Table of Contents

 

 

 

#### **UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**FORM 10-Q**

** **

| **x**                                                                                                                                     | **QUARTERLY  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**  |
|-------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
|                                                                                                                                      |                                                                                                     |
| **For the quarterly period ended  April 30, 2009**                                                                                   |
|                                                                                                                                      |                                                                                                     |
| **OR**                                                                                                                                    |
|                                                                                                                                      |                                                                                                     |
| **o**                                                                                                                                     | **TRANSITION  REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                      |                                                                                                     |
| **For the transition period from           to          ** |

 

**Commission file number: 0-20008**

 

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**FORGENT NETWORKS, INC.**

(Exact Name ofRegistrant as Specified in its Charter)

 

| **Delaware**                              | ** ** | **74-2415696**       |
|-------------------------------------------|------------|----------------------|
| (State of other  jurisdiction of          |       | (I.R.S. Employer     |
| incorporation or  organization)           |       | Identification  No.) |
|                                      |       |                 |
| **108  Wild Basin Road**                  |       |                 |
| **Austin,  Texas**                        | ** ** | **78746**            |
| (Address of  Principal Executive Offices) |       | (Zip Code)           |

 

**(512) 437-2700**

(Registrant’s Telephone Number, including Area Code)

 

----

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15(d) of the SecuritiesExchange Act of 1934 during the preceding 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  Yes xNo o

 

Indicate by check mark whether the registrant has submittedelectronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files).  Yes o No o

 

Indicate by check mark whether the registrant isa large accelerated filer, an accelerated filer or a non-accelerated filer (asdefined in Rule 12b-2 of the Exchange Act).

 

| Large  accelerated filer o |   | Accelerated  filer o         |
|----------------------------|--------|------------------------------|
|                       |   |                         |
| Non-accelerated  filer o   |   | Smaller  reporting company x |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).  Yes oNo x

 

OnJune 12, 2009, the registrant had outstanding 31,114,915 shares of its Common Stock, $0.01 par value.

 

 

 

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Table ofContents

 

# **INDEXTO FINANCIAL STATEMENTS**

 
| ** **                                                                                                                   | ** ** | **Page**   |
|------------------------------------------------------------------------------------------------------------------------------|------------|------------|
| ** **                                                                                                                   | ** ** | **Number** |
| **PART I - FINANCIAL INFORMATION**                                                                                      |       |       |
|                                                                                                                         |       |       |
| Item 1 — Condensed Consolidated Financial  Statements                                                                   |       |       |
| Condensed  Consolidated Balance Sheets as of April 30, 2009 (unaudited) and  July 31, 2008                         |       | 3          |
| Unaudited Condensed  Consolidated Statements of Operations for the Three and Nine Months Ended  April 30, 2009 and 2008 |       | 4          |
| Unaudited Condensed  Consolidated Statements of Cash Flows for the Nine Months Ended  April 30, 2009 and 2008           |       | 5          |
| Notes to the  Unaudited Condensed Consolidated Financial Statements                                                          |       | 6          |
| Item 2 -  Management’s Discussion and Analysis of Financial Condition and Results of  Operations                        |       | 11         |
| Item 3 -  Quantitative and Qualitative Disclosures About Market Risk                                                         |       | 18         |
| Item 4 — Controls  and Procedures                                                                                       |       | 18         |
|                                                                                                                         |       |       |
| **PART II - OTHER  INFORMATION**                                                                                        |       |       |
|                                                                                                                         |       |       |
| Item 1 - Legal  Proceedings                                                                                                  |       | 19         |
| Item  1A - Risk Factors                                                                                                      |       | 20         |
| Item 2 -  Unregistered Sales of Equity Securities and Use of Proceeds                                                        |       | 20         |
| Item 3 -  Defaults upon Senior Securities                                                                                    |       | 20         |
| Item 4 -  Submission of Matters to a Vote of Security Holders                                                                |       | 20         |
| Item 5 - Other  Information                                                                                                  |       | 20         |
| Item  6 - Exhibits                                                                                                           |       | 20         |
|                                                                                                                         |       |       |
| **Signatures**                                                                                                               |       | 22         |
|                                                                                                                         |       |       |
| **Index to Exhibits**                                                                                                        |       | 23         |

 

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**FORGENT NETWORKS, INC.**

**CONDENSED CONSOLIDATED BALANCESHEETS**

(Amounts in thousands, except per share data)

 
| ** **                                                                                                                                                                                  | ** ** | **APRIL 30,********2009** | ** **       | **JULY 31,********2008** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------|------------------|--------------------------|------------|
| ** **                                                                                                                                                                                  | ** ** | **(UNAUDITED)**           | ** **       | ** **               | ** ** |
| **ASSETS******                                                                                                                                                                              |       |                      |             |                     |       |
| Current Assets:                                                                                                                                                                             |       |                      |             |                     |       |
| *Cash and cash equivalents*                                                                                                                                                                 |       | $                         | 8,194            |                     | $          | 12,062 |   |
| Short-term investments                                                                                                                                                                      |       | 2,915                     |             | 2,627                    |       |
| Accounts receivable, net of allowance for doubtful  accounts of $30 and $41 at April 30, 2009 and July 31, 2008,  respectively                                                    |       | 901                       |             | 1,488                    |       |
| Inventory                                                                                                                                                                                   |       | 3                         |             | 74                       |       |
| Prepaid expenses and other current assets                                                                                                                                                   |       | 444                       |             | 421                      |       |
| Total Current Assets                                                                                                                                                                        | ** ** | **12,457**                | ** **       | **16,672**               | ** ** |
|                                                                                                                                                                                        |       |                      |             |                     |       |
| Property and equipment, net                                                                                                                                                                 |       | 695                       |             | 907                      |       |
| Intangible assets, net                                                                                                                                                                      |       | 4,144                     |             | 4,729                    |       |
| ** **                                                                                                                                                                                  | ** ** | **$**                     | ** 17,296** | ** **               | **$**      | **22,308** | ** ** |
| **LIABILITIES AND STOCKHOLDERS’  EQUITY******                                                                                                                                          |       |                      |             |                     |       |
| Current Liabilities:                                                                                                                                                                        |       |                      |             |                     |       |
| Accounts payable                                                                                                                                                                            |       | $                         | 3,562            |                     | $          | 3,778 |   |
| Accrued compensation and benefits                                                                                                                                                           |       | 184                       |             | 203                      |       |
| Lease impairment and advance                                                                                                                                                                |       | 335                       |             | 373                      |       |
| Other accrued liabilities                                                                                                                                                                   |       | 465                       |             | 384                      |       |
| Deferred revenue                                                                                                                                                                            |       | 1,807                     |             | 1,844                    |       |
| Total Current Liabilities                                                                                                                                                                   | ** ** | **6,353**                 | ** **       | **6,582**                | ** ** |
|                                                                                                                                                                                        |       |                      |             |                     |       |
| Long-Term Liabilities:                                                                                                                                                                      |       |                      |             |                     |       |
| Deferred revenue                                                                                                                                                                            |       | 72                        |             | 25                       |       |
| Lease  impairment and advance                                                                                                                                                               |       | 276                       |             | 564                      |       |
| Other long-term obligations                                                                                                                                                                 |       | 183                       |             | 217                      |       |
| Total Long-Term Liabilities                                                                                                                                                                 | ** ** | **531**                   | ** **       | **806**                  | ** ** |
| ** **                                                                                                                                                                                  | ** ** | ** **                | ** **       | ** **               | ** ** |
| Stockholders’ Equity:                                                                                                                                                                  |       |                      |             |                     |       |
| Preferred stock, $.01 par value; 10,000 shares  authorized; none issued or outstanding                                                                                                      |       | —                    |             | —                   |       |
| Common stock, $.01 par value; 40,000 shares  authorized; 32,905 and 32,892 shares issued; 31,115 and 31,102 shares  outstanding at April 30, 2009 and July 31, 2008, respectively |       | 329                       |             | 329                      |       |
| Treasury stock at cost, 1,790 shares at  April 30, 2009 and July 31, 2008                                                                                                         |       | (4,815                    | )                | (4,815                   | )          |
| Additional paid-in capital                                                                                                                                                                  |       | 270,725                   |             | 270,657                  |       |
| Accumulated deficit                                                                                                                                                                         |       | (255,678                  | )                | (251,214                 | )          |
| Accumulated other comprehensive income                                                                                                                                                      |       | (149                      | )                | (37                      | )          |
| Total Stockholders’ Equity                                                                                                                                                             | ** ** | **10,412**                | ** **       | **14,920**               | ** ** |
| ** **                                                                                                                                                                                  | ** ** | **$**                     | ** 17,296** | ** **               | **$**      | **22,308** | ** ** |

 

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

 

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**FORGENT NETWORKS, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF OPERATIONS**

(Amounts in thousands, except per share data)

 
| ** **                                     | ** ** | **FOR THE********THREE MONTHS ENDED********APRIL 30,** | ** ** | **FOR THE********NINE MONTHS ENDED********APRIL 30,** | ** ** |
|------------------------------------------------|------------|--------------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                     | ** ** | **2009**                                               | ** ** | **2008**                                              | ** ** | **2009** | ** ** | **2008** | ** ** |
| ** **                                     | ** ** | **(UNAUDITED)**                                        | ** ** | **(UNAUDITED)**                                       | ** ** |
|                                           |       |                                                   |       |                                                  |       |   |   |   |   |
| Revenues                                       |       | $                                                      | 2,402      |                                                  | $          | 2,707 |   | $ | 7,615 |   | $ | 7,316 |   |
| Cost  of Sales                                 |       | (494                                                   | )          | (639                                                  | )          | (1,526 | ) | (1,598 | ) |
| **Gross Margin**                               | ** ** | **1,908**                                              | ** ** | **2,068**                                             | ** ** | **6,089** | ** ** | **5,718** | ** ** |
|                                           |       |                                                   |       |                                                  |       |   |   |   |   |
| **OPERATING  EXPENSES:**                       |       |                                                   |       |                                                  |       |   |   |   |   |
| Selling, general and  administrative           |       | 2,614                                                  |       | 2,951                                                 |       | 8,844 |   | 8,353 |   |
| Research and development                       |       | 544                                                    |       | 616                                                   |       | 1,630 |   | 1,547 |   |
| Amortization of intangible assets              |       | 149                                                    |       | 149                                                   |       | 448 |   | 340 |   |
| Total Operating Expenses                       | ** ** | **3,307**                                              | ** ** | **3,716**                                             | ** ** | **10,922** | ** ** | **10,240** | ** ** |
| ** **                                     | ** ** | ** **                                             | ** ** | ** **                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| **LOSS FROM OPERATIONS**                       | ** ** | **(1,399**                                             | **)**      | **(1,648**                                            | **)**      | **(4,833** | **)** | **(4,522** | **)** |
|                                           |       |                                                   |       |                                                  |       |   |   |   |   |
| **OTHER  INCOME AND (EXPENSES):**              |       |                                                   |       |                                                  |       |   |   |   |   |
| Interest income                                |       | 20                                                     |       | 109                                                   |       | 109 |   | 641 |   |
| Foreign currency translation                   |       | (6                                                     | )          | 2                                                     |       | 93 |   | (9 | ) |
| Gain on sale of assets                         |       | 26                                                     |       | —                                                |       | 276 |   | — |   |
| Interest expense and other                     |       | (18                                                    | )          | (22                                                   | )          | (51 | ) | (51 | ) |
| Total Other Income                             | ** ** | **22**                                                 | ** ** | **89**                                                | ** ** | **427** | ** ** | **581** | ** ** |
| ** **                                     | ** ** | ** **                                             | ** ** | ** **                                            | ** ** | ** ** | ** ** | ** ** | ** ** |
| **LOSS FROM OPERATIONS, BEFORE  INCOME TAXES** | ** ** | **(1,377**                                             | **)**      | **(1,559**                                            | **)**      | **(4,406** | **)** | **(3,941** | **)** |
| Provision for income taxes                     |       | (10                                                    | )          | (14                                                   | )          | (58 | ) | (34 | ) |
| **NET LOSS**                                   | ** ** | **$**                                                  | **(1,387** | **)**                                                 | **$**      | **(1,573** | **)** | **$** | **(4,464** | **)** | **$** | **(3,975** | **)** |
|                                           |       |                                                   |       |                                                  |       |   |   |   |   |
| **BASIC AND  DILUTED LOSS PER SHARE:**         |       |                                                   |       |                                                  |       |   |   |   |   |
| Basic                                          |       | $                                                      | (0.04      | )                                                     | $          | (0.05 | ) | $ | (0.14 | ) | $ | (0.13 | ) |
| Diluted                                        |       | $                                                      | (0.04      | )                                                     | $          | (0.05 | ) | $ | (0.14 | ) | $ | (0.13 | ) |
|                                           |       |                                                   |       |                                                  |       |   |   |   |   |
| **WEIGHTED  AVERAGE SHARES OUTSTANDING:**      |       |                                                   |       |                                                  |       |   |   |   |   |
| Basic                                          |       | 31,113                                                 |       | 30,995                                                |       | 31,109 |   | 29,667 |   |
| Diluted                                        |       | 31,113                                                 |       | 30,995                                                |       | 31,109 |   | 29,667 |   |

 

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

 

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** **

**FORGENT NETWORKS, INC.**

**CONDENSED CONSOLIDATED STATEMENTSOF CASH FLOWS**

(Amounts in thousands)

 
| ** **                                                         | ** ** | **FOR THE NINE MONTHS  ENDED APRIL 30,** | ** ** |
|--------------------------------------------------------------------|------------|------------------------------------------|------------|
| ** **                                                         | ** ** | **2009**                                 | ** ** | **2008** | ** ** |
| ** **                                                         | ** ** | **(UNAUDITED)**                          | ** ** |
| ** **                                                         | ** ** | ** **                               | ** ** | ** ** | ** ** |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                         |       |                                     |       |   |   |
| Net loss                                                           |       | $                                        | (4,464     | ) | $ | (3,975 | ) |
| Adjustments to reconcile net loss to net cash used  in operations: |       |                                     |       |   |   |
|                                                               |       |                                     |       |   |   |
| Depreciation and amortization                                      |       | 957                                      |       | 808 |   |
| Amortization of leasehold advance and lease  impairment            |       | (285                                     | )          | (298 | ) |
| Provision for doubtful accounts                                    |       | 32                                       |       | 15 |   |
| Share-based compensation                                           |       | 66                                       |       | 72 |   |
| Foreign currency translation (gain) loss                           |       | (90                                      | )          | 1 |   |
| Loss on sale of assets                                             |       | 67                                       |       | — |   |
| Changes in operating assets and liabilities:                       |       |                                     |       |   |   |
| Accounts receivable                                                |       | 487                                      |       | 386 |   |
| Inventory                                                          |       | 71                                       |       | — |   |
| Prepaid expenses and other current assets                          |       | (82                                      | )          | (94 | ) |
| Accounts payable                                                   |       | (233                                     | )          | (8,207 | ) |
| Accrued expenses and other long-term obligations                   |       | 88                                       |       | (454 | ) |
| Deferred revenue                                                   |       | 78                                       |       | (180 | ) |
| Net cash used in operating activities                              | ** ** | **(3,308**                               | **)**      | **(11,926** | **)** |
|                                                               |       |                                     |       |   |   |
| **CASH FLOWS FROM INVESTING  ACTIVITIES:**                         |       |                                     |       |   |   |
| Net purchases of short-term investments                            |       | (276                                     | )          | (1,273 | ) |
| Net purchases of property and equipment                            |       | (254                                     | )          | (284 | ) |
| Change in other assets                                             |       | —                                   |       | 164 |   |
| Acquisition of iSarla, Inc., net of cash  acquired            |       | —                                   |       | (7,344 | ) |
| Net cash used in investing activities                              | ** ** | **(530**                                 | **)**      | **(8,737** | **)** |
|                                                               |       |                                     |       |   |   |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                          |       |                                     |       |   |   |
| Net proceeds from issuance of stock                                |       | 2                                        |       | 14 |   |
| Payments on capital leases                                         |       | (25                                      | )          | (1 | ) |
| Net cash (used in) provided by financing  activities               | ** ** | **(23**                                  | **)**      | **13** | ** ** |
|                                                               |       |                                     |       |   |   |
| Effect of translation exchange rates                               |       | (7                                       | )          | (62 | ) |
|                                                               |       |                                     |       |   |   |
| Net decrease in cash and cash equivalents                          |       | (3,868                                   | )          | (20,712 | ) |
| Cash and cash equivalents at beginning of period                   |       | 12,062                                   |       | 33,524 |   |
| Cash and cash equivalents at end of period                         | ** ** | **$**                                    | **8,194**  | ** ** | **$** | **12,812** | ** ** |
|                                                               |       |                                     |       |   |   |
| **SUPPLEMENTAL  CASH FLOW INFORMATION:**                           |       |                                     |       |   |   |
| Issuance of stock for  acquisition of iSarla, Inc.            |       | $                                        | —     |   | $ | 4,987 |   |

 

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

 

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**FORGENT NETWORKS, INC.**

**NOTES TO THE CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS**

(Amounts in thousands, except per share data unless otherwise noted)

 

**NOTE 1 - GENERAL AND BASIS OF FINANCIAL STATEMENTS**

 

Theaccompanying unaudited condensed consolidated financial statements have beenprepared in accordance with the rules and regulations of the Securitiesand Exchange Commission and accordingly, do not include all information andfootnotes required under U.S. generally accepted accounting principles forcomplete financial statements. In the opinion of management, these interimfinancial statements contain all adjustments, consisting of normal, recurringadjustments, necessary for a fair presentation of the financial position ofForgent Networks, Inc. (“Forgent” or the “Company”) as of April 30,2009 and July 31, 2008, the results of operations for the three and ninemonths ended April 30, 2009 and April 30, 2008, and the cash flows for the nine months ended April 30, 2009and April 30, 2008. These condensed consolidated financialstatements should be read in conjunction with the Company’s auditedconsolidated financial statements and notes thereto filed with the Securitiesand Exchange Commission in the Company’s annual report on Form 10-K/A forthe fiscal year ended July 31, 2008.  The results for the interim periods are not necessarily indicative ofresults for a full fiscal year.  Certainreclassifications have been made to prior year’s financial statement to conformto the current year presentation.

 

**NOTE 2 - INTANGIBLE ASSETS**

 

Forgent accounted for its historical acquisitions inaccordance with Financial Accounting Standard Board (“FASB”) Statement No. 141, *“Business Combination.”*The Company recorded intangible assets apart fromgoodwill if the assets had contractual or other legal rights or if the assetscould be separated and sold, transferred, licensed, rented or exchanged.  Forgent’s intangible assets relate to itsacquisition of iSarla Inc. and the iEmployee operations.

 

In accordance with FASB Statement No. 144, *“Accounting for the Impairment or Disposal of Long-Lived Assets,”*Forgent reviews and evaluates its long-lived assets, including intangibleassets with finite lives, for impairment whenever events or changes incircumstances indicate that their net book value may not be recoverable.  The gross carrying amount and accumulatedamortization of the Company’s intangible assets as of April 30, 2009 and July 31,2008 are as follows:

 
| ** **               | ** ** | ** **            | ** ** | **April 30, 2009** | ** ** |
|--------------------------|------------|-----------------------|------------|-------------------------|------------|
| ** **               | ** ** | **Amortization**      | ** ** | ** **              | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| **Intangible Asset**     | ** ** | **Period (in Years)** | ** ** | **Gross**               | ** ** | **Amortization** | ** ** | **Net** | ** ** |
|                     |       |                  |       |                    |       |   |   |   |   |
| Developed  Technology    |       | 5                     |       | $                       | 915        |   | $ | (287 | ) | $ | 628 |   |
| Customer  Relationships  |       | 8                     |       | 2,470                   |       | (485 | ) | 1,985 |   |
| Ceridian  Contract       |       | 8                     |       | 1,545                   |       | (303 | ) | 1,242 |   |
| Trade  Names             |       | 5                     |       | 288                     |       | (90 | ) | 198 |   |
| Covenant  not-to-compete |       | 4                     |       | 150                     |       | (59 | ) | 91 |   |
| ** **               | ** ** | ** **            | ** ** | **$**                   | **5,368**  | ** ** | **$** | **(1,224** | **)** | **$** | **4,144** | ** ** |

 
| ** **               | ** ** | ** **            | ** ** | **July 31, 2008** | ** ** |
|--------------------------|------------|-----------------------|------------|------------------------|------------|
| ** **               | ** ** | **Amortization**      | ** ** | ** **             | ** ** | **Accumulated** | ** ** | ** ** | ** ** |
| **Intangible Asset**     | ** ** | **Period (in Years)** | ** ** | **Gross**              | ** ** | **Amortization** | ** ** | **Net** | ** ** |
|                     |       |                  |       |                   |       |   |   |   |   |
| Developed  Technology    |       | 5                     |       | $                      | 915        |   | $ | (150 | ) | $ | 765 |   |
| Customer  Relationships  |       | 8                     |       | 2,470                  |       | (253 | ) | 2,217 |   |
| Ceridian  Contract       |       | 8                     |       | 1,545                  |       | (158 | ) | 1,387 |   |
| Trade  Names             |       | 5                     |       | 288                    |       | (47 | ) | 241 |   |
| Covenant  not-to-compete |       | 4                     |       | 150                    |       | (31 | ) | 119 |   |
| ** **               | ** ** | ** **            | ** ** | **$**                  | **5,368**  | ** ** | **$** | **(639** | **)** | **$** | **4,729** | ** ** |

 

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**FORGENT NETWORKS, INC.**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

(Amounts in thousands, except per share data unless otherwise noted)

 

Amortizationexpense is recorded using the straight-line method over the estimated economicuseful lives of the intangible assets, as noted above.  Amortization expense for the three monthsended April 30, 2009 and 2008 were $195 and $195, respectively.  Amortization expense for the nine months ended April 30,2009 and 2008 were $585 and $445, respectively.  The following table summarizes the estimatedamortization expense relating to the Company’s intangible assets for the nextfive fiscal years and thereafter as of April 30, 2009:

 
| **Fiscal Years** | ** ** | ** ** | ** **      |
|------------------|------------|------------|-----------------|
| Remaining  2009  |       | $          |  195       |   |
| 2010             |       | 780        |            |
| 2011             |       | 780        |            |
| 2012             |       | 749        |            |
| 2013             |       | 546        |            |
| Thereafter       |       | 1,094      |            |
|             | ** ** | **$**      | ** 4,144** | ** ** |

 

**NOTE 3 — FAIR VALUE MEASUREMENTS**

 

Effective August 1,2008, Forgent adopted FASB Statement No. 157, *“Fair Value Measurements.”  *Statement No. 157defines fair value, establishes a framework for measuring fair value in U.S.generally accepted accounting principles and expands disclosures about fairvalue measurements.  The adoption of Statement No. 157 did not have amaterial impact to the Company’s consolidated financial statements.

 

StatementNo. 157 establishes a three-tier fair value hierarchy, which is based onthe reliability of the inputs used in measuring fair values. These tiersinclude:

 
| Level  1: | Quoted  prices in active markets for *identical*  assets or liabilities;                                                                                                                                                                       |
|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Level  2: | Quoted  prices in active markets for *similar*  assets or liabilities; quoted prices in markets that are not active for identical  or similar assets or liabilities; and model-driven valuations whose  significant inputs are observable; and |
| Level 3:  | Unobservable inputs that are supported by little or no market activity  and that are significant to the fair value of the assets or liabilities.                                                                                               |

 

The followingtable presents the fair value hierarchy for the Company’s financial assets(cash equivalents and short-term investments) measured at fair value on arecurring basis as of April 30, 2009:

 
| ** **                                 | ** ** | ** **         | ** ** | **Fair Value Measure at April 30, 2009** | ** ** |
|--------------------------------------------|------------|--------------------|------------|-----------------------------------------------|------------|
| ** **                                 | ** ** | **Total**          | ** ** | **Quoted**                                    | ** ** | **Significant** | ** ** | ** ** | ** ** |
| ** **                                 | ** ** | **Carrying**       | ** ** | **Prices**                                    | ** ** | **Other** | ** ** | **Significant** | ** ** |
| ** **                                 | ** ** | **Value at**       | ** ** | **in Active**                                 | ** ** | **Observable** | ** ** | **Unobservable** | ** ** |
| ** **                                 | ** ** | **April 30,** | ** ** | **Market**                                    | ** ** | **Inputs** | ** ** | **Inputs** | ** ** |
| **Description**                            | ** ** | **2009**           | ** ** | **(Level 1)**                                 | ** ** | **(Level 2)** | ** ** | **(Level 3)** | ** ** |
| Money  Market Funds                        |       | $                  | 8,194      |                                          | $          | 8,194 |   | $ | — |   | $ | — |   |
| Short-term  investments available for sale |       | 2,915              |       | 2,915                                         |       | — |   | — |   |
| **Total**                                  | ** ** | **$**              | **11,109** | ** **                                    | **$**      | **11,109** | ** ** | **$** | **—** | ** ** | **$** | **—** | ** ** |

 

In February 2007,the FASB issued Statement No. 159, *“TheFair Value Option for Financial Assets and Financial Liabilities.”*StatementNo. 159 provides companies with an option to report selected financialassets and liabilities at fair value. The standard’s objective is to reduceboth complexity in accounting for financial instruments and the volatility inearnings caused by measuring related assets and liabilities differently.  The standard requires companies to provideadditional information that will help investors and other users of financialstatements to more easily understand the effect of the company’s choice to usefair value on its earnings. It also requires companies to display the fairvalue of those assets and liabilities for which the company has chosen to usefair value on the face of the balance sheet. This statement does not eliminatedisclosure requirements included in other accounting standards, includingrequirements for disclosures about fair value measurements included inStatement No. 157, *“Fair Value*

 

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**FORGENT NETWORKS, INC.**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

(Amounts in thousands, except per share data unless otherwise noted)

 

*Measurements,”*and Statement No. 107, *“Disclosuresabout Fair Value of Financial Instruments.”*  Forgent adopted Statement No. 159,effective August 1, 2008, and elected not to measure any additionalfinancial instruments at fair value. Therefore, the adoption of Statement No. 159 did not have amaterial impact to the Company’s consolidated financial statements.

 

**NOTE 4 — SALE OF ASSETS**

 

InFebruary 2009, Forgent sold certain assets associated with its VisualAsset Manager (“VAM”) software product to E-Innovative Services Group, LLC (“EISG”),the Company’s key partner in providing a complete asset management solution toits customers.  EISG agreed to payForgent quarterly royalty payments equal to 20% of all net revenue generated byEISG’s sales of the VAM products, or any products derived from any of theacquired assets, up to a total sum of $1,000. EISG also agreed to assume all contractual obligations related to theCompany’s VAM maintenance and support agreements.  By divesting its VAM software product andservices, Forgent can focus its investment on NetSimplicity’s schedulingsoftware, Meeting Room Manager, which the Company believes has the greaterpotential for the Company’s future growth and profitability.  Forgent’s iEmployee operations were notaffected by this sale.  As a result ofthe VAM sale, the Company recorded a gain of $26 during the third fiscalquarter, which is included in other income on the Consolidated Statement ofOperations.

 

**NOTE 5 - COMPREHENSIVE INCOME (LOSS)**

 

In accordance with thedisclosure requirements of FASB Statement No. 130, *“Reporting Comprehensive Income,”* theCompany’s comprehensive income (loss) is comprised of net income (loss),foreign currency translation adjustments and unrealized gains and losses onshort-term investments held as available-for-sale securities. The followingtable presents the Company’s comprehensive loss and its components for thethree and nine months ended April 30, 2009 and 2008:

 
| ** **                                        | ** ** | **For the Three Months** | ** ** | **For the Nine Months**  | ** ** |
|---------------------------------------------------|------------|--------------------------|------------|--------------------------|------------|
| ** **                                        | ** ** | **Ended April 30,** | ** ** | **Ended April 30,** | ** ** |
| ** **                                        | ** ** | **2009**                 | ** ** | **2008**                 | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                              |       |                     |       |                     |       |   |   |   |   |
| Net  Loss                                         |       | $                        | (1,387     | )                        | $          | (1,573 | ) | $ | (4,464 | ) | $ | (3,975 | ) |
| Foreign  currency loss                            |       | (9                       | )          | (73                      | )          | (124 | ) | (61 | ) |
| Unrealized  (loss) gain on short-term investments |       | (4                       | )          | (9                       | )          | 12 |   | 4 |   |
| **Comprehensive Loss**                            | ** ** | **$**                    | **(1,400** | **)**                    | **$**      | **(1,655** | **)** | **$** | **(4,576** | **)** | **$** | **(4,032** | **)** |

 

##### **NOTE 6 - RECENT ACCOUNTING PRONOUNCEMENTS**

##### ** **

In April 2008, theFASB issued FSP 142-3*, “**Determination of the Useful Life of Intangible Assets.”* FSP 142-3 amends the factors that should beconsidered in developing renewal or extension assumptions used to determine theuseful life of a recognized intangible asset under FASB Statement No. 142,*“Goodwill and Other Intangible Assets.”* This new guidance applies prospectively tointangible assets that are acquired individually or with a group of otherassets in business combinations and asset acquisitions. FSP 142-3 is effectivefor fiscal years beginning after December 15, 2008 and early adoption isprohibited.  Forgent does not expect thatthe adoption of FSP 142-3 during fiscal year 2010 will have a material impacton the useful lives of its intangible assets, or on its financial position orresults of operations.

 

In December 2007,the FASB issued Statement No. 141(R), *“Business Combinations.”*Statement No. 141(R) establishes principles and requirements for howan acquirer recognizes and measures in its financial statements theidentifiable assets acquired, the liabilities assumed, any non-controllinginterest in the acquiree and the goodwill acquired in the businesscombination.  The statement alsoestablishes disclosure requirements which will enable users to evaluate thenature and financial effects of the business combination. Statement No. 141(R) iseffective for fiscal years, and interim periods within those fiscal years,beginning on or after December 15, 2008. As such, the Company will adoptthese provisions for any business combination after August 1, 2009.  The adoption of Statement No. 141(R) mayhave an impact on Forgent’s accounting for future business combinations onceadopted.

 

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**FORGENT NETWORKS, INC.**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

(Amounts in thousands, except per share data unless otherwise noted)

 

## **NOTE7 — SHARE BASED COMPENSATION**

## ** **

Share based compensation for the Company’sstock option, restricted stock and stock purchase plans for the three and ninemonths ended April 30, 2009 was $13and $65, respectively.  Sharebased compensation for the Company’s stock option, restricted stock and stockpurchase plans for the three and nine months ended April 30, 2008 was $0 and $72, respectively.  TheCompany issued 4 and 13 sharesof common stock related to its Stock Option, Restricted Stock, and StockPurchase Plans for the three and nine months ended April 30, 2009,respectively.  The Company issued 140 and 396 shares of common stockrelated to its Stock Option, Restricted Stock, and Stock Purchase Plans for thethree and nine months ended April 30, 2008, respectively.

 

**NOTE 8 - CONTINGENCIES**

 

Forgent is the defendant or plaintiff in various actions that arose inthe normal course of business.  With theexception of the proceedings described below, none of the pending legalproceedings to which the Company is a party are material to the Company.

 

**Litigation with Jenkens & Gilchrist, P.C.**

 

On July 16, 2007, Jenkens &Gilchrist, P.C. (“Jenkens”), Forgent’s former legal counsel, filed a complaintagainst Forgent and Compressions Labs, Inc., in the District Court ofDallas County, Texas.  In its complaint,Jenkens alleges a breach of contract and is seeking a declaratoryjudgment.  Forgent disputes Jenkens’claims and is seeking relief through the court system.

 

After Forgent terminated Jenkens, the Companyentered into a Resolution Agreement with Jenkens in December 2004.  Under the Resolution Agreement, the Companybelieves Jenkens is entitled to no more than $1.4 million pursuant to theResolution Agreement as a result of the amounts received by Forgent in the pastlitigation.  Jenkens interprets theResolution Agreement on broader terms and believes it is entitled to $3.4million, including attorneys’ fees and interest.

 

On March 3, 2008, Forgent and Jenkensappeared before the Court regarding a hearing on a motion for summary judgmentfiled by Jenkens.  On May 20, 2008,the Court granted Jenkens’ motion and ordered Forgent to pay Jenkens $2.8million for past recoveries and other amounts including attorney’s fees andinterest.  Forgent asked the Court toreconsider its order and, on September 3, 2008, the Court reconsidered itsprior ruling and denied Jenkens’ motion and held that language from thecontract in dispute was ambiguous and the issue would be submitted to a jury.

 

On May 20, 2009, Jenkens submitted a secondmotion for summary judgment.  Forgentresponded to this motion on June 3, 2009 and both parties appeared beforethe Court regarding this motion on June 10, 2009.  The Court has not ruled on Jenkens’ secondmotion.

 

The trial datefor this litigation has been rescheduled to commence on July 13,2009.  Managementcurrently cannot predict how long it ultimately will take to resolve theJenkens lawsuit.  Until the Jenkenslitigation is finalized, the related amounts charged by Jenkens pursuant to theResolution Agreement may be adjusted in a future period and could have amaterial impact to the Company’s consolidated financial statements.

 

**Litigation with Wild Basin**

 

On September 6,2007, Forgent filed a petition against Wild Basin One & Two, Ltd. (“WildBasin”) in the District Court of Travis County, Texas.  The petition claimed Wild Basin was in breachof contract relating to Forgent’s lease agreement by unreasonably withholdingand delaying its consent to Forgent’s lease assignment to a third party.  Forgent sought to recover all damages as aresult of the delay in closing its pending assignment and amounts notdistributed in the past, among other damages.

 

The trial for thislitigation commenced on September 22, 2008.  Prior to the conclusion of the trial, Forgentand Wild Basin reached a settlement agreement, effective September 25,2008.  This settlement agreementrequires,

 

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**FORGENT NETWORKS, INC.**

**NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

(Amounts in thousands, except per share data unless otherwise noted)

 

among other terms, that Wild Basin consent toForgent’s lease assignment.  In return,Forgent paid Wild Basin $75 thousand in November 2008.  Both parties agreed to mutually releaseclaims against each other.

 

AfterForgent and Wild Basin participated in mediation on November 11, 2008 tofinalize the terms of the settlement agreement, Wild Basin consented to Forgent’slease assignment and the documents were submitted to Wild Basin’s lender forfinal approval.  Although the lendergranted its final approval on February 11, 2009, the third party iscurrently having difficulties obtaining the required financing due to thetightened capital markets.  Forgentcontinues to negotiate with this third party and is working with otherinterested third parties.  However, thereis no assurance that Forgent will be successful in assigning its leaseagreement.

 

**NOTE 9 — SUBSEQUENT EVENT**

 

On June 1, 2009, theCompany announced that its Board of Directors unanimously voted to cancel theSpecial Meeting of Stockholders scheduled for June 2, 2009.  Themeeting was originally called for the purpose of allowing the stockholders tovote on two separate proposals to amend the Company’s Restated Certificate ofIncorporation to effect a reverse/forward stock split (the “Reverse/ForwardStock Split”) of the Company’s common stock, which was expected to allowForgent to become a privately-held company.  While there was substantialstockholder support for the Reverse/Forward Stock Split proposals, the Board ofDirectors determined that, based on the total number of stockholder proxiesreceived prior to the announcement, the proposals would not receive sufficientvotes to pass due to concerns about the loss of liquidity.  Therefore, theBoard of Directors decided to cancel the meeting in order to save theassociated expenses.  Since the stockholders prefer Forgent to remain as apublicly traded company, management is proceeding with its alternativelong-term plan for the Company’s future growth. Forgent will hold its annual stockholders meeting on July 30, 2009

 

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**ITEM 2.****    ****MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**

 

The following review ofForgent’s financial position as of April 30, 2009 and July 31, 2008,and for the three and nine months ended April 30, 2009 and 2008, should beread in conjunction with the Company’s 2008 Annual Report on Form 10-K/Afiled with the Securities and Exchange Commission.  Forgent’s internet website address ishttp://www.asuresoftware.com.  The Company’s annual report on Form 10-K,quarterly reports on Form 10-Q, current reports on Form 8-K andamendments to those reports filed or furnished pursuant to Section 13(a) or15(d) of the Securities Exchange Act of 1934 are available through theinvestor relations page of the Company’s internet website free of chargeas soon as reasonably practicable after they are electronically filed, orfurnished to, the Securities and Exchange Commission.  Forgent’s internetwebsite and the information contained therein or connected thereto are notintended to be incorporated into this Quarterly Report on Form 10-Q.

 

On February 4,2008, Forgent received a Nasdaq deficiency letter indicating that, for 30consecutive business days, the bid price per share of the Company’s commonstock closed below the minimum $1.00 per share requirement.  Since Forgent was unable to regain compliancethrough improving its operating results, the Company applied for a transferlisting on the Nasdaq Capital Market, which Nasdaq approved, effective September 19,2008.  The Company’s trading symbolcontinued to be “ASUR” and the trading of the Company’s stock was unaffected bythis change.

 

Due to the continuedunprecedented market conditions, on March 23, 2009, Nasdaq furthersuspended the enforcement of its rules requiring a minimum $1.00 share bidprice for all Nasdaq-listed companies until July 20, 2009.  Consequently, Forgent’s compliance deadlinehas further been extended until November 3, 2009.  Forgent continues to strive for improvedoperations and will explore all opportunities to regain compliance.  If the Company cannot achieve compliance withthe minimum share price requirement by November 3, 2009, Nasdaq willprovide written notification that the Company’s securities will be de-listed fromthe Capital Market Exchange.

 

On June 1,2009, the Company announced that its Board of Directors unanimously voted tocancel the Special Meeting of Stockholders scheduled for June 2,2009.  The meeting was originally called for the purpose of allowing thestockholders to vote on two separate proposals to amend the Company’s RestatedCertificate of Incorporation to effect a reverse/forward stock split (the “Reverse/ForwardStock Split”) of the Company’s common stock, which was expected to allowForgent to become a privately-held company.  While there was substantialstockholder support for the Reverse/Forward Stock Split proposals, the Board ofDirectors determined that, based on the total number of stockholder proxiesreceived prior to the announcement, the proposals would not receive sufficientvotes to pass due to concerns about the loss of liquidity.  Therefore, theBoard of Directors decided to cancel the meeting in order to save theassociated expenses.  Since the stockholders prefer Forgent to remain as apublicly traded company, management is proceeding with its alternativelong-term plan for the Company’s future growth. Forgent will hold its annual stockholders meeting on July 30, 2009

 

**CAUTIONARY STATEMENTREGARDING FORWARD-LOOKING STATEMENTS**

 

Certain statementsin this Report represent forward-looking statements. These statements involveknown and unknown risks, uncertainties and other factors that may cause actualresults of operations, levels of activity, economic performance, financialcondition or achievements to be materially different from future results ofoperations, levels of activity, economic performance, financial condition orachievements as expressed or implied by such forward-looking statements.

 

Forgenthas attempted to identify these forward-looking statements with the words “believes,”“estimates,” “plans,” “expects,” “anticipates,” “may,” “could” and othersimilar expressions. Although these forward-looking statements reflectmanagement’s current plans and expectations, which are believed to bereasonable as of the filing date of this report, they inherently are subject tocertain risks and uncertainties. Additionally, Forgent is under no obligation to update any of theforward-looking statements after the date of this Form 10-Q to conformsuch statements to actual results.

 

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**RESULTS OF OPERATIONS**

 

Thefollowing table sets forth for the fiscal periods indicated the percentage ofrevenues represented by certain items in Forgent’s Condensed ConsolidatedStatements of Operations:

 
| ** **                          | ** ** | **FOR THE THREE  MONTHS ENDED********APRIL 30,** | ** ** | **FOR THE NINE********MONTHS ENDED********APRIL 30,** | ** ** |
|-------------------------------------|------------|--------------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                          | ** ** | **2009**                                         | ** ** | **2008**                                              | ** ** | **2009** | ** ** | **2008** | ** ** |
|                                |       |                                             |       |                                                  |       |   |   |   |   |
| Revenues                            |       | 100                                              | %          | 100                                                   | %          | 100 | % | 100 | % |
| Gross margin                        |       | 79                                               |       | 76                                                    |       | 80 |   | 78 |   |
| Selling, general and administrative |       | 109                                              |       | 109                                                   |       | 116 |   | 114 |   |
| Research and development            |       | 23                                               |       | 23                                                    |       | 21 |   | 21 |   |
| Amortization of intangible assets   |       | 6                                                |       | 5                                                     |       | 6 |   | 5 |   |
| Total operating expenses            |       | 138                                              |       | 137                                                   |       | 143 |   | 140 |   |
| Other income, net                   |       | 1                                                |       | 3                                                     |       | 6 |   | 8 |   |
| Net loss                            |       | 58                                               | %          | 58                                                    | %          | 59 | % | 54 | % |

 

**THREE AND NINE MONTHS ENDED APRIL 30, 2009 and 2008**

 

### **Revenues**

### ** **

Revenues for the three months ended April 30, 2009 were $2.4million, a decrease of $0.3 million, or 11%, from the $2.7 million reported forthe three months ended April 30, 2008. Revenues for the nine months ended April 30,2009 were $7.6 million, an increase of $0.3 million, or 4%, from the $7.3million reported for the nine months ended April 30, 2008. Consolidated revenues represent the combined revenues of the Company andits subsidiaries, including sales of the Company’s schedulingsoftware, asset management software, human resource and time and attendancesoftware, complementary hardware devices to enhance itssoftware products, software maintenance and support services, installation andtraining services and other professional services.

 

During the three months ended April 30,2009, revenues decreased $0.3 million, approximately 84% of which was due tothe decrease in software license revenues. As a result of the protracted economic recession, Forgent continued toexperience customers and prospects reducing or freezing their capital budgetsand deferring their projects.  Thesereductions and deferrals largely led to the decrease in the Company’s softwarelicense revenues during the third fiscal quarter.

 

During the nine months ended April 30, 2009,revenues increased $0.3 million due primarily to an increase in softwaresubscription revenues, which more than offset the decrease in software licenserevenues, and an increase in maintenance revenues.  Software subscription revenues increased by$0.9 million during the nine months ended April 30, 2009 due primarily tothe Company generating revenues from the iEmployee operations for the entirenine month period in fiscal 2009.  SinceForgent acquired the iEmployee operations in October 2007, the Company didnot generate a full nine months’ worth of revenues from the iEmployeeoperations during the nine months ended April 30, 2008.  The $0.9 million increase in softwaresubscription revenues was offset by a $0.8 million decrease in software licenserevenues caused by the economic recession during the nine months ended April 30,2009.  Despite the decrease in software license sales in fiscal 2009, Forgentdoes continue to sell additional licenses and its cumulative license basecontinues to grow.  As a result, theCompany’s related maintenance base also continues to grow, leading to a $0.3million increase in maintenance revenues during the nine months ended April 30,2009.

 

In addition to continuing to develop its workforcemanagement solutions and releasing new software updates and enhancements, Forgent is conducting several sales and marketingcampaigns with the goal of increasing sales during the fourth fiscalquarter.  Forgent will alsocontinue targeting small and medium businesses and divisions of enterprises andemploying targeted vertical marketing programs, as appropriate.  Althoughthe macroeconomic environment continues to present challenges for the Companyto grow its revenues, management believes that Forgent is operating in a growthmarket and that sales will grow in the future as the economy starts to recover.

 

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### **GrossMargin**

### ** **

Grossmargin for the three months ended April 30, 2009 was $1.9 million, adecrease of $0.2 million, or 8%, from the $2.1 million reported for the three monthsended April 30, 2008. Gross margin for the nine months ended April 30,2009 was $6.1 million, an increase of $0.4 million, or 6%, from the $5.7million reported for the nine months ended April 30, 2008. Gross margin as a percentage of revenues were 79% and 76% forthe three months ended April 30, 2009 and 2008, respectively.  Gross margin as a percentage of total revenues were 80% and 78% for the nine monthsended April 30, 2009 and 2008, respectively.

 

Forgent’scost of sales relates primarily to compensation expenses, hardwareexpenses and the amortization of the Company’s purchased software.  These expenses represented approximately 67%and 68% of the total cost of sales for the three months ended April 30,2009 and 2008, respectively.  SinceForgent’s total cost of sales is relatively fixed, any decrease in revenueswill directly impact the Company’s gross margin negatively.  Thus, the $0.2 million decrease in grossmargin during the three months ended April 30, 2009, is due primarily tothe decrease in revenues.  In terms ofgross margin as a percentage of revenue, the change in product mix during thethird fiscal quarter of 2009 led gross margin to increase from 76% during thethree months ended April 30, 2008 to 79% during the three months ended April 30,2009.

 

Asdecreases in revenues negatively impact gross margin, increases in revenuespositively impact gross margin.  Thus,the $0.4 million increase in gross margin during the nine months ended April 30,2009 is due primarily to the $0.3 million increase in revenues.  The $0.1 million decrease in cost of salesduring the nine months ended April 30, 2009 also contributed to theincrease in gross margin.  This decreasein cost of sales resulted from a change in product mix and led gross margin asa percentage of revenue to increase from 78% during the nine months ended April 30,2008 to 80% during the nine months ended April 30, 2009.  Forfuture periods,  Forgent expectsgross margins will remain relatively consistent with the gross margins for the ninemonths ended April 30, 2009, in terms of percentage of revenues.

 

**Selling, General andAdministrative**

 

Selling,general and administrative (“SG&A”) expenses for the three months ended April 30,2009 were $2.6 million, a decrease of $0.3 million, or 11%, from the $2.9million reported for the three months ended April 30, 2008. SG&Aexpenses for the nine months ended April 30, 2009 were $8.8 million, anincrease of $0.5 million, or 6%, from the $8.3 million reported for the ninemonths ended April 30, 2008. SG&A expenses as a percentage of revenues were 109% and 109% for the three months endedApril 30, 2009 and 2008, respectively. SG&A expenses as apercentage of revenues were 116% and 114% for the nine months ended April 30,2009 and 2008, respectively.

 

During the three monthsended April 30, 2009, SG&A expenses decreased $0.3 million,approximately 83% of which is due to decreases in compensation and marketingexpenses.  Effective March 1, 2009,Forgent implemented a mandatory 10% pay reduction for its personnel between March 2009and July 2009.  This pay reductiondecreased compensation expenses by approximately $0.2 million during the thirdfiscal quarter.  Additionally, in effortsto further trim overhead costs, Forgent’s marketing program budget was cut,decreasing marketing expenses by $0.1 million during the three months ended April 30,2009.

 

During the nine monthsended April 30, 2009, SG&A expenses increased $0.5 million,approximately 71% of which is due to an increase in legal expenses.  In fiscal 2009, Forgent incurred significantlegal expenses preparing for trial and litigating against Wild Basin One &Two, Ltd. (“Wild Basin”), thus increasing legal expenses by $0.4 million duringthe nine months ended April 30, 2009. Although a tentative settlement agreement was reached on September 25,2008 prior to the conclusion of the trial and although Wild Basin’s lender granted its final approval on February 11,2009, the third party is currently having difficulties obtaining the requiredfinancing due to the tightened capital markets. Forgent continues to negotiate with this third party and is working withother interested third parties.  However,there is no assurance that Forgent will be successful in assigning its leaseagreement.  Additionally, Forgentincurred $0.1 million in legal expenses related to its efforts to privatize theCompany.  No such expenses were incurred during the ninemonths ended April 30, 2008.  As stated previously in this QuarterlyReport, Forgent cancelled its special stockholders meeting scheduled for June 2,2009 and the Company will remain as a publicly traded company.

 

In accordance with thelease agreement, Wild Basin pays Forgent certain net profit interestpayments.  During the third fiscalquarter, Wild Basin submitted financial data to Forgent which indicated WildBasin’s 

 

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intention not tomake such payment.  Consequently, theCompany recorded a 50% reserve against its receivable from Wild Basin.  The related $0.2 million expense was offsetby reductions in other various SG&A expenses resulting from management’sconcentrated efforts to further reduce overhead expenses.  If not for the reserve against the Wild Basinreceivable, Forgent’s operating results for the three and nine months ended April 30,2009 would have been improved by $0.2 million, or almost $0.01 per share.  As of April 30, 2009, Forgent’s netreceivable from Wild Basin was $0.2 million. Forgent will continue to work with Wild Basin in efforts to collect itsreceivable in full.

 

Despitebudget cuts from its marketing programs, Forgent is conducting campaignsemphasizing the benefits that can be gained through use of the Company’sproducts, including increased worker productivity and operational savings whichare particularly important benefits during difficult economic times.  Also, as the Company prepares for its trialwith Jenkens & Gilchrist, P.C., which is currently scheduled for July 13,2009, Forgent expects that it will continue to incur potentially significantlegal expenses.  Throughout itsoperations, Forgent continues to evaluate any unnecessary SG&Aexpenses and expects to further reduce expenses.

 

### **Researchand Development**

### ** **

Researchand development (“R&D”) expenses for the three months ended April 30,2009 were $0.5 million, a decrease of $0.1 million, or 12%, from the $0.6million reported for the three months ended April 30, 2008. R&Dexpenses for the nine months ended April 30, 2009 were $1.6 million, anincrease of $0.1 million, or 5%, from the $1.5 million reported for the ninemonths ended April 30, 2008. R&D expenses as a percentage of revenues were 23% and 23% for the three months ended April 30,2009 and 2008, respectively.  R&Dexpenses as a percentage of revenues were21% and 21% for the nine months ended April 30, 2009 and 2008,respectively.

 

Duringthe three months ended April 30, 2009, R&D expenses decreased $0.1million.  Approximately 83% of this decrease is due to a decrease incompensation expenses.  In addition tothe mandatory 10% pay reduction for its personnel, effective March 1,2009, Forgent released all non-vital personnel in May 2008 after theCompany fully integrated the iEmployee R&D workforce into the existingR&D team in fiscal 2008.  Thecombination of these events led to the decrease in compensation expenses duringthe three months ended April 30, 2009. During the nine months ended April 30, 2009, R&D expensesincreased $0.1 million.  Approximately 110% of this increase resulted from an increase in R&D expensesrelated to the iEmployee operations.  Sincethe iEmployee operations were acquired in October 2007, Forgent did notincur a full nine months of R&D expenses related to the iEmployee productline during the nine months ended April 30, 2008.

 

Duringthe third fiscal quarter of 2009, Forgent continued concentrating its R&Defforts on enhancing its Time & Attendance and MRM products.  The Company implemented a new line of clocksto integrate with its Time & Attendance product.  This new line of clocks includes severalforms of data collection including magnetic stripe, barcode, proximity andbiometric readers, thereby expanding Time & Attendance’s capabilitiesto meet various customers’ requirements. Forgent also added functionality to its Time & Attendancesoftware by developing a new flexible pay schedule that allows customers tospecify start and end dates, as well as start and end times, for multipledifferent pay periods. In response to growing interest in Arabic countries,Forgent developed a low-cost prototype of its MRM software, which is currentlybeing tested for market demand in these countries.  In order to support its customers who use SunGard HigherEducation Banner®, a widely used collegiate course scheduling solution, Forgent developedenhancements to its MRM software to dramatically reduce data import time, thussignificantly saving administrative time.

 

Forgentcontinues to solicit and receive feedback regarding its products and servicesfrom its existing and potential customers. As the Companydesigns and further improves its workforce management solutions through newreleases and new feature developments, managementwill attempt to maintain R&D expenses at reasonable levels in terms ofpercentage of revenue.

 

## **Amortization of intangible assets**

## ** **

Amortization expenses forthe three months ended April 30, 2009 were $0.1 million, which was thesame amount as the $0.1 million reported for the three months ended April 30,2008. Amortizationexpenses for the nine months ended April 30,2009 were $0.4 million, an increase of $0.1 million, or 32%, from the $0.3million reported for the nine months ended April 30, 2008. Amortizationexpenses as a percentage of revenues were 6% and5% for the three months ended April 30, 2009 and 2008, respectively.  Amortization expenses asa percentage of revenues

 

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were 6% and 5% for the nine months ended April 30,2009 and 2008, respectively.  Upon acquiring the iEmployee business in October 2007, Forgentrecorded several intangible assets, which are being amortized over theirappropriate useful lives.  Theamortization expenses during the three and nine months ended April 30,2009 and 2008 relate entirely to these acquired intangible assets.

 

### **OtherIncome and Expenses**

### ** **

Otherincome and expenses for the three months ended April 30, 2009 were $22.1thousand, a decrease of $66.5 thousand, or 75%, from the $88.6 thousandreported for the three months ended April 30, 2008. Other income andexpenses for the nine months ended April 30, 2009 were $0.4 million, adecrease of $0.2 million, or 27%, from the $0.6 million reported for the ninemonths ended April 30, 2008. Other income and expenses as a percentage of revenues were 1% and 3% forthe three months ended April 30, 2009 and 2008, respectively.  Other income and expenses as a percentage of revenues were 6% and 8% forthe nine months ended April 30, 2009 and 2008, respectively.

 

As a result of the sale of assets to Tandberg TelecomAS (“Tandberg”) in November 2006, $0.3 million was held in escrow for twoyears for indemnity claims.  No suchclaims were made by Tandberg during the two years to reduce the escrowamount.  In November 2008, Forgentreceived the funds from the escrow account in full.  These funds were recorded as gain on sale ofassets on the Company’s Consolidated Statement of Operations for the ninemonths ended April 30, 2009.

 

**Net Loss**

 

Forgentincurred a net loss of $1.4 million, or $0.04****per share, during the three months ended April 30, 2009,compared to a net loss of $1.6 million, or $0.05 per share, during the threemonths ended April 30, 2008. Forgent incurred a net loss of $4.5 million,or $0.14****per share, during thenine months ended April 30, 2009 compared to a net loss of $4.0 million,or $0.14 per share, during the nine months ended April 30, 2008. Net lossas a percentage of revenues were 58% and 58% for the three months ended April 30,2009 and 2008, respectively. Net loss as a percentage of revenues were 59% and54% for the nine months ended April 30, 2009 and 2008, respectively.

 

Forgent’s primary goal is to achieve profitability as soon as possible. During the 2009 fiscal year, the Company’smanagement and board of directors unanimously proposed privatization as apossible means to advancing toward this goal.  Although there wassubstantial stockholder support for the Company’s proposal, Forgent cancelledthe special stockholder meeting schedule for June 2, 2009 to vote on theprivatization due primarily to stockholders’ concerns over the loss ofliquidity.  As a result, management and the board of directors areproceeding with Forgent’s alternative long-term plan for the Company’s futuregrowth.  Uncertainties and challengesremain, especially during this macroeconomic environment downturn, and therecan be no assurance that the Company can successfully grow its revenues orachieve profitability during the remainder of fiscal year 2009.

 

**LIQUIDITY AND CAPITAL RESOURCES**

 
| ** **                                         | ** ** | **FOR THE NINE**   | ** ** |
|----------------------------------------------------|------------|--------------------|------------|
| ** **                                         | ** ** | **MONTHS ENDED**   | ** ** |
| ** **                                         | ** ** | **APRIL 30,**      | ** ** |
| ** **                                         | ** ** | **2009**           | ** ** | **2008** | ** ** |
| ** **                                         | ** ** | **(in thousands)** | ** ** |
| ** **                                         | ** ** | ** **         | ** ** | ** ** | ** ** |
| Working  capital                                   |       | $                  | 6,104      |   | $ | 11,449 |   |
| Cash,  cash equivalents and short-term investments |       | 11,109             |       | 16,122 |   |
| Cash  used in operating activities                 |       | (3,308             | )          | (11,926 | ) |
| Cash  used in investing activities                 |       | (530               | )          | (8,737 | ) |
| Cash  (used in) provided by financing activities   |       | (23                | )          | 13 |   |
|                                                    |            |                    |            |  |  |  |  |

 

Cash used in operating activities was $3.3million for the nine months ended April 30, 2009 due primarily to a $4.5million net loss, which was offset by $0.7 million in total non-cashdepreciation and amortization expenses and a $0.5 million decrease in accountsreceivable.  Cash used in operating activitieswas $11.9 million for the nine

 

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monthsended April 30, 2008 due primarily to a $4.0 million net loss and a $8.2million decrease in accounts payable. During the three months ended April 30,2009, Forgent’s average days sales outstanding was 33 days, a decrease from 39days for the three months ended April 30, 2008.  Due to some customers delaying payment as aresult of the current economic environment, Forgent diligently focused on itscollection efforts during the third fiscal quarter, which accounted for thedecrease in its average days sales outstanding. Management will continue to closely monitor all of its cash sources anduses as it manages its operations through the current recession.

 

Cash used in investingactivities was $0.5 million for the nine months ended April 30, 2009 dueto $0.3 million in net purchases of short-term investments and $0.3 million innet purchases of property and equipment. Cash used in investing activities was $8.7 million for the nine monthsended April 30, 2008 due primarily to $7.3 million paid in cash related tothe iEmployee acquisition and $1.3 million in net purchases of short-terminvestments.  Forgent manages itsinvestments portfolio in order to fulfill corporate liquidity requirements andmaximize investment returns while preserving the quality of the portfolio.  Approximately 43% of Forgent’s purchasedfixed assets during the nine months ended April 30, 2009 related toleasehold improvements for the Company’s subtenants.  The other purchases were spread across theCompany’s four facilities.  Forgent’s currentoperations are not capital intensive and management does not anticipate any significant capital expendituresduring the remainder of fiscal 2009.

 

The Company leases office space and equipment under non-cancelableoperating leases that expire at various dates through 2013. Certain leasesobligate Forgent to pay property taxes, maintenance and insurance and includeescalation clauses.  The totalamount of base rentals over the term of the Company’s leases is charged toexpense on a straight-line basis, with the amount of the rental expense inexcess of the lease payments recorded as a deferred rent liability.  Despitethe additional lease obligations acquired with the iEmployee operations,approximately $13.7 million, or 96% of the Company’s total operating leaseobligations, relate to its corporate office facility at Wild Basin in Austin,Texas.  As of April 30, 2009,Forgent had $5.0 million infuture minimum lease payments receivable under non-cancelable subleasearrangements.  Additionally, Forgent hada $0.2 million liability related to impairment charges for the economic valueof the lost sublease rental income related to its Austin property.  Forgent may periodically make othercommitments and thus become subject to other contractual obligations.

 

Cashused in financing activities was $23.0 thousand for the nine months ended April 30,2009. Cash provided by financing activities was $13.0 thousand for the ninemonths ended April 30, 2008.  Management believes it currently has sufficientcash and short-term investments on hand to fund its operations during the next twelvemonths and beyond without needing to obtain long-term financing.  Therefore, the Company does not anticipatethat it will be affected by any credit shortage in the current economicbusiness environment.  Forgent’s stockrepurchase program allows the Company to purchase up to three million shares ofthe Company’s common stock. No shares were repurchased during the nine monthsended April 30, 2009 and 2008.  Asof April 30, 2009, Forgent had repurchased 1,790,401 shares forapproximately $4.8 million and had the authority to repurchase approximately1.2 million additional shares. Management will periodically assess repurchasing additional shares infiscal year 2009, depending on the Company’s cash position, market conditionsand other factors.

 

As of April 30, 2009, Forgent’s principal source of liquidityconsisted of $11.1 million in cash, cash equivalents and short-terminvestments.  Management is focused ongrowing its software operations and thus plans to utilize its cash balances tofund its operations and may possibly repurchase outstanding shares.  Although Forgent is currently not activelyexploring prospects in acquiring a public or privately held technology businessor product line, the Company will consider a potential opportunity if the rightopportunity presents itself.

 

There is no assurance that the Company will beable to limit its cash consumption and preserve its cash balances, and it ispossible that the Company’s future business demands may lead to cashutilization at levels greater than recently experienced. Management believesthat the Company has sufficient capital and liquidity to fund and cultivate thegrowth of its current and future operations for the next 12 months andthereafter.  However, due touncertainties related to the timing and costs of these efforts, Forgent mayneed to raise additional capital in the future. Yet, there is no assurance that the Company will be able to raiseadditional capital if and when it is needed. Additionally, Forgent currently does not meet Nasdaq’s minimum$1.00 share bid price requirement.  TheCompany continues to strive for improved operations and will explore allopportunities to regain compliance. However, if Forgent is unable to comply with this requirement by November 3,2009, the Company’s common stock will be de-listed from the Nasdaq CapitalMarket Exchange.  If the Company’ssecurities are de-listed, Forgent’s ability to raise additional capital will besignificantly limited.

 

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#### **CRITICAL ACCOUNTING POLICIES**

#### ** **

TheCompany’s condensed consolidated financial statements have been prepared inaccordance with U.S. generally accepted accounting principles and include theaccounts of Forgent’s wholly owned subsidiaries. All significant intercompanytransactions and balances have been eliminated in the consolidation.Preparation of the condensed consolidated financial statements in conformitywith U.S. generally accepted accounting principles requires management to makeestimates and assumptions that affect the reported amounts of the assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period. These estimates are subjective in natureand involve judgments that affect the reported amounts of assets andliabilities, the disclosure of contingent assets and liabilities at fiscalquarter end and the reported amounts of revenues and expenses during the fiscalquarter.  The more significant estimates made by management include the valuationallowance for the gross deferred tax asset, contingency legal reserves, leaseimpairment, useful lives of fixed assets, the determination of the fair valueof its long-lived assets, and the fair value of assets acquired andliabilities assumed during the iEmployee acquisition. The Company bases its estimates on historical experience andon various other assumptions that are believed to be reasonable under the givencircumstances.  These estimates could be materially different under differentconditions and assumptions. Additionally, the actual amounts could differ from the estimates made.Management periodically evaluates estimates used in the preparation of thefinancial statements for continued reasonableness. Appropriate adjustments, ifany, to the estimates used are made prospectively based upon such periodicevaluation.

 

Managementbelieves the following represent Forgent’s critical accounting policies:

 

**RevenueRecognition**

 

TheCompany recognizes revenue when persuasive evidence of an arrangement exists,delivery has occurred, the fee is fixed or determinable and collectibility isprobable.   The Company recognizessoftware license revenue in accordance with Statement of Position (“SOP”) 97-2,*“Software Revenue Recognition,”*asamended by SOP 98-4, “*Deferral of the EffectiveDate of a Provision of SOP 97-2,”* and SOP 98-9, “*Modification of SOP 97-2 With Respect to CertainTransactions,”* Securities and Exchange Commission StaffAccounting Bulletin 104, *“RevenueRecognition”*and Emerging Issues Task Force Issue No. 00-21, *“Revenue Arrangements with Multiple Deliverables.”*The Company recognizes software subscription revenue in accordance with EITFIssue No. 00-3, *“Application of AICPAStatement of Position 97-2 to Arrangements That Include the Right to UseSoftware Stored on Another Entity’s Hardware”*and EITF Issue No. 00-21.

 

Revenueconsists of software license, software subscription and service fees.  Revenue from the software element is earnedthrough the licensing or right to use the Company’s software and from the saleof specific software products.  Servicefee income is earned through the sale of maintenance and technical support,training and installation. Revenuefrom the sale of hardware devices is recognized upon shipment of thehardware.  Forgent sells multipleelements within a single sale.  Forsoftware license arrangements, the Company allocates the total fee to thevarious elements based on the relative fair values of the elements specific tothe Company.  For software subscriptionarrangements, the Company recognizes the total contract value ratably over thecontract term, beginning when the customer is able to utilize the software.

 

The Company determinesthe fair value of each element in the arrangement based on vendor-specificobjective evidence (“VSOE”) of fair value. VSOE of fair value for the software, maintenance, and training andinstallation services are based on the prices charged for the software,maintenance and services when sold separately. Revenue allocated to maintenance and technical support is recognizedratably over the maintenance term (typically one year).  Revenue allocated to installation andtraining is recognized upon completion of these services.  The Company’s training and installationservices are not essential to the functionality of the Company’s products assuch services can be provided by a third party or the customers themselves.

 

Forinstances in which VSOE cannot be determined for undelivered elements, andthese undelivered elements do not provide significant customization ormodification of its software product, Forgent recognizes the entire contractamount ratably over the period during which the services are expected to beperformed.

 

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TheCompany does not recognize revenue for agreements with rights of return,refundable fees, cancellation rights or acceptance clauses until such rights ofreturn, refund or cancellation have expired or acceptance has occurred.  The Company’s arrangements with resellers donot allow for any rights of return.

 

Deferredrevenue includes amounts received from customers in excess of revenuerecognized, and is comprised of deferred maintenance, service and otherrevenue.  Deferred revenues arerecognized in the Condensed Consolidated Statements of Operations when theservice is completed and over the terms of the arrangements, primarily rangingfrom one to three years.

 

## **Impairmentof Goodwill, Intangible Assets and Long-Lived Assets**

## ** **

Goodwilland other intangible assets with indefinite lives are not requiredto be amortized under Financial Accounting Standard Board (“FASB”)Statement No. 142, *“Goodwill and OtherIntangible Assets,”*and accordingly, the Company reviews itsgoodwill for possible impairment on an annual basis, or whenever specificevents warrant. Events that may create an impairment review include, but arenot limited to: significant and sustained decline in the Company’s stock priceor market capitalization, significant underperformance of operating units andsignificant changes in market conditions and trends. Forgent uses a two-stepprocess and a discounted cash flow model to evaluate itsassets for impairment. If the carrying amount of the goodwill or assetexceeds its implied fair value, an impairment loss is recognized in an amountequal to the excess during that fiscal period. Intangible assets that are not deemed to have indefinite lives areamortized over their useful lives and are tested for impairment in accordancewith FASB Statement No. 144, *“Accountingfor the Impairment or Disposal of Long-Lived Assets.”*

 

Inaccordance with Statement No. 144, Forgent reviews and evaluates itslong-lived assets for impairment whenever events or changes in circumstancesindicate that their net book value may not be recoverable.  When suchfactors and circumstances exist, including those noted above, the Companycompares the assets’ carrying amounts against the estimated undiscounted cashflows to be generated by those assets over their estimated useful lives. If the carrying amounts are greater than the undiscounted cash flows, thefair values of those assets are estimated by discounting the projected cashflows.  Any excess of the carryingamounts over the fair values are recorded as impairments in that fiscal period.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

The Company is a smallerreporting company as defined by Rule 12b-2 under the Exchange Act and isnot required to provide the information required under this item.

 

**ITEM 4. CONTROLS AND PROCEDURES**

 

The Company’s management is responsible forestablishing and maintaining adequate internal control over financial reportingfor the Company.  The Company maintainsdisclosure controls and procedures that are designed to ensure that informationrequired to be disclosed in the reports it files under the Securities andExchange Act of 1934, as amended, is recorded, processed, summarized andreported within the time periods specified in the rules and forms of theSecurities and Exchange Commission.  Suchcontrols include those designed to ensure that information for disclosure iscommunicated to management, including the Chairman of the Board and the ChiefExecutive Officer (“CEO”), as appropriate to allow timely decisions regardingrequired disclosure.

 

The CEO and Chief Financial Officer, with theparticipation of management, have evaluated the effectiveness of the Company’sdisclosure controls and procedures as of April 30, 2009.  Based on their evaluation, they haveconcluded, to the best of their knowledge and belief, that the disclosurecontrols and procedures are effective. No changes were made in the Company’s internal controls over financialreporting during the quarter ended April 30, 2009, that have materiallyaffected, or are reasonably likely to materially affect, the Company’s internalcontrols over financial reporting.  Inmaking this assessment, management used the criteria set forth in *Internal Control-Integrated Framework* issued by theCommittee of Sponsoring Organizations of the Treadway Commission.

 

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**PART II — OTHER INFORMATION**

 

**ITEM 1. LEGAL PROCEEDINGS**

 

Forgent is the defendant or plaintiff in various actions that arose inthe normal course of business. With the exception of theproceedings described below, none of the pending legal proceedings to which theCompany is a party are material to the Company.

 

**Litigation with Jenkens & Gilchrist, P.C.**

 

On July 16, 2007, Jenkens &Gilchrist, P.C. (“Jenkens”), Forgent’s former legal counsel, filed a complaintagainst Forgent and Compressions Labs, Inc., in the District Court ofDallas County, Texas.  In its complaint,Jenkens alleges a breach of contract and is seeking a declaratoryjudgment.  Forgent disputes Jenkens’claims and is seeking relief through the court system.

 

After Forgent terminated Jenkens, the Companyentered into a Resolution Agreement with Jenkens in December 2004.  Under the Resolution Agreement, the Companybelieves Jenkens is entitled to no more than $1.4 million pursuant to theResolution Agreement as a result of the amounts received by Forgent in the pastlitigation.  Jenkens interprets theResolution Agreement on broader terms and believes it is entitled to $3.4million, including attorneys’ fees and interest.

 

On March 3, 2008, Forgent and Jenkensappeared before the Court regarding a hearing on a motion for summary judgmentfiled by Jenkens.  On May 20, 2008,the Court granted Jenkens’ motion and ordered Forgent to pay Jenkens $2.8million for past recoveries and other amounts including attorneys’ fees andinterest.  Forgent asked the Court toreconsider its order and, on September 3, 2008, the Court reconsidered itsprior ruling and denied Jenkens’ motion and held that language from thecontract in dispute was ambiguous and the issue would be submitted to a jury.

 

On May 20, 2009, Jenkens submitted a secondmotion for summary judgment.  Forgentresponded to this motion on June 3, 2009 and both parties appeared beforethe Court regarding this motion on June 10, 2009.  The Court has not ruled on Jenkens’ secondmotion.

 

The trial datefor this litigation has been rescheduled to commence on July 13,2009.  Managementcurrently cannot predict how long it ultimately will take to resolve theJenkens lawsuit.  Until the Jenkenslitigation is finalized, the related amounts charged by Jenkens pursuant to theResolution Agreement may be adjusted in a future period and could have amaterial impact to the Company’s consolidated financial statements.

 

**Litigation with Wild Basin**

 

On September 6,2007, Forgent filed a petition against Wild Basin One & Two, Ltd. (“WildBasin”) in the District Court of Travis County, Texas.  The petition claimed Wild Basin was in breachof contract relating to Forgent’s lease agreement by unreasonably withholdingand delaying its consent to Forgent’s lease assignment to a third party.  Forgent sought to recover all damages as aresult of the delay in closing its pending assignment and amounts notdistributed in the past, among other damages.

 

The trial for thislitigation commenced on September 22, 2008.  Prior to the conclusion of the trial, Forgentand Wild Basin reached a settlement agreement, effective September 25,2008.  This settlement agreementrequires, among other terms, that Wild Basin consent to Forgent’s leaseassignment.  In return, Forgent paid WildBasin $75 thousand in November 2008. Both parties agreed to mutually release claims against each other.

 

AfterForgent and Wild Basin participated in mediation on November 11, 2008 tofinalize the terms of the settlement agreement, Wild Basin consented to Forgent’slease assignment and the documents were submitted to Wild Basin’s lender forfinal approval.  Although the lendergranted its final approval on February 11, 2009, the third party iscurrently having difficulties obtaining the required financing due to thetightened capital markets.  Forgentcontinues to negotiate with this third party and is working with otherinterested third parties.  However, thereis no assurance that Forgent will be successful in assigning its leaseagreement.

 

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##### **ITEM 1A. RISK FACTORS**

##### ** **

The Company is a smaller reporting company as defined by Rule 12b-2of the Exchange Act and is not required to provide the information requiredunder this item.

 

**ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES ANDUSE OF PROCEEDS**

 

None

 

**ITEM 3. DEFAULTS UPON SENIOR SECURITIES**

 

None

 

**ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

On June 1, 2009, theCompany announced that its Board of Directors unanimously voted to cancel theSpecial Meeting of Stockholders scheduled for June 2, 2009.  Themeeting was originally called for the purpose of allowing the stockholders tovote on two separate proposals to amend the Company’s Restated Certificate ofIncorporation to affect a reverse/forward stock split (the “Reverse/ForwardStock Split”) of the Company’s common stock, which would allow Forgent tobecome a privately-held company.  While there was substantial stockholdersupport for the Reverse/Forward Stock Split proposals, the Board of Directorsdetermined that, based on the total number of stockholder proxies receivedprior to the announcement, the proposals would not receive sufficient votes topass due to concerns about the loss of liquidity.  Therefore, the Board ofDirectors decided to cancel the meeting in order to save the associatedexpenses.  Since the stockholders prefer Forgent to remain as a publiclytraded company, management is proceeding with its alternative long-term planfor the Company’s future growth.  Forgentwill hold its annual stockholders meeting on July 30, 2009

 

**ITEM 5. OTHER INFORMATION**

 

None

 

### **ITEM6. EXHIBITS**

### ** **

Exhibits:

 
| 2.2    | Agreement  and Plan of Merger, dated as of September 11, 2007 by and among Forgent  Networks, Inc., Cheetah Acquisition Company, Inc. and iSarla Inc.  (incorporated by reference to Exhibit 2.2 to the Company’s quarterly  report on Form 10-Q for the three months ended October 31, 2007).                                                                                              |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.1    | Restated  Certificate of Incorporation (incorporated by reference to Exhibit 3.1  to the Company’s quarterly report on Form 10-Q for the three months  ended October 31, 2004).                                                                                                                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.2    | Restated  Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s  quarterly report on Form 10-Q for the three months ended  October 31, 2004).                                                                                                                                                                                                                                                  |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.1    | Specimen  Certificate for the Common Stock (incorporated by reference to  Exhibit 4.1 to the Company’s Registration Statement on Form S-1,  File No. 33-45876, as amended).                                                                                                                                                                                                                                |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.2    | Rights Agreement, dated  as of December 19, 2005, between Forgent Networks, Inc. and  American Stock Transfer & Trust Company, which includes the form of  Series A Preferred Stock, $0.01 par value, the form of Rights  Certificate, and the Summary of Rights (incorporated by reference  to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated  December 19, 2005). |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 31.1*  | Certification  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 31.2*  | Certification  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                 |

 

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| 32.1*  | Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                |
| 32.2*  | Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002. |

 

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* Filed herewith

 

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#### **SIGNATURES**

#### ** **

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.

 
|                                  | FORGENT  NETWORKS, INC. |
|---------------------------------------|-------------------------|
|                                  |                    |
|                                  |                    |
|  Date:   June 15, 2009 | By:                     | /s/  RICHARD N. SNYDER |
|                                  |                    | Richard  N. Snyder |
|                                  |                    | Chief  Executive Officer |
|                                  |                    |   |
| Date:  June 15, 2009        | By:                     | /s/  JAY C. PETERSON |
|                                  |                    | Jay  C. Peterson |
|                                  |                    | Chief  Financial Officer |

 

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**INDEX TOEXHIBITS**

 
| **EXHIBIT** | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **NUMBER**  | ** ** | **DESCRIPTION**                                                                                                                                                                                                                                                                                                                                                                                                                |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 2.2         |       | Agreement  and Plan of Merger, dated as of September 11, 2007 by and among Forgent  Networks, Inc., Cheetah Acquisition Company, Inc. and iSarla Inc.  (incorporated by reference to Exhibit 2.2 to the Company’s quarterly  report on Form 10-Q for the three months ended October 31, 2007).                                                                                              |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.1         |       | Restated  Certificate of Incorporation (incorporated by reference to Exhibit 3.1  to the Company’s quarterly report on Form 10-Q for the three months  ended October 31, 2004).                                                                                                                                                                                                                            |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 3.2         |       | Restated  Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s  quarterly report on Form 10-Q for the three months ended  October 31, 2004).                                                                                                                                                                                                                                                  |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.1         |       | Specimen  Certificate for the Common Stock (incorporated by reference to  Exhibit 4.1 to the Company’s Registration Statement on Form S-1,  File No. 33-45876, as amended).                                                                                                                                                                                                                                |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 4.2         |       | Rights Agreement, dated  as of December 19, 2005, between Forgent Networks, Inc. and  American Stock Transfer & Trust Company, which includes the form of  Series A Preferred Stock, $0.01 par value, the form of Rights  Certificate, and the Summary of Rights (incorporated by reference  to Exhibit 4.1 to the Company’s Current Report on Form 8-K dated  December 19, 2005). |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 31.1        |       | Certification  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                  |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 31.2        |       | Certification  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                  |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 32.1        |       | Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                             |
|        |       |                                                                                                                                                                                                                                                                                                                                                                                                                           |
| 32.2        |       | Certification  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to  Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                             |

 

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