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`Section 1: 10-K (10-K)
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`Document Contents
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`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
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`Washington, D.C. 20549
`Form 10-K
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`ANNUAL REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`For the fiscal year ended December 31, 2015
`
`El TRANSITION REPORT PURSUANT TO SECTION 13 OR l5(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`to
`For the transition period from
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`Commission file numher: 001-36355
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`Aerohive Networks, Inc.
`(Exact name of registrant as specified in its charter)
`
`Delaware
`
`(State or otherjurisdiction of
`incorporation or organization)
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`204524700
`(I.R.S. Employer
`Identification Number)
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`330 Gibraltar Drive
`Sunnyvale, California 94089
`(408) 510-6100
`(Address, including zip code, and telephone number,
`including area code, of registrant's principal executive offices)
`Securities registered pursuant to Section 12(b) of the Act:
`
`Title of Each Class
`Common Stock, par value $0.001 per share
`Securities registered pursuant to Section 12(g) of the Act:
`None
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes El No X
`XI
`Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section l5(d) of the Securities Exchange Act of 1934 (the “Exchange Act"). Yes El No
`Indicate by ehock mark whether the registrant (1) has filed all reports required to bc filed by Section 13 or 15(d) ofthc 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
`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
`X
`No
`(§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
`Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy
`or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Fonn 10-K.
`Yes El No X
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
`reporting company” in Rule l2b—2 of the Exchange Act.
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`Name of Exchange on Which Registered
`New York Stock Exchange
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`Document Contents
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`AirTight Networks, or AirTight, has alleged that the Company’s products infringe U.S. Patent #7,339,914, or the ‘914 Patent. On January 23, 2013, in light ofAirTight’s allegations, the
`Company filed in the U.S. District Court, Northern District ofCalifornia, a Complaint for Declaratory Judgment against AirTight asserting that the Company’s products do not infiinge the ‘914 Patent
`and that the ‘914 Patent is, in any case, invalid and not enforceable. AirTight filed a separate action asserting infringement ofthe ‘9 1 4 Patent by some or all ofthe Company’s products, which has been
`related to the Company ’s initial action for declaratory judgment. Both ofthe related court actions are currently stayed based on pending re-examination, which the Company initiated with the U.S.
`Patent and Trademark Oflice, or PTO, regarding the ‘9 14 Patent. All claims are currently rejected and Airtight has appealed the final rejection ofall claims ofthe ‘914 Patent.
`
`Linex Technologies, or Linex, filed on March 19, 2013 a Complaint in the U.S. District Court, Southern District ofFlorida asserting that some or all ofthe Company’s products infringe U.S.
`Patents #6,493,377, or the ‘3 77 Patent, and #7,167,503, or the '50?! Patent. The Company filed an answer and counterclaims for declaratory judgment against Linex asserting that the Company's
`products do not infiinge the ‘377 and ‘5 03 Patents, and that the ‘377 and ‘503 Patents are, in any case, invalid and not enforceable. The Company separately filed with the PTO petitions to initiate
`reexamination ofthe ‘377 and ‘503 Patents, which petitions the PTO granted. In the PTO reexaminations, all claims under the ‘377 Patent are currently rejected and Linex has appealed the final
`rejections ofthe claims, and the petition regarding the claims subject to the ‘503 Patent is still pending. The case before the U.S. District Court, Southern District ofFlorida is currently stayed pending
`the reexamination.
`
`Chrimar Systems, or Chrimar, filed in July 2015 a complaint in the U.S. District Court, Eastem District ofTexas, asserting that certain ofthe Company’s products which utilize Power over
`Ethernet (PoE) firnctionality infiinge United States Patent Nos. 8,155,012, 8,942,107, 8,902,760 and 9,019,838. The complainant has since also named one ofthe Company’s customers as a co—defendant
`and, in at least one instance, filed a separate action against a channel partner based on that partner’s sale ofCompany products. The Company continues to evaluate the allegations and its possible
`obligations to the Company's customer and partners under written indemnification commitments.
`
`The Company is also currently in litigation asserting clairrrs under federal securities laws.
`
`In June 2015, a class action complaint was filed in the Superior Court ofthe State ofCalifornia, County of San Mateo, against the Company and certain ofits current and former officers and
`directors. This action was subsequently related and consolidated with two identical, follow-on complaints and is captioned Hunter v. Aerohive Networks, Inc., et al., Shareholder Litigation, Master File
`No. 534070. The consolidated complaint alleges claims under federal securities laws that the Registration Statement which the Company filed with the Securities and Exchange Commission on Form S-
`l in connection with its initial public offering in March 2014 contained false and/ornrisleading statements or omissions. The consolidated action also names as defendants the investment firms who
`underwrote the Company’s initial public offering.
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`The consolidated complaint alleges that the Registration Statement failed to disclose, among other things, product deficiencies, poor sales, and a decline in sales-related personnel. The complaint
`additionally alleges that the Company improperly recognized revenue, including by booking certain sales with rights ofreturn. The consolidated complaint seeks unspecified compensatory damages
`and other relief. The Company is advancing certain defense costs with respect to individual defendants, including the underwriting investment firms, under written indemnification agreements.
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`The Company intends to defend these lawsuits vigorously.
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`The Company is not able to predict or estimate any range ofreasonably possible loss related to these lawsuits. Ifthese matters have an adverse outcome, they may have an impact on the
`Company’s financial position, results ofoperations or cash flows.
`
`In October 2015, we resolved the pending lawsuit brought by JSDQ Mesh Technologies LLC, filed in June 2015 in the U.S. District Court, District ofDelaware, asserting that certain ofour
`products which utilize a so—called wireless mesh transmission feature infringe United States Patent Nos. 7,286,828, 7,916,648, RE43,675 and RE44,607. The complaint also named one ofour customers
`as a co-defendant. Our settlement payment regarding this matter was not nraterial.
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`Export Compliance
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`Our products are subject to U.S. export controls, specifically the Export Administration Regulations, and economic sanctions enforced by the Office ofForeign Assets Control. We incorporate
`standard encryption algorithms into our products, which, along with the underlying technology may be exported outside ofthe United States only with the required export authorizations, including by
`license, license exception or other appropriate government authorizations. Each ofthese authorizations may require the filing ofan encryption registration and classification request. Furthermore, U.S.
`export control
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