UNITED STATES
  SECURITIES AND EXCHANGE COMMISSION
  Washington, D.C. 20549
 
  FORM 10-Q
 (Mark One)T
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 For the Quarterly Period Ended March 31, 2010
 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  T     No  £
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).         Yes  £No  £
 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  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 filer  £Non-accelerated filer  £ (Do not check if a smaller reporting company)

Smaller reporting company  T
 
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  £    No  T
 
 Number of shares of the Registrant's Common Stock, par value $0.01 per share, outstanding as of April 26, 2010 was 8,348,000.
  
 
  Concurrent Computer Corporation
 Form 10-Q
 For the Three and Nine Months Ended March 31, 2010
  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

15Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24Item 4.

Controls and Procedures

24Part II – Other InformationItem 1.

Legal Proceedings

25Item 1A.

Risk Factors

25Item 5.

Other Information

25Item 6.

Exhibits

25
 EX-31.1 SECTION 302 CERTIFICATION OF CEO
 EX-31.2 SECTION 302 CERTIFICATION OF CFO
 EX-32.1 SECTION 906 CERTIFICATION OF CEO
 EX-32.2 SECTION 906 CERTIFICATION OF CFO
  1
 Table of Contents
  Part I
Financial Information
 
 Item 1.
Condensed Consolidated Financial Statements
 
 Concurrent Computer Corporation
 Condensed Consolidated Balance Sheets
 (Dollars in Thousands)
 
 March 31,


June 30,2010


2009(Unaudited)ASSETSCurrent assets:Cash and cash equivalents

$
28,994


$
29,110Accounts receivable, less allowance for doubtful accounts of $84 at March 31, 2010 and $97 at June 30, 2009


16,389



14,546Inventories, net


4,694



3,060Prepaid expenses and other current assets


2,094



1,444Total current assets


52,171



48,160Property, plant and equipment, net


4,762



3,860Intangible - purchased technology, net


2,559



3,166Intangible - customer relationships, net


1,128



1,257Other long-term assets, net


730



692$
61,350


$
57,135LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable and accrued expenses

$
8,874


$
10,582Deferred revenue


13,039



7,870Total current liabilities


21,913



18,452Long-term liabilities:Deferred revenue


3,045



1,041Revolving bank line of credit, non-current


949



949Pension liability


1,878



1,868Other


1,410



1,297Total liabilities


29,195



23,607Commitments and contingencies (Note 12)Stockholders' equity:Shares of common stock, par value $.01; 100,000,000 authorized;8,386,209 and 8,321,916 issued and outstanding at March 31, 2010 and June 30, 2009, respectively


84



83Capital in excess of par value


205,687



205,222Accumulated deficit


(174,159
)


(172,259
)Treasury stock, at cost; 37,788 at March 31, 2010and June 30, 2009


(255
)


(255
)Accumulated other comprehensive income


798



737Total stockholders' equity


32,155



33,528Total liabilities and stockholders' equity

$
61,350


$
57,135
 
 The accompanying notes are an integral part of the condensed consolidated financial statements.
  2
 Table of Contents
  Concurrent Computer Corporation
 Condensed Consolidated Statements of Operations (Unaudited)
 (In Thousands, Except Per Share Amounts)
 
 Three Months Ended


Nine Months EndedMarch 31,


March 31,2010


2009


2010


2009Revenues:Product

$
9,241


$
12,730


$
24,587


$
35,845Service


5,337



6,513



17,743



19,853Total revenues


14,578



19,243



42,330



55,698Cost of sales:Product


4,211



5,813



10,604



16,554Service


2,272



2,453



6,594



7,265Total cost of sales


6,483



8,266



17,198



23,819Gross margin


8,095



10,977



25,132



31,879Operating expenses:Sales and marketing


3,786



4,200



11,537



12,006Research and development


3,267



3,522



9,463



10,668General and administrative


1,993



2,222



5,994



6,725Impairment of goodwill and trademark


-



17,090



-



17,090Total operating expenses


9,046



27,034



26,994



46,489Operating loss


(951
)


(16,057
)


(1,862
)


(14,610
)Interest income


6



19



36



175Interest expense


(28
)


(32
)


(85
)


(96
)Other expense


(111
)


(107
)


(53
)


(305
)Loss before income taxes


(1,084
)


(16,177
)


(1,964
)


(14,836
)Benefit for income taxes


(110
)


(832
)


(64
)


(114
)Net loss

$
(974
)

$
(15,345
)

$
(1,900
)

$
(14,722
)Net loss per shareBasic

$
(0.12
)

$
(1.85
)

$
(0.23
)

$
(1.78
)Diluted

$
(0.12
)

$
(1.85
)

$
(0.23
)

$
(1.78
)Weighted average shares outstanding, basic


8,344



8,276



8,318



8,281Weighted average shares outstanding, diluted


8,344



8,276



8,318



8,281
 
 The accompanying notes are an integral part of the condensed consolidated financial statements.
  3
 Table of Contents
  Concurrent Computer Corporation
 Condensed Consolidated Statements of Cash Flows (Unaudited)
 (Dollars in Thousands)
 
 Nine Months EndedMarch 31,2010


2009OPERATING ACTIVITIESNet loss

$
(1,900
)

$
(14,722
)Adjustments to reconcile net loss to net cash provided by (used in) operating activities:Depreciation and amortization


2,287



2,421Impairment of goodwill and trademark


-



17,090Share-based compensation


466



474Other non-cash expenses


103



(95
)Changes in operating assets and liabilities:Accounts receivable


(1,843
)


(7,946
)Inventories


(1,679
)


1,318Prepaid expenses and other current assets


(648
)


(153
)Other long-term assets


(35
)


40Accounts payable and accrued expenses


(1,708
)


(1,744
)Deferred revenue


7,173



1,928Other long-term liabilities


180



133Total adjustments to net loss


4,296



13,466Net cash provided by (used in) operating activities


2,396



(1,256
)INVESTING ACTIVITIESCapital expenditures


(2,431
)


(1,631
)Net cash used in investing activities


(2,431
)


(1,631
)FINANCING ACTIVITIESPurchase of treasury stock


-



(255
)Net cash used in financing activities


-



(255
)Effect of exchange rates on cash and cash equivalents


(81
)


(361
)Decrease in cash and cash equivalents


(116
)


(3,503
)Cash and cash equivalents at beginning of period


29,110



27,359Cash and cash equivalents at end of period

$
28,994


$
23,856Cash paid during the period for:Interest

$
48


$
47Income taxes (net of refunds)

$
754


$
682
 
 The accompanying notes are an integral part of the condensed consolidated financial statements
  4
 Table of Contents
 
 Concurrent Computer 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 solutions market and the high-performance, real-time market.  Our business is comprised of two segments for financial reporting purposes: products and services.  We provide products and services for each of these markets.
 
 Our video solutions products consist of hardware and/or software, sold primarily to broadband companies that provide interactive, digital services for the delivery of video.  Our 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.
 
 We provide sales and support from offices and subsidiaries throughout North America, Europe, and Asia.
 
 Our condensed consolidated interim financial statements are unaudited and reflect all adjustments (consisting of only normal recurring adjustments) necessary for a fair statement of our 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 our Annual Report on Form 10-K for the year ended June 30, 2009.  There have been no changes to our Significant Accounting Policies as disclosed in Note 2 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2009.  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, 2009, we had U.S. federal tax net operating loss carryforwards of approximately $145.5 million for income tax purposes, of which $10.3 million expire in fiscal year 2010, and the remainder expire at various dates through 2028.
 
 Recently Issued Accounting Pronouncements
 
 Adopted
  In May 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) No. 855, which provides guidance on management’s assessment of subsequent events.  Historically, management had relied on U.S. auditing literature for guidance on assessing and disclosing subsequent events.  ASC 855 represents the inclusion of guidance on subsequent events in the accounting literature and is directed specifically to management, since management is responsible for preparing an entity’s financial statements.  The new standard clarifies that management must evaluate, as of each reporting period, events or transactions that occur after the balance sheet date, “through the date that the financial statements are issued or are available to be issued.”  Management must perform its assessment for both interim and annual financial reporting periods.  We adopted ASC 855 as of June 30, 2009, and adoption of this ASC did not have a material impact on our financial statements.  For each reporting period, we assess the need for disclosure of subsequent events through the date that the financial statements are issued and have determined that no subsequent events merit disclosure for our interim period ending March 31, 2010.
  5
 Table of Contents
 Concurrent Computer Corporation
 Notes to the Condensed Consolidated Financial Statements (Continued)
 ASC  No. 810, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” requires the recognition of a noncontrolling interest (minority interest) as equity in the consolidated financial statements and separate from the parent’s equity.  The amount of net income attributable to the noncontrolling interest will be included in consolidated net income.  It also amends certain consolidation procedures for consistency with the requirements of ASC 805, “Business Combinations.”  The provisions also include expanded disclosure requirements regarding the interests of the parent and its noncontrolling interest.  We adopted these provisions on July 1, 2009 and the adoption did not have an impact on our financial position or results of operations.
 
 In August 2009, the FASB issued ASU No. 2009-05, “Measuring Liabilities at Fair Value.” This ASU clarifies the application of certain valuation techniques in circumstances in which a quoted price in an active market for the identical liability is not available and clarifies that when estimating the fair value of a liability, the fair value is not adjusted to reflect the impact of contractual restrictions that prevent its transfer. We adopted these provisions on October 1, 2009 and the adoption did not have an impact on our financial position or results of operations.
 
 In January 2010, the FASB issued ASU No. 2010-06, “Improving Disclosures About Fair Value Measurements” (“ASU 2010-06”), which provides amendments to ASU Subtopic No. 820-10, “Fair Value Measurements and Disclosures – Overall.”  ASU 2010-06 requires additional disclosures and clarifications of existing disclosures for recurring and nonrecurring fair value measurements.  ASU 2010-06 added new requirements for disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances and settlements related to Level 3 measurements.  The ASU also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value.  The ASU further amends the disclosure requirements about employers post retirement benefit plant assets.  The revised guidance is effective for interim and annual reporting periods beginning after December 15, 2009.  ASU 2010-06 concerns disclosure only and did not have an impact on our financial position or results of operations.
 
 In February 2010, the FASB issued ASU No. 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements.”  The amendments in ASU 2010-09 remove the requirement for a Securities and Exchange Commission (SEC) filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements.  Revised financial statements include financial statements revised as a result of either correction of an error or retrospective application of U.S. GAAP.  The FASB also clarified that if the financial statements have been revised, then an entity that is not an SEC filer should disclose both the date that the financial statements were issued or available to be issued and the date the revised financial statements were issued or available to be issued.  The FASB believes these amendments remove potential conflicts with the SEC’s literature.  All of the amendments in ASU 2010-09 were effective upon issuance except for conduit debt obligors, and we adopted this ASU as of March 31, 2010.  The adoption did not have an impact on our financial position or results of operations.
 
 Not yet adopted
 
 In September 2009, the FASB  issued ASU  No. 2009-13, “Multiple Deliverable Revenue Arrangements – A consensus of the FASB Emerging Issues Task Force.”  The guidance provides principles and application guidance on whether multiple deliverables exist, determining the unit of accounting for each deliverable, and the consideration allocated to the separate units of accounting.  Additionally, this guidance requires an entity to allocate revenue in an arrangement using estimated selling prices of deliverables if a vendor does not have vendor-specific objective evidence or third-party evidence of selling price, eliminates the use of the residual method, and requires an entity to allocate revenue using the relative selling price method.  However, guidance on determining when the criteria for revenue recognition are met and how an entity should recognize revenue for a given unit of accounting are contained in other accounting literature.  The guidance is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  Earlier application is permitted as of the beginning of an entity’s fiscal year, and would be applied retrospectively as of the beginning of the fiscal year, if applied subsequent to the first quarter of a fiscal year.  We are currently evaluating the timing of adoption and the impact of adoption of this accounting standard on our consolidated financial statements.
 
 6
 Table of Contents
 Concurrent Computer Corporation
 Notes to the Condensed Consolidated Financial Statements (Continued)
 In September 2009, the FASB issued ASU No. 2009-14, “Certain Revenue Arrangements That Include Software Elements – A consensus of the FASB Emerging Issues Task Force” which amends ASC 985-605, “Software: Revenue Recognition” to exclude from its scope certain tangible products containing both software and non-software components that function together to deliver the product’s essential functionality.This guidance focuses on determining which arrangements are within the scope of the software revenue guidance in Topic 985 (previously included in AICPA Statement of Position 97-2, Software Revenue Recognition) and which are not. This guidance also removes tangible products from the scope of the software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that include a tangible product are within the scope of the software revenue guidance.This guidance is effective for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and shall be applied on a prospective basis.  Earlier application is permitted as of the beginning of an entity’s fiscal year, and would be applied retrospectively as of the beginning of the fiscal year, if applied subsequent to the first quarter of a fiscal year.  Weare currently evaluating the timing of adoption and the impact of adoption of this accounting standard on our consolidated financial statements.
 
 In December 2008, the FASB issued ASC 715-20-65-2, “Compensation – Retirement Benefits:  Defined Benefit Plans.”  This section provides guidance on the objectives an employer should consider when providing detailed disclosures about assets of a defined benefit pension plan or other postretirement plan.  These disclosure objectives include investment policies and strategies, categories of plan assets, significant concentrations of risk and the inputs and valuation techniques used to measure the fair value of plan assets.  These provisions are effective for our fiscal year ending June 30, 2010.  We are currently evaluating the effects that this provision may have on our financial statements.
 
 In December 2009, the FASB issued ASU No. 2009-17, “Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.”  ASU 2009-17 amends the evaluation criteria to identify the primary beneficiary of a variable interest entity provided by FASB Interpretation 46(R), “Consolidation of Variable Interest Entities-An Interpretation of ARB No. 51.”  Additionally, the provisions require ongoing assessment of whether an enterprise is the primary beneficiary of the variable interest entity.  We will adopt these provisions on July 1, 2010.  We do not expect that these provisions will have a material impact on our financial statements.
  7
 Table of Contents
 Concurrent Computer Corporation
 Notes to the Condensed Consolidated Financial Statements (Continued)
 2.
Basic and Diluted Net Income (Loss) per Share
 
 Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during each period.  Diluted net income (loss) per share is computed by dividing net income (loss) 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 983,000 and 1,029,000 for the three months ended March 31, 2010 and 2009, respectively, were excluded from the calculation as their effect was antidilutive.  Common share equivalents of 990,000 and 1,059,000 for the nine months ended March 31, 2010 and 2009, 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 (loss) per share for the periods indicated (dollars and share data in thousands, except per-share amounts):
 
 Three Months Ended March 31,


Nine Months Ended March 31,2010


2009


2010


2009Basic and diluted earnings per share (EPS) calculation:Net loss

$
(974
)

$
(15,345
)

$
(1,900
)

$
(14,722
)Basic weighted average number of shares outstanding


8,344



8,276



8,318



8,281Effect of dilutive securities:Restricted stock


-



-



-



-Diluted weighted average number of shares outstanding


8,344



8,276



8,318



8,281Basic EPS

$
(0.12
)

$
(1.85
)

$
(0.23
)

$
(1.78
)Diluted EPS

$
(0.12
)

$
(1.85
)

$
(0.23
)

$
(1.78
)
 
 3.
Share-Based Compensation
 
 As of March 31, 2010, we had share-based employee compensation plans which are described in Note 11 of the consolidated financial statements included in our Annual Report on Form 10-K for the year ended June 30, 2009.  Option awards are granted with an exercise price equal to the market price of our stock at the date of grant.  We recognize stock compensation expense over the requisite service period of the individual grantees, which generally equals the vesting period.  During the nine months ended March 31, 2010, we issued 306,000 shares of restricted stock to employees, directors, and non-employee advisors, of which approximately 135,000 shares will be released over three to four year vesting periods, and the remaining 171,000 will be released only if certain performance or market criteria are achieved over time.  Performance criteria for the performance based restricted shares include achieving certain financial results, and market criteria include our stock reaching certain share prices.  As of March 31, 2010, we had approximately 552,000 stock options and approximately 500,000 restricted shares outstanding.
 
 During the three months ended March 31, 2010 and 2009, we recorded $233,000 and $228,000, respectively, of share-based compensation related to issuances of stock options and restricted stock to employees, non-employee advisors, and directors.  During the nine months ended March 31, 2010 and 2009, we recorded $466,000 and $474,000, respectively, of share-based compensation related to issuances of stock options and restricted stock to employees, non-employee advisors, and directors.
  8
 Table of Contents
 Concurrent Computer Corporation
 Notes to the Condensed Consolidated Financial Statements (Continued)
 4.
Inventories
 
 Inventories are stated at the lower of cost or market, with cost being determined by using the first-in, first-out method.  We establish excess and obsolete inventory reserves based upon historical and anticipated usage.  The components of inventories are as follows (in thousands):
 
 March 31,


June 30,2010


2009Raw materials, net

$
2,370


$
2,239Work-in-process


859



289Finished goods


1,465



532$
4,694


$
3,060
 
 As of March 31, 2010 and June 30, 2009, some portion of our inventory was in excess of the current requirements based upon the planned level of sales for future years.  Accordingly, we have reduced our gross raw materials inventory by $1,233,000 at March 31, 2010 and $1,242,000 at June 30, 2009, to the estimated net realizable value.
 
 5.
Fair Value Measurements
 
 As of July 1, 2009, we have fully adopted all provisions of the FASB’s ASC that defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  This guidance defines fair value as the price that would be received upon sale of an asset or paid upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.  The fair value, in this context, should be calculated based on assumptions that market participants would use in pricing the asset or liability, not on assumptions specific to the entity.  In addition, the fair value of liabilities should include consideration of non-performance risk including our own credit risk.
  The FASB ASC requires certain disclosures around fair value and establishes a fair value hierarchy for valuation inputs.  The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.  Each fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety.  These levels are:
 
 ●     Level 1
Quoted prices (unadjusted) in active markets for identical assets or liabilities;
 ●     Level 2
Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;
 ●     Level 3
Assets or liabilities for which fair value is based on valuation models with significant unobservable pricing inputs and which result in the use of management estimates.
 
 Our debt is based on variable interest rates, therefore the carrying value of the debt approximates fair value, which would be based on Level 2 inputs.
  9
 Table of Contents
 Concurrent Computer Corporation
 Notes to the Condensed Consolidated Financial Statements (Continued)
 Assets and Liabilities Measured at Fair Value on a Recurring Basis
 
 The table below presents information as of March 31, 2010, about our financial assets and financial liabilities that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value (in thousands):
 
 Level 1


Level 2


Level 3Cash & cash equivalents

$
28,994


$
-


$
-Revolving line of credit

$
-


$
(949
)

$
-
 
 6.
Other Intangible Assets
 
 Intangible assets consist of the following (in thousands):
 
 March 31,


June 30,2010


2009Cost 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


(5,141
)


(4,534
)Customer relationships


(772
)


(643
)Total accumulated amortization


(5,913
)


(5,177
)Total intangible assets, net

$
3,687


$
4,423
 
 Amortization expense was $736,000 and $815,000 for the nine months ended March 31, 2010 and 2009, respectively.
 
 7.
Accounts Payable and Accrued Expenses
 
 The components of accounts payable and accrued expenses are as follows (in thousands):
 
 March 31,


June 30,2010


2009Accounts payable, trade

$
4,616


$
4,175Accrued payroll, vacation, severance and other employee expenses


2,707



4,682Other accrued expenses


1,551



1,725$
8,874


$
10,582
  10
 Table of Contents
 Concurrent Computer Corporation
 Notes to the Condensed Consolidated Financial Statements (Continued)
 8.
Comprehensive Income (Loss)
 
 Our total comprehensive income (loss) is as follows (in thousands):
 
 Three Months Ended


Nine Months EndedMarch 31,


March 31,2010


2009


2010


2009Net loss

$
(974
)

$
(15,345
)

$
(1,900
)

$
(14,722
)Other comprehensive income (loss):Foreign currency translation adjustment


(46
)


(65
)


58



184Adjustment in pensions


1



9



3



30Total comprehensive loss

$
(1,019
)

$
(15,401
)

$
(1,839
)

$
(14,508
)
 
 9.
Concentration of Credit Risk, Segment, and Geographic Information
 
 We operate in two segments, products and services, as disclosed within our condensed consolidated Statements of Operations.  We do not identify assets on a segment basis.  We attribute revenues to individual countries and geographic areas based upon location of our selling operating subsidiaries.  A summary of our revenues by geographic area is as follows (dollars in thousands):
 
 Three Months Ended


Nine Months EndedMarch 31,


March 31,2010


2009


2010


2009United States

$
10,596


$
15,797


$
32,009


$
44,668Japan


2,312



1,140



5,119



6,258Other Asia Pacific countries


440



698



1,454



1,233Asia Pacific


2,752



1,838



6,573



7,491Europe


1,230



1,608



3,748



3,539Total revenue

$
14,578


$
19,243


$
42,330


$
55,698
 
 In addition, the following summarizes revenues by significant customer where such revenue accounted for 10%, or more, of total revenues for any one of the indicated periods:
 
 Three Months Ended


Nine Months EndedMarch 31,


March 31,2010


2009


2010


2009Customer A


19
%


17
%


17
%


21
%Customer B


17
%

<10
%

<10
%

<10
%Customer C

<10
%


21
%

<10
%


19
%Customer D

<10
%


14
%

<10
%

<10
%
 
 We assess credit risk through ongoing credit evaluations of customers’ financial condition and collateral is generally not required.  At March 31, 2010, one customer accounted for $2,597,000 or 16% of trade receivables, a second customer accounted for $2,409,000 or 15% of trade receivables and a third customer accounted for $2,216,000 or 14% of trade receivables.  At June 30, 2009, one customer accounted for $2,019,000 or 14% of trade receivables, a second customer accounted for $1,599,000 or 11% of trade receivables and a third customer accounted for $1,536,000 or 10% of trade receivables.  No other customers accounted for 10% or more of trade receivables as of March 31, 2010 or June 30, 2009.
  11
 Table of Contents
 Concurrent Computer Corporation
 Notes to the Condensed Consolidated Financial Statements (Continued)
 The following summarizes purchases from significant vendors where such purchases accounted for 10%, or more, of total purchases for any one of the indicated periods:
 
 Three Months Ended


Nine Months EndedMarch 31,


March 31,2010


2009


2010


2009Vendor A


34
%


23
%


21
%


24
%Vendor B


22
%


19
%


21
%


18
%Vendor C

<10
%


24
%

<10
%


17
%
 
 10.
Term Loan and Revolving Credit Facility
 
 On March 31, 2010, we entered into a Second Amended and Restated Loan and Security Agreement (the “Credit Agreement”) with Silicon Valley Bank (the “Bank”) which amends certain terms of the existing Loan and Security Agreement (the “Prior Agreement’).  The Credit Agreement extends the maturity date of our credit facility to December 31, 2013 and improves the interest rate paid on outstanding advances under the existing $10,000,000 credit line (the “Revolver”).  Advances against the Revolver bear interest on the outstanding principal at a rate per annum equal to the greater of 4.00% or either: (1) the prime rate, or (2) the LIBOR rate plus a LIBOR rate margin of 2.75%.  The Credit Agreement also alters the Revolver availability, allowing $10,000,000 for advances under the Revolver as long as we maintain cash at or through the Bank of $15,000,000 or more.  At all times that we maintain cash at or through the Bank of less than $15,000,000, the amount available for advance under the Revolver is based upon a formula that is primarily based upon  a percentage of eligible accounts receivable, which may result in less than, but no more than $10,000,000 of availability.
 
 The interest rate on the Revolver was 4.00% as of March 31, 2010. The outstanding principal amount plus all accrued but unpaid interest is payable in full at the expiration of the credit facility on December 31, 2013.  Based on our cash balance at the Bank as of March 31, 2010, $10,000,000 was available to us under the Revolver.  As of March 31, 2010, $949,000 was drawn under the Revolver and we had $9,011,000 of remaining available funds under the Revolver.
 
 Under the Credit Agreement, we will be subject to financial covenants similar to those in the Prior Agreement.  Specifically, we are obligated to maintain as of the last day of each quarter, a consolidated tangible net worth of at least $10,600,000, increasing by 100% of quarterly net income and 100% of issuances of equity, net of issuance costs.  Our obligation with respect to maintaining a consolidated quick ratio of at least 1.25:1.00 did not change in the Credit Agreement.  All other material terms of the Prior Agreement remain the same and include additional financial covenants and customary restrictive covenants concerning our operations.  The Credit Agreement is secured by substantially all of the assets of the Company.  As of March 31, 2010, we were in compliance with these covenants as our adjusted quick ratio was 4.62 to 1.00 and our tangible net worth was $28,150,000.
  12
 Table of Contents
 Concurrent Computer Corporation
 Notes to the Condensed Consolidated Financial Statements (Continued)
 11.
Retirement Plans
 
 The following table provides a detail of the components of net periodic benefit cost of our German Subsidiary’s defined benefit pension plan for the three and nine months ended March 31, 2010 and 2009 (in thousands):
 
 Three Months Ended


Nine Months EndedMarch 31,


March 31,2010


2009


2010


2009Service cost

$
4


$
4


$
13


$
13Interest cost


66



60



205



188Expected return on plan assets


(28
)


(31
)


(85
)


(98
)Amortization of net (gain) loss


-



9



(1
)


30Amortization of transition amount


2



-



4



-Net periodic benefit cost

$
44


$
42


$
136


$
133
 
 We contributed $11,000 and $14,000 to our German subsidiary’s defined benefit plan during the three months ended March 31, 2010 and 2009, respectively, and expect to make similar contributions during the remaining quarter of fiscal 2010.  During the nine months ended March 31, 2010 and 2009, we contributed $40,000 and $43,000 to our German subsidiary’s defined benefit plan.
 
 We maintain 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 of 1986.  In September 2009, we suspended the matching of our employee’s retirement savings plan contribution as a temporary measure to reduce costs.  Prior to this suspension, we matched 50% of up to 5% of an employee’s salary invested in our 401K program.  During the three months ended March 31, 2010 and 2009, we contributed $0 and $132,000 to this plan, respectively.  During the nine months ended March 31, 2010 and 2009, we contributed $68,000 and $379,000 to this plan, respectively.
 
 We also maintain a defined contribution plan (“Stakeholder Plan”) for our U.K. based employees.  Previously, we had agreements with certain of our U.K. based employees to make supplementary contributions to the Stakeholder Plan, contingent upon their continued employment with Concurrent.  This supplementary contribution program ended in May 2009.  For our U.K. based employees who contribute 4% or more of their salary to the Stakeholder Plan, we match 100% of employee contributions, up to 7% of their salary.  During the three months ended March 31, 2010 and 2009, we contributed $34,000 and $83,000 to the Stakeholder Plan, respectively.  During the nine months ended March 31, 2010 and 2009, we contributed $108,000 and $284,000 to the Stakeholder Plan, respectively.
 
 12.
Commitments and Contingencies
 
 We, from time to time, are involved in litigation incidental to the conduct of our business.  We believe that such pending litigation will not have a material adverse effect on our results of operations or financial condition.
 
 We enter into agreements in the ordinary course of business with customers that often require us to defend and/or indemnify the customer against intellectual property infringement claims brought by a third party with respect to our products.  For example, we were notified that certain of our customers have been sued by the following companies, in the noted jurisdictions, regarding the listed patents:
  13
 Table of Contents
 Concurrent Computer Corporation
 Notes to the Condensed Consolidated Financial Statements (Continued)
 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
 
 We continue to review our potential obligations under our 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, we also indemnify 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 our products and services or resulting from our acts or omissions, our employees, authorized agents or subcontractors.  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 the financial statements under ASC 460-10-25.  The maximum potential amount of future payments that we could be required to make is unlimited.
  Pursuant to the terms of the employment agreements with our executive officers, employment may be terminated by either the respective executive officer or us 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 us without cause or in certain circumstances constructively by us, 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, our CEO and CFO may be entitled to bonuses during the severance period.  At March 31, 2010, the maximum contingent liability under these agreements is $2,027,000.  Our employment agreements with certain of our officers contain certain offset provisions, as defined in their respective agreements.
  14
 Table of Contents
 
 Item 2.
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 (the “SEC”).  References herein to “Concurrent”, the “Company”, “we”, “our” or “us” refer to Concurrent Computer Corporation and its subsidiaries.
 
 Overview
 
 We are a provider of computing technologies and software applications and related services for the video solutions market and the high-performance, real-time market.  Our business is comprised of two segments for financial reporting purposes: products and services.  We provide products and services for each of these markets.
 
 Our video solutions products consist of hardware and/or software, sold primarily to broadband companies that provide interactive, digital services for the delivery of video.  Our real-time products consist of real-time operating systems and software development tools combined, in most cases, with hardware and services sold to a wide variety of companies seeking high-performance, real-time computer solutions.  We provide sales and support from offices and subsidiaries throughout North America, Europe, and Asia.
 
 We are implementing our strategy to market our video solutions, including our media data and advertising solutions, for the internet and mobility markets.  We believe this strategy may have a positive impact on our business; however, we cannot assure the success or timing of this initiative.  We expect to continue to review and realign our cost structure as needed, balanced with investing in the business.
 
 Our sales model for media data and advertising solutions products is converting from a one-time perpetual license sale, for which maintenance was sold separately, to two types of commercial models: 1) a term license with maintenance and managed services, or 2) software as a service.  We expect that revenue from these sales generally will be recognized over the term of the various customer contracts.
  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, 2009 filed with the SEC on August 28, 2009.
 
 As described in footnote 1 of our condensed consolidated financial statements, in September, 2009 the Financial Accounting Standards Board (“FASB”) issued accounting guidance pertaining to revenue arrangements with multiple deliverables, and accounting guidance on all tangible products containing both software and non-software components that function together to deliver the product’s essential functionality.  Once adopted, these accounting standards may result in changes to our critical accounting estimates pertaining to revenue recognition.
  15
 Table of Contents
  Results of Operations
 
 The three months ended March 31, 2010 compared to the three months ended March 31, 2009
 
 Three Months EndedMarch 31,(Dollars in Thousands)

2010


2009


$ Change


% ChangeProduct revenues

$
9,241


$
12,730


$
(3,489
)


(27.4
%)Service revenues


5,337



6,513



(1,176
)


(18.1
%)Total revenues


14,578



19,243



(4,665
)


(24.2
%)Product cost of sales


4,211



5,813



(1,602
)


(27.6
%)Service cost of sales


2,272



2,453



(181
)


(7.4
%)Total cost of sales


6,483



8,266



(1,783
)


(21.6
%)Product gross margin


5,030



6,917



(1,887
)


(27.3
%)Service gross margin


3,065



4,060



(995
)


(24.5
%)Total gross margin


8,095



10,977



(2,882
)


(26.3
%)Operating expenses:Sales and marketing


3,786



4,200



(414
)


(9.9
%)Research and development


3,267



3,522



(255
)


(7.2
%)General and administrative


1,993



2,222



(229
)


(10.3
%)Impairment of goodwill and trademark


-



17,090



(17,090
)

NM(1)Total operating expenses


9,046



27,034



(17,988
)


(66.5
%)Operating loss


(951
)


(16,057
)


15,106



(94.1
%)Interest expense - net


(22
)


(13
)


(9
)


69.2
%Other expense


(111
)


(107
)


(4
)


3.7
%Loss before income taxes


(1,084
)


(16,177
)


15,093



(93.3
%)Benefit for income taxes


(110
)


(832
)


722



(86.8
%)Net loss

$
(974
)

$
(15,345
)

$
14,371



(93.7
%)
 (1) NM denotes percentage is not meaningful
 Product Revenue.  Total product revenue for the three months ended March 31, 2010 was $9.2 million, a decrease of $3.5 million, or 27.4%, from approximately $12.7 million for the three months ended March 31, 2009.  The decrease in product revenue resulted from a $3.0 million, or 36.9%, decrease in video product sales during the three months ended March 31, 2010, compared to the same period in the prior year.  Video product sales decreased by $3.2 million in the United States primarily due to reductions in purchases from our two largest customers.  We believe that the decreasing volume of video product sales is primarily due to the impact of the economic downturn and the pace at which our broadband customers upgrade or replace video technology.  Fluctuation in video revenue is often due to the fact that we have a small number of customers making periodic large purchases that account for a significant percentage of revenue.
 
 Additionally, revenue from our real-time products decreased by $0.5 million, or 10.3%, during the three months ended March 31, 2010, compared to the same period in the prior year.  This decrease was primarily due to a decrease in sales within the United States resulting from delays in customer orders during the three months ended March 31, 2010, and also due to a smaller amount of our revenue from legacy system sales.
  Service Revenue.Total service revenue for the three months ended March 31, 2010 was $5.3 million, a decrease of $1.2 million, or 18.1%, from $6.5 million for the three months ended March 31, 2009.  The decrease in service revenue was due to the $1.0 million, or 25.4%, decrease in service revenue related to video products.  Video service revenue decreased due to lower installation revenue in the three months ended March 31, 2010, compared to the same period in the prior year.  Lower installation service revenue was attributable lower product sales, from which installation service revenue is often derived, and from the timing of completion of installation services.
  16
 Table of Contents
 
 Service revenues related to real-time products decreased by $0.1 million, or 5.6%, during the three months ended March 31, 2010, compared to the same period in the prior year.  We have experienced a steady decline in real-time service revenues over the past few years, as our legacy products have been removed from service and, to a lesser extent, from customers purchasing our new products that produce less service revenue.  We expect real-time service revenues to ultimately decline further, as legacy systems continue to be removed from service, partially offset by newer system services and price increases to maintain support of legacy systems.
 
 Product Gross Margin.  Product gross margin was $5.0 million for the three months ended March 31, 2010, a decrease of $1.9 million, or 27.3%, from $6.9 million for the three months ended March 31, 2009.  Product margins decreased in terms of dollars due to lower product revenue during the three months ended March 31, 2010, compared to the same period of the prior year.  Product gross margin as a percentage of product revenue remained relatively flat at 54.4% in the three months ended March 31, 2010, compared to 54.3% in the three months ended March 31, 2009, due to a similar mix of product sales in both periods.
 
 Service Gross Margin.  The gross margin on service revenue decreased to 57.4% of service revenue in the three months ended March 31, 2010 from 62.3% of service revenue in the three months ended March 31, 2009.  The decrease in service margins as a percentage of service revenue was primarily due to the $1.2 million decrease in service revenue, which was coupled with only a $0.2 million reduction of service costs, as service costs are predominantly fixed over the near term.  Decreasing service costs resulted from decreasing facilities and personnel and severance costs, as we have focused on managing costs of the infrastructure that is necessary to fulfill service and support provided for our products.
 
 Sales and Marketing.Sales and marketing expenses decreased approximately $0.4 million, or 9.9% to $3.8 million in the three months ended March 31, 2010 from $4.2 million in the three months ended March 31, 2009.  Lower sales and marketing expenses were primarily attributable to a $0.2 million reduction of sales and marketing related salaries and benefits, and a $0.2 million decrease in severance charges  as a result of prior year changes to our sales group.  Sales and marketing expenses also decreased $0.2 million due to prior year expenses from our strategic marketing launch during the three months ended March 31, 2009.  Partially offsetting the decreases in costs, we incurred $0.1 million of additional costs to support channel partner sales.
 
 Research and Development.Research and development expenses decreased approximately $0.3 million, or 7.2%, to approximately $3.3 million in the three months ended March 31, 2010 from $3.5 million in the three months ended March 31, 2009.  During the three months ended March 31, 2010, we incurred $0.3 million less in severance charges as a result of prior year reductions to our real-time research and development group.  In addition, research and development expenses decreased because we incurred $0.1 million less in incentive compensation resulting primarily from lower revenue and operating results during the three months ended March 31, 2010, as compared to the same period in the prior year.  Partially offsetting these decreases in costs, we incurred an additional $0.2 million of  salaries and benefits to execute the development of our multi-screen strategy.
 
 General and Administrative.General and administrative expenses decreased approximately $0.2 million, or 10.3%, to approximately $2.0 million in the three months ended March 31, 2010 from $2.2 million in the three months ended March 31, 2009.  General and administrative expenses decreased primarily because we incurred $0.2 million less in incentive compensation resulting from lower revenue and operating results during the three months ended March 31, 2010, as compared to the same period in the prior year.
 
 Goodwill and Trademark Impairment.  As of March 31, 2010 and 2009, we had net goodwill and trademark balances of $0 due to the fact that we recorded total goodwill and trademark impairment charges of $17.1 million during the three months ended March 31, 2009.  We recorded a $16.0 million goodwill impairment charge due to the sustained decline in our stock price and the estimated effect of the economic downturn on our weighted average cost of capital, which reflects the market’s presumed risk on our ability to generate estimated future cash flows.    Additionally, as a result of our strategic planning process for the period ended March 31, 2009, we rebranded our product lines to better reflect our strategic direction and no longer intend to use the Everstream trademark.  Consequently, we recorded a $1.1 million impairment of our Everstream trademark for the three months ended March 31, 2009.
  17
 Table of Contents
 
 Provision for Income Taxes.We recorded an income tax benefit for our domestic and foreign subsidiaries of $0.1 million in the three months ended March 31, 2010, compared to an income tax benefit of $0.8 million for our domestic and foreign subsidiaries in the three months ended March 31, 2009.  During the three months ended March 31, 2010, the tax benefit was primarily attributable to a benefit recorded by our Japan subsidiary as a result of the pretax loss reported during the period.  The benefit recorded in the three months ended March 31, 2009 was attributable to a $0.4 million reversal of a deferred tax liability associated with the Everstream trademark.  When the trademark was removed from the books as a result of the impairment, the associated deferred tax liability was also written off.  The remaining $0.4 million of benefit recorded during the three months ended March 31, 2009 was attributable to a benefit recorded by our Japan subsidiary as a result of the pretax loss reported during the period.
 
 Net Income.The net loss for the three months ended March 31, 2010 was $1.0 million or $0.12 per basic and diluted share, compared to net loss for the three months ended March 31, 2009 of $15.3 million, or $1.85 per basic and diluted share.
  18
 Table of Contents
  The nine months ended March 31, 2010 compared to the nine months ended March 31, 2009
 
 Nine Months EndedMarch 31,(Dollars in Thousands)

2010


2009


$ Change


% ChangeProduct revenues

$
24,587


$
35,845


$
(11,258
)


(31.4
%)Service revenues


17,743



19,853



(2,110
)


(10.6
%)Total revenues


42,330



55,698



(13,368
)


(24.0
%)Product cost of sales


10,604



16,554



(5,950
)


(35.9
%)Service cost of sales


6,594



7,265



(671
)


(9.2
%)Total cost of sales


17,198



23,819



(6,621
)


(27.8
%)Product gross margin


13,983



19,291



(5,308
)


(27.5
%)Service gross margin


11,149



12,588



(1,439
)


(11.4
%)Total gross margin


25,132



31,879



(6,747
)


(21.2
%)Operating expenses:Sales and marketing


11,537



12,006



(469
)


(3.9
%)Research and development


9,463



10,668



(1,205
)


(11.3
%)General and administrative


5,994



6,725



(731
)


(10.9
%)Impairment of goodwill and trademark


-



17,090



(17,090
)

NM(1)Total operating expenses


26,994



46,489



(19,495
)


(41.9
%)Operating loss


(1,862
)


(14,610
)


12,748



(87.3
%)Interest (expense) income - net


(49
)


79



(128
)

NM(1)Other expense - net


(53
)


(305
)


252



(82.6
%)Loss before income taxes


(1,964
)


(14,836
)


12,872



(86.8
%)Benefit for income taxes


(64
)


(114
)


50



(43.9
%)Net loss

$
(1,900
)

$
(14,722
)

$
12,822



(87.1
%)
 (1) NM denotes percentage is not meaningful
 Product Revenue.  Total product revenue for the nine months ended March 31, 2010 was $24.6 million, a decrease of approximately $11.3 million, or 31.4%, from approximately $35.8 million for the nine months ended March 31, 2009.  The decrease in product revenue resulted from a $12.4 million, or 51.7%, decrease in video product sales during the nine months ended March 31, 2010, compared to the same period in the prior year.  Video product sales decreased by $11.0 million in the United States due to reductions in purchases from our two largest customers.  Video product sales decreased by $1.3 million in our Asia-Pacific region primarily due to revenue in the prior year period from completion of customized software products to a Japanese cable distributor, that did not recur in the current year period.  We believe that the decreasing volume of video product sales is primarily due to the impact of the economic downturn and the pace at which our broadband customers  upgrade or replace video technology.  Fluctuation in video revenue is often due to the fact that we have a small number of customers making periodic large purchases that account for a significant percentage of revenue.
 
 Partially offsetting the decline in video product revenue, revenue from our real-time products increased by $1.1 million, or 9.5%, during the nine months ended March 31, 2010, compared to the same period in the prior year.  Real-time product sales increased by $0.4 million in the United States primarily due to the sale of legacy, Aegis system spares during the nine months ended March 31, 2010, compared to the same period in the prior year.  Additionally, real-time product sales increased by $0.5 million and $0.3 million in our Asia-Pacific and Europe regions, respectively, during the nine months ended March 31, 2010, compared to the same period in the prior year.  During the nine months ended March 31, 2010, some of our international customers who delayed purchases of real-time systems in our prior fiscal year, during the global economic downturn, increased their volume of real-time system purchases in the current fiscal year.
  19
 Table of Contents
 
 Service Revenue.Total service revenue for the nine months ended March 31, 2010 was $17.7 million, a decrease of $2.1 million, or 10.6%, from $19.9 million for the nine months ended March 31, 2009.  The decrease in service revenue was due to the $1.9 million, or 15.4%, decrease in service revenue related to video products.  Video service revenue decreased due to lower installation revenue in the nine months ended March 31, 2010, compared to the same period in the prior year.  Lower installation service revenue was attributable to lower product sales, from which installation service revenue is often derived, and from the timing of installation services.
  Service revenues related to real-time product sales decreased $0.2 million, or 2.4%, during the nine months ended March 31, 2010, compared to the same period in the prior year.  We have experienced a steady decline in real-time service revenues over the past few years, as our legacy products have been removed from service and, to a lesser extent, from customers purchasing our new products that produce less service revenue.  We expect real-time service revenues to ultimately decline further, as legacy systems continue to be removed from service, partially offset by newer system service and price increases to maintain support of legacy systems.
 
 Product Gross Margin.  Product gross margin was $14.0 million for the nine months ended March 31, 2010, a decrease of $5.3 million, or 27.5%, from $19.3 million for the nine months ended March 31, 2009.  Product margins decreased in terms of dollars due to lower product revenue during the nine months ended March 31, 2010, compared to the same period of the prior year.  Product gross margin as a percentage of product revenue increased to 56.9% in the nine months ended March 31, 2010 from 53.8% in the nine months ended March 31, 2009.  Product gross margins, as a percentage of product revenue, increased primarily because higher margin real-time legacy system sales and video software sales accounted for a greater portion of total product revenue during the nine months ended March 31, 2010, compared to the same period in the prior year.
 
 Service Gross Margin.  The gross margin on service revenue decreased to 62.8% of service revenue in the nine months ended March 31, 2010 from 63.4% of service revenue in the nine months ended March 31, 2009.  The decrease in service margins as a percentage of service revenue was primarily due to the $2.1 million decrease in service revenue, which was coupled with only a $0.7 million reduction of service costs, as service costs are predominantly fixed over the near term.  Decreasing service costs resulted from decreasing facilities, personnel and severance costs, as we have focused on managing costs of the infrastructure that is necessary to fulfill service and support provided for our products.
 
 Sales and Marketing.Sales and marketing expenses decreased approximately $0.5 million, or 3.9%, to $11.5 million in the nine months ended March 31, 2010 from $12.0 million in the nine months ended March 31, 2009.  Sales and marketing expenses decreased primarily because we incurred $0.4 million less in severance charges as a result of prior year changes to our sales group.  Sales and marketing expense also decreased $0.2 million due to prior year expenses from our strategic marketing launch during the nine months ended March 31, 2009.  We incurred $0.1 million less in incentive compensation during the nine months ended March 31, 2010, as compared to the same period in the prior year primarily due to lower revenues in the current year period.  Partially offsetting these decreases in costs, we incurred $0.2 million of additional costs to support channel partner sales.
 
 Research and Development.Research and development expenses decreased approximately $1.2 million, or 11.3%, to $9.5 million in the nine months ended March 31, 2010 from $10.7 million in the nine months ended March 31, 2009.  Lower research and development expenses were primarily attributable to a $0.6 million reduction of salaries and benefits, and $0.3 million reduction in severance charges as a result of prior year reductions to our real-time research and development group.  Additionally, we incurred $0.2 million less in incentive compensation resulting primarily from lower revenue and operating results during the three months ended March 31, 2010, as compared to the same period in the prior year.
 
 General and Administrative.General and administrative expenses decreased approximately $0.7 million, or 10.9%, to $6.0 million in the nine months ended March 31, 2010 from $6.7 million in the nine months ended March 31, 2009.  General and administrative expenses decreased primarily because we incurred $0.4 million less in incentive compensation resulting from lower revenue and operating results during the nine months ended March 31, 2010, as compared to the same period in the prior year.  We also incurred $0.2 million less in consulting fees, primarily attributable to prior year strategic planning costs.  Additionally, we were able to reduce our insurance costs by $0.1 million during the nine months ended March 31, 2010, compared to the same period in the prior year.
  20
 Table of Contents
 
 Goodwill and Trademark Impairment.  As of both March 31, 2010 and 2009, we had net goodwill and trademark balances of $0 due to the fact that we recorded total goodwill and trademark impairment charges of $17.1 million during the nine months ended March 31, 2009.    We recorded a $16.0 million goodwill impairment charge due to the sustained decline in our stock price and the estimated effect of the economic downturn on our weighted average cost of capital, which reflects the market’s presumed risk on our ability to generate estimated future cash flows.    Additionally, as a result of our strategic planning process for the period ended March 31, 2009, we rebranded our product lines to better reflect our strategic direction and no longer intend to use the Everstream trademark.  Consequently, we recorded a $1.1 million impairment of our Everstream trademark for the nine months ended March 31, 2009.
 
 Other Income (Expense) - net.  During the nine months ended March 31, 2010, we incurred $0.2 million less of realized currency translation losses.  Prior year realized 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 nine months ended March 31, 2009.
  Net (Loss) Income.The net loss for the nine months ended March 31, 2010 was $1.9 million or a loss of $0.23 per basic and diluted share, compared to net loss for the nine months ended March 31, 2009 of $14.7 million, or $1.78 per basic share and $1.78 per diluted share.
 
 Liquidity and Capital Resources
 
 Our liquidity is dependent upon many factors, including sales volume, operating results 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 video market expansions and the pace that broadband companies implement, upgrade or replace video technology;
  ·
the impact of the global economic recession on our business and our customers;
  ·
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;
  ·
our ability to manage expenses consistent with the rate of growth or decline in our markets;
  ·
the success of our strategy to market our solutions for the internet and mobility markets;
  ·
ongoing cost control actions and expenses, including capital expenditures;
  ·
the margins on our product sales;
  ·
our ability to leverage the potential of our  media data management to serve advanced advertising and other related data initiatives;
  ·
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;
  ·
our reliance on a small customer base (two of our video customers accounted for 27% of our revenue for the nine months ended March 31, 2010, and two customers accounted for 40% of our revenue in the nine months ended March 31, 2009);
  ·
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, by requiring us to maintain levels of capital.
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  Uses and Sources of Cash
 
 We generated $2.4 million of cash from operating activities during the nine months ended March 31, 2010 compared to using $1.3 million of cash during the nine months ended March 31, 2009.  Operating cash inflow during the nine months ended March 31, 2010 was primarily attributable to prepayments from two of our video customers for multi-year maintenance and service contracts.  As a result, the deferred revenue increased by approximately $7.0 million.  Partially offsetting the increase in cash, we had an increase in inventory purchases of $1.7 million.  In addition, cash decreased due to the timing of accounts receivable collection by $1.8 million.  Prior period operating cash inflow was primarily attributable to the timing of accounts receivable collection and the payment of prior year payables and accruals during the period.
 
 We invested $2.4 million in property, plant and equipment during the nine months ended March 31, 2010 compared to $1.6 million during the nine months ended March 31, 2009.  Capital additions during the nine months ended March 31, 2010 were primarily related to development and testing equipment required to implement our strategy to develop and sell solutions to the internet and mobile device markets.  Capital additions during the nine months ended March 31, 2009 related primarily to demonstration systems and product development and testing equipment related to our traditional markets.  We expect capital additions to continue at a similar or slightly lower level during the remainder of this fiscal year.
 
 On March 31, 2010, we entered into a Second Amended and Restated Loan and Security Agreement (the “Credit Agreement”) with Silicon Valley Bank (the “Bank”) which amends certain terms of the existing Loan and Security Agreement (the “Prior Agreement’).  The Credit Agreement extends the maturity date of our credit facility to December 31, 2013 and improves the interest rate paid on outstanding advances under the existing $10.0 million credit line (the “Revolver”).  Advances against the Revolver bear interest on the outstanding principal at a rate per annum equal to the greater of 4.00% or either: (1) the prime rate, or (2) the LIBOR rate plus a LIBOR rate margin of 2.75%.  The Credit Agreement also alters the Revolver availability, allowing $10.0 million for advances under the Revolver as long as we maintain cash at or through the Bank of $15.0 million or more.  At all times that we maintain cash at or through the Bank of less than $15.0 million, the amount available for advance under the Revolver is based upon a formula that is primarily based upon  a percentage of eligible accounts receivable, which may result in less than, but no more than $10.0 million of availability.
 
 The interest rate on the Revolver was 4.00% as of March 31, 2010. The outstanding principal amount plus all accrued but unpaid interest is payable in full at the expiration of the credit facility on December 31, 2013.  Based on our cash balance at the Bank as of March 31, 2010, $10.0 million was available to us under the Revolver.  As of March 31, 2010, $0.9 million was drawn under the Revolver and we had approximately $9.0 million of remaining available funds under the Revolver.
 
 Under the Credit Agreement, we are subject to financial covenants similar to those in the Prior Agreement.  Specifically, we are obligated to maintain as of the last day of each quarter, a consolidated tangible net worth of at least $10.6 million, increasing by 100% of quarterly net income and 100% of issuances of equity, net of issuance costs.  Our obligation with respect to maintaining a consolidated quick ratio of at least 1.25:1.00 did not change in the Credit Agreement.  All other material terms of the Prior Agreement remain the same and include additional financial covenants and customary restrictive covenants concerning our operations.  The Credit Agreement is secured by substantially all of the assets of the Company.  As of March 31, 2010, we were in compliance with these covenants as our adjusted quick ratio was 4.62 to 1.00 and our tangible net worth was $28.2 million.
  At March 31, 2010, we had working capital (current assets less current liabilities) of $30.3 million, including cash and cash equivalents of approximately $29.0 million, and had no material commitments for capital expenditures, compared to working capital of $29.7 million at June 30, 2009, including cash and cash equivalents of approximately $29.1 million.  Based upon our existing cash balances, historical cash usage, available credit facility, and anticipated 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.
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  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 ASC 460-20 and ASC 460-10-25.  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, 2009. There have been no material changes to our contractual obligations and commercial commitments during the nine months ended March 31, 2010.
 
 CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
 Certain statements made or incorporated by reference in this quarterly report may constitute “forward-looking statements” within the meaning of the federal securities laws.  When used or incorporated by reference in this report, 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, the impact of our new video strategy on our business, anticipated reduced product revenue due to the economic downturn, the expected timing of revenue recognition for Media Data and Advertising Solutions sales, 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 our 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 video products; failure to effectively service the installed base; the entry of new well-capitalized competitors into our markets; the success of new video solutions; the success of our relationships with technology and channel partners; capital spending patterns by a limited customer base; the current challenging macro-economic environment; privacy concerns over data collection; and the availability of debt or equity financing to support our liquidity needs.
 
 Other important risk factors are discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2009.
 
 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.
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  Item 3. 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. Controls and Procedures
 
 As required by SEC 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”), are recorded, processed, summarized and reported, within the time periods specified in the SEC’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.
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  Part II  Other Information
 
 Item 1. Legal Proceedings
 
 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. Risk Factors
 
 Risk factors are discussed in Part I, Item 1A. of our Annual Report on Form 10-K for the fiscal year ended June 30, 2009.
 
 Item 5. Other Information
 
 On February 5, 2010, the Compensation Committee (the “Committee”) of the Board of Directors of Concurrent adopted a cash bonus plan (the “Plan”) for certain of our employees, including our named executive officers.  The Plan provides for the payment of a cash bonus payment to eligible employees if we meet 100% of a pre-established revenue target for the second half of our 2010 fiscal year.  If the Committee determines that the pre-established revenue target was achieved, 50% of our pre-bonus operating income will be available as a bonus pool to be distributed to eligible employees selected by our chief executive officer, provided that the allocation of the bonus pool must be approved by the Committee.  The total amount of all payments made pursuant to the Plan, if any, will not exceed $875,000.   Cash bonus payments will be made promptly upon such determination and after our audited financials or audit is complete, but no later than September 15, 2010, provided the Plan participant was an employee of ours or our subsidiaries’ through the end of fiscal year 2010.
 
 Item 6. 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).
  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
Second Amended and Restated Loan and Security Agreement dated March 31, 2010 between the Company and Silicon Valley Bank (filed as Exhibit 99.1 to the Form 8-K filed on April 2, 2010).
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 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.
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  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:  April 30, 2010

CONCURRENT COMPUTER CORPORATIONBy:
/s/ Emory O. BerryEmory O. BerryChief Financial Officer and Executive Vice President of Operations(Principal Financial and Accounting Officer)
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 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 4.2 to the Registrant’s Current Report on Form 8-K dated May 15, 2007 and incorporated herein by reference).
 
 10.1
Second Amended and Restated Loan and Security Agreement dated March 31, 2010 between the Company and Silicon Valley Bank (filed as Exhibit 99.1 to the Form 8-K filed on April 2, 2010).
  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.
 
  28