the Security Holders named therein and the agreements related thereto. Share Exchange Agreement, dated as of May 19, 2000,... Agreement by and among 8x8, Inc. and the Buyers dated December 15, 1999. Form of Series A Warrant by and among 8x8, Inc. and FleetBoston Robertson...

  • Page 63
    ... ended December 31, 1999. Incorporated by reference to identically numbered exhibits filed in response to Item 7, "Exhibits," of the Registrant's Report on Form 8-K filed on February 16, 2000. Incorporated by reference to identically numbered exhibits filed in response to Item 7, "Exhibits," of the...

  • Page 64
    EXHIBIT 21.1 SUBSIDIARIES OF REGISTRANT Jurisdiction of Name Incorporation Integration Information Technology FSC Barbados Netergy Networks, Ltd. United Kingdom Odisei S.A. France Visit, Inc. California, USA 51

  • Page 65
    ... 333-32932) and Form S-8 (Nos. 333-30943 and 333-50519) of 8x8, Inc. of our report dated May 10, 2000, except for Note 13, which is as of May 19, 2000, relating to the consolidated financial statements, which appears in this Form 10-K. PricewaterhouseCoopers LLP San Jose, California June 27, 2000 50

  • Page 66
    ... EQUITY SALES TOTAL REVENUES CGS TOTAL COSTS OTHER EXPENSES LOSS PROVISION INTEREST EXPENSE INCOME PRETAX INCOME TAX INCOME CONTINUING DISCONTINUED EXTRAORDINARY CHANGES NET INCOME EPS BASIC EPS DILUTED 1 12 MOS MAR 31 2000 APR 01 1999 MAR 31 2000 48,576 0 2,394 1 0 1,367 53,380 10,259 (7,572) 59...