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





For
      the
      Quarterly Period Ended December 31, 2007





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 
      xNo   ̈





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




Large
                Accelerated Filer  ̈
            Accelerated
                Filer x
            Non-Accelerated
                Filer  ̈





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




Yes
        ̈    No 
x





Number
      of
      shares of the Registrant's Common Stock, par value $0.01 per share, outstanding
      as of January 28, 2008 was 83,056,000.












Concurrent
      Computer Corporation


Form
      10-Q


For
      the Three Months Ended December
      31, 2007




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
                Operations15Item
                3.
            
            Quantitative
                and Qualitative Disclosures About Market Risk
            25Item
                4.
            
            Controls
                and
                Procedures
            25Part
                II – Other
                InformationItem
                1.
            
            Legal
                Proceedings
            26Item
                1A.
            
            Risk
                Factors
            26Item
                4.
            
            Submission
                of  Matters to a Vote of Security
                Holders
            26Item
                6.
            
            Exhibits
            26EX-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)





December
                31,
            
            
            June
                30,2007
            
            
            2007(Unaudited)ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            $
            23,058
            
            
            $
            20,416Accounts
                receivable, less allowance for doubtful accounts of $94 at December
                31,
                2007 and $96 at June 30, 2007
            
            
            14,975
            
            
            
            20,987Inventories,
                net
            
            
            2,815
            
            
            
            3,457Prepaid
                expenses and other current assets
            
            
            1,001
            
            
            
            934Total
                current assets
            
            
            41,849
            
            
            
            45,794Property,
                plant and equipment, net
            
            
            3,593
            
            
            
            4,303Intangible
                - purchased technology, net
            
            
            4,539
            
            
            
            4,996Intangible
                - customer relationships and trademark, net
            
            
            2,616
            
            
            
            2,703Goodwill
            
            
            15,560
            
            
            
            15,560Other
                long-term assets, net
            
            
            755
            
            
            
            777Total
                assets
            
            $
            68,912
            
            
            $
            74,133LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilities:Accounts
                payable and accrued expenses
            
            $
            10,343
            
            
            $
            15,566Deferred
                revenue
            
            
            6,371
            
            
            
            7,996Total
                current liabilities
            
            
            16,714
            
            
            
            23,562Long-term
                liabilities:Deferred
                revenue
            
            
            954
            
            
            
            1,053Revolving
                bank line of credit
            
            
            686
            
            
            
            1,077Pension
                liability
            
            
            1,335
            
            
            
            1,190Other
            
            
            1,065
            
            
            
            656Total
                liabilities
            
            
            20,754
            
            
            
            27,538Commitments
                and contingencies (Note 14)Stockholders'
                equity:Shares
                of common stock, par value $.01; 100,000,000 authorized; 83,055,884
                and
                82,940,528 issued and outstanding at December 31, 2007 and June 30,
                2007,
                respectively
            
            
            831
            
            
            
            829Capital
                in excess of par value
            
            
            203,304
            
            
            
            202,819Accumulated
                deficit
            
            
            (157,072
            )
            
            
            (157,971
            )Treasury
                stock, at cost; 0 shares and 1,845 at December 31, 2007 and June
                30, 2007,
                respectively
            
            
            -
            
            
            
            (3
            )Accumulated
                other comprehensive income
            
            
            1,095
            
            
            
            921Total
                stockholders' equity
            
            
            48,158
            
            
            
            46,595Total
                liabilities and stockholders' equity
            
            $
            68,912
            
            
            $
            74,133




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





2
 Table
            of Contents





Concurrent
      Computer Corporation


Condensed
      Consolidated Statements of Operations (Unaudited)


(In
      thousands, except per share amounts)





Three
                Months Ended
            
            
            Six
                Months EndedDecember
                31,
            
            
            December
                31,2007
            
            
            2006
            
            
            2007
            
            
            2006Revenues:Product
            
            $
            9,964
            
            
            $
            11,685
            
            
            $
            19,732
            
            
            $
            21,017Service
            
            
            7,614
            
            
            
            5,449
            
            
            
            14,101
            
            
            
            10,898Total
                revenues
            
            
            17,578
            
            
            
            17,134
            
            
            
            33,833
            
            
            
            31,915Cost
                of sales:Product
            
            
            5,309
            
            
            
            6,998
            
            
            
            10,362
            
            
            
            12,186Service
            
            
            2,810
            
            
            
            2,721
            
            
            
            5,457
            
            
            
            5,360Total
                cost of sales
            
            
            8,119
            
            
            
            9,719
            
            
            
            15,819
            
            
            
            17,546Gross
                margin
            
            
            9,459
            
            
            
            7,415
            
            
            
            18,014
            
            
            
            14,369Operating
                expenses:Sales
                and marketing
            
            
            3,721
            
            
            
            4,133
            
            
            
            7,514
            
            
            
            8,446Research
                and development
            
            
            4,019
            
            
            
            4,107
            
            
            
            8,231
            
            
            
            8,759General
                and administrative
            
            
            2,566
            
            
            
            2,502
            
            
            
            4,913
            
            
            
            5,245Total
                operating expenses
            
            $
            10,306
            
            
            
            10,742
            
            
            
            20,658
            
            
            
            22,450Operating
                loss
            
            
            (847
            )
            
            
            (3,327
            )
            
            
            (2,644
            )
            
            
            (8,081
            )Gain
                on arbitration settlement, net
            
            
            -
            
            
            
            -
            
            
            
            1,900
            
            
            
            -Recovery
                of minority investment, net
            
            
            -
            
            
            
            -
            
            
            
            1,415
            
            
            
            -Interest
                income
            
            
            246
            
            
            
            84
            
            
            
            472
            
            
            
            193Interest
                expense
            
            
            (36
            )
            
            
            (177
            )
            
            
            (72
            )
            
            
            (251
            )Other
                income (expense)
            
            
            (11
            )
            
            
            (178
            )
            
            
            79
            
            
            
            (93
            )Income
                (loss) before income taxes
            
            
            (648
            )
            
            
            (3,598
            )
            
            
            1,150
            
            
            
            (8,232
            )Provision
                (benefit) for income taxes
            
            
            121
            
            
            
            (67
            )
            
            
            175
            
            
            
            151Net
                income (loss)
            
            $
            (769
            )
            
            $
            (3,531
            )
            
            $
            975
            
            
            $
            (8,383
            )Net
                income (loss) per shareBasic
            
            $
            (0.01
            )
            
            $
            (0.05
            )
            
            $
            0.01
            
            
            $
            (0.12
            )Diluted
            
            $
            (0.01
            )
            
            $
            (0.05
            )
            
            $
            0.01
            
            
            $
            (0.12
            )




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





3
 Table
            of Contents





Concurrent
      Computer Corporation


Condensed
      Consolidated Statements of Cash Flows (Unaudited)


(Dollars
      in thousands)





Six
                Months EndedDecember
                31,2007
            
            
            2006OPERATING
                ACTIVITIESNet
                income (loss)
            
            $
            975
            
            
            $
            (8,383
            )Adjustments
                to reconcile net income (loss) to net cash provided by (used in)
                operating
                activities:Depreciation
                and amortization
            
            
            2,154
            
            
            
            2,744Share-based
                compensation
            
            
            500
            
            
            
            482Recovery
                of minority investment, net
            
            
            (1,415
            )
            
            
            -Other
                non-cash expenses
            
            
            (38
            )
            
            
            42Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            6,012
            
            
            
            742Inventories
            
            
            584
            
            
            
            412Prepaid
                expenses and other current assets
            
            
            (67
            )
            
            
            (270
            )Other
                long-term assets
            
            
            22
            
            
            
            202Accounts
                payable and accrued expenses
            
            
            (5,223
            )
            
            
            506Deferred
                revenue
            
            
            (1,724
            )
            
            
            (1,064
            )Other
                long-term liabilities
            
            
            426
            
            
            
            145Total
                adjustments to net income (loss)
            
            
            1,231
            
            
            
            3,941Net
                cash provided by (used in) operating activities
            
            
            2,206
            
            
            
            (4,442
            )INVESTING
                ACTIVITIESCapital
                expenditures
            
            
            (842
            )
            
            
            (1,478
            )Recovery
                of minority investment, net
            
            
            1,415
            
            
            
            -Net
                cash provided by (used in) investing activities
            
            
            573
            
            
            
            (1,478
            )FINANCING
                ACTIVITIESProceeds
                from revolving bank line of credit
            
            
            -
            
            
            
            1,077Repayment
                of revolving bank line of credit
            
            
            (391
            )
            
            
            -Repayment
                of note payable to bank
            
            
            -
            
            
            
            (1,583
            )Proceeds
                from short-term note payable
            
            
            -
            
            
            
            690Repayment
                of short term note payable
            
            
            -
            
            
            
            (409
            )Sale
                (purchase) of treasury stock, net
            
            
            (10
            )
            
            
            (19
            )Proceeds
                from sale and issuance of common stock
            
            
            -
            
            
            
            5Net
                cash used in financing activities
            
            
            (401
            )
            
            
            (239
            )Effect
                of exchange rates on cash and cash equivalents
            
            
            264
            
            
            
            71Increase
                (decrease) in cash and cash equivalents
            
            
            2,642
            
            
            
            (6,088
            )Cash
                and cash equivalents at beginning of period
            
            
            20,416
            
            
            
            14,423Cash
                and cash equivalents at end of period
            
            $
            23,058
            
            
            $
            8,335Cash
                paid during the period for:Interest
            
            $
            34
            
            
            $
            122Income
                taxes (net of refunds)
            
            $
            128
            
            
            $
            13




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





4
 Table
            of Contents





Concurrent
      Computer Corporation


Notes
      to Condensed Consolidated Financial Statements








1.
            Overview
                of Business and Basis of Presentation





Concurrent
      Computer Corporation (“Concurrent”) is a supplier of high-performance computer
      systems, software and services.  The computer systems and software
      fall under two product lines: on-demand and real-time.





Concurrent’s
      on-demand product line provides on-demand systems consisting of hardware and
      software that provide monitoring and operations management for on-demand TV
      and
      integration services, primarily to residential broadband companies that have
      upgraded their networks to support interactive, digital services.





Concurrent’s
      real-time product line provides high-performance, real-time operating systems
      and development tools to commercial and government customers for use with a
      wide
      range of applications that benefit from guaranteed, instantaneous response
      and
      repeatability.





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





The
      condensed consolidated 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,
      2007.  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, 2007, except as disclosed under the caption, Income Taxes,
      below.  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





In
      June, 2006, the Financial
      Accounting
      Standards Board (“FASB”) issued Interpretation No.48,“Accounting
      for Uncertainty in Income
      Taxes, an interpretation of
      FASB Statement
      No.109, Accounting for
      Income Taxes” (“FIN 48”), to create a single model to address accounting for
      uncertainty in tax positions.  FIN 48 clarifies the accounting for
      income taxes, by prescribing a minimum recognition threshold that a tax position
      is required to meet before being recognized in the financial
      statements.  Additionally, FIN 48 provides guidanceon the derecognition,
      measurement,
      classification, interest and penalties, accounting in interim periods and
      disclosure requirements for uncertain tax positions.  FIN 48 is
      effective for fiscal years beginning afterDecember 15, 2006.  Concurrent
      adopted FIN 48
      as ofJuly 1,
      2007, as
      required.  As ofJuly 1, 2007,
      Concurrent did not recognize an
      increase or decrease in the liability for unrecognized tax benefits, but did
      recognize an additional $76,000 of accrued interest and penalties related to
      previously recorded liabilities for unrecognized tax benefits.  The
      interest and penalties recognized upon adoption of FIN 48 were accounted for
      as
      a reduction to Concurrent’s Accumulated Deficit as ofJuly 1, 2007.  AtJuly
      1, 2007, the total liability
      for uncertain tax
      benefits recorded in our balance sheet in Other Long-term Liabilities, including
      interest and penalties, was approximately $356,000.  Of this amount,
      approximately $76,000, if recognized, would be included in Concurrent’s
      statement of operations and have an impact on Concurrent’s effective tax
      rate.  Upon adoption of FIN 48, Concurrent has elected to recognize
      interest and penalties accrued for unrecognized tax benefits in income tax
      expense.  As of the date of adoption of FIN 48, Concurrent had accrued
      approximately $213,000 for the payment of interest and
      penalties.





5
 Table
            of Contents





Concurrent
      Computer Corporation


Notes
      to the Condensed Consolidated Financial Statements (Continued)








Concurrent
      and its subsidiaries file
      income tax returns in theU.S.federal
      jurisdiction, and various states
      and foreign jurisdictions.  With few exceptions, Concurrent is no
      longer subject to U.S. federal, state and local, or non-U.S. income tax
      examinations by tax authorities for fiscal yearsbefore 1992.  Concurrent does
      not believe that the amount of uncertain tax positions will change by a
      significant amount within the next 12 months.  In the event of
      subsequent recognition, the entire amount recognized would impact the effective
      tax rate.  Concurrent does not expect this change to have a
      significant impact on the results of operations or financial position of the
      Company.  For the threeand sixmonths
      endedDecember 31,
      2007there were no material
      changes in
      accruedinterest or
      penalties associated with unrecognized tax benefits from the date of
      adoption.





Recently
      Issued Accounting
      Pronouncements





In
      February 2007, the FASB issued
      Statement of Financial Accounting Standards No. (“SFAS”)
      159, "The Fair Value Option for
      Financial Assets and Liabilities"(“SFAS 159”).  SFAS159
      permits entities to choose to
      measure many financial instruments and certaininsurance and warranty
      contracts at fair
      value on a contract-by-contract basis. If the fair value option
      is elected,
      unrealized gains and losses will be recognized in earnings at each subsequent
      reporting date. SFAS159
      is effective for fiscal years
      beginning after November 15, 2007.Concurrentis
      currently evaluating the impact of
      adopting SFAS159
      but does not expect the adoption to
      have a material impact on itscondensedconsolidated
      financial
      statements.





2.
            Revenue
                Recognition and Related Matters





Concurrent
      recognizes revenue when persuasive evidence of an arrangement exists, the system
      has been shipped, the fee is fixed or determinable and collectibility of the
      fee
      is probable.





Software
      and Hardware
      Sales





On-demand
      and real-time product revenues are recognized based on the guidance in American
      Institute of Certified Public Accountants Statement of Position (“SOP”) 97-2,
“Software Revenue Recognition” (“SOP 97-2”) and related amendments, SOP 98-4,
“Deferral of the Effective Date of a Provision of SOP 97-2, Software Revenue
      Recognition” and SOP 98-9, “Modification of SOP 97-2, Software
      Revenue Recognition, With Respect to Certain Transactions.”  Concurrent’s
      standard contractual arrangements with its customers generally include the
      delivery of a hardware and/or software system, certain professional services
      that typically involve installation and training, and ongoing software and
      hardware maintenance.  The software component of the arrangement is
      considered to be essential to the functionality of the
      hardware.  Therefore, in accordance with Emerging Issues Task Force
      No. 03-5, “Applicability of AICPA Statement of Position 97-2 to Non-Software
      Deliverables in an Arrangement Containing More-Than-Incidental Software,” the
      hardware and the hardware maintenance components are considered software related
      and the provisions of SOP 97-2 apply to all elements of the
      arrangement.  Under multiple element arrangements, Concurrent
      allocates revenue to the various elements based on vendor-specific objective
      evidence (“VSOE”) of fair value.  Concurrent’s VSOE of fair value is
      determined based on the price charged when the same element is sold
      separately.  If VSOE of fair value does not exist for all elements in
      a multiple element arrangement, Concurrent recognizes revenue using the residual
      method.  Under the residual method, the fair value of the undelivered
      elements is deferred and the remaining portion of the arrangement is recognized
      as revenue.





In
      certain instances, Concurrent’s customers require significant customization of
      both the software and hardware products.  In these situations, the
      services are considered essential to the functionality of the software and,
      therefore, the revenue from the arrangement, with the exception of maintenance,
      is recognized in conformity with Accounting Research Bulletin (“ARB”) No. 45,
“Long Term Construction Type Contracts” and SOP 81-1, “Accounting for
      Performance of Construction-Type and Certain Production-Type
      Contracts.”  Concurrent records the value of the entire arrangement
      (excluding maintenance) as the project progresses based on actual costs incurred
      compared to the total costs expected to be incurred through
      completion.





Professional
      Services





Professional
      services revenue is primarily generated from integration of third party software
      interfaces, training, and hardware installation.  These services are
      typically completed within 90 days from the receipt of the
      order.  Under multiple element arrangements, Concurrent allocates
      revenue to the various elements based on VSOE of fair
      value.  Concurrent determines VSOE of fair value for the services
      based on the standard rate per hour or fixed fee used when similar services
      are
      sold separately.  Revenues from these services are recognized when the
      services are performed.





6
 Table
            of Contents





Concurrent
      Computer Corporation


Notes
      to the Condensed Consolidated Financial Statements (Continued)








Hardware
      and Software
      Maintenance





Concurrent
      recognizes revenue from maintenance services in accordance with SOP
      97-2.  Depending upon the specific terms of the customer agreement,
      Concurrent may include warranty as part of the purchase price.  In
      accordance with SOP 97-2 and, depending upon the specific terms of the customer
      agreement, Concurrent either accrues the estimated costs to be incurred in
      performing maintenance services at the time of revenue recognition and shipment
      of product, or Concurrent defers revenue associated with the maintenance
      services to be provided during the warranty period based upon the value for
      which Concurrent has sold such services separately when they are renewed by
      existing customers.  For those arrangements in which the warranty
      period is less than or equal to one year, Concurrent accrues the estimated
      costs
      to be incurred in providing services.  Therefore, in accordance with
      paragraph 59 of SOP 97-2, Concurrent has determined that the warranty fee is
      part of the initial license fee, the warranty period is for one year or less,
      the estimated cost of providing the services are immaterial, and upgrades and
      enhancements offered during maintenance arrangements historically have been
      and
      are expected to continue to be minimal and infrequent.  Actual costs
      are then charged against the warranty accrual as they are
      incurred.  For those arrangements in which the warranty period is
      greater than one year, Concurrent defers revenue based upon the value for which
      Concurrent has sold such services separately.  This revenue is then
      recognized on a straight line basis over the warranty period.





3.
            Basic
                and Diluted Net Income (Loss) per Share





Basic
      net
      income (loss) per share is computed in accordance with SFAS No. 128, “Earnings
      Per Share,” by dividing net income (loss) 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 and for contingently issuable shares, 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
      10,456,000 and 7,980,000 for the three months ended December 31, 2007 and 2006,
      respectively, were excluded from the calculation as their effect was
      antidilutive.  Common share equivalents of 10,031,000 and 7,931,000
      for the six months ended December 31, 2007 and 2006, respectively, were excluded
      from the calculation as their effect was antidilutive.  The following
      table presents a reconciliation of the numerators and denominators of basic
      and
      diluted net income (loss) per share for the periods indicated (dollars and
      share
      data in thousands, except per-share amounts):





Three
                Months Ended
            
            
            Six
                Months EndedDecember
                31,
            
            
            December
                31,2007
            
            
            2006
            
            
            2007
            
            
            2006Basic
                and diluted earnings per share (EPS) calculation:Net
                income (loss)
            
            $
            (769
            )
            
            $
            (3,531
            )
            
            $
            975
            
            
            $
            (8,383
            )Basic
                weighted average number of shares outstanding
            
            
            83,025
            
            
            
            71,600
            
            
            
            82,975
            
            
            
            71,567Effect
                of dilutive securities:Restricted
                stock
            
            
            -
            
            
            
            -
            
            
            
            128
            
            
            
            -Employee
                stock options
            
            
            -
            
            
            
            -
            
            
            
            5
            
            
            
            -Shares
                issued upon assumed exercise of warrants
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Diluted
                weighted average number of shares outstanding
            
            
            83,025
            
            
            
            71,600
            
            
            
            83,108
            
            
            
            71,567Basic
                EPS
            
            $
            (0.01
            )
            
            $
            (0.05
            )
            
            $
            0.01
            
            
            $
            (0.12
            )Diluted
                EPS
            
            $
            (0.01
            )
            
            $
            (0.05
            )
            
            $
            0.01
            
            
            $
            (0.12
            )




7
 Table
            of Contents





Concurrent
      Computer Corporation


Notes
      to the Condensed Consolidated Financial Statements (Continued)








4.
            Share-Based
                Compensation





At
      December 31, 2007, 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,
      2007.  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.





Concurrent
      uses the Black-Scholes valuation model to estimate the fair value of each option
      award on the date of grant.  During the six months ended December 31,
      2007, Concurrent granted 50,000 stock options to the Board of Directors with
      immediate vesting and 1,574,000 stock options to employees with four year
      vesting.  The weighted-average grant-date fair value of the options
      granted under the stock option plans during the six months ended December 31,
      2007 period was $0.95.  The weighted-average assumptions used were:
      expected dividend yield of 0.0%; risk-free interest rate of 4.2%; expected
      life
      of 6 years; and an expected volatility of 75.8%.





Based
      on historical experience of option
      pre-vesting cancellations, Concurrent has assumed an annualized forfeiture
      rateof 8.5% forunvested
      options for the six months ended December 31, 2007.  Under the true-up
      provisions of SFAS 123R, Concurrentwill record additional expense
      if the
      actual forfeiture rateis
      lower than estimated, and will record a recovery of prior expense if the actual
      forfeiture is higher than estimated.





The
      Compensation Committee approved and Concurrent issued 40,000 shares of
      restricted stock to the Board of Directors during the six months ended December
      31, 2007.  Restrictions on these shares lapse at various times in the
      next one to three years.





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





Three
                Months Ended
            
            
            Six
                Months EndedDecember
                31,
            
            
            December
                31,2007
            
            
            2006
            
            
            2007
            
            
            2006Share-based
                compensation expense included in theStatement
                of Operations:Cost
                of sales
            
            $
            14
            
            
            $
            9
            
            
            $
            12
            
            
            $
            16Sales
                and marketing
            
            
            60
            
            
            
            42
            
            
            
            92
            
            
            
            64Research
                and development
            
            
            42
            
            
            
            79
            
            
            
            56
            
            
            
            144General
                and administrative
            
            
            222
            
            
            
            180
            
            
            
            340
            
            
            
            260Total
            
            
            338
            
            
            
            310
            
            
            
            500
            
            
            
            484Tax
                benefit
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -Share-based
                compensation expense, net of taxes
            
            $
            338
            
            
            $
            310
            
            
            $
            500
            
            
            $
            484Effect
                on basic net income (loss) per share
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.01
            )
            
            $
            (0.01
            )Effect
                on basic net income (loss) per share
            
            $
            (0.00
            )
            
            $
            (0.00
            )
            
            $
            (0.01
            )
            
            $
            (0.01
            )





8
 Table
            of Contents





Concurrent
      Computer Corporation


Notes
      to the Condensed Consolidated Financial Statements (Continued)








5.
            Inventories





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





December
                31,
            
            
            June
                30,2007
            
            
            2007Raw
                materials, net
            
            $
            1,726
            
            
            $
            2,054Work-in-process
            
            
            546
            
            
            
            935Finished
                goods
            
            
            543
            
            
            
            468$
            2,815
            
            
            $
            3,457





At
      December 31, 2007 and June 30, 2007, 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 had inventory valuation
      allowances for raw materials of $2,045,000 at December 31, 2007 and $1,976,000
      at June 30, 2007, to reduce the value of the inventory to its estimated net
      realizable value.





6.
            Goodwill
                and Other Intangible Assets





Goodwill
      was $15,560,000 as of both December 31, 2007 and June 30,
      2007.  Concurrent operates in two segments, products and services, as
      disclosed within its condensed consolidated Statements of
      Operations.  Since Concurrent does not measure assets on a segment
      basis, it allocates operating expenses on a pro-rata basis between products
      and
      services to test impairment of goodwill and allocates goodwill between the
      two
      reporting units in the same manner.  In accordance with SFAS 142,
      Concurrent tests goodwill and trademark for impairment, at least
      annually.  Concurrent’s annual goodwill and trademark impairment
      testing date is July 1.  There has not been any impairment charge as a
      result of the most recent assessment as of July 1, 2007.





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





December
                31,
            
            
            June
                30,2007
            
            
            2007Cost
                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
            
            
            (3,161
            )
            
            
            (2,704
            )Customer
                relationships
            
            
            (384
            )
            
            
            (297
            )Total
                accumulated amortization
            
            
            (3,545
            )
            
            
            (3,001
            )Trademark
            
            
            1,100
            
            
            
            1,100Total
                intangible assets, net
            
            $
            7,155
            
            
            $
            7,699





Amortization
      expense was $544,000 for each of the six months ended December 31, 2007 and
      2006, respectively.





9
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            of Contents





Concurrent
      Computer Corporation


Notes
      to the Condensed Consolidated Financial Statements (Continued)








7.
            Accounts
                Payable and Accrued Expenses





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





December
                31,
            
            
            June
                30,2007
            
            
            2007Accounts
                payable, trade
            
            $
            5,185
            
            
            $
            7,955Accrued
                payroll, vacation, severance and other employee expenses
            
            
            3,402
            
            
            
            4,679Warranty
                accrual
            
            
            274
            
            
            
            343Other
                accrued expenses
            
            
            1,482
            
            
            
            2,589$
            10,343
            
            
            $
            15,566





Concurrent’s
      estimate of warranty obligations is based on historical experience and
      expectation of future conditions.  The changes in the warranty accrual
      during the three months ended December 31, 2007 were as follows (in
      thousands):





Balance
                at June 30, 2007
            
            $
            343Charged
                to costs and expenses, net
            
            
            78Deductions
            
            
            (147
            )Balance
                at December 31, 2007
            
            $
            274





8.
            Comprehensive
                Income (Loss)





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





Three
                Months Ended
            
            
            Six
                Months EndedDecember
                31,
            
            
            December
                31,2007
            
            
            2006
            
            
            2007
            
            
            2006Net
                income (loss)
            
            $
            (769
            )
            
            $
            (3,531
            )
            
            $
            975
            
            
            $
            (8,383
            )Other
                comprehensive income (loss):Foreign
                currency translation gain
            
            
            80
            
            
            
            140
            
            
            
            213
            
            
            
            88Amortization
                of pension gain and transition amount
            
            
            (20
            )
            
            
            -
            
            
            
            (39
            )
            
            
            -Total
                comprehensive income (loss)
            
            $
            (709
            )
            
            $
            (3,391
            )
            
            $
            1,149
            
            
            $
            (8,295
            )





9.
            Recovery
                of Minority Interest 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, now part of C-COR,
      Incorporated (“C-COR”), if any, from the lawsuit brought by C-COR 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 C-COR.  Until our fiscal year 2008,
      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.





10
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            of Contents





Concurrent
      Computer Corporation


Notes
      to the Condensed Consolidated Financial Statements (Continued)








On
      September 28, 2007, C-COR, Alcatel and Concurrent agreed upon the terms of
      distributing this asset.  Netproceeds from the settlement,
      including
      $85,000 of liquidation fees, were$1,415,000.  Consistent with
      previous recoveries of the impaired Thirdspace investment, Concurrent recorded
      the $1,415,000 as a “Recovery of minority investment, net” within its condensed
      consolidated Statements of Operations during the six months ended December
      31,
      2007.  Concurrent does not anticipate further cash proceeds related to
      the liquidation of Thirdspace’s remaining assets.  As part of the
      arrangement with C-COR and Alcatel, Concurrent also eliminated transferability
      concerns regarding its license to U.S. patent numbers 5,805,804 and
      5,623,595.  The agreement provides that licenses to these patents may
      be transferred to an acquirer of Concurrent or Concurrent’s on-demand business,
      so long as the acquirer has not been formally identified as an Alcatel
      target.





10.
            Arbitration
                Settlement





In
      August
      2007, Concurrent reached an agreement with Vicor, Inc. (“Vicor”), a supplier of
      Concurrent’s, to settle the claims in the pending arbitration between the two
      parties, in exchange for a full release.  In the arbitration,
      Concurrent alleged that in 2002 and 2003 Concurrent experienced high failure
      rates in its MediaHawk 2000 and 3000 series on-demand servers as a result of
      defective power converters manufactured by Vicor.  Concurrent asserted
      claims for breach of contract and fraud.  Concurrent’s alleged damages
      consisted of material and labor costs associated with the replacement of the
      defective parts, internal engineering costs, loss of market share, and attorney
      fees, as well as exemplary damages.  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 six months
      ended December 31, 2007.  Concurrent recorded the $1,900,000 net
      proceeds as a “Gain on arbitration settlement, net” within the condensed
      consolidated Statements of Operations during the six months ended December
      31,
      2007.





11.
            Concentration
                of Credit Risk, Segment, and Geographic Information





In
      accordance with SFAS 131, “Disclosure about Segments of an Enterprise and
      Related Information”,
      Concurrent operates in two segments, products and services, as disclosed
      within its condensed consolidated Statements of Operations.  The
      financial information reviewed by the chief operating decision
      maker  (as defined in SFAS 131) for these two segments is limited to
      segment revenues, cost of sales and gross margins, as presented in the
      accompanying statements of operations.  Concurrent does not track
      operating expenses, net income (loss), or assets and liabilities on a segment
      basis.





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





Three
                Months Ended
            
            
            Six
                Months EndedDecember
                31,
            
            
            December
                31,2007
            
            
            2006
            
            
            2007
            
            
            2006United
                States
            
            $
            13,629
            
            
            $
            12,469
            
            
            $
            26,951
            
            
            $
            22,882Japan
            
            
            1,563
            
            
            
            1,534
            
            
            
            2,851
            
            
            
            3,362Other
                Asia Pacific countries
            
            
            812
            
            
            
            472
            
            
            
            1,251
            
            
            
            925Asia
                Pacific
            
            
            2,375
            
            
            
            2,006
            
            
            
            4,102
            
            
            
            4,287Europe
            
            
            1,574
            
            
            
            2,659
            
            
            
            2,780
            
            
            
            4,746Total
                revenue
            
            $
            17,578
            
            
            $
            17,134
            
            
            $
            33,833
            
            
            $
            31,915





11
 Table
            of Contents





Concurrent
      Computer Corporation


Notes
      to the Condensed Consolidated Financial Statements (Continued)








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





Three
                Months Ended
            
            
            Six
                Months EndedDecember
                31,
            
            
            December
                31,2007
            
            
            2006
            
            
            2007
            
            
            2006Customer
                A
            
            14%
            
            
            10%
            
            
            11%
            
            
            14%Customer
                B
            
            10%
            
            
            10%
            
            
            11%
            
            
            <10%Customer
                C
            
            <10%
            
            
            <10%
            
            
            13%
            
            
            <10%Customer
                D
            
            <10%
            
            
            10%
            
            
            <10%
            
            
            <10%





Concurrent
      assesses credit risk through ongoing credit evaluations of customers’ financial
      condition and collateral is generally not required.  At December 31,
      2007, one customer accounted for $2,607,000 or 17% of trade
      receivables.  At June 30, 2007, one customer accounted for $9,190,000
      or 44% of trade receivables.No other
      customers accounted for 10% or more of trade receivables as of December 31,
      2007
      or June 30, 2007.





Concurrent
      sometimes purchases product components from a single supplier in order to obtain
      the required technology and the most favorable price and delivery terms.For the three months
      ended
      December 31, 2007, purchases from each of three suppliers were equal to, or
      in
      excess of 10% of Concurrent’s total purchases.  These three suppliers
      accounted for 20%, 15% and 10% of Concurrent’s purchases during the three months
      ended December 31, 2007.  Also, for the three months ended December
      31, 2006, purchases from each of two suppliers were equal to, or in excess
      of
      10% of Concurrent’s total purchases.  These two suppliers accounted
      for 38% and 11% of Concurrent’s purchases during the three months ended December
      31, 2006.  For the six months ended December 31, 2007, purchases from
      three suppliers were in excess of 10% of Concurrent’s total
      purchases.  These three suppliers accounted for 17%, 16% and 15% of
      Concurrent’s purchases during the six months ended December 31,
      2007.  Also, for the six months ended December 31, 2006, purchases
      from two suppliers were in excess of 10% of Concurrent’s total
      purchases.  These two suppliers accounted for 25% and 17% of
      Concurrent’s purchases during the six months ended December 31,
      2006.





12.
            Revolving
                Credit Facility





OnDecember19,
      2007,Concurrententered
      into a First Amendment(“Amendment”)toitsAmended
      and Restated Loan and Security
      Agreement (the “Credit Agreement”)withSilicon
      Valley Bank (the “Bank”), which
      amends certain terms of the existing Credit Agreement.  The Amendmentextendsthe
      maturity date of the Credit
      Agreement fromDecember 23,
      2008toJuly
      1, 2009.  The Amendment also resets
      the Minimum Tangible Net Worth covenant requirement from $15,172,000 as ofSeptember 30,
      2007, under the previous
      terms, to $10,000,000 as ofDecember 31, 2007.  At
      all times afterDecember 31,
      2007, the minimum tangible
      net worth requirement shall increase by 50% of quarterly net income and 50%
      of
      issuances of equity, net of issuance costs, and the principal amount of any
      subordinated debt.  TheAmendmentalsoallows
      Concurrent to utilize all of its
      operating accounts with the Bank to meet the requiredmonthly average balance
      of not less than
      $1,000,000 in deposits.  The Credit Agreementissecured
      by substantially all of the
      assets of Concurrent.





The
      outstanding principal amount plus
      all accrued but unpaid interest is payable in full at the expiration of the
      Credit Agreement on July 1, 2009.  The Credit Agreement
      provides for a $10,000,000 revolving credit line (the “Revolver”) with a
      borrowing base dependent upon Concurrent’s outstanding North American accounts
      receivable.  Concurrent had $686,000 and $1,077,000 outstanding under
      the Revolver as of December 31, 2007 and June 30, 2007,
      respectively.  During the six months ended December 31, 2007,
      Concurrent repaid $391,000 of the outstanding balance.  Based on the
      borrowing formula and Concurrent’s financial position as of December 31, 2007,
      $8,907,000 was available to Concurrent under the Revolver, resulting in
      approximately $8,221,000 of remaining available funds under the
      Revolver.





Interest
      on any outstanding amounts under the Revolver is payable monthly at the prime
      rate (7.25% at December 31, 2007) plus 0.50% per annum.





The
      Credit Agreement contains certain financial covenants, including a required
      adjusted quick ratio (the ratio of cash and accounts receivable to current
      liabilities and outstanding bank debt (less the current portion of deferred
      revenue)) of at least 1.25 to 1.00 and a minimum tangible net worth of at least
      $10,000,000 as of December 31, 2007.  The Credit Agreement also
      contains customary restrictive covenants concerning Concurrent's
      operations.  As of December 31, 2007, Concurrent’s adjusted quick
      ratio was 3.45 to 1.00 and its tangible net worth (defined as total assets
      (less
      goodwill and other intangibles) minus total liabilities) was approximately
      $25,038,000.  Concurrent was in compliance with all applicable
      covenants as of December 31, 2007.





12
 Table
            of Contents





Concurrent
      Computer Corporation


Notes
      to the Condensed Consolidated Financial Statements (Continued)








13.
            Retirement
                Plans





The
      following table provides a detail of the components of net periodic benefit cost
      for the three and six months ended December 31, 2007 and 2006 (in
      thousands):





Three
                Months Ended
            
            
            Six
                Months EndedDecember
                31,
            
            
            December
                31,2007
            
            
            2006
            
            
            2007
            
            
            2006Service
                cost
            
            $
            6
            
            
            $
            8
            
            
            $
            12
            
            
            $
            16Interest
                cost
            
            
            53
            
            
            
            57
            
            
            
            103
            
            
            
            113Expected
                return on plan assets
            
            
            (34
            )
            
            
            (22
            )
            
            
            (66
            )
            
            
            (44
            )Amortization
                of net (gain) loss
            
            
            (29
            )
            
            
            -
            
            
            
            (57
            )
            
            
            -Amortization
                of transition amount
            
            
            9
            
            
            
            8
            
            
            
            18
            
            
            
            16Net
                periodic benefit cost
            
            $
            5
            
            
            $
            51
            
            
            $
            10
            
            
            $
            101





Concurrent
      contributed $16,000 and $31,000 to its German subsidiary’s defined benefit plan
      during the three and six months ended December 31, 2007, respectively, and
      expects to make similar contributions during the remaining quarters of fiscal
      2007.  Concurrent contributed $18,000 and $34,000 to its German
      subsidiary’s defined benefit plan during the three and six months ended December
      31, 2006, respectively.





Concurrent
      maintains a retirement savings plan, available to U.S. employees, which
      qualifies as a defined contribution plan under Section 401(k) of the Internal
      Revenue Code.  During the three months ended December 31, 2007 and
      2006, Concurrent contributed $105,000 and $70,000 to this plan,
      respectively.  During the six months ended December 31, 2007 and 2006,
      Concurrent contributed $242,000 and $154,000 to this plan,
      respectively.





Concurrent
      also maintains a defined contribution plan (“Stakeholder Plan”) for its U.K.
      based employees.  Concurrent has agreements with certain of its U.K.
      based employees to make supplementary contributions to the Stakeholder Plan
      over
      the next three years, contingent upon their continued employment with
      Concurrent.  During the three months ended December 31, 2007 and 2006,
      Concurrent contributed $119,000 and $149,000 to the Stakeholder Plan,
      respectively.  During the six months ended December 31, 2007 and 2006,
      Concurrent contributed $238,000 and $336,000 to this plan,
      respectively.





14.
            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.





13
 Table
            of Contents





Concurrent
      Computer Corporation


Notes
      to the Condensed Consolidated Financial Statements (Continued)








Concurrent
      enters into agreements in the ordinary course of business with customers that
      often require Concurrent to defend and/or indemnify the other party 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 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
      of
      these customers have requested indemnification under their customer agreements.
      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
      hasnot encountered material
      costs as a
      result of such obligations and hasnot accrued any material liabilities
      related to such indemnifications inthefinancial statementsunder 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.  At December 31, 2007, the maximum contingent liability under
      these agreements is $1,645,000.  Concurrent’s employment agreements
      with certain of its officers contain certain offset provisions, as defined
      in
      their respective agreements.





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            of Contents





Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of Operations





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





Overview





Our
      on-demand product line has experienced pricing pressure by some substantially
      larger companies such as Cisco and Motorola.  The on-demand market has
      a limited number of customers, a number of well-financed competitors, and
      requires significant research and development expenditures.  As a
      result, competition is significant within the on-demand business.  Our
      business plan assumes greater demand from our customers that we believe could
      materialize in calendar year 2008.  In addition, we believe we are
      better positioned with new products than in previous
      periods.  Further, our Everstream subsidiary is continuing to gain
      subscribers and introduce new and innovative software products that address
      the
      traditional on-demand market as well as new markets such as satellite, audience
      measurement, targeted advertising, and IPTV.  We cannot assure the
      success of any of these initiatives.





We
      have
      commenced a process to better achieve value out of our targeted advertising
      patent portfolio.  We are in the midst of this process and believe
      that it may have a positive impact on our business and/or balance
      sheet.  However, we cannot assure the timing or success of this
      initiative.





Our
      real-time software initiatives have not come to fruition as quickly as
      expected.  Sales of our software-only real-time operating system to
      financial customers have been less successful and slower to finalize than
      anticipated.  Further, our relationship with Novell has not generated
      the revenue that we expected.  We are taking steps to independently
      achieve success in this market, while continuing to work with Novell, but we
      cannot assure the success of any of these initiatives.





Furthermore,
      we believe we are executing our business plan and expense reduction initiatives
      to achieve profitability.  We will continue to review and realign our
      cost structure as needed.   If we are not able to successfully
      execute our business plans to achieve profitability or execute other strategic
      alternatives, we may experience deterioration of our liquidity
      position.   In addition, unless and until our revenue increases
      and stabilizes, we could use cash from operating activities on an annual
      basis.





Other
      trends in our business are detailed in our Annual Report on Form 10-K for the
      year ended June 30, 2007 filed with the Securities and Exchange Commission
      (“SEC”) on August 31, 2007.





Application
      of Critical Accounting Policies





The
      SEC
      defines “critical accounting policies” 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, 2007 filed with the SEC on August
      31,
      2007.





15
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            of Contents





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
            
            
            Six
                Months EndedDecember
                31,
            
            
            December
                31,2007
            
            
            2006
            
            
            2007
            
            
            2006Revenues:
            
            (Unaudited)
            
            
            (Unaudited)Product
            
            
            56.7
            %
            
            
            68.2
            %
            
            
            58.3
            %
            
            
            65.9
            %Service
            
            
            43.3
            
            
            
            31.8
            
            
            
            41.7
            
            
            
            34.1Total
                revenues
            
            
            100.0
            
            
            
            100.0
            
            
            
            100.0
            
            
            
            100.0Cost
                of sales (% of respective sales category):Product
            
            
            53.3
            
            
            
            59.9
            
            
            
            52.5
            
            
            
            58.0Service
            
            
            36.9
            
            
            
            49.9
            
            
            
            38.7
            
            
            
            49.2Total
                cost of sales
            
            
            46.2
            
            
            
            56.7
            
            
            
            46.8
            
            
            
            55.0Gross
                margin
            
            
            53.8
            
            
            
            43.3
            
            
            
            53.2
            
            
            
            45.0Operating
                expenses:Sales
                and marketing
            
            
            21.2
            
            
            
            24.1
            
            
            
            22.2
            
            
            
            26.5Research
                and development
            
            
            22.8
            
            
            
            24.0
            
            
            
            24.3
            
            
            
            27.4General
                and administrative
            
            
            14.6
            
            
            
            14.6
            
            
            
            14.5
            
            
            
            16.4Total
                operating expenses
            
            
            58.6
            
            
            
            62.7
            
            
            
            61.0
            
            
            
            70.3Operating
                loss
            
            
            (4.8
            )
            
            
            (19.4
            )
            
            
            (7.8
            )
            
            
            (25.3
            )Gain
                on arbitration settlement, net
            
            
            -
            
            
            
            -
            
            
            
            5.6
            
            
            
            -Recovery
                of minority investment, net
            
            
            -
            
            
            
            -
            
            
            
            4.2
            
            
            
            -Interest
                income (expense) - net
            
            
            1.2
            
            
            
            (0.6
            )
            
            
            1.2
            
            
            
            (0.2
            )Other
                income (expense) - net
            
            
            (0.1
            )
            
            
            (1.0
            )
            
            
            0.2
            
            
            
            (0.3
            )Income
                (loss) before income taxes
            
            
            (3.7
            )
            
            
            (21.0
            )
            
            
            3.4
            
            
            
            (25.8
            )Provision
                (benefit) for income taxes
            
            
            0.7
            
            
            
            (0.4
            )
            
            
            0.5
            
            
            
            0.5Net
                income (loss)
            
            
            (4.4
            )%
            
            
            (20.6
            )%
            
            
            2.9
            %
            
            
            (26.3
            )%





16
 Table
            of Contents





Results
      of Operations





The
      three months ended December 31,
      2007 compared to the three months ended December 31, 2006





Three
                  Months EndedDecember
                  31,(Dollars
                  in Thousands)
              
              2007
              
              
              2006
              
              
              $
                  Change
              
              
              %
                  ChangeProduct
                  revenues
              
              $
              9,964
              
              
              $
              11,685
              
              
              $
              (1,721
              )
              
              
              (14.7
              %)Service
                  revenues
              
              
              7,614
              
              
              
              5,449
              
              
              
              2,165
              
              
              
              39.7
              %Total
                  revenues
              
              
              17,578
              
              
              
              17,134
              
              
              
              444
              
              
              
              2.6
              %Product
                  cost of sales
              
              
              5,309
              
              
              
              6,998
              
              
              
              (1,689
              )
              
              
              (24.1
              %)Service
                  cost of sales
              
              
              2,810
              
              
              
              2,721
              
              
              
              89
              
              
              
              3.3
              %Total
                  cost of sales
              
              
              8,119
              
              
              
              9,719
              
              
              
              (1,600
              )
              
              
              (16.5
              %)Product
                  gross margin
              
              
              4,655
              
              
              
              4,687
              
              
              
              (32
              )
              
              
              (0.7
              %)Service
                  gross margin
              
              
              4,804
              
              
              
              2,728
              
              
              
              2,076
              
              
              
              76.1
              %Total
                  gross margin
              
              
              9,459
              
              
              
              7,415
              
              
              
              2,044
              
              
              
              27.6
              %Operating
                  expenses:Sales
                  and marketing
              
              
              3,721
              
              
              
              4,133
              
              
              
              (412
              )
              
              
              (10.0
              %)Research
                  and development
              
              
              4,019
              
              
              
              4,107
              
              
              
              (88
              )
              
              
              (2.1
              %)General
                  and administrative
              
              
              2,566
              
              
              
              2,502
              
              
              
              64
              
              
              
              2.6
              %Total
                  operating expenses
              
              
              10,306
              
              
              
              10,742
              
              
              
              (436
              )
              
              
              (4.1
              %)Operating
                  loss
              
              
              (847
              )
              
              
              (3,327
              )
              
              
              2,480
              
              
              
              (74.5
              %)Interest
                  income (expense) - net
              
              
              210
              
              
              
              (93
              )
              
              
              303
              
              
              NM
              
              (1)Other
                  expense - net
              
              
              (11
              )
              
              
              (178
              )
              
              
              167
              
              
              
              (93.8
              %)Loss
                  before income taxes
              
              
              (648
              )
              
              
              (3,598
              )
              
              
              2,950
              
              
              
              (82.0
              %)Provision
                  (benefit) for income taxes
              
              
              121
              
              
              
              (67
              )
              
              
              188
              
              
              NM
              
              (1)Net
                  loss
              
              $
              (769
              )
              
              $
              (3,531
              )
              
              $
              2,762
              
              
              
              (78.2
              %)


(1)
      NM
      denotes percentage is not meaningful




Product
      Sales.  Total product sales for the three months ended December
      31, 2007 were $10.0 million, a decrease of approximately $1.7 million, or 14.7%,
      from $11.7 million for the three months ended December 31, 2006.  The
      decrease in product sales resulted from the $3.4 million, or 42.8%, decrease
      in
      on-demand product sales to $4.6 million in the three months ended December
      31,
      2007, from $8.0 million in the three months ended December 31,
      2006.  The decrease in on-demand product revenue resulted from a $2.9
      million decrease in North American on-demand product revenue in the three months
      ended December 31, 2007, compared to the same period of the prior year,
      primarily due to several cable on-demand system expansions in the prior year
      period that did not recur to the same extent in the current
      period.  Fluctuation in on-demand revenue is often due to the fact
      that a significant percentage of revenue is attributable to periodic large
      purchases by a small base of large customers.





Partially
      offsetting the decrease in on-demand product sales, real-time product sales
      increased approximately $1.7 million, or 46.6%, to $5.4 million in the three
      months ended December 31, 2007 from $3.7 million in the three months ended
      December 31, 2006.  This increase was due to delivery of several
      simulation and image generator systems to defense and automotive industry
      customers and to numerous real-time customers using excess available calendar
      year-end budgeted funds to purchase additional spares and add-on products for
      existing systems.





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 Table
            of Contents





Service
      Revenue.Total service revenue for the three months ended
      December 31, 2007 was $7.6 million, an increase of approximately $2.2 million,
      or 39.7%, from $5.4 million for the three months ended December 31,
      2006.  Service revenue associated with on-demand products increased
      $1.9 million, or 65.5%, as we continue to expand our base of on-demand market
      deployments and data collection and reporting software that requires maintenance
      and support services.  Also, during the three months ended December
      31, 2007 we recognized additional maintenance and support revenue related to
      customers for whom we provided service and support during calendar year 2007,
      but that was not recognized until collectibility was reasonably assured during
      the three months ended December 31, 2007.  We expect that service
      revenue for on-demand products may be flat or down in future quarters as new,
      less expensive products replace older products currently under service
      contracts.





The
      increase in on-demand service revenues was accompanied by a $0.2 million, or
      9.6%, increase in service revenue related to real-time products.  We
      believe service revenue associated with real-time products is beginning to
      stabilize.  For years we have experienced a steady decline in
      real-time service revenues, as our legacy machines have been removed from
      service and, to a lesser extent, from customers purchasing our new products
      that
      produce significantly less service revenue.  The remaining legacy
      machines are currently being removed from service at a slower rate, and
      additional maintenance on our newer real-time systems and software continue
      to
      grow with the related expanding base of products and software.  We
      expect real-time service revenues to remain somewhat level over the next twelve
      months, but that these revenues will ultimately decline further, partially
      offset by newer system service, as additional legacy machines continue to be
      removed from service.





Product
      Gross
      Margin.  Product gross margin was $4.7 million for each of the
      three months ended December 31, 2007 and 2006, respectively.  Product
      gross margin as a percentage of product revenue increased to 46.7% in the three
      months ended December 31, 2007 from 40.1% in the three months ended December
      31,
      2006.  Product gross margins, as a percentage of product revenue,
      increased primarily due to a favorable real-time product mix and our ability
      to
      purchase product components at lower prices during the three months ended
      December 31, 2007, compared to the same period in the prior year.





Service
      Gross
      Margin.  The gross margin on service revenue increased
      approximately $2.1 million, or 76.1%, to $4.8 million, or 63.1% of service
      revenue in the three months ended December 31, 2007 from $2.7 million, or 50.1%
      of service revenue in the three months ended December 31, 2006.  The
      increase in service margins was primarily due to the fact that we recognized
      additional maintenance and support revenue related to customers for whom we
      provided service and support during calendar year 2007, but that was not
      recognized until collectibility was reasonably assured during the three months
      ended December 31, 2007, as well as from additional maintenance revenue
      generated from our expanding customer base.  Improved margins were
      further attributable to flat service cost of sales for the three months ended
      December 31, 2007, compared to the same period in the prior year, 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 expand our support
      revenue base and manage costs related to our maintenance and support
      infrastructure.





Sales
      and
      Marketing.Sales and marketing expenses decreased
      approximately $0.4 million, or 10.0% to $3.7 million in the three months ended
      December 31, 2007 from $4.1 million in the three months ended December 31,
      2006.  The decrease in sales and marketing expense resulted from a
      reduction of our worldwide sales and marketing workforce in the prior fiscal
      year, which resulted in a $0.4 million decrease in sales and marketing salaries,
      wages and benefits in the three months ended December 31, 2007, compared to
      the
      same period of the prior year.  These cost reductions are part of our
      business plan and expense reduction initiatives to achieve
      profitability.





Research
      and
      Development.Research and development expenses decreased
      approximately $0.1 million, or 2.1%, to approximately $4.0 million in the three
      months ended December 31, 2007 from $4.1 million in the three months ended
      December 31, 2006.  Decreasing research and development expenses were
      primarily to due the fact that we incurred $0.2 million less in depreciation
      expense related to development and test equipment in the three months ended
      December 31, 2007, 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.





18
 Table
            of Contents





General
      and
      Administrative.General and administrative expenses increased
      $0.1 million, or 2.6%, to $2.6 million in the three months ended December 31,
      2007, from $2.5 million in the three months ended December 31, 2006. This
      increase in general and administrative expenses resulted from $0.1 million
      of
      severance charges for termination of part of our administrative workforce in
      Europe, during the three months ended December 31, 2007.  These
      expenses were incurred as part of our business plan to reduce operating costs
      going forward.





Interest
      Income,
      Net.  During the three months ended December 31, 2007, interest
      income, net of interest expense, increased $0.3 million, compared to the same
      period in the prior year, due to an increase in cash.  This increase
      in cash resulted from proceeds generated by our private placement during the
      fourth quarter of the prior fiscal year and due to positive cash flow from
      operations during the twelve months ended December 31, 2007.





Provision
      for Income
      Taxes.We recorded income tax expense for our domestic and
      foreign subsidiaries of $121,000 in the three months ended December 31,
      2007.  Income tax expense for the three months ended December 31, 2007
      was primarily attributable to income earned in foreign locations that cannot
      be
      offset by net operating loss carryforwards.  We recorded an income tax
      benefit of ($67,000) for our domestic and foreign subsidiaries in the three
      months ended December 31, 2006.  Income tax benefit recorded during
      the three months ended December 31, 2006 was primarily attributable to partial
      reversal of income tax provision recorded in the prior quarter of the same
      fiscal year by one of our foreign locations that has no remaining net operating
      loss carryforwards.





Net
      Loss.The net
      loss for the three months ended December 31, 2007 was $0.8 million or $0.01
      per
      basic and diluted share compared to a net loss for the three months ended
      December 31, 2006 of $3.5 million or $0.05 per basic and diluted
      share.





19
 Table
            of Contents





The
      six months ended December 31,
      2007 compared to the six months ended December 31, 2006





Six
                Months EndedDecember
                31,(Dollars
                in Thousands)
            
            2007
            
            
            2006
            
            
            $
                Change
            
            
            %
                ChangeProduct
                revenues
            
            $
            19,732
            
            
            $
            21,017
            
            
            $
            (1,285
            )
            
            
            (6.1
            %)Service
                revenues
            
            
            14,101
            
            
            
            10,898
            
            
            
            3,203
            
            
            
            29.4
            %Total
                revenues
            
            
            33,833
            
            
            
            31,915
            
            
            
            1,918
            
            
            
            6.0
            %Product
                cost of sales
            
            
            10,362
            
            
            
            12,186
            
            
            
            (1,824
            )
            
            
            (15.0
            %)Service
                cost of sales
            
            
            5,457
            
            
            
            5,360
            
            
            
            97
            
            
            
            1.8
            %Total
                cost of sales
            
            
            15,819
            
            
            
            17,546
            
            
            
            (1,727
            )
            
            
            (9.8
            %)Product
                gross margin
            
            
            9,370
            
            
            
            8,831
            
            
            
            539
            
            
            
            6.1
            %Service
                gross margin
            
            
            8,644
            
            
            
            5,538
            
            
            
            3,106
            
            
            
            56.1
            %Total
                gross margin
            
            
            18,014
            
            
            
            14,369
            
            
            
            3,645
            
            
            
            25.4
            %Operating
                expenses:Sales
                and marketing
            
            
            7,514
            
            
            
            8,446
            
            
            
            (932
            )
            
            
            (11.0
            %)Research
                and development
            
            
            8,231
            
            
            
            8,759
            
            
            
            (528
            )
            
            
            (6.0
            %)General
                and administrative
            
            
            4,913
            
            
            
            5,245
            
            
            
            (332
            )
            
            
            (6.3
            %)Total
                operating expenses
            
            
            20,658
            
            
            
            22,450
            
            
            
            (1,792
            )
            
            
            (8.0
            %)Operating
                loss
            
            
            (2,644
            )
            
            
            (8,081
            )
            
            
            5,437
            
            
            
            (67.3
            %)Gain
                on arbitration settlement, net
            
            
            1,900
            
            
            
            -
            
            
            
            1,900
            
            
            NM
            
            (1)Recovery
                of minority investment, net
            
            
            1,415
            
            
            
            -
            
            
            
            1,415
            
            
            NM
            
            (1)Interest
                income (expense) - net
            
            
            400
            
            
            
            (58
            )
            
            
            458
            
            
            NM
            
            (1)Other
                income (expense) - net
            
            
            79
            
            
            
            (93
            )
            
            
            172
            
            
            NM
            
            (1)Income
                (loss) before income taxes
            
            
            1,150
            
            
            
            (8,232
            )
            
            
            9,382
            
            
            NM
            
            (1)Provision
                for income taxes
            
            
            175
            
            
            
            151
            
            
            
            24
            
            
            
            15.9
            %Net
                income (loss)
            
            $
            975
            
            
            $
            (8,383
            )
            
            $
            9,358
            
            
            NM
            
            (1)




(1)
      NM
      denotes percentage is not meaningful





Product
      Sales.  Total product sales for the six months ended December
      31, 2007 were $19.7 million, a decrease of approximately $1.3 million, or 6.1%,
      from $21.0 million for the six months ended December 31, 2006.  The
      decrease in product sales resulted from the $2.2 million, or 16.9%, decrease
      in
      on-demand product sales to $10.9 million in the six months ended December 31,
      2007, from $13.1 million in the six months ended December 31,
      2006.  The decrease in on-demand product revenue was primarily due to
      several cable on-demand system and storage expansions in the prior year period
      that did not recur to the same extent in the current
      period.  Fluctuation in on-demand revenue is often due to the fact
      that a significant percentage of revenue is attributable to periodic large
      purchases by a small base of large customers.





Partially
      offsetting the decrease in on-demand product sales, real-time product sales
      increased approximately $0.9 million, or 11.8%, to $8.8 million in the six
      months ended December 31, 2007 from $7.9 million in the six months ended
      December 31, 2006.  This increase was due to delivery of several
      simulation and image generator systems to defense contract and automotive
      industry customers in North America and to numerous North American customers
      using excess available calendar year-end budgeted funds to purchase additional
      spare and add-on products for existing systems during the six months ended
      December 31, 2007.





20
 Table
            of Contents





Service
      Revenue.Total service revenue for the six months ended
      December 31, 2007 was $14.1 million, an increase of approximately $3.2 million,
      or 29.4%, from $10.9 million for the three months ended December 31,
      2006.  Service revenue associated with on-demand products increased
      $2.6 million, or 45.3%, as we continue to expand our base of on-demand market
      deployments and data collection and reporting software that requires maintenance
      and support services.  Also, during the six months ended December 31,
      2007 we recognized additional maintenance and support revenue related to
      customers for whom we provided service and support during calendar year 2007,
      but that was not recognized until collectibility was reasonably assured during
      the six months ended December 31, 2007.    We expect that
      service revenue for on-demand products may be flat or down in future quarters
      as
      new, less expensive products replace older products currently under service
      contracts.





The
      increase in on-demand service revenues was accompanied by a $0.6 million, or
      10.9%, increase in service revenue related to real-time products.  We
      believe service revenue associated with real-time products is beginning to
      stabilize.  For years we have experienced a steady decline in
      real-time service revenues, as our legacy machines have been removed from
      service and, to a lesser extent, from customers purchasing our new products
      that
      produce significantly less service revenue.  The remaining legacy
      machines are currently being removed from service at a slower rate, and
      additional maintenance on our newer real-time systems and software continue
      to
      grow with the related expanding base of products and software.  We
      expect real-time service revenues to remain somewhat level over the next twelve
      months, but that these revenues will ultimately decline further, partially
      offset by newer system service, as additional legacy machines continue to be
      removed from service.





Product
      Gross
      Margin.  Product gross margin was $9.4 million for the six
      months ended December 31, 2007, an increase of approximately $0.5 million,
      or
      6.1%, from $8.8 million for the six months ended December 31,
      2006.  Product gross margin as a percentage of product revenue
      increased to 47.4% in the six months ended December 31, 2007 from 42.0% in
      the
      six months ended December 31, 2006.  Product gross margins, as a
      percentage of product revenue, increased primarily due to a favorable real-time
      product mix and our ability to purchase product components at lower prices
      during the six months ended December 31, 2007, compared to the same period
      in
      the prior year.





Service
      Gross
      Margin.  The gross margin on service revenue increased
      approximately $3.1 million, or 56.1%, to $8.6 million, or 61.3% of service
      revenue in the six months ended December 31, 2007 from $5.5 million, or 50.8%
      of
      service revenue in the six months ended December 31, 2006.  The
      increase in service margins was primarily due to the fact that we recognized
      additional maintenance and support revenue related to customers for whom we
      provided service and support during calendar year 2007, but that was not
      recognized until collectibility was reasonably assured during the six months
      ended December 31, 2007, as well as from additional maintenance revenue
      generated from our expanding customer base.  Improved margins were
      further attributable to flat service cost of sales for the six months ended
      December 31, 2007, compared to the same period in the prior year, 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 expand our support
      revenue base and manage costs related to our maintenance and support
      infrastructure.





Sales
      and
      Marketing.Sales and marketing expenses decreased
      approximately $0.9 million, or 11.0% to $7.5 million in the six months ended
      December 31, 2007 from $8.4 million in the six months ended December 31,
      2006.  The decrease in sales and marketing expense resulted from a
      reduction of our worldwide sales and marketing workforce in the prior fiscal
      year, which resulted in a $0.8 million decrease in worldwide sales and marketing
      salaries, wages and benefits in the six months ended December 31, 2007, compared
      to the same period of the prior year. These cost reductions are part of our
      business plan and expense reduction initiatives to achieve
      profitability.





Research
      and
      Development.Research and development expenses decreased
      approximately $0.5 million, or 6.0%, to $8.2 million in the six months ended
      December 31, 2007 from $8.8 million in the six months ended December 31,
      2006.  Research and development expenses decreased primarily because
      we incurred $0.4 million less in depreciation expense related to development
      and
      test equipment in the six months ended December 31, 2007, 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.  We also reduced research and development related salaries,
      benefits and other employee related costs by $0.1 million during the six months
      ended December 31, 2007, compared to the same period in the prior
      year.  These decreasing costs resulted from the termination of a part
      of our development and engineering workforce during the prior year in an effort
      to reduce operating expenses.





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General
      and
      Administrative.General and administrative expenses decreased
      $0.3 million, or 6.3%, to $4.9 million in the six months ended December 31,
      2007, from $5.2 million in the six months ended December 31, 2006. This decrease
      in general and administrative expenses resulted from a prior year $0.4 million
      severance charge for our chief operating officer, who was terminated in the
      six
      months ended December 31, 2006 and, pursuant to his employment agreement,
      received one year of severance equal to the value of his salary and
      benefits.  Partially offsetting this prior year severance charge,
      during the six months ended December 31, 2007 we incurred $0.1 million of
      severance charges for termination of part of our administrative workforce in
      Europe.  These expenses were incurred as part of our business plan to
      reduce operating costs going forward.





Gain
      on Arbitration Settlement,
      Net.  In August 2007, we reached an agreement with Vicor, Inc.
      (“Vicor”) a supplier of ours, to settle the claims in the pending arbitration
      between the two parties, in exchange for a full release.  In the
      arbitration, we alleged that in 2002 and 2003 we experienced high failure rates
      in our MediaHawk 2000 and 3000 series on-demand servers as a result of defective
      power converters manufactured by Vicor.  We asserted claims for breach
      of contract and fraud.  Our alleged damages consisted of material and
      labor costs associated with the replacement of the defective parts, internal
      engineering costs, loss of market share, and attorney fees, as well as exemplary
      damages.  We settled for approximately $2.4 million, from which
      approximately $0.5 million of attorney fees were deducted and we received the
      net proceeds in the six months ended December 31, 2007.  We do not
      anticipate any further proceeds from this settlement.





Recovery
      of Minority Investment,
      Net.  In fiscal year 2003, we recorded a $13.0 million net
      impairment charge due to an “other-than-temporary” decline in the market value
      of an equity investment in Thirdspace Living Limited
      (“Thirdspace”).  At the end of fiscal year 2003, Thirdspace was sold
      to Alcatel Telecom Ltd. and placed into liquidation.  The liquidation
      of Thirdspace assets resulted in a recovery for us of $3.1 million of our
      previously impaired investment, in aggregate, during fiscal year
      2004.  Thirdspace’s only significant remaining asset subsequent to the
      aforementioned transactions was a right to 40% of amounts recovered by nCube
      Corporation, now part of C-COR, Incorporated (“C-COR”), if any, from the lawsuit
      brought by C-COR 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
      C-COR.  On September 28, 2007, C-COR, Alcatel and Concurrent agreed
      upon the terms of distributing this Thirdspace asset and we received $1.4
      million of net proceeds from the settlement of Thirdspace’s remaining
      asset.  Consistent with previous recoveries of the impaired Thirdspace
      investment, we recorded the $1.4 million as a “Recovery of minority investment”
within the Statement of Operations during the six months ended December 31,
      2007.  We do not anticipate further cash proceeds related to the
      liquidation of Thirdspace.  As part of the arrangement with C-COR and
      Alcatel, we also eliminated transferability concerns regarding our license
      to
      U.S. patent numbers 5,805,804 and 5,623,595.  The agreement provides
      that licenses to these patents may be transferred to an acquirer of Concurrent
      or Concurrent’s on-demand business, so long as the acquirer has not been
      formally identified as an Alcatel target.





Interest
      Income,
      Net.  During the six months ended December 31, 2007, interest
      income, net of interest expense, increased $0.5 million, compared to the same
      period in the prior year, due to an increase in cash.  This increase
      in cash resulted from proceeds generated by our private placement during the
      fourth quarter of the prior fiscal year and due to positive cash flow from
      operations during the twelve months ended December 31, 2007.





Provision
      for Income
      Taxes.We recorded income tax expense for our domestic and
      foreign subsidiaries of $175,000 in the six months ended December 31,
      2007.  We recorded income tax expense of $151,000 for our domestic and
      foreign subsidiaries in the six months ended December 31,
      2006.  Income tax expense for the three months ended December 31, 2007
      and 2006 was primarily attributable to income earned in foreign locations that
      cannot be offset by net operating loss carryforwards.





Net
      Income
      (Loss).The net income for the six months ended December 31,
      2007 was $1.0 million or $0.01 per basic and diluted share compared to a net
      loss for the six months ended December 31, 2006 of $(8.4) million or $(0.12)
      per
      basic and diluted share.





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Liquidity
      and Capital Resources





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





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




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




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




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




·
            the
                margins on our product lines;




·
            our
                ability to leverage the potential of Everstream;




·
            our
                ability to raise additional capital, if necessary;




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




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




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




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




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




Uses
      and Sources of Cash





We
      generated $2.2 million of cash from operating activities during the six months
      ended December 31, 2007 compared to using $4.4 million of cash from operating
      activities during the six months ended December 31, 2006.  The
      operating cash inflow was primarily attributable to collection of receivables
      from prior period sales, and $1.9 million of net cash proceeds received from
      an
      arbitration settlement with a supplier that we alleged had previously provided
      defective parts used in certain of our products.  We do not anticipate
      further cash proceeds related to this settlement.  Prior period cash
      usage resulted primarily from operating losses.





During
      the six months ended December 31, 2007, we received $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 $0.8 million in property, plant and equipment during the six months
      ended December 31, 2007 compared to $1.5 million during the six months ended
      December 31, 2006.  Capital additions during each of these periods
      related primarily to product development and testing equipment.  We
      expect capital additions to continue at a level comparable to the prior year,
      during the remainder of this fiscal year.





On
      December19,
      2007, we entered into a First
      Amendment(“Amendment”)to
      our Amended and Restated
      Loan and Security Agreement (the “Credit Agreement”)withSilicon
      Valley Bank (the “Bank”), which
      amends certain terms of the existing Credit Agreement.  The Amendmentextendsthe
      maturity date of the Credit
      Agreement from December 23, 2008 to July 1, 2009.  The Amendment also
      resets theMinimum
      Tangible Net Worth covenant
      requirement from $15.2
      millionas of September 30,
      2007, under the previous terms, to $10.0 millionas
      of December 31, 2007.  At
      all times after December 31, 2007, the minimum tangible net worth requirement
      shall increase by 50% of quarterly net income and 50% of issuances of equity,
      net of issuance costs, and the principal amount of any subordinated
      debt.  TheAmendmentalsoallows
      us to utilize all of our
      operating accounts with the Bank to meet our requiredmonthly average balance
      of not less than
      $1.0 millionin
      deposits.





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All
      other terms of the existing Credit
      Agreement remain the same, whereby the Bankprovides for a $10.0
      millionrevolving credit line
      with a borrowing
      base dependent uponouroutstanding accountsreceivable (the “Revolver”) and is
      secured by substantially all ofour assets.   In
      additiontothe
      minimum tangible net worth
      requirement, the Credit Agreement contains additional 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 customary restrictive
      covenants concerning the Company’s operations.    As of
      December 31, 2007, we were in compliance with these covenants as our tangible
      net worth was $25.0 million and our adjusted quick ratio was 3.45 to
      1.00.





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.  The interest rate on the Revolver
      was 7.75% as of December 31, 2007. The outstanding principal amount plus all
      accrued but unpaid interest is payable in full at the expiration of the credit
      facility.  During the six months ended December 31, 2007 we repaid
      $0.4 million of the outstanding balance of this
      Revolver.Based on the borrowing formula and our financial
      position as of December 31, 2007, approximately $8.9 million was available
      to us
      under the Revolver.  As of December 31, 2007, $0.7 million was drawn
      under the Revolver, resulting in $8.2 million of remaining available funds
      under
      the Revolver.





At
      December 31, 2007, we had working capital (current assets, less current
      liabilities) of $25.1 million and had no material commitments for capital
      expenditures compared to working capital of $22.2 million at June 30,
      2007.  We believe that existing cash balances will be sufficient to
      meet our anticipated working capital and capital expenditure requirements for
      the next twelve months.  However, unless and until our revenue
      increases and stabilizes, it is possible that we could use cash from operating
      activities.  We believe that we could report a net loss for fiscal
      2008 and may continue to use cash from operating activities.





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
      notencountered 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 endedJune 30,
      2007. There have been no
      material changes to our contractual obligations and commercial commitments
      during the six months endedDecember 31, 2007.





CAUTIONARY
      NOTE REGARDING FORWARD-LOOKING STATEMENTS





Certain
      statements made or incorporated by reference in this release may constitute
      “forward-looking statements” within the meaning of the federal securities
      laws.  When used or incorporated by reference in this release, the
      words “believes,” “expects,” “estimates,” “anticipates,” and similar
      expressions, are intended to identify forward-looking
      statements.  Statements regarding future events and developments, our
      future performance, market share, and new market growth, as well as our
      expectations, beliefs, plans, estimates, or projections relating to the future,
      are forward-looking statements within the meaning of these
      laws.  Examples of our forward-looking statements in this report
      include, but are not limited to, our pricing trends, our expected cash position,
      our expectations of on-demand service revenue flattening or decreasing, our
      expectations of market share and growth, 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:
      availability of video-on-demand (“VOD”) content; delays or cancellations of
      customer orders; changes in product demand; economic conditions; 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
      growth; delays in testing and introductions of new products;  rapid
      technology changes; system errors or failures; reliance on a limited number
      of
      suppliers and failure of components provided by those suppliers; uncertainties
      associated with international business activities, including foreign
      regulations, trade controls, taxes, and currency fluctuations; the impact
      of  competition on the pricing of VOD products; failure to effectively
      service the installed base; the entry of new well-capitalized competitors into
      our markets; the success of new on-demand and real-time products; financing
      for
      working capital needs; 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; the possible delisting
      of
      our shares of common stock from the Nasdaq Global Market; and privacy concerns
      over data collection.





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Other
      important risk factors are discussed in our Annual Report on Form 10-K for
      the
      fiscal year ended June 30, 2007, and in Part II, Item 1A, "Risk Factors" of
      this
      document.





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.





Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk





We
      are
      exposed to market risk from changes in interest rates and foreign currency
      exchange rates.  We are exposed to the impact of interest rate changes
      on our short-term cash investments and bank loans.  Short-term cash
      investments are in money market funds consisting of commercial paper, corporate
      bonds and other investments, all with tier-one or better credit ratings, and
      all
      of which have weighted average maturities of three months or less, providing
      daily liquidity.  These short-term investments carry a degree of
      interest rate risk.  Bank loans include a variable rate
      Revolver.  We believe that the impact of a 10% 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,
      Australia, and Japan.  We do not hedge against fluctuations in
      exchange rates and believe that a 10% upward or downward fluctuation in foreign
      currency exchange rates relative to the United States dollar would not have
      a
      material impact on future earnings, fair values, or cash flows.





Item
                4.
            Controls
                and Procedures





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





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





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Part
                II
            Other
                Information





Item
                1.
            Legal
                Proceedings





From
      time
      to time, we may be involved in litigation relating to claims arising out of
      our
      ordinary course of business.  We are not presently involved in any
      material litigation.  Material developments concerning legal
      proceedings occurring in previous quarters of our fiscal year 2008 are detailed
      in our Form 10-Q for the quarter ended September 30, 2007, filed with the
      Securities and Exchange Commission on November 2, 2007.





Item
                1A.
            Risk
                Factors





Concurrent’s
      shares of common stock may be delisted from the Nasdaq Global
      Market.





OnDecember
      26, 2007, Concurrent received
      a letter from
      Nasdaq confirming that Concurrent’s minimum bid price had fallen below $1.00 for
      30 consecutive business days and that its securities are, therefore, subject
      to
      delisting from the Nasdaq Global Market.  Concurrent is provided with
      one-hundred eighty (180) calendar days, or untilJune 23, 2008,
      to regain compliance with the minimum
      bid price requirement.  If compliance cannot be demonstrated byJune 23, 2008,
      then Nasdaq will provide written
      notification to Concurrent that its securities will be delisted, subject to
      Concurrent’s right to make an appeal to Nasdaq to maintain its listing on the
      Nasdaq Global Market or to apply to list on the Nasdaq Capital
      Market.





A
      delisting would negatively impact the value of Concurrent’s stock, as
      Concurrent’s stock will likely be less liquid and may trade with larger
      variations between the bid and ask price.  Concurrent could also lose
      support from institutional investors, brokerage firms and market makers, if
      any,
      that currently buy and sell Concurrent’s stock and may find it difficult to
      obtain future financing for the continuation of its operations or to use its
      stock in acquisitions.  Further, delisting could result in the loss of
      confidence by Concurrent’s suppliers, customers and employees.





Item
                4.
            Submission
                of Matters to a Vote of Security Holders





Concurrent’s
      Annual Meeting of Stockholders was held on October 24, 2007.  The
      results of the voting were as follows:





-
            The
                following persons were elected as directors to serve until the next
                annual
                meeting of stockholders: Alex B. Best (63,259,047 votes for, 3,953,948
                votes withheld), Charles Blackmon (63,112,127 votes for, 4,100,868
                votes
                withheld), Larry L. Enterline (63,395,512 votes for, 3,817,483 votes
                withheld), C. Shelton James (63,163,253 votes for, 4,049,742 votes
                withheld), Steve G. Nussrallah (62,773,737 votes for, 4,439,258 votes
                withheld), and T. Gary Trimm (63,321,763 votes for, 3,891,232 votes
                withheld).





-
            The
                selection of Deloitte & Touche LLP as Concurrent’s independent
                registered public accountants for the fiscal year ending June 30,
                2008 was
                ratified (65,490,496 votes for, 1,592,164 votes against, 130,333
                votes
                abstained).





Item
                6.
            Exhibits





3.1
            Restated
                Certificate of Incorporation of the Registrant (incorporated by reference
                to the Registrant's Registration Statement on Form S-2 (No. 33-62440)).





3.2
            Amended
                and Restated Bylaws of the Registrant (incorporated by reference
                to the
                Registrant’s Quarterly Report on Form 10-Q for the period ended March 31,
                2003 (No. 000-13150)).





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 (No. 000-13150)).





3.4
            Amended
                Certificate of Designations of Series A Participating Cumulative
                Preferred
                Stock (incorporated by reference to the Form 8-A/A, dated August
                9, 2002
                (No. 000-13150)).





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3.5
            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 (No. 000-13150)).





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
                (No.
                000-13150)).





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 (No. 000-13150)).





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 (No. 000-13150)).





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(No.
                000-13150) ).





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
                (No.
                000-13150)).





10.1
            First
                Amendment to Amended and Restated Loan and Security Agreement
                (incorporated by reference to the Registrant’s Current Report on Form 8-K
                filed on December 20, 2007(No. 000-13150)).





11.1*
            Statement
                Regarding Computation of Per Share Earnings.





31.1**
            Certification
                of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.





31.2**
            Certification
                of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.





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





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





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





**
            Filed
                herewith.





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SIGNATURES








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








Date:  February
                1, 2007
            CONCURRENT
                COMPUTER CORPORATIONBy:
            /s/
                Emory O. BerryEmory
                O. BerryChief
                Financial Officer(Principal
                Financial and Accounting Officer)





28
 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 (No. 000-13150)).





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 (No. 000-13150)).





3.4
            Amended
                Certificate of Designations of Series A Participating Cumulative
                Preferred
                Stock (incorporated by reference to the Form 8-A/A, dated August
                9, 2002
                (No. 000-13150)).





3.5
            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 (No. 000-13150)).





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
                (No.
                000-13150)).





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 (No. 000-13150)).





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
                (No.
                000-13150)).





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
                (No.
                000-13150)).





10.1
            First
                Amendment to Amended and Restated Loan and Security Agreement
                (incorporated by reference to the Registrant’s Current Report on Form 8-K
                filed on December 20, 2007(No. 000-13150)).





11.1*
            Statement
                Regarding Computation of Per Share Earnings.





31.1**
            Certification
                of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.





31.2**
            Certification
                of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.





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





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





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





**
            Filed
                herewith.






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