UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2016~~2017

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to _________

Commission file number 000-21783

8X8, INC.
(Exact name of Registrant as Specified in its Charter)

Delaware 77-0142404
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)

2125 O'Nel Drive
San Jose, CA 95131
(Address of Principal Executive Offices)

(408) 727-1885
(Registrant's Telephone Number, including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file reports), and (2) has been subject to such filing requirements for the past 90 days. x YES ¨ NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company. See definitions of "large accelerated filer," "accelerated ~~filer"~~filer," "smaller reporting company" and ~~"smaller reporting~~"emerging growth company" in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

Large accelerated filer x

Accelerated filer ¨

Non-accelerated filer ¨
(Do not check if a smaller reporting company)

Smaller reporting company ¨

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

The number of shares of the Registrant's Common Stock outstanding as of October ~~26, 2016~~27, 2017 was ~~90,551,664.~~91,952,521.

FORM 10-Q
TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION Page No.

Item 1. Financial ~~Statements:~~Statements (unaudited):

           Condensed Consolidated Balance Sheets at September 30, ~~2016~~2017 and March 31, ~~2016~~2017 2

           Condensed Consolidated Statements of Operations for the three and six
           months ended September 30, ~~2016~~2017 and ~~2015~~2016 3

           Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six
           months ended September 30, ~~2016~~2017 and ~~2015~~2016 4

           Condensed Consolidated Statements of Cash Flows for the six months
           ended September 30, ~~2016~~2017 and ~~2015~~2016 5

           Notes to Unaudited Condensed Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 1915

Item 3. Quantitative and Qualitative Disclosures About Market Risk 2621

Item 4. Controls and Procedures 2721

PART II. OTHER INFORMATION

Item 1. Legal Proceedings 2722

Item 1A. Risk Factors 2722

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 2822

Item 5. Other Information 2822

Item 6. Exhibits 2823

Signature 2924

Part I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

8X8, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)

		September 30,		March 31,		September 30,		March 31,
		2016		2016		2017		2017
ASSETS
Current assets:
Cash and cash equivalents	$	32,094	$	33,576	$	34,570	$	41,030
Short-term investments		137,650		129,274		132,480		133,959
Accounts receivable, net		11,661		11,070		15,179		14,264
Inventory		464		520
Deferred cost of goods sold		699		634
Deferred tax asset		-		5,382
Other current assets		6,667		5,444		11,986		8,101
Total current assets		189,235		185,900		194,215		197,354
Property and equipment, net		15,315		12,375		29,600		24,061
Intangible assets, net		18,212		21,464		14,957		17,038
Goodwill		45,290		47,420		47,519		46,136
Non-current deferred tax asset		48,565		43,189
Non-current deferred income taxes						71,135		48,859
Other assets		5,415		3,104		417		407
Total assets	$	322,032	$	313,452	$	357,843	$	333,855

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	14,026	$	10,954	$	20,123	$	18,631
Accrued compensation		9,995		10,063		15,783		11,508
Accrued warranty		333		326
Accrued taxes		5,424		5,200		5,286		5,354
Accrued outside commissions		2,183		2,186
Deferred revenue		2,281		1,925		2,521		2,144
Other accrued liabilities		3,033		4,080		5,626		5,707
Total current liabilities		37,275		34,734		49,339		43,344

Non-current liabilities		3,321		3,258		1,564		1,910
Non-current deferred revenue		112		154
Total liabilities		40,708		38,146		50,903		45,254

Commitments and contingencies (Note 6)
Commitments and contingencies (Note 5)

Stockholders' equity:
Common stock		90		89		92		91
Additional paid-in capital		399,955		389,260		412,963		412,762
Accumulated other comprehensive loss		(8,361)		(4,184)		(6,434)		(9,642)
Accumulated deficit		(110,360)		(109,859)		(99,681)		(114,610)
Total stockholders' equity		281,324		275,306		306,940		288,601
Total liabilities and stockholders' equity	$	322,032	$	313,452	$	357,843	$	333,855

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8X8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts; unaudited)

		Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
		September 30,				September 30,				September 30,				September 30,
		2016		2015		2016		2015		2017		2016		2017		2016
Service revenue	$	57,717	$	46,951	$	113,013	$	91,119	$	68,123	$	57,717	$	133,214	$	113,013
Product revenue		5,466		3,991		10,211		7,715		4,360		5,466		8,367		10,211
Total revenue		63,183		50,942		123,224		98,834		72,483		63,183		141,581		123,224

Operating expenses:
Cost of service revenue		10,837		9,186		21,072		17,645		12,757		10,837		24,419		21,072
Cost of product revenue		5,782		4,596		11,287		8,978		5,098		5,782		9,982		11,287
Research and development		6,505		6,446		13,215		11,526		8,311		6,505		16,254		13,215
Sales and marketing		33,691		26,730		65,382		50,554		41,163		33,691		82,273		65,382
General and administrative		6,747		5,657		13,548		11,725		9,616		6,747		18,572		13,548
Total operating expenses		63,562		52,615		124,504		100,428		76,945		63,562		151,500		124,504
Loss from operations		(379)		(1,673)		(1,280)		(1,594)		(4,462)		(379)		(9,919)		(1,280)
Other income, net		391		204		801		438		463		391		2,515		801
Income (loss) before provision (benefit) for income taxes		12		(1,469)		(479)		(1,156)		(3,999)		12		(7,404)		(479)
Provision (benefit) for income taxes		(15)		423		22		1,208		(3,453)		(15)		(4,689)		22
Net income (loss)	$	27	$	(1,892)	$	(501)	$	(2,364)	$	(546)	$	27	$	(2,715)	$	(501)

Net income (loss) per share:
Net loss per share:
Basic	$	0.00	$	(0.02)	$	(0.01)	$	(0.03)	$	(0.01)	$	0.00	$	(0.03)	$	(0.01)
Diluted	$	0.00	$	(0.02)	$	(0.01)	$	(0.03)	$	(0.01)	$	0.00	$	(0.03)	$	(0.01)
Weighted average number of shares:
Basic		89,987		88,557		89,171		88,397		91,689		89,987		91,667		89,171
Diluted		93,447		88,557		89,171		88,397		91,689		93,447		91,667		89,171

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8X8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, unaudited)

		Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
		September 30,				September 30,				September 30,				September 30,
		2016		2015		2016		2015		2017		2016		2017		2016
Net income (loss)	$	27	$	(1,892)	$	(501)	$	(2,364)	$	(546)	$	27	$	(2,715)	$	(501)
Other comprehensive income (loss), net of tax
Unrealized gain (loss) on investments in securities		(39)		(29)		107		(76)		198		(39)		225		107
Foreign currency translation adjustment		(1,500)		(1,409)		(4,284)		68		1,192		(1,500)		2,983		(4,284)
Comprehensive loss	$	(1,512)	$	(3,330)	$	(4,678)	$	(2,372)
Comprehensive income (loss)									$	844	$	(1,512)	$	493	$	(4,678)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8X8, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

		Six Months Ended				Six Months Ended
		September 30,				September 30,
		2016		2015		2017		2016
Cash flows from operating activities:
Net loss	$	(501)	$	(2,364)	$	(2,715)	$	(501)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation		2,979		2,275		3,962		2,979
Amortization of intangible assets		1,868		1,563		2,815		1,868
Amortization of capitalized software		296		456		581		296
Net accretion of discount and amortization of premium on
marketable securities		171		435
Stock-based compensation expense		9,559		6,539
Deferred income tax (benefit) provision		(153)		687
Stock-based compensation						13,008		9,559
Deferred income tax benefit						(4,862)		(153)
Gain on escrow settlement						(1,393)		-
Other		328		248		761		499
Changes in assets and liabilities:
Accounts receivable, net		(1,859)		(2,976)		(1,183)		(1,859)
Inventory		38		(200)
Other current and noncurrent assets		(2,216)		(794)		(3,485)		(2,297)
Deferred cost of goods sold		(119)		(77)
Accounts payable		3,133		132
Accrued compensation		46		1,234
Accrued warranty		7		(14)
Accrued taxes		290		891
Accounts payable and accruals						3,399		2,666
Deferred revenue		367		(621)		286		367
Accrued outside commissions		(3)		874
Other current and noncurrent liabilities		(807)		(1,173)
Net cash provided by operating activities		13,424		7,115		11,174		13,424

Cash flows from investing activities:
Purchases of property and equipment		(5,230)		(2,118)		(4,021)		(5,230)
Proceeds from escrow settlement						1,393		-
Cost of capitalized software		(2,443)		(708)		(5,203)		(2,443)
Purchase of businesses, net of cash acquired		-		(23,434)
Proceeds from maturity of investments		29,225		24,106		45,850		29,225
Sales of investments - available for sale		26,863		31,299		13,254		26,863
Purchases of investments - available for sale		(64,517)		(52,286)		(57,561)		(64,517)
Net cash used in investing activities		(16,102)		(23,141)		(6,288)		(16,102)

Cash flows from financing activities:
Capital lease payments		(333)		(200)		(616)		(333)
Payment of contingent consideration and escrow		(200)		(150)
Repurchase of common stock		(842)		(10,133)
Payment of contingent consideration						(150)		(200)
Repurchase and tax-related withholding of common stock						(13,842)		(842)
Proceeds from issuance of common stock under employee stock plans		2,600		2,076		2,788		2,600
Net cash provided by (used in) financing activities		1,225		(8,407)
Net cash (used in) provided by financing activities						(11,820)		1,225

Effect of exchange rate changes on cash		(29)		118		474		(29)
Net decrease in cash and cash equivalents		(1,482)		(24,315)		(6,460)		(1,482)

Cash and cash equivalents, beginning of the period		33,576		53,110
Cash and cash equivalents, end of the period	$	32,094	$	28,795
Cash and cash equivalents at the beginning of the period						41,030		33,576
Cash and cash equivalents at the end of the period					$	34,570	$	32,094

Supplemental cash flow information
Income taxes paid	$	286	$	299	$	174	$	286
Interest paid		12		17		16		12
Property and equipment acquired under capital leases		823		-		765		823

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8X8, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

8x8, Inc. (8x8 or the Company) is a leading provider of truly unified cloud communications. The Company's suite of products weaves together unified cloud communications, messaging, meeting and contact center solutions so today's organization can communicate at the speed of employee and customer expectations. 8x8 technology provides one unified management platform with one communication experience for employees and customers, as well as a real-time data analytics platform for constant learning and improvement. The Company is a provider of cloud-based, enterprise-class software solutions that transform the way businesses communicate and collaborate globally. The Company's integrated, "pure-cloud" offering combines global voice, conferencing, messaging and video with integrated workflows and big data analytics on a single platform to enable increased team productivity, better customer engagement and real-time insights into business performance.

BASIS OF PRESENTATION

The Company's fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in these notes to the consolidated financial statements refers to the fiscal year ended March 31 of the calendar year indicated (for example, fiscal ~~2017~~2018 refers to the fiscal year ended March 31, ~~2017)~~2018).

The accompanying interim condensed consolidated financial statements are unaudited and have been prepared on substantially the same basis as our annual consolidated financial statements for the fiscal year ended March 31, ~~2016.~~2017. In the opinion of the Company's management, these interim condensed consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of our financial position, results of operations, and cash flows for the periods presented. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, ~~and~~ liabilities, ~~and~~ disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.

The March 31, ~~2016~~2017 year-end condensed consolidated balance sheet data in this document were derived from audited consolidated financial statements and does not include all of the disclosures required by U.S. generally accepted accounting principles. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements as of and for the fiscal year ended March 31, ~~2016~~2017 and notes thereto included in the Company's fiscal ~~2016~~2017 Annual Report on Form 10-K.

The results of operations and cash flows for the interim periods included in these condensed consolidated financial statements are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

RECLASSIFICATION

Certain software development costs capitalized in accordance with ASC 350-40,Internal Use Software (ASC 350-40), that were presented in other long-term assets in the Company's consolidated balance sheets as of March 31, 2017 are presented as property and equipment for the condensed consolidated balance sheet as of September 30, 2017. Assets in the amount of $7.7 million, net of accumulated amortization, have been reclassified in the balance sheet as of March 31, 2017 to conform to the current period presentation. The reclassification had no impact on the Company's previously reported consolidated net income (loss), cash flows, or basic or diluted net income per share amounts.

Certain amounts previously reported within the Company's condensed consolidated balance sheets and condensed consolidated statements of cash flows have been reclassified within each financial statement section to conform to the current period presentation. The reclassification had no impact on the Company's previously reported net ~~income (loss),~~loss, cash flows, or basic or diluted net ~~income~~loss per share amounts.

ACQUISITIONS

In May 2015, the Company entered into a share purchase agreement with the shareholders of DXI Limited for a purchase price of $22.5 million, consisting of $18.7 million in cash paid to the DXI shareholders at closing and $3.8 million in cash deposited into escrow to be held for two years as security against indemnity claims made by the Company after the closing date. During the fiscal quarter ended June 30, 2017, $1.4 million of the cash held in escrow was returned to the Company and the escrow fund was closed. Since the purchase accounting for the acquisition was finalized by March 31, 2016, the proceeds are realized as a gain and reported as other income in the consolidated statements of operations.

PRINCIPLES OF CONSOLIDATION

The condensed consolidated financial statements include the accounts of 8x8 and its subsidiaries. All material intercompany accounts and transactions have been eliminated.

SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies used in preparation of these condensed consolidated financial statements are disclosed in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2016~~2017 filed with the SEC on May ~~31, 2016,~~30, 2017, and there have been no changes to the Company's significant accounting policies during the six months ended September 30, ~~2016,~~2017, except as described in the "Recently Adopted Accounting Pronouncements" section below.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

In ~~April 2015,~~March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) ~~2015-5,~~ 2016-09,~~"Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40)~~Compensation - Stock Compensation (Topic 718): ~~Customer's~~Improvements to Employee Stock-based Payment Accounting, which simplified certain aspects of accounting for ~~Fees Paid in a Cloud Computing Arrangement."~~ ~~This update provides guidance in evaluating whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then~~stock-based payment transactions, including the ~~software license element~~income tax consequences, classification of awards as either equity or liabilities, an option to recognize gross stock compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The following is the impact of the ~~arrangement should~~adoption on the Company's consolidated financial statements:

In recording stock-based compensation expense, the ASU allows companies to make a policy election as to whether they will include an estimate of awards expected to be ~~accounted~~forfeited or whether they will account for forfeitures as they occur. The Company has elected to continue to include an estimate of forfeitures in its stock-based compensation expense. Therefore, there was no impact to the Company's consolidated financial statements.

The ASU requires that employee taxes paid when an employer withholds shares for tax-withholding purposes be reported as financing activities in the consolidated statements of cash flows. Previously, the Company already included these cash flows in financing activities. Therefore, the adoption of this provision had no impact.

The ASU requires previously unrecognized excess tax benefits from stock-based compensation to be recognized on a modified retrospective basis. Unrecognized tax benefits result when a deduction for stock-based compensation does not reduce taxes payable. The impact to deferred tax assets is disclosed in Note 7.

The ASU also requires excess tax benefits to be presented as an ~~acquisition~~operating activity on the statement of ~~a software license. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement~~cash flows rather than as a ~~service contract.~~financing activity on either a retrospective or prospective basis. The guidance does not change generally accepted accounting principles for a customer's accounting for service contracts. This update is effective for annual periods, including interim periods within those annual periods, beginning after December 15, 2015. Therefore, the Company has ~~prospectively adopted~~elected to apply this ~~new~~provision of the standard on ~~April 1, 2016.~~a prospective basis.

In July 2015, the FASB issued ASU 2015-11,Simplifying the Measurement of Inventory. Under this guidance, entities utilizing the first-in-first-out or average cost method should measure inventory at the lower of cost or net realizable value, where net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The adoption of this standard did not have a material impact ~~on our~~to the Company's consolidated financial statements.

~~In November 2015, the FASB issued ASU 2015-17,~~~~Income Taxes - Balance Sheet Classification of Deferred Taxes (Topic 740)~~. This ASU requires all deferred tax liabilities and assets to be presented in the balance sheet as noncurrent. As permitted, the Company early adopted this standard prospectively during the quarter ended June 30, 2016. The adoption of this standard resulted in reclassifying current deferred income tax assets to noncurrent deferred income tax assets and current deferred income tax liabilities to noncurrent deferred income tax liabilities. No prior periods were retrospectively adjusted.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers, along with amendments issued in 2015 and 2016, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ~~The~~This ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The new standard will become effective for the Company on April 1, ~~2018. The standard~~2018 and permits the use of either the full retrospective or ~~cumulative effect~~modified retrospective transition method. The Company has ~~not yet~~preliminarily selected athe modified retrospective method as the transition method.

The Company is ~~currently assessing~~in the initial stages of the assessment of the impact of ~~this pronouncement~~the new standard on the Company's accounting policies, processes and ~~its amendments~~system requirements. The Company has assigned internal resources and engaged third-party service providers to ~~its consolidated financial statements.~~assist with the assessment and implementation. The Company currently believes the most significant impact relates to:

The allocation of consideration in a contract between product and service performance obligations; and
The determination of performance obligations for professional services.

In ~~June 2016,~~May 2017, the FASB issued ASU No. ~~2016-13,~~2017-09,~~Financial Instruments -Credit Losses~~Compensation-Stock Compensation (Topic ~~326): Measurement~~718) - Scope of ~~Credit Losses~~Modification Accounting. The amendments in the update provide guidance on ~~Financial Instruments, which provides guidance for measurement and recognition~~types of ~~expected credit losses for financial assets held based on historical experience, current~~changes to the terms or conditions ~~and reasonable and supportable forecasts~~of share-based payment awards that ~~affect the collectability of the reported amount.~~would be required to apply modification accounting under ASC 718,Compensation-Stock Compensation. The ~~amendment is~~amendments are effective for fiscal years beginning after December 15, 2020. Early adoption is permitted for fiscal years beginning after December 15, 2018. The Company is currently assessing the impact of this pronouncement to its consolidated financial statements.

~~In August 2016, the FASB issued ASU No. 2016-15~~~~, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments~~~~, which provides guidance on how certain cash receipts and cash payments are to be presented and classified in the statement of cash flows. This amendment is effective for fiscal years~~annual reporting periods beginning after December 15, 2017 ~~and interim periods within those fiscal years. Early~~with early adoption permitted. Upon adoption, the amendment is ~~permitted. The Company is currently assessing~~not expected to have a material impact to the ~~impact of this pronouncement to its Consolidated Statements of Cash Flows.~~

consolidated financial statements.

2. FAIR VALUE MEASUREMENTS

Cash, cash equivalents, and available-for-sale investments, and contingent consideration were (in thousands):

				Gross		Gross				Cash and						Gross		Gross				Cash and
		Amortized		Unrealized		Unrealized		Estimated		Cash		Short-Term		Amortized		Unrealized		Unrealized		Estimated		Cash		Short-Term
As of September 30, 2016		Costs		Gain		Loss		Fair Value		Equivalents		Investments
As of September 30, 2017														Costs		Gain		Loss		Fair Value		Equivalents		Investments
Cash	$	24,564	$	-	$	-	$	24,564	$	24,564	$	-	$	20,122	$	-	$	-	$	20,122	$	20,122	$	-
Level 1:
Money market funds		7,530		-		-		7,530		7,530		-		14,448		-		-		14,448		14,448		-
Mutual funds		2,000		-		(169)		1,831		-		1,831		1,828		-		-		1,828		-		1,828
Subtotal		34,094		-		(169)		33,925		32,094		1,831		36,398		-		-		36,398		34,570		1,828
Level 2:
Commercial paper		15,578		6		-		15,584		-		15,584		13,554		2		-		13,556		-		13,556
Corporate debt		91,244		116		(16)		91,344		-		91,344		88,578		62		(21)		88,619		-		88,619
International government securities														2,494		-		(1)		2,493		-		2,493
Asset backed securities		24,063		26		(1)		24,088		-		24,088		25,988		4		(8)		25,984		-		25,984
Mortgage backed securities		1,814		-		(14)		1,800		-		1,800
Agency bond		2,000		2		-		2,002		-		2,002
International government securities		1,000		1		-		1,001		-		1,001
Subtotal		135,699		151		(31)		135,819		-		135,819		130,614		68		(30)		130,652		-		130,652
Total assets	$	169,793	$	151	$	(200)	$	169,744	$	32,094	$	137,650	$	167,012	$	68	$	(30)	$	167,050	$	34,570	$	132,480
Level 3:
Contingent consideration	$	-	$	-	$	-	$	216	$	-	$	-
Total liabilities	$	-	$	-	$	-	$	216	$	-	$	-

				Gross		Gross				Cash and						Gross		Gross				Cash and
		Amortized		Unrealized		Unrealized		Estimated		Cash		Short-Term		Amortized		Unrealized		Unrealized		Estimated		Cash		Short-Term
As of March 31, 2016		Costs		Gain		Loss		Fair Value		Equivalents		Investments
As of March 31, 2017														Costs		Gain		Loss		Fair Value		Equivalents		Investments
Cash	$	18,596	$	-	$	-	$	18,596	$	18,596	$	-	$	29,122	$	-	$	-	$	29,122	$	29,122	$	-
Level 1:
Money market funds		14,980		-		-		14,980		14,980		-		11,908		-		-		11,908		11,908		-
Mutual funds		2,000		-		(187)		1,813		-		1,813		2,000		-		(194)		1,806		-		1,806
Subtotal		35,576		-		(187)		35,389		33,576		1,813		43,030		-		(194)		42,836		41,030		1,806
Level 2:
Commercial paper		6,794		2		-		6,796		-		6,796		19,144		8		-		19,152		-		19,152
Corporate debt		85,164		78		(28)		85,214		-		85,214		83,995		61		(58)		83,998		-		83,998
Municipal securities		1,007		-		(1)		1,006		-		1,006
Asset backed securities		24,614		7		(11)		24,610		-		24,610		26,906		4		(22)		26,888		-		26,888
Mortgage backed securities		2,045		-		(17)		2,028		-		2,028		116		-		(1)		115		-		115
Agency bond		6,805		1		-		6,806		-		6,806		2,000		-		-		2,000		-		2,000
International government securities		1,000		1		-		1,001		-		1,001
Subtotal		127,429		89		(57)		127,461		-		127,461		132,161		73		(81)		132,153		-		132,153
Total assets	$	163,005	$	89	$	(244)	$	162,850	$	33,576	$	129,274	$	175,191	$	73	$	(275)	$	174,989	$	41,030	$	133,959
Level 3:
Contingent consideration	$	-	$	-	$	-	$	341	$	-	$	-	$	-	$	-	$	-	$	148	$	-	$	-
Total liabilities	$	-	$	-	$	-	$	341	$	-	$	-	$	-	$	-	$	-	$	148	$	-	$	-

Contractual maturities of investments as of September 30, ~~2016~~2017 are set forth below (in thousands):

		Estimated
		Fair Value
Due within one year	$	~~83,100~~80,612
Due after one year		~~54,550~~51,868
Total	$	~~137,650~~132,480

Contingent Consideration and Escrow Liability

The Company's contingent consideration liability, ~~and escrow liability,~~ included in other accrued liabilities and noncurrent liabilities on the condensed consolidated balance sheets as of March 31, 2017, was associated with the Quality Software Corporation (QSC) acquisition made in the first quarter of fiscal year 2016. ~~Amounts held in escrow were measured at fair value using present value computations. The~~This contingent ~~consideration~~liability was measured at fair value using a probability weighted average of the potential payment outcomes that would occur should certain contract milestones be reached. There is no market data available to use in valuing the contingent consideration; therefore, the Company developed its own assumptions related to the achievement of the milestones to evaluateclassified as level 3 within the fair value hierarchy. The remaining liability of ~~the liability. As such, the contingent consideration is classified within Level 3~~$0.1 million was settled and paid as ~~described below.~~

~~The items are classified as Level 3 within the valuation hierarchy, consisting~~ of contingent consideration and escrow liability related to the QSC acquisition, were valued based on an estimate of the probability of success of the milestones being achieved and present value computations, respectively. The table below presents a roll-forward of the contingent consideration and escrow liability valued using a Level 3 input (in thousands):September 30, 2017.

Three Months Ended Six Months Ended
September 30, September 30,
2016 2015 2016 2015
Balance at beginning of period $ 216 $ 391 $ 341 $ -
Purchase price contingent consideration - - - 391
Contingent consideration payments - (150) (125) (150)
Balance at end of period $ 216 $ 241 $ 216 $ 241

3. ~~INVENTORIES~~

September 30, March 31,
2016 2016
Inventory (in thousands)
     Work-in-process $ - $ 76
     Finished goods 464 444
          $ 464 $ 520

4. INTANGIBLE ASSETS ~~AND GOODWILL~~

The carrying value of intangible assets consisted of the following (in thousands):

		September 30, 2016						March 31, 2016						September 30, 2017						March 31, 2017
		Gross				Net		Gross				Net		Gross				Net		Gross				Net
		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
		Amount		Amortization		Amount		Amount		Amortization		Amount		Amount		Amortization		Amount		Amount		Amortization		Amount
Technology	$	17,776	$	(5,776)	$	12,000	$	18,640	$	(4,622)	$	14,018	$	19,151	$	(8,421)	$	10,730	$	18,685	$	(7,010)	$	11,675
Customer relationships		9,600		(5,562)		4,038		9,993		(4,847)		5,146		9,615		(6,863)		2,752		9,419		(6,187)		3,232
Trade names/domains		2,079		-		2,079		2,205		-		2,205		2,107		(632)		1,475		2,036		-		2,036
In-process research and development		95		-		95		95		-		95		95		(95)		-		95		-		95
Total acquired identifiable intangible assets	$	29,550	$	(11,338)	$	18,212	$	30,933	$	(9,469)	$	21,464	$	30,968	$	(16,011)	$	14,957	$	30,235	$	(13,197)	$	17,038

At September 30, ~~2016,~~2017, annual amortization of intangible assets, based upon our existing intangible assets and current useful lives, is estimated to be the following (in thousands):

		Amount		Amount
Remaining 2017	$	1,803
2018		3,340
Remaining 2018			$	2,373
2019		3,090		4,596
2020		3,090		3,162
2021		2,735		2,796
2022				1,796
Thereafter		1,980		234
Total	$	16,038	$	14,957

During the first quarter of fiscal year 2018, the Company determined that the tradename/domains no longer have an indefinite life, and has assigned those assets an estimated life of two years. Amortization expenses associated with tradename/domains are included in selling and marketing expenses in the condensed consolidated statements of operations.

4. GOODWILL

The following table provides a summary of the changes in the carrying amounts of goodwill by reporting segment (in thousands):

Americas Europe Total
Balance as of March 31, 2016 $ 25,729 $ 21,691 $ 47,420
Foreign currency translation - (2,130) (2,130)
Balance as of September 30, 2016 $ 25,729 $ 19,561 $ 45,290

		Americas		Europe		Total
Balance at March 31, 2017	$	27,309	$	18,827	$	46,136
Foreign currency translation		-		1,383		1,383
Balance at September 30, 2017	$	27,309	$	20,210	$	47,519

5. ~~RESEARCH, DEVELOPMENT AND SOFTWARE COSTS~~

~~In the first six months of fiscal 2017 and 2016, the Company expensed all research and development costs in accordance with ASC 985-20,~~~~Costs of Software to be Sold, Leased or Marketed~~ ~~(ASC 985-20).~~

~~The Company accounts for computer software developed or obtained for internal use in accordance with ASC 350-40,~~~~Internal Use Software~~ ~~(ASC 350-40). Capitalized costs are classified as either long-term assets or property and equipment on the consolidated balance sheets.~~

~~Other Long-Term Assets~~

In the first six months of fiscal 2017, the Company capitalized $2.4 million as other long-term assets. In the first six months of fiscal 2016, the Company capitalized $0.7 million as other long-term assets. At September 30, 2016 and March 31, 2016, total completed capitalized software development cost included in other long-term assets was approximately $1.7 million and $0, respectively. At September 30, 2016 and March 31, 2016, accumulated amortization cost related to completed capitalized software in other long term assets was approximately $0.3 million and $0, respectively.

~~Property and Equipment~~

In the first six months of fiscal 2017, the Company capitalized $0.5 million as property and equipment. In the first six months of fiscal 2016, the Company capitalized $0.3 million as property and equipment. At September 30, 2016 and March 31, 2016, total completed capitalized software cost included in property and equipment was approximately $1.2 million. At September 30, 2016 and March 31, 2016, accumulated amortization cost related to completed capitalized software in property and equipment was approximately $0.4 million and $0.2 million, respectively.

6. COMMITMENTS AND CONTINGENCIES

Facility and Equipment Leases

The Company leases its headquarters ~~facility~~ in San Jose, California, under an operating lease agreement that expires in October 2019. The lease is an industrial net lease with monthly base rent of $130,821 for the first 15 months with a 3% increase each year thereafter, and ~~requires us to pay property taxes, utilities and normal maintenance costs. The Company~~ also leases ~~facilities for~~ office space under non-cancelable operating leases ~~for its~~in various domestic and international locations. Future minimum annual lease payments were as follows (in thousands):

		Amount
Remaining 2018	$	2,841
2019		5,774
2020		5,085
2021		2,615
2022		2,308
Thereafter		5,126
Total	$	23,749

The Company has entered into a series of noncancelable capital lease agreements for data center and office equipment bearing interest at various rates. ~~Assets~~

Other Commitments, Indemnifications and Contingencies

There were no material changes in our other commitments under ~~capital lease at September 30, 2016 totaled $2.4 million with accumulated amortization of $0.7 million.~~

~~Guarantees~~

~~Indemnifications~~

~~In the normal course of business, the Company may agree to indemnify~~contractual obligations, indemnification and other parties, including customers, lessors and parties to other transactions with the Company, with respect to certain matters such as breaches of representations or covenants or intellectual property infringement or other claims made by third parties. These agreements may limit the time within which an indemnification claim can be made and the amount of the claim. In addition, the Company has entered into indemnification agreements with its officers and directors.contingencies since March 31, 2017.

It is not possible to determine the maximum potential amount of the Company's exposure under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments made by the Company under these agreements have not had a material impact on the Company's operating results, financial position or cash flows. Under some of these agreements, however, the Company's potential indemnification liability might not have a contractual limit.

~~Product Warranties~~

The Company accrues for the estimated costs that may be incurred under its product warranties upon revenue recognition. Changes in the Company's product warranty liability, which is included in cost of product revenues in the consolidated statements of operations, were as follows (in thousands):

Three Months Ended Six Months Ended
September 30, September 30,
2016 2015 2016 2015
Balance at beginning of period $ 340 $ 342 $ 326 $ 339
     Accruals for warranties 113 77 227 175
     Settlements (88) (70) (175) (153)
     Adjustments (32) (24) (45) (36)
Balance at end of period $ 333 $ 325 $ 333 $ 325

~~Minimum Third Party Customer Support Commitments~~

In the third quarter of 2010, the Company amended its contract with one of its third party customer support vendors containing a minimum monthly commitment of approximately $0.4 million effective April 1, 2010. The agreement requires a 150-day notice to terminate. At September 30, 2016, the total remaining obligation upon a termination of the contract was $2.2 million.

~~Minimum Third Party Network Service Provider Commitments~~

The Company has entered into contracts with multiple vendors for third party network service which expire on various dates in fiscal 2017 through 2020. At September 30, 2016, future minimum annual payments under these third party network service contracts were as follows (in thousands):

Year ending March 31:
     Remaining 2017 $ 1,263
     2018 1,363
     2019 132
     2020 8
          Total minimum payments $ 2,766

Legal Proceedings

The Company, from time to time, is involved in various legal claims or litigation, including patent infringement claims that can arise in the normal course of the Company's operations. Pending or future litigation could be costly, could cause the diversion of management's attention and could upon resolution, have a material adverse effect on the Company's business, results of operations, financial condition and cash flows.

On ~~February~~August 22, ~~2011, the Company was named a defendant in Bear Creek Technologies, Inc. (BCT) v. 8x8, Inc.~~~~et al.~~, filed in the U.S. District Court for the District of Delaware (the Court), along with 20 other defendants. Collectively this patent litigation is collectively referred to as In re Bear Creek Technologies, Inc. (MDL No.: 2344). In August 2011, the suit was dismissed without prejudice and then was refiled against the Company before the same Court. On November 28, 2012, the USPTO initiated and has since maintained a Reexamination Proceeding in which the claims of a patent (asserted against the Company) were rejected as being invalid based on four separate grounds. In response to the USPTO invalidity rejections, the Company filed an informational pleading (on July 10, 2013) to join a motion to stay the proceeding in the District Court, which this motion was granted on July 17, 2013. On May 5, 2015 and presumably in light of the Reexamination Proceeding, the Court administratively closed this case with leave to reopen if needed. The Reexamination Proceeding was appealed to the USPTO Patent Trial and Appeal Board, which affirmed the rejection of all claims in a decision on December 29, 2015. Beginning on February 26, 2016, the patent owner initiated the formal process to appeal that decision to the Court of Appeals for the Federal Circuit. No hearing date has been set.

~~On April 16, 2015,~~2017, the Company was named as a defendant in ~~Slocumb Law Firm~~Venadium LLC v. 8x8 Inc. ~~The Slocumb Law Firm has alleged that it purchased certain business services from~~, filed in the District of Delaware (Civil Action No. 1:17-cv-1176-LPS-CJB) along with five other defendants. PlaintiffVenadium LLC sued the Company ~~that did not perform as advertised or expected, and has asserted causes~~for alleged patent infringement concerning alleged activities involving the Company's alleged methods for protecting computer programs. Based on the Company's subscription to certain patent risk management services, the Company settled the suit without needing to respond to the Complaint. The settlement amount was immaterial. On October 5, 2017, PlaintiffVenadium LLC filed a Notice of ~~actions for fraud, breach~~Voluntary Dismissal of ~~contract, violations~~Defendant (with prejudice) pursuant to Federal Rule of Civil Procedure 41(a)(1), thereby effecting formal dismissal of the ~~Alabama Deceptive Trade Practices Act and negligence.~~ suit without a Court Order.

On ~~May 7, 2015,~~August 25, 2017, the Company was named as a defendant inHublink, LLC v. 8x8 Inc., based on a Complaint filed ~~a motion with~~in the ~~U.S. District Court for the Middle~~ District of ~~Alabama, seeking an order compelling the Slocumb Law Firm to arbitrate its claims against~~Delaware (Civil Action No. 1:17-cv-1214-GMS) along with four other defendants. PlaintiffHublink, LLC sued the Company in Santa Clara County, California pursuant to a clause mandating arbitration of disputes set forth in the terms and conditions to which Slocumb Law Firm agreed in connection with its purchase of business services from the Company. No briefing schedule or hearing date for ~~the motion has been set as of this time. Discovery has not yet commenced in the case. The Company intends to vigorously defend against the Slocumb Law Firm's claims.~~

~~State and Municipal Taxes~~

From time to time, the Company has received inquiries from a number of state and municipal taxing agencies with respect to the remittance of sales, use, telecommunications, excise, and income taxes. Several jurisdictions currently are conducting tax auditsalleged patent infringement concerning alleged activities involving alleged implementations of the Company's ~~records.~~videophone communications uses and/or offerings. Based on the Company's subscription to certain patent risk management services, a third-party service provider has effectively settled the suit on behalf of the Company without needing to respond to the Complaint. The settlement amount was immaterial. PlaintiffHublink, LLC and the Company ~~collects or has accrued for taxes that it believes~~ are ~~required~~in the process of filing appropriate papers with the Court to ~~be remitted. The amounts that have been remitted have historically been within~~effect formal dismissal of the ~~accruals established by the Company.~~suit with prejudice.

7.10

6. STOCK-BASED COMPENSATION

The following table summarizes information pertaining to the stock-based compensation expense ~~(in thousands):~~

Three Months Ended Six Months Ended
September 30, September 30,
2016 2015 2016 2015
Cost of service revenue $ 440 $ 263 $ 800 $ 482
Cost of product revenue - - - -
Research and development 863 726 1,750 1,257
Sales and marketing 1,751 1,422 3,666 2,619
General and administrative 1,454 1,106 3,343 2,181
Total stock-based compensation expense
     related to employee stock options and
     employee stock purchases, pre-tax 4,508 3,517 9,559 6,539

Tax benefit - - - -
Stock-based compensation expense
     related to employee stock options and
     employee stock purchases, net of tax $ 4,508 $ 3,517 $ 9,559 $ 6,539

~~Stock Options, Stock Purchase Right and Restricted Stock Unit Activity~~

~~Stock Option activity under all the Company's stock option plans for the six months ended September 30, 2016, is summarized as follows:~~

Weighted Average
Number of Exercise Price
Shares Per Share
Outstanding at March 31, 2016 4,793,266 $ 6.29
     Granted 308,560 14.40
     Exercised (318,197) 1.83
     Canceled/Forfeited (1) 2.58
Outstanding at September 30, 2016 4,783,628 $ 7.11

Vested and expected to vest at September 30, 2016 4,783,628 $ 7.11
Exercisable at September 30, 2016 3,085,831 $ 5.80

~~Stock Purchase Right activity for the six months ended September 30, 2016 is summarized as follows:~~

Weighted Weighted
Average Average
Grant-Date Remaining
Number of Fair Market Contractual
Shares Value Term (in Years)
Balance at March 31, 2016 82,171 $ 6.30 0.76
Granted - -
Vested (65,006) 5.89
Forfeited (250) 7.88
Balance at September 30, 2016 16,915 $ 7.86 1.21

~~Restricted Stock Unit activity for the six months ended September 30, 2016 is summarized as follows:~~

Weighted
Weighted Average
Average Remaining
Number of Grant Date Contractual
Shares Fair Value Term (in Years)
Balance at March 31, 2016 4,544,799 $ 8.08 1.67
Granted 1,899,350 15.08
Vested (868,648) 8.27
Forfeited (141,143) 8.82
Balance at September 30, 2016 5,434,358 $ 10.49 1.75

~~The following table summarizes stock options outstanding and exercisable at September 30, 2016:~~

Options Outstanding Options Exercisable
Weighted Weighted Weighted
Average Average Average
Exercise Remaining Aggregate Exercise Aggregate
Price Contractual Intrinsic Price Intrinsic
Shares Per Share Life (Years) Value Shares Per Share Value
$0.55 to $4.26 995,448 $ 1.44 1.9 $ 13,930,587 995,448 $ 1.44 $ 13,930,587
$4.32 to $6.86 1,288,863 $ 6.26 7.0 11,825,206 925,675 $ 6.02 8,712,685
$7.52 to $8.93 973,650 $ 8.28 8.6 6,963,536 333,871 $ 8.23 2,403,471
$9.21 to $9.74 983,835 $ 9.62 7.0 5,711,928 729,275 $ 9.63 4,232,016
$10.50 to $15.18 541,832 $ 12.92 9.1 1,361,380 101,562 $ 11.10 439,646
4,783,628 $ 39,792,637 3,085,831 $ 29,718,405

~~As of September 30, 2016, there was $52.6 million of unamortized stock-based compensation expense related to unvested~~from stock options and stock awards ~~which is expected to be recognized over a weighted average period of 2.26 years.~~

Unamortized stock-based compensation expense related to shares issued as part of a prior year acquisition was approximately $1.6 million, which will be recognized over a weighted average period of 2.67 years.

~~Assumptions Used to Calculate Stock-Based Compensation Expense~~

~~The~~(in thousands, except grant-date fair value ~~of each of the Company's option grants has been estimated on the date of grant using the Black-Scholes pricing model with the following assumptions:~~and recognition period):

Three Months Ended Six Months Ended
September 30, September 30,
2016 2015 2016 2015
Expected volatility 42% 53% 44% 53%
Expected dividend yield - - - -
Risk-free interest rate 1.12% 1.59% 1.17% 1.59%
Weighted average expected option term 4.50 years 5.57 years 4.72 years 5.46 years

Weighted average fair value of options granted $ 5.46 $ 4.00 $ 5.46 $ 4.06

		Three Months Ended				Six Months Ended
		September 30,				September 30,
		2017		2016		2017		2016
Cost of service revenue	$	473	$	440	$	864	$	800
Cost of product revenue		-		-		-		-
Research and development		1,314		863		2,651		1,750
Sales and marketing		2,568		1,751		5,215		3,666
General and administrative		2,302		1,454		4,278		3,343
Total	$	6,657	$	4,508	$	13,008	$	9,559

~~The estimated fair value of options granted under the Employee Stock Purchase Plan was estimated at the date of grant using Black-Scholes pricing model with the following weighted average assumptions:~~

Three Months Ended Six Months Ended
September 30, September 30,
2016 2015 2016 2015
Expected volatility 40% 45% 40% 45%
Expected dividend yield - - - -
Risk-free interest rate 0.45% 0.30% 0.45% 0.30%
Weighted average expected ESPP option term 0.76 years 0.75 years 0.76 years 0.75 years

Weighted average fair value of
ESPP options granted $ 4.04 $ 2.78 $ 4.04 $ 2.78

As of September 30, 2016, there were approximately $0.5 million of total unrecognized compensation cost related to employee stock purchases. This cost is expected to be recognized over a weighted average period of 0.5 years.

		Six Months Ended
		September 30,
		2017		2016
Options outstanding at the beginning of the period:		4,462		4,793
Options granted		229		310
Options exercised		(329)		(318)
Options canceled and forfeited		(134)		(1)
Options outstanding at the end of the period:		4,228		4,784
Weighted-average fair value of grants during the period	$	5.28	$	5.46
Total intrinsic value of options exercised during the period	$	3,537	$	3,551
Weighted-average remaining recognition period at period-end (in years)		1.95		2.26

Stock awards outstanding at the beginning of the period:		4,950		4,628
Stock awards granted		2,446		1,899
Stock awards vested		(1,225)		(934)
Stock awards canceled and forfeited		(272)		(142)
Stock awards outstanding at the end of the period:		5,899		5,451
Weighted-average fair value of grants during the period	$	14.09	$	15.08
Weighted-average remaining recognition period at period-end (in years)		2.75		2.68

Total unrecognized compensation expense at period-end	$	63,323	$	52,623

Performance Stock Units

During the three and six months ended September 30, ~~2016,~~2017, the Company issued restricted performance stock units (PSUs) to a group of executives with vesting that is contingent on both market performance and continued service. These PSUs vest (1) 50% on September ~~22, 2018~~19, 2019 and (2) 50% on September ~~27, 2019,~~19, 2020, in each case subject to the performance of the Company's common stock relative to the Russell 2000 Index (the benchmark) during the period from grant date through such vesting date. A 2x multiplier will be applied to the total shareholder returns (TSR) for each 1% of positive or negative relative TSR, and the number of shares earned will increase or decrease at the end of each respective performance measurement period by 2% of the target numbers. In the event 8x8's common stock performance is below negative 30%, relative to the benchmark, no shares will be issued. These PSU grants are included in the restricted stock unit activity disclosure for the six months ended September 30, ~~2016.~~2017.

To value these market-based ~~restricted performance stock units~~PSUs under the Equity Compensation Plans, the Company used a Monte Carlo simulation model on the date of grant. Fair value determined using the Monte Carlo simulation model varies based on the assumptions used for the expected stock price volatility, the correlation coefficient between the Company and the NASDAQ Composite Index, risk free interest rates, and future dividend payments.

1511

Stock Repurchases

In ~~February 2015,~~May 2017, the Company's board of directors authorized the Company to purchase ~~up to $20.0~~$25.0 million of its common stock from time to time ~~until February 29, 2016~~under the 2017 Repurchase Plan (the ~~"2015 Repurchase~~"2017 Plan"). ~~Share repurchases, if any, will be funded with~~The 2017 Plan expires when the maximum purchase amount is reached, or upon the earlier revocation or termination by the board of directors. The remaining amount available ~~cash. Repurchases~~ under the ~~2015 Repurchase~~2017 Plan ~~may be made through open market purchases~~ at ~~prevailing market prices or in privately negotiated transactions.~~ September 30, 2017 was approximately $10.9 million.

The ~~timing, volume and nature~~stock repurchase activity as of ~~share repurchases are subject to market prices and conditions, applicable securities laws and other factors, and are at the discretion~~September 30, 2017 is summarized as follows (in thousands):

			Weighted Average
	Shares		Price		Amount
	Repurchased		Per Share		Repurchased (1)
Repurchase of common stock under 2017 Repurchase Plan	1,064	$	13.23	$	14,081
Total	1,064			$	14,081

(1) Amount excludes commission fees.

The total purchase price of the common stock repurchased and retired was reflected as a reduction to consolidated stockholders' equity during the period of repurchase.

7. INCOME TAXES

The Company's ~~management. Share repurchases under~~effective tax rate was 86% and negative 125% for the ~~2015 Repurchase Plan may be commenced, suspended or discontinued at any time. This tranche~~three months ended September 30, 2017 and 2016, respectively. The effective tax rate is calculated by dividing the income tax provision by net income before income tax expense. The difference in the effective tax rate and the U.S. federal statutory rate of ~~shares authorized for repurchase expired~~34% in ~~February 2016.~~both periods was due primarily to the change in pretax profitability, geographic mix of profits and losses, and adoption of ASU 2016-09 effective April 1, 2017.

~~In October 2015, the Company's board of directors authorized~~As described in Note 1, the Company adopted the updated accounting standard for share-based payment accounting in the first quarter of fiscal year 2018. As a result, the Company recorded deferred tax assets of approximately $17.6 million with a corresponding increase to ~~purchase an additional $15.0 million of its common stock from time~~retained earnings related to ~~time until October 20, 2016 under the 2015 Repurchase Plan. There were no stock repurchases for~~previously unrecognized excess tax benefits. For the six months ended September 30, ~~2016. The remaining authorized repurchase amount at September 30, 2016 was $15.0 million.~~

~~8. INCOME TAXES~~

~~For the three months ended September 30, 2016,~~2017, the Company ~~recorded a benefit from income taxes~~recognized approximately $2.7 million of ~~$15,000, which was primarily attributable to income from operations. For~~excess tax benefits within the ~~three months ended September 30, 2015, the Company recorded a~~ provision for income ~~taxes of $0.4 million, which was primarily attributable to income from operations.~~

The Company estimated the annual effective rate at the end of each quarterly period, and recorded the tax effect of certain discrete items, which are unusual or occur infrequently, in the interim period in which they occur, including changes in judgment about deferred tax valuation allowances. The determination of the effective tax rate reflects tax expense and benefit generated in certain domestic and foreign jurisdictions. However, jurisdictions with a year-to-date loss where no tax benefit can be recognized are excluded from the annual effective tax rate.

~~At March 31, 2016,~~taxes. Additionally, the Company ~~had a liability for unrecognized~~elected to prospectively apply the change in presentation of excess tax benefits as an operating activity on the statement of ~~$2.9 million, all~~cash flows rather than as a financing activity. Accordingly, prior period classification of ~~which, if recognized, would decrease the company's effective tax rate. The Company does not believe that there has been any significant change in the unrecognized~~cash flows related to excess tax benefits ~~for the three and six months ended September 30, 2016, and does~~were not expect the remaining unrecognized tax benefit to change materially in the next 12 months. To the extent that the remaining unrecognized tax benefits are ultimately recognized, they will have an impact on the effective tax rate in future periods.adjusted.

The Company is subject to taxation in the U.S., California and various other states and foreign jurisdictions in which it has or had a subsidiary or branch operations or it is collecting sales tax. All tax returns from fiscal 2013 to fiscal 2016 may be subject to examination by the Internal Revenue Service, California and various other states. Net operating losses and tax credits carried forward to March 31, 2016 may still be subject to adjustment by the taxing authorities until the period is closed to examination. As of October 24, 2016, there were no active federal or state income tax audits. Returns filed in foreign jurisdictions may be subject to examination for the fiscal years 2011 to 2016.

9.8. NET INCOME (LOSS) PER SHARE

The following is a reconciliation of the weighted average number of common shares outstanding used in calculating basic and diluted net income (loss) per share (in thousands, except share and per share data):

		Three Months Ended				Six Months Ended				Three Months Ended				Six Months Ended
		September 30,				September 30,				September 30,				September 30,
		2016		2015		2016		2015		2017		2016		2017		2016
Numerator:
Net income (loss) available to common stockholders	$	27	$	(1,892)	$	(501)	$	(2,364)	$	(546)	$	27	$	(2,715)	$	(501)

Denominator:
Common shares		89,987		88,557		89,171		88,397		91,689		89,987		91,667		89,171

Denominator for basic calculation		89,987		88,557		89,171		88,397		91,689		89,987		91,667		89,171
Employee stock options		1,717		-		-		-		-		1,717		-		-
Stock purchase rights		1,743		-		-		-
Stock purchases rights										-		1,743		-		-
Denominator for diluted calculation		93,447		88,557		89,171		88,397		91,689		93,447		91,667		89,171

Net income (loss) per share
Basic	$	0.00	$	(0.02)	$	(0.01)	$	(0.03)	$	(0.01)	$	0.00	$	(0.03)	$	(0.01)
Diluted	$	0.00	$	(0.02)	$	(0.01)	$	(0.03)	$	(0.01)	$	0.00	$	(0.03)	$	(0.01)

The following shares attributable to outstanding stock options and ~~restricted~~ stock ~~purchase rights~~awards were excluded from the calculation of diluted earnings per share because their inclusion would have been antidilutive (in thousands):

Three Months Ended Six Months Ended
September 30, September 30,
2016 2015 2016 2015
Employee stock options 187 2,640 153 2,544
Stock purchase rights 307 262 154 157
Total anti-dilutive employee stock-based securities 494 2,902 307 2,701

	Three Months Ended		Six Months Ended
	September 30,		September 30,
	2017	2016	2017	2016
Stock options	4,228	187	4,228	4,784
Stock awards	5,899	307	5,899	5,451
Total anti-dilutive shares	10,127	494	10,127	10,235

~~10.~~9. SEGMENT REPORTING

ASC 280,Segment Reporting, establishes annual and interim reporting standards for an enterprise's business segments and related disclosures about its products, services, geographic areas and major customers. Under ASC 280, the method for determining what information to report is based upon the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance.

The Company manages its operations primarily on a geographic basis. The Chief Executive Officer, the Chief Financial Officer, and the Chief Technology Officer or the Company's Chief Operating Decision Makers (CODMs), evaluate performance of the Company and make decisions regarding allocation of resources based on geographic results. The Company's reportable segments are the Americas and Europe. The Americas segment is primarily North America. The Europe segment is primarily the United Kingdom. Each operating segment provides similar products and services.

The Company's CODMs evaluate the performance of its operating segments based on revenues and net income. ~~Revenues are attributed to each segment based on the ordering location of the customer or ship to location.~~ The Company ~~allocates corporate overhead costs such as~~does not allocate research and development, sales and marketing, general and administrative, amortization expense, stock-based compensation expense, and commitment and contingencies for each segment as management does not consider this information in its evaluation of the performance of each operating segment. Revenues are attributed to each segment based on the ~~Americas segment.~~

ordering location of the customer or ship to location.

The ~~Company's revenue distribution by~~following tables set forth the segment and geographic ~~region (based~~information for each period (in thousands):

		Revenue for the
		Three Months Ended				Six Months Ended
		September 30,				September 30,
		2017		2016		2017		2016
Americas (principally US)	$	65,121	$	56,635	$	127,526	$	110,033
Europe (principally UK)		7,362		6,548		14,055		13,191
	$	72,483	$	63,183	$	141,581	$	123,224

Revenue is based upon the destination of shipments and the ~~customer's~~customers' service ~~address) was as follows:~~

Three Months Ended Six Months Ended
September 30, September 30,
2016 2015 2016 2015
Americas (principally US) 89% 86% 88% 87%
Europe (principally UK) 10% 14% 11% 11%
Asia-Pacific 1% 0% 1% 2%
100% 100% 100% 100%

~~Geographic area data is based upon the location of the property and equipment and is as follows (in thousands):~~

September 30, March 31,
2016 2016
Americas (principally US) $ 11,231 $ 9,165
Europe (principally UK) 3,902 2,642
Asia-Pacific 182 568
Total $ 15,315 $ 12,375

~~The following table provides financial information by segment for~~address. For the three and six months ended September 30, 2017 and 2016, intersegment revenues of approximately $4.4 million and ~~2015 (in thousands):~~$6.9 million, and $1.5 million and $2.6 million, respectively, were eliminated in consolidation, and have been excluded from the table above.

Three Months Ended Six Months Ended
September 30, September 30,
2016 2015 2016 2015
Americas (principally US):
     Net revenues $ 56,635 $ 44,086 $ 110,033 $ 87,674
     Net income $ 2,044 $ 15 $ 3,510 $ 266
Europe (principally UK):
     Net revenues $ 6,548 $ 6,856 $ 13,191 $ 11,160
     Net loss $ (2,017) $ (1,907) $ (4,011) $ (2,630)

		Depreciation and Amortization for the
		Three Months Ended				Six Months Ended
		September 30,				September 30,
		2017		2016		2017		2016
Americas (principally US)	$	2,336	$	1,618	$	4,869	$	3,276
Europe (principally UK)		1,295		959		2,489		1,867
	$	3,631	$	2,577	$	7,358	$	5,143

Net Income (Loss) for the
Three Months Ended Six Months Ended
September 30, September 30,
2017 2016 2017 2016
Americas (principally US) $ 970 $ 2,044 $ 1,379 $ 3,510
Europe (principally UK) (1,516) (2,017) (4,094) (4,011)
$ (546) $ 27 $ (2,715) $ (501)

		September 30, 2017				March 31, 2017
		Total		Property and		Total		Property and
		Assets		Equipment, net		Assets		Equipment, net
Americas (principally US)	$	308,986	$	22,608	$	284,011	$	19,480
Europe (principally UK)		48,857		6,992		49,844		4,581
	$	357,843	$	29,600	$	333,855	$	24,061

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

This Management Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements within the meaning of Section 27A of the Securities Act ~~of 1933~~ and Section 21E of the ~~Securities~~ Exchange ~~Act of 1934.~~Act. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends," and similar expressions are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Actual results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors. These factors include, but are not limited to ~~market~~- customer acceptance ~~of new or existing services~~ and ~~features, success~~demand for our cloud communications and collaboration services; the quality and reliability of our ~~efforts to target mid-market and larger distributed enterprises, changes in~~services; the ~~competitive dynamics of the markets in which we compete,~~prices for our services; customer ~~cancellations and rate of churn, impact of current economic climate and adverse credit markets on our target customers,~~renewal rates; customer acquisition costs; our ability to ~~scale~~compete effectively in the hosted telecommunications and cloud-based computing services business; actions by our ~~business, our reliance on infrastructure of third-party network~~competitors, including price reductions for their competitive services, ~~providers, risk of failure in our physical infrastructure, risk of failure of our software,~~ our ability to ~~maintain~~provide cost-effective and timely service and support to larger distributed enterprises; the ~~compatibility~~impact of risks associated with our ~~software with third-party applications~~international operations; potential federal and ~~mobile platforms, continued~~state regulatory actions; compliance ~~with industry standards~~costs; potential warranty claims and ~~regulatory requirements in~~product defects; our need for and the ~~United States and foreign countries in which we make~~availability of adequate working capital; our ~~software solutions available, risks relating~~ability to innovate technologically; the timely supply of products by our contract manufacturers; our management's ability to execute its plans, strategies and objectives for future operations, including the execution of integration plans, and ~~realization~~the timing and extent of improvements in operating results from increased spending for marketing, sales and R&D; our management's ability and to realize the expected benefits of our acquisitions, ~~the amount~~ and ~~timing of costs associated with recruiting, training~~potential future intellectual property infringement claims and ~~integrating new employees, introduction and adoption of our cloud software solutions in markets outside of the United States, and general economic conditions~~other litigation that could adversely affect our business and operating results. All forward-looking statements included in this report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. In addition to the factors discussed elsewhere in this Form 10-Q, see the Risk Factors discussion in Item 1A of our ~~2016~~2017 Form 10-K. The forward-looking statements included in this Form 10-Q are made only as of the date of this report, and we undertake no obligation to update the forward-looking statements to reflect subsequent events or circumstances.

BUSINESS OVERVIEW

We ~~provide cloud-based, enterprise-class software solutions that transform the way businesses communicate and collaborate globally. Delivered through~~are a ~~SaaS (Software as a Service) business model, our solutions are at the forefront~~leading provider of ~~a disruptive technology shift that is occurring in business~~truly unified cloud communications. Our suite of products weaves together unified cloud communications, ~~where enterprises are increasingly replacing costly and unwieldy on-premises communications equipment with agile, cloud-based software services delivered over the public Internet.~~

~~Our integrated, "pure-cloud" offering combines global voice, conferencing,~~ messaging, and video with integrated workflows and big data analytics on a single platform to enable increased team productivity, better customer engagement and real-time insights into business performance. Through a combination of open API's (application program interface) and pre-built integrations, our solutions seamlessly leverage critical customer context from internal data systems and industry-leading Customer Relationship Management (CRM) systems, including cloud-based solutions from Salesforce.com, NetSuite, and Zendesk.

~~Powered by internally owned and managed technologies, our cloud communications~~meeting and contact center ~~offerings are positioned to serve businesses~~solutions so today's organization can communicate at the speed of ~~all sizes~~employee and ~~can easily scale to large, globally distributed enterprise customers.~~customer expectations. Our ~~turnkey solution spans~~technology provides one unified management platform with one communication experience for employees and customers, as well as a ~~broad spectrum of communications~~one real-time data analytics platform for constant learning and collaboration needs, is provided with industry-leading reliability at an affordable cost and is quick and easy-to deploy through our proprietary deployment methodology. This allows customers to focus on their business instead of managing the complexities of disparate communications and collaboration platforms and the integration of these platforms with other cloud-based business applications.improvement.

Our fiscal year ends on March 31 of each calendar year. Each reference to a fiscal year in this report refers to the fiscal year ending March 31 of the calendar year indicated (for example, fiscal ~~2017~~2018 refers to the fiscal year ending March 31, ~~2017)~~2018).

SUMMARY AND OUTLOOK

In the second quarter of fiscal ~~2017,~~year 2018, our service revenue from mid-market and enterprise customers grew ~~36%~~28% year-over year and represented ~~53%~~58% of total service revenue. New monthly recurring revenue (MRR) bookings from mid-market and enterprise customers and by our channel sales teams ~~increased 30% year-over-year,~~was 61% of total bookings for the quarter, reflecting strong demand for our services in our target market segments. Also, average monthly service revenue per mid-market and enterprise business customer (ARPU) increased ~~14%~~8% to a record ~~$409,~~$4,697, compared with ~~$360~~$4,351 in the same period last year. ~~Our ability~~The increase resulted from our success in selling a greater number of subscriptions to ~~offer a broad range of cloud- based mission critical communications services is bringing us~~ larger, ~~deals where we continue to displace incumbent, premises-based systems.~~more established customers.

~~Building upon our Global Reach® initiative, during the quarter,~~In October 2017, we launched the new 8x8 Virtual Office Editions, in three product bundles: X2, X5 and X8. X8, our most unified offering, weaves together communications, collaboration with our contact center all into one solution. It includes an unlimited calling zone to 45 countries and a ~~new customer~~full suite of 8x8 Virtual Office features, such as HD voice, Virtual Office Meetings, HD Video, integrations with Salesforce, Zendesk and NetSuite CRM, Salesforce analytics for better and faster data insights, call recording, call quality reporting, and barge monitor whisper capabilities.

In order to position ourselves most effectively for our next phase of growth, we have identified the following strategic initiatives.

First, we are aligning global business units around our core market segments to optimize for growth. We bifurcated our internal sales operations into two separate sales operations - Small Business & eCommerce and Mid-market & Enterprise. These operations will align sales and delivery, connecting demand generation, services and support ~~center~~to drive revenue growth and profitability globally. Small Business & eCommerce will focus on our high-volume, transactional business, with the objective of accelerating growth and productivity through eCommerce and self-service. Midmarket & Enterprise will focus on creating and leveraging channel relationships to drive a consultative approach to our land and expand strategy for larger accounts in the ~~Philippines,~~US, Europe, Middle East and ~~expect~~Asia, and Asia-Pacific regions.

Second, we have made several executive appointments in our marketing and sales organizations to ~~open an additional support center~~align with our new sales operations and accelerate adoption of our solutions across all market segments.

Third, we have expanded our global field sales organization with both Mid-market and Enterprise Sales Executives and Channel Development Managers. Our field sales executives work directly with customer prospects to understand, customize, and optimize communications solution for customer's business while Channel Development Managers are responsible for recruiting and enabling partners in ~~Cluj, Romania by~~their respective territories, evangelizing the ~~end~~8x8 brand and growing the sales pipeline with partners.

In the first fiscal quarter of the calendar year. These new technical support operations outside of the U.S. will expand our 24/7 worldwide support capabilities while favorably impacting our margins through reduced customer support costs. Additionally, all of the three data datacenters that2018, we announced ~~earlier~~increased investments for sales and marketing expenses to accelerate the growth of our business in the ~~year, Amsterdam, Brazil~~mid-market and ~~Singapore, are in operation and are supporting customers and users based in those regions.~~

enterprise segments. We ~~continued the advancement of our technology and service offerings~~commenced these investments in the second quarter of fiscal ~~2017 with two~~2018 and intend to incur them over several quarters. The precise timing of these additional expenditures, and the reporting periods in which they occur, will depend in part on when our management can implement the steps, particularly hiring additional personnel, necessary for achieving anticipated growth in our bookings and revenues. In addition, though we believe our new marketing and sales expenditures, and, to a lesser extent, our product ~~releases: Quality Management~~development expenditures will help us achieve the bookings and Virtual Office for Sales. Our new Quality Management solution leverages cloud technology combined with deep Virtual Contact Center integration to deliver an easy to install, use and manage framework for monitoring and improving the quality of a customer's contact center operations. Our new Virtual Office for Sales solution streamlines the entire sales process with built in Salesforce.com integration across all Virtual-Office connected devices, including mobile, to offer a constantly updated view of communications activities along with detailed analytics on team, individual and account performance.

~~Despite increases in total~~ revenue ~~year over year,~~growth we are ~~expecting a continued depreciation~~seeking, such growth in not assured, and will be impacted not only by the timing of ~~the British Pound (GBP)~~those expenditures but also by our ability to ~~the U.S. Dollar (USD). A significantly weaker GBP compared~~effectively implement such plans and limit disruptions to ~~the USD could materially reduce~~ our ~~revenues after taking into account foreign currency translation adjustments.~~current operations while we do so. If we do not timely and effectively implement our new marketing, sales and product development plans, and productively

CRITICAL ACCOUNTING POLICIES & ESTIMATES

The discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of assets and liabilities. On an on-going basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS

See Item 1 of Part I, "Financial Statements - Note 1 - Basis of Presentation - Recent Adopted Accounting Pronouncements."

RECENT ACCOUNTING PRONOUNCEMENTS

See Item 1 of Part I, "Financial Statements - Note 1 - Basis of Presentation - Recent Accounting Pronouncements."

SELECTED OPERATING STATISTICS

We periodically review certain key business metrics, within the context of our articulated performance goals, in order to evaluate the effectiveness of our operational strategies, allocate resources and maximize the financial performance of our business. The selected operating statistics include the following:

	Selected Operating Statistics					Selected Operating Statistics
	Sept. 30,	June 30,	March 31,	Dec. 31,	Sept. 30,	Sept. 30,	June 30,	March 31,	Dec. 31,	Sept. 30,
	2016	2016	2016	2015	2015	2017	2017	2017	2016	2016
Business customers average monthly
service revenue per customer (1)	$ 409	$ 399	$ 385	$ 369	$ 360	$442	$432	$426	$414	$409
Monthly business service revenue churn (2)(3)	0.6%	0.5%	0.4%	1.2%	0.7%	0.4%	0.6%	0.7%	1.0%	0.6%

Overall service margin	81%	81%	81%	80%	80%	81%	82%	83%	83%	81%
Overall product margin	-6%	-16%	-18%	-21%	-15%	-17%	-22%	-9%	-20%	-6%
Overall gross margin	74%	74%	72%	72%	73%	75%	76%	77%	77%	74%

_____________

(1)	Business customer average monthly service revenue per customer is service revenue from business customers in the period divided by the number of months in the period divided by the simple average number of business customers during the period.
(2)	Business customer service revenue churn is calculated by dividing the service revenue lost from business customers (after the expiration of 30-day trial) during the period by the simple average of business customer service revenue during the same period and dividing the result by the number of months in the period.
(3)	Excludes DXI business customer service revenue churn for all periods presented.

RESULTS OF OPERATIONS

The following discussion should be read in conjunction with our condensed consolidated financial statements and the notes thereto.

		September 30,				Dollar	Percent		September 30,				Dollar	Percent
Service revenue		2016		2015		Change	Change		2017		2016		Change	Change
		(dollar amounts in thousands)							(dollar amounts in thousands)
Three months ended	$	57,717	$	46,951	$	10,766	22.9%	$	68,123	$	57,717	$	10,406	18.0%
Percentage of total revenue		91.3%		92.2%					94.0%		91.3%
Six months ended	$	113,013	$	91,119	$	21,894	24.0%	$	133,214	$	113,013	$	20,201	17.9%
Percentage of total revenue		91.7%		92.2%					94.1%		91.7%

Service revenue consists primarily ~~of revenue attributable to the provision~~ of our 8x8 cloud communication and collaboration services. ~~We expect that cloud software solutions service revenues will continue to comprise nearly all of our service revenues for the foreseeable future.~~

8x8 service revenues increased in the ~~second quarter~~three and six months of fiscal ~~2017~~year 2018 compared ~~with~~to the ~~second quarter~~same period of the previous fiscal year primarily due to an increase in our business customer subscriber base (net of customer churn), and an increase in the average monthly service revenue per customer. Average monthly service revenue per customer increased from ~~$360 at September 30, 2015 to~~ $409 at September 30, ~~2016.~~ 2016 to $442 at September 30, 2017.

We expect growth in the number of business customers and average monthly service revenue per customer to continue ~~to increase~~ in fiscal ~~2017.~~year 2018.

We translate revenue denominated in foreign currency into U.S. dollars for our financial statements. If the exchange rate for the GBP to the USD persists at current levels, or declines further, our revenues will be adversely impacted due to the foreign currency translation adjustment. We cannot ascertain how much impact this will have in fiscal 2017, but at the current exchange rate, we estimate a negative impact on revenues of approximately $1.2 million per quarter in comparison with the exchange rate for GBP to USD effective in the first quarter of fiscal 2017.

		September 30,				Dollar	Percent		September 30,				Dollar	Percent
Product revenue		2016		2015		Change	Change		2017		2016		Change	Change
		(dollar amounts in thousands)							(dollar amounts in thousands)
Three months ended	$	5,466	$	3,991	$	1,475	37.0%	$	4,360	$	5,466	$	(1,106)	-20.2%
Percentage of total revenue		8.7%		7.8%					6.0%		8.7%
Six months ended	$	10,211	$	7,715	$	2,496	32.4%	$	8,367	$	10,211	$	(1,844)	-18.1%
Percentage of total revenue		8.3%		7.8%					5.9%		8.3%

Product revenue consists primarily of revenue from sales of IP telephones in conjunction with our 8x8 cloud communication service. Product revenue ~~increased~~decreased for the three and six months ended September 30, ~~2016~~2017 primarily due to ~~an increase~~a decrease in equipment sales to business customers.

No customer represented greater than 10% of the Company's total revenues for the three and six months ended September 30, ~~2016~~2017 or ~~2015.~~2016.

		September 30,				Dollar	Percent		September 30,				Dollar	Percent
Cost of service revenue		2016		2015		Change	Change		2017		2016		Change	Change
		(dollar amounts in thousands)							(dollar amounts in thousands)
Three months ended	$	10,837	$	9,186	$	1,651	18.0%	$	12,757	$	10,837	$	1,920	17.7%
Percentage of service revenue		18.8%		19.6%					18.7%		18.8%
Six months ended	$	21,072	$	17,645	$	3,427	19.4%	$	24,419	$	21,072	$	3,347	15.9%
Percentage of service revenue		18.6%		19.4%					18.3%		18.6%

The cost of service revenue primarily consists of costs associated with network operations and related personnel, communication origination and termination services provided ~~third party~~by third-party carriers, and technology ~~licenses, and royalty expenses.~~licenses.

Cost of service revenue for the three months ended September 30, ~~2016~~2017 increased over the comparable period in the prior fiscal year primarily due to a ~~$0.8~~$0.4 million increase in ~~third party~~third-party network services expenses, a ~~$0.2~~$0.4 million increase in amortization of intangibles expense, a $0.3 million increase in payroll and related ~~expenses,~~costs, a ~~$0.2~~$0.3 million increase in ~~stock-based compensation~~computer supply expenses, ~~and a $0.2 million increase in license and fee expenses.~~as well as other smaller cost increases.

Cost of service revenue for the six months ended September 30, ~~2016~~2017 increased over the comparable period in the prior fiscal year primarily due to a ~~$1.6~~$0.6 million increase in ~~third party~~third-party network services expenses, a $0.6 million increase in computer supply expenses, a $0.6 million increase in amortization of intangibles expense, a $0.4 million increase in payroll and related expenses, a ~~$0.3~~$0.4 million increase in license and fee expenses, and a $0.3 million increase in ~~stock-based compensation expenses.~~

September 30, Dollar Percent
Cost of product revenue 2016 2015 Change Change
(dollar amounts in thousands)
Three months ended $ 5,782 $ 4,596 $ 1,186 25.8%
Percentage of product revenue 105.8% 115.2%
Six months ended $ 11,287 $ 8,978 $ 2,309 25.7%
Percentage of product revenue 110.5% 116.4%

depreciation expense.

We expect cost of service revenue to increase moderately as a percentage of service revenue during the remainder of fiscal year 2018.

		September 30,				Dollar	Percent
Cost of product revenue		2017		2016		Change	Change
		(dollar amounts in thousands)
Three months ended	$	5,098	$	5,782	$	(684)	-11.8%
Percentage of product revenue		116.9%		105.8%
Six months ended	$	9,982	$	11,287	$	(1,305)	-11.6%
Percentage of product revenue		119.3%		110.5%

The cost of product revenue consists primarily of IP Telephones, estimated warranty obligations and direct and indirect costs associated with product purchasing, scheduling, shipping and handling. ~~The amount of revenue allocated to product revenue based on relative selling price under our customer subscription agreements is less than the cost of the IP phone equipment.~~

The cost of product revenue for the three and six months ended September 30, ~~2016 increased~~2017 decreased over the comparable period in the prior fiscal year primarily due to ~~an increase~~a decrease in equipment shipped to customers. The ~~decrease~~increase in negative margin iswas due to ~~less~~additional discounting of equipment in the current period and an increase in rebates offered to ~~a decrease in our standard costs~~customers for ~~certain phone equipment.~~the purchase of IP telephones.

		September 30,				Dollar	Percent		September 30,				Dollar	Percent
Research and development		2016		2015		Change	Change		2017		2016		Change	Change
		(dollar amounts in thousands)							(dollar amounts in thousands)
Three months ended	$	6,505	$	6,446	$	59	0.9%	$	8,311	$	6,505	$	1,806	27.8%
Percentage of total revenue		10.3%		12.7%					11.5%		10.3%
Six months ended	$	13,215	$	11,526	$	1,689	14.7%	$	16,254	$	13,215	$	3,039	23.0%
Percentage of total revenue		10.7%		11.7%					11.5%		10.7%

~~Historically, our research~~Research and development expenses ~~have consisted~~consist primarily of personnel, system prototype design, and equipment costs necessary for us to conduct our development and engineering efforts.

The research and development expenses for the three months ended September 30, ~~2016~~2017 increased over the comparable period in the prior fiscal year primarily due to a $0.9 million increase in payroll and related costs, net of costs capitalized in accordance with ASC 350-40, a $0.5 million increase in stock-based compensation expense, and a $0.2 million increase in travel expenses.

The research and development expenses for the six months ended September 30, 2017 increased over the comparable period in the prior fiscal year primarily due to a $1.3 million increase in payroll and related costs, ~~offset by a $1.0 million~~net of ~~payroll and related~~ costs ~~consulting and outside services~~ capitalized in accordance with ASC 350-40, ~~and an offset of $0.4 million decrease of facility allocation costs (which is based on employee headcount).~~

~~The research and development expenses for the six months ended September 30, 2016 increased over the comparable period in the prior fiscal year primarily due to~~ a ~~$0.6 million increase in facility allocation costs, $0.4 million increase in payroll and related costs, a $0.4~~$0.8 million increase in stock-based compensation expenses, a $0.3 million increase in travel expenses, and a $0.2 million increase in ~~consulting, temporary personnel, and outside service~~recruiting expenses.

We expect research and development expenses to ~~increase for~~remain consistent as a percentage of total revenue during the ~~foreseeable future~~remainder of fiscal year 2018 as we continue to invest in our ~~DXI unit and in the formation of our research and development team in Romania.~~product offerings.

		September 30,				Dollar	Percent		September 30,				Dollar	Percent
Sales and marketing		2016		2015		Change	Change		2017		2016		Change	Change
		(dollar amounts in thousands)							(dollar amounts in thousands)
Three months ended	$	33,691	$	26,730	$	6,961	26.0%	$	41,163	$	33,691	$	7,472	22.2%
Percentage of total revenue		53.3%		52.5%					56.8%		53.3%
Six months ended	$	65,382	$	50,554	$	14,828	29.3%	$	82,273	$	65,382	$	16,891	25.8%
Percentage of total revenue		53.1%		51.2%					58.1%		53.1%

Sales and marketing expenses consist primarily of personnel and related overhead costs for sales, marketing, and customer service which includes deployment engineering. Such costs also include outsourced customer service call center operations, sales commissions, as well as trade show, advertising and other marketing and promotional expenses.

Sales and marketing expenses for ~~the second quarter of fiscal~~three months ended September 30, 2017 increased over the ~~same quarter~~comparable period in the prior fiscal year primarily due to a ~~$4.3~~$4.1 million increase in payroll and related costs, a ~~$0.9~~$0.7 million increase in ~~lead generation expenses,~~stock-based compensation costs, a ~~$1.3~~$0.6 million increase in ~~facility allocation costs,~~channel commission expenses, a $0.6 million increase in consulting, temporary personnel, and outside services, and a $0.4 million increase in ~~indirect channel commission expenses, and a $0.3 million increase in stock-based compensation~~travel expenses.

Sales and marketing expenses for the six months ended September 30, ~~2016~~2017 increased over the same period in the prior fiscal year primarily ~~because of~~due to an ~~$8.8~~$8.2 million increase in payroll and related costs, a ~~$2.3~~$1.8 million increase in ~~departmental~~indirect channel commissions, a $1.7 million increase in facility allocation costs, a ~~$1.0~~$1.5 million increase in stock-based compensation expenses, a ~~$1.0 million increase in indirect channel commissions, a $0.5~~$1.1 million increase in lead generation expenses, ~~and~~ a ~~$0.5~~$0.8 million increase in travel ~~expenses.~~ expenses, and a $0.7 million increase in consulting, temporary personnel, and outside services.

We expect sales and marketing expenses to increase ~~for~~as percentage of total revenue during the ~~foreseeable future~~remainder of fiscal year 2018 as we continue to ~~increase our efforts to sell to larger businesses~~invest in the acquisition of mid-market and ~~to deploy our cloud communication and collaboration services globally to~~ enterprise customers.

		September 30,				Dollar	Percent		September 30,				Dollar	Percent
General and administrative		2016		2015		Change	Change		2017		2016		Change	Change
		(dollar amounts in thousands)							(dollar amounts in thousands)
Three months ended	$	6,747	$	5,657	$	1,090	19.3%	$	9,616	$	6,747	$	2,869	42.5%
Percentage of total revenue		10.7%		11.1%					13.3%		10.7%
Six months ended	$	13,548	$	11,725	$	1,823	15.5%	$	18,572	$	13,548	$	5,024	37.1%
Percentage of total revenue		11.0%		11.9%					13.1%		11.0%

General and administrative expenses consist primarily of personnel and related overhead costs for finance, human resources, legal and general management.

General and administrative expenses for ~~the second quarter of fiscal~~three months ended September 30, 2017 increased over the ~~same quarter~~comparable period in the prior fiscal year primarily due to a ~~$0.4 million increase in stock-based compensation expenses, a $0.3~~$0.9 million increase in payroll and related ~~expenses, and~~costs, a ~~$0.2~~$0.8 million increase in ~~facility expenses.~~stock-based compensation costs, a $0.5 million increase in temporary personnel, consulting and outside services, a $0.3 million increase in computer supply expenses, as well as other smaller cost increases.

General and administrative expenses for the six months ended September 30, ~~2016~~2017 increased over the same period in the prior fiscal year primarily because of a ~~$1.2~~$1.9 million increase in payroll and related expenses, a $0.9 million increase in stock-based compensation expenses, a ~~$0.5~~$0.9 million increase in ~~facility expenses,~~consulting, temporary personnel, and outside services, a ~~$0.3~~$0.4 million increase in ~~payroll~~computer supply expenses, as well as other smaller cost increases.

We expect general and ~~related~~administrative expenses ~~partially offset by a $0.4 million decrease in legal fees, primarily due~~ to increase moderately as percentage of total revenue during the ~~business acquisitions that occurred in the first quarter~~remainder of fiscal ~~2016.~~year 2018.

		September 30,				Dollar	Percent		September 30,				Dollar	Percent
Other income, net		2016		2015		Change	Change		2017		2016		Change	Change
		(dollar amounts in thousands)							(dollar amounts in thousands)
Three months ended	$	391	$	204	$	187	91.7%	$	463	$	391	$	72	18.4%
Percentage of total revenue		0.6%		0.4%					0.6%		0.6%
Six months ended	$	801	$	438	$	363	82.9%	$	2,515	$	801	$	1,714	214.0%
Percentage of total revenue		0.7%		0.4%					1.8%		0.7%

Other income, net, primarily consisted of interest income earned on our cash, cash equivalents and investments and amortization or accretion of investments in fiscal ~~2017~~years 2018 and ~~2016.~~2017. During the first quarter of fiscal year 2018, $1.4 million of the cash held in an escrow fund from our 2015 acquisition of DXI was returned to us and recorded as other income.

2419

September 30, Dollar Percent
Provision (benefit) for income tax 2016 2015 Change Change
(dollar amounts in thousands)
Three months ended $ (15) $ 423 $ (438) -103.5%
Percentage of income (loss)
before provision for income taxes -125.0% -28.8%
Six months ended $ 22 $ 1,208 $ (1,186) -98.2%
Percentage of income (loss)
before provision for income taxes -4.6% -104.5%
September 30, Dollar
Provision (benefit) for income tax 2017 2016 Change
(dollar amounts in thousands)
     Three months ended $ (3,453) $ (15) $ (3,438)
     Percentage of income (loss) before provision (benefit) for income taxes 86.3% -125.0%
     Six months ended $ (4,689) $ 22 $ (4,711)
     Percentage of income (loss) before provision (benefit) for income taxes 63.3% -4.6%

~~For~~The change in our effective tax rate for the ~~three months ended September 30, 2016,~~periods presented was due primarily to the change in pretax profitability, geographic mix of profits and losses, and adoption of ASU 2016-09 effective April 1, 2017 (see Note 1 and Note 7 in the notes to the consolidated financial statements for additional information on the effects of the adoption).

As described in Note 1 in the consolidated financial statements, we adopted the updated accounting standard for share-based payment accounting in the first quarter of fiscal year 2018. As a result, we recorded deferred tax assets of approximately $17.6 million with a ~~benefit from income taxes of $15,000, all of which related~~corresponding increase to ~~net income (loss) from operations. For the three months ended September 30, 2015, we recorded a provision for income taxes of $0.4 million, all of which related to net income (loss) from operations.~~

retained earnings. For the six months ended September 30, ~~2016,~~2017, we ~~recorded a~~recognized approximately $2.7 million of excess tax benefits within the provision for income ~~taxes~~taxes. Additionally, starting in the first quarter of ~~$22,000, all of which~~fiscal year 2018, we presented the cash flows related to the stock-based compensation net ~~income (loss) from operations. For the six months ended September 30, 2015, we recorded a provision for income taxes~~excess tax benefits in operating activities rather than in financing activities in our statement of ~~$1.2 million, which was primarily attributable~~cash flows. Prior period classification of cash flows related to ~~domestic income from operations.~~excess tax benefits were not adjusted.

~~The effective tax rate set forth in the previous table is calculated by dividing the income tax provision by net income before income tax expense.~~ We estimate our annual effective tax rate at the end of each quarter. In estimating the annual effective tax rate, we ~~in consultation with our tax advisors,~~ consider, among other things, annual pre-tax income, permanent tax differences, the geographic mix of pre-tax income and the application and interpretations of existing tax laws.

We ~~estimate our annual effective rate at the end of each quarterly period, and we~~ record the tax effect of certain discrete items, which are unusual or occur infrequently, in the interim period in which they occur, including changes in judgment about deferred tax valuation allowances. The determination of the effective tax rate reflects tax expense and benefit generated in certain domestic and foreign jurisdictions. However, jurisdictions with a year-to-date loss where no tax benefit can be recognized are excluded from the annual effective tax rate.

Liquidity and Capital Resources

As of September 30, ~~2016,~~2017, we had ~~approximately $169.7~~$167.1 million in cash, cash equivalents and short-term investments.

Net cash provided by operating activities for the six months ended September 30, ~~2016~~2017 was approximately ~~$13.4~~$11.2 million, compared with ~~$7.1~~$13.4 million for the six months ended September 30, ~~2015.~~2016. Cash provided by operating activities has historically been affected by the amount of net income (loss), ~~sales of subscriptions,~~ changes in working capital accounts particularly in ~~deferred revenue due to~~the timing and collection of ~~annual plan renewals,~~payments, add-backs of non-cash expense items such as ~~the use of~~ deferred ~~tax assets,~~taxes, depreciation and amortization, and ~~the expense associated~~ with stock-based ~~awards.~~compensation.

The net cash used in investing activities for the six months ended September 30, 2017 was $6.3 million, during which we had proceeds from maturity and sale of short term investments of approximately $1.5 million, net of purchases of short term investments. We also had proceeds of $1.4 million from the settlement of an escrow claim in relation to our acquisition of DXI. We spent approximately $4.0 million on the purchase of property and equipment and capitalized $5.2 million of software costs in accordance with ASC 350-40. The net cash used in investing activities for the six months ended September 30, 2016 was $16.1 million, during which we purchased approximately $8.4 million of short term investments, net of sales and maturities of short term ~~investments, we~~investments. We spent approximately $5.2 million on the purchase of property and equipment, and we capitalized $2.4 million of internal use software.

Net cash used in ~~investing~~financing activities ~~was approximately $23.1 million, during~~for the six months ended September 30, ~~2015, during~~2017 was approximately $11.8 million, which ~~we spent approximately $2.1~~primarily resulted from $13.8 million onof repurchases of our common stock related to shares withheld for payroll taxes and common stock repurchased under the ~~purchase~~2017 Repurchase Plan, and $0.6 million in capital leases payments, offset by $2.8 million of ~~property and equipment, spent approximately $23.4 million on acquisitions of two businesses, and we had proceeds of approximately $3.1 million~~cash received from the ~~sale~~issuance of ~~short term investments, net of purchases and maturities of short term investments.~~

common stock under our employee stock plans. Net cash provided by financing activities for the six months ended September 30, 2016 was approximately $1.2 million, which primarily resulted from $2.6 million of cash received from the issuance of common stock under our employee stock purchase plan, reduced by $0.8 million of repurchases of our common stock related to shares withheld for payroll taxes, $0.3 million of payments on capital leases, and $0.2 million of payments of contingent consideration and escrow. Net cash used in financing activities for the six months ended September 30, 2015 were approximately $8.4 million, which was primarily due from cash used to repurchase our common stock as part of our Repurchase Plan in the amount of approximately $10.1 million, partially offset by cash received from the issuance of common stock under our employee stock purchase plan of approximately $2.1 million.

Contractual Obligations

~~Except as set forth below, there~~There were no significant changes in our commitments under contractual obligations during the six months ended September 30, 2017, as disclosed in the Company's Annual Report on Form 10-K, for the ~~six months~~year ended ~~September 30, 2016.~~March 31, 2017.

In June 2016, we entered into a new lease in London UK for our DXI location for approximately 16,000 square feet under an operating lease that expires in June 2026. We received an 18 month rent holiday from rent payments. After the rent holiday, the lease has a base monthly rent of approximately $95,000, and requires us to pay service charges and normal maintenance costs. The lease contains a break clause, which allows us to end the lease in June 2022, subject to certain conditions.20

In August 2016, we entered into a new lease in New York City for additional office space for approximately 5,200 square feet under an operating lease that expires in October 2021. The lease has a base monthly rent of approximately $26,000.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Foreign Currency~~

Our financial market risk consists primarily of risks associated with international operations and related foreign currencies. We derive a portion of our revenue from customers in Europe and Asia. In order to reduce the risk from fluctuation in foreign exchange rates, the vast majority of our sales are denominated in U.S. dollars. In addition, almost all of our arrangements with our contract manufacturers are denominated in U.S. dollars. We have not entered into any currency hedging activities.

We translate revenue denominated in foreign currency into U.S. dollars for our financial statements. During periods of a strengthening dollar, our reported European revenue is reduced because foreign currencies translate into fewer U.S. dollars. However, our UK segments are currently in a net loss position. Therefore, during periods of a strengthening dollar, our net loss from our UK segment would be reduced as well.

To date, our exposure to exchange rate volatility has not been significant. However, the June 2016 vote on a referendum to exit the European Union decision has resulted in a steep decline in the exchange rate for GBP to USD. The impact of Brexit to our results of operations for the period ended September 30, 2016 was not material. However, there can be no assurance that there will not be a material impact in the future.

~~Investments~~Interest Rate Fluctuation Risk

The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. Some of the securities in which we invest may be subject to market risk. This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. To minimize this risk, we may maintain our portfolio of cash equivalents and investments in a variety of shorter term securities, including commercial paper, money market funds, debt securities and certificates of deposit. The risk associated with fluctuating interest rates is limited to our investment portfolio and we do not believe that a ~~10%~~hypothetical change in interest rates of 100 basis points would have a significant impact on our interest income.

We do not have any outstanding debt instruments other than equipment under capital leases and, therefore, we were not exposed to market risk relating to interest rates.

Foreign Currency Exchange Risk

We have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar, primarily the British Pound, causing both our revenue and our operating results to be impacted by fluctuations in the exchange rates.

Gains or losses from the translation of certain cash balances, accounts receivable balances and intercompany balances that are denominated in these currencies impact our net income (loss). A hypothetical decrease in all foreign currencies against the US dollar of 10 percent, would not result in a material foreign currency loss on foreign-denominated balances. As our foreign operations expand, our results may be more impacted by fluctuations in the exchange rates of the currencies in which we do business.

At this time, we do not, but we may in the future, enter into financial instruments to hedge our foreign currency exchange risk.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (Disclosure Controls) that are designed to ensure that information we are required to disclose in reports filed or submitted under the Securities and Exchange Act of 1934 is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure, and that such information is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

As of the end of the period covered by this Quarterly Report on Form 10-Q, under the supervision of our Chief Executive Officer and our Chief Financial Officer, we evaluated the effectiveness of our Disclosure Controls. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our Disclosure Controls were effective as of September 30, ~~2016.~~2017.

Limitations on the Effectiveness of Controls

Our management, including the Chief Executive Officer and Chief Financial Officer, do not expect that our Disclosure Controls or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Changes in Internal Control over Financial Reporting

During the second quarter of fiscal ~~2016,~~year 2018, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II -- OTHER INFORMATION

ITEM 1. ~~Legal Proceedings~~LEGAL PROCEEDINGS

Descriptions of our legal proceedings are contained in Part I, Item 1, Financial Statements - Notes to Condensed Consolidated Financial Statements - "Note 6"5".

ITEM 1A. ~~Risk Factors~~RISK FACTORS

We face many significant risks in our business, some of which are unknown to us and not presently foreseen. These risks could have a material adverse impact on our business, financial condition and results of operations in the future. We have disclosed a number of material risks under Part I, Item 1A of our annual report on Form 10-K for the fiscal year ended March 31, ~~2016,~~2017, which we filed with the Securities and Exchange Commission on May ~~31, 2016. Except as presented below, there have been no material changes from the risk factors described in our Form 10-K.~~30, 2017.

~~Because our long-term growth strategy involves further expansion outside the United States, our business will be susceptible to risks associated with international operations.~~

In addition, on June 23, 2016, the UK held a referendum in which a majority of voters voted to exit the European Union (Brexit). The result of the Brexit vote adversely impacted global markets and foreign currencies. In particular, the value of the Pound Sterling has sharply declined as compared to the U.S. Dollar and other currencies. This volatility in foreign currencies is expected to continue as the UK negotiates and executes its exit from the European Union but it is uncertain over what time period this will occur. A significantly weaker Pound Sterling compared to the U.S. Dollar could materially reduce our revenues after taking into account foreign currency translation adjustments.

ITEM 2. ~~Unregistered Sales~~UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities ~~and Use of Proceeds~~

~~Total Number~~

~~Approximate Dollar~~

~~Total Number~~

~~Average~~

~~of Shares Purchased~~

~~Value of Shares that~~

~~of Shares~~

~~Price Paid~~

~~as Part of Publicly~~

~~May Yet be Purchased~~

~~Purchased~~

~~Per Share~~

~~Announced Program~~

~~Under the Program~~⁽¹⁾

~~July 1 - July 31, 2016~~

~~15,000,000~~

~~August 1 - August 31, 2016~~

~~15,000,000~~

~~September 1 - September 30, 2016~~

~~15,000,000~~

~~Total~~

The activity under the Repurchase Plan for the three months ended September 30, 2017 is summarized as follows:

				Total Number		Approximate Dollar
	Total Number		Average	of Shares Purchased		Value of Shares that
	of Shares		Price Paid	as Part of Publicly		May Yet be Purchased
	Purchased		Per Share	Announced Program		Under the Program

July 1 - July 31, 2017	-	$	-	-	$	25,000,000

August 1 - August 31, 2017	923,338		13.22	923,338		12,792,281

September 1 - September 30, 2017	140,676		13.32	140,676	$	10,918,741

Total	1,064,014	$	13.23	1,064,014

ITEM 5. OTHER INFORMATION

~~See Item 2 of Part II, "Contractual Obligations", regarding the new DXI operating lease for office space in London, UK and in New York City.~~None.

ITEM 6. ~~Exhibits~~EXHIBITS

Exhibit Number	Description
~~10.34~~ 10.19(r)	Amended and Restated ~~2013 New Employee Inducement~~2012 Equity Incentive Plan.
10.36	Employment Agreement Dated September 4, 2017 Between the Company and Dejan Deklich.
31.1	Certification of Chief Executive Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

(r)	Incorporated by reference to exhibit 10.19 to the Registrant's Report on Form S-8 August 9, 2016 (File No. 333-213032). (To correct the reference in the Annual Report on Form 10-K filed May 30, 2017)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 2, ~~2016~~2017

8X8, INC.
(Registrant)
By: /s/ MARYELLEN GENOVESE
MaryEllen Genovese
Chief Financial Officer
(Principal Financial and ~~Chief Accounting Officer and~~ Duly Authorized Officer)

2924

Delaware	77-0142404
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification Number)

PART I. FINANCIAL INFORMATION	Page No.

Item 1. Financial ~~Statements:~~Statements (unaudited):

Condensed Consolidated Balance Sheets at September 30, ~~2016~~2017 and March 31, ~~2016~~2017	2

Condensed Consolidated Statements of Operations for the three and six months ended September 30, ~~2016~~2017 and ~~2015~~2016	3

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended September 30, ~~2016~~2017 and ~~2015~~2016	4

Condensed Consolidated Statements of Cash Flows for the six months ended September 30, ~~2016~~2017 and ~~2015~~2016	5

Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	1915

Item 3. Quantitative and Qualitative Disclosures About Market Risk	2621

Item 4. Controls and Procedures	2721

PART II. OTHER INFORMATION

Item 1. Legal Proceedings	2722

Item 1A. Risk Factors	2722

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2822

Item 5. Other Information	2822

Item 6. Exhibits	2823

Signature	2924

			Weighted Average
	Number of		Exercise Price
	Shares		Per Share
Outstanding at March 31, 2016	4,793,266	$	6.29
Granted	308,560		14.40
Exercised	(318,197)		1.83
Canceled/Forfeited	(1)		2.58
Outstanding at September 30, 2016	4,783,628	$	7.11

Vested and expected to vest at September 30, 2016	4,783,628	$	7.11
Exercisable at September 30, 2016	3,085,831	$	5.80

			Weighted	Weighted
			Average	Average
			Grant-Date	Remaining
	Number of		Fair Market	Contractual
	Shares		Value	Term (in Years)
Balance at March 31, 2016	82,171	$	6.30	0.76
Granted	-		-
Vested	(65,006)		5.89
Forfeited	(250)		7.88
Balance at September 30, 2016	16,915	$	7.86	1.21

	Options Outstanding						Options Exercisable
			Weighted	Weighted					Weighted
			Average	Average					Average
			Exercise	Remaining		Aggregate			Exercise		Aggregate
			Price	Contractual		Intrinsic			Price		Intrinsic
	Shares		Per Share	Life (Years)		Value	Shares		Per Share		Value
$0.55 to $4.26	995,448	$	1.44	1.9	$	13,930,587	995,448	$	1.44	$	13,930,587
$4.32 to $6.86	1,288,863	$	6.26	7.0		11,825,206	925,675	$	6.02		8,712,685
$7.52 to $8.93	973,650	$	8.28	8.6		6,963,536	333,871	$	8.23		2,403,471
$9.21 to $9.74	983,835	$	9.62	7.0		5,711,928	729,275	$	9.63		4,232,016
$10.50 to $15.18	541,832	$	12.92	9.1		1,361,380	101,562	$	11.10		439,646
	4,783,628				$	39,792,637	3,085,831			$	29,718,405

		Net Income (Loss) for the
		Three Months Ended				Six Months Ended
		September 30,				September 30,
		2017		2016		2017		2016
Americas (principally US)	$	970	$	2,044	$	1,379	$	3,510
Europe (principally UK)		(1,516)		(2,017)		(4,094)		(4,011)
	$	(546)	$	27	$	(2,715)	$	(501)

		September 30,				Dollar
Provision (benefit) for income tax		2017		2016		Change
		(dollar amounts in thousands)
Three months ended	$	(3,453)	$	(15)	$	(3,438)
Percentage of income (loss) before provision (benefit) for income taxes		86.3%		-125.0%
Six months ended	$	(4,689)	$	22	$	(4,711)
Percentage of income (loss) before provision (benefit) for income taxes		63.3%		-4.6%

Year ending March 31:

Remaining 2017

Total minimum payments