UNITED
STATES




SECURITIES
AND EXCHANGE COMMISSION




Washington,
D.C. 20549









FORM
10-Q


(Mark
One)


S       Quarterly
Report Pursuant to Section 13 or 15(d) of


the
Securities Exchange Act of 1934





For the
Quarterly Period Ended December 31, 2008


or


£       Transition
Report Pursuant to Section 13 or 15(d) of


the
Securities Exchange Act of 1934





For the
Transition Period from ____ to  ____





Commission
File No. 0-13150


_____________





CONCURRENT
COMPUTER CORPORATION


(Exact
name of registrant as specified in its charter)





Delaware
              04-2735766(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)





4375
River Green Parkway, Suite 100, Duluth, GA  30096


(Address
of principal executive offices) (Zip Code)





Telephone:
(678) 258-4000


(Registrant’s
telephone number, including area code)





Indicate
by check mark whether the Registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes  S      No£





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





Large accelerated
      filer ̈
              
              Accelerated
      filerxNon-accelerated filer ̈(Do not check if a smaller
      reporting company)
              
              Smaller reporting
      companyx





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).





Yes £    No  S





Number of
shares of the Registrant's Common Stock, par value $0.01 per share, outstanding
as of January 23, 2009 was 8,525,000.









ConcurrentComputer Corporation


Form 10-Q


For the Three and Six Months Ended
December 31, 2008





Table of Contents





PagePart I – Financial
    InformationItem 1.
                      
                      Condensed Consolidated Financial Statements
                      
                      2Condensed Consolidated Balance Sheets
      (Unaudited)
                      
                      2Condensed Consolidated Statements of Operations
      (Unaudited)
                      
                      3Condensed Consolidated Statements of Cash Flows
      (Unaudited)
                      
                      4Notes to Condensed Consolidated Financial Statements
      (Unaudited)
                      
                      5Item 2.
                      
                      Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
                      
                      13Item 3.
                      
                      Quantitative and Qualitative Disclosures About Market
      Risk
                      
                      23Item 4.
                      
                      Controls and Procedures
                      
                      23Part II – Other InformationItem 1.
                      
                      Legal Proceedings
                      
                      23Item
      1A.
                      
                      Risk Factors
                      
                      23Item 2.
                      
                      Unregistered Sales of Equity Securities and Use of
      Proceeds
                      
                      24Item 4.
                      
                      Submission of Matters to a Vote of Security
      Holders
                      
                      24Item 6.
                      
                      Exhibits
                      
                      24EX-31.1
      SECTION 302 CERTIFICATION OF CEOEX-31.2
      SECTION 302 CERTIFICATION OF CFOEX-32.1
      SECTION 906 CERTIFICATION OF CEOEX-32.2
      SECTION 906 CERTIFICATION OF CFO


1
 Table of Contents




Part
      I
            Financial
      Information





Item1.
            Condensed
      Consolidated Financial Statements





ConcurrentComputer Corporation


Condensed
Consolidated Balance Sheets


(Dollars
in Thousands)





December 31,
                
                
                June 30,2008
                
                
                2008(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                27,668
                
                
                $
                27,359Accounts
      receivable, less allowance for doubtful accounts of $87 at December 31,
      2008 and $90 at June 30, 2008
                
                
                12,063
                
                
                
                14,422Inventories
      – net
                
                
                3,222
                
                
                
                5,094Prepaid
      expenses and other current assets
                
                
                1,662
                
                
                
                1,360Total
      current assets
                
                
                44,615
                
                
                
                48,235Property,
      plant and equipment - net
                
                
                3,952
                
                
                
                3,867Intangible
      - purchased technology, net
                
                
                3,624
                
                
                
                4,081Intangible
      - customer relationships and trademark, net
                
                
                2,444
                
                
                
                2,530Goodwill
                
                
                15,990
                
                
                
                15,990Other
      long-term assets - net
                
                
                824
                
                
                
                836Total
      assets
                
                $
                71,449
                
                
                $
                75,539LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                
                $
                9,890
                
                
                $
                13,984Deferred
      revenue
                
                
                7,689
                
                
                
                8,570Total
      current liabilities
                
                
                17,579
                
                
                
                22,554Long-term
      liabilities:Deferred
      revenue
                
                
                1,034
                
                
                
                962Revolving
      bank line of credit
                
                
                949
                
                
                
                949Pension
      liability
                
                
                1,700
                
                
                
                1,878Other
                
                
                1,874
                
                
                
                1,768Total
      liabilities
                
                
                23,136
                
                
                
                28,111Commitments
      and contingencies (Note 13)Stockholders'
      equity:Shares
      of common stock, par value $.01; 100,000,000 authorized; 8,314,016 and
      8,305,588 issued and outstanding at December 31, 2008 and June 30, 2008,
      respectively
                
                
                83
                
                
                
                83Capital
      in excess of par value
                
                
                204,821
                
                
                
                204,574Accumulated
      deficit
                
                
                (157,159
                )
                
                
                (157,782
                )Treasury
      stock, at cost; 37,788 shares and 0 at December 31, 2008 and June 30,
      2008, respectively
                
                
                (255
                )
                
                
                -Accumulated
      other comprehensive income
                
                
                823
                
                
                
                553Total
      stockholders' equity
                
                
                48,313
                
                
                
                47,428Total
      liabilities and stockholders' equity
                
                $
                71,449
                
                
                $
                75,539





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




2
 Table of Contents




ConcurrentComputer Corporation


Condensed
Consolidated Statements of Operations (Unaudited)


(In
Thousands, Except Per Share Amounts)





Three
      Months Ended
                
                
                Six
      Months EndedDecember 31,
                
                
                December 31,2008
                
                
                2007
                
                
                2008
                
                
                2007Revenues:Product
                
                $
                11,066
                
                
                $
                9,964
                
                
                $
                23,115
                
                
                $
                19,732Service
                
                
                7,054
                
                
                
                7,614
                
                
                
                13,340
                
                
                
                14,101Total
      revenues
                
                
                18,120
                
                
                
                17,578
                
                
                
                36,455
                
                
                
                33,833Cost
      of sales:Product
                
                
                5,106
                
                
                
                5,309
                
                
                
                10,741
                
                
                
                10,362Service
                
                
                2,394
                
                
                
                2,810
                
                
                
                4,812
                
                
                
                5,457Total
      cost of sales
                
                
                7,500
                
                
                
                8,119
                
                
                
                15,553
                
                
                
                15,819Gross
      margin
                
                
                10,620
                
                
                
                9,459
                
                
                
                20,902
                
                
                
                18,014Operating
      expenses:Sales
      and marketing
                
                
                4,238
                
                
                
                3,721
                
                
                
                7,806
                
                
                
                7,514Research
      and development
                
                
                3,307
                
                
                
                4,019
                
                
                
                7,146
                
                
                
                8,231General
      and administrative
                
                
                2,180
                
                
                
                2,566
                
                
                
                4,503
                
                
                
                4,913Total
      operating expenses
                
                
                9,725
                
                
                
                10,306
                
                
                
                19,455
                
                
                
                20,658Operating
      income (loss)
                
                
                895
                
                
                
                (847
                )
                
                
                1,447
                
                
                
                (2,644
                )Gain
      on arbitration settlement, net
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,900Recovery
      of minority investment, net
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,415Interest
      income
                
                
                46
                
                
                
                246
                
                
                
                156
                
                
                
                472Interest
      expense
                
                
                (34
                )
                
                
                (36
                )
                
                
                (64
                )
                
                
                (72
                )Other
      income (expense)
                
                
                91
                
                
                
                (11
                )
                
                
                (198
                )
                
                
                79Income
      (loss) before income taxes
                
                
                998
                
                
                
                (648
                )
                
                
                1,341
                
                
                
                1,150Provision
      for income taxes
                
                
                468
                
                
                
                121
                
                
                
                718
                
                
                
                175Net
      income (loss)
                
                $
                530
                
                
                $
                (769
                )
                
                $
                623
                
                
                $
                975Net
      income (loss) per shareBasic
                
                $
                0.06
                
                
                $
                (0.09
                )
                
                $
                0.08
                
                
                $
                0.12Diluted
                
                $
                0.06
                
                
                $
                (0.09
                )
                
                $
                0.07
                
                
                $
                0.12Weighted
      average shares outstanding - basic
                
                
                8,274
                
                
                
                8,303
                
                
                
                8,283
                
                
                
                8,298Weighted
      average shares outstanding - diluted
                
                
                8,302
                
                
                
                8,303
                
                
                
                8,316
                
                
                
                8,311




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


3
 Table of Contents


ConcurrentComputer Corporation


Condensed
Consolidated Statements of Cash Flows (Unaudited)


(Dollars
in Thousands)





Six
      Months EndedDecember
      31,2008
                
                
                2007OPERATING
      ACTIVITIESNet
      income
                
                $
                623
                
                
                $
                975Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
                
                
                1,564
                
                
                
                2,154Share-based
      compensation
                
                
                247
                
                
                
                500Recovery
      of minority investment, net
                
                
                -
                
                
                
                (1,415
                )Other
      non-cash expenses
                
                
                284
                
                
                
                (38
                )Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                2,359
                
                
                
                6,012Inventories
                
                
                1,799
                
                
                
                584Prepaid
      expenses and other current assets
                
                
                (324
                )
                
                
                (67
                )Other
      long-term assets
                
                
                29
                
                
                
                22Accounts
      payable and accrued expenses
                
                
                (4,094
                )
                
                
                (5,223
                )Deferred
      revenue
                
                
                (809
                )
                
                
                (1,724
                )Other
      long-term liabilities
                
                
                119
                
                
                
                426Total
      adjustments to net income
                
                
                1,174
                
                
                
                1,231Net
      cash provided by operating activities
                
                
                1,797
                
                
                
                2,206INVESTING
      ACTIVITIESCapital
      expenditures
                
                
                (1,016
                )
                
                
                (842
                )Recovery
      of minority investment, net
                
                
                -
                
                
                
                1,415Net
      cash (used in) provided by investing activities
                
                
                (1,016
                )
                
                
                573FINANCING
      ACTIVITIESRepayment
      of revolving bank line of credit
                
                
                -
                
                
                
                (391
                )Purchase
      of treasury stock
                
                
                (255
                )
                
                
                (10
                )Net
      cash used in financing activities
                
                
                (255
                )
                
                
                (401
                )Effect
      of exchange rates on cash and cash equivalents
                
                
                (217
                )
                
                
                264Increase
      in cash and cash equivalents
                
                
                309
                
                
                
                2,642Cash
      and cash equivalents at beginning of period
                
                
                27,359
                
                
                
                20,416Cash
      and cash equivalents at end of period
                
                $
                27,668
                
                
                $
                23,058Cash
      paid during the period for:Interest
                
                $
                31
                
                
                $
                34Income
      taxes (net of refunds)
                
                $
                408
                
                
                $
                128





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


4
 Table of Contents




ConcurrentComputer Corporation


Notes
to Condensed Consolidated Financial Statements




1.
            Overview
      of Business and Basis of
Presentation





Concurrent
is a provider of computing technologies and software applications and related
services for the video-on-demand (VOD) market and the high-performance real-time
market.  Concurrent’s business is comprised of two segments for
financial reporting purposes: products and services.  We provide
products and services for each of these markets.





Concurrent’s
on-demand products consist of hardware and/or software as well as integration
services, sold primarily to broadband companies that provide interactive,
digital services for the delivery of video on-demand.  Concurrent’s
real-time products consist of real-time operating systems and software
development tools combined, in most cases, with off-the-shelf hardware and
services sold to a wide variety of companies seeking high-performance, real-time
computer solutions for use in various applications requiring low-latency
response and determinism such as simulation, image generation,
hardware-in-the-loop testing and data acquisition.





Concurrent
provides sales and support from offices and subsidiaries throughout North
America, Europe, and Asia.





The
condensed consolidated interim financial statements of Concurrent are unaudited
and reflect all adjustments (consisting of only normal recurring adjustments)
necessary for a fair statement of Concurrent’s financial position, results of
operations and cash flows at the dates and for the periods
indicated.  These financial statements should be read in conjunction
with Concurrent’s Annual Report on Form 10-K for the year ended June 30,
2008.  There have been no changes to Concurrent’s Significant
Accounting Policies as disclosed in Note 2 of the consolidated financial
statements included in Concurrent’s Annual Report on Form 10-K for the year
ended June 30, 2008.  The results reported in these condensed
consolidated financial statements should not be regarded as necessarily
indicative of results that may be expected for the entire year.





Use of Estimates





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.





Income
Taxes





As of
June 30, 2008, Concurrent had U.S. Federal Tax net operating loss carryforwards
of approximately $161.0 million for income tax purposes, of which $13.6 million
expire in fiscal year 2009, and the remainder expire at various dates through
2028.  The benefits associated with these losses and tax credits may
be limited if an “ownership change” has occurred within the meaning of Section
382(g) of the Internal Revenue Code.  Concurrent is not certain that
an ownership change has occurred as of December 31, 2008, but will be conducting
an evaluation to make a final determination on this matter.  If
Concurrent determines that an ownership change has occurred, this event could
subject Concurrent’s net operating loss carryforwards to an annual limitation,
which could restrict its ability to use them to offset taxable income in
periods following the ownership change.





Recently
Issued Accounting Pronouncements





Effective
July 1, 2008, Concurrent adopted Financial Accounting Standards Board (“FASB”)
Statement of Financial Accounting Standards (“SFAS”) No. 157, Fair Value Measurements
(“SFAS 157”), and this adoption did not have a material impact on Concurrent’s
financial statements.  On October 10, 2008, the FASB issued FASB Staff
Position (FSP) FAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active(“FSP
157-3”).  The FSP clarifies the application of SFAS No. 157 in a
market that is not active and provides an example to illustrate key
considerations in determining the fair value of a financial asset when the
market for that financial asset is not active.  The FSP is effective
upon issuance, including prior periods for which financial statements have not
been issued.  Revisions resulting from a change in the valuation
technique or its application should be accounted for as a change in accounting
estimate following the guidance in SFAS No. 154, Accounting Changes and Error
Corrections.  However, the disclosure provisions in Statement
154 for a change in accounting estimate are not required for revisions resulting
from a change in valuation technique or its application.  The adoption
of SFAS 157 and FSP 157-3 did not have a material impact on Concurrent’s
financial statements.


5
 Table of Contents


Concurrent
Computer Corporation


Notes
to the Condensed Consolidated Financial Statements (Continued)








2.
            Basic
      and Diluted Net Income per Share





On July
8, 2008, Concurrent’s shareholders approved a one-for-ten reverse stock split
(the “Reverse Stock Split”) and the reverse stock split became effective on July
9, 2008.  Pursuant to the Reverse Stock Split, every ten shares of
Concurrent common stock have been combined into one share of common
stock.  The number of shares subject to outstanding options and
warrants have been reduced in the same ratio as the reduction in the outstanding
shares, and the per share exercise price of those options and warrants have been
increased in direct proportion to the Reverse Stock Split
ratio.   Earnings per share computations, balance sheets, and
footnote presentation of shares and share equivalents for the three and six
months ended December 31, 2007 have been restated to reflect the Reverse Stock
Split.  The Reverse Stock Split had no impact on the authorized number
of shares.





Basic net
income per share is computed in accordance with SFAS No. 128, Earnings Per Share, by
dividing net income by the weighted average number of common shares outstanding
during each period.  Diluted net income per share is computed by
dividing net income by the weighted average number of shares including dilutive
common share equivalents.  Under the treasury stock method,
incremental shares representing the number of additional common shares that
would have been outstanding if the dilutive potential common shares had been
issued are included in the computation.  Diluted earnings per common
share assumes exercise of outstanding stock options and vesting of restricted
stock when the effects of such assumptions are dilutive.  Common share
equivalents of 1,028,000 and 1,046,000 for the three months ended December 31,
2008 and 2007, respectively, were excluded from the calculation as their effect
was antidilutive.  Common share equivalents of 1,034,000 and 1,003,000
for the six months ended December 31, 2008 and 2007, respectively, were excluded
from the calculation as their effect was antidilutive The following table
presents a reconciliation of the numerators and denominators of basic and
diluted net income per share for the periods indicated (dollars and share data
in thousands, except per-share amounts):





Three
      Months Ended
                  December 31,
                
                
                Six
      Months Ended
                  December 31,2008
                
                
                2007
                
                
                2008
                
                
                2007Basic
      and diluted earnings per share (EPS) calculation:Net
      income (loss)
                
                $
                530
                
                
                $
                (769
                )
                
                $
                623
                
                
                $
                975Basic
      weighted average number of shares outstanding
                
                
                8,274
                
                
                
                8,303
                
                
                
                8,283
                
                
                
                8,298Effect
      of dilutive securities:Restricted
      stock
                
                
                28
                
                
                
                -
                
                
                
                33
                
                
                
                13Employee
      stock options
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Shares
      issued upon assumed exercise of warrants
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Diluted
      weighted average number of shares outstanding
                
                
                8,302
                
                
                
                8,303
                
                
                
                8,316
                
                
                
                8,311Basic
      EPS
                
                $
                0.06
                
                
                $
                (0.09
                )
                
                $
                0.08
                
                
                $
                0.12Diluted
      EPS
                
                $
                0.06
                
                
                $
                (0.09
                )
                
                $
                0.07
                
                
                $
                0.12





3.
            Share-Based
      Compensation





At
December 31, 2008, Concurrent had share-based employee compensation plans which
are described in Note 12 of the consolidated financial statements included in
Concurrent’s Annual Report on Form 10-K for the year ended June 30,
2008.  Option awards are granted with an exercise price equal to the
market price of Concurrent’s stock at the date of grant.  Concurrent
recognizes stock compensation expense over the requisite service period of the
individual grantees, which generally equals the vesting period.  All of
Concurrent’s stock compensation is accounted for as equity
instruments.  During the three months ended December 31, 2008,
Concurrent issued 211,280 shares of restricted stock to its employees and Board
of Directors.  127,950 of these restricted shares were issued to
employees and the Board of Directors and vest over a 4 year
period.  Additionally, executive management and the Board of Directors
were issued 83,330 of these restricted shares which are released only when
certain performance criteria are achieved over time.  Performance
criteria for the performance based restricted shares include achieving certain
financial results or share prices.  As of December 31, 2008,
Concurrent had approximately 684,000 stock options and approximately 249,000
restricted shares outstanding.


6
 Table of Contents


Concurrent
Computer Corporation


Notes
to the Condensed Consolidated Financial Statements (Continued)








Concurrent
uses the Black-Scholes valuation model to estimate the fair value of each option
award on the date of grant.  Concurrent granted 20,000 stock options
during the six months ended December 31, 2008.





Concurrent
recorded share-based compensation related to issuances of stock options and
restricted stock to employees and directors, as follows (amounts in thousands of
dollars):





Three
      Months Ended
                  December 31,
                
                
                Six
      Months Ended
                  December 31,2008
                
                
                2007
                
                
                2008
                
                
                2007Share-based
      compensation expense included in theStatement
      of Operations:Cost
      of sales
                
                $
                11
                
                
                $
                14
                
                
                $
                12
                
                
                $
                12Sales
      and marketing
                
                
                40
                
                
                
                60
                
                
                
                51
                
                
                
                92Research
      and development
                
                
                45
                
                
                
                42
                
                
                
                66
                
                
                
                56General
      and administrative
                
                
                69
                
                
                
                222
                
                
                
                118
                
                
                
                340Total
                
                
                165
                
                
                
                338
                
                
                
                247
                
                
                
                500Tax
      benefit
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Share-based
      compensation expense, net of taxes
                
                $
                165
                
                
                $
                338
                
                
                $
                247
                
                
                $
                500





4.
            Inventories





Inventories
are stated at the lower of cost or market, with cost being determined by using
the first-in, first-out method.  Concurrent establishes excess and
obsolete inventory reserves based upon historical and anticipated
usage.  The components of inventories are as follows (in
thousands):





December 31,
                  
                  
                  June 30,2008
                  
                  
                  2008Raw
      materials, net
                  
                  $
                  2,203
                  
                  
                  $
                  3,849Work-in-process
                  
                  
                  587
                  
                  
                  
                  609Finished
      goods
                  
                  
                  432
                  
                  
                  
                  636$
                  3,222
                  
                  
                  $
                  5,094





At
December 31, 2008 and June 30, 2008, some portion of Concurrent’s inventory was
in excess of the current requirements based upon the planned level of sales for
future years.  Accordingly, Concurrent has reduced its gross raw
materials inventory by $1,304,000 at December 31, 2008 and $1,234,000 at June
30, 2008, to its estimated net realizable value.





5.
            Goodwill
      and Other Intangible Assets





Goodwill
was $15,990,000 as of both December 31, 2008 and June 30,
2008.  Concurrent does not measure assets on a segment basis, and
therefore, does not allocate goodwill on a segment basis.  Concurrent
operates in two segments, as defined by SFAS No. 131, Disclosure about Segments of an
Enterprise and Related Information.  Concurrent’s two segments
are products and services, which are also considered Reporting Units for
assessment of goodwill impairment under SFAS No. 142, Goodwill and Other Intangible Assets(“SFAS No. 142”).  Since
Concurrent does not measure assets on a segment basis, it allocates operating
expenses on a pro-rata basis between products and services to test impairment of
goodwill and allocates goodwill between the two reporting units in the same
manner.  Concurrent performs a goodwill impairment review annually on
July 1, or more frequently if events or circumstances indicate that the asset
might be impaired.  For purposes of goodwill impairment testing, Concurrent
compares the fair value of each reporting unit with its carrying amount,
including allocated goodwill.  If the carrying amount of the reporting unit
exceeds its fair value, determined based on expected discounted future cash
flows, the goodwill allocated to that reporting unit may not be
recoverable.  An impairment charge is recorded if the carrying amount of
allocated goodwill exceeds its implied fair value. As of December 31, 2008, the
price per share of Concurrent’s common stock declined by 47% from the closing
price per share on July 1, 2008.  Based on Concurrent’s recent trend
of revenue growth and improved profitability, there were no events or
circumstances during the quarter ended December 31, 2008 that would indicate
potential goodwill impairment so Concurrent did not perform an interim
impairment analysis.  Concurrent believes that this decline in market
capitalization is unrelated to its current operations andreflects
the overall macro-economic downturn as well as the relative volatility of the
capital markets.  However, considering that this recent economic downturn
may persist to the point that Concurrent’s business and future cash flows may be
impacted, Concurrent is monitoring the need for an interim impairment analysis
of goodwill and other intangible assets during its third quarter ended March 31,
2009.  Concurrent will continue to monitor its market capitalization and
the impact of the current economic downturn on the business to determine if
there is an impairment of goodwill in future periods.  Impairment losses,
if any, are reflected in operating expenses in the Consolidated Statements of
Operations.


7
 Table of Contents


Concurrent
Computer Corporation


Notes
to the Condensed Consolidated Financial Statements (Continued)








Other
intangible assets consist of the following (in thousands):





December 31,
                    
                    
                    June 30,2008
                    
                    
                    2008Cost
      of amortizable intangibles:Purchased
      technology
                    
                    $
                    7,700
                    
                    
                    $
                    7,700Customer
      relationships
                    
                    
                    1,900
                    
                    
                    
                    1,900Total
      cost of intangibles
                    
                    
                    9,600
                    
                    
                    
                    9,600Less
      accumulated amortization:Purchased
      technology
                    
                    
                    (4,076
                    )
                    
                    
                    (3,619
                    )Customer
      relationships
                    
                    
                    (556
                    )
                    
                    
                    (470
                    )Total
      accumulated amortization
                    
                    
                    (4,632
                    )
                    
                    
                    (4,089
                    )Trademark
                    
                    
                    1,100
                    
                    
                    
                    1,100Total
      intangible assets, net
                    
                    $
                    6,068
                    
                    
                    $
                    6,611





Amortization
expense was $544,000 for each of the six months ended December 31, 2008 and
2007, respectively.





6.
            Accounts
      Payable and Accrued Expenses





The
components of accounts payable and accrued expenses are as follows (in
thousands):





December 31,
                    2008
                  
                  
                  June 30,
                    2008Accounts
      payable, trade
                  
                  $
                  4,288
                  
                  
                  $
                  7,003Accrued
      payroll, vacation, severance and other employee expenses
                  
                  
                  3,677
                  
                  
                  
                  4,338Other
      accrued expenses
                  
                  
                  1,925
                  
                  
                  
                  2,643$
                  9,890
                  
                  
                  $
                  13,984


8
 Table of Contents




Concurrent
Computer Corporation


Notes
to the Condensed Consolidated Financial Statements (Continued)








7.
            Comprehensive
      Income (Loss)





Concurrent’s
total comprehensive income (loss) is as follows (in thousands):





Three
      Months Ended December 31,
                
                
                Six
      Months Ended December 31,2008
                
                
                2007
                
                
                2008
                
                
                2007Net
      income (loss)
                
                $
                530
                
                
                $
                (769
                )
                
                $
                623
                
                
                $
                975Other
      comprehensive income (loss):Foreign
      currency translation gain
                
                
                178
                
                
                
                80
                
                
                
                249
                
                
                
                213Amortization
      of pension gain and transition amount
                
                
                10
                
                
                
                (20
                )
                
                
                21
                
                
                
                (39
                )Total
      comprehensive income (loss)
                
                $
                718
                
                
                $
                (709
                )
                
                $
                893
                
                
                $
                1,149





8.
            Recovery
      of Investment in Minority
Investment





In March
2002, Concurrent purchased a 14.4% equity ownership interest in Thirdspace
Living Limited (“Thirdspace”) for $7,000,000 and loaned Thirdspace $6,000,000 in
exchange for two $3,000,000 long-term notes receivable.  In fiscal
year 2003, Concurrent recorded a $13,000,000 net impairment charge due to an
“other-than-temporary” decline in the market value of the investment in
Thirdspace.  In May 2003, Thirdspace sold the majority of its assets
to Alcatel Telecom Ltd.  As a result of the sale of these certain
assets, in fiscal year 2004, Concurrent received $3,100,000 in proceeds that
were recorded in the line item “Recovery of minority investment,” within
Concurrent’s Statement of Operations.




Thirdspace’s
only significant remaining asset subsequent to the aforementioned transactions
was a right to 40% of amounts recovered by nCube Corporation (“nCube”), now part
of Arris Group, Inc., if any, from the lawsuit brought by nCube against
SeaChange International, Inc., alleging patent infringement.  On
January 9, 2006, the U.S. Court of Appeals for the Federal Circuit affirmed the
lower court’s decision in favor of nCube.  Until the three months
ended September 30, 2007, the likelihood of collecting this asset, and the
amount and timing of such collection was uncertain and, as a result, Concurrent
had not recorded the gain contingency.




On
September 28, 2007, nCube, Alcatel and Concurrent agreed upon the terms of
distributing this asset.  Net proceeds from the settlement, including
$85,000 of liquidation fees, were $1,415,000.  Consistent with
previous recoveries of the impaired Thirdspace investment, Concurrent recorded
the $1,415,000 as a “Recovery of minority investment, net” within its condensed
consolidated Statements of Operations during the six months ended December 31,
2007.  Concurrent does not anticipate further cash proceeds related to
the liquidation of Thirdspace’s remaining assets.





9.
            Arbitration
      Settlement





In August
2007, Concurrent reached an agreement with Vicor, Inc. (“Vicor”), a supplier of
Concurrent’s, to settle the claims in the pending arbitration between the two
parties, in exchange for a full release.  In the arbitration, Concurrent
alleged that in 2002 and 2003 Concurrent experienced high failure rates in its
MediaHawk 2000 and 3000 series on-demand servers as a result of defective power
converters manufactured by Vicor.  Concurrent settled for
approximately $2,350,000, from which approximately $450,000 of attorney fees was
deducted and Concurrent received $1,900,000 in net proceeds in the three months
ended September 30, 2007.  Concurrent recorded the $1,900,000 net
proceeds as a “Gain on arbitration settlement, net” within the condensed
consolidated Statements of Operations during the six months ended December 31,
2007.


9
 Table of Contents




Concurrent
Computer Corporation


Notes
to the Condensed Consolidated Financial Statements (Continued)








10.
            Concentration
      of Credit Risk, Segment, and Geographic
  Information





In
accordance with SFAS 131, “Disclosure about Segments of an Enterprise and
Related Information”, Concurrent operates in two segments, products and
services, as disclosed within its condensed consolidated Statements of
Operations.  Concurrent does not identify assets on a segment
basis.





Concurrent
attributes revenues to individual countries and geographic areas based upon
location of its selling operating subsidiaries.  A summary of
Concurrent’s financial data by geographic area follows (dollars in
thousands):





Three
      Months Ended
                    December
      31,
                  
                  
                  Six
      Months Ended
                    December 31,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007United
      States
                  
                  $
                  13,643
                  
                  
                  $
                  13,629
                  
                  
                  $
                  28,871
                  
                  
                  $
                  26,951Japan
                  
                  
                  3,128
                  
                  
                  
                  1,563
                  
                  
                  
                  5,117
                  
                  
                  
                  2,851Other
      Asia Pacific countries
                  
                  
                  313
                  
                  
                  
                  812
                  
                  
                  
                  535
                  
                  
                  
                  1,251Asia
      Pacific
                  
                  
                  3,441
                  
                  
                  
                  2,375
                  
                  
                  
                  5,652
                  
                  
                  
                  4,102Europe
                  
                  
                  1,036
                  
                  
                  
                  1,574
                  
                  
                  
                  1,932
                  
                  
                  
                  2,780Total
      revenue
                  
                  $
                  18,120
                  
                  
                  $
                  17,578
                  
                  
                  $
                  36,455
                  
                  
                  $
                  33,833





In
addition, the following summarizes revenues by significant customer where such
revenue exceeded 10% of total revenues for any one of the indicated
periods:





Three
      Months Ended
                  
                  
                  Six
      Months EndedDecember
      31,
                  
                  
                  December
      31,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Customer
      A
                  
                  
                  19
                  %
                  
                  <10
                  %
                  
                  
                  23
                  %
                  
                  <10
                  %Customer
      B
                  
                  
                  16
                  %
                  
                  
                  10
                  %
                  
                  
                  18
                  %
                  
                  
                  11
                  %Customer
      C
                  
                  
                  12
                  %
                  
                  <10
                  %
                  
                  
                  10
                  %
                  
                  <10
                  %Customer
      D
                  
                  <10
                  %
                  
                  <10
                  %
                  
                  <10
                  %
                  
                  
                  13
                  %Customer
      E
                  
                  <10
                  %
                  
                  
                  14
                  %
                  
                  <10
                  %
                  
                  
                  11
                  %





Concurrent
assesses credit risk through ongoing credit evaluations of customers’ financial
condition and collateral is generally not required.  At December 31,
2008, one customer accounted for $1,996,000 or 16% of trade receivables, a
second customer accounted for $1,911,000 or 16% of trade receivables, and a
third customer accounted for $1,455,000 or 12% of trade
receivables.  At June 30, 2008, one customer accounted for $1,807,000
or 12% and a second customer accounted for $1,398,000 or 10% of trade
receivables.  No other customers accounted for 10% or more of trade
receivables as of December 31, 2008 or June 30, 2008.





Concurrent
sometimes purchases product components from a single supplier in order to obtain
the required technology and the most favorable price and delivery
terms.  For the three months ended December 31, 2008, purchases from
each of two suppliers were equal to, or in excess of 10% of Concurrent’s total
purchases.  These two suppliers accounted for 28% and 18% of
Concurrent’s purchases during the three months ended December 31,
2008.  Also, for the three months ended December 31, 2007, purchases
from each of three suppliers were equal to, or in excess of 10% of Concurrent’s
total purchases.  These three suppliers accounted for 20%, 15% and 10%
of Concurrent’s purchases during the three months ended December 31,
2007.  For the six months ended December 31, 2008, purchases from
three suppliers were in excess of 10% of Concurrent’s total
purchases.  These three suppliers accounted for 25%, 17% and 11% of
Concurrent’s purchases during the six months ended December 31,
2008.  Also, for the six months ended December 31, 2007, purchases
from three suppliers were in excess of 10% of Concurrent’s total
purchases.  These three suppliers accounted for 17%, 16% and 15% of
Concurrent’s purchases during the six months ended December 31,
2007.


10
 Table of Contents




Concurrent
Computer Corporation


Notes
to the Condensed Consolidated Financial Statements (Continued)








11.
            Term
      Loan and Revolving Credit Facility





Concurrent
has a Credit Agreement with Silicon Valley Bank that provides for a $10.0
million revolving credit line (the “Revolver”) with a borrowing base dependent
upon our outstanding North American accounts receivable.   The
interest amount is based upon the amount advanced and the rate varies based upon
Concurrent’s accounts receivable and the amount of cash in excess of
debt.  On December 24, 2008, Concurrent amended its Credit Agreement
with Silicon Valley Bank (the “Amendment”).  The Amendment extends the
maturity date of the Credit Agreement from July 1, 2009 under the previous
terms, to December 31, 2010.  The Amendment also creates a minimum
interest rate so that interest on outstanding principle is calculated as prime
plus 0.50% whereby, for purposes of this Amendment, “prime” is the greater of
(a) the Bank’s most recently announced “prime” rate,” and (b)
4.00%.  The interest rate on the Revolver was 4.50% as of December 31,
2008. The outstanding principal amount plus all accrued but unpaid interest is
payable in full at the expiration of the credit facility on December 31,
2010.  Based on the borrowing formula and Concurrent’s financial
position as of December 31, 2008, approximately $8.4 million was available to
Concurrent under the Revolver.  As of December 31, 2008, $0.9 million
was drawn under the Revolver, resulting in approximately $7.4 million of
remaining available funds under the Revolver.





In
addition, the Credit Agreement contains certain financial covenants, including a
required adjusted quick ratio (the ratio of cash and accounts receivable to
current liabilities (less the current portion of deferred revenue)) of at least
1.25 to 1.00 and a minimum tangible net worth of at least $10.5 million, as of
December 31, 2008. The Credit Agreement also contains customary restrictive
covenants concerning Concurrent’s operations.  As of December 31,
2008, Concurrent was in compliance with these covenants as its adjusted quick
ratio was 3.67 to 1.00 and our tangible net worth was $25.8
million.





12.
            Retirement
      Plans





The
following table provides a detail of the components of net periodic benefit cost
for the three and six months ended December 31, 2008 and 2007 (in
thousands):





Three
      Months Ended
                    December
      31,
                  
                  
                  Six
      Months Ended
                    December 31,2008
                  
                  
                  2007
                  
                  
                  2008
                  
                  
                  2007Service
      cost
                  
                  $
                  5
                  
                  
                  $
                  6
                  
                  
                  $
                  9
                  
                  
                  $
                  12Interest
      cost
                  
                  
                  69
                  
                  
                  
                  53
                  
                  
                  
                  128
                  
                  
                  
                  103Expected
      return on plan assets
                  
                  
                  (36
                  )
                  
                  
                  (34
                  )
                  
                  
                  (68
                  )
                  
                  
                  (66
                  )Amortization
      of net (gain) loss
                  
                  
                  -
                  
                  
                  
                  (29
                  )
                  
                  
                  -
                  
                  
                  
                  (57
                  )Amortization
      of transition amount
                  
                  
                  10
                  
                  
                  
                  9
                  
                  
                  
                  21
                  
                  
                  
                  18Net
      periodic benefit cost
                  
                  $
                  48
                  
                  
                  $
                  5
                  
                  
                  $
                  90
                  
                  
                  $
                  10





Concurrent
contributed $16,000 and $29,000 to its German subsidiary’s defined benefit plan
during the three and six months ended December 31, 2008, respectively, and
expects to make similar contributions during the remaining quarters of fiscal
2008.  Concurrent contributed $16,000 and $31,000 to its German
subsidiary’s defined benefit plan during the three and six months ended December
31, 2007, respectively.





Concurrent
maintains a retirement savings plan, available to U.S. employees, which
qualifies as a defined contribution plan under Section 401(k) of the Internal
Revenue Code.  During the three months ended December 31, 2008 and
2007, Concurrent contributed $97,000 and $105,000 to this plan,
respectively.  During the six months ended December 31, 2008 and 2007,
Concurrent contributed $247,000 and $242,000 to this plan,
respectively.





Concurrent
also maintains a defined contribution plan (“Stakeholder Plan”) for its U.K.
based employees.  Concurrent has agreements with certain of its U.K.
based employees to make supplementary contributions to the Stakeholder Plan over
the next three years, contingent upon their continued employment with
Concurrent.  During the three months ended December 31, 2008 and 2007,
Concurrent contributed $92,000 and $119,000 to the Stakeholder Plan,
respectively.  During the six months ended December 31, 2008 and 2007,
Concurrent contributed $200,000 and $238,000 to this plan,
respectively.


11
 Table of Contents


Concurrent
Computer Corporation


Notes
to the Condensed Consolidated Financial Statements (Continued)








13.
            Commitments
      and Contingencies





Concurrent,
from time to time, is involved in litigation incidental to the conduct of its
business.  Concurrent believes that such pending litigation will not
have a material adverse effect on Concurrent’s results of operations or
financial condition.





Concurrent
enters into agreements in the ordinary course of business with customers that
often require Concurrent to defend and/or indemnify the customer against
intellectual property infringement claims brought by a third party with respect
to Concurrent’s products.  For example, Concurrent was notified that
certain of its customers have been sued by the following companies, in the noted
jurisdictions, regarding the listed patents:





Asserting
      Party
              
              Jurisdiction
              
              Patents
      at IssueAcacia
      Media Technologies, Corp.
              
              U.S.
      District Court
              
              U.S.
      Patent Nos. 5,132,992; 5,253,275;Northern
      District of California
              
              5,550,863,
      6,002,720 and 6,144,702U.S.A
      Video Inc.
              
              U.S.
      District Court
              
              U.S.
      Patent No. 5,130,792Eastern
      District of TexasVtran
      Media Technologies, LLC
              
              U.S.
      District Court
              
              U.S.
      Patent Nos. 4,890,320 andEastern
      District of Texas
              
              4,995,078





Some
customers have requested indemnification under their agreements with
Concurrent.  Concurrent continues to review its potential obligations
under its indemnification agreements with these customers and the indemnity
obligations to these customers from other vendors that also provided systems and
services to these customers.  From time to time, Concurrent also
indemnifies customers and business partners for damages, losses and liabilities
they may suffer or incur relating to personal injury, personal property damage,
product liability, and environmental claims relating to the use of Concurrent’s
products and services or resulting from the acts or omissions of Concurrent, its
employees, authorized agents or subcontractors.  To date, Concurrent
has not encountered material costs as a result of such obligations and has not
accrued any material liabilities related to such indemnifications in the
financial statements under FIN No. 45, “Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others.”  The maximum potential amount of future payments that
Concurrent could be required to make is unlimited.





Pursuant
to the terms of the employment agreements with the executive officers of
Concurrent, employment may be terminated by either Concurrent or the respective
executive officer at any time.  In the event the executive officer
voluntarily resigns (except as described below) or is terminated for cause,
compensation under the employment agreement will end.  In the event an
agreement is terminated by Concurrent without cause or in certain circumstances
constructively by Concurrent, the terminated employee will receive severance
compensation for a period from 6 to 12 months, depending on the officer, in an
annualized amount equal to the respective employee's base salary then in
effect.  Additionally, if terminated, Concurrent’s CEO and
CFO may be entitled to bonuses during the severance period.  At
December 31, 2008, the maximum contingent liability under these agreements is
$1,912,000.  Concurrent’s employment agreements with certain of its
officers contain certain offset provisions, as defined in their respective
agreements.


12
 Table of Contents




Item2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations





The
following Management’s Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Condensed
Consolidated Financial Statements and the related Notes thereto which appear
elsewhere herein.  Except for the historical financial information,
many of the matters discussed in this Item 2 may be considered “forward-looking”
statements that reflect our plans, estimates and beliefs.  Actual
results could differ materially from those discussed in the forward-looking
statements.  Factors that could cause or contribute to such
differences include, but are not limited to, those discussed in the “Cautionary
Note regarding Forward-Looking Statements,” elsewhere herein and in other
filings made with the Securities and Exchange Commission.





Overview





Concurrent
is a provider of computing technologies and software applications and related
services for the video-on-demand (VOD) market and the high-performance real-time
market.  Concurrent’s business is comprised of two segments for
financial reporting purposes: products and services.  We provide
products and services for each of these markets.





Concurrent’s
on-demand products consist of hardware and/or software as well as integration
services, sold primarily to broadband companies that provide interactive,
digital services for the delivery of video on-demand.  Concurrent’s
real-time products consist of real-time operating systems and software
development tools combined, in most cases, with off-the-shelf hardware and
services sold to a wide variety of companies seeking high-performance, real-time
computer solutions for use in various applications requiring low-latency
response and determinism such as simulation, image generation,
hardware-in-the-loop testing and data acquisition.





Concurrent
provides sales and support from offices and subsidiaries throughout North
America, Europe, and Asia.





We are
evaluating the targeted video advertising market over cable networks and the
internet to determine if there are opportunities to sell our current products or
develop new products.  We are focused on utilizing our video and
analytics expertise, existing and newly developed software, and our patent
portfolio to address these markets.  We are in the midst of this
process and believe that it may have a positive impact on our business, however,
we cannot assure the success or timing of this initiative.





We
believe we are executing our business plan and expense reduction initiatives to
achieve sustainable profitability.  We will continue to review and
realign our cost structure as needed, balanced with investing in the business to
increase revenues.





We
perform our goodwill impairment review annually on July 1, or more frequently if
events or circumstances indicate that the asset might be impaired.  For
purposes of goodwill impairment testing, we compare the fair value of each
reporting unit with its carrying amount, including allocated goodwill.  If
the carrying amount of the reporting unit exceeds its fair value, determined
based on expected discounted future cash flows, the goodwill allocated to that
reporting unit may not be recoverable.  An impairment charge is recorded if
the carrying amount of allocated goodwill exceeds its implied fair value. As of
December 31, 2008, the price per share of our common stock declined by 47% from
the closing price per share on July 1, 2008.  Based on our recent
trend of revenue growth and improved profitability, there were no events or
circumstances during the quarter ended December 31, 2008 that would indicate
potential goodwill impairment so we did not perform an interim impairment
analysis.  We believe that this decline in market capitalization is
unrelated to our current operations andreflects
the overall macro-economic downturn as well as the relative volatility of the
capital markets.  However, considering that this recent economic downturn
may persist to the point that our business and future cash flows may be
impacted, we are monitoring the need for an interim impairment analysis of
goodwill and other intangible assets during our third quarter ended March 31,
2009.  We will continue to monitor our market capitalization and the impact
of the current economic downturn on our business to determine if there is an
impairment of goodwill in future periods.  Impairment losses, if any, are
reflected in operating expenses in the Consolidated Statements of
Operations.


13
 Table of Contents




Application
of Critical Accounting Estimates





The SEC
defines “critical accounting estimates” as those that require application of
management’s most difficult, subjective or complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain and may change in subsequent periods.  For a complete
description of our critical accounting policies, please refer to the
“Application of Critical Accounting Policies” in our most recent Annual Report
on Form 10-K for the year ended June 30, 2008 filed with the SEC on August 27,
2008.





Selected
Operating Data as a Percentage of Total Revenue





The
following table sets forth selected operating data as a percentage of total
revenue, unless otherwise indicated, for certain items in our consolidated
statements of operations for the periods indicated.





Three
      Months Ended
                  December 31,
                
                
                Six
      Months Ended
                  December 31,2008
                
                
                2007
                
                
                2008
                
                
                2007Revenues:
                
                (Unaudited)
                
                
                (Unaudited)Product
                
                
                61.1
                %
                
                
                56.7
                %
                
                
                63.4
                %
                
                
                58.3
                %Service
                
                
                38.9
                
                
                
                43.3
                
                
                
                36.6
                
                
                
                41.7Total
      revenues
                
                
                100.0
                
                
                
                100.0
                
                
                
                100.0
                
                
                
                100.0Cost
      of sales (% of respective sales category):Product
                
                
                46.1
                
                
                
                53.3
                
                
                
                46.5
                
                
                
                52.5Service
                
                
                33.9
                
                
                
                36.9
                
                
                
                36.1
                
                
                
                38.7Total
      cost of sales
                
                
                41.4
                
                
                
                46.2
                
                
                
                42.7
                
                
                
                46.8Gross
      margin
                
                
                58.6
                
                
                
                53.8
                
                
                
                57.3
                
                
                
                53.2Operating
      expenses:Sales
      and marketing
                
                
                23.4
                
                
                
                21.2
                
                
                
                21.4
                
                
                
                22.2Research
      and development
                
                
                18.3
                
                
                
                22.8
                
                
                
                19.6
                
                
                
                24.3General
      and administrative
                
                
                12.0
                
                
                
                14.6
                
                
                
                12.4
                
                
                
                14.5Total
      operating expenses
                
                
                53.7
                
                
                
                58.6
                
                
                
                53.4
                
                
                
                61.0Operating
      income (loss)
                
                
                4.9
                
                
                
                (4.8
                )
                
                
                3.9
                
                
                
                (7.8
                )Gain
      on arbitration settlement, net
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                5.6Recovery
      of minority investment, net
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                4.2Interest
      income - net
                
                
                0.1
                
                
                
                1.2
                
                
                
                0.3
                
                
                
                1.2Other
      income (expense) - net
                
                
                0.5
                
                
                
                (0.1
                )
                
                
                (0.5
                )
                
                
                0.2Income
      (loss) before income taxes
                
                
                5.5
                
                
                
                (3.7
                )
                
                
                3.7
                
                
                
                3.4Provision
      for income taxes
                
                
                2.6
                
                
                
                0.7
                
                
                
                2.0
                
                
                
                0.5Net
      income (loss)
                
                
                2.9
                %
                
                
                (4.4
                )
      %
                
                
                1.7
                %
                
                
                2.9
                %


14
 Table of Contents




Results
of Operations





The three months ended December 31,
2008 compared to the three months ended December 31, 2007





Three
      Months Ended
                                    December 31,(Dollars
      in Thousands)
                                  
                                  2008
                                  
                                  
                                  2007
                                  
                                  
                                  $
      Change
                                  
                                  
                                  %
      ChangeProduct
      revenues
                                  
                                  $
                                  11,066
                                  
                                  
                                  $
                                  9,964
                                  
                                  
                                  $
                                  1,102
                                  
                                  
                                  
                                  11.1
                                  %Service
      revenues
                                  
                                  
                                  7,054
                                  
                                  
                                  
                                  7,614
                                  
                                  
                                  
                                  (560
                                  )
                                  
                                  
                                  (7.4
                                  %)Total
      revenues
                                  
                                  
                                  18,120
                                  
                                  
                                  
                                  17,578
                                  
                                  
                                  
                                  542
                                  
                                  
                                  
                                  3.1
                                  %Product
      cost of sales
                                  
                                  
                                  5,106
                                  
                                  
                                  
                                  5,309
                                  
                                  
                                  
                                  (203
                                  )
                                  
                                  
                                  (3.8
                                  %)Service
      cost of sales
                                  
                                  
                                  2,394
                                  
                                  
                                  
                                  2,810
                                  
                                  
                                  
                                  (416
                                  )
                                  
                                  
                                  (14.8
                                  %)Total
      cost of sales
                                  
                                  
                                  7,500
                                  
                                  
                                  
                                  8,119
                                  
                                  
                                  
                                  (619
                                  )
                                  
                                  
                                  (7.6
                                  %)Product
      gross margin
                                  
                                  
                                  5,960
                                  
                                  
                                  
                                  4,655
                                  
                                  
                                  
                                  1,305
                                  
                                  
                                  
                                  28.0
                                  %Service
      gross margin
                                  
                                  
                                  4,660
                                  
                                  
                                  
                                  4,804
                                  
                                  
                                  
                                  (144
                                  )
                                  
                                  
                                  (3.0
                                  %)Total
      gross margin
                                  
                                  
                                  10,620
                                  
                                  
                                  
                                  9,459
                                  
                                  
                                  
                                  1,161
                                  
                                  
                                  
                                  12.3
                                  %Operating
      expenses:Sales
      and marketing
                                  
                                  
                                  4,238
                                  
                                  
                                  
                                  3,721
                                  
                                  
                                  
                                  517
                                  
                                  
                                  
                                  13.9
                                  %Research
      and development
                                  
                                  
                                  3,307
                                  
                                  
                                  
                                  4,019
                                  
                                  
                                  
                                  (712
                                  )
                                  
                                  
                                  (17.7
                                  %)General
      and administrative
                                  
                                  
                                  2,180
                                  
                                  
                                  
                                  2,566
                                  
                                  
                                  
                                  (386
                                  )
                                  
                                  
                                  (15.0
                                  %)Total
      operating expenses
                                  
                                  
                                  9,725
                                  
                                  
                                  
                                  10,306
                                  
                                  
                                  
                                  (581
                                  )
                                  
                                  
                                  (5.6
                                  %)Operating
      income (loss)
                                  
                                  
                                  895
                                  
                                  
                                  
                                  (847
                                  )
                                  
                                  
                                  1,742
                                  
                                  
                                  NM
                                  
                                  (1
                                  )Interest
      income - net
                                  
                                  
                                  12
                                  
                                  
                                  
                                  210
                                  
                                  
                                  
                                  (198
                                  )
                                  
                                  
                                  (94.3
                                  %)Other
      expense - net
                                  
                                  
                                  91
                                  
                                  
                                  
                                  (11
                                  )
                                  
                                  
                                  102
                                  
                                  
                                  NM
                                  
                                  (1
                                  )Income
      (loss) before income taxes
                                  
                                  
                                  998
                                  
                                  
                                  
                                  (648
                                  )
                                  
                                  
                                  1,646
                                  
                                  
                                  NM
                                  
                                  (1
                                  )Provision
      for income taxes
                                  
                                  
                                  468
                                  
                                  
                                  
                                  121
                                  
                                  
                                  
                                  347
                                  
                                  
                                  
                                  286.8
                                  %Net
      income (loss)
                                  
                                  $
                                  530
                                  
                                  
                                  $
                                  (769
                                  )
                                  
                                  $
                                  1,299
                                  
                                  
                                  NM
                                  
                                  (1
                                  )





(1) NM
denotes percentage is not meaningful





Product
Revenue.  Total product sales for the three months ended
December 31, 2008 were approximately $11.1 million, an increase of approximately
$1.1 million, or 11.1%, from $10.0 million for the three months ended December
31, 2007.  The increase in product sales resulted from the $2.8
million, or 60.7%, increase in on-demand product sales to $7.4 million in the
three months ended December 31, 2008, from $4.6 million in the three months
ended December 31, 2007.  The increase in on-demand product revenue
was primarily generated by $1.8 million and $1.0 million increases in revenue
from sales in North America and Asia, respectively.  North American
on-demand product sales increased due to existing customers replacing older
systems with our latest generation on-demand system, expanding existing systems
and storage, and deploying video-on-demand to new markets.  On-demand
product sales increased in Japan due to completion of a customized software
product to a Japanese cable distributor in the three months ended December 31,
2008, that was incremental over prior year
revenue.    Fluctuation in on-demand revenue is often due to
the fact that we have a small base of large customers making periodic large
purchases that account for a significant percentage of revenue.





Real-time
product sales decreased approximately $1.7 million, or 31.2%, to $3.7 million in
the three months ended December 31, 2008 from $5.4 million in the three months
ended December 31, 2007.  This decrease was due to a $1.5 million and
$0.4 million decrease in revenue from sales in North America and Europe,
respectively, resulting from decreasing volume of system sales in these markets
during the three months ended December 31, 2008, compared to the same period in
the prior year.  Decreasing volume of real-time product sales is
primarily due to the impact of the economic downturn on our customers.  In
addition, the worldwide economic downturn has also delayed international
purchases of our products during the three months ended December 31,
2008.  This trend of declining real-time product revenue may continue
until the economy recovers.


15
 Table of Contents




Service
Revenue.Total service revenue for the three months ended
December 31, 2008 was $7.1 million, a decrease of $0.6 million, or 7.4%, from
$7.6 million for the three months ended December 31, 2007.  The
decrease in service revenue was due to the $0.3 million, or 11.1%, decrease in
service revenue related to real-time products.  For years we have
experienced a steady decline in real-time service revenues, as our old legacy
products have been removed from service and, to a lesser extent, from customers
purchasing our new products that produce significantly less service
revenue.  We expect real-time service revenues to ultimately decline
further, partially offset by newer system service, as additional legacy systems
are eventually removed from service.





Service
revenue associated with on-demand products also decreased $0.3 million, or 5.2%,
for the three months ended December 31, 2008, compared to the same period in the
prior year.  This decrease relates primarily to a prior year
non-recurring event whereby, during the three months ended December 31, 2007, we
recognized additional maintenance and support revenue related to customers for
whom we provided service and support during calendar year 2007, but that was not
recognized until collectability was reasonably assured during the three months
ended December 31, 2007.  Partially offsetting the effects of this
prior year event, we recognized additional installation service revenue during
the three months ended December 31, 2008, compared to the same period in the
prior year, due to the timing of system installations during the
quarter.





Product Gross
Margin.  Product gross margin was $6.0 million for the three
months ended December 31, 2008, an increase of approximately $1.3 million, or
28.0%, from $4.7 million for the three months ended December 31,
2007.  Product gross margin as a percentage of product revenue
increased to 53.9% in the three months ended December 31, 2008 from 46.7% in the
three months ended December 31, 2007.  Product gross margins, as a
percentage of product revenue, increased primarily due to the mix of software
and hardware sales, as well as technological advances in our systems allowing us
to utilize less hardware per system, coupled with a lower fixed component of
labor and overhead and our ability to purchase product components at lower
prices during the three months ended December 31, 2008, compared to the same
period in the prior year.





Service Gross
Margin.  The gross margin on service revenue increased to 66.1%
of service revenue in the three months ended December 31, 2008 from 63.1% of
service revenue in the three months ended December 31, 2007.  The
increase in service margins as a percentage of service revenue was primarily due
to the $0.4 million reduction in service costs during the three months ended
December 31, 2008, compared to the same period in the prior
year.  Decreasing service costs resulted from decreasing headcount, as
we have focused on managing costs of the infrastructure that is necessary to
fulfill service and support provided for our products.  We expect to
maintain slightly lower service margins as we continue to manage costs related
to our maintenance and support infrastructure.





Sales and
Marketing.Sales and marketing expenses increased
approximately $0.5 million, or 13.9% to $4.2 million in the three months ended
December 31, 2008 from $3.7 million in the three months ended December 31,
2007.  Sales and marketing expense increased primarily because we
incurred $0.4 million of additional salaries wages and benefits and $0.4 million
of additional severance as a result of changes to our sales group and directing
additional resources to focus on strategic marketing.  Partially
offsetting these increasing costs, during the three months ended December 31,
2008 we incurred $0.1 million less in depreciation expense related to our
MediaHawk 4500 on-demand systems that were being used as demonstration systems
for customers.  Additionally, we incurred $0.1 million less in
commission expense in the three months ended December 31, 2008, compared to the
same period in the prior year.





Research and
Development.Research and development expenses decreased
approximately $0.7 million, or 17.7%, to approximately $3.3 million in the three
months ended December 31, 2008 from $4.0 million in the three months ended
December 31, 2007.  Decreasing research and development expenses were
primarily attributable to an additional $0.4 million of development costs
incurred for customized solutions sold to customers being charged to cost of
sales in the current period, compared to the same period of the prior
year.  We also reduced research and development related salaries,
benefits and other employee related costs by $0.2 million during the three
months ended December 31, 2008, compared to the same period in the prior year,
as part of our effort to reduce operating
expenses.   Additionally, our depreciation expense decreased $0.1
million during the three months ended December 31, 2008, compared to the same
period in the prior year as a result of a downward trend in capital expenditures
for development and test equipment over the past few years.


16
 Table of Contents


General and
Administrative.General and administrative expenses decreased
approximately $0.4 million, or 15.0%, to approximately $2.2 million in the three
months ended December 31, 2008 from $2.6 million in the three months ended
December 31, 2007.  Decreasing general and administrative expenses
were primarily attributable to $0.2 million of cost reductions resulting from
our prior year consolidation of certain international administrative
functions.  Additionally, our share-based compensation decreased by
approximately $0.1 million during the three months ended December 31, 2008,
compared to the same period of the prior year, due to the impact of our lower
share price on share-based compensation expense and because we granted fewer
stock options and restricted stock awards in the current fiscal
year.





Other (Expense) Income -
net.  During the three months ended December 31, 2008, we
incurred approximately $0.1 million of realized currency translation
gains.  These gains resulted from foreign currency transactions by our
subsidiaries for which the Japanese yen is the functional currency and the
strengthening of the yen value during the three months ended December 31,
2008.





Provision for Income
Taxes.We recorded income tax expense for our domestic and
foreign subsidiaries of $0.5 million in the three months ended December 31,
2008, compared to tax expense of $0.1 million for our domestic and foreign
subsidiaries in the three months ended December 31, 2007.  Income tax
expense for each of the three months ended December 31, 2008 and 2007 was
primarily attributable to income earned in Japan that cannot be offset by net
operating loss carryforwards and that is subject to an approximately 49%
effective tax rate.  As of June 30, 2008, we had U.S. Federal Tax net
operating loss carryforwards of approximately $161.0 million for income tax
purposes, of which $13.6 million expire in fiscal year 2009, and the remainder
expire at various dates through 2028.  The benefits associated with
these losses and tax credits may be limited if an “ownership change” has
occurred within the meaning of Section 382(g) of the Internal Revenue
Code.  We are not certain that an ownership change has occurred as of
December 31, 2008, but will be conducting an evaluation to make a final
determination on this matter.  If we determine that an ownership
change has occurred, this event could subject our net operating loss
carryforwards to an annual limitation, which could restrict our ability to
use them to offset taxable income in periods following the ownership
change.





Net Income.The
net income for the three months ended December 31, 2008 was $0.5 million or
$0.06 per basic and diluted share compared to a net loss for the three months
ended December 31, 2007 of $0.8 million, or $0.09 per basic and diluted
share.


17
 Table of Contents


The six months ended December 31,
2008 compared to the six months ended December 31, 2007





Six
      Months Ended
                        December 31,(Dollars
      in Thousands)
                      
                      2008
                      
                      
                      2007
                      
                      
                      $
      Change
                      
                      
                      %
      ChangeProduct
      revenues
                      
                      $
                      23,115
                      
                      
                      $
                      19,732
                      
                      
                      $
                      3,383
                      
                      
                      
                      17.1
                      %Service
      revenues
                      
                      
                      13,340
                      
                      
                      
                      14,101
                      
                      
                      
                      (761
                      )
                      
                      
                      (5.4
                      %)Total
      revenues
                      
                      
                      36,455
                      
                      
                      
                      33,833
                      
                      
                      
                      2,622
                      
                      
                      
                      7.7
                      %Product
      cost of sales
                      
                      
                      10,741
                      
                      
                      
                      10,362
                      
                      
                      
                      379
                      
                      
                      
                      3.7
                      %Service
      cost of sales
                      
                      
                      4,812
                      
                      
                      
                      5,457
                      
                      
                      
                      (645
                      )
                      
                      
                      (11.8
                      %)Total
      cost of sales
                      
                      
                      15,553
                      
                      
                      
                      15,819
                      
                      
                      
                      (266
                      )
                      
                      
                      (1.7
                      %)Product
      gross margin
                      
                      
                      12,374
                      
                      
                      
                      9,370
                      
                      
                      
                      3,004
                      
                      
                      
                      32.1
                      %Service
      gross margin
                      
                      
                      8,528
                      
                      
                      
                      8,644
                      
                      
                      
                      (116
                      )
                      
                      
                      (1.3
                      %)Total
      gross margin
                      
                      
                      20,902
                      
                      
                      
                      18,014
                      
                      
                      
                      2,888
                      
                      
                      
                      16.0
                      %Operating
      expenses:Sales
      and marketing
                      
                      
                      7,806
                      
                      
                      
                      7,514
                      
                      
                      
                      292
                      
                      
                      
                      3.9
                      %Research
      and development
                      
                      
                      7,146
                      
                      
                      
                      8,231
                      
                      
                      
                      (1,085
                      )
                      
                      
                      (13.2
                      %)General
      and administrative
                      
                      
                      4,503
                      
                      
                      
                      4,913
                      
                      
                      
                      (410
                      )
                      
                      
                      (8.3
                      %)Total
      operating expenses
                      
                      
                      19,455
                      
                      
                      
                      20,658
                      
                      
                      
                      (1,203
                      )
                      
                      
                      (5.8
                      %)Operating
      income (loss)
                      
                      
                      1,447
                      
                      
                      
                      (2,644
                      )
                      
                      
                      4,091
                      
                      
                      NM
                      
                      (1
                      )Gain
      on arbitration settlement, net
                      
                      
                      -
                      
                      
                      
                      1,900
                      
                      
                      
                      (1,900
                      )
                      
                      NM
                      
                      (1
                      )Recovery
      of minority investment, net
                      
                      
                      -
                      
                      
                      
                      1,415
                      
                      
                      
                      (1,415
                      )
                      
                      NM
                      
                      (1
                      )Interest
      income - net
                      
                      
                      92
                      
                      
                      
                      400
                      
                      
                      
                      (308
                      )
                      
                      
                      (77.0
                      %)Other
      income (expense) - net
                      
                      
                      (198
                      )
                      
                      
                      79
                      
                      
                      
                      (277
                      )
                      
                      NM
                      
                      (1
                      )Income
      before income taxes
                      
                      
                      1,341
                      
                      
                      
                      1,150
                      
                      
                      
                      191
                      
                      
                      
                      16.6
                      %Provision
      for income taxes
                      
                      
                      718
                      
                      
                      
                      175
                      
                      
                      
                      543
                      
                      
                      
                      310.3
                      %Net
      income
                      
                      $
                      623
                      
                      
                      $
                      975
                      
                      
                      $
                      (352
                      )
                      
                      
                      (36.1
                      %)





(1) NM
denotes percentage is not meaningful





Product
Revenue.  Total product sales for the six months ended December
31, 2008 were approximately $23.1 million, an increase of approximately $3.4
million, or 17.1%, from $19.7 million for the six months ended December 31,
2007.  The increase in product sales resulted from the approximately
$4.9 million, or 44.6%, increase in on-demand product sales to $15.7 million in
the six months ended December 31, 2008, from $10.9 million in the six months
ended December 31, 2007.  The increase in on-demand product revenue
was primarily generated by $3.2 million and $1.7 million increases in revenue
from sales in North America and Asia, respectively.  North American
on-demand product sales increased due to existing customers replacing older
systems with our latest generation on-demand system, expanding existing systems,
and deploying video-on-demand to new markets.  On-demand product sales
increased in Japan due to completion of customized software products to a
Japanese cable distributor in the six months ended December 31, 2008, that
was incremental over prior year revenue.    Fluctuation in
on-demand revenue is often due to the fact that we have a small base of large
customers making periodic large purchases that account for a significant
percentage of revenue.





Real-time
product sales decreased approximately $1.5 million, or 16.6%, to $7.4 million in
the six months ended December 31, 2008 from $8.8 million in the six months
ended December 31, 2007.  This decrease was due to a $1.2 million and
$0.7 million decrease in revenue from sales in North America and Europe,
respectively, resulting from decreasing volume of system sales in these markets
during the six months ended December 31, 2008, compared to the same period in
the prior year.  Decreasing volume of real-time product sales is
primarily due to the impact of the economic downturn on our
customers.  In addition, the worldwide economic downturn has also
delayed international purchases of our products during the first six months
of our fiscal 2009.  This trend of declining real-time product revenue
may continue until the economy recovers.


18
 Table of Contents


Service
Revenue.Total service revenue for the six months ended
December 31, 2008 was $13.3 million, a decrease of $0.8 million, or 5.4%, from
$14.1 million for the six months ended December 31, 2007.  The
decrease in service revenue was due to the $0.7 million, or 12.7%, decrease in
service revenue related to real-time products.  For years we have
experienced a steady decline in real-time service revenues, as our old legacy
products have been removed from service and, to a lesser extent, from customers
purchasing our new products that produce significantly less service
revenue.  We expect real-time service revenues to ultimately decline
further, partially offset by newer system service, as additional legacy systems
are eventually removed from service.





Service
revenue associated with on-demand products remained flat at approximately $8.5
million for each of the six months ended December 31, 2008 and
2007.  During the six months ended December 31, 2007, we recognized
additional maintenance and support revenue related to customers for whom we
provided service and support during calendar year 2007, but that was not
recognized until collectibility was reasonably assured during the six months
ended December 31, 2007.  During the six months ended December 31,
2008, we recognized additional installation service revenue, compared to the
same period in the prior year, due to the timing of system installations during
the period, offsetting the effects of the prior year non-recurring recognition
of maintenance revenue previously deferred until collectibility was
assured.





Product Gross
Margin.  Product gross margin was $12.4 million for the six
months ended December 31, 2008, an increase of approximately $3.0 million, or
32.1%, from $9.4 million for the six months ended December 31,
2007.  Product gross margin as a percentage of product revenue
increased to 53.5% in the six months ended December 31, 2008 from 47.5% in the
six months ended December 31, 2007.  Product gross margins, as a
percentage of product revenue, increased primarily due to the mix of software
and hardware sales, as well as technological advances in our systems allowing us
to utilize less hardware per system, coupled with a lower fixed component of
labor and overhead and our ability to purchase product components at lower
prices during the six months ended December 31, 2008, compared to the same
period in the prior year.





Service Gross
Margin.  The gross margin on service revenue increased to 63.9%
of service revenue in the six months ended December 31, 2008 from 61.3% of
service revenue in the six months ended December 31, 2007.  The
increase in service margins as a percentage of service revenue was primarily due
to the $0.6 million reduction in service costs during the six months ended
December 31, 2008, compared to the same period in the prior
year.  Decreasing service costs resulted from a $0.5 million decrease
in salaries, wages, and benefits and $0.1 million decrease in severance charges,
as we have focused on managing costs of the personnel that is necessary to
fulfill service and support provided for our products.  We expect to
maintain similar service margins as we continue to manage costs related to our
maintenance and support infrastructure.





Sales and
Marketing.Sales and marketing expenses increased
approximately $0.3 million, or 3.9% to $7.8 million in the six months ended
December 31, 2008 from $7.5 million in the six months ended December 31,
2007.  Sales and marketing expense increased primarily because we
incurred $0.4 million of additional salaries wages and benefits and $0.3 million
of additional severance as a result of changes to our sales group and directing
additional resources to focus on strategic marketing.  Partially
offsetting these increasing costs, during the six months ended December 31,
2008, we incurred $0.3 million less in depreciation expense related to our
MediaHawk 4500 on-demand systems that were being used as demonstration systems
for customers.  Additionally, we incurred $0.1 million less in
incentive compensation expense in the six months ended December 31, 2008,
compared to the same period in the prior year.





Research and
Development.Research and development expenses decreased
approximately $1.1 million, or 13.2%, to approximately $7.1 million in the six
months ended December 31, 2008 from $8.2 million in the six months ended
December 31, 2007.  Decreasing research and development expenses were
primarily attributable to an additional $0.5 million of development costs
incurred for customized solutions sold to customers being charged to cost of
sales in the current period, compared to the same period of the prior
year.  We also reduced research and development related facilities
costs by $0.2 million during the six months ended December 31, 2008, compared to
the same period in the prior year, as part of our effort to reduce operating
expenses.   Depreciation expense decreased $0.2 million during
the six months ended December 31, 2008, compared to the same period in the prior
year as a result of a downward trend in capital expenditures for development and
test equipment over the past few years.  Additionally, costs of
development work conducted by our UK development group decreased by
approximately $0.2 million during the six months ended December 31, 2008,
compared to the same period in the prior year, due to the declining value of the
British pound relative to the U.S. Dollar.


19
 Table of Contents


General and
Administrative.General and administrative expenses decreased
approximately $0.4 million, or 8.3%, to approximately $4.5 million in the six
months ended December 31, 2008 from $4.9 million in the six months ended
December 31, 2007.  Decreasing general and administrative expenses
were primarily attributable to $0.4 million of cost reductions resulting from
our prior year consolidation of certain international administrative
functions.  Additionally, our share-based compensation decreased by
approximately $0.2 million during the six months ended December 31, 2008,
compared to the same period of the prior year, due to the impact of our lower
share price on share-based compensation expense and because we granted fewer
share based options and awards in the current fiscal year.  Partially
offsetting these decreases, incentive compensation increased by approximately
$0.1 million as a result of improved financial results during the six months
ended December 31, 2008, compared to the same period in the prior
year.





Other (Expense) Income -
net.  During the six months ended December 31, 2008, we
incurred approximately $0.2 million of realized currency translation
losses.  These losses resulted primarily from foreign currency
transactions by our subsidiaries for which the euro is the functional currency
and the decline in the euro value during the six months ended December 31,
2008.  The impact of the decline in the euro was partially offset by
the strengthening of the Japanese yen during the latter half of the six months
ended December 31, 2008.





Provision for Income
Taxes.We recorded income tax provision for our domestic and
foreign subsidiaries of $0.7 million in the six months ended December 31, 2008,
compared to income tax provision of $0.2 million for our domestic and foreign
subsidiaries in the six months ended December 31, 2007.  Income tax
expense for each of the six months ended December 31, 2008 and 2007 was
primarily attributable to income earned in Japan that cannot be offset by net
operating loss carryforwards and that is subject to an approximately 49%
effective tax rate.  As of June 30, 2008, we had U.S. Federal Tax net
operating loss carryforwards of approximately $161.0 million for income tax
purposes, of which $13.6 million expire in fiscal year 2009, and the remainder
expire at various dates through 2028.  The benefits associated with
these losses and tax credits may be limited if an “ownership change” has
occurred within the meaning of Section 382(g) of the Internal Revenue
Code.  We are not certain that an ownership change has occurred as of
December 31, 2008, but will be conducting an evaluation to make a final
determination on this matter.  If we determine that an ownership
change has occurred, this event could subject our net operating loss
carryforwards to an annual limitation, which could restrict our ability to
use them to offset taxable income in periods following the ownership
change.





Net Income.The
net income for the six months ended December 31, 2008 was $0.6 million, or $0.08
per basic share and $0.07 per diluted share, compared to net income for the six
months ended December 31, 2007 of $1.0 million, or $0.12 per basic and diluted
share.





Liquidity
and Capital Resources





Our
liquidity is dependent on many factors, including sales volume, operating profit
and the efficiency of asset use and turnover.  Our future liquidity
will be affected by, among other things:





·
            the
      rate of growth or decline, if any, of on-demand market expansions and the
      pace at which domestic and international cable companies and telephone
      companies implement upgrade or replace on-demand
    technology;




·
            the
      rate of growth or decline, if any, of deployment of our real-time
      operating systems and tools;




·
            the
      actual versus anticipated decline in revenue from maintenance and product
      sales of real-time proprietary
systems;




·
            ongoing
      cost control actions and expenses, including capital
      expenditures;




·
            the
      margins on our product sales;




·
            our
      ability to leverage the potential of our Everstream products, including
      advanced advertising and other related
  initiatives;  20
 Table of Contents




·
            our
      ability to raise additional capital, if
  necessary;




·
            our
      ability to obtain additional or replacement bank financing, if
      necessary;




·
            our
      ability to meet the covenants contained in our Credit
      Agreement;




·
            timing
      of product shipments, which typically occur during the last month of the
      quarter;




·
            the
      percentage of sales derived from outside the United States where there are
      generally longer accounts receivable collection cycles;
  and




·
            the
      number of countries in which we operate, which may require maintenance of
      minimum cash levels in each country and, in certain cases, may restrict
      the repatriation of cash, such as cash held on deposit to secure office
      leases.




Uses
and Sources of Cash





We
generated $1.8 million of cash from operating activities during the six months
ended December 31, 2008 compared to generating $2.2 million of cash during the
six months ended December 31, 2007.  Operating cash flow was primarily
attributable to income earned from operations and the timing of accounts
receivable collection.  Prior period operating cash inflow was
primarily attributable to collection of receivables and $1.9 million of net cash
proceeds received from an arbitration settlement.  We do not
anticipate further cash proceeds related to this settlement.





During
the six months ended December 31, 2007, we received approximately $1.4 million
of net cash proceeds from the monetization of remaining assets of Thirdspace, an
entity that we purchased a minority interest in during fiscal 2002, and that was
subsequently liquidated.   We do not anticipate further cash
proceeds related to the liquidation of Thirdspace.





We
invested $1.0 million in property, plant and equipment during the six months
ended December 31, 2008 compared to $0.8 million during the six months ended
December 31, 2007.  Capital additions during each of these periods
related primarily to demonstration systems and product development and testing
equipment.  We expect capital additions to continue at a similar level
during the remainder of this fiscal year.





We have a
Credit Agreement with Silicon Valley Bank that provides for a $10.0 million
revolving credit line (the “Revolver”) with a borrowing base dependent upon our
outstanding North American accounts receivable.   The interest
amount is based upon the amount advanced and the rate varies based upon our
accounts receivable and the amount of cash in excess of debt.  On December
24, 2008, we amended our Credit Agreement with Silicon Valley Bank (the
“Amendment”).  The Amendment extends the maturity date of the Credit
Agreement from July 1, 2009 under the previous terms, to December 31,
2010.  The Amendment also creates a minimum interest rate so that
interest on outstanding principle is calculated as prime plus 0.50% whereby, for
purposes of this Amendment, “prime” is the greater of (a) the Bank’s most
recently announced “prime” rate,” and (b) 4.00%. The interest rate on the
Revolver was 4.50% as of December 31, 2008. The outstanding principal
amount plus all accrued but unpaid interest is payable in full at the expiration
of the credit facility on December 31, 2010.  Based on the borrowing
formula and our financial position as of December 31, 2008, approximately $8.4
million was available to us under the Revolver.  As of December 31,
2008, $0.9 million was drawn under the Revolver, resulting in approximately $7.4
million of remaining available funds under the Revolver.





In
addition, the Credit Agreement contains certain financial covenants, including a
required adjusted quick ratio (the ratio of cash and accounts receivable to
current liabilities (less the current portion of deferred revenue)) of at least
1.25 to 1.00 and a minimum tangible net worth of at least $10.5 million, as of
December 31, 2008. The Credit Agreement also contains customary restrictive
covenants concerning our operations.  As of December 31, 2008, we were
in compliance with these covenants as our adjusted quick ratio was 3.67 to 1.00
and our tangible net worth was $25.8 million.





At
December 31, 2008, we had working capital (current assets, less current
liabilities) of $27.0 million, including cash and cash equivalents of
approximately $27.7 million, and had no material commitments for capital
expenditures compared to working capital of $25.7 million at June 30, 2008,
including cash and cash equivalents of approximately $27.4
million.  Based upon our existing cash balances, historical cash
usage, available credit facility, and generation of operating cash flow in the
current fiscal year, we believe that existing cash balances will be sufficient
to meet our anticipated working capital and capital expenditure requirements for
the next twelve months.


21
 Table of Contents




Off-Balance
Sheet Arrangements





We enter
into agreements in the ordinary course of business with customers, resellers,
distributors, integrators and suppliers that often require us to defend and/or
indemnify the other party against intellectual property infringement claims
brought by a third party with respect to our products.  We evaluate
estimated losses for such indemnifications under SFAS No. 5,“Accounting for
Contingencies”, as interpreted by FASB Interpretation No. (“FIN”) 45,
“Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others.” We consider factors such as the
degree of probability of an unfavorable outcome and the ability to make a
reasonable estimate of the amount of loss. To date, we have not encountered
material costs as a result of such obligations and have not accrued any material
liabilities related to such indemnifications in our financial
statements.





Contractual
Obligations and Commercial Commitments





Our
contractual obligations and commercial commitments are disclosed in our Annual
Report on Form 10-K for the year ended June 30, 2008. There have been no
material changes to our contractual obligations and commercial commitments
during the six months ended December 31, 2008.





CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS





Certain
statements made or incorporated by reference in this release may constitute
“forward-looking statements” within the meaning of the federal securities
laws.  When used or incorporated by reference in this release, the
words “believes,” “expects,” “estimates,” “anticipates,” and similar
expressions, are intended to identify forward-looking
statements.  Statements regarding future events and developments, our
future performance, market share, and new market growth, as well as our
expectations, beliefs, plans, estimates, or projections relating to the future,
are forward-looking statements within the meaning of these
laws.  Examples of our forward-looking statements in this report
include, but are not limited to, reduced real-time product revenue due to the
economic downturn, maintaining similar service margins, our expected cash
position, the impact of interest rate changes and fluctuation in currency
exchange rates, our sufficiency of cash, the impact of litigation, and our trend
of declining real-time service revenue.  These statements are based on
beliefs and assumptions of Concurrent’s management, which are based on currently
available information.  All forward-looking statements are subject to
certain risks and uncertainties that could cause actual events to differ
materially from those projected.  The risks and uncertainties which
could affect our financial condition or results of operations include, without
limitation: delays or cancellations of customer orders; changes in product
demand; economic conditions; our ability to satisfy the financial covenants in
the credit agreement; various inventory risks due to changes in market
conditions; uncertainties relating to the development and ownership of
intellectual property; uncertainties relating to our ability and the ability of
other companies to enforce their intellectual property rights; the pricing and
availability of equipment, materials and inventories; the concentration of our
customers; failure to effectively manage change; delays in testing and
introductions of new products;  rapid technology changes; system
errors or failures; reliance on a limited number of suppliers and failure of
components provided by those suppliers; uncertainties associated with
international business activities, including foreign regulations, trade
controls, taxes, and currency fluctuations; the impact of  competition
on the pricing of VOD products; failure to effectively service the installed
base; the entry of new well-capitalized competitors into our markets; the
success of new on-demand and real-time products; the availability of Linux
software in light of issues raised by SCO Group; the success of our
relationships with Alcatel-Lucent; capital spending patterns by a limited
customer base and in light of the current negative macro-economic environment;
privacy concerns over data collection; and the availability of debt or equity
financing to support our liquidity needs if cash flow does not
improve.





Other
important risk factors are discussed in Part II, Item 1A. of this Form 10-Q and
in our Annual Report on Form 10-K for the fiscal year ended June 30,
2008.





Our
forward-looking statements are based on current expectations and speak only as
of the date of such statements.  We undertake no obligation to
publicly update or revise any forward-looking statement, whether as a result of
future events, new information or otherwise.


22
 Table of Contents




Item3.
            Quantitative
      and Qualitative Disclosures About Market
Risk





We are
exposed to market risk from changes in interest rates and foreign currency
exchange rates.  We are exposed to the impact of interest rate changes
on our short-term cash investments and bank loans.  Short-term cash
investments are primarily in U.S. treasuries.  These short-term
investments carry a degree of interest rate risk.  Bank loans include
the variable rate Revolver.  We believe that the impact of a 2%
increase or decrease in interest rates would not be material to our investment
income and interest expense from bank loans.





We
conduct business in the United States and around the world.  Our most
significant foreign currency transaction exposure relates to the United Kingdom,
those Western European countries that use the euro as a common currency, and
Japan.  We do not hedge against fluctuations in exchange rates and
believe that a 10% upward or downward fluctuation in foreign currency exchange
rates relative to the United States dollar would not have a material impact on
future earnings, fair values, or cash flows.





Item
      4.
            Controlsand Procedures





As
required by Securities and Exchange Commission rules, we have evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this report.  This
evaluation was carried out under the supervision and with the participation of
our management, including our principal executive officer and principal
financial officer.  Based on this evaluation, these officers have
concluded that the design and operation of our disclosure controls and
procedures are effective.  There were no significant changes to our
internal control over financial reporting during the period covered by this
report that materially affected, or are reasonably likely to materially affect,
our internal controls over financial reporting.





Disclosure
controls and procedures are our controls and other procedures designed to ensure
that information required to be disclosed by us in the reports that we file or
submit under the Exchange Act are recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange Commission’s
rules and forms.  Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by us in the reports that we file under the Exchange Act are
accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure.





Part
      II
            Other
      Information





Item
      1.
            LegalProceedings





From time
to time, we may be involved in litigation relating to claims arising out of our
ordinary course of business.  We are not presently involved in any
material litigation.





Item
      1A.
            RiskFactors





An
economic downturn may result in an impairment of our goodwill and other
intangible assets





As of
December 31, 2008, the price per share of our common stock declined by 47% from
the closing price per share on July 1, 2008.  If the economic downturn
begins to have a significant negative impact on our business, we may determine
that certain assets, and particularly goodwill and other intangibles, may become
impaired.  Based on our recent trend of revenue growth and improved
profitability, there were no events or circumstances during the quarter ended
December 31, 2008 that would indicate potential goodwill impairment so we did
not perform an interim impairment analysis.  We believe that the decline in
market capitalization is unrelated to our current operations and reflects the
overall macro-economic downturn as well as the relative volatility of the
capital markets.  However, considering that this recent economic downturn
may persist to the point that our business and future cash flows may be
impacted, we are monitoring the need for an interim impairment analysis of
goodwill and other intangible assets.  We will continue to monitor our
market capitalization and the impact of the current economic downturn on our
business to determine if there is an impairment of goodwill in future
periods.  Impairment losses, if any, are reflected in operating expenses in
the Consolidated Statements of Operations.


23
 Table of Contents


Other
important risk factors are discussed in Part II, Item 1A. of our Annual Report
on Form 10-K for the fiscal year ended June 30, 2008.





Item2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds





The
following table below provides monthly activity for the number of shares we
acquired and the average price paid per share during the three months ended
December 31, 2008:





Purchased
                                                            
                                                            (1)
                                                              Total
      number of shares purchased
                                                            
                                                            
                                                            Average
      price paid per share
                                                            
                                                            
                                                            Total
      number of shares purchased as part of publicly announced plans or
      programs
                                                            
                                                            
                                                            Maximum
      number of shares (or approximate dollar value of shares) that may yet be
      purchased under the planOctober 1,
      2008 – October  31, 2008
                                                            
                                                            
                                                            786
                                                            
                                                            
                                                            $
                                                            3.59
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            $
                                                            2,248,025November 1,
      2008 – November 30, 2008
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            $
                                                            2,248,025December
      1, 2008 – December 31, 2008
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            
                                                            -
                                                            
                                                            
                                                            $
                                                            2,248,025Total
                                                            
                                                            
                                                            786
                                                            
                                                            
                                                            $
                                                            3.59
                                                            
                                                            
                                                            
                                                            -





(1)  Includes
786 shares withheld to cover the withholding taxes upon the vesting of
restricted stock.





Item4.
            Submission
      of Matters to a Vote of Security
Holders





Concurrent’s
Annual Meeting of Stockholders was held on October 22, 2008.  The
results of the voting were as follows:





-
            The
      following persons were elected as directors to serve until the next annual
      meeting of stockholders: Charles Blackmon (5,878,491 votes for, 1,425,647
      votes withheld), Larry L. Enterline (5,844,056 votes for, 1,460,082 votes
      withheld), C. Shelton James (5,880,157 for, 1,423,981 votes withheld), Dan
      Mondor (5,885,250 votes for, 1,418,888 votes withheld), and Steve G.
      Nussrallah (5,852,247 votes for, 1,451,891 votes
  withheld).





-
            The
      selection of Deloitte & Touche LLP as Concurrent’s independent
      registered public accountants for the fiscal year ending June 30, 2009 was
      ratified (6,246,654 votes for, 1,027,073 votes against, 30,411 votes
      abstained).





Item6.
            Exhibits





3.1
                                                            
                                                            Restated
      Certificate of Incorporation of the Registrant (incorporated by reference
      to the Registrant's Registration Statement on Form S-2 (No.
      33-62440)).3.2
                                                            
                                                            Amended
      and Restated Bylaws of the Registrant (incorporated by reference to the
      Registrant’s Quarterly Report on Form 10-Q for the period ended March 31,
      2003).3.3
                                                            
                                                            Certificate
      of Correction to Restated Certificate of Incorporation of the Registrant
      (incorporated by reference to the Registrant’s Annual Report on Form 10-K
      for the fiscal year ended June 30, 2002).3.4
                                                            
                                                            Certificate
      of Amendment of the Restated Certificate of Incorporation of the
      Registrant (incorporated by reference to the Registrant’s Proxy on Form
      DEFR14A filed on June 2, 2008).3.5
                                                            
                                                            Amended
      Certificate of Designations of Series A Participating Cumulative Preferred
      Stock (incorporated by reference to the Form 8-A/A, dated August 9,
      2002).3.6
                                                            
                                                            Amendment
      to Amended Certificate of Designations of Series A Participating
      Cumulative Preferred Stock (incorporated by reference to the Form 8-A/A,
      dated August 9,
2002).




24
 Table of Contents




4.1
            
            Form
      of Common Stock Certificate (incorporated by reference to the Registrant’s
      Quarterly Report on Form 10-Q for the period ended March 31,
      2003).4.2
            
            Form
      of Rights Certificate (incorporated by reference to the Registrant’s
      Current Report on Form 8-K/A filed on August 12, 2002).4.3
            
            Amended
      and Restated Rights Agreement dated as of August 7, 2002 between the
      Registrant and American Stock Transfer & Trust Company, as Rights
      Agent (incorporated by reference to the Registrant’s Current Report on
      Form 8-K/A filed on August 12, 2002).4.4
            
            Form
      of Warrant (filed as Exhibit 4.1 to the Registrant’s Current Report on
      Form 8-K dated May 15, 2007 and incorporated herein by
      reference).4.5
            
            Form
      of Warrant (filed as Exhibit 4.1 to the Registrant’s Current Report on
      Form 8-K dated May 15, 2007 and incorporated herein by
      reference).10.1
            
            Third
      Amendment to Amended and Restated Loan and Security Agreement
      (incorporated by reference to the Registrant’s Current Report on Form 8-K
      filed on December 30, 2008 (No. 000-13150)).11.1*
            
            Statement
      Regarding Computation of Per Share Earnings.31.1**
            
            Certification
      of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2**
            
            Certification
      of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1**
            
            Certification
      of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2**
            
            Certification
      of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.


*
            Data
      required by Statement of Financial Accounting Standards No. 128, “Earnings
      per Share,” is provided in the Notes to the condensed consolidated
      financial statements in this
report.




**
            Filed
      herewith.


25
 Table of Contents


SIGNATURES








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








Date:  January
      28, 2009
              CONCURRENT
      COMPUTER CORPORATION








By:
              /s/
      Emory O. BerryEmory
      O. BerryChief
      Financial Officer and Executive Vice President of
    Operations(Principal
      Financial and Accounting
Officer)


26
 Table of Contents


Exhibit
Index





3.1
                
                Restated
      Certificate of Incorporation of the Registrant (incorporated by reference
      to the Registrant's Registration Statement on Form S-2 (No.
      33-62440)).3.2
                
                Amended
      and Restated Bylaws of the Registrant (incorporated by reference to the
      Registrant’s Quarterly Report on Form 10-Q for the period ended March 31,
      2003).3.3
                
                Certificate
      of Correction to Restated Certificate of Incorporation of the Registrant
      (incorporated by reference to the Registrant’s Annual Report on Form 10-K
      for the fiscal year ended June 30, 2002).3.4
                
                Certificate
      of Amendment of the Restated Certificate of Incorporation of the
      Registrant (incorporated by reference to the Registrant’s Proxy on Form
      DEFR14A filed on June 2, 2008).3.5
                
                Amended
      Certificate of Designations of Series A Participating Cumulative Preferred
      Stock (incorporated by reference to the Form 8-A/A, dated August 9,
      2002).3.6
                
                Amendment
      to Amended Certificate of Designations of Series A Participating
      Cumulative Preferred Stock (incorporated by reference to the Form 8-A/A,
      dated August 9, 2002).4.1
                
                Form
      of Common Stock Certificate (incorporated by reference to the Registrant’s
      Quarterly Report on Form 10-Q for the period ended March 31,
      2003).4.2
                
                Form
      of Rights Certificate (incorporated by reference to the Registrant’s
      Current Report on Form 8-K/A filed on August 12, 2002).4.3
                
                Amended
      and Restated Rights Agreement dated as of August 7, 2002 between the
      Registrant and American Stock Transfer & Trust Company, as Rights
      Agent (incorporated by reference to the Registrant’s Current Report on
      Form 8-K/A filed on August 12, 2002).4.4
                
                Form
      of Warrant (filed as Exhibit 4.1 to the Registrant’s Current Report on
      Form 8-K dated May 15, 2007 and incorporated herein by
      reference).4.5
                
                Form
      of Warrant (filed as Exhibit 4.1 to the Registrant’s Current Report on
      Form 8-K dated May 15, 2007 and incorporated herein by
      reference).10.1
                
                Third
      Amendment to Amended and Restated Loan and Security Agreement
      (incorporated by reference to the Registrant’s Current Report on Form 8-K
      filed on December 30, 2008 (No. 000-13150)).11.1*
                
                Statement
      Regarding Computation of Per Share Earnings.31.1**
                
                Certification
      of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2**
                
                Certification
      of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1**
                
                Certification
      of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2**
                
                Certification
      of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.





*
              Data
      required by Statement of Financial Accounting Standards No. 128, “Earnings
      per Share,” is provided in the Notes to the condensed consolidated
      financial statements in this
report.





**
              Filed
      herewith.






27