<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q


                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2002


                         Commission file number 0-20008


                             FORGENT NETWORKS, INC.

            A DELAWARE CORPORATION           IRS EMPLOYER ID NO. 74-2415696


                               108 WILD BASIN ROAD
                               AUSTIN, TEXAS 78746


                                 (512) 437-2700


The registrant 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
has been subject to such filing requirements for the past 90 days.

At June 4, 2002 the registrant had outstanding 24,744,924 shares of its Common
Stock, $0.01 par value.


<PAGE>


FORGENT NETWORKS, INC.

CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                              APRIL 30,      JULY 31,
                                                                2002           2001
                                                             (UNAUDITED)
<S>                                                          <C>           <C>

ASSETS
Current assets:
    Cash and equivalents                                     $   13,327    $   15,848
    Short-term investments                                        1,974         6,128
    Accounts receivable, net of allowance for doubtful
      accounts of $502 and $1,089 at
      April 30, 2002 and July 31, 2001                           13,103        13,770
    Notes receivable, net of reserve of $967 and $121 at
         April 30, 2002 and July 31, 2001                           319            50
    Inventories                                                     850           454
    Prepaid expenses and other current assets                     1,088         1,355
                                                             ----------    ----------
        Total current assets                                     30,661        37,605

Property and equipment, net                                       6,011         9,500
Intangible assets, net                                           10,603        10,617
Capitalized software, net                                         3,324         2,998
Other assets                                                        414           616
Net assets from discontinued operations                              --         8,004
                                                             ----------    ----------
                                                             $   51,013    $   69,340
                                                             ==========    ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable                                         $    6,428    $    9,594
    Accrued compensation and benefits                             1,916         3,636
    Other accrued liabilities                                     2,173         2,652
    Notes payable, current portion                                  155            --
    Deferred revenue                                              7,348         8,802
                                                             ----------    ----------
        Total current liabilities                                18,020        24,684

Long-term liabilities:
    Other long-term obligations                                   2,528         3,034
                                                             ----------    ----------
        Total long-term liabilities                               2,528         3,034

Stockholders' equity:
    Preferred stock, $.01 par value; 10,000
      authorized; none issued or outstanding                         --            --
    Common stock, $.01 par value; 40,000 authorized;
      24,726 and 24,889 issued and outstanding at
      April 30, 2002 and July 31, 2001                              254           249
    Treasury stock, 677 and 87 at April 30, 2002
      and July 31, 2001                                          (1,865)         (108)
    Additional paid-in capital                                  262,692       261,713
    Accumulated deficit                                        (230,549)     (221,908)
    Unearned compensation                                          (130)           --
    Accumulated other comprehensive income                           63         1,676
                                                             ----------    ----------
        Total stockholders' equity                               30,465        41,622
                                                             ----------    ----------
                                                             $   51,013    $   69,340
                                                             ==========    ==========
</Table>

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


                                       2

<PAGE>


FORGENT NETWORKS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                        FOR THE                      FOR THE
                                                                   THREE MONTHS ENDED           NINE MONTHS ENDED
                                                                         APRIL 30,                   APRIL 30,
                                                                    2002           2001         2002           2001
                                                                        (UNAUDITED)                 (UNAUDITED)
<S>                                                               <C>           <C>           <C>           <C>

REVENUES:
    Network software and services                                 $      852    $       --    $    1,309    $       --
    Intellectual property licensing                                   15,000            --        15,000            --
    Services and other                                                 6,465         7,253        20,694        20,420
                                                                  ----------    ----------    ----------    ----------
       Total revenues                                                 22,317         7,253        37,003        20,420
                                                                  ----------    ----------    ----------    ----------

COST OF SALES:
    Network software and services                                        411            --         1,025            --
    Intellectual property licensing                                    6,600            --         6,600            --
    Services and other                                                 3,598         5,403        12,195        15,091
                                                                  ----------    ----------    ----------    ----------
       Total cost of sales                                            10,609         5,403        19,820        15,091
                                                                  ----------    ----------    ----------    ----------
    GROSS MARGIN                                                      11,708         1,850        17,183         5,329
                                                                  ----------    ----------    ----------    ----------

OPERATING EXPENSE:
    Selling, general and                                               2,926         4,574         7,922        12,184
    administrative
    Research and development                                             567         1,401         2,026         5,889
    Asset impairment                                                      --         1,147         2,381         1,147
    Amortization of intangible assets                                     --           369            --           853
    Restructuring expense                                                 --            --           818            --
                                                                  ----------    ----------    ----------    ----------
       Total operating expenses                                        3,493         7,491        13,147        20,073
                                                                  ----------    ----------    ----------    ----------

INCOME (LOSS) FROM OPERATIONS                                          8,215        (5,641)        4,036       (14,744)
                                                                  ----------    ----------    ----------    ----------

OTHER INCOME (EXPENSE):
    Interest income                                                       53           231           237         1,064
    Gain on investment                                                    --         3,670         1,670         4,886
    Interest expense and other                                           169        (1,646)          106        (1,246)
                                                                  ----------    ----------    ----------    ----------
       TOTAL OTHER INCOME (EXPENSE)                                      222         2,255         2,013         4,704
                                                                  ----------    ----------    ----------    ----------

INCOME (LOSS) FROM CONTINUING OPERATIONS, BEFORE INCOME TAXES          8,437        (3,386)        6,049       (10,040)
Provision for income taxes                                               177           304           177           304
                                                                  ----------    ----------    ----------    ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS                               8,614        (3,082)        6,226        (9,736)
                                                                  ----------    ----------    ----------    ----------
Loss from discontinued operations, net of income taxes                (6,133)       (1,498)      (14,612)      (14,942)
Loss on disposal, net of income taxes                                     --            --          (255)           --
                                                                  ----------    ----------    ----------    ----------
LOSS FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES                (6,133)       (1,498)      (14,867)      (14,942)
                                                                  ----------    ----------    ----------    ----------

NET INCOME (LOSS)                                                 $    2,481    $   (4,580)   $   (8,641)   $  (24,678)
                                                                  ==========    ==========    ==========    ==========

BASIC INCOME (LOSS) PER SHARE:
Income (loss) from continuing operations                          $     0.35    $    (0.12)   $     0.25    $    (0.39)
                                                                  ==========    ==========    ==========    ==========
Loss from discontinued operations                                 $    (0.25)   $    (0.06)   $    (0.60)   $    (0.60)
                                                                  ==========    ==========    ==========    ==========
Net income (loss)                                                 $     0.10    $    (0.18)   $    (0.35)   $    (0.99)
                                                                  ==========    ==========    ==========    ==========

DILUTED INCOME (LOSS) PER SHARE:
Income (loss) from continuing operations                          $     0.34    $    (0.12)   $     0.25    $    (0.39)
                                                                  ==========    ==========    ==========    ==========
Loss from discontinued operations                                 $    (0.24)   $    (0.06)   $    (0.60)   $    (0.60)
                                                                  ==========    ==========    ==========    ==========
Net income (loss)                                                 $     0.10    $    (0.18)   $    (0.35)   $    (0.99)
                                                                  ==========    ==========    ==========    ==========

WEIGHTED AVERAGE SHARES OUTSTANDING:
    Basic and diluted                                                 24,761        24,890        24,807        24,862
    Diluted                                                           25,373        24,890        24,807        24,862
</Table>

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


                                       3

<PAGE>


FORGENT NETWORKS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
--------------------------------------------------------------------------------

<Table>
<Caption>
                                                                               FOR THE
                                                                          NINE MONTHS ENDED
                                                                              APRIL 30,
                                                                          2002           2001
                                                                              (UNAUDITED)
<S>                                                                    <C>           <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
     Income (Loss) from continuing operations                          $    6,226    $   (9,736)
     Adjustments to reconcile net income (loss)
     to net cash provided by (used in) operations:
        Depreciation and amortization                                       3,689         6,463
        Amortization of unearned compensation                                  76             4
        Foreign currency translation loss (gain)                              178            42
        Loss (gain) on sale of fixed assets                                    58         2,715
        Asset impairment                                                    2,381            --
        Sale of accounts receivable                                         8,297            --
        (Increase) decrease in receivables                                 (9,019)       10,012
        Increase in inventories                                              (909)       (3,751)
        Decrease in prepaid expenses and other current assets                 147           664
        Decrease in accounts payable                                       (3,575)       (5,985)
        Decrease in accrued expenses                                       (2,633)       (4,244)
        Decrease in deferred revenues                                      (1,617)       (4,172)
                                                                       ----------    ----------
            Net cash provided by  (used in) operating activities            3,299        (7,988)
                                                                       ----------    ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Net sales of short-term investments                                    2,613        17,289
     Net purchases of property and equipment                                 (664)       (1,177)
     Collection (issuance) of notes receivable                                245           (20)
     Increase in capitalized software                                      (2,989)           --
     Decrease (increase) in other assets                                      (43)          168
                                                                       ----------    ----------
            Net cash (used in) provided by investing activities              (838)       16,260
                                                                       ----------    ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net proceeds from issuance of stock                                      797           159
     Purchase of treasury stock                                            (1,757)           --
     Proceeds from notes payable                                              544           544
     Payments on notes payable                                               (464)       (1,360)
                                                                       ----------    ----------
            Net cash used in financing activities                            (880)         (657)
                                                                       ----------    ----------

CASH FLOWS FROM DISCONTINUED OPERATIONS:
      Net cash used in discontinued operations                             (3,929)       (7,829)

Effect of translation exchange rates on cash                                 (173)          (19)
                                                                       ----------    ----------

Net decrease in cash and equivalents                                       (2,521)         (233)

Cash and equivalents at beginning of period                                15,848         6,868
                                                                       ----------    ----------
Cash and equivalents at end of period                                  $   13,327    $    6,635
                                                                       ==========    ==========
SUPPLEMENTARY INFORMATION
      Non-cash reserve on note payable                                 $    5,967            --
</Table>

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


                                       4

<PAGE>
FORGENT NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share and employee data unless otherwise
noted)
--------------------------------------------------------------------------------

NOTE 1 - GENERAL AND BASIS OF FINANCIAL STATEMENTS

         The accompanying unaudited consolidated financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission and accordingly, do not include all information and
footnotes required under accounting principals generally accepted in the United
States for complete financial statements. In the opinion of management, these
interim financial statements contain all adjustments, consisting of normal,
recurring adjustments, necessary for a fair presentation of the financial
position of Forgent Networks, Inc. ("Forgent") as of April 30, 2002 and July 31,
2001, the results of operations for the three and nine months ended April 30,
2002 and 2001, and cash flows for the nine months ended April 30, 2002 and 2001.
The results for interim periods are not necessarily indicative of results for a
full fiscal year.

NOTE 2 - BUSINESS DISPOSITION

         In April 2002, Forgent sold inventory and certain other assets related
to its integration business to SPL Integrated Solutions ("SPL"), the largest
independent integrator of large videoconferencing systems and fully-integrated
multimedia systems. SPL will provide all of the integration services for Forgent
and Forgent will become the exclusive service provider for SPL, thus allowing
each company to strengthen and to significantly expand its individual core
services while complementing each others' product offerings. As a result of the
sale, Forgent received $150 thousand in cash and a $282 thousand note receivable
from SPL. SPL will absorb 15 Forgent employees and lease office space in
Forgent's King of Prussia, Pennsylvania facility, where the combined team of
engineers and technicians will manage and execute the delivery of audio-video
system integration and support. The assets related to the integration business
were sold for approximately their net book value and thus an immaterial amount
of gain was recorded during the third fiscal quarter.

         On October 2, 2001, Forgent announced that it had signed a definitive
sales agreement to sell the operations and certain assets of its VTEL Products
business unit, including the VTEL name, in order to devote its energies and
resources to the development of Forgent's services and software business. The
Company's shareholders approved the transaction during its 2001 annual meeting
and the sale was finalized on January 23, 2002. The sale of substantially all of
the assets used in the Products business unit was made to VTEL Products
Corporation ("VTEL"), a privately held company created by the former
Vice-President of Manufacturing of the Products business unit and two other
senior management members of the Products business unit. As a result, the
Company received cash of $0.5 million, a 90-day subordinated promissory note,
bearing interest at an annual rate of five percent, for approximately $1.0
million, a 5-year subordinated promissory note, bearing interest at an annual
rate of five percent, for $5.0 million and 1,045 shares of common stock, par
value $0.01 per share, representing 19.9% of the new company's fully diluted
equity. Additionally, Forgent and VTEL entered into a general license agreement,
in which VTEL was granted certain non-exclusive rights in and to certain
patents, software, proprietary know-how, and information of the Company that was
used in the daily operations of the Products business unit. Due to uncertainties
regarding VTEL's future business, Forgent fully reserved its equity interest in
VTEL. VTEL did not remit payment on its first subordinated promissory note due
in April 2002, as stipulated in the sales agreement, and management is currently
renegotiating the terms of the note. As a result of this default and due to the
uncertainty in collecting the two outstanding notes from VTEL, the Company
recorded a $6 million charge for the reserve of the both notes from VTEL, which
is presented in discontinued operations for the three and nine months ended
April 30, 2002 included. As of July 31, 2001, the Company estimated the loss
from the disposal of the VTEL Products business unit to be $1.1 million. During
the three months ended January 31, 2002, Forgent recorded an additional $0.2
million in expenses associated with the completion of the sale.


                                       5
<PAGE>
FORGENT NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share and employee data unless otherwise
noted)
--------------------------------------------------------------------------------

NOTE 3 - DISCONTINUED OPERATIONS

         During the third fiscal quarter, Forgent sold its integration business
to SPL Integrated Solutions ("SPL"), a leading nationwide integrator that
designs and installs large-display videoconferencing systems and fully
integrated multimedia systems for corporations, educational institutions and
government agencies. As a result, SPL will employ 15 members of Forgent's
Professional Services Integration team and will provide all of the future
integrated services for Forgent. The sale allows Forgent to focus its strengths
and resources on growing its more profitable software and services business
while still providing multimedia system integration to its customers through
SPL.

         In May 2001, the Company announced its plan to sell its Products
business unit and rename the remaining Solutions business unit as Forgent
Corporation, subject to the execution and consummation of a sale agreement and
shareholder approval. The Company submitted the sale of the Products business to
its shareholders at the 2001 annual meeting, and the proposal was passed. On
January 23, 2002, the Company consummated the sale of the Products business (see
Note 2) and renamed its remaining business as Forgent Networks, Inc.

NOTE 4 - SALE OF ACCOUNTS RECEIVABLE

         During the third fiscal quarter ending April 30, 2002, the Company had
sold $4.3 million of its outstanding accounts receivable, without any recourse,
in efforts to recapture cash balances lost due to the remaining payments of
outstanding payables related to the discontinued operations and to non-linear
service bookings. Silicon Valley Bank purchased the assets for a fee of 1.7% of
the value of the accounts receivable sold. The Company received proceeds from
Silicon Valley Bank of $4.2 million. During the second fiscal quarter ending
January 31, 2002, the Company had sold $4.2 million of its outstanding accounts
receivable, without any recourse, in efforts to recapture cash balances lost due
to the unanticipated significant drop in sales from discontinued operations.
Silicon Valley Bank purchased the assets for a fee of 1.7% of the value of the
accounts receivable sold and a one time set-up fee of $13 thousand. The Company
received proceeds from Silicon Valley Bank of $4.1 million.

         Under the provisions of Statement of Financial Accounting Standards
("SFAS") No. 140, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities," which Forgent had adopted as of January 31,
2002, a transfer of receivables may be accounted for as a sale if the following
three conditions are met: (1) the transferred assets are isolated from the
transferor, (2) the transferee has the right to pledge or sell the transferred
assets, and (3) the transferor does not maintain control over the transferred
assets. Accordingly, the Company recorded the transfer of the accounts
receivable as a sale of asset, excluded the related receivables from the
Consolidated Balance Sheet and recorded related expenses of $72 thousand and
$158 thousand for the three months and nine months ended April 30, 2002,
respectively.

                                       6
<PAGE>
FORGENT NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share and employee data unless otherwise
noted)
--------------------------------------------------------------------------------

NOTE 5 - ASSET IMPAIRMENT

         Initially, management intended to further develop its video streaming
technology, which is a server application with the abilities to create video
e-mail programs and to store streamed video for later non-real time playback, as
an added feature to its current VNP software. Based upon customer feedback
regarding the VNP software during the second fiscal quarter, customers do not
need these advanced features but desire fundamental network management
applications with more robust device level support and value added network level
instrumentation for ISDN and IP networks to enable them to understand and
monitor how well their networks are performing. Therefore, management reviewed
its capitalized software development costs and determined the video streaming
technology will not be used immediately in the development of VNP, in response
to customer demands, but will be reserved for potential future development. As a
result, the $2.4 million capitalized software development costs associated with
technology was impaired as of January 31, 2002.

NOTE 6 - RESTRUCTURING ACTIVITIES

         In August 2001, the Company restructured its organization, which
involved the termination of 65 employees, or 17% of the workforce, who were
assisted with outplacement support and severance. The reduction affected 16
employees in Austin, Texas, 30 employees in King of Prussia, Pennsylvania, and
19 employees in remote and international locations. The restructuring was the
result of eliminating certain business elements that did not contribute to
Forgent's core competencies as well as efforts to increase efficiencies and to
significantly reduce administrative costs. All of the employees were terminated
and the Company recorded a one-time charge of $0.8 million in the first quarter
of fiscal 2002 for the restructuring. As of April 30, 2002, all of the
involuntary termination benefits had been paid.

         On August 23, 2000, the Company announced a new business charter and
the restructuring of its organization. The new business charter was intended to
execute a change in business strategy that leveraged Forgent's services and
systems integration capabilities in order to become the industry leader in
providing visual communication solutions over broadband enterprise networks. The
restructuring involved the involuntary termination of approximately 200
employees globally, or 34% of the Company's workforce and the consolidation of
leased office space in its Austin, Texas headquarters, as well as in Sunnyvale,
California and other remote facilities. These workforce reductions and
consolidations of office space reduced costs and focused resources on efforts to
support the new business strategy. The Company completed all terminations by
January 31, 2001. During the first quarter of fiscal year 2001, the Company
recorded a restructuring charge of $1.7 million, all of which is included in the
loss from discontinued operations.

                                       7

<PAGE>

FORGENT NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share and employee data unless otherwise
noted)
--------------------------------------------------------------------------------

NOTE 7 - SEGMENT INFORMATION

         During fiscal year 2001, the Company managed its business primarily
along the lines of three reportable segments: Solutions, Products, and Internet
Ventures. The Solutions segment provided a wide variety of maintenance, network
consulting and support services to customers, and designs and installs custom
integrated visual communication systems primarily in meetings spaces of large
corporations. The Company focused on this core business line, and the Solutions
segment evolved into Forgent Networks, Inc. In April 2002, the Company sold its
integration business within this segment and thus accounted for it as
discontinued operations in the consolidated financial statements. The Products
segment designed, manufactured, and sold multi-media visual communication
products to customers primarily through a network of resellers, and to a lesser
extent directly to end-users. As a result of the sale of the Products segment in
January 2002, the Products business was also accounted for as discontinued
operations in the consolidated financial statements. The Internet Ventures
included OnScreen24(TM), which delivered and marketed visual communication tools
for the Internet and ArticuLearn(TM), an e-learning portal provider for
commercial and educational businesses that deliver learning content in a Web
environment. OnScreen24's operations were folded back into the core businesses
as of January 31, 2001 and ArticuLearn's operations were terminated as of June
30, 2001.

         The Company evaluates the performance as well as the financial results
of its segments. Included in the segment operating income (loss) is an
allocation of certain corporate operating expenses. The Company does not
identify assets or capital expenditures by reportable segments. Additionally,
the Chief Executive Officer and Chief Financial Officer do not evaluate the
business groups based on these criteria.

         The table below presents segment information about revenue from
unaffiliated customers, gross margins, and operating loss for the three and nine
months ended April 30, 2002 and 2001:

<Table>
<Caption>
                                                                              INTERNET
                                                             SOLUTIONS        VENTURES         TOTAL
                                                             ---------        --------         -----
<S>                                                         <C>             <C>             <C>

FOR THE THREE-MONTH PERIOD ENDING APRIL 30, 2002
Revenues from unaffiliated customers                        $   22,317      $       --      $   22,317
Gross margin                                                    11,708              --          11,708
Operating income                                                 8,215              --           8,215

FOR THE THREE-MONTH PERIOD ENDING APRIL 30, 2001
Revenues from unaffiliated customers                        $    7,181      $       72      $    7,253
Gross margin                                                     1,932             (82)          1,850
Operating loss                                                  (3,612)         (2,029)         (5,641)

FOR THE NINE-MONTH PERIOD ENDING APRIL 30, 2002
Revenues from unaffiliated customers                        $   37,003      $       --      $   37,003
Gross margin                                                    17,183              --          17,183
Operating income                                                 4,036              --           4,036

FOR THE NINE-MONTH PERIOD ENDING APRIL 30, 2001
Revenues from unaffiliated customers                        $   20,318      $      102      $   20,420
Gross margin                                                     5,473            (144)          5,329
Operating loss                                                  (6,235)         (8,509)        (14,744)
</Table>



                                       8

<PAGE>

FORGENT NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share and employee data unless otherwise
noted)
--------------------------------------------------------------------------------

NOTE 8 - INVENTORIES

         Inventories consist of the following:

<Table>
<Caption>
                                    APRIL 30,  JULY 31,
                                      2002       2001
<S>                                 <C>        <C>

         Raw materials              $    756   $    454
         Work in process                  49         --
         Other                            45         --
                                    --------   --------
                                    $    850   $    454
                                    ========   ========
</Table>

NOTE 9 - COMPREHENSIVE INCOME/(LOSS)

         In accordance with the disclosure requirements of SFAS No. 130,
"Reporting Comprehensive Income," the Company's other comprehensive
income/(loss) is comprised of net loss, foreign currency translation
adjustments, and unrealized gains and losses on short-term investments held as
available-for-sale securities. Comprehensive income for the three months ended
April 30, 2002 was $2.3 million and comprehensive loss for the nine months ended
April 30, 2002 was $10.3 million. Comprehensive loss for the three and nine
months ended April 30, 2001 was $10.9 million and $31.6 million, respectively.

NOTE 10 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

         On August 31, 2000 the Company adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities." SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. SFAS No. 133 requires the recognition
of all derivatives as either assets or liabilities on the Consolidated Balance
Sheet with changes in fair value recorded in the Consolidated Statement of
Operations.

         The accounting for changes in fair value of a derivative depends upon
whether it has been designated in a hedging relationship and, further, on the
type of hedging relationship pursuant to SFAS No. 133. Changes in the fair value
of derivatives not designated in a hedging relationship are recognized each
period in earnings. Hedging relationships are established pursuant to the
Company's risk management policies, and are initially and regularly evaluated to
determine whether they are expected to be, and have been, highly effective
hedges. If a derivative ceases to be a highly effective hedge, hedge accounting
is discontinued prospectively, and future changes in the fair value of the
derivative is recognized in earnings each period. For derivatives designated as
hedges of the variability of cash flows related to a recognized asset or


                                       9

<PAGE>

FORGENT NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share and employee data unless otherwise
noted)
--------------------------------------------------------------------------------
liability (cash flow hedges), the effective portion of the change in fair value
of the derivatives is reported in other comprehensive income and reclassified
into earnings in the period in which the hedged items affect earnings. Gains or
losses deferred in accumulated other comprehensive income associated with
terminated derivatives remain in accumulated other comprehensive income until
the hedged items affect earnings. Forecasted transactions designated as the
hedged items in cash flow hedges are regularly evaluated to assess that they
continue to be probable of occurring, and if the forecasted transactions are no
longer probable of occurring, any gain or loss deferred in accumulated other
comprehensive income is recognized in earnings currently.

         During the nine months ended April 30, 2001, the Company utilized
forward currency exchange contracts to reduce the exposure to fluctuations in
foreign currency exchange rates related to the European Euro and the Australian
Dollar. The changes in these contracts are reflected in the Consolidated
Statement of Operations. The Company also utilized derivatives designated as
cash flow hedges to ensure a minimum level of cashflows as related to its
investment in the Polycom stock. The amount of ineffectiveness with respect to
these cash flow hedges was not material. During the first quarter of fiscal year
2002, the 77 shares of Polycom were sold under a cash flow hedge and $1.7
million was reclassed from other comprehensive income to earnings.

NOTE 11 - RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets." SFAS No. 142 addresses financial accounting and
reporting for acquired goodwill and other intangible assets. Since the standard
recognizes goodwill and certain intangible assets may have indefinite useful
lives, these assets are no longer required to be amortized but are evaluated at
least annually for impairment. Intangible assets with finite useful lives will
continue to be amortized over their useful lives, but without constraint of an
arbitrary ceiling. In accordance with SFAS No. 142, the Company is required to
complete its transitional impairment test, with any resulting impairment loss
recorded as a cumulative effect of a change in accounting principle. Subsequent
impairment losses will be reflected in operating income from continuing
operations on the Consolidated Statement of Operations. Effective August 1,
2001, the Company chose early adoption of SFAS No. 142, and therefore did not
record any goodwill amortization expenses during the nine months ended April 30,
2002. As a result of the transitional impairment test, the Company did not
record any impairment of its goodwill for the nine months ended April 30, 2002.
The Company's goodwill, net of accumulated amortization, was $10.6 million at
April 30, 2002 and at July 31, 2001.



                                       10

<PAGE>

FORGENT NETWORKS, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share and employee data unless otherwise
noted)
--------------------------------------------------------------------------------

         As required by SFAS No. 142, the results for the prior year's quarter
have not been restated. A reconciliation of the previously reported net loss and
earnings per share as if SFAS No. 142 had been adopted is presented as follows:

<Table>
<Caption>
                                             FOR THE THREE MONTHS ENDED        FOR THE NINE MONTHS ENDED
                                           APRIL 30, 2002   APRIL 30, 2001   APRIL 30, 2002   APRIL 30, 2001
<S>                                        <C>              <C>              <C>              <C>

Reported net income (loss)                   $     2,481     $    (4,580)     $    (8,641)     $   (24,678)

Add back goodwill amortization                        --             369               --              853
                                             -----------     -----------      -----------      -----------
Adjusted net income (loss)                   $     2,481     $    (4,211)     $    (8,641)     $   (23,825)
                                             ===========     ===========      ===========      ===========


Basic and diluted earnings per share:
As reported                                  $      0.10     $     (0.18)     $     (0.35)     $     (0.99)
Goodwill amortization                                 --            0.01               --             0.03
                                             -----------     -----------      -----------      -----------
Adjusted earnings per share                  $      0.10     $     (0.17)     $     (0.35)     $     (0.96)
                                             ===========     ===========      ===========      ===========
</Table>


NOTE 12 - SUBSEQUENT EVENTS

         In May 2002, Forgent signed a multi-million dollar patent license
agreement with Sony Corporation, a leading manufacturer of audio, video,
communications and information technology products for the consumer and
professional markets. The patent agreement relates to the Company's data
compression technology and marks the second such agreement that Forgent has
obtained. The first agreement, with another prestigious international company,
was signed in April 2002 and generated $15.0 million in revenue during the three
months ended April 30, 2002 for the Company. The Company is pursuing additional
license agreements with other companies from multiple industries; however, there
can be no assurance that additional licenses can be obtained or, if obtained
will be on similar favorable terms.

         As approved by each company's board of directors and finalized on June
3, 2002, Forgent acquired certain assets and liabilities of Global Scheduling
Solutions, Inc. ("Global Scheduling Solutions"), a global provider of enterprise
conference room scheduling and resource management solutions. Global Scheduling
Solutions will become a wholly owned subsidiary of Forgent and its flagship
product, Global Scheduling System(TM) ("GSS"), an industry leading scheduling
application, will continue to be marketed, as well as fully integrated with
Forgent's VNP software in order to provide customers a leading edge solution
from one vendor that handles all of the video network scheduling, reservations,
monitoring, and management of complex video networks that are comprised of
multi-vendor and multi-brand endpoints and devices. Forgent purchased Global
Scheduling Solutions for $4.0 million in cash and $0.7 million in payments tied
to certain future contingencies.

                                       11


<PAGE>



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

         The following review of Forgent's financial position as of April 30,
2002 and July 31, 2001 and for the three and nine months ended April 30, 2002
and 2001 should be read in conjunction with our 2001 Annual Report on Form 10-K
filed with the Securities and Exchange Commission on October 29, 2001.

RESULTS OF OPERATIONS

         The following table provides the percentage of total revenues
represented by certain items in Forgent's Consolidated Statements of Operations:

<Table>
<Caption>
                                                           FOR THE THREE            FOR THE NINE
                                                            MONTHS ENDED            MONTHS ENDED
                                                              APRIL 30,               APRIL 30,
                                                          2002        2001        2002        2001
<S>                                                       <C>         <C>         <C>         <C>
    Network software and services revenues                  4%         --%          4%         --%
    Intellectual property revenues                         67          --          41          --
    Services and other revenues                            29         100          56         100
    Gross margin                                           52          26          46          26
    Selling, general and administrative                    13          63          21          60
    Research and development                                3          19           6          29
    Asset impairment                                       --          16           6           5
    Restructuring expenses                                 --          --           2          --
    Total operating expenses                               16         103          35          98
    Other income, net                                       1          31           5          23
    Income (loss) from continuing operations               39         (42)         17         (48)
    Loss from discontinued operations                     (27)        (21)        (40)        (73)
    Net income (loss)                                      11%        (63)%       (23)%      (121)%
</Table>

THREE AND NINE MONTHS ENDED APRIL 30, 2002 AND 2001

         Revenues. Revenues for the three months ended April 30, 2002 were $22.3
million, an increase of $15.1 million, or 208%, from $7.2 million reported for
the three months ended April 30, 2001. Revenues for the nine months ended April
30, 2002 were $37.0 million, an increase of $16.6 million, or 81%, from $20.4
million reported for the nine months ended April 30, 2001. Revenues represent
the combined revenues including sale of Forgent's software, network consulting,
installation, training, maintenance services, and multi-vendor products as well
as royalties received from licensing the Company's intellectual property. The
revenues do not include any revenues from the discontinued integration business,
which provided custom videoconferencing integration solutions and the
discontinued products business, which engaged in the manufacture and sale of
endpoint systems.

         Network software and services revenues were $.9 million and $1.3
million for the three and nine months ended April 30, 2002, respectively. These
revenues include sales of Forgent Video Network Platform ("VNP") and other
software, network consulting services, and royalties. VNP, an enterprise-class
network management software that manages video, voice and other types of rich
media on multi-



                                       12

<PAGE>

protocol and multi-vendor networks, is designed to schedule, monitor and manage
enterprise video networks from a central location, thus improving ease-of-use,
reliability, and manageability of video communications, as well as cost of
ownership. Forgent's network consulting services provide technical market
research, evaluation and analysis to customers in addition to the means to test
multiple network systems for manageability, interoperability, and optimum
network connectivity prior to installation. During the three months ended April
30, 2002, Forgent sold eight new VNP licenses, growing revenues by approximately
127% compared to the three months ended January 31, 2002. Additionally, the
average selling price per engagement is approximately $100 thousand, which is up
from the last fiscal quarter. With the acquisition of Global Scheduling
Solutions, which increased Forgent's sales force by ten members.

         Intellectual property licensing revenues were $15.0 million for the
three and nine months ending April 30, 2002. As a result of the Company's
Strategic Patent Program, Forgent signed a $15.0 million patent license
agreement with a prestigious international consumer and commercial electronics
firm during the third fiscal quarter, which was fully paid during the fourth
fiscal quarter. The license relates to the Company's data compression technology
embodied in U.S. Patent No. 4,698,672. Multiple manufacturers in various
industries use still-compression technology in their products, including digital
cameras, printers, scanners, internet service providers, wireless devices, as
well as new emerging products such as new cell phones and wireless sharing
networks. In addition to the '672 patent, which allows for licensing abilities
in the United States as well as multiple international countries, Forgent
maintains a patent portfolio and, as part of its on-going business, has a
program in place to explore the contents of its existing patents for additional
licensing opportunities. The Company is pursuing additional license agreements
with other companies from multiple industries; however, there can be no
assurance that additional licenses can be obtained or, if obtained will be on
similar favorable terms.

         Services and other revenues decreased by $0.8 million, or 11%, to $6.5
million for the quarter ended April 30, 2002 from $7.3 million for the quarter
ended April 30, 2001. Services and other revenues increased by $0.3 million, or
1%, to $20.7 million for the nine months ended April 30, 2002 from $20.4 million
the nine months ended April 30, 2001. Service and other revenues include the
maintenance and support of thousands of endpoints and bridges under maintenance
agreements, as well as sales of a variety of third-party manufactured equipment
through its Multi-Vendor Partners Program (TM) ("MVP"). The decline in revenues
during the three months ended April 30, 2002, as compared to the revenues during
the three months ended April 30, 2001, is largely due to the decrease in the
renewal rate of service contracts for VTEL products during the current fiscal
year. Service revenues generated during the third fiscal quarter were flat
compared to the service revenues generated during the second fiscal quarter.
Forgent is a vendor-neutral service provider, offering installation, training,
and maintenance to a wider array of videoconferencing devices, including end
points, multipoint control units, gateways, gatekeepers, and traditional network
switches and routers. This business strategy is resulting in service revenues
that offset the decline in service revenues based primarily on VTEL equipment.
Forgent will continue to sell equipment through its MVP program. The Company's
strategy is to stabilize this line of business in order to provide cash and
accessibility to customers as Forgent continues to invest and focus on its
network software and services.



                                       13


<PAGE>

         Gross margin. Gross margin as a percentage of total revenues was 52%
and 46% for the three and nine months ended April 30, 2002, respectively, an
increase from the gross margin as a percentage of total revenues of 26% for the
three and nine months ended April 30, 2001. Gross margins increased $9.9
million, or 533%, to $11.7 million for the three months ended April 30, 2002
from $1.8 million for the three months ended April 30, 2001. Gross margins
increased $11.8 million, or 222%, to $17.1 million for the nine months ended
April 30, 2002 from $5.3 million for the nine months ended April 30, 2001.

         The increase in gross margins, as well as the increase in gross margins
as a percentage of total revenues, for the three and nine months ended April 30,
2002 as compared to the three and nine months ended April 30, 2001 are due
primarily to the gross margins resulting from the patent license agreement
obtained during the third fiscal quarter. The cost of sales on the intellectual
property licensing business relates to the legal fees incurred on successfully
achieving signed agreements. The contingent legal fees are based on a standard
percentage of the signed agreement and are paid to a national law firm, which
has personally invested and continues to invest in developing Forgent's
licensing program.

         Since the costs associated with the network software and services
business result primarily from the amortization of the Company's capitalized
software development costs on a straight-line basis and from minimal royalty
payments to outside vendors, the cost of sales from this line of business is
relatively fixed. During the three months ended April 30, 2002, Forgent sold
eight VNP licenses, as compared to the four licenses sold during the previous
three months ended January 31, 2002. The doubling in sales quarter-over-quarter
resulted in a 52% gross margin, as compared to the negative margins achieved
during the second fiscal quarter. As more licenses are sold, management expects
to achieve higher gross margins from the network software and services business,
in absolute terms and in terms of percentage of revenue.

         Similarly, the costs associated with the service and maintenance
business are labor intensive and relatively fixed, which causes gross margins to
be directly affected by the level of revenue generated from new and renewed
service contracts. Gross margins from other revenues are subject to product mix
shifts based on the types of MVP products sold. In August 2001, Forgent resized
its infrastructure to incur costs that more closely matched the projected
revenue levels. As a result, gross margins from the service and other business
significantly increased by 55% from $1.9 million to $2.9 million for the three
months ended April 30, 2002 and increased by 59% from $5.3 million to $8.5
million for the nine months ended April 30, 2002.

         Selling, general and administrative. Selling, general and
administrative expenses decreased by $1.6 million, or 36%, to $2.9 million for
the quarter ended April 20, 2002 from $4.5 million for the quarter ended April
30, 2001. Selling, general and administrative expenses decreased by $4.3
million, or 35%, to $7.9 million for the nine months ended April 30, 2002 from
$12.2 million for the nine months ended April 30, 2001. Selling, general and
administrative expenses as a percentage of revenues were 13% and 63% for the
three months ended April 30, 2002 and 2001, respectively, and were 21% and 60%
for the nine months ended April 30, 2002 and 2001, respectively.

         Total selling, general and administrative expenses ("SG&A") as well as
SG&A expenses as a percentage of revenue, have significantly decreased during
the reporting periods in fiscal year 2002, as compared to the corresponding
periods in fiscal year 2001. The SG&A expenses incurred by the Company's
Internet subsidiaries, which were folded back into the core operations during
fiscal 2001, were $0.5 million and $2.3 million for the three and nine months
ended April 30, 2001, respectively. Without the effect of the Internet ventures,
total SG&A expenses decreased $1.1 million, or 28% and $2.0 million, or 20%, for
the three and nine months ended April 30, 2002, respectively.



                                       14

<PAGE>

         In efforts to find efficiencies and to significantly reduce our
administrative costs as a percent of expected revenues, the Company reexamined
its overall staffing needs, restructured its operations and recorded a one-time
charge of $0.8 million during the three months ended October 31, 2001. Efforts
to reduce administrative costs during fiscal year 2001, including the closing of
the Sunnyvale, California facility, continue to be realized in fiscal 2002. As a
result of the Global Scheduling Solutions acquisition, Forgent's sales force has
more than doubled and thus, SG&A expenses are projected to increase. However,
management is committed to maintaining SG&A expenses at reasonable levels in
terms of percentage of revenue and to further decreasing any unnecessary SG&A
expenses that do not directly support the generation of revenues for Forgent.

         Research and development. Research and development expenses decreased
by $0.8 million, or 60%, to $0.6 million for the quarter ended April 30, 2002
from $1.4 million for the quarter ended April 30, 2001. Research and development
expenses decreased by $3.9 million, or 66%, to $2.0 million for the nine months
ended April 30, 2002 from $5.9 million for the nine months ended April 30, 2001.
Research and development as a percentage of revenues were 3% and 19% for the
three months ended April 30, 2002 and 2001, respectively, and were 6% and 29%
for the nine months ended April 30, 2002 and 2001, respectively.

         During the three and nine months ended April 30, 2001, the Company's
subsidiaries, ArticuLearn (TM) and OnScreen24(TM), which were comprised
primarily of Forgent research and development engineers who developed visual
communication delivery products for use over the Internet, incurred $0.3 million
and $4.8 million in research and development expenses, respectively. Due to the
weakening environment for start-up businesses and related tightening of the
venture capital marketplace, the Company absorbed its Internet operations back
into the operations of its core business in fiscal 2001. Without the effect of
the Internet ventures, total research and development expenses decreased $0.6
million, or 50% and $0.9 million, or 80%, for the three and nine months ended
April 30, 2002, respectively.

         Unlike proprietary device management software from manufacturers that
only support their brand and consequently lock customers into a single vendor
purchase decision, VNP is the industry's only enterprise video network
management software that improves quality of service and reduces cost of
ownership for multi-protocol and multi-vendor environments. Forgent developed a
Common Operating Environment ("COE"), which uses standards-based interfaces and
methods to recognize a host of video devices, as well as traditional network
devices, thus allowing companies to grow their video networks and make future
purchase decisions that are independent of hardware configurations. During the
three and nine months ended April 30, 2002, the Company incurred $0.6 million
and $2.0 million, respectively, in research and development expenses, which are
related to efforts on designing Forgent's VNP. These expenses are net of $1.1
million and $3.0 million capitalized during the three and nine months ended
April 30, 2002, respectively. As of April 30, 2002, $1.7 million of the
Company's net capitalized software expenses relates to the efforts on Forgent's
VNP Release 1.0, which started amortizing during the second fiscal quarter as
sales on this software were realized. The remaining $1.6 million of the
Company's net capitalized software expenses, relates to efforts on Forgent's VNP
Release 2.0, which offers an intuitive, user-friendly interface that provides an
at-a-glance summary and statistics of the entire video network including calls,
video devices, and bandwidth utilization and enables users to manage their
networks and to quickly resolve problems, even from remote locations.
Additionally, VNP Release 2.0 features a new easy-to-use reporting wizard with a
rich set of reports that can be customized to meet specific customer
requirements. Forgent's newest version of VNP, which is targeted to the
corporate audiovisual departments, was released for sale one month ahead of
schedule in May 2002 and will start being amortized during the fourth fiscal
quarter. The Company's development team is designing and initiating work on the
next major VNP release, which is scheduled for the first part of fiscal year
2003.



                                       15
<PAGE>

         During the three months ended April 30, 2002, the Company filed an
additional eight VNP-related patent submissions, which brings the total VNP
filings count to thirty-four. Forgent will continue to test and add new devices
to its managed-list to ensure VNP supports the broadest range possible of both
legacy and new endpoints and devices and expects to file more patent
applications during the next fiscal quarter. The Company remains committed to
developing its intellectual property to protect its investment in research and
development as well as to exploring potential revenue streams from its existing
patent portfolio.

         The Company's ability to successfully develop software solutions to
enable enterprise video networks is a significant factor in Forgent's success.
As Forgent develops its research and development strategy, management
anticipates additional costs associated with the recruiting and retention of
engineering professionals adept at broadband technologies. Management will
attempt to maintain research and development expenses at reasonable levels in
terms of percentage of revenue. However, management believes Forgent's ultimate
future success is based significantly on the success of joint solution offering
from VNP and GSS.

         Asset impairment. Initially, management intended to further develop its
video streaming technology, which is a server application with the abilities to
create video e-mail programs and to store streamed video for later non-real time
playback, as an added feature to its current VNP software. Based upon customer
feedback regarding the VNP software during the second fiscal quarter, customers
do not need these advanced features but desire fundamental network management
applications with more robust device level support and value added network level
instrumentation for ISDN and IP networks to enable them to understand and
monitor how well their networks are performing. Therefore, management reviewed
its capitalized software development costs and determined the video streaming
technology will not be used immediately in the development of VNP, in response
to customer demands, but will be reserved for potential future development. As a
result, the $2.4 million capitalized software development costs associated with
technology was impaired as of January 31, 2002.

         Amortization of intangible assets. Amortization expenses were $0.4
million and $0.9 million during the three and nine months ended April 30, 2001,
respectively. The expenses relate to the amortization of goodwill resulting from
certain acquisitions. Effective August 1, 2001, the Company chose early adoption
of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets," which recognizes that since goodwill and certain
intangible assets may have indefinite useful lives, these assets are no longer
required to be amortized but are to be evaluated at least annually for
impairment. Therefore, no amortization expenses were recorded for the three and
nine months ended April 30, 2002 (see Note 11).

         Restructuring charge. During the three months ended October 31, 2001,
the Company restructured its organization, which involved the termination of 65
employees or 17% of the workforce. The restructuring was the result of
eliminating certain business elements that did not contribute to Forgent's core
competencies as well as efforts to increase efficiencies and to significantly
reduce administrative costs. Forgent recorded a one-time charge of $0.8 million
in the first quarter of fiscal 2002 for the restructuring. As of April 30, 2002,
all of the involuntary termination benefits had been paid. During the nine
months ended April 30, 2002, the Company has realized the benefits of the
restructuring through lower cost of sales and operating expenses.



                                       16


<PAGE>

         Other income (expense). Other income decreased by $2.0 million, or 90%,
to $0.2 million for the quarter ended April 30, 2002 from income of $2.2 million
for the quarter ended April 30, 2001. Other income decreased by $2.7 million, or
57%, to $2.0 million for the nine months ended April 30, 2002 from income of
$4.7 million for the nine months ended April 30, 2001. The decreases are
primarily attributable to the decreases in gain on sales of Forgent's investment
in common stock of Accord Networks Ltd. ("Accord"), a networking equipment
manufacturer. During the three and nine months ended April 30, 2001, the Company
partially sold its investment in Accord, which netted $3.7 million and $4.9
million in realized gains, respectively. Polycom, Inc., also a networking
equipment manufacturer, acquired Accord and during the first fiscal quarter of
2002, the Company sold its remaining 76,625 shares of Polycom common stock under
a cash flow hedge, resulting in a $1.7 million realized gain.

         Loss from discontinued operations. During the nine months ended April
30, 2002, the Company sold the operations and substantially all of the assets of
its VTEL Products business, including the VTEL name, and the operations and
assets of its integration business. Accordingly, the products and integration
businesses have been accounted for and presented as discontinued operations in
the consolidated financial statements. Loss from discontinued operations was
$6.1 million and $14.9 million for the three and nine months ended April 30,
2002, respectively. Loss from discontinued operations was $1.5 million and $14.9
million for the three and nine months ended April 30, 2001, respectively. Loss
from discontinued operations was 27% and 40% of revenues for the three and nine
months ended April 30, 2002, respectively. Loss from discontinued operations was
21% and 73% of revenues for the three and nine months ended April 30, 2001,
respectively. In April 2002, VTEL did not remit payment on its first
subordinated promissory note, as stipulated in the sales agreement, and
management is currently renegotiating the terms of the note. Due to this default
and the uncertainty in collecting the two outstanding notes from VTEL, the
losses from discontinued operations for the three and nine months ended April
30, 2002 included a $5.9 million charge for the reserve of the both notes from
VTEL.

         As of July 31, 2001, the Company estimated the loss from the disposal
of the VTEL Products business unit to be $1.1 million. During the three months
ended January 31, 2002, Forgent recorded an additional $0.2 million in expenses
associated with the completion of the sale. The assets related to the
integration business were sold for approximately their net book value and thus
an immaterial amount of gain was recorded during the third fiscal quarter.

         Net income (loss). Forgent generated a net income of $2.5 million, or
$0.10 per share, during the quarter ended April 30, 2002 compared to net loss of
$4.6 million, or $0.18 per share, during the quarter ended April 30, 2001.
Forgent generated a net loss of $8.6 million, or $0.35 per share, during the
nine months ended April 30, 2002 compared to net loss of $24.7 million, or $0.99
per share, during the nine months ended April 30, 2001. Despite the increase in
loss from discontinued operations, the increase in net income during the three
months ended April 30, 2002, as compared to the net loss incurred during the
three months ended April 30, 2001, is due primarily to the revenues generated
from the licensing of intellectual property and the decrease in operating
expenses. Similarly, the revenues from the patent license agreement and the
decrease in operating expenses contributed to the decline in net loss during the
nine months ended April 30, 2002 as compared to the nine months ended April 30,
2001. Forgent's success during the third fiscal quarter reflects the Company's
eighth consecutive quarter of improved financial performance.

         During the nine months ended April 30, 2002, Forgent has taken steps
(1) to grow its revenues through VNP sales, patent licensing agreements, and
increased professional service offerings and video network consulting, (2) to
improve gross margins, (3) to reduce costs by resizing its infrastructure, (4)
to maintain a strong cash balance, and (5) to finalize the sales of its less
profitable businesses.



                                       17

<PAGE>
However, uncertainties and challenges remain, and there can be no assurance
that the Company can successfully grow its revenues or maintain profitability.

LIQUIDITY AND CAPITAL RESOURCES

         On April 30, 2002, Forgent had working capital of $12.6 million,
including $15.3 million in cash, cash equivalents and short-term investments.
The Company's working capital at the end of the third fiscal quarter grew by
106% since the end of the previous fiscal quarter. Cash provided by operating
activities was $3.3 million for the nine months ended April 30, 2002 due
primarily to the sale of $8.3 million in accounts receivable and the change in
accounts receivable. Cash used in operating activities was $8.0 million for the
nine months ended April 30, 2001 and largely resulted from operating losses and
changes in accounts receivable and accounts payable. The liquidation of the
Internet ventures, which historically required significant funding for
operations, as well as the completion of the restructuring efforts, improved the
Company's cash flows from operations during the nine months ended April 30,
2002, as compared to the nine months ended April 30, 2001. Cash provided by
operating activities will be further improved during the fourth fiscal quarter
as payments from the licensing agreements are received. During the third fiscal
quarter ending April 30, 2002, the Company had sold $4.3 million of its
outstanding accounts receivable, without any recourse, in efforts to recapture
cash balances lost due to the remaining payments of outstanding payables related
to the discontinued operations and to non-linear service bookings. Silicon
Valley Bank purchased the assets for a fee of 1.7% of the value of the accounts
receivable sold. The Company received proceeds from Silicon Valley Bank of $4.2
million. During the second fiscal quarter ending January 31, 2002, the Company
had sold $4.2 million of its outstanding accounts receivable, without any
recourse, in efforts to recapture cash balances lost due to the unanticipated
significant drop in sales from discontinued operations. Silicon Valley Bank
purchased the assets for a fee of 1.7% of the value of the accounts receivable
sold and a one time set-up fee of $13 thousand. The Company received proceeds
from Silicon Valley Bank of $4.1 million. As a result of the two sales of
accounts receivable, the Company excluded the related receivables from the
Consolidated Balance Sheet and recorded related expenses of $72 thousand and
$158 thousand for the three months and nine months ended April 30, 2002,
respectively.

         Cash used in investing activities was $0.8 million for the nine months
ended April 30, 2002 due primarily to the capitalization of software development
costs, which were offset by net sales of short-term investments. Cash provided
by investing activities was $16.3 million for the nine months ended April 30,
2001 and primarily resulted from the net sales of short-term investments. For
fiscal 2002 management established a capital budget of $2.0 million primarily
for investing in development tools, sales and marketing demonstration equipment
and for on-going operational requirements. Capital expenditures incurred during
the nine months ended April 30, 2002 primarily relate to the purchase of the
Company's new accounting system.

         Cash used in financing activities was $0.9 million for the nine months
ended April 30, 2002 due primarily to the purchase of treasury stock, which was
offset by proceeds received from the issuance of stock. Cash used in financing
activities was $0.7 million for the nine months ended April 30, 2001 and largely
resulted from payments on notes payable. In fiscal 2001 Forgent announced a
stock repurchase program to purchase up to two million of the Company's common
stock. During the nine months ended April 30, 2002, the Company repurchased
589,800 shares for $1.8 million. Management is committed to



                                       18

<PAGE>

repurchasing additional shares in fiscal 2002, depending on the Company's cash
position, market conditions, and other factors. During fiscal year 2002, Forgent
entered into a three-year notes payable of $0.5 million for the purchase of the
Company's new accounting system. At April 30, 2002, Forgent did not have a line
of credit in place. Based on the Company's strong cash position, management does
not expect to obtain any line of credit during the current fiscal year.

         Forgent's principal sources of liquidity at April 30, 2002 consisted of
$15.3 million of cash, cash equivalents and short-term investments, and the
ability to generate cash from operations. In essence, the Company's cash and
short-term investment balance has remained relatively stable over the past
several quarters. Management expects the Company's cash position to strengthen.
Management plans to strategically utilize positive cashflow to invest further in
developing Forgent's VNP and GSS software and to exploring more opportunities
for growing the business. However, there is no assurance that the Company will
be able to continue to limit its cash consumption and preserve its cash
balances, and it is possible that the Company's business demands may lead to
cash utilization at levels greater than recently experienced due to investments
in research and development, increased expenses levels and other factors.

LEGAL MATTERS

         Forgent is the defendant or plaintiff in various actions that arose in
the normal course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse affect on the
Company's financial condition or results of operations.

GENERAL

         The markets for Forgent's software and services are characterized by a
highly competitive and rapidly changing environment in which operating results
are subject to the effects of frequent product introductions, manufacturing
technology innovations and rapid fluctuations in demand. While management
attempts to identify and respond to these changes as soon as possible,
prediction of and reaction to such events will be an ongoing challenge and may
result in revenue shortfalls during certain periods of time.

         Forgent's future results of operations and financial condition could be
impacted by the following factors, among others: trends in the videoconferencing
market; introduction of new products or services by competitors; increased
competition due to the entrance of other companies into the videoconferencing
market, especially more established companies with greater resources than
Forgent's; market acceptance of new software and services the Company
introduces; price competition; interruption of the supply of low-cost products
from third-party manufacturers; changes in general economic conditions; and
adverse legal disputes.

         Due to the factors noted above and elsewhere in the Management's
Discussion and Analysis of Financial Condition and Results of Operations,
Forgent's past earnings and stock price have been, and future earnings and stock
price potentially may be, subject to significant volatility, particularly on a
quarterly basis. Past financial performance should not be considered a reliable
indicator of future performance and investors are cautioned in using historical
trends to anticipate results or trends in future periods. Any shortfall in
revenue or earnings from the levels anticipated by securities analysts could
have an immediate and significant effect on the trading price of the Company's
common stock in any given period. Also, Forgent participates in a highly dynamic
industry, which often contributes to the volatility of its common stock price.



                                       19


<PAGE>

CAUTIONARY STATEMENT REGARDING RISKS AND UNCERTAINTIES THAT MAY AFFECT FUTURE
RESULTS

         Certain portions of this report contain forward-looking statements that
reflect the Company's current expectations regarding future results of
operations, economic performance, financial condition and achievements. Whenever
possible, Forgent attempted to identify these forward-looking statements with
the words "believes," "estimates," "plans," "expects," "anticipates" and other
similar expressions. These statements reflect management's current plans and
expectations that rely on a number of assumptions and estimates that are subject
to risks and uncertainties including, but not limited to rapid changes in
technology, unexpected changes in customer order patterns, the intensity of
competition, economic conditions, pricing pressures, interest rates
fluctuations, changes in the capital markets, litigation involving intellectual
property, changes in tax and other laws and governmental rules applicable to
Forgent's business and other risks indicated in Forgent's filings with the
Securities and Exchange Commission. These risks and uncertainties are beyond the
Company's control, and in many cases, management cannot predict all of the risks
and uncertainties that could cause actual results to differ materially from
those indicated by the forward-looking statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company's primary market risk exposure relates to interest rate
risk and foreign currency exchange fluctuations. Since Forgent's investment
portfolio primarily consists of money market funds and other marketable
securities including commercial paper and government securities, management
believes the interest rate risk is minimal due to the short-term nature of these
investments. Additionally, Forgent previously invested in common stock shares of
Accord Networks ("Accord"), an Israeli-based manufacturer of networking
equipment, which converted to Polycom, Inc. ("Polycom") common stock shares as a
result of Polycom's acquisition of Accord. During the first fiscal quarter of
2002, the remaining Polycom shares were sold under a cash flow hedge, realizing
$1.7 million in gain and $1.8 million in net cash flows. As of April 30, 2002,
the Company no longer had market risks related to the Polycom stock.

         Management's objective in managing the exposure to foreign currency
exchange rate fluctuations is to reduce the impact of adverse fluctuations in
earnings and cash flows associated with foreign currency exchange rate changes.
Management reviews the credit worthiness of Forgent's customers to mitigate the
foreign currency exchange risk and credit risk and historically utilized foreign
currency forward contracts to hedge its foreign currency exposure on firm
commitments, particularly related to the Euro and Australian dollar. Since most
of Forgent's foreign sales are predominantly in U.S. dollars, management
believes the foreign currency exposure to be relatively low and discontinued
using foreign currency contracts as of July 31, 2001.

         For additional Quantitative and Qualitative Disclosures about Market
Risk reference is made to Part II, Item 7A, Quantitative and Qualitative
Disclosures about Market Risk, in the Company's Annual Report on Form 10-K for
the year ended July 31, 2001.



                                       20

<PAGE>

PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         Forgent is the defendant or plaintiff in various actions that arose in
the normal course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse affect on the
Company's financial condition or results of operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

                  None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

                  None

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

                  None

ITEM 5. OTHER INFORMATION

                  None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits:

                  None

         (B) Reports on Form 8-K:

                  None

                                      * * *

                                   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.


                                     FORGENT NETWORKS, INC.


     June 17, 2002                   By:/s/ Richard N. Snyder
                                        ---------------------------------------
                                        Richard N. Snyder
                                        Chief Executive Officer

                                     By:/s/ Jay C. Peterson
                                        ----------------------------------------
                                        Jay C. Peterson
                                        Chief Financial Officer



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