UNITED STATESSECURITIES AND EXCHANGE
COMMISSIONWashington, D.C.
20549

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FORM 10-Q

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

FOR THE QUARTER ENDED SEPTEMBER 30,
2000

000-25475(Commission file number
)

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LATITUDE COMMUNICATIONS,
INC.(Exact name of registrant as specified in its
charter)

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| | Delaware(State or other
      jurisdiction of incorporation or organization) |  | 94-3177392(I.R.S.
      Employer Identification No.) | 
| | ---------------------------------------------------------------------------- |  | ---------------------------------------------------- | 

| | 2121 Tasman DriveSanta Clara, CA(Address of principal executive
      offices) |  | 95054(Zip code) | 
| | ------------------------------------------------------------------------------ |  | --------------- | 

(408) 988-7200(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 such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes [x] No [  ]

As
of October 31, 2000, there were 19,254,129 shares of the registrants Common
Stock outstanding.

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INDEX

|         |  |                                                                                                                                                                                          | Page
|-------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|PART I   |  | FINANCIAL
    INFORMATION                                                                                                                                                                |     
|Item 1.  |  | Financial Statements                                                                                                                                                                     |     
|         |  | Condensed Consolidated Balance
      Sheets at September 30, 2000   and December 31, 1999                                                                                                | 3   
|         |  | Condensed Consolidated Statements of
      Operations for the   Three Months Ended September 30,
      2000 and 1999;    and for the Nine Months Ended
      September 30, 2000 and 1999 | 4   
|         |  | Condensed Consolidated Statements of
      Cash Flows   for the Nine Months Ended September 30,
      2000 And 1999                                                                      | 5   
|         |  | Notes to Condensed Consolidated
      Financial Statements                                                                                                                               | 6   
|Item 2.  |  | Managements Discussion and Analysis
      of Financial Condition   and Results of Operations                                                                                            | 8   
|Item 3.  |  | Quantitative and Qualitative
      Disclosures About Market Risk                                                                                                                         | 16  
|         |  |                                                                                                                                                                                          |     
|PART II. |  | OTHER INFORMATION                                                                                                                                                                        |     
|Item 1.  |  | Legal Proceedings                                                                                                                                                                        | 17  
|Item 2.  |  | Changes in Securities and Use of
      Proceeds                                                                                                                                          | 17  
|Item 3.  |  | Defaults Upon Senior Securities                                                                                                                                                          | 17  
|Item 4.  |  | Submission of Matters to a Vote of
      Security Holders                                                                                                                                | 17  
|Item 5.  |  | Other Information                                                                                                                                                                        | 17  
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                                                                                                                         | 17  

|          |   
|--------- | --
|SIGNATURE | 18
|          |   

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PART I FINANCIAL INFORMATION

Item 1.   Financial
Statements

LATITUDE COMMUNICATIONS,
INC.CONDENSED CONSOLIDATED BALANCE SHEETS(in
thousands)

|                                                 |  | September 30, 2000 |        | December
      31, 1999 |  
|------------------------------------------------ |  | ------------------ | ------ | ----------------------- | -
|                                                 |  |                    |        |                         |  
|                                                 |  | (Unaudited)        |        |                         |  
|ASSETS                                           |  |                    |        |                         |  
|Current assets:                                  |  |                    |        |                         |  
|Cash and cash
      equivalents                  |  | $                  | 14,595 |                         | $
|Short-term
      marketable securities           |  |                    | 20,398 |                         |  
|Accounts
      receivable, net                   |  |                    | 12,645 |                         |  
|Inventory                                        |  |                    | 1,527  |                         |  
|Prepaid and
      other assets                   |  |                    | 2,234  |                         |  
|Deferred tax
      asset                         |  |                    | 3,457  |                         |  
|                                                 |  |                    |        |                         |  
|Total current assets                             |  |                    | 54,856 |                         |  
|Property and equipment, net                      |  |                    | 3,904  |                         |  
|Long-term marketable securities                  |  |                    | 4,297  |                         |  
|Deposits and other long-term
      assets        |  |                    | 296    |                         |  
|Deferred tax asset                               |  |                    | 939    |                         |  
|                                                 |  |                    |        |                         |  
|Total assets                                     |  | $                  | 64,292 |                         | $
|                                                 |  |                    |        |                         |  
|                                                 |  |                    |        |                         |  
|LIABILITIES AND
      STOCKHOLDERS EQUITY       |  |                    |        |                         |  
|Current liabilities:                             |  |                    |        |                         |  
|Accounts
      payable                           |  | $                  | 573    |                         | $
|Accrued
      expenses                           |  |                    | 5,392  |                         |  
|Deferred
      revenue                           |  |                    | 6,363  |                         |  
|Current
      portion of long-term debt          |  |                    | 432    |                         |  
|                                                 |  |                    |        |                         |  
|Total current liabilities                        |  |                    | 12,760 |                         |  
|Long-term debt                                   |  |                    | 169    |                         |  
|                                                 |  |                    |        |                         |  
|Total liabilities                                |  |                    | 12,929 |                         |  
|                                                 |  |                    |        |                         |  
|                                                 |  |                    |        |                         |  
|Stockholders equity:                            |  |                    |        |                         |  
|Common stock,
      $0.001 par value             |  |                    | 19     |                         |  
|Additional
      paid-in capital                 |  |                    | 57,212 |                         |  
|Notes
      receivable from common stockholders  |  |                    | (30    | )                       |  
|Deferred stock
      compensation                |  |                    | (812   | )                       |  
|Accumulated
      other comprehensive loss       |  |                    | (16    | )                       |  
|Accumulated
      deficit                        |  |                    | (5,010 | )                       |  
|                                                 |  |                    |        |                         |  
|Total stockholders
      equity                 |  |                    | 51,363 |                         |  
|                                                 |  |                    |        |                         |  
|Total liabilities
      and stockholders equity |  | $                  | 64,292 |                         | $
|                                                 |  |                    |        |                         |  

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

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LATITUDE COMMUNICATIONS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in
thousands, except per share amounts)(Unaudited)

|                                                                                                                                          |  | Three
      Months Ended September 30, |        | Nine
      Months Ended September 30, |  
|----------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------- | ------ | ------------------------------------- | -
|                                                                                                                                          |  |                                        |        |                                       |  
|                                                                                                                                          |  | 2000                                   |        | 1999                                  |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Revenue:                                                                                                                                  |  |                                        |        |                                       |  
|Product                                                                                                                                   |  | $                                      | 6,413  |                                       | $
|Service                                                                                                                                   |  |                                        | 3,750  |                                       |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Total revenue                                                                                                                             |  |                                        | 10,163 |                                       |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Cost of revenue:                                                                                                                          |  |                                        |        |                                       |  
|Product                                                                                                                                   |  |                                        | 990    |                                       |  
|Service
      (exclusive of non-cash compensation expenses of $2,
            $21, $24 and $64, respectively)                             |  |                                        | 1,974  |                                       |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Total cost of revenue                                                                                                                     |  |                                        | 2,964  |                                       |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Gross profit                                                                                                                              |  |                                        | 7,199  |                                       |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Operating expenses:                                                                                                                       |  |                                        |        |                                       |  
|Research and
      development (exclusive of non-cash compensation
            expenses of $18, $20, $57 and $59,
      respectively)     |  |                                        | 1,324  |                                       |  
|Marketing and
      sales (exclusive of non-cash compensation
            expenses of $24, $75, $75 and
      $228, respectively)         |  |                                        | 4,865  |                                       |  
|General and
      administrative (exclusive of non-cash compensation
            expenses of $68, $67, $198 and
      $249, respectively) |  |                                        | 945    |                                       |  
|Amortization
      of deferred stock compensation                                                                                         |  |                                        | 112    |                                       |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Total operating expenses                                                                                                                  |  |                                        | 7,246  |                                       |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Income (loss) from operations                                                                                                             |  |                                        | (47    | )                                     |  
|Interest income, net                                                                                                                      |  |                                        | 600    |                                       |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Income before provision for
      income tax                                                                                              |  |                                        | 553    |                                       |  
|Provision for income tax                                                                                                                  |  |                                        | (253   | )                                     |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Net income                                                                                                                                |  | $                                      | 300    |                                       | $
|                                                                                                                                          |  |                                        |        |                                       |  
|Other comprehensive income
      (loss), net of tax   Unrealized gain (loss) on
      securities                                         |  |                                        | 178    |                                       |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Comprehensive income                                                                                                                      |  | $                                      | 478    |                                       | $
|                                                                                                                                          |  |                                        |        |                                       |  
|Net income per sharebasic                                                                                                                |  | $                                      | 0.02   |                                       | $
|                                                                                                                                          |  |                                        |        |                                       |  
|Shares used in per share
      calculationbasic                                                                                          |  |                                        | 18,718 |                                       |  
|                                                                                                                                          |  |                                        |        |                                       |  
|Net income per sharediluted                                                                                                              |  | $                                      | 0.02   |                                       | $
|                                                                                                                                          |  |                                        |        |                                       |  
|Shares used in per share
      calculationdiluted                                                                                        |  |                                        | 19,827 |                                       |  
|                                                                                                                                          |  |                                        |        |                                       |  

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

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LATITUDE COMMUNICATIONS,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in
thousands)(Unaudited)

|                                                               |  | Nine
      Months Ended |  
|-------------------------------------------------------------- |  | ----------------------- | -
|                                                               |  | September 30,           |  
|                                                               |  |                         |  
|                                                               |  | 2000                    |  
|                                                               |  |                         |  
|Cash flows from operating
      activities:                    |  |                         |  
|Net income                                                     |  |                         | $
|Adjustments to
      reconcile net income to net cash          |  |                         |  
|provided by (used in) operating
      activities:              |  |                         |  
|Depreciation and
      amortization                            |  |                         |  
|Provision for excess and
      obsolete inventory              |  |                         |  
|Provision for doubtful
      accounts                          |  |                         |  
|Amortization of deferred
      stock compensation              |  |                         |  
|Changes in operating
      assets and liabilities:             |  |                         |  
|Accounts receivable                                            |  |                         |  
|Inventory                                                      |  |                         |  
|Prepaids and other assets                                      |  |                         |  
|Accounts payable                                               |  |                         |  
|Accrued expenses                                               |  |                         |  
|Deferred revenue                                               |  |                         |  
|                                                               |  |                         |  
|Net cash provided
      by (used in) operating activities      |  |                         |  
|                                                               |  |                         |  
|                                                               |  |                         |  
|Cash flows from investing
      activities:                    |  |                         |  
|Purchases of
      property and equipment                      |  |                         |  
|Purchases of
      available for sale securities               |  |                         |  
|Maturities of
      available for sale securities              |  |                         |  
|Other                                                          |  |                         |  
|                                                               |  |                         |  
|Net cash provided
      by (used in) investing activities      |  |                         |  
|                                                               |  |                         |  
|                                                               |  |                         |  
|Cash flows from financing
      activities:                    |  |                         |  
|Proceeds from
      issuance of common stock                   |  |                         |  
|Repayment of
      notes payable and capital lease obligations |  |                         |  
|Other                                                          |  |                         |  
|                                                               |  |                         |  
|Net cash provided
      by financing activities                |  |                         |  
|                                                               |  |                         |  
|                                                               |  |                         |  
|Net increase in cash and cash
      equivalents                |  |                         |  
|Cash and cash equivalents,
      beginning of period           |  |                         |  
|                                                               |  |                         |  
|Cash and cash equivalents, end
      of period                 |  |                         | $
|                                                               |  |                         |  

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

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LATITUDE COMMUNICATIONS, INC.NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. The Company and Basis of
Presentation

Latitude
Communications, Inc. (the Company) is a leading provider of enterprise
e-conferencing solutions that enable geographically dispersed organizations to
collaborate in real time. The companys award-winning MeetingPlace system is
designed for enterprise-wide deployment to improve the ability of employees,
partners, and customers to meet and work. With MeetingPlace, participants can
schedule and attend a meeting, view, share and edit documents, and capture and
retrieve meeting content. MeetingPlace is designed to be an enterprise-wide
resource and to leverage existing technologies such as telephones, cellular
phones and personal computers.

The
accompanying unaudited condensed consolidated financial statements reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the results for the periods shown. The results of operations for
such periods are not necessarily indicative of the results expected for the full
year or for any future period. The balance sheet at December 31, 1999 was
derived from audited financial statements, however, it does not include all
disclosures required by generally accepted accounting principles.

The
financial statements and related disclosures have been prepared with the
presumption that users of the interim financial information have read or have
access to the audited financial statements for the preceding fiscal year.
Accordingly, these financial statements should be read in conjunction with the
audited financial statements and the related notes thereto contained in the
Companys Annual Report on Form 10-K for the year ended December 31, 1999, dated
March 30, 2000.

Note 2. Marketable Securities

The
following table summarizes the fair value and unrealized gains and losses of
marketable securities, by contractual maturity, at September 30, 2000. All
marketable securities have been classified as available-for-sale:

|                              |  | Cost |        | Gross
      Unrealized Gains |   | Gross
      Unrealized Losses |  | Estimate
      FairValue |    
|----------------------------- |  | ---- | ------ | ---------------------------- | - | ----------------------------- |  | ------------------------ | ---
|                              |  |      |        |                              |   |                               |  |                          |    
|Commercial paper              |  |      |        |                              |   |                               |  |                          |    
|Due in 1 year
      or less   |  | $    | 1,974  |                              |   |                              |  |                          | (1 
|Corporate notes and
    bonds |  |      |        |                              |   |                               |  |                          |    
|Due in 1 year
      or less   |  |      | 18,445 |                              |   |                              |  |                          | (20
|Due in 1-2
      years        |  |      | 1,987  |                              |   | 7                             |  |                          |    
|Federal Agencies              |  |      |        |                              |   |                               |  |                          |    
|Due in 1-2 years              |  |      | 2,300  |                              |   | 3                             |  |                          |    
|                              |  |      |        |                              |   |                               |  |                          |    
|                              |  | $    | 24,706 |                              | $ | 10                            |  | $                        | (21
|                              |  |      |        |                              |   |                               |  |                          |    

Note 3. Inventory

|               |  | September 30, |       | December
      31, |  
|-------------- |  | ------------- | ----- | ------------------ | -
|               |  | 2000          |       | 1999               |  
|               |  |               |       |                    |  
|               |  | (Unaudited)   |       |                    |  
|Raw materials  |  | $             | 1,221 |                    | $
|Finished goods |  |               | 306   |                    |  
|               |  |               |       |                    |  
|               |  | $             | 1,527 |                    | $
|               |  |               |       |                    |  

Note 4. Recent Accounting
Pronouncements

In
June 1998, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standard No. 133, Accounting for Derivative Instruments
and Hedging Activities, (SFAS 133) that requires companies to record
derivative financial instruments on their balance sheets as assets or
liabilities measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be recorded depending on the use of the
derivative instrument and whether it qualifies for hedge accounting. The key
criterion for hedge accounting is that the hedging relationship must be highly
effective in achieving offsetting changes in fair value or cash flows. In June
1999, the FASB issued Statement of Financial Accounting Standard No. 137,
Accounting for

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Derivative Instruments and Hedging
ActivitiesDeferral of the Effective Date of FASB Statement No. 133, (SFAS
137) that amends SFAS 133 to be effective for all fiscal quarters of fiscal
years beginning after June 15, 2000. In June 2000, the Financial Accounting
Standards Board issued SFAS No. 138, Accounting for Derivative Instruments and
Hedging ActivitiesAn Amendment of FASB No. 133 (SFAS 138). SFAS 138 amends
the accounting and reporting standards for certain derivatives and hedging
activities such as net settlement contracts, foreign currency translations and
intercompany derivatives. The Company will adopt SFAS 133 in its quarter ending
March 31, 2001. To date, the Company has not engaged in derivatives or hedging
activities.

In
November, 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin 100, or SAB 100, which clarifies the SECs views on
accounting for and disclosing certain expenses incurred in connection with exit
activities and business combinations. The Company does not expect SAB 100 to
have a material effect on its financial position, results of operations or cash
flow. In December, 1999, SAB 101 was issued which summarizes the SECs views in
applying generally accepted accounting principles to revenue recognition in
financial statements. SAB 101 is effective beginning in the fourth quarter of
2000. In October 2000, the SEC issued SAB 100, Revenue Recognition in Financial
Statements Frequently Asked Questions (FAQ). The Company is currently
evaluating the impact SAB 101 and FAQ will have on its financial position and
results of operations.

In
March 2000, the Financial Accounting Standards Board issued Interpretation
No. 44 or FIN 44, Accounting for Certain Transactions involving Stock
Compensation an interpretation of APB Opinion No. 25. FIN 44 clarifies
the application of Opinion 25 for (a) the definition of employee for
purposes of applying Opinion 25, (b) the criteria for determining
whether a plan qualifies as a noncompensatory plan, (c) the accounting for
an exchange of stock compensation awards in a business combination. FIN 44
is effective July 1, 2000, but certain conclusions cover specific events
that occur after either December 15, 1998, or January 12, 2000. The
adoption of FIN 44 did not have a material effect on the Companys
financial position or results of operations.

Note 5. Net Income Per Share

Basic
net income per share is computed by dividing net income available to common
stockholders by the weighted average number of vested common shares outstanding
for the period. Diluted net income per share is computed giving effect to all
dilutive potential common shares, including options, warrants and preferred
stock.

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A
reconciliation of the numerator and denominator of basic and diluted EPS is
provided as follows (in thousands, except per share amounts).

|                                                           |  | Three
      Months Ended September 30, |        | Nine
      Months Ended September 30, |  
|---------------------------------------------------------- |  | -------------------------------------- | ------ | ------------------------------------- | -
|                                                           |  |                                        |        |                                       |  
|                                                           |  | 2000                                   |        | 1999                                  |  
|                                                           |  |                                        |        |                                       |  
|                                                           |  | (Unaudited)                            |        | (Unaudited)                           |  
|Net income per share, basic and
      diluted:             |  |                                        |        |                                       |  
|Numerator for
      net income, basic and diluted          |  | $                                      | 300    |                                       | $
|                                                           |  |                                        |        |                                       |  
|Denominator
      for basic net income per share:          |  |                                        |        |                                       |  
|Weighted average vested common shares
      outstanding    |  |                                        | 18,718 |                                       |  
|                                                           |  |                                        |        |                                       |  
|Net income per
      share basic                           |  | $                                      | 0.02   |                                       | $
|                                                           |  |                                        |        |                                       |  
|                                                           |  |                                        |        |                                       |  
|Denominator
      for diluted earnings per share:          |  |                                        |        |                                       |  
|Weighted average vested common shares
      outstanding    |  |                                        | 18,718 |                                       |  
|Effect of dilutive
    securities:                         |  |                                        |        |                                       |  
|Nonvested common shares                                    |  |                                        | 419    |                                       |  
|Common stock options                                       |  |                                        | 657    |                                       |  
|Warrants                                                   |  |                                        | 33     |                                       |  
|Convertible preferred
      stock                          |  |                                        |       |                                       |  
|                                                           |  |                                        |        |                                       |  
|Weighted average common and common
      equivalent shares |  |                                        | 19,827 |                                       |  
|                                                           |  |                                        |        |                                       |  
|Net income per
      share diluted                         |  | $                                      | 0.02   |                                       | $
|                                                           |  |                                        |        |                                       |  

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

This
Managements Discussion and Analysis of Financial Condition and Results of
Operations and other parts of this Form 10-Q contain forward-looking statements
that involve risks and uncertainties. Words such as anticipates, expects,
intends, plans, believes, seeks, estimates, and similar expressions
identify such forward-looking statements. These statements are not guarantees of
future performance and are subject to certain risks and uncertainties that could
cause actual results to differ materially from those expressed or forecasted.
Factors that might cause such a difference include, but are not limited to,
those discussed in the section entitled Factors That May Affect Future Results
and those appearing elsewhere in this Form 10-Q. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect
managements analysis only as of the date hereof. The Company assumes no
obligation to update these forward-looking statements to reflect actual results
or changes in factors or assumptions affecting such forward-looking
statements.

Overview

We
are a leading provider of enterprise e-conferencing solutions that enable
geographically dispersed organizations to collaborate in real time. The
companys award-winning MeetingPlace system is designed for enterprise-wide
deployment to improve the ability of employees, partners, and customers to meet
and work. With MeetingPlace, participants can schedule and attend a meeting,
view, share and edit documents, and capture and retrieve meeting content.
MeetingPlace is designed to be an enterprise-wide resource and to leverage
existing technologies such as telephones, cellular phones and personal
computers.

We
generate revenue from sales of our MeetingPlace products and related services
revenue. Product revenue is generally recognized upon shipment. We calculate an
allowance for returns based on historical rates. Service revenue includes
revenue from implementation, system management services, warranty coverage and
customer support. Revenue from implementation is recognized as the services are
performed, while revenue from system management services, warranty coverage and
customer support is recognized ratably over the period of the
contract.

We
sell our MeetingPlace products primarily through our direct sales force and, to
a lesser extent, through indirect distribution channels. The majority of our
revenue is derived from Fortune 1000 companies, many of which initially purchase
MeetingPlace servers and later expand deployment of our products as they require
additional capacity for voice and data conferencing. We have international sales
offices in the United Kingdom and Singapore and expect to continue to expand
into new international markets. In addition, we have established distributor

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relationships in Australia, Hong Kong and Japan.
While we intend to increase sales through indirect channels and internationally,
we cannot assure you that we will be successful.

Total
cost of revenue consists of component and materials costs, direct labor costs,
warranty costs, royalties and overhead related to manufacturing of our products,
as well as materials, travel and labor costs related to personnel engaged in our
service operations. Product gross margin is impacted by the proportion of
product revenue derived from software sales, which typically carry higher
margins than hardware sales, and from indirect distribution channels, which
typically carry lower margins than direct sales. Service gross margin is
impacted by the mix of services we provide, which have different levels of
profitability, and the efficiency with which we provide full care support and
other services to our customers.

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Results Of Operations

The
following table lists, for the periods indicated, the percentage of total
revenue of each line item from our condensed consolidated statement of
operations to total revenues:

|                                                  |  | Three
      Months Ended September 30, |       | Nine
      Months Ended September 30, | 
|------------------------------------------------- |  | -------------------------------------- | ----- | ------------------------------------- | 
|                                                  |  |                                        |       |                                       | 
|                                                  |  | 2000                                   |       | 1999                                  | 
|                                                  |  |                                        |       |                                       | 
|Revenue:                                          |  |                                        |       |                                       | 
|Product                                           |  |                                        | 63.1  | %                                     | 
|Service                                           |  |                                        | 36.9  | %                                     | 
|                                                  |  |                                        |       |                                       | 
|Total revenue                                     |  |                                        | 100.0 | %                                     | 
|                                                  |  |                                        |       |                                       | 
|Cost of revenue:                                  |  |                                        |       |                                       | 
|Product                                           |  |                                        | 9.7   | %                                     | 
|Service                                           |  |                                        | 19.4  | %                                     | 
|                                                  |  |                                        |       |                                       | 
|Total cost of revenue                             |  |                                        | 29.1  | %                                     | 
|                                                  |  |                                        |       |                                       | 
|Gross profit                                      |  |                                        | 70.9  | %                                     | 
|                                                  |  |                                        |       |                                       | 
|                                                  |  |                                        |       |                                       | 
|Operating expenses:                               |  |                                        |       |                                       | 
|Research and
      development                    |  |                                        | 13.0  | %                                     | 
|Marketing and
      sales                         |  |                                        | 47.9  | %                                     | 
|General and
      administrative                  |  |                                        | 9.3   | %                                     | 
|Amortization
      of deferred stock compensation |  |                                        | 1.1   | %                                     | 
|                                                  |  |                                        |       |                                       | 
|Total operating expenses                          |  |                                        | 71.3  | %                                     | 
|                                                  |  |                                        |       |                                       | 
|Income (loss) from operations                     |  |                                        | (0.4  | )%                                    | 
|Interest income net                               |  |                                        | 5.9   | %                                     | 
|                                                  |  |                                        |       |                                       | 
|Income before provision for
      income tax      |  |                                        | 5.5   | %                                     | 
|                                                  |  |                                        |       |                                       | 
|Provision for income tax                          |  |                                        | (2.5  | )%                                    | 
|                                                  |  |                                        |       |                                       | 
|Net income                                        |  |                                        | 3.0   | %                                     | 
|                                                  |  |                                        |       |                                       | 



Product
revenue was $6.4 million and $22.1 million for the third quarter and first nine
months of 2000, which represented increases of 1.6% and 33.9% when compared to
the corresponding periods of 1999. The increases were due primarily to increased
sales of our MeetingPlace products domestically to new customers, increased
sales of additional products and features to existing customers, and, to a
lesser extent, increased international sales for the full nine month period in
2000. International sales represented approximately 4.8% and 10.7% of product
revenue in the three months ended September 30, 2000 and 1999, respectively and
approximately 8.9% and 8.3% of product revenue in the nine months ended
September 30, 2000 and 1999, respectively.



Service
revenue was $3.8 million and $10.1 million for the third quarter and first nine
months of 2000, which represented increases of 56.3% and 59.2% when compared to
the corresponding periods of 1999. The increases were attributable primarily to
growth in our customer base during this period, which led to increased sales of
full care support services, as well as the introduction of additional consulting
services such as managed services and expanded implementation and integration
services.



Total
cost of revenue was $3.0 million and $9.0 million for the third quarter and
first nine months of 2000, which represented increases of 25.1% and 46.5% when
compared to the corresponding periods of 1999. The increase in total cost of
revenue was attributable primarily to increased sales of our MeetingPlace
products and

---

related services, as well as the increased size of
our services staff and the costs of providing services to support an
increasingly geographically dispersed customer base. Resulting gross profit was
$7.2 million and $23.2 million for the third quarter and first nine months of
2000, as compared to $6.3 million and $16.7 million in the corresponding periods
of 1999. Gross margin was 70.8% and 72.1% as a percentage of revenue, for the
third quarter and first nine months of 2000, as compared to 72.8% and 73.2% for
the corresponding periods of 1999.

Product
gross margin was 84.6% and 83.2% as a percentage of product revenue for the
third quarter and first nine months of 2000 as compared to 83.4% and 82.8% for
the corresponding periods of 1999. Product cost of revenue includes the cost of
royalties payable to third parties of approximately $250,000 for both the first
nine months of 2000 and the corresponding period in 1999. We expect that product
gross margin may decrease in the future due in part to potential pricing
pressure and an expected increase in the proportion of revenue derived from
indirect distribution channels.

Service
gross margin was 47.4% and 48.0% as a percentage of revenue for the third
quarter and first nine months of 2000 as compared to 44.8% and 48.3% for the
corresponding periods in 1999. We expect that service gross margin may decline
in the future as a result of the addition of support personnel, potential
pricing pressure and an increase in the mix of lower margin service
offerings.



Research
and development expenses consist primarily of compensation and related costs for
research and development personnel, facilities expenses for testing space and
equipment and payments for technology for which technological feasibility has
not been established. Research and development expenses were $1.3 million and
$4.4 million for the third quarter and first nine months of 2000, which
represented increases of 29.7% and 52.8% when compared to corresponding periods
in 1999. As a percentage of total revenues, research and development expenses
were 13.0% and 13.7% in the third quarter and first nine months of 2000,
increases from the 11.7% and 12.7% in the corresponding periods in 1999. The
increase was attributable primarily to the addition of personnel in our research
and development organization associated with product development. We expect to
continue to make substantial investments in research and development and
anticipate that research expenses will continue to increase in absolute
dollars.



Marketing
and sales expenses consist primarily of promotional expenditures and
compensation and related costs for marketing and sales personnel. Marketing and
sales expenses were $4.9 million and $14.2 million for the third quarter and
first nine months of 2000, which represented increases of 27.6% and 40.1% when
compared to corresponding periods in 1999. As a percentage of total revenues,
marketing and sales expenses of 47.9% and 44.1% in the third quarter and first
nine months of 2000 as compared to 43.7% and 44.3% in the corresponding periods
of 1999. The increase in absolute dollars of $1.0 million and $4.1 million for
the third quarter and first nine months of 2000 as compared to the corresponding
period in 1999, reflected the addition of personnel in our sales and marketing
organizations, as well as costs associated with increased selling efforts to
develop market awareness of our products and services.



General
and administrative expenses consist primarily of personnel expenses, legal and
accounting expenses and other general corporate expenses. General and
administrative expenses were $945,000 and $2.7 million for the third quarter and
first nine months of 2000, which represented increase of 47.3% and 69.5% when
compared to the corresponding periods in 1999. As a percentage of total
revenues, general and administrative expenses were 9.3% and 8.3% in the third
quarter and first nine months of 2000 as compared to 7.4% and 6.9% in the
corresponding periods of 1999. The increase in both absolute dollars and
percentage of revenue was attributable primarily to the addition of personnel in
our general and administrative organization and expenses in connection with
being a public company. We expect general and administrative expenses to
increase in absolute dollars as we add personnel and incur additional costs
related to the anticipated growth of our business and operation as a public
company.

---



In
connection with the completion of our initial public offering in May 1999,
options granted in the last quarter of 1997, 1998 and the first quarter of 1999
have been considered to be compensatory. Total deferred stock compensation
associated with these options as of September 30, 2000 amounted to $3.1 million,
of which $2,000, $299,000, $752,000 and $354,000 had been amortized to expense
in 1997, 1998, 1999 and the first nine months of 2000, respectively. These
amounts are being amortized based on the vesting period of these options, most
of which are over 48 months. We expect amortization of approximately $111,000 in
the three months ending December 31, 2000, $441,000 in 2001 and $260,000 in 2002
related to the options presently outstanding.



Interest
income, net of interest expense, was $600,000 and $1.8 million for the third
quarter and first nine months of 2000, compared to $475,000 and $713,000 for the
corresponding periods in 1999. The increase in net interest income was
attributable primarily to interest income earned on higher cash and marketable
securities average balances in the third quarter and first nine months of 2000
as compared to corresponding periods in 1999, primarily from net proceeds from
our initial public offering in May 1999.



The
provision for income tax was $253,000 and $1.4 million for the third quarter and
first nine months of 2000, compared to $67,000 and $137,000 for the
corresponding periods in 1999. Our effective tax rate was approximately 46% for
the third quarter and 42% for the first nine months of 2000 and approximately 6%
for the corresponding periods in 1999. The rate in 1999 was lower than the
statutory U.S. federal rate due primarily to the utilization of net operating
loss carryforwards.

Liquidity and Capital Resources

In
May 1999, we completed an initial public offering of common stock, resulting in
net proceeds to us of approximately $33.8 million. As of September 30, 2000, we
had $39.2 million of cash, cash equivalents and marketable securities, which
represented 62% of total assets.

Cash
used by operating activities was $1.1 million in the first nine months of 2000,
compared to cash provided by operating activities of $4.6 million in the
same period of 1999. Net cash used by operating activities in the first nine
months of 2000 related to increased use of working capital of $5.0 million,
compared to $1.2 million in the same period in 1999. The largest component of
the increased use of working capital in the first nine months of 2000 was an
increase in accounts receivable due to large sales transactions occurring late
in the third quarter of 2000. This increased use was partially offset by
adjustments for non-cash items of $2.0 million in the first nine months of 2000,
compared to $1.3 million in the same period in 1999.

Cash
provided by investing activities in the first nine months of 2000 was $4.4
million, which consisted primarily of maturities of marketable securities of
$33.6 million, partially offset by the purchase of marketable securities of
$26.6 million and purchase of property and equipment of $2.5 million.
For the first nine months in 1999, cash used in investing activities of $33.2
million reflected the purchase of available for sale securities of
$40.9 million and the purchase of property and equipment of $1.6 million,
partially offset by maturities of available for sale securities of
$9.3 million.

Cash
provided by financing activities in the first nine months of 2000 of $466,000
consisted primarily of the proceeds from issuance of common stock under employee
benefit plans of $863,000, partially offset by payments on obligations under
capital leases and notes payable of $428,000. For the first nine months of 1999,
cash provided by financing activities of $33.4 million related primarily to the
proceeds of our initial public offering of common stock.

We
believe that our current cash, cash equivalents and marketable securities will
be sufficient to meet our anticipated cash needs for working capital and capital
expenditures for at least the next 12 months.

Impact of Recently Issued Accounting
Standards

In
June 1998, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standard No. 133, Accounting for Derivative Instruments
and Hedging Activities, (SFAS 133) that requires

---

companies to record derivative financial instruments
on their balance sheets as assets or liabilities measured at fair value. Gains
or losses resulting from changes in the values of those derivatives would be
recorded depending on the use of the derivative instrument and whether it
qualifies for hedge accounting. The key criterion for hedge accounting is that
the hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. In June 1999, the FASB issued Statement of
Financial Accounting Standard No. 137, Accounting for Derivative Instruments
and Hedging ActivitiesDeferral of the Effective Date of FASB Statement No.
133, (SFAS 137) that amends SFAS 133 to be effective for all fiscal quarters
of fiscal years beginning after June 15, 2000. In June 2000, the Financial
Accounting Standards Board issued SFAS No. 138, Accounting for Derivative
Instruments and Hedging ActivitiesAn Amendment of FASB No. 133 (SFAS 138).
SFAS 138 amends the accounting and reporting standards for certain derivatives
and hedging activities such as net settlement contracts, foreign currency
translations and intercompany derivatives. The Company will adopt SFAS 133 in
its quarter ending March 31, 2001. To date, the Company has not engaged in
derivatives or hedging activities.

In
November, 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin 100, or SAB 100, which clarifies the SECs views on
accounting for and disclosing certain expenses incurred in connection with exit
activities and business combinations. The Company does not expect SAB 100 to
have a material effect on its financial position, results of operations or cash
flow. In December, 1999, SAB 101 was issued which summarizes the SECs views in
applying generally accepted accounting principles to revenue recognition in
financial statements. SAB 101 is effective beginning in the fourth quarter of
2000. In October 2000, the SEC issued SAB 101, Revenue Recognition in Financial
Statements Frequently Asked Questions (FAQ). The Company is currently
evaluating the impact SAB 101 and FAQ will have on its financial position and
results of operations.

Factors That May Affect Future
Results

In
addition to the other information in this report, the following factors should
be considered carefully in evaluating the Companys business and
prospects:

Our
future profitability is uncertain due to our limited operating history.We
have a limited operating history and cannot assure you that our revenue will
continue to grow or that we will maintain profitability in the future. Our
financial statements must be considered in light of the risks and uncertainties
encountered by companies in the early stages of development. We rely
substantially on sales of our MeetingPlace products, which have limited market
acceptance.

In
addition, we are unable to predict our future product development, sales and
marketing, and administrative expenses. To the extent that these expenses
increase, we will need to increase revenue to sustain profitability. Our ability
to increase revenue and sustain profitability also depends on the other risk
factors described in this section.

Our
operating results may fluctuate significantly.Our operating results are
difficult to predict. Our future quarterly operating results may fluctuate and
may not meet the expectations of securities analysts or investors. If this
occurs, the price of our common stock would likely decline. The factors that may
cause fluctuations of our operating results include the following:

- changes in our mix of revenues generated from product sales and
  services;

- changes by existing customers in their levels of purchases of our products
  and services;

- changes in our mix of sales channels through which our products and
  services are sold; and

- changes in our mix of domestic and international sales.

Orders
at the beginning of each quarter typically do not equal expected revenue for
that quarter. In addition, a significant portion of our orders is received in
the last month of each fiscal quarter. If we fail to ship products by the end of
a quarter in which the order is received, or if our prospective customers delay
their orders or delivery schedules until the following quarter, we may fail to
meet our revenue objectives.

Our
market is highly competitive.Because of intense market competition, we may
not be successful. Currently, our principal competitors include:

- major telecommunications carriers that operate service bureaus for voice
  conferencing, such as AT&T Corp., MCI Worldcom, Inc. and Sprint
  Corporation;

---

- private branch exchange, or PBX, vendors that sell systems with voice
  conferencing capabilities, such as Lucent Technologies Inc. and Nortel
  Networks; and

- companies that offer web-based voice and data conferencing products, such
  as WebEx, Inc. and PlaceWare, Inc.

Many
of these companies have longer operating histories, stronger brand names and
significantly greater financial, technical, marketing and other resources than
we do. These companies also may have existing relationships with many of our
prospective customers. In addition, these companies may be able to respond more
quickly than we can to new or emerging technologies and changes in customer
requirements.

In
addition, we expect competition to persist and intensify in the future, which
could adversely affect our ability to increase sales, penetrate new markets and
maintain average selling prices. In the future, we may experience competition
from potential competitors that include:

- networking companies, such as Cisco Systems, Inc., 3Com Corporation,
  Lucent Technologies Inc. and Nortel Networks that are focusing on enabling the
  transmission of voice over the Internet and that may offer voice and data
  conferencing functionality; and

- collaborative software providers, such as Microsoft Corporation and Lotus
  Development Corporation, that are focusing on data conferencing products and
  that may in the future incorporate voice conferencing functionality into their
  products.

Our
market is in an early stage of development, and our products may not be adopted.If the market for our integrated voice and data conferencing products fails
to grow or grows more slowly than we anticipate, we may not be able to increase
revenues or remain profitable. The market for integrated real-time voice and
data conferencing is relatively new and rapidly evolving. Our ability to remain
profitable depends in large part on the widespread adoption by end users of
real-time voice and data conferencing.

We
will have to devote substantial resources to educate prospective customers about
the uses and benefits of our products. In addition, businesses that have
invested substantial resources in other conferencing products may be reluctant
or slow to adopt our products, which might replace or compete with their
existing systems. Our efforts to educate potential customers may not result in
our products achieving market acceptance.

Rapid
technological changes could cause our products to become obsolete or require us
to redesign our products.The market in which we compete is characterized by
rapid technological change, frequent new product introductions, changes in
customer requirements and emerging industry standards. In particular, we expect
that the growth of the Internet and Internet-based telephony applications, as
well as general technology trends such as migrations to new operating systems,
will require us to adapt our product to remain competitive. This adaptation
could be costly and time-consuming. Our products could become obsolete and
unmarketable if products using new technologies are introduced and new industry
standards emerge. For example, the widespread acceptance of competing
technologies, such as video conferencing and the transmission of voice over the
Internet, could diminish demand for our current products. As a result, the life
cycle of our products is difficult to estimate.

To
be successful, we will need to develop and introduce new products and product
enhancements that respond to technological changes or evolving industry
standards, such as the transmission of voice over the Internet, in a timely
manner and on a cost effective basis. We cannot assure you that we will
successfully develop these types of products and product enhancements or that
our products will achieve broad market acceptance.

Our
sales cycle is lengthy and unpredictable.Any delay in sales of our products
could cause our quarterly revenue and operating results to fluctuate. The
typical sales cycle of our products is lengthy, generally between six to nine
months, unpredictable, and involves significant investment decisions by
prospective customers, as well as our education of potential customers regarding
the use and benefits of our products. Furthermore, many of our prospective
customers have neither budgeted expenses for voice and data conferencing systems
nor have personnel specifically dedicated to procurement and implementation of
these conferencing systems. As a result, our customers spend a substantial
amount of time before purchasing our products in performing internal reviews and
obtaining capital expenditure approvals. We cannot be certain that this cycle
will not lengthen in the future. The emerging and evolving nature of the
real-time voice and data conferencing market may lead to confusion in the
market, which may cause prospective customers to postpone their purchase
decisions.

---

If
we fail to expand our sales and distribution channels, our business could
suffer.If we are unable to expand our sales and distribution channels, we
may not be able to increase revenue or achieve market acceptance of our
MeetingPlace product. We have recently expanded our direct sales force and plan
to recruit additional sales personnel. New sales personnel will require training
and take time to achieve full productivity, and there is strong competition for
qualified sales personnel in our business. In addition, we believe that our
future success is dependent upon establishing successful relationships with a
variety of distribution partners. To date, we have entered into agreements with
only a small number of these distribution partners. We cannot be certain that we
will be able to reach agreement with additional distribution partners on a
timely basis or at all, or that these distribution partners will devote adequate
resources to selling our products. Furthermore, if our distribution partners
fail to adequately market or support our products, the reputation of our
products in the market may suffer. In addition, we will need to manage potential
conflicts between our direct sales force and third-party reselling
efforts.

Our
ability to expand into international markets is uncertain.We intend to
continue to expand our operations into new international markets. In addition to
general risks associated with international expansion, such as foreign currency
fluctuations and political and economic instability, we face the following risks
and uncertainties any of which could prevent us from selling our products in a
particular country or harm our business operations once we have established
operations in that country:

- the difficulties and costs of localizing products for foreign markets,
  including the development of multilingual capabilities in our MeetingPlace
  system;

- the need to modify our products to comply with local telecommunications
  certification requirements in each country; and

- our lack of a direct sales presence in other countries, our need to
  establish relationships with distribution partners to sell our products in
  these markets and our reliance on the capabilities and performance of these
  distribution partners.

If
we fail to integrate our products with third-party technology, our sales could
suffer.Our products are designed to integrate with our customers data and
voice networks, as well as with enterprise applications such as browsers and
collaborative software applications. If we are unable to integrate our products
with these networks and systems, sales of our products could suffer.

In
addition, we may be required to engage in costly and time-consuming redesigns of
our products because of technology enhancements or upgrades of these systems. We
may not be able to redesign our products or be certain that any of these
redesigns will achieve market acceptance. In addition, we will need to
continually modify our products as newer versions of the enterprise applications
with which our products integrate are introduced. Our ability to do so largely
depends on our ability to gain access to the advanced programming interfaces for
these applications, and we cannot assure you that we will have access to
necessary advanced programming interfaces in the future.

We
may experience difficulties managing our expected growth.Our recent growth
has strained, and we expect that any future growth will continue to strain, our
management systems and resources, which could hinder our ability to continue to
grow in the future. We may also experience difficulties meeting the demand for
our products and services. If we are unable to provide training and support for
our products, the implementation process will be longer and customer
satisfaction may be lower.

We
may not be able to install management information and control systems in an
efficient and timely manner, and our current or planned personnel, systems,
procedures and controls may not be adequate to support our future operations.
Competition for qualified personnel in the San Francisco Bay area, as well as
other markets in which we recruit, is extremely intense and characterized by
rapidly increasing salaries, which may increase our operating expenses or hinder
our ability to recruit qualified candidates.

Our
business could suffer if we lose the services of our current management team.Our future success depends on the ability of our management to operate
effectively, both individually and as a group. If we were to lose the services
of any of these key employees we may encounter difficulties finding qualified
personnel to replace them. Recently, we have had one individual join and two
individuals leave the management team.

The
loss of our right to use technology licensed to us by third parties could harm
our business.We license technology that is incorporated into our products
from third parties, including digital signal processing algorithms

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and the MeetingPlace servers operating system and
relational database. Any interruption in the supply or support of any licensed
software could disrupt our operations and delay our sales, unless and until we
can replace the functionality provided by this licensed software. Because our
products incorporate software developed and maintained by third parties, we
depend on these third parties to deliver and support reliable products, enhance
their current products, develop new products on a timely and cost-effective
basis and respond to emerging industry standards and other technological
changes.

Any
interruption in supply of components from outside manufacturers and suppliers
could hinder our ability to ship products in a timely manner. We rely on
third parties to obtain most of the components of the MeetingPlace server and
integrate them with other standard components, such as the central processing
unit and disk drives. If these third parties are no longer able to supply and
assemble these components or are unable to do so in a timely manner, we may
experience delays in shipping our products and have to invest resources in
finding an alternative manufacturer or manufacture our products
internally.

In
addition, we obtain key hardware components, including the processors and
digital signal processing devices used in the MeetingPlace server, from sole
source suppliers. In the past, we have experienced problems in obtaining some of
these components in a timely manner from these sources, and we cannot be certain
that we will be able to continue to obtain an adequate supply of these
components in a timely manner or, if necessary, from alternative sources. If we
are unable to obtain sufficient quantities of components or to locate
alternative sources of supply, we may experience delays in shipping our products
and incur additional costs to find an alternative manufacturer or manufacture
our products internally.

Our
products may suffer from defects, errors or breaches of security. Software
and hardware products as complex as ours are likely to contain undetected errors
or defects, especially when first introduced or when new versions are released.
Any errors or defects that are discovered after commercial release could result
in loss of revenue or delay in market acceptance, diversion of development
resources, damage to our customer relationships or reputation or increased
service and warranty cost. Our products may not be free from errors or defects
after commercial shipments have begun, and we are aware of instances in which
some of our customers have experienced product failures or errors.

Many
of our customers conduct confidential conferences, and transmit confidential
data, using MeetingPlace. Concerns over the security of information sent over
the Internet and the privacy of its users may inhibit the market acceptance of
our products. In addition, unauthorized users in the past have gained, and in
the future may be able to gain, access to our customers MeetingPlace systems.
Any compromise of security could deter people from using MeetingPlace and could
harm our reputation and business and result in claims against us.

We
may be unable to adequately protect our proprietary rights, and we may be
subject to infringement claims.Unauthorized parties may copy aspects of our
products and obtain and use information that we regard as proprietary, which
could cause our business to suffer. Furthermore, the laws of many foreign
countries do not protect our intellectual property rights to the same extent as
the laws of the United States.

In
the future, we may be subject to legal proceedings and claims for alleged
infringement of third party proprietary rights. Any of these claims, even if not
meritorious, could result in costly litigation, divert managements attention
and resources, or require us to enter into royalty or license agreements which
are not advantageous to us. Parties making these claims may be able to obtain
injunctive or other equitable relief, which could prevent us from selling our
products.

Dell
Computer Corporation has registered the Latitude mark for computers in the
United States and in other countries. Dells United States trademark
registration and Canadian application have blocked our ability to register the
Latitude Communications and Latitude with logo marks in the United States
and the Latitude Communications mark in Canada. Since we believe that we have
priority of trade name usage in the United States, we have petitioned to cancel
Dells United States registration and opposed its Canadian application. The
outcome of these proceedings is uncertain. If Dells registration for the
Latitude mark is not canceled or if we are unable to obtain consent from Dell
for our registration of our marks, we may not be able to register our marks and
would have to rely solely on common law protection for these marks. We cannot
assure you that we will be free from challenges of or obstacles to our use or
registration of our marks.

We
are subject to government regulation, and our failure to comply with these
regulations could harm our business.Our products are subject to a wide
variety of safety, emissions and compatibility regulations imposed by

---

governmental authorities in the United States or in
other countries in which we sell our products. If we are unable to obtain
necessary approvals or maintain compliance with the regulations of any
particular jurisdiction, we may be prohibited from selling our products in that
territory. In addition, to sell our products in many international markets, we
are required to obtain certifications that are specific to the local telephony
infrastructure.

Our
stock price may be volatile.We expect that the market price of our common
stock will fluctuate as a result of variations in our quarterly operating
results. These fluctuations may be exaggerated if the trading volume of our
common stock is low. In addition, due to the technology-intensive and emerging
nature of our business, the market price of our common stock may rise and fall
in response to:

- announcements of technological or competitive developments;

- acquisitions or strategic alliances by us or our competitors;
  or

- the gain or loss by us of significant orders.

Our
executive officers and directors and their affiliates own a large percentage of
our voting stock and could control the voting power of the common stock. Our
executive officers and directors and their affiliates beneficially own, in the
aggregate, a large percentage of our outstanding common stock. As a result,
these stockholders are able to exercise control over all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may delay,
deter or prevent transactions that would result in the change of control, which
in turn could reduce the market price of our common stock.

Future
sales of our common stock may depress our stock price.

If
our stockholders sell substantial amounts of common stock, including shares
issued upon the exercise of outstanding options and warrants, in the public
market, the market price of our common stock could fall.

Item 3.   Quantitative and
Qualitative Disclosures About Market Risk.

Our
exposure to market risk for changes in interest rates relates primarily to our
investment portfolio. We do not use derivative financial instruments in our
investment portfolio. We place our investments with high credit quality issuers
and, by policy, limit the amount of credit exposure to any one issuer. The
portfolio includes only marketable securities with maturities of three to 24
months and with active secondary or resale markets to ensure portfolio
liquidity. We have no investments denominated in foreign country currencies and
therefore are not subject to foreign currency risk on such
investments.

The
tables below presents principal amounts and related weighted average interest
rates for our investment portfolio at September 30, 2000.



|                                            |  | Fair
      Value |        | AverageInterest Rate | 
|------------------------------------------- |  | ---------------- | ------ | -------------------- | 
|                                            |  |                  |        |                      | 
|Commercial paper                            |  | $                | 1,973  |                      | 
|Corporate notes and bonds                   |  |                  | 18,424 |                      | 
|                                            |  |                  |        |                      | 
|                                            |  | $                | 20,397 |                      | 
|                                            |  |                  |        |                      | 
|Long-term investments (in
      thousands): |  |                  |        |                      | 
|                                            |  | Fair
      Value |        | AverageInterest Rate | 
|                                            |  |                  |        |                      | 
|Corporate notes and bonds                   |  | $                | 1,994  |                      | 
|Federal agencies                            |  |                  | 2,303  |                      | 
|                                            |  |                  |        |                      | 
|                                            |  | $                | 4,297  |                      | 
|                                            |  |                  |        |                      | 

Currently,
the majority of our sales and expenses are denominated in U.S. dollars and, as a
result, we have not experienced significant foreign exchange gains and losses to
date. While we do expect to effect some transactions in foreign currencies in
the next 12 months, we do not anticipate that foreign exchange gains and losses
will be significant. We have not engaged in foreign currency hedging activities
to date.



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PART II. OTHER INFORMATION

Item 1.   Legal
ProceedingsNot Applicable.

Item 2.   Changes in
Securities and Use of Proceeds.

On
May 6, 1999, in connection with the Companys initial public offering, a
Registration Statement on Form S-1 (No. 333-72935) was declared effective by the
Securities and Exchange Commission, pursuant to which 3,125,000 shares of the
Companys Common Stock were offered and sold for the account of the Company at a
price of $12.00 per share, generating gross offering proceeds of $37.5 million.
The managing underwriters were Credit Suisse First Boston Corporation, Hambrecht
& Quist LLC and Dain Rauscher Wessels. After deducting approximately $2.6
million in underwriting discounts and $1.1 million in other related expenses,
the net proceeds of the offering were approximately $33.8 million. The Company
has not yet used any of the funds from the initial public offering, and the
$33.8 million has been invested in investment grade, interest bearing
securities. The Company intends to use such remaining proceeds for capital
expenditures, including the acquisition of redundant computer and communication
systems, and for general corporate purposes, including working capital to fund
increased accounts receivable and inventory levels.

Item 3.   Defaults Upon
Senior SecuritiesNot Applicable.

Item 4.   Submission of
Matters to a Vote of Security HoldersNot Applicable

Item 5.   Other
InformationNot Applicable.

Item 6.   Exhibits and
Reports on Form 8-K.



| | ExhibitNumber |  | Description              
| | ------------- |  | -------------------------
| | 27.1          |  | Financial Data
  Schedule



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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.

|                                          |  |     | LATITUDE COMMUNICATIONS,
      INC.                                                                                                             
|----------------------------------------- |  | --- | ------------------------------------------------------------------------------------------------------------------------------------------------
|Date:             November
      14, 2000 |  | By: | /s/ Rick M. McConnell                                                                                                                           
|                                          |  |     |                                                                                                                                                 
|                                          |  |     | Rick M. McConnellVice
      President of Finance and Administration andChief Financial Officer
      (Principal Financial andAccounting
Officer)

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EXHIBIT INDEX

| | ExhibitNumber |  | Description              
| | ------------- |  | -------------------------
| | 27.1          |  | Financial Data
  Schedule

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