UNITED
STATES




SECURITIES
AND EXCHANGE COMMISSION




Washington,
D.C. 20549










FORM
10-Q


(Mark
One)


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


the
Securities Exchange Act of 1934





oFor
the Quarterly Period Ended March 31, 2009


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   x      No   o





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 o     No
x





Number of
shares of the Registrant's Common Stock, par value $0.01 per share, outstanding
as of April 27, 2009 was 8,552,000.













ConcurrentComputer Corporation


Form
10-Q


For the Three and Nine Months Ended
March 31, 2009




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
                      
                      
                      14Item 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 6.
                      
                      Exhibits
                      
                      
                      25EX-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





Item
      1.
            Condensed
      Consolidated Financial Statements





Concurrent
Computer Corporation


Condensed
Consolidated Balance Sheets


(Dollars
in Thousands)





March
      31,
                
                
                June
      30,2009
                
                
                2008(Unaudited)ASSETSCurrent
      assets:Cash
      and cash equivalents
                
                $
                23,856
                
                
                $
                27,359Accounts
      receivable, less allowance for doubtful accounts of $98 at March 31, 2009
      and $90 at June 30, 2008
                
                
                22,355
                
                
                
                14,422Inventories
      – net
                
                
                3,774
                
                
                
                5,094Prepaid
      expenses and other current assets
                
                
                1,472
                
                
                
                1,360Total
      current assets
                
                
                51,457
                
                
                
                48,235Property,
      plant and equipment – net
                
                
                3,885
                
                
                
                3,867Intangible
      - purchased technology, net
                
                
                3,395
                
                
                
                4,081Intangible
      - customer relationships and trademark, net
                
                
                1,301
                
                
                
                2,530Goodwill
                
                
                -
                
                
                
                15,990Other
      long-term assets – net
                
                
                804
                
                
                
                836Total
      assets
                
                $
                60,842
                
                
                $
                75,539LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                
                $
                12,240
                
                
                $
                13,984Deferred
      revenue
                
                
                10,182
                
                
                
                8,570Total
      current liabilities
                
                
                22,422
                
                
                
                22,554Long-term
      liabilities:Deferred
      revenue
                
                
                1,278
                
                
                
                962Revolving
      bank line of credit
                
                
                949
                
                
                
                949Pension
      liability
                
                
                1,646
                
                
                
                1,878Other
                
                
                1,408
                
                
                
                1,768Total
      liabilities
                
                
                27,703
                
                
                
                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 March 31, 2009 and June 30, 2008,
      respectively
                
                
                83
                
                
                
                83Capital
      in excess of par value
                
                
                205,048
                
                
                
                204,574Accumulated
      deficit
                
                
                (172,504
                )
                
                
                (157,782
                )Treasury
      stock, at cost; 37,788 shares and 0 at March 31, 2009 and June 30, 2008,
      respectively
                
                
                (255
                )
                
                
                -Accumulated
      other comprehensive income
                
                
                767
                
                
                
                553Total
      stockholders' equity
                
                
                33,139
                
                
                
                47,428Total
      liabilities and stockholders' equity
                
                $
                60,842
                
                
                $
                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
                
                
                Nine
      Months EndedMarch 31,
                
                
                March 31,2009
                
                
                2008
                
                
                2009
                
                
                2008Revenues:Product
                
                $
                12,730
                
                
                $
                13,279
                
                
                $
                35,845
                
                
                $
                33,011Service
                
                
                6,513
                
                
                
                6,095
                
                
                
                19,853
                
                
                
                20,196Total
      revenues
                
                
                19,243
                
                
                
                19,374
                
                
                
                55,698
                
                
                
                53,207Cost
      of sales:Product
                
                
                5,813
                
                
                
                6,022
                
                
                
                16,554
                
                
                
                16,384Service
                
                
                2,453
                
                
                
                2,753
                
                
                
                7,265
                
                
                
                8,210Total
      cost of sales
                
                
                8,266
                
                
                
                8,775
                
                
                
                23,819
                
                
                
                24,594Gross
      margin
                
                
                10,977
                
                
                
                10,599
                
                
                
                31,879
                
                
                
                28,613Operating
      expenses:Sales
      and marketing
                
                
                4,200
                
                
                
                3,923
                
                
                
                12,006
                
                
                
                11,437Research
      and development
                
                
                3,522
                
                
                
                4,214
                
                
                
                10,668
                
                
                
                12,445General
      and administrative
                
                
                2,222
                
                
                
                2,406
                
                
                
                6,725
                
                
                
                7,319Impairment
      of goodwill and trademark
                
                
                17,090
                
                
                
                -
                
                
                
                17,090
                
                
                
                -Total
      operating expenses
                
                
                27,034
                
                
                
                10,543
                
                
                
                46,489
                
                
                
                31,201Operating
      (loss) income
                
                
                (16,057
                )
                
                
                56
                
                
                
                (14,610
                )
                
                
                (2,588
                )Gain
      on arbitration settlement, net
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,900Recovery
      of minority investment, net
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1,415Interest
      income
                
                
                19
                
                
                
                203
                
                
                
                175
                
                
                
                677Interest
      expense
                
                
                (32
                )
                
                
                (29
                )
                
                
                (96
                )
                
                
                (102
                )Other
      (expense) income
                
                
                (107
                )
                
                
                91
                
                
                
                (305
                )
                
                
                169(Loss)
      income before income taxes
                
                
                (16,177
                )
                
                
                321
                
                
                
                (14,836
                )
                
                
                1,471(Benefit)
      provision for income taxes
                
                
                (832
                )
                
                
                20
                
                
                
                (114
                )
                
                
                195Net
      (loss) income
                
                $
                (15,345
                )
                
                $
                301
                
                
                $
                (14,722
                )
                
                $
                1,276Net
      (loss) income per shareBasic
                
                $
                (1.85
                )
                
                $
                0.04
                
                
                $
                (1.78
                )
                
                $
                0.15Diluted
                
                $
                (1.85
                )
                
                $
                0.04
                
                
                $
                (1.78
                )
                
                $
                0.15Weighted
      average shares outstanding - basic
                
                
                8,276
                
                
                
                8,306
                
                
                
                8,281
                
                
                
                8,300Weighted
      average shares outstanding - diluted
                
                
                8,276
                
                
                
                8,318
                
                
                
                8,281
                
                
                
                8,316





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)




Nine
      Months EndedMarch 31,2009
                
                
                2008OPERATING
      ACTIVITIESNet
      (loss) income
                
                $
                (14,722
                )
                
                $
                1,276Adjustments
      to reconcile net (loss) income to net cash (used in) provided by operating
      activities:Depreciation
      and amortization
                
                
                2,421
                
                
                
                3,056Impairment
      of goodwill and trademark
                
                
                17,090
                
                
                
                -Share-based
      compensation
                
                
                474
                
                
                
                798Recovery
      of minority investment, net
                
                
                -
                
                
                
                (1,415
                )Other
      non-cash expenses
                
                
                (95
                )
                
                
                (153
                )Changes
      in operating assets and liabilities:Accounts
      receivable
                
                
                (7,946
                )
                
                
                130Inventories
                
                
                1,318
                
                
                
                (228
                )Prepaid
      expenses and other current assets
                
                
                (153
                )
                
                
                (338
                )Other
      long-term assets
                
                
                40
                
                
                
                10Accounts
      payable and accrued expenses
                
                
                (1,744
                )
                
                
                (2,092
                )Deferred
      revenue
                
                
                1,928
                
                
                
                2,159Other
      long-term liabilities
                
                
                133
                
                
                
                668Total
      adjustments to net (loss) income
                
                
                13,466
                
                
                
                2,595Net
      cash (used in) provided by operating activities
                
                
                (1,256
                )
                
                
                3,871INVESTING
      ACTIVITIESCapital
      expenditures
                
                
                (1,631
                )
                
                
                (1,496
                )Recovery
      of minority investment, net
                
                
                -
                
                
                
                1,415Net
      cash used in investing activities
                
                
                (1,631
                )
                
                
                (81
                )FINANCING
      ACTIVITIESRepayment
      of revolving bank line of credit
                
                
                -
                
                
                
                (391
                )Proceeds
      from revolving bank line of credit
                
                
                -
                
                
                
                263Purchase
      of treasury stock
                
                
                (255
                )
                
                
                (10
                )Net
      cash used in financing activities
                
                
                (255
                )
                
                
                (138
                )Effect
      of exchange rates on cash and cash equivalents
                
                
                (361
                )
                
                
                561(Decrease)
      increase in cash and cash equivalents
                
                
                (3,503
                )
                
                
                4,213Cash
      and cash equivalents at beginning of period
                
                
                27,359
                
                
                
                20,416Cash
      and cash equivalents at end of period
                
                $
                23,856
                
                
                $
                24,629Cash
      paid during the period for:Interest
                
                $
                47
                
                
                $
                54Income
      taxes (net of refunds)
                
                $
                682
                
                
                $
                174





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 solutions  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
video solutions 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.  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 $159.1 million for income tax purposes, of which $13.6 million
expire immediately after our 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 March 31, 2009 and is
currently conducting a study to make a final determination on this matter which
Concurrent expects to complete prior to its fiscal year end.  If
Concurrent determines that an ownership change has occurred, this event could
subject Concurrent’s net operating loss carryforwards to an annual limitation
and possibly restrict Concurrent’s ability to use net operating loss
carryforwards 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) SFAS 157-3, Determining the Fair Value of a
Financial Asset When the Market for That Asset Is Not Active(“FSP
157-3”).  FSP 157-3 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(“SFAS 154”).  However, SFAS
154’s disclosure provisions 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 Condensed Consolidated Financial Statements (Continued)








In
December 2008, the FASB issued FSP 132R-1,Employers’ Disclosures about
Pensions and Other Postretirement Benefits(“FSP 132R-1”).  FSP
132R-1 requires enhanced disclosures about the plan assets of a Company’s
defined benefit pension and other postretirement plans intended to provide users
of financial statements with a greater understanding of:  (1) how
investment allocation decisions are made, including the factors that are
pertinent to an understanding of investment policies and strategies; (2) the
major categories of plan assets; (3) the inputs and valuation techniques used to
measure the fair value of plan assets; (4) the effect of fair value measurements
using significant unobservable inputs (Level 3) on changes in plan assets for
the period; and (5) significant concentrations of risk within plan
assets.  FSP 132R-1 is effective for years ending after December 15,
2009.  Concurrent will provide the required disclosures for all its
filings for periods subsequent to the effective date.





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 prior to the split were combined into one share of
common stock.  The number of shares subject to outstanding options and
warrants were 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 nine
months ended March 31, 2008 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 1,029,000 and 1,011,000 for the three months ended March 31, 2009
and 2008, respectively, were excluded from the calculation as their effect was
antidilutive.  Common share equivalents of 1,059,000 and 1,001,000 for
the nine months ended March 31, 2009 and 2008, 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 March 31,
                
                
                Nine
      Months Ended March 31,2009
                
                
                2008
                
                
                2009
                
                
                2008Basic
      and diluted earnings per share (EPS) calculation:Net
      (loss) income
                
                $
                (15,345
                )
                
                $
                301
                
                
                $
                (14,722
                )
                
                $
                1,276Basic
      weighted average number of shares outstanding
                
                
                8,276
                
                
                
                8,306
                
                
                
                8,281
                
                
                
                8,300Effect
      of dilutive securities:Restricted
      stock
                
                
                -
                
                
                
                12
                
                
                
                -
                
                
                
                16Diluted
      weighted average number of shares outstanding
                
                
                8,276
                
                
                
                8,318
                
                
                
                8,281
                
                
                
                8,316Basic
      EPS
                
                $
                (1.85
                )
                
                $
                0.04
                
                
                $
                (1.78
                )
                
                $
                0.15Diluted
      EPS
                
                $
                (1.85
                )
                
                $
                0.04
                
                
                $
                (1.78
                )
                
                $
                0.15





6
 Table of Contents





Concurrent
Computer Corporation


Notes
to Condensed Consolidated Financial Statements (Continued)








3.
            Share-Based
      Compensation





At March
31, 2009, 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 March 31, 2009, Concurrent
issued 33,000 shares of restricted stock to its employees, of which
approximately 3,000 shares will be released over a four year vesting period, and
the remaining 30,000 will be released only when certain performance criteria are
achieved over time.  During the nine months ended March 31, 2009,
Concurrent issued 254,000 shares of restricted stock to employees and the Board
of Directors, of which approximately 141,000 shares will be released over a four
year vesting period, and the remaining 113,000 will be 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.





Concurrent
uses the Black-Scholes valuation model to estimate the fair value of each option
award on the date of grant.  Concurrent granted 0 and 20,000 stock
options during the three and nine months ended March 31, 2009,
respectively.  As of March 31, 2009, Concurrent had approximately
650,000 stock options and approximately 276,000 restricted shares
outstanding.





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
                
                
                Nine
      Months EndedMarch 31,
                
                
                March 31,2009
                
                
                2008
                
                
                2009
                
                
                2008Share-based
      compensation expense included in the Statement of
    Operations:Cost
      of sales
                
                $
                16
                
                
                $
                14
                
                
                $
                28
                
                
                $
                24Sales
      and marketing
                
                
                55
                
                
                
                61
                
                
                
                106
                
                
                
                153Research
      and development
                
                
                45
                
                
                
                43
                
                
                
                110
                
                
                
                99General
      and administrative
                
                
                112
                
                
                
                181
                
                
                
                230
                
                
                
                522Total
                
                
                228
                
                
                
                299
                
                
                
                474
                
                
                
                798Tax
      benefit
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Share-based
      compensation expense, net of taxes
                
                $
                228
                
                
                $
                299
                
                
                $
                474
                
                
                $
                798





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):





March
      31,
                  
                  
                  June
      30,2009
                  
                  
                  2008Raw
      materials, net
                  
                  $
                  2,844
                  
                  
                  $
                  3,849Work-in-process
                  
                  
                  525
                  
                  
                  
                  609Finished
      goods
                  
                  
                  405
                  
                  
                  
                  636$
                  3,774
                  
                  
                  $
                  5,094





7
 Table of Contents





Concurrent
Computer Corporation


Notes
to Condensed Consolidated Financial Statements (Continued)








At March
31, 2009 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 $1,234,000 at March 31, 2009 and June 30, 2008, to its estimated
net realizable value.





5.
            Goodwill
      and Other Intangible Assets





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(“SFAS
131”).  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 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 a manner that
approximates fair value.





During
the three months ended March 31, 2009, Concurrent initiated an interim goodwill
impairment test in accordance with SFAS 142, due to its sustained, reduced stock
price and market capitalization during the quarter.  Concurrent
employed the following methodologies to determine the fair-value of its
reporting units:




•
            A
      market capitalization approach, which measures market capitalization of
      Concurrent at the measurement date.





•
            A
      discounted cash flow approach, which entails determining fair value of
      each reporting unit using expected discounted cash flows. This methodology
      requires significant judgment to estimate fair value, including
      projections of future cash flows and expected growth rates, the discount
      rate reflecting the risk inherent in such future cash flows, Concurrent’s
      interpretation of current economic indicators, Concurrent’s strategic and
      business operating plans, and other relevant
  assumptions.





•
            A
      guideline company approach, which entails analysis of market multiples
      based on comparable, publicly traded
companies.




Concurrent
tested its goodwill during the third quarter of fiscal 2009 and concluded that a
full impairment existed due to declines in the fair values of Concurrent’s
reporting units. Three changes in circumstances led to the finding of
impairment:




•
            Concurrent’s
      stock price and market capitalization has experienced a sustained
      decline;





•
            Valuation
      estimates based on analysis of comparable companies also continued to
      decline;





•
            The
      sustained economic downturn has increased Concurrent’s estimated cost of
      capital which has impacted Concurrent’s discounted, projected future cash
      flows.




Concurrent
concluded that an impairment charge of $15,990,000 should be recorded during the
three months ended March 31, 2009, resulting in goodwill being fully
impaired.  This is a non-cash charge and has been recognized as an
“Impairment of goodwill and trademark” as a part of operating results during the
third quarter of Concurrent’s fiscal 2009, ended March 31, 2009.




Also for
the period ended March 31, 2009, Concurrent completed its strategic marketing
plan.  As a result of the strategic planning process, Concurrent
rebranded certain products to better reflect its strategic direction and no
longer intends to use the Everstream trademark.  Consequently,
Concurrent has recorded a $1,100,000 impairment of its Everstream trademark
during the three months ended March 31, 2009, resulting in the trademark being
fully impaired.   As a result of the full trademark impairment,
Concurrent also eliminated a related $430,000 deferred tax liability by
recording a non-current deferred tax benefit to the line item “(Benefit)
provision for income taxes” within the Statement of Operations.





8
 Table of Contents





Concurrent
Computer Corporation


Notes
to Condensed Consolidated Financial Statements (Continued)








Intangible assets, other than goodwill
consist of the following (in thousands):





March
      31,
                  
                  
                  June
      30,2009
                  
                  
                  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
                  
                  
                  (4,305
                  )
                  
                  
                  (3,619
                  )Customer
      relationships
                  
                  
                  (599
                  )
                  
                  
                  (470
                  )Total
      accumulated amortization
                  
                  
                  (4,904
                  )
                  
                  
                  (4,089
                  )Trademark
                  
                  
                  -
                  
                  
                  
                  1,100Total
      intangible assets, net
                  
                  $
                  4,696
                  
                  
                  $
                  6,611





Amortization
expense was $815,000 for each of the nine months ended March 31, 2009 and 2008,
respectively.





6.
            Accounts
      Payable and Accrued Expenses





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





March
      31,
                  
                  
                  June
      30,2009
                  
                  
                  2008Accounts
      payable, trade
                  
                  $
                  6,316
                  
                  
                  $
                  7,003Accrued
      payroll, vacation, severance and other employee expenses
                  
                  
                  4,546
                  
                  
                  
                  4,338Other
      accrued expenses
                  
                  
                  1,378
                  
                  
                  
                  2,643$
                  12,240
                  
                  
                  $
                  13,984





7.
            Comprehensive
      Income (Loss)





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





Three
      Months Ended
                
                
                Nine
      Months EndedMarch
      31,
                
                
                March
      31,2009
                
                
                2008
                
                
                2009
                
                
                2008Net
      (loss) income
                
                $
                (15,345
                )
                
                $
                301
                
                
                $
                (14,722
                )
                
                $
                1,276Other
      comprehensive income (loss):Foreign
      currency translation (loss) gain
                
                
                (65
                )
                
                
                290
                
                
                
                184
                
                
                
                503Amortization
      of pension gain and transition amount
                
                
                9
                
                
                
                (21
                )
                
                
                30
                
                
                
                (60
                )Total
      comprehensive (loss) income
                
                $
                (15,401
                )
                
                $
                570
                
                
                $
                (14,508
                )
                
                $
                1,719








9
 Table of Contents





Concurrent
Computer Corporation


Notes
to Condensed Consolidated Financial Statements (Continued)








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 nine months ended March 31,
2008.  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 video solutions 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 nine months ended
March 31, 2008.





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





In
accordance with SFAS 131,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.





10
 Table of Contents





Concurrent
Computer Corporation


Notes
to Condensed Consolidated Financial Statements (Continued)








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
                  
                  
                  Nine
      Months EndedMarch
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008United
      States
                  
                  $
                  15,797
                  
                  
                  $
                  14,894
                  
                  
                  $
                  44,668
                  
                  
                  $
                  41,845Japan
                  
                  
                  1,140
                  
                  
                  
                  1,435
                  
                  
                  
                  6,258
                  
                  
                  
                  4,287Other
      Asia Pacific countries
                  
                  
                  698
                  
                  
                  
                  565
                  
                  
                  
                  1,233
                  
                  
                  
                  1,814Asia
      Pacific
                  
                  
                  1,838
                  
                  
                  
                  2,000
                  
                  
                  
                  7,491
                  
                  
                  
                  6,101Europe
                  
                  
                  1,608
                  
                  
                  
                  2,480
                  
                  
                  
                  3,539
                  
                  
                  
                  5,261Total
      revenue
                  
                  $
                  19,243
                  
                  
                  $
                  19,374
                  
                  
                  $
                  55,698
                  
                  
                  $
                  53,207





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
                  
                  
                  Nine
      Months EndedMarch
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Customer
      A
                  
                  
                  21
                  %
                  
                  
                  14
                  %
                  
                  
                  19
                  %
                  
                  
                  12
                  %Customer
      B
                  
                  
                  17
                  %
                  
                  
                  19
                  %
                  
                  
                  21
                  %
                  
                  
                  11
                  %Customer
      C
                  
                  
                  14
                  %
                  
                  
                  16
                  %
                  
                  <10
                  %
                  
                  <10
                  %





Concurrent
assesses credit risk through ongoing credit evaluations of customers’ financial
condition and collateral is generally not required.  At March 31,
2009, one customer accounted for $5,262,000 or 23% of trade receivables, a
second customer accounted for $3,048,000 or 14% of trade receivables, and a
third customer accounted for $2,946,000 or 13% 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 March 31, 2009 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 March 31, 2009, purchases from each
of three suppliers were equal to, or in excess of 10% of Concurrent’s total
purchases.  These three suppliers accounted for 24%, 23% and 19% of
Concurrent’s purchases during the three months ended March 31,
2009.  Also, for the three months ended March 31, 2008, purchases from
each of three suppliers were equal to, or in excess of 10% of Concurrent’s total
purchases.  These three suppliers accounted for 23%, 22% and 15% of
Concurrent’s purchases during the three months ended March 31,
2008.  For the nine months ended March 31, 2009, purchases from three
suppliers were in excess of 10% of Concurrent’s total
purchases.  These three suppliers accounted for 24%, 18% and 17% of
Concurrent’s purchases during the nine months ended March 31,
2009.  Also, for the nine months ended March 31, 2008, purchases from
three suppliers were in excess of 10% of Concurrent’s total
purchases.  These three suppliers accounted for 20%, 18% and 12% of
Concurrent’s purchases during the nine months ended March 31, 2008.





11.
            Term
      Loan and Revolving Credit Facility





Concurrent
has a Credit Agreement with Silicon Valley Bank that provides for a
$10,000,000 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, 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 4.5% as of March 31,
2009. 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 March 31, 2009, approximately $9,960,000 was available to
Concurrent under the Revolver.  As of March 31, 2009, $949,000 was
drawn under the Revolver, resulting in approximately $9,011,000 of remaining
available funds under the Revolver.





11
 Table of Contents





Concurrent
Computer Corporation


Notes
to Condensed Consolidated Financial Statements (Continued)








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 $10,462,000, as of
March 31, 2009. The Credit Agreement also contains customary restrictive
covenants concerning Concurrent’s operations.  As of March 31, 2009,
Concurrent was in compliance with these covenants as its adjusted quick ratio
was 3.50 to 1.00 and our tangible net worth was $27,977,000.





12.
            Retirement
      Plans





The
following table provides a detail of the components of net periodic benefit cost
of Concurrent’s German Subsidiary’s defined benefit pension plan for the three
and nine months ended March 31, 2009 and 2008 (in thousands):





Three
      Months Ended
                  
                  
                  Nine
      Months EndedMarch
      31,
                  
                  
                  March
      31,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Service
      cost
                  
                  $
                  4
                  
                  
                  $
                  6
                  
                  
                  $
                  13
                  
                  
                  $
                  18Interest
      cost
                  
                  
                  60
                  
                  
                  
                  55
                  
                  
                  
                  188
                  
                  
                  
                  158Expected
      return on plan assets
                  
                  
                  (31
                  )
                  
                  
                  (35
                  )
                  
                  
                  (98
                  )
                  
                  
                  (101
                  )Amortization
      of net (gain) loss
                  
                  
                  9
                  
                  
                  
                  (30
                  )
                  
                  
                  30
                  
                  
                  
                  (87
                  )Amortization
      of transition amount
                  
                  
                  -
                  
                  
                  
                  9
                  
                  
                  
                  -
                  
                  
                  
                  27Net
      periodic benefit cost
                  
                  $
                  42
                  
                  
                  $
                  5
                  
                  
                  $
                  133
                  
                  
                  $
                  15





Concurrent
contributed $14,000 and $16,000 to its German subsidiary’s defined benefit plan
during the three months ended March 31, 2009 and 2008, respectively, and expects
to make similar contributions during the remaining quarter of fiscal
2009.  Concurrent contributed $43,000 and $47,000 to its German
subsidiary’s defined benefit plan during the nine months ended March 31, 2009
and 2008, 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 March 31, 2009 and 2008,
Concurrent contributed $132,000 and $131,000 to this plan,
respectively.  During the nine months ended March 31, 2009 and 2008,
Concurrent contributed $379,000 and $373,000 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
through fiscal year 2009, contingent upon their continued employment with
Concurrent.  During the three months ended March 31, 2009 and 2008,
Concurrent contributed $83,000 and $115,000 to the Stakeholder Plan,
respectively.  During the nine months ended March 31, 2009 and 2008,
Concurrent contributed $284,000 and $354,000 to this plan,
respectively.





12
 Table of Contents





Concurrent
Computer Corporation


Notes
to 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 March 31, 2009,
the maximum contingent liability under these agreements is
$2,025,000.  Concurrent’s employment agreements with certain of its
officers contain certain offset provisions, as defined in their respective
agreements.





13
 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 solutions 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
video solutions 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.  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 have
announced a new strategy to sell our video solutions, including our media data
and advertising solutions to the internet and mobile device markets, 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 March 31, 2009, the price per share of our
common stock declined by 47% from the closing price per share on June 30,
2008.  The recent economic downturn has persisted to the point that
our market capitalization has remained well below our book value and our
business and future cash flows may be impacted.  We performed an
interim impairment analysis of goodwill and other intangible assets during our
third quarter of fiscal 2009.  As a result of this analysis, we
recorded a $16.0 million impairment of our goodwill during the three months
ended March 31, 2009, and such loss is reflected in operating expenses in the
Consolidated Statements of Operations.





As
a result of the strategic planning process for the three months ended March 31,
2009, Concurrent rebranded certain products to better reflect its strategic
direction and no longer intends to use the Everstream
trademark.  Consequently, Concurrent recorded a $1.1 million
impairment of its Everstream trademark and a $0.4 million deferred tax benefit
for the three months ended March 31, 2009.





14
 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
                    
                    
                    Nine
      Months EndedMarch
      31,
                    
                    
                    March
      31,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Revenues:
                    
                    (Unaudited)
                    
                    
                    (Unaudited)Product
                    
                    
                    66.2
                    %
                    
                    
                    68.5
                    %
                    
                    
                    64.4
                    %
                    
                    
                    62.0
                    %Service
                    
                    
                    33.8
                    
                    
                    
                    31.5
                    
                    
                    
                    35.6
                    
                    
                    
                    38.0Total
      revenues
                    
                    
                    100.0
                    
                    
                    
                    100.0
                    
                    
                    
                    100.0
                    
                    
                    
                    100.0Cost
      of sales (% of respective sales category):Product
                    
                    
                    45.7
                    
                    
                    
                    45.3
                    
                    
                    
                    46.2
                    
                    
                    
                    49.6Service
                    
                    
                    37.7
                    
                    
                    
                    45.2
                    
                    
                    
                    36.6
                    
                    
                    
                    40.7Total
      cost of sales
                    
                    
                    43.0
                    
                    
                    
                    45.3
                    
                    
                    
                    42.8
                    
                    
                    
                    46.2Gross
      margin
                    
                    
                    57.0
                    
                    
                    
                    54.7
                    
                    
                    
                    57.2
                    
                    
                    
                    53.8Operating
      expenses:Sales
      and marketing
                    
                    
                    21.8
                    
                    
                    
                    20.2
                    
                    
                    
                    21.5
                    
                    
                    
                    21.5Research
      and development
                    
                    
                    18.3
                    
                    
                    
                    21.8
                    
                    
                    
                    19.1
                    
                    
                    
                    23.4General
      and administrative
                    
                    
                    11.5
                    
                    
                    
                    12.4
                    
                    
                    
                    12.1
                    
                    
                    
                    13.8Impairment
      of goodwill and trademark
                    
                    
                    88.8
                    
                    
                    
                    -
                    
                    
                    
                    30.7
                    
                    
                    
                    -Total
      operating expenses
                    
                    
                    140.4
                    
                    
                    
                    54.4
                    
                    
                    
                    83.4
                    
                    
                    
                    58.7Operating
      (loss) income
                    
                    
                    (83.4
                    )
                    
                    
                    0.3
                    
                    
                    
                    (26.2
                    )
                    
                    
                    (4.9
                    )Gain
      on arbitration settlement, net
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    3.6Recovery
      of minority investment, net
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2.7Interest
      (expense) income - net
                    
                    
                    (0.1
                    )
                    
                    
                    0.9
                    
                    
                    
                    0.1
                    
                    
                    
                    1.1Other
      (expense) income - net
                    
                    
                    (0.6
                    )
                    
                    
                    0.5
                    
                    
                    
                    (0.5
                    )
                    
                    
                    0.3(Loss)
      income before income taxes
                    
                    
                    (84.1
                    )
                    
                    
                    1.7
                    
                    
                    
                    (26.6
                    )
                    
                    
                    2.8(Benefit)
      provision for income taxes
                    
                    
                    (4.3
                    )
                    
                    
                    0.1
                    
                    
                    
                    (0.2
                    )
                    
                    
                    0.4Net
      (loss) income
                    
                    
                    (79.8
                    )%
                    
                    
                    1.6
                    %
                    
                    
                    (26.4
                    )%
                    
                    
                    2.4
                    %





15
 Table of Contents





Results
of Operations





The three months ended March 31,
2009 compared to the three months ended March 31, 2008





Three
      Months EndedMarch 31,(Dollars
      in Thousands)
                  
                  2009
                  
                  
                  2008
                  
                  
                  $ Change
                  
                  
                  % ChangeProduct
      revenues
                  
                  $
                  12,730
                  
                  
                  $
                  13,279
                  
                  
                  $
                  (549
                  )
                  
                  
                  (4.1
                  %)Service
      revenues
                  
                  
                  6,513
                  
                  
                  
                  6,095
                  
                  
                  
                  418
                  
                  
                  
                  6.9
                  %Total
      revenues
                  
                  
                  19,243
                  
                  
                  
                  19,374
                  
                  
                  
                  (131
                  )
                  
                  
                  (0.7
                  %)Product
      cost of sales
                  
                  
                  5,813
                  
                  
                  
                  6,022
                  
                  
                  
                  (209
                  )
                  
                  
                  (3.5
                  %)Service
      cost of sales
                  
                  
                  2,453
                  
                  
                  
                  2,753
                  
                  
                  
                  (300
                  )
                  
                  
                  (10.9
                  %)Total
      cost of sales
                  
                  
                  8,266
                  
                  
                  
                  8,775
                  
                  
                  
                  (509
                  )
                  
                  
                  (5.8
                  %)Product
      gross margin
                  
                  
                  6,917
                  
                  
                  
                  7,257
                  
                  
                  
                  (340
                  )
                  
                  
                  (4.7
                  %)Service
      gross margin
                  
                  
                  4,060
                  
                  
                  
                  3,342
                  
                  
                  
                  718
                  
                  
                  
                  21.5
                  %Total
      gross margin
                  
                  
                  10,977
                  
                  
                  
                  10,599
                  
                  
                  
                  378
                  
                  
                  
                  3.6
                  %Operating
      expenses:Sales
      and marketing
                  
                  
                  4,200
                  
                  
                  
                  3,923
                  
                  
                  
                  277
                  
                  
                  
                  7.1
                  %Research
      and development
                  
                  
                  3,522
                  
                  
                  
                  4,214
                  
                  
                  
                  (692
                  )
                  
                  
                  (16.4
                  %)General
      and administrative
                  
                  
                  2,222
                  
                  
                  
                  2,406
                  
                  
                  
                  (184
                  )
                  
                  
                  (7.6
                  %)Impairment
      of goodwill and trademark
                  
                  
                  17,090
                  
                  
                  
                  -
                  
                  
                  
                  17,090
                  
                  
                  NM(1)Total
      operating expenses
                  
                  
                  27,034
                  
                  
                  
                  10,543
                  
                  
                  
                  16,491
                  
                  
                  
                  156.4
                  %Operating
      (loss) income
                  
                  
                  (16,057
                  )
                  
                  
                  56
                  
                  
                  
                  (16,113
                  )
                  
                  NM(1)Interest
      (expense) income - net
                  
                  
                  (13
                  )
                  
                  
                  174
                  
                  
                  
                  (187
                  )
                  
                  NM(1)Other
      (expense) income - net
                  
                  
                  (107
                  )
                  
                  
                  91
                  
                  
                  
                  (198
                  )
                  
                  NM(1)(Loss)
      income before income taxes
                  
                  
                  (16,177
                  )
                  
                  
                  321
                  
                  
                  
                  (16,498
                  )
                  
                  NM(1)(Benefit)
      provision for income taxes
                  
                  
                  (832
                  )
                  
                  
                  20
                  
                  
                  
                  (852
                  )
                  
                  NM(1)Net
      (loss) income
                  
                  $
                  (15,345
                  )
                  
                  $
                  301
                  
                  
                  $
                  (15,646
                  )
                  
                  NM(1)





(1) NM
denotes percentage is not meaningful





Product
Revenue.  Total product revenue for the three months ended
March 31, 2009 was approximately $12.7 million, a decrease of approximately $0.6
million, or 4.1%, from $13.3 million for the three months ended March 31,
2008.  The decrease in product revenue resulted from the $0.3 million,
or 3.6%, decrease in video product sales and the $0.2 million, or 5.1%, decrease
in real-time product sales.  Fluctuation in video revenue is often due
to the fact that we have customers making periodic large purchases that account
for a significant percentage of revenue.  Decreasing volume of
real-time product sales is primarily due to the impact of the economic downturn
on our customers.  We believe that the trend of declining real-time
product revenue may continue as a result of the sustained economic
downturn.





Service
Revenue.Total service revenue for the three months ended
March 31, 2009 was $6.5 million, an increase of $0.4 million, or 6.9%, from $6.1
million for the three months ended March 31, 2008.  The increase in
service revenue was due to the $0.6 million, or 16.1%, increase in service
revenue related to video products. Video service revenue increased due to
additional installations during the three months ended March 31, 2009, compared
to the same period in the prior year, and also because we continue to expand our
base of video market deployments that generate maintenance and support service
revenue.





16
 Table of Contents





Partially
offsetting the increase in video related service revenue, service revenue
related to real-time products during the three months ended March 31, 2009
decreased approximately $0.2 million, or 5.8% from the three months ended March
31, 2008.  For years we have experienced a steady decline in real-time
service revenues, 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 decline
further, partially offset by newer system service, as additional legacy systems
are eventually removed from service.





Product Gross
Margin.  Product gross margin was $6.9 million for the three
months ended March 31, 2009, a decrease of approximately $0.3 million, or 4.7%,
from approximately $7.3 million for the three months ended March 31,
2008.  Product gross margin as a percentage of product revenue
remained approximately the same, decreasing slightly to 54.3% in the three
months ended March 31, 2009 from 54.7% in the three months ended March 31,
2008.





Service Gross
Margin.  The gross margin on service revenue increased to $4.1
million, or 62.3% of service revenue in the three months ended March 31, 2009
from $3.3 million, or 54.8% of service revenue in the three months ended March
31, 2008.  The increase in service margins as a percentage of service
revenue was primarily due to the $0.3 million reduction in service costs during
the three months ended March 31, 2009, 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 similar or 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 $0.3 million, or 7.1% to $4.2 million in the three months ended
March 31, 2009 from $3.9 million in the three months ended March 31,
2008.  Sales and marketing expense increased primarily because we
incurred $0.2 million of expenses from our strategic marketing launch during the
three months ended March 31, 2009.  Also, we incurred $0.1 million of
additional salaries wages and benefits and $0.2 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 increases in
costs, we incurred $0.2 million less in commission expense in the three months
ended March 31, 2009, compared to the same period in the prior
year.





Research and
Development.Research and development expenses decreased
approximately $0.7 million, or 16.4%, to approximately $3.5 million in the three
months ended March 31, 2009 from $4.2 million in the three months ended March
31, 2008.  Decreasing research and development expenses were primarily
attributable to a $0.4 reduction of research and development related salaries,
benefits and other employee related costs as part of our effort to reduce
operating expenses.  Also, an additional $0.2 million of development
costs incurred for customized solutions sold to customers were charged to cost
of sales in the current period, compared to the same period of the prior
year.  Additionally, costs incurred by our UK development group
decreased by approximately $0.2 million during the three months ended March 31,
2009, compared to the same period in the prior year, due to the declining value
of the British pound relative to the U.S. dollar.





General and
Administrative.General and administrative expenses decreased
approximately $0.2 million, or 7.6%, to approximately $2.2 million in the three
months ended March 31, 2009 from $2.4 million in the three months ended March
31, 2008.  Decreasing general and administrative expenses were
primarily attributable to $0.2 million of severance expense that we incurred in
the prior year period that did not recur during the three months ended March 31,
2009.





Goodwill and Trademark
Impairment.  During the three months ended March 31, 2009, we
recorded total goodwill and trademark impairment charges of $17.1
million.  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.  This impairment charge resulted in a net goodwill balance of
$0 as of March 31, 2009.  Additionally, as a result of our strategic
planning process for the period ended March 31, 2009, we have 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, which resulted in a net trademark balance of $0 as of March 31,
2009.





17
 Table of Contents





Interest income (expense) -
net.Interest income decreased approximately $0.2 million
during the three months ended March 31, 2009, compared to the same period of the
prior year, primarily due the decrease in yield from our cash caused by the
decline in interest rates during the past twelve months.





Other (Expense) Income -
net.  During the three months ended March 31, 2009, we incurred
approximately $0.1 million of realized currency translation
losses.  These losses resulted from foreign currency transactions by
our subsidiaries for which the Japanese yen and Euro are the functional
currency.





(Benefit) Provision for Income
Taxes.We recorded an income tax benefit for our domestic and
foreign subsidiaries of ($0.8) million in the three months ended March 31, 2009,
compared to tax expense of less than $0.1 million for our domestic and foreign
subsidiaries in the three months ended March 31, 2008.  The change in
the consolidated effective tax rate during the three months ended March 31,
2009, compared to the same period in the prior year was primarily attributable
to a $0.4 million deferred tax benefit resulting from the 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.  Net operating loss
carryforwards were available to reduce otherwise taxable income recorded in the
US in the three months ended March 31, 2009.  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.  Our Japan subsidiary 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 $159.1 million for income tax purposes, of which $13.6 million
will expire immediately after fiscal year 2009, and the remainder will 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 March 31, 2009 and are
currently conducting a study to make a final determination on this
matter.  We expect to complete this study prior to our fiscal year
ended June 30, 2009.  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 (Loss)
Income.The net loss for the three months ended March 31, 2009
was ($15.3) million or ($1.85) per basic and diluted share compared to net
income for the three months ended March 31, 2008 of $0.3 million, or $0.04 per
basic and diluted share.




18
 Table of Contents





The nine months ended March 31, 2009
compared to the nine months ended March 31, 2008




Nine
      Months EndedMarch 31,(Dollars
      in Thousands)
                
                2009
                
                
                2008
                
                
                $ Change
                
                
                % ChangeProduct
      revenues
                
                $
                35,845
                
                
                $
                33,011
                
                
                $
                2,834
                
                
                
                8.6
                %Service
      revenues
                
                
                19,853
                
                
                
                20,196
                
                
                
                (343
                )
                
                
                (1.7
                %)Total
      revenues
                
                
                55,698
                
                
                
                53,207
                
                
                
                2,491
                
                
                
                4.7
                %Product
      cost of sales
                
                
                16,554
                
                
                
                16,384
                
                
                
                170
                
                
                
                1.0
                %Service
      cost of sales
                
                
                7,265
                
                
                
                8,210
                
                
                
                (945
                )
                
                
                (11.5
                %)Total
      cost of sales
                
                
                23,819
                
                
                
                24,594
                
                
                
                (775
                )
                
                
                (3.2
                %)Product
      gross margin
                
                
                19,291
                
                
                
                16,627
                
                
                
                2,664
                
                
                
                16.0
                %Service
      gross margin
                
                
                12,588
                
                
                
                11,986
                
                
                
                602
                
                
                
                5.0
                %Total
      gross margin
                
                
                31,879
                
                
                
                28,613
                
                
                
                3,266
                
                
                
                11.4
                %Operating
      expenses:Sales
      and marketing
                
                
                12,006
                
                
                
                11,437
                
                
                
                569
                
                
                
                5.0
                %Research
      and development
                
                
                10,668
                
                
                
                12,445
                
                
                
                (1,777
                )
                
                
                (14.3
                %)General
      and administrative
                
                
                6,725
                
                
                
                7,319
                
                
                
                (594
                )
                
                
                (8.1
                %)Impairment
      of goodwill and trademark
                
                
                17,090
                
                
                
                -
                
                
                
                17,090
                
                
                NM(1)Total
      operating expenses
                
                
                46,489
                
                
                $
                31,201
                
                
                
                15,288
                
                
                
                49.0
                %Operating
      (loss) income
                
                
                (14,610
                )
                
                
                (2,588
                )
                
                
                (12,022
                )
                
                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
                
                
                79
                
                
                
                575
                
                
                
                (496
                )
                
                
                (86.3
                %)Other
      (expense) income - net
                
                
                (305
                )
                
                
                169
                
                
                
                (474
                )
                
                NM(1)(Loss)
      income before income taxes
                
                
                (14,836
                )
                
                
                1,471
                
                
                
                (16,307
                )
                
                NM(1)(Benefit)
      provision for income taxes
                
                
                (114
                )
                
                
                195
                
                
                
                (309
                )
                
                NM(1)Net
      (loss) income
                
                $
                (14,722
                )
                
                $
                1,276
                
                
                
                (15,998
                )
                
                NM(1)





(1) NM
denotes percentage is not meaningful





Product
Revenue.  Total product revenue for the nine months ended March
31, 2009 was approximately $35.8 million, an increase of approximately $2.8
million, or 8.6%, from $33.0 million for the nine months ended March 31,
2008.  The increase in product sales resulted from the approximately
$4.5 million, or 23.4%, increase in video product sales to $24.0 million in the
nine months ended March 31, 2009, from $19.4 million in the nine months ended
March 31, 2008.  The increase in video product revenue was primarily
generated by $2.8 million and $1.7 million increases in revenue from sales in
North America and Asia, respectively.  North American video solutions
product sales increased due to existing customers replacing older systems with
our latest generation video solutions system, expanding existing systems, and
deploying video solutions to new markets.  Video solutions product
sales increased in Japan due to completion of customized software products to a
Japanese cable operator in the nine months ended March 31, 2009, that was
incremental over prior year revenue.    Fluctuation in video
solutions revenue is often due to the fact that we have customers making
periodic large purchases that account for a significant percentage of
revenue.





Real-time
product sales decreased $1.7 million, or 12.6%, to $11.9 million in the nine
months ended March 31, 2009 from $13.6 million in the nine months ended March
31, 2008.  This decrease was due to a $1.5 million and $0.5 million
decrease in revenue from sales in Europe and North America, respectively,
resulting from decreasing volume of system sales in these markets during the
nine months ended March 31, 2009, compared to the same period in the prior
year.  We believe that decreasing volume of real-time product sales is
primarily due to the impact of the economic downturn on our customers in these
markets.  This trend of declining real-time product revenue may
continue as a result of the sustained economic downturn.





19
 Table of Contents





Service
Revenue.Total service revenue for the nine months ended March
31, 2009 was $19.9 million, a decrease of $0.3 million, or 1.7%, from $20.2
million for the nine months ended March 31, 2008.  The decrease in
service revenue was due to the approximate $0.9 million, or 10.5%, decrease in
service revenue related to real-time products.  For years we have
experienced a steady decline in real-time service revenues, 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 decline further, partially offset by newer
system service, as additional legacy systems are eventually removed from
service.





Service
revenue associated with video solutions products increased $0.5 million, or
4.3%, to $12.5 million during the nine months ended March 31, 2009 from
approximately $12.0 million for the nine months ended March 31,
2008.  During the nine months ended March 31, 2009, 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, and
also because we continue to expand our base of video market deployments that
generate maintenance and support service revenue.





Product Gross
Margin.  Product gross margin was $19.3 million for the nine
months ended March 31, 2009, an increase of approximately $2.7 million, or 16%,
from $16.6 million for the nine months ended March 31, 2008.  Product
gross margin as a percentage of product revenue increased to 53.8% in the nine
months ended March 31, 2009 from 50.4% in the nine months ended March 31,
2008.  Product gross margins, as a percentage of product revenue,
increased primarily due to the mix of software and hardware sales, as well as
technological improvements 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 nine months ended March
31, 2009, compared to the same period in the prior year.





Service Gross
Margin.  The gross margin on service revenue increased to 63.4%
of service revenue in the nine months ended March 31, 2009 from 59.3% of service
revenue in the nine months ended March 31, 2008.  The increase in
service margins as a percentage of service revenue was primarily due to the $0.9
million reduction in service costs during the nine months ended March 31, 2009,
compared to the same period in the prior year.  Decreasing service
costs resulted from a $0.7 million decrease in salaries, wages, and benefits, 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 or 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 $0.6 million, or 5.0% to $12.0 million in the nine months ended
March 31, 2009 from $11.4 million in the nine months ended March 31,
2008.  Sales and marketing expense increased primarily because we
incurred $0.7 million of additional salaries and benefits and $0.6 million of
additional severance as a result of changes to our sales and marketing
group.  Partially offsetting these increasing costs, during the nine
months ended March 31, 2009, we incurred $0.4 million less in depreciation
expense related to our MediaHawk 4500 video solutions systems that were being
used as demonstration systems for customers and have been fully depreciated or
sold.  Additionally, we incurred $0.3 million less in incentive
compensation expense in the nine months ended March 31, 2009, compared to the
same period in the prior year.





Research and
Development.Research and development expenses decreased
approximately $1.8 million, or 14.3%, to approximately $10.7 million in the nine
months ended March 31, 2009 from $12.4 million in the nine months ended March
31, 2008.  Decreasing research and development expenses were primarily
attributable to an additional $0.8 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 $0.3 million
and salaries and benefits by $0.3 million during the nine months ended March 31,
2009, 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 nine months ended March 31, 2009, 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 incurred by our UK development group decreased by approximately $0.4
million during the nine months ended March 31, 2009, compared to the same period
in the prior year, due to the declining value of the British pound relative to
the U.S. dollar.





20
 Table of Contents





General and
Administrative.General and administrative expenses decreased
approximately $0.6 million, or 8.1%, to approximately $6.7 million in the nine
months ended March 31, 2009 from $7.3 million in the nine months ended March 31,
2008.  Decreasing general and administrative expenses were primarily
attributable to $0.3 million of cost reductions resulting from our prior year
consolidation of certain international administrative
functions.  Additionally, our share-based compensation decreased by
approximately $0.3 million during the nine months ended March 31, 2009, 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.





Goodwill and Trademark
Impairment.  During the nine months ended March 31, 2009, we
recorded total goodwill and trademark impairment charges of $17.1
million.  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.  This impairment charge resulted in a net goodwill balance of
$0 as of March 31, 2009.  Additionally, as a result of our strategic
planning process for the period ended March 31, 2009, we have 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, which resulted in a net trademark balance of $0 as of March 31,
2009.





Interest income (expense) -
net.Interest income decreased approximately $0.5 million
during the nine months ended March 31, 2009, compared to the same period of the
prior year, primarily due the decrease in the yield from our cash caused by the
decline in interest rates during the past twelve months.





Other (Expense) Income -
net.  During the nine months ended March 31, 2009, we incurred
approximately $0.3 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 nine months ended March 31,
2009.





Provision (Benefit) for Income
Taxes.We recorded an income tax benefit for our domestic and
foreign subsidiaries of ($0.1) million in the nine months ended March 31, 2009,
compared to income tax expense of $0.2 million for our domestic and foreign
subsidiaries in the nine months ended March 31, 2008.  The change in
the consolidated effective tax rate during the nine months ended March 31, 2009,
compared to the same period in the prior year was primarily attributable to a
($0.4) million deferred tax benefit resulting from the 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. Net operating loss carryforwards were
available to reduce otherwise taxable income recorded in the US in the nine
months ended March 31, 2009.  Partially offsetting this tax benefit,
we recorded $0.2 million of income tax expense that was primarily attributable
to income earned in Japan that cannot be offset by U.S. 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 $159.1 million for income tax purposes, of which $13.6 million
will expire immediately after the end of our fiscal year 2009, and the remainder
will 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
March 31, 2009 and are currently conducting a study to make a final
determination on this matter.  We expect to complete this study prior
to our fiscal year ended June 30, 2009.  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 (Loss)
Income.The net loss for the nine months ended March 31, 2009
was ($14.7) million, or $(1.78) per basic and diluted share, compared to net
income for the nine months ended March 31, 2008 of $1.3 million, or $0.15 per
basic and diluted share.





21
 Table of Contents





Liquidity
and Capital Resources





Our
liquidity is dependent on 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 solutions market expansions
      and the pace at which domestic and international cable companies and
      telephone companies implement, upgrade or replace video
      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;




·
            the
      success of our strategy to sell our solutions to the internet and mobile
      device markets;




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




·
            the
      margins on our product sales;




·
            our
      ability to leverage the potential of our advanced advertising and other
      related 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;




·
            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 used
$1.3 million of cash from operating activities during the nine months ended
March 31, 2009 compared to generating $3.9 million of cash during the nine
months ended March 31, 2008.  Operating cash outflow during the nine
months ended March 31, 2009 was primarily attributable to the timing of
receivables collection.  Prior period operating cash inflow was
primarily attributable to improved operating results 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 nine months ended March 31, 2008, 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 $1.6 million in property, plant and equipment during the nine months
ended March 31, 2009 compared to $1.5 million during the nine months ended March
31, 2008.  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 March 31, 2009. 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 March 31, 2009, approximately $9.9 million was
available to us under the Revolver.  As of March 31, 2009, $0.9
million was drawn under the Revolver, resulting in approximately $9.0 million of
remaining available funds under the Revolver.





22
 Table of Contents





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
March 31, 2009. The Credit Agreement also contains customary restrictive
covenants concerning our operations.  As of March 31, 2009, we were in
compliance with these covenants as our adjusted quick ratio was 3.5 to 1.00 and
our tangible net worth was $28.0 million.





At March
31, 2009, we had working capital (current assets, less current liabilities) of
$29.0 million, including cash and cash equivalents of approximately $23.9
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.





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 nine months ended March 31,
2009.





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
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, the impact of our new video strategy on our
business, anticipated 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 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 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.





23
 Table of Contents





Other important risk factors are
discussed in Part II, Item 1A. of the Form 10-Q’s for the periods ending
September 30, 2008 and  December 31, 2008, 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.





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.





Item4.
            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, 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.





24
 Table of Contents





Part
      II
            Other
      Information





Item1.
            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.





Item1A.
            Risk
      Factors





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, and Form 10-Q’s for the periods ended
September 30, 2008 and December 31, 2008, respectively.





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).




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).




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:  May
      1, 2009
              CONCURRENT
      COMPUTER CORPORATIONBy:
              /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).





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