**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


________________________________________





**FORM
      10-Q**





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





For
      the
      quarterly period ended April 30, 2006





OR





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





For
      the transition period from ____ to ______





Commission
      file number: 0-20008





__________________________________________





**FORGENT
      NETWORKS, INC.**


(Exact
      Name of Registrant as Specified in its Charter)








**Delaware**
            
            **74-2415696**(State
                of other jurisdiction of
            
            (I.R.S.
                Employerincorporation
                or organization)
            
            Identification
                No.)**108
                Wild Basin Road****Austin,
                Texas**
            
            **78746**(Address
                of Principal Executive Offices)
            
            (Zip
                Code)**(512)
                437-2700**(Registrant's
                Telephone Number, including Area
                Code)





________________________________________







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


Yes x 
       No o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer or a non-accelerated filer (as defined in Rule 12b-2 of the
      Exchange Act).


Large
      accelerated filer o   Accelerated
      filer o   Non-accelerated
      filer x




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


Yes o 
       No x





At
      June
      13, 2006, the registrant had outstanding 25,436,786 **** shares
      of
      its Common Stock, $0.01 par value.








**INDEX
      TO FINANCIAL STATEMENTS**








**Page****Number****PART
                I - FINANCIAL INFORMATION**Item
              1
              -
            Condensed
                Consolidated Financial StatementsCondensed
                Consolidated Balance Sheets as of April 30, 2006 (unaudited) and
                July 31,
                2005
            
            3Unaudited
                Condensed Consolidated Statements of Operations for the Three and
                Nine
                Months Ended April 30, 2006 and 2005
            
            4Unaudited
                Condensed Consolidated Statements of Cash Flows for the Nine Months
                Ended
              April
                30, 2006 and 2005
            
            5Notes
                to the Unaudited Condensed Consolidated Financial
                Statements
            
            6Item
              2 -
            Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            12Item
              3 -
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            19Item
              4 -
            Controls
                and Procedures
            
            20**PART
                II - OTHER INFORMATION**Item
              1
              -
            Legal
              Proceedings
            
            21Item
              1A
              -
            Risk
              Factors
            
            22Item
              2 -
            Unregistered
              Sales of Equity Securities and Use of Proceeds
            
            26Item
              3 -
            Defaults
                upon Senior Securities
            
            26Item
              4
              -
            Submission
              of
              Matters to a Vote of Security Holders
            
            27Item
              5 -
            Other
                Information
            
            27Item
              6
              -
            Exhibits
            
            27**Signatures**
            
            29**Index
                to Exhibits**
            
            30






2




**FORGENT
      NETWORKS, INC.**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


(Amounts
      in thousands, except per share data)







**APRIL
                30,**
              **2006**
            
            **JULY
                31,**
              **2005****(UNAUDITED)****ASSETS**Current
                Assets:Cash
                and cash equivalents, including restricted cash of $650
              at
                April 30, 2006 and July 31, 2005
            
            $
            14,610
            
            $
            15,861Short-term
                investments
            
            
            --
            
            
            1,487Accounts
                receivable, net of allowance for doubtful accounts of
              $11
                and $10 at April 30, 2006 and July 31, 2005, respectively
            
            
            724
            
            
            471Prepaid
                expenses and other current assets
            
            
            335
            
            
            266Total
                Current Assets
            
            
            **15,669**
            
            
            **18,085**Property
                and equipment, net
            
            
            1,076
            
            
            1,957Intangible
                assets, net
            
            
            10
            
            
            33Other
                assets
            
            
            15
            
            
            27**$**
            **16,770**
            
            **$**
            **20,102****LIABILITIES
                AND STOCKHOLDERS’ EQUITY**
              Current
                Liabilities:Accounts
                payable
            
            $
            2,092
            
            $
            1,856Accrued
                compensation and benefits
            
            
            463
            
            
            590Other
                accrued liabilities
            
            
            922
            
            
            1,209Notes
                payable, current position
            
            
            352
            
            
            355Deferred
                revenue
            
            
            615
            
            
            517Total
                Current Liabilities
            
            
            **4,444**
            
            
            **4,527**Long-Term
                Liabilities:Deferred
                revenue
            
            
            14
            
            
            4Other
                long-term obligations
            
            
            1,958
            
            
            2,280Total
                Long-Term Liabilities
            
            
            **1,972**
            
            
            **2,284**Stockholders’
                Equity:Preferred
                stock, $.01 par value; 10,000 authorized;
              none
                issued or outstanding
            
            
            --
            
            
            --Common
                stock, $.01 par value; 40,000 authorized; 27,163 and
              26,967
                shares issued; 25,373 and 25,177 shares outstanding
              at
                April 30, 2006 and July 31, 2005, respectively
            
            
            271
            
            
            269Treasury
                stock at cost, 1,790 issued at April 30, 2006 and
              July
                31, 2005
            
            
            (4,815
            )
            
            (4,815
            )Additional
                paid-in capital
            
            
            265,377
            
            
            265,020Accumulated
                deficit
            
            
            (250,491
            )
            
            (247,199
            )Accumulated
                other comprehensive income
            
            
            12
            
            
            16Total
                Stockholders’ Equity
            
            
            **10,354**
            
            
            **13,291****$**
            **16,770**
            
            **$**
            **20,102**





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





3




**FORGENT
        NETWORKS, INC.**
 **CONDENSED
        CONSOLIDATED STATEMENT OF OPERATIONS**
 (Amounts
        in thousands, except per share data)


**FOR
                THE**
              **THREE
                MONTHS ENDED**
              **APRIL
                30,**
            
            **FOR
                THE**
              **NINE
                MONTHS ENDED**
              **APRIL
                30,****2006**
            
            **2005**
            
            **2006**
            
            **2005****(UNAUDITED)**
            
            **(UNAUDITED)****REVENUES:**Intellectual
                property licensing
            
            $
            1,891
            
            $
            665
            
            $
            8,613
            
            $
            7,628Software
                and services
            
            
            647
            
            
            488
            
            
            1,924
            
            
            1,400Total
                revenues
            
            
            **2,538**
            
            
            **1,153**
            
            
            **10,537**
            
            
            **9,028****COST
                OF SALES:**Intellectual
                property licensing
            
            
            1,147
            
            
            970
            
            
            5,314
            
            
            5,451Software
                and services
            
            
            213
            
            
            294
            
            
            604
            
            
            709Total
                cost of sales
            
            
            **1,360**
            
            
            **1,264**
            
            
            **5,918**
            
            
            **6,160****GROSS
                MARGIN**
            
            
            **1,178**
            
            
            **(111**
            **)**
            
            **4,619**
            
            
            **2,868****OPERATING
                EXPENSES:**Selling,
                general and administrative
            
            
            2,561
            
            
            4,047
            
            
            7,721
            
            
            10,197Research
                and development
            
            
            153
            
            
            79
            
            
            454
            
            
            236Amortization
                of intangible assets
            
            
            6
            
            
            12
            
            
            23
            
            
            36Total
                operating expenses
            
            
            **2,720**
            
            
            **4,138**
            
            
            **8,198**
            
            
            **10,469****LOSS
                FROM OPERATIONS**
            
            
            **(1,542**
            **)**
            
            **(4,249**
            **)**
            
            **(3,579**
            **)**
            
            **(7,601**
            **)****OTHER
                INCOME AND (EXPENSES):**Interest
                income
            
            
            128
            
            
            115
            
            
            360
            
            
            285Interest
                expense and other
            
            
            (12
            )
            
            (4
            )
            
            (58
            )
            
            (29
            )Total
                other income and (expenses)
            
            
            **116**
            
            
            **111**
            
            
            **302**
            
            
            **256****LOSS
                FROM CONTINUING OPERATIONS**,
              **BEFORE
                INCOME TAXES**
            
            
            **(1,426**
            **)**
            
            **(4,138**
            **)**
            
            **(3,277**
            **)**
            
            **(7,345**
            **)**Provision
                for income taxes
            
            
            (5
            )
            
            (7
            )
            
            (15
            )
            
            (12
            )**LOSS
                FROM CONTINUING OPERATIONS**
            
            
            **(1,431**
            **)**
            
            **(4,145**
            **)**
            
            **(3,292**
            **)**
            
            **(7,357**
            **)**Loss
                from discontinued operations, net of income taxes
            
            
            --
            
            
            (143
            )
            
            --
            
            
            (631
            )(Loss)
                gain on disposal, net of income taxes
            
            
            --
            
            
            (3
            )
            
            --
            
            
            4,315**(LOSS)
                INCOME FROM DISCONTINUED**
              **OPERATIONS,
                NET OF INCOME TAXES**
            
            
            **--**
            
            
            **(146**
            **)**
            
            **--**
            
            
            **3,684****NET
                LOSS**
            
            **$**
            **(1,431**
            **)**
            **$**
            **(4,291**
            **)**
            **$**
            **(3,292**
            **)**
            **$**
            **(3,673**
            **)****BASIC
                AND DILUTED (LOSS) INCOME PER SHARE:**Loss
                from continuing operations
            
            $
            (0.06
            )
            $
            (0.17
            )
            $
            (0.13
            )
            $
            (0.30
            )Income
                from discontinued operations
            
            $
            0.00
            
            $
            0.00
            
            $
            0.00
            
            $
            0.15Net
                loss
            
            $
            (0.06
            )
            $
            (0.17
            )
            $
            (0.13
            )
            $
            (0.15
            )**WEIGHTED
                AVERAGE SHARES OUTSTANDING:**Basic
            
            
            25,372
            
            
            24,927
            
            
            25,262
            
            
            24,910Diluted
            
            
            25,372
            
            
            24,927
            
            
            25,262
            
            
            24,910





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





4




**FORGENT
        NETWORKS, INC.**
 **CONDENSED
        CONSOLIDATED STATEMENT OF CASH FLOWS**
 (Amounts
        in thousands)





**FOR
                THE NINE MONTHS ENDED APRIL 30,****2006**
            
            **2005****(UNAUDITED)****(Revised)****CASH
                FLOWS FROM OPERATING ACTIVITIES:**Loss
                from continuing operations
            
            $
            (3,292
            )
            $
            (7,357
            )Adjustments
                to reconcile loss from continuing operations to net cash used in
                operations:Depreciation
                and amortization
            
            
            952
            
            
            1,136Amortization
                of leasehold advance and lease impairment
            
            
            (420
            )
            
            (463
            )Provision
                for doubtful accounts
            
            
            28
            
            
            (12
            )Share-based
                compensation
            
            
            119
            
            
            --Foreign
                currency translation (gain) loss
            
            
            (8
            )
            
            6(Gain)
                loss on disposal of fixed assets
            
            
            (6
            )
            
            18Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            (335
            )
            
            (132
            )Prepaid
                expenses and other current assets
            
            
            (255
            )
            
            (7
            )Accounts
                payable
            
            
            420
            
            
            649Accrued
                expenses and other long-term obligations
            
            
            (318
            )
            
            724Deferred
                revenues
            
            
            175
            
            
            129Net
                cash used in operating activities
            
            
            **(2,940**
            **)**
            
            **(5,309**
            **)****CASH
                FLOWS FROM INVESTING ACTIVITIES:**Net
                sales of short-term investments
            
            
            1,491
            
            
            999Net
                purchases of property and equipment
            
            
            (42
            )
            
            (29
            )Net
                issuance of notes receivable
            
            
            --
            
            
            (3
            )Decrease
                in other assets
            
            
            --
            
            
            100Net
                cash provided by investing activities
            
            
            **1,449**
            
            
            **1,067****CASH
                FLOWS FROM FINANCING ACTIVITIES:**Net
                proceeds from issuance of stock
            
            
            240
            
            
            143Purchase
                of treasury stock
            
            
            --
            
            
            (89
            )Proceeds
                from notes payable
            
            
            297
            
            
            304Payments
                on notes payable and capital leases
            
            
            (297
            )
            
            (309
            )Net
                cash provided by financing activities
            
            
            **240**
            
            
            **49****CASH
                FLOWS FROM DISCONTINUED OPERATIONS (REVISED):**Operating
                cash flows
            
            
            --
            
            
            (708
            )Investing
                cash flows
            
            
            --
            
            
            4,315Net
                cash provided by discontinued operations
            
            
            **--**
            
            
            **3,607**Effect
                of exchange rate changes on cash and cash equivalents
            
            
            --
            
            
            5Net
                change in cash and cash equivalents
            
            
            (1,251
            )
            
            (581
            )Cash
                and cash equivalents at beginning of period
            
            
            15,861
            
            
            19,051Cash
                and cash equivalents at end of period
            
            **$**
            **14,610**
            
            **$**
            **18,470**





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





5




**FORGENT
          NETWORKS, INC.**
 **NOTES
          TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 (Amounts
          in thousands, except per share data unless otherwise
          noted)





**NOTE
      1 - GENERAL AND BASIS OF FINANCIAL STATEMENTS**





The
      accompanying unaudited condensed 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 principles 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” or the “Company”) as of April 30,
      2006 and July 31, 2005, the results of operations for the three and nine months
      ended April 30, 2006 and April 30, 2005, and the cash flows for the nine months
      ended April 30, 2006 and April 30, 2005. These condensed consolidated financial
      statements should be read in conjunction with the Company's audited consolidated
      financial statements and notes thereto filed with the Securities and Exchange
      Commission in the Company's annual report on Form 10-K for the year ended July
      31, 2005. The results for the interim periods are not necessarily indicative
      of
      results for a full fiscal year.





The
      Company has revised and separately disclosed the operating and investing
      portions of the cash flows attributable to its discontinued operations for
      the
      nine months ended April 30, 2005, which in prior periods were reported on a
      combined basis as a single amount. This revision did not have any affect on
      the
      Company’s cash balances, working capital, or operations. ****





**NOTE
      2 - INTELLECTUAL** **PROPERTY LEGAL CONTRACTS**





In
      October 2004, Forgent terminated Jenkens & Gilchrist (“Jenkens”), who
      previously served as lead counsel in the litigation of the Company’s U.S. Patent
      No. 4,698,672 (the “’672 Litigation”). In December 2004, Forgent entered into a
      Resolution Agreement with Jenkens, paid Jenkens $1,000 and agreed to them pay
      50% of the first $6,000 in gross recoveries received on or after October 27,
      2004 and 10% of all gross recoveries received thereafter.





In
      January 2005, Forgent engaged Godwin Gruber, LLP (“Gruber”) to represent the
      Company as lead counsel in its Patent Licensing Program. Under this agreement,
      as amended in May 2005, Forgent agreed to pay Gruber a contingency fee of 22%
      of
      all license and litigation proceeds, net of expenses, once total proceeds from
      licensing and litigation exceed $6,000, and a fixed monthly fee of $200 for
      time
      incurred. In October 2005, Forgent terminated Gruber and engaged Susman Godfrey,
      LLP (“Susman”) to serve as lead counsel in the ‘672 Litigation. Forgent agreed
      to pay Susman 33% of all net proceeds received from licensing and litigation
      once Forgent receives $6,000 in gross recoveries received on or after October
      27, 2004. Additionally, Forgent agreed to pay Susman a fixed monthly fee of
      $116
      for time incurred.





In
      April
      2006, Forgent engaged Hagans Burdine Montgomery Rustay & Winchester
      (“Hagans”) and Bracewell & Giuliani, L.L.P. (“Bracewell”) to provide legal
      services related to the litigation of the Company’s U.S. Patent No. 6,285,746
      (the “’746 Litigation”). Hagans and Bracewell replaced Godwin Pappas Langley
      Ronquillo, LLP and Hagans will serve as lead counsel on the ‘746 Litigation.
      Forgent agreed to pay Hagans and Bracewell 30% (15% to each law firm) of all
      license and litigation proceeds, net of expenses. In May 2005, the Company
      engaged The Roth Law Firm, P.C. (“Roth”) to serve as local counsel in Marshall,
      Texas. Forgent agreed to pay Roth 10% of all litigation proceeds related to
      the
‘746 Litigation.





Legal
      expenses for contingency fees and legal counsel’s time incurred are recorded as
      part of cost of sales for Forgent’s intellectual property licensing business on
      the Consolidated Statements of Operations. Cost of sales for the intellectual
      property licensing business for the three and nine months ended April 30, 2006
      were $1,147 and $5,314, respectively. Cost of sales for the intellectual
      property licensing business for the three and nine months ended April 30, 2005
      were $970 and $5,451, respectively. Other legal expenses incurred related to
      the
      Patent Licensing Program are recorded as part of operating expenses on the
      Consolidated Statements of Operations. Other related legal expenses for the
      three and nine months ended April 30, 2006 were $562 and $1,379, respectively.
      Other related legal expenses for the three and nine months ended April 30,
      2005
      were $1,512 and $3,253 respectively.





6




**FORGENT
          NETWORKS, INC.**
 **NOTES
          TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 (Amounts
          in thousands, except per share data unless otherwise noted)


**NOTE
      3 - COMPREHENSIVE INCOME (LOSS)**





In
      accordance with the disclosure requirements of Statement of Financial Accounting
      Standard No. 130, *“Reporting
      Comprehensive Income,”* the
      Company’s comprehensive income (loss) is comprised of net income (loss), foreign
      currency translation adjustments and unrealized gains and losses on short-term
      investments held as available-for-sale securities. Comprehensive loss for the
      three and nine months ended April 30, 2006 was $1,443 and $3,296, respectively.
      Comprehensive loss for the three and nine months ended April 30, 2005 was $4,292
      and $3,665, respectively.





**NOTE
      4 - RECENT ACCOUNTING PRONOUNCEMENTS**




In
      November 2005, the Financial Accounting Standard Board (“FASB”) issued FASB
      Staff Position (“FSP”) FAS 115-1 and FAS 124-1, *“The
      Meaning of Other-Than-Temporary Impairment and Its Application to Certain
      Investments”* (“FSP
      115-1”), which amends FASB Statement No. 115, “ *Accounting
      for Certain Investments in Debt and Equity Securities,”* Statement
      No. 124, *“Accounting
      for Certain Investments Held by Not-for-Profit Organizations,”* and
      Accounting Principles Board (“APB”) Opinion No. 18, *“The
      Equity Method of Accounting for Investments in Common Stock.”* FSP
      115-1 provides guidance on determining when investments in certain debt and
      equity securities are considered impaired, whether that impairment is
      other-than-temporary, and the measurement of an impairment loss. FSP 115-1
      also
      includes accounting considerations subsequent to the recognition of an
      other-than-temporary impairment and requires certain disclosures about
      unrealized losses that have not been recognized as other-than-temporary
      impairments. FSP 115-1 is effective for reporting periods beginning after
      December 15, 2005. The adoption of FSP 115-1 during the third fiscal
      quarter did not have any material impact on the Company’s consolidated financial
      statements.




In
      November 2005, the FASB issued FSP FAS 123R-3, *“Transition
      Election Related to Accounting for the Tax Effects of Share-Based Payment
      Awards.”* Effective
      upon issuance, this FSP describes an alternative transition method for
      calculating the tax effects of stock-based compensation pursuant to Statement
      No. 123R, *“Share-Based
      Payment.”* The
      alternative transition method includes simplified methods to establish the
      beginning balance of the additional paid-in capital pool (“APIC pool”) related
      to the tax effects of employee stock-based compensation and to determine the
      subsequent impact on the APIC pool and the statement of cash flows of the tax
      effects of employee stock-based compensation awards that are outstanding upon
      adoption of Statement No. 123R. This FSP requires companies to follow either
      the
      transition guidance for the additional-paid-in-capital pool as prescribed in
      Statement No. 123R, or the alternative transition method as described in
      the FSP. Companies may take up to one year from the later of its initial
      adoption of Statement No. 123R or the effective date of this FSP to
      evaluate its available transition alternatives and make its one-time election.
      Implementation of this accounting guidance currently does not have any impact
      on
      the Company's consolidated financial statements.




In
      October 2005, the FASB issued FSP FAS 123R-2, *“Practical
      Accommodation to the Application of Grant Date as Defined in FASB Statement
      No. 123R.”* This
      FSP
      allows companies to establish the grant date for a share-based award under
      Statement No. 123R prior to the communication of the award terms to the
      recipient if the award is unilateral and the terms are communicated within
      a
      relatively short time period. This FSP is effective upon the initial adoption
      of
      Statement No. 123R or in the first reporting period after the issuance of this
      FSP if a company has already adopted Statement No. 123R and has issued interim
      financial statements. The adoption of this guidance did not have a material
      impact on the Company’s consolidated financial statements.





In
      May
      2005, the FASB issued Statement No. 154, *“Accounting
      Changes and Error Corrections,”* which
      replaces APB Opinion No. 20, *“Accounting
      Changes”* and
      Statement No. 3, *“Reporting
      Accounting Changes in Interim Financial Statements.”* Statement No. 154 requires that a voluntary change in accounting principle
      be applied retrospectively with all prior period financial statements presented
      on the new accounting principle. The standard also requires that a change in
      depreciation or amortization method for long-lived non-financial assets be
      accounted for prospectively as a change in estimate, and correction of errors
      in
      previously issued financial statements should be termed a “restatement.”
Statement No. 154 is effective for accounting changes and correction of
      errors made in fiscal years beginning after December 15, 2005. Thus,
      Forgent will adopt this standard for accounting changes and corrections of
      errors made beginning August 1, 2006.





7




**FORGENT
          NETWORKS, INC.**
 **NOTES
          TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 (Amounts
          in thousands, except per share data unless otherwise
          noted)





**NOTE
      5 - SHARE BASED COMPENSATION**




In
      December 2004, the FASB issued Statement No. 123 (Revised 2004), “ *Share-Based
      Payment”* (“No.
      123R”). This revised standard addresses the accounting for stock-based payment
      transactions in which a company receives employee services in exchange for
      either equity instruments of the company or liabilities that are based on the
      fair value of the company’s equity instruments or that may be settled by the
      issuance of such equity instruments. Under the new standard, companies are
      no
      longer able to account for stock-based compensation transactions using the
      intrinsic-value method in accordance with APB Opinion No. 25, “ *Accounting
      for Stock Issued to Employees.”* Instead,
      companies are required to account for such transactions using a fair-value
      method and recognize the related expense in the Consolidated Statement of
      Operations.




The
      Company adopted Statement No. 123R effective beginning August 1, 2005 using
      the modified prospective application transition method. The modified prospective
      application method requires that companies recognize compensation expense on
      stock-based payment awards that are modified, repurchased or cancelled after
      the
      effective date. Additionally, compensation cost of the portion of awards for
      which the requisite service has not been rendered that are outstanding as of
      the
      August 1, 2005 shall be recognized as the requisite service is rendered.




The
      impact of adopting Statement No. 123R was an increase of  $12
      and
      $44  in
      selling, general and administrative expenses for the three and nine months
      ended
      April 30, 2006, respectively, and an increase of $12 and $44 in loss from
      operations, loss before income taxes and net loss for the three and nine months
      ended April, 2006, respectively. The adoption of Statement No. 123R had no
      impact on basic and diluted net loss per share for the three and nine months
      ended April 30, 2006.





The
      weighted average estimated grant date fair value, as defined by Statement No.
      123R, for options granted under the company’s stock option plan during the three
      and nine months ended April 30, 2006 were $1.42 and $1.41 per share,
      respectively. The weighted average estimated grant date fair value, as defined
      by Statement No. 123 for options granted under the company’s stock option plan
      during the three and nine months ended April 30, 2005 were $1.56 and $1.42
      per
      share, respectively.




During
      the three and nine months ended April 30, 2005, had compensation expense for
      stock options been determined based on the fair value of the options at dates
      of
      grant consistent with the provisions of Statement No.123, *“Accounting
      for Stock-Based Compensation,”* net
      income (loss) and net income (loss) per share would have been reduced to the
      pro
      forma amounts indicated in the following table:




**For
                the**
            
            **For
                the****Three
                Months Ended**
            
            **Nine
                Months Ended****April
                30, 2005**
            
            **April
                30, 2005****Net
                income (loss)**Net
                income (loss), as reported
            
            $
            (4,291
            )
            $
            (3,673
            )Add:
                    Stock-based employee compensationexpense included in reported net
                    earnings (loss), net of related tax effects
            
            
            --
            
            
            --Deduct:
                      Stock-based employeecompensation expense determined under fair
                      value-based method for all awards, net of related tax
                      effects
            
            
            (121
            )
            
            (462
            )Net
                income (loss), pro forma
            
            **$**
            **(4,412**
            **)**
            **$**
            **(4,135**
            **)****Basic
                earnings (loss) per common share:**As
                reported
            
            $
            (0.17
            )
            $
            (0.15
            )Pro
                forma
            
            $
            (0.18
            )
            $
            (0.17
            )**Diluted
                earnings (loss) per common share:**As
                reported
            
            $
            (0.17
            )
            $
            (0.15
            )Pro
                forma
            
            $
            (0.18
            )
            $
            (0.17
            )





8




**FORGENT
          NETWORKS, INC.**
 **NOTES
          TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 (Amounts
          in thousands, except per share data unless otherwise
          noted)




The
      fair
      value of each award granted from Forgent’s stock option plan during the three
      and nine months ended April 30, 2006 and 2005 were estimated at the date of
      grant using the Black-Scholes option pricing model, assuming no expected
      dividends and the following weighted average assumptions:





**Three
                Months**
            
            **Three
                Months**
            
            **Nine
                Months**
            
            **Nine
                Months****Ended**
            
            **Ended**
            
            **Ended**
            
            **Ended****April
                30, 2006**
            
            **April
                30, 2005**
            
            **April
                30, 2006**
            
            **April
                30, 2005**Expected
                volatility (based on historical data)
            
            
            74.52
            %
            
            74.84
            %
            
            73.70
            %
            
            77.18
            %Expected
                life in years
            
            
            4.92
            
            
            6.02
            
            
            5.05
            
            
            5.96Risk-free
                interest rate
            
            
            4.92
            %
            
            4.13
            %
            
            4.69
            %
            
            4.00
            %Fair
                value per award
            
            $
            1.42
            
            $
            1.56
            
            $
            1.41
            
            $
            1.42





As
      of
      April 30, 2006, $73 of unrecognized compensation costs related to non-vested
      option grants is expected to be recognized over the course of the following
      4
      years.




On
      September 14, 2005 the Company’s Board of Directors approved the repricing of
      all employee stock options with an exercise price greater than $1.42 (the
      average of the high and low for September 14, 2005), most of which were fully
      vested. The new exercise price is $1.42. The Board of Directors determined
      that
      the repricing was the most cost effective way to motivate employees with options
      that had exercise prices greater than the current fair market value. The
      repricing resulted in a charge of $65 for the nine months ended April 30, 2006
      based on the incremental fair value of the new options versus the fair value
      of
      the old options.





The
      Company issued 1 and 171 shares of common stock related to exercises of stock
      options granted from its Stock Option and Stock Purchase Plans for the three
      and
      nine months ended April 30, 2006, respectively. The Company issued 0 and 30
      shares of restricted common stock related from its Restricted Stock Plan for
      the
      three and nine months ended April 30, 2006, respectively.





**NOTE
      6 - SEGMENT INFORMATION**





Currently,
      the Company operates in two distinct segments: intellectual property licensing
      and software and services. Forgent's intellectual property licensing business
      is
      currently focused on generating licensing revenues relating to the Company's
      technologies embodied in U.S. Patent No. 4,698,672 and its foreign counterparts
      as well as in U.S. Patent No. 6,285,746. Forgent's software and services
      business currently provides customers with scheduling and asset management
      software as well as software maintenance and support, installation and training
      services. In order to evaluate the intellectual property and software segments
      as stand-alone businesses, the Company records all unallocated corporate
      operating expenses in the Corporate segment. The prior year’s segment
      information has been revised to present the Company's reportable segments as
      they are currently defined.





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, and the Company’s Chief Executive
      Officer and Chief Financial Officer do not evaluate the segments based on these
      criteria.






9




**FORGENT
        NETWORKS, INC.**
 **NOTES
        TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 (Amounts
        in thousands, except per share data unless otherwise noted)




The
        table
        below presents segment information about revenue from unaffiliated customers,
        gross margins, and
        operating (loss) income for the three and nine months ended April 30, 2006
        and
        2005:





**Intellectual****Property**
            
            **Software
                &****Licensing**
            
            **Services**
            
            **Corporate**
            
            **Total****For
                the Three Month Period Ending April 30, 2006**Revenues
                from unaffiliated customers
            
            $
            1,891
            
            $
            647
            
            $
            -
            
            $
            2,538Gross
                margin
            
            
            744
            
            
            434
            
            
            -
            
            
            1,178Operating
                income (loss)
            
            
            (237
            )
            
            (535
            )
            
            (770
            )
            
            (1,542
            )**For
                the Three Month Period Ending April 30, 2005**Revenues
                from unaffiliated customers
            
            $
            665
            
            $
            488
            
            $
            -
            
            $
            1,153Gross
                margin
            
            
            (305
            )
            
            194
            
            
            -
            
            
            (111
            )Operating
                income (loss)
            
            
            (2,159
            )
            
            (589
            )
            
            (1,501
            )
            
            (4,249
            )**For
                the Nine Month Period Ending April 30, 2006**Revenues
                from unaffiliated customers
            
            $
            8,613
            
            $
            1,924
            
            $
            -
            
            $
            10,537Gross
                margin
            
            
            3,299
            
            
            1,320
            
            
            -
            
            
            4,619Operating
                income (loss)
            
            
            788
            
            
            (1,503
            )
            
            (2,864
            )
            
            (3,579
            )**For
                the Nine Month Period Ending April 30, 2005**Revenues
                from unaffiliated customers
            
            $
            7,628
            
            $
            1,400
            
            $
            -
            
            $
            9,028Gross
                margin
            
            
            2,177
            
            
            691
            
            
            -
            
            
            2,868Operating
                income (loss)
            
            
            (2,092
            )
            
            (1,697
            )
            
            (3,812
            )
            
            (7,601
            )





**NOTE
      7 - CONTINGENCIES**





Forgent
      is the defendant or plaintiff in various actions that arose in the normal course
      of business.





**Litigation
      of United States Patent No. 4,698,672 (JPEG) and FTC Non-Public
      Investigation**





Forgent
      and its wholly-owned subsidiary, Compression Labs, Incorporated (“CLI”), are
      currently in legal proceedings with multiple companies for infringement of
      the
‘672 patent. On March 9, 2006, Forgent and the defendants in the ‘672 Litigation
      appeared before the United States District Court for the Northern District
      of
      California at a claims construction hearing. The Company is currently awaiting
      the results of this hearing. However, the results are not yet known and
      uncertainties remain.





On
      November 16, 2005, the United States Patent and Trademark Office (the “USPTO”)
      received a petition to re-examine the ‘672 patent. In January 2006, the USPTO
      granted the petition and subsequently issued its first office action on May
      25,
      2006. This first office action, which is not the final conclusion of the
      re-examination, confirmed 27 of the 46 claims in the ‘672 patent. Forgent has 60
      days to respond to this first office action. The re-examination process is
      an
      extended process and Forgent will work directly with the USPTO to vigorously
      defend all of the claims, including those that were not initially upheld in
      the
      first office action. If the USPTO examiner ultimately rejects the claims,
      Forgent could pursue the appeal process within the USPTO and within the federal
      court system, if necessary. Any negative results would reduce the Company’s
      ability to negotiate settlements with defendants and new licenses with other
      companies, which would materially and adversely affect Forgent’s licensing
      revenues. The ultimate rejection of significant claims could have material
      and
      adverse consequences for Forgent.





In
      December 2003, the Company received notification from the Federal Trade
      Commission (the “FTC”) that it is conducting a non-public investigation to
      determine whether the Company may have engaged in violation of the Federal
      Trade
      Commission Act by reason of the alleged involvement of CLI in the JPEG
      standard-setting process during the 1980’s and very early 1990’s and its
      subsequent licensing of the ‘672 patent, which the Company believes is infringed
      by the implementation of that standard. The Company believes that CLI has not
      acted improperly and advised the FTC accordingly. In April 2004, Forgent
      received a Subpoena Duces Tecum (“Subpoena”) and a Civil Investigative Demand
      (“CID”) in this FTC proceeding. The Company responded in May 2004 by filing a
      petition to quash and/or limit the Subpoena and CID. In November 2004, the
      FTC
      issued a ruling denying Forgent’s Petition to Quash, but modifying the Subpoena
      and CID. In February 2005 and March 2005, the Company responded to the Subpoena
      and the CID by providing the required documents and other responsive material.
      Forgent has not received any final conclusion from the FTC on its inquiries.





10




**FORGENT
          NETWORKS, INC.**
 **NOTES
          TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 (Amounts
          in thousands, except per share data unless otherwise
          noted)




Forgent
      continues to monitor the progress of the ‘672 Litigation, the USPTO’s
      re-examination and the FTC’s non-public investigation. The Company plans to
      vigorously defend the validity of its patents, as well as pursuing any entities
      that violated its patents. Presently, the final results of the claims
      construction hearing and the USPTO re-examination are uncertain. Resolution
      of
      some or all of these matters could materially affect the Company’s business,
      future results of operations, financial position or cash flows in a particular
      period.





**Litigation
      of United States Patent No. 6,285,746 (DVR)**





In
      July
      2005, Forgent initiated litigation against 15 companies for infringement of
      the
      United States Patent No. 6,285,746 in the United States District Court for
      the
      Eastern District of Texas, Marshall Division, seeking injunctive relief against
      sales of infringing products and monetary damages, among other relief sought.
      The ‘746 litigation has since been moved to the United States District Court for
      the Eastern District of Texas, Tyler Division.





On
      September 19, 2005, Scientific-Atlanta Inc. and Motorola Inc. filed a
      declaratory judgment against Forgent in the United States District Court for
      the
      Eastern District of Texas, Tyler Division, claiming, among other assertions,
      that their products do not infringe Forgent’s patent and that the patent is
      invalid. During a hearing on November 8, 2005, the Court ordered this case
      to be
      transferred to the Marshall Division and consolidated with the case initiated
      by
      Forgent in July 2005.





On
      January 3, 2006, Diego, Inc. filed a motion to intervene as a declaratory
      judgment plaintiff after learning that their products were accused of infringing
      the ‘746 patent in the midst of the ongoing ‘746 Litigation. On January 4, 2006,
      the Court granted Diego Inc.’s motion.





In
      April
      2006, Forgent participated in a court-ordered mediation with the defendants.
      In
      May 2006, the Court ordered another mediation proceeding to be held prior to
      the
      claims construction hearing. The Court also reset the ‘746 Litigation claims
      construction hearing date for November 9, 2006 and the trial date for May 14,
      2007 in the Tyler Division of the United States District Court for the Eastern
      District of Texas.





Since
      July 2005, Forgent has dismissed six defendants from the lawsuit since they
      had
      no operational role with respect to infringement: Cox Communications, Inc.;
      DIRECTV Group, Inc.; DIRECTV Enterprises, LLC; DIRECTV Operations, LLC; EchoStar
      Communications Corporation; and EchoStar DBS Corporation. No settlements
      accompanied these dismissals.





Forgent
      continues to monitor the progress of the ‘746 Litigation. Resolution of this
      matter could materially affect the Company’s business, future results of
      operations, financial position or cash flows in a particular
      period.








11





**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, 2006 and July
      31, 2005, and for the three and nine months ended April 30, 2006 and 2005,
      should be read in conjunction with the Company’s 2005 Annual Report on Form 10-K
      filed with the Securities and Exchange Commission.





**CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**





Certain
      statements in this report represent forward-looking statements. These statements
      involve known and unknown risks, uncertainties and other factors that may cause
      actual results of operations, levels of activity, economic performance,
      financial condition or achievements to be materially different from future
      results of operations, levels of activity, economic performance, financial
      condition or achievements as expressed or implied by such forward-looking
      statements.





Forgent
      has attempted to identify these forward-looking statements with the words
“believes,” “estimates,” “plans,” “expects,” “anticipates,” “may,” “could” and
      other similar expressions. Although these forward-looking statements reflect
      management’s current plans and expectations, which are believed to be reasonable
      as of the filing date of this report, they inherently are subject to certain
      risks and uncertainties, including:




·
            timing
                of intellectual property license agreements and related recording
                of
                licensing revenues;


·
            results
                of the claims construction hearing for the ‘672
                Litigation;


·
            resolution
                of the USPTO’s re-examination of the ‘672
                patent;


·
            resolution
                of the FTC’s non-public
                investigation;


·
            timing
                and costs related to the Company’s patent litigation;


·
            market
                demand for the Company’s software products and
                services;


·
            timing
                of customers’ budget cycles;


·
            timing
                of customer orders and deployment of Forgent’s software products and
                services;


·
            the
                mix of software license and services
                revenue;


·
            seasonal
                fluctuations in capital spending;


·
            changes
                in the rapidly evolving market for web-based
                applications;


·
            management’s
                ability to manage operating costs, a large portion of which are relatively
                fixed in advance of any particular quarter;


·
            timing
                and costs related to possible acquisitions of technology or
                businesses;


·
            costs
                of attracting, retaining and training skilled
                personnel;


·
            management’s
                ability to manage future growth;
                and


·
            general
                economic climate.





In
      addition to the items noted above, such risks and uncertainties include, but
      are
      not limited to, those described under “Risk Factors” in this Report and other
      risks indicated in Forgent’s filings with the Securities and Exchange Commission
      from time to time. Forgent is under no obligation to update any of the
      forward-looking statements after the date of this Form 10-Q to conform such
      statements to actual results.





**RESULTS
      OF OPERATIONS**





The
      following table sets forth for the periods indicated the percentage of total
      revenues represented by certain items in Forgent’s Consolidated Statements of
      Operations:





**FOR
                THE THREE**
              **MONTHS
                ENDED**
              **APRIL
                30,**
            **FOR
                THE NINE**
              **MONTHS
                ENDED**
              **APRIL
                30,****2006**
            **2005**
            **2006**
            **2005**Intellectual
                property licensing revenues
            75%
            58%
            82%
            84%Software
                and services revenues
            25
            42
            18
            16Gross
                margin
            46
            (10)
            44
            32Selling,
                general and administrative
            101
            351
            73
            113Research
                and development
            6
            7
            4
            3Total
                operating expenses
            107
            359
            78
            116Other
                income, net
            5
            10
            3
            3Income
                (loss) from continuing operations
            (56)
            (359)
            (31)
            (81)Income
                (loss) from discontinued operations
            --
            (13)
            --
            40Net
                income (loss)
            (56%)
            (372%)
            (31%)
            (41%)





12


**THREE
      AND NINE MONTHS ENDED APRIL 30, 2006 AND 2005**





**Revenues**





Revenues
      for the three months ended April 30, 2006 were $2.5 million, an increase of
      $1.3
      million, or 120%, from the $1.2 million reported for the three months ended
      April 30, 2005. Revenues for the nine months ended April 30, 2006 were $10.5
      million, an increase of $1.5 million, or 17%, from the $9.0 million reported
      for
      the nine months ended April 30, 2005. Consolidated revenues represent the
      combined revenues of the Company and its subsidiaries, including royalties
      and
      settlements received from licensing the Company's intellectual property as
      well
      as sales of Forgent's NetSimplicity software, installation and training and
      software maintenance services. Consolidated revenues do not include any revenues
      from Forgent's discontinued ALLIANCE operations, which provided conferencing
      and
      scheduling software and maintenance, installation, training and network
      consulting.





***Intellectual
      Property Licensing Business***





Intellectual
      property licensing revenues increased by $1.2 million, or 184%, to $1.9 million
      for the three months ended April 30, 2006 from $0.7 million for the three months
      ended April 30, 2005. Intellectual property licensing revenues increased by
      $1.0
      million, or 13%, to $8.6 million for the nine months ended April 30, 2006 from
      $7.6 million for the nine months ended April 30, 2005. Intellectual property
      licensing revenues as a percentage of total revenues were 75% and 58% for the
      three months ended April 30, 2006 and 2005, respectively. Intellectual property
      licensing revenues as a percentage of total revenues were 82% and 84% for the
      nine months ended April 30, 2006 and 2005, respectively. Forgent’s licensing
      revenues relate to one-time intellectual property license agreements with
      companies for Forgent's data compression technology embodied in U.S. Patent
      No.
      4,698,672 (the “ ‘672 patent”) and its foreign counterparts, which is utilized
      in several types of products including many digital cameras, personal computers,
      camera cell phones, scanners, printing devices, video cameras, rendering devices
      and other technologies. Additionally, the ‘672 patent is included in a group of
      Moving Picture Experts Group (“MPEG”) patents that garner royalties. Forgent’s
      licensing revenues include royalties received from the MPEG-2 consortium. The
      Company is also seeking to license its U.S. Patent No. 6,285,746 (the “ ‘746
      patent”), which relates to technology for storing and retrieving multimedia data
      in a manner that allows playback during recording, although no licensing
      revenues have been achieved as of April 30, 2006.





As
      of
      April 30, 2006, Forgent has achieved approximately $110.2 million in aggregate
      revenues generated from one-time license agreements with international consumer
      and commercial electronics firms in multiple countries, including the United
      States. Licensing of the ‘672 patent is currently conducted through the
      Company’s wholly-owned subsidiary, Compression Labs, Inc. (“CLI”). These
      one-time license agreements generated approximately 95% and 96% of the
      intellectual property segment’s licensing revenues for the three and nine months
      ended April 30, 2006, respectively, and approximately 90% and 96% of the
      intellectual property segment’s licensing revenues for the three and nine months
      ended April 30, 2005, respectively. The timing of signing license agreements
      and
      the variable amount of each license fee has been and continues to be uncertain.
      Therefore, the $1.2 million increase in licensing revenues during the three
      months ended April 30, 2006, as well as the $1.0 million increase in licensing
      revenues during the nine months ended April 30, 2006, are due to the change
      in
      the number of license agreements signed related to the ‘672 patent as well as
      the amount of each license fee received during these periods. Although, the
      Company does not anticipate any additional licensing revenue from companies
      that
      have previously signed license agreements, Forgent will continue to seek new
      licenses from its ‘672 patent as well as its ‘746 patent.





Forgent
      is currently in legal proceedings with multiple companies in the United
      States District Court for the Northern District of California regarding the infringement
      of its ‘672 patent (the “ ‘672 Litigation”). During the three months ended April
      30, 2006, Forgent settled and signed a license agreement with one of the
      defendants in the ‘672 Litigation. As of April 30, 2006, 14 of the defendants in
      the ‘672 Litigation have settled with Forgent and signed license agreements. The
      Company is currently awaiting the results of the claims construction hearing
      for
      the ‘672 Litigation.





13


On
      November 16, 2005, the United States Patent and Trademark Office (the “USPTO”)
      received a petition to re-examine the ‘672 patent. In January 2006, the USPTO
      granted the petition and subsequently issued its first office action on May
      25,
      2006. This first action, which is not the final conclusion of the
      re-examination, confirmed 27 of the 46 claims in the ‘672 patent. Forgent has 60
      days to respond to this first office action. The re-examination process is
      an
      extended process and Forgent will work directly with the USPTO to vigorously
      defend all of the claims, including those that were not initially upheld in
      the
      first office action. If the USPTO examiner ultimately rejects the claims,
      Forgent could pursue the appeal process within the USPTO and within the federal
      court system, if necessary. Additionally, the ‘672 Litigation could be stayed,
      pending the results of the USPTO’s re-examination; however, no such stay has
      been initiated.





Presently,
      the final results of the claims construction hearing and the USPTO
      re-examination are uncertain. Any negative results would reduce the Company’s
      ability to negotiate settlements with defendants and new licenses with other
      companies, which would materially and adversely affect Forgent’s licensing
      revenues. The ultimate rejection of significant claims could have material
      and
      adverse consequences for Forgent.





Additionally,
      the ‘672 patent, which has generated all of the intellectual property licensing
      revenues to date, expires in October 2006 in the United States and its foreign
      counterparts expire in September 2007. Upon expiration of the ‘672 patent, no
      additional damages will accrue but the Company’s ability to recover for past
      damages will not immediately be affected. Ultimately, the Company’s ability to
      recover for past damages will be limited by any applicable statute of
      limitations. Also, upon expiration of the ‘672 patent, Forgent will cease
      receiving royalties from the MPEG-2 consortium.





Forgent
      is also currently in legal proceedings with several companies for the
      infringement of its ‘746 patent (the “ ‘746 Litigation”). In April 2006, Forgent
      participated in a court-ordered mediation with the defendants. In May 2006,
      the
      Court ordered another mediation proceeding to be held prior to the claims
      construction hearing. The Court also reset the ‘746 Litigation claims
      construction hearing date for November 9, 2006 and the trial date for May 14,
      2007 in the Tyler Division of the United States District Court for the Eastern
      District of Texas. See Part II, Item 1 “Legal Proceedings” for more detail.





Although
      there continues to be uncertainties and risks related to the Company’s Patent
      Licensing Program, management anticipates generating revenues from its
      intellectual property licensing segment during the remainder of fiscal year
      2006
      and during fiscal year 2007. However, Forgent's Patent Licensing Program
      involves risks inherent in licensing intellectual property, including risks
      of
      protracted delays, legal challenges that would lead to disruption or curtailment
      of the program, increasing expenditures associated with pursuit of the licensing
      program and other risks that could adversely affect the Company.





There
      can
      be no assurance that the Company will be able to continue to effectively license
      its technology to other companies. Additionally, there are no guarantees that
      the Company can protect its intellectual property rights in its current
      litigation or prevent the unauthorized use of its technology in the future.
      However, Forgent will continue to seek to enforce and will pursue its rights
      through the legal system when necessary.





***Software
      and Services Business***





Software
      and services revenues increased by $0.1 million, or 33%, to $0.6 million for
      the
      three months ended April 30, 2006 from $0.5 million for the three months ended
      April 30, 2005. Software and professional services revenues increased by $0.5
      million, or 37%, to $1.9 million for the nine months ended April 30, 2006 from
      $1.4 million for the nine months ended April 30, 2005. Software and services
      revenues as a percentage of total revenues were 25% and 42% for the three months
      ended April 30, 2006 and 2005, respectively. Software and services revenues
      as a
      percentage of total revenues were 18% and 16% for the nine months ended April
      30, 2006 and 2005, respectively. Revenues from this line of business include
      sales of Forgent's NetSimplicity scheduling and asset management software.
      The
      NetSimplicity software includes Meeting Room Manager (“MRM”), Visual Asset
      Manager (“VAM”) and Resource Scheduler . Also
      included in this segment’s revenues are software maintenance and professional
      services, such as add-on software customization, installation and training.





During
      the three and nine months ended April 30, 2006, Forgent’s NetSimplicity software
      revenues increased 13% and 15%, respectively, due to additional sales efforts
      and a reallocation of marketing program dollars in order to create more sales
      leads and optimize demand generation. The growth in software revenue and the
      renewals of maintenance and support contracts led to increased sales of
      maintenance and support contracts. Additionally, Forgent continued to provide
      more professional services and training in fiscal 2006. The additional software
      maintenance and professional services increased services revenues by $0.1
      million and $0.3 million for the three and nine months ended April 30, 2006,
      respectively. Management believes that its software and services business is
      a
      growth business and will continue to actively pursue growing revenues from
      this
      segment.





14


**Gross
      Margin**





Gross
      margin for the three months ended April 30, 2006 was $1.2 million, an increase
      of $1.3 million from the ($0.1) million reported for the three months ended
      April 30, 2005. Gross margin for the nine months ended April 30, 2006 was $4.6
      million, an increase of $1.7 million, or 61%, from the $2.9 million reported
      for
      the nine months ended April 30, 2005. Gross margin as a percentage of total
      revenues were 46% and (10%) for the three months ended April 30, 2006 and 2005,
      respectively. Gross margin as a percentage of total revenues were 44% and 32%
      for the nine months ended April 30, 2006 and 2005, respectively.





The
      cost
      of sales from the intellectual property licensing business relates to the legal
      fees incurred on successfully achieving licensing revenues as well as legal
      expenses incurred from legal counsel’s time in connection with the Company’s
      Patent Licensing Program. In October 2004, Forgent terminated Jenkens &
Gilchrist (“Jenkens”) and entered into an agreement with the law firm of Godwin
      Gruber, LLP (“Godwin”) to represent the Company as lead counsel in its Patent
      Licensing Program. During fiscal 2005, Forgent’s cost of sales from the
      intellectual property licensing business included 50% of the licensing revenues
      received on signed agreements and paid to Jenkens and 50% of Godwin’s standard
      hourly rate for time incurred. In October 2005, Forgent terminated Gruber and
      engaged Susman Godfrey, LLP (“Susman”) to lead its ‘672 Litigation. Under the
      agreement with Susman, Forgent agreed to pay Susman 33% of all net proceeds
      received from licensing and litigation once Forgent reached $6.0 million in
      gross recoveries received on or after October 27, 2004, and a fixed monthly
      fee
      of $0.1 million for time incurred. During second fiscal quarter of 2006, Forgent
      reached $6.0 million in gross recoveries received since October 27, 2004. Since
      reaching this milestone, Forgent is now obligated to pay Jenkens only 10% of
      licensing revenues. The combination of the increased licensing revenues
      generated, the decrease in legal expenses for legal counsel’s time incurred and
      the change in contingency fees incurred during the three and nine months ended
      April 30, 2006, as compared to the three and nine months ended April 30, 2005,
      accounts for 81% and 64% of the increases in total gross margin, respectively.
      To date, all of the Company’s licensing revenue has been generated by the '672
      patent. The U.S. '672 patent expires in October 2006 and the foreign
      counterparts expire in September 2007. When the '672 patents expire, licensing
      revenues may decline unless alternative sources are found. If licensing revenues
      decline, total gross margins may be adversely affected. Based on the Company’s
      current agreements with legal counsel, management anticipates higher gross
      margins for the Company since it has ceased paying Jenkens a 50% contingent
      fee.





The
      cost
      of sales associated with the software and services business is relatively fixed
      and results primarily from the amortization of the Company’s purchased software
      development costs and intangible assets. Cost of sales for the software segment
      decreased during the three and nine months ended April 30, 2006 due to decreases
      in amortization expenses of the intangible assets, which were fully amortized
      during the 2005 fiscal periods. The combination of an increase in software
      revenues and a decrease in cost of sales during the three months ended April
      30,
      2006 resulted in a 67% gross margin for the software segment, as compared to
      a
      40% gross margin during the three months ended April 30, 2005. Similarly, gross
      margin for the software segment during the nine months ended April 30, 2006
      was
      69%, compared to a 49% gross margin during the nine months ended April 30,
      2005.
      The increases in gross margin from the software segment account for 19% and
      36%
      of the increases in total gross margin during the three and nine months ended
      April 30, 2006, respectively. Since revenues generated from the software and
      services business directly affect gross margins, management expects gross
      margins from the software and services business to improve as Forgent generates
      more business from this segment and as the Company fully amortizes the purchased
      software development costs.





**Selling,
      General and Administrative**





Selling,
      general and administrative (“SG&A”) expenses for the three months ended
      April 30, 2006 were $2.5 million, a decrease of $1.5 million, or 37%, from
      the
      $4.0 million reported for the three months ended April 30, 2005. SG&A
      expenses for the nine months ended April 30, 2006 were $7.7 million, a decrease
      of $2.5 million, or 24%, from the $10.2 million reported for the nine months
      ended April 30, 2005. SG&A expenses as a percentage of total revenues were
      101% and 351% for the three months ended April 30, 2006 and 2005, respectively.
      SG&A expenses as a percentage of total revenues were 73% and 113% for the
      nine months ended April 30, 2006 and 2005, respectively.





15


During
      fiscal 2005, Forgent incurred significant legal expenses as the Company
      responded to an inquiry with the Federal Trade Commission (“FTC”) and
      successfully defended its position in a lawsuit with a former director’s estate.
      Also, Forgent incurred more legal expenses related to the ‘672 patent during
      fiscal 2005 than during fiscal 2006 due to significant document production
      expenses, which are usually incurred during the early phases of a litigation
      case, and due to the different litigation and licensing approach under Godwin
      in
      fiscal 2005 as compared to the approach under Susman in fiscal 2006. Forgent
      initiated the ‘746 Litigation in July 2005 and incurred increased legal expenses
      in pursuit of this case during fiscal 2006.





The
      $1.5
      million decrease in SG&A expenses during the three months ended April 30,
      2006, as compared to the three months ended April 30, 2005, is due primarily
      to
      (1) a $0.7 million decrease in legal expenses related to the ‘672 patent, (2) a
      $0.6 million decrease in legal expenses related to the FTC inquiry and (3)
      a
      $0.4 million decrease in legal expenses related to the lawsuit with a former
      director’s estate. These decreases were offset by a $0.3 million increase in
      legal expenses related to the ‘746 patent. Similarly, the $2.5 million decrease
      in SG&A expenses during the nine months ended April 30, 2006, as compared to
      the nine months ended April 30, 2005, is due primarily to (1) a $1.7 million
      decrease in legal expenses related to the ‘672 patent, including $1.2 million in
      one-time expenses incurred during the second fiscal quarter of 2005 related
      to
      the termination of Jenkens, (2) a $0.5 million decrease in legal expenses
      related to the FTC inquiry and (3) a $0.5 million decrease in legal expenses
      related to the lawsuit with a former director’s estate. These decreases were
      offset by a $0.4 million increase in legal expenses related to the ‘746 patent.





As
      Forgent continues to pursue licensing and litigating the ‘672 patent and the
‘746 patent, significant legal fees and consulting expenses will continue to
      be
      incurred and may actually increase. However, management believes the Company
      has
      the necessary financial resources to support all of its current and upcoming
      licensing and litigation efforts. Management also continues to evaluate and
      reduce any unnecessary SG&A expenses that do not directly support the
      generation of revenues for the Company. In future periods, management expects
      its corporate SG&A expenses to fluctuate as legal fees and consulting
      expenses are incurred during the various litigation milestones.





**Research
      and Development**





Research
      and development (“R&D”) expenses for the three months ended April 30, 2006
      were $0.2 million, an increase of $0.1 million, or 94%, from the $0.1 million
      reported for the three months ended April 30, 2005. R&D expenses for the
      nine months ended April 30, 2006 were $0.4 million, an increase of $0.2 million,
      or 92%, from the $0.2 million reported for the nine months ended April 30,
      2005.
      R&D expenses as a percentage of total revenues were 6% and 7% for the three
      months ended April 30, 2006 and 2005, respectively. R&D expenses as a
      percentage of total revenues were 4% and 3% for the nine months ended April
      30,
      2006 and 2005, respectively.





The
      $0.1
      million and $0.2 million increases in R&D expenses during the three and nine
      months ended April 30, 2006 are due primarily to increases in compensation
      expenses resulting from shifting of resources between the NetSimplicity’s sales
      and R&D teams in fiscal 2006. During the three months ended April 30,
      2006, Forgent continued developing its MRM and VAM products and focused on
      developing its next major release of MRM, version 7.0, which the Company expects
      to release in June 2006. Management anticipates R&D expenses to remain
      relatively flat during the next fiscal quarter.





**(Loss)
      Income from Discontinued Operations**





Loss
      from
      discontinued operations for the three months ended April 30, 2005 was $0.1
      million. Income from discontinued operations for the nine months ended April
      30,
      2005 was $3.7 million. Loss from discontinued operations as a percentage of
      total revenues was 13% for the three months ended April 30, 2005. Income from
      discontinued operations as a percentage of total revenues was 40% for the nine
      months ended April 30, 2005.





16


During
      the second fiscal quarter of 2005, Forgent sold certain patents and other
      intellectual property and documentation, including its ALLIANCE software suite,
      to Tandberg Telecom AS. As a result of this sale, Forgent recorded a $3.3
      million gain, net of expenses, for the nine months ended April 30, 2005.
      Additionally, the Company recorded $1.0 million in income during the second
      fiscal quarter of 2005. The income represents the final cash payment received
      from Gores Technology Group ("Gores") in January 2005 for indemnity claims
      held
      in escrow related to the sale of Forgent’s videoconferencing hardware services
      business. No indemnity claims were paid pursuant to the sales agreement with
      Gores. The $3.3 million gain and $1.0 income were offset by $0.6 million in
      losses from the ALLIANCE operations during the nine months ended April 30,
      2005.
      The ALLIANCE operations incurred $0.1 million in losses during the three months
      ended April 30, 2005. During the fourth fiscal quarter of 2005, Forgent
      discontinued its ALLIANCE operations. The Company did not conduct any business
      from this business line during the nine months ended April 30,
      2006.





**Net
      (Loss) Income**





Forgent
      realized a net loss of $1.4 million, or $0.06 per share, during the three months
      ended April 30, 2006 compared to a net loss of $4.3 million, or $0.17 per share,
      during the three months ended April 30, 2005. Forgent realized a net loss of
      $3.3 million, or $0.13 per share, during the nine months ended April 30, 2006
      compared to a net loss of $3.7 million, or $0.15 per share, during the nine
      months ended April 30, 2005. Net loss as a percentage of total revenues were
      56%
      and 372% for the three months ended April 30, 2006 and 2005, respectively.
      Net
      loss as a percentage of total revenues were 31% and 41% for the nine months
      ended April 30, 2006 and 2005, respectively. The $2.9 million increase in the
      Company’s net income during the three months ended April 30, 2006 as compared to
      the three months ended April 30, 2005 is primarily attributable to the $1.3
      million increase in gross margin and the $1.5 million decrease in SG&A
      expenses during the third fiscal quarter of 2006. The $0.4 million decrease
      in
      the Company’s net loss during the nine months ended April 30, 2006 as compared
      to the nine months ended April 30, 2005 is primarily attributable to the $1.8
      million increase in gross margin and the $2.5 million decrease in SG&A
      expenses, which is offset by a $3.7 million decrease in income from discontinued
      operations during fiscal 2006.





**LIQUIDITY
      AND CAPITAL RESOURCES**





On
      April
      30, 2006, Forgent had working capital of $11.2 million, including $14.6 million
      in cash and cash equivalents. Cash used in operating activities was $2.9 million
      for the nine months ended April 30, 2006 due primarily to a $3.3 million net
      loss, which was offset by $0.5 million in non-cash depreciation and amortization
      expenses. Cash used in operating activities was $5.3 million for the nine months
      ended April 30, 2005 due primarily to a $7.4 million net loss, which was offset
      by $0.7 million in non-cash depreciation and amortization expenses and a $1.4
      million increase in accounts payable and accrued expenses. During the nine
      months ended April 30, 2006, Forgent collected $8.3 million in cash receipts
      from its licensing program. Management plans to continue utilizing these cash
      receipts for its Patent Licensing Program, especially due to anticipated
      expenditures related to the ‘672 Litigation and the ‘746 Litigation, and to
      support its software operations. Although Forgent’s average days sales
      outstanding was 26 for the third fiscal quarter of 2006, an increase from the
      21
      days for the second fiscal quarter of 2006, less than 4% of the Company’s trade
      receivables were aged out past 60 days as of April 30, 2006.





Cash
      provided by investing activities was $1.4 million for the nine months ended
      April 30, 2006 due primarily to $1.5 million in net sales of short-term
      investments. Similarly, cash provided by investing activities was $1.1 million
      for the nine months ended April 30, 2005 due primarily to $1.0 million in net
      sales of short-term investments. Forgent manages its investments portfolio
      in
      order to fulfill corporate liquidity requirements and maximize investment
      returns while preserving the quality of the portfolio. The Company’s current
      operations are not capital intensive and Forgent purchased minimal fixed assets
      during the nine months ended April 30, 2006. Approximately half of the purchases
      during fiscal year 2006 were for subtenant improvements as the Company subleased
      its vacated office space. Management does not anticipate any significant
      purchases of fixed assets during the rest of fiscal 2006.





The
      Company leased office space and equipment under non-cancelable operating leases
      that expire at various dates through 2013. Certain leases obligate Forgent
      to
      pay property taxes, maintenance and insurance. Additionally, the Company used
      the proceeds from its loans from Silicon Valley Bank to purchase equipment
      and
      fund operations. Any additional loans from Silicon Valley Bank will bear
      interest at prime plus 0.75% and require monthly installments over a three-year
      term. Forgent may periodically make other commitments and thus become subject
      to
      other contractual obligations. Forgent’s future minimum lease payments under all
      operating leases and payments on its notes payable as of April 30, 2006 are
      as
      follows:




17





**Payments
                Due By Period**(in
                thousands)**Total**
            
            **Less
                than**
              **1
                year**
            
            **1
                - 3 years**
            
            **3-
                5 years**
            
            **More
                than**
              **5
                years**Operating
                lease obligations
            
            $
            23,614
            
            $
            3,583
            
            $
            6,920
            
            $
            6,801
            
            $
            6,310Notes
                payable obligations
            
            
            702
            
            
            387
            
            
            315
            
            
            --
            
            
            --**Total**
            
            **$**
            **24,316**
            
            **$**
            **3,970**
            
            **$**
            **7,235**
            
            **$**
            **6,801**
            
            **$**
            **6,310**




Approximately
      98.1% of the Company’s operating lease obligations relates to its corporate
      office location at Wild Basin in Austin, Texas. Additionally, Forgent had a
      $1.2
      million liability related to impairment charges for the economic value of the
      lost sublease rental income for its Wild Basin property. As of April 30, 2006,
      Forgent had $3.5 million in future minimum lease payments receivable under
      non-cancelable sublease arrangements. Forgent will continue to sublease any
      vacated office space through the end of the Company’s lease terms.





Cash
      provided by financing activities was $0.2 million for the nine months ended
      April 30, 2006 due primarily to $0.2 million in proceeds received from the
      issuance of stock. Similarly, cash provided by financing activities was $49
      thousand for the nine months ended April 30, 2005 due primarily to $0.1 million
      in proceeds received from the issuance of stock. Forgent’s stock repurchase
      program allows the Company to purchase up to three million shares of the
      Company’s common stock. No shares were repurchased during the nine months ended
      April 30, 2006. During the nine months ended April 30, 2005, 36,200 shares
      were
      repurchased. As of April 30, 2006, Forgent had repurchased 1,790,401 shares
      and
      had the approval to repurchase approximately 1.2 million additional shares.
      Management will periodically assess repurchasing additional shares in the
      future, depending on the Company’s cash position, market conditions and other
      factors.





As
      of
      April 30, 2006, Forgent’s principal source of liquidity consisted of
      approximately $14.6 million in cash and cash equivalents. Management currently
      plans to utilize its cash balances as necessary to focus on the litigation
      efforts, continue licensing its intellectual property and fund its software
      operations. Forgent’s ability to generate cash from its intellectual property
      licensing business is subject to certain risks as discussed under "Risk
      Factors." Additionally, there remain risks and uncertainties as to the timing
      of
      the receipts of license fees due, in part, to the inherent nature of a patent
      licensing program. Therefore, there is no assurance that the Company will be
      able 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 the litigations, increased
      legal
      expense levels and other factors. While management believes that the Company
      has
      sufficient capital and liquidity to pursue its licensing and litigation efforts,
      due to uncertainties related to the timing and costs of these efforts, Forgent
      may need to raise additional capital in the future. However, there is no
      assurance that the Company will be able to raise additional capital if and
      when
      it is needed.





**CRITICAL
      ACCOUNTING POLICIES**





The
      Company’s consolidated financial statements have been prepared in accordance
      with accounting principles generally accepted in the United States and include
      the accounts of Forgent's wholly owned subsidiaries. All significant
      intercompany transactions and balances have been eliminated in the
      consolidation. Preparation of the consolidated financial statements in
      conformity with accounting principles generally accepted in the United States
      requires management to make estimates and assumptions that affect the reported
      amounts of the 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. The more significant
      estimates made by management include the valuation allowance for the gross
      deferred tax asset, contingency reserves, useful lives of fixed assets, the
      determination of the fair value of its long-lived assets and the loss from
      discontinued operations. These estimates could be materially different under
      different conditions and assumptions. Additionally, the actual amounts could
      differ from the estimates made. Management periodically evaluates estimates
      used
      in the preparation of the financial statements for continued reasonableness.
      Appropriate adjustments, if any, to the estimates used are made prospectively
      based upon such periodic evaluation.





18


Management
      believes the following represent Forgent’s critical accounting
      policies:





**Revenue
      Recognition**





The
      Company recognizes revenue when persuasive evidence of an arrangement exists,
      delivery has occurred, the fee is fixed or determinable and collectibility
      is
      probable. The Company recognizes software revenue in accordance with Statement
      of Position ("SOP") 97-2, *“Software
      Revenue Recognition,”* as
      amended by SOP 98-4, “ *Deferral
      of the Effective Date of a Provision of SOP 97-2,”* and SOP
      98-9, “ *Modification
      of SOP 97-2 With Respect to Certain Transactions,”* and
      Securities and Exchange Commission Staff Accounting Bulletin 104, *“Revenue
      Recognition.”*





Intellectual
      property licensing revenue is derived from the Company’s Patent Licensing
      Program, which is currently focused on generating licensing revenues relating
      to
      the Company's technologies embodied in the ‘672 patent and its foreign
      counterparts as well as in the ‘746 patent. Gross intellectual property
      licensing revenue is recognized at the time a license agreement has been
      executed and collection has been deemed probable. Related costs are recorded
      as
      cost of sales. The cost of sales on the intellectual property licensing business
      relates to contingent legal fees incurred on successfully achieving signed
      agreements, as well as legal fees incurred for legal counsel’s
      time.





Software
      and service revenue consists of software license and service fees. Revenue
      from
      the software element is earned through the licensing or right to use the
      Company’s software and from the sale of specific software products. Service fee
      income is earned through the sale of maintenance and technical support, training
      and installation. The Company allocates the total fee to the various elements
      based on the relative fair values of the elements specific to the Company.
      The
      Company determines the fair value of each element in the arrangement based
      on
      vendor-specific objective evidence ("VSOE") of fair value. During the nine
      months ended April 30, 2006, VSOE of fair value for the software, maintenance,
      and training and installation services are based on the prices charged for
      the
      software, maintenance and services when sold separately. During the nine months
      ended April 30, 2005, VSOE of fair value for maintenance was based upon the
      renewal rate specified in each contract; VSOE of fair value for training and
      installation services was based on the prices charged for these services when
      sold separately; and VSOE of fair value for the software element was not
      available and thus, software revenue was recognized under the residual method.
      Under the residual method, the contract value is first allocated to the
      undelivered elements (maintenance and service elements) based upon their VSOE
      of
      fair value; the remaining contract value, including any discount, is allocated
      to the delivered element (software element). The establishment of VSOE of fair
      value for the software element during the nine months ended April 30, 2006
      did
      not have a material impact on the Company’s consolidated financial statements.
      Revenue allocated to maintenance and technical support is recognized ratably
      over the maintenance term (typically one year). Revenue allocated to
      installation and training is recognized upon completion of these services.
      The
      Company’s training and installation services are not essential to the
      functionality of its products as such services can be provided by a third party
      or the customers themselves. For instances in which VSOE cannot be determined
      for undelivered elements, and these undelivered elements do not provide
      significant customization or modification of its software product, Forgent
      recognizes the entire contract amount ratably over the period during which
      the
      services are expected to be performed.





The
      Company does not recognize revenue for agreements with rights of return,
      refundable fees, cancellation rights or acceptance clauses until such rights
      of
      return, refund or cancellation have expired or acceptance has occurred. The
      Company's arrangements with resellers do not allow for any rights of return.





Deferred
      revenue includes amounts received from customers in excess of revenue
      recognized, and is comprised of deferred maintenance, service and other revenue.
      Deferred revenues are recognized in the Consolidated Statements of Operations
      when the service is completed and over the terms of the arrangements, primarily
      ranging from one to three years.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





The
      Company’s primary market risk exposure relates to interest rate risk. Forgent's
      interest income is sensitive to changes in U.S. interest rates. However, due
      to
      the short-term nature of the Company's investments, Forgent does not consider
      these risks to be significant. 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, 2005.





19


**ITEM
      4. CONTROLS AND PROCEDURES**





Under
      the
      supervision and with the participation of the Company's Chief Executive Officer
      and Chief Financial Officer, management of the Company has evaluated the
      effectiveness of the Company's disclosure controls and procedures (as defined
      in
      Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934)
      as
      of a date within 90 days prior to the filing date of this report on Form 10-Q.
      Based on that evaluation, the Chief Executive Officer and Chief Financial
      Officer concluded that, as of the date of the evaluation, the Company's
      disclosure controls and procedures are effective in timely alerting them to
      the
      material information relating to the Company required to be included in its
      periodic filings with the Securities and Exchange Commission. No changes were
      made in the Company’s internal controls over financial reporting during the
      quarter ended April 30, 2006, that have materially affected, or is reasonably
      likely to materially affect, the Company’s internal controls over financial
      reporting.





20




**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. With the exception of the proceedings described below, none of
      the
      pending legal proceedings to which the Company is a party are expected to have
      a
      material adverse effect on the Company.





**Litigation
      of United States Patent No. 4,698,672 (JPEG)**





Between
      April 2004 and November 2004, Forgent’s wholly-owned subsidiary, Compression
      Labs, Incorporated (“CLI”), initiated litigation against multiple companies for
      infringement of the ‘672 patent in the United States District Court for the
      Eastern District of Texas, Marshall Division, seeking royalties from sales
      of
      infringing products and monetary damages, among other relief sought. The
      original defendants included Agfa Corporation; Apple Computer, Incorporated;
      AudioVox Corporation; AudioVox Electronics Corporation; Axis Communications,
      Incorporated; BancTec, Inc.; Canon USA; Dell Incorporated; Eastman Kodak
      Company; Fuji Photo Film Co. U.S.A.; Fujitsu Computer Products of America;
      Gateway, Inc.; Hewlett-Packard Company; International Business Machines Corp.;
      JASC Software; JVC Americas Corporation; Macromedia, Inc.; Matsushita Electric
      Corporation of America; Mitsubishi Digital Electronics American, Incorporated;
      Oce’ North America, Incorporated; PalmOne, Inc.; Ricoh Corporation; Riverdeep,
      Incorporated (d.b.a. Broderbund); Savin Corporation; ScanSoft, Inc.; Thomson
      S.A.; TiVo Inc.; Toshiba Corporation; Xerox Corporation; Yahoo! Inc.; Acer
      America Corporation; Adobe Systems Incorporated; BenQ America Corporation;
      Color
      Dreams, Inc. (d/b/a StarDot Technologies); Concord Camera Corporation; Creative
      Labs, Incorporated; Creo, Inc.; Creo Americas, Inc.; Google Inc.; Kyocera
      Wireless Corporation; Onkyo Corporation; Panasonic Communications Corporation
      of
      America; Panasonic Mobile Communications Development Corporation of USA; Sun
      Microsystems Inc.; and Veo Inc. Also included in the ‘672 Litigation is
      Microsoft Corporation. Forgent has since settled with defendants Adobe Systems,
      Inc.; AudioVox Corporation; Axis Communications, Incorporated; BenQ America
      Corporation; Color Dreams, Inc.; JASC Software; Google Inc.; Macromedia, Inc.;
      ScanSoft, Inc.; Oce’ North America, Incorporated; Onkyo Corporation; Riverdeep,
      Incorporated; Xerox Corporation and Yahoo! Inc.





On
      November 16, 2005, the Public Patent Foundation filed a petition with the United
      States Patent and Trademark Office (the “USPTO”) to re-examine the ‘672 patent.
      In January 2006, the USPTO granted the Public Patent Foundation’s petition to
      re-examine the ‘672 patent and issued its first office action on May 25, 2006.
      This first action, which is not the final conclusion of the re-examination,
      confirmed 27 of the 46 claims in the ‘672 patent. Forgent has 60 days to respond
      to this first office action. The re-examination process is an extended process
      and Forgent will work directly with the USPTO to vigorously defend all of the
      claims, including those that were not initially upheld in the first office
      action.





On
      March
      9, 2006, Forgent and the defendants in the ‘672 Litigation appeared before the
      United States District Court for the Northern District of California at a claims
      construction hearing. The Company is currently awaiting the results of this
      hearing. However, the results are not yet known.





**Federal
      Trade Commission Inquiry**





In
      December 2003, the Company received notification from the Federal Trade
      Commission (the “FTC”) that it is conducting a non-public investigation to
      determine whether the Company may have engaged in violation of the Federal
      Trade
      Commission Act by reason of the alleged involvement of CLI in the JPEG
      standard-setting process during the 1980’s and very early 1990’s and its
      subsequent licensing of the ‘672 patent, which the Company believes is infringed
      by the implementation of that standard. The Company believes that CLI has not
      acted improperly and advised the FTC accordingly. In April 2004, Forgent
      received a Subpoena Duces Tecum (“Subpoena”) and a Civil Investigative Demand
      (“CID”) in this FTC proceeding. The Company responded in May 2004 by filing a
      petition to quash and/or limit the Subpoena and CID. In November 2004, the
      FTC
      issued a ruling denying Forgent’s Petition to Quash, but modifying the Subpoena
      and CID. In February 2005 and March 2005, the Company responded to the Subpoena
      and the CID by providing the required documents and other responsive material.
      Forgent has not received any final conclusion from the FTC on its
      inquiries.





21


**Litigation
      of United States Patent No. 6,285,746 (DVR)**





In
      July
      2005, Forgent initiated litigation against 15 companies for infringement of
      the
      United States Patent No. 6,285,746 in the United States District Court for the
      Eastern District of Texas, Marshall Division, seeking injunctive relief against
      sales of infringing products and monetary damages, among other relief sought.
      The defendants are Cable One, Inc., a subsidiary of the Washington Post Company;
      Charter Communications, Inc.; Comcast Corporation; Cox Communications, Inc.,
      a
      subsidiary of Cox Enterprises, Inc.; EchoStar Communications Corporation; The
      DIRECTV Group, Inc.; Time Warner Inc.; and their respective subsidiaries. The
      ‘746 litigation has since been moved to the United States District Court for
      the
      Eastern District of Texas, Tyler Division.





On
      September 19, 2005, Scientific-Atlanta Inc. and Motorola Inc. filed a
      declaratory judgment against Forgent in the United States District Court for
      the
      Eastern District of Texas, Tyler Division, claiming, among other assertions,
      that their products do not infringe Forgent’s patent and that the patent is
      invalid. During a hearing on November 8, 2005, the Court ordered this case
      to be
      transferred to the Marshall Division and consolidated with *Forgent
      Networks, Inc. v. EchoStar Communications Corporation, et al.* .





On
      January 3, 2006, Diego, Inc. filed a motion to intervene as a declaratory
      judgment plaintiff after learning that their products were accused of infringing
      the ‘746 patent in the midst of the ongoing ‘746 Litigation. On January 4, 2006,
      the Court granted Diego Inc.’s motion.





In
      April
      2006, Forgent participated in a court-ordered mediation with the defendants.
      In
      May 2006, the Court ordered another mediation proceeding to be held prior to
      the
      claims construction hearing. The Court also reset the ‘746 Litigation claims
      construction hearing date for November 9, 2006 and the trial date for May 14,
      2007 in the Tyler Division of the United States District Court for the Eastern
      District of Texas.





Since
      July 2005, Forgent has dismissed six defendants from the lawsuit since they
      had
      no operational role with respect to infringement: Cox Communications, Inc.;
      DIRECTV Group, Inc.; DIRECTV Enterprises, LLC; DIRECTV Operations, LLC; EchoStar
      Communications Corporation; and EchoStar DBS Corporation. No settlements
      accompanied these dismissals.





**ITEM
      1A. RISK FACTORS**





There
      are
      many factors that affect the Company's business, prospects, liquidity and the
      results of operations, some of which are beyond the control of the Company.
      The
      following is a discussion of some, but not all, of these and other important
      risk factors that may cause the actual results of the Company's operations
      in
      future periods to differ materially from those currently expected or desired.
      Additional risks not presently known to management or risks that are currently
      believed to be immaterial, but which may become material, may also affect the
      Company’s business, prospects, liquidity and results of operations.





**Forgent
      is largely dependent on its Patent Licensing Program. If the Company’s patent
      licensing process is successfully challenged and/or the Company is unable to
      obtain new license agreements, licensing revenues will
      decrease.**


Forgent
      is largely dependent on its ability to enter into new license agreements.
      Failure to sign new license agreements would cause operating results to suffer.
      The Company's Patent Licensing Program involves risks inherent in licensing
      intellectual property, including risks of protracted delays, legal or regulatory
      challenges that would lead to disruption or curtailment of the program,
      increasing expenditures associated with the pursuit of the program and other
      risks that could cause the Company’s results of operations to decline. Thus,
      there can be no assurance that the Company will be able to continue to license
      its technology to others. Additionally, quarterly operating results may fail
      to
      meet expectations for a number of reasons, including the unwillingness or
      inability of licensees to pay for the license and other fees, a decline in
      the
      demand for the Company's patented technology, higher than expected operating
      expenses and license delays due to legal and other factors.





**The
      '672 patent will be expiring soon and revenues may decline if Forgent is unable
      to replace this revenue stream.**


To
      date,
      all of the Company’s intellectual property licensing revenue has been derived
      from the '672 patent. The U.S. '672 patent expires in October 2006 and its
      foreign counterparts expire in September 2007. Upon expiration of the ‘672
      patent, no additional damages will accrue but the Company’s ability to recover
      for past damages will not immediately be affected. Ultimately, the Company’s
      ability to recover for past damages will be limited by any applicable statute
      of
      limitations. Also, upon expiration of the ‘672 patent, Forgent will cease
      receiving royalties from the MPEG-2 consortium. Therefore, revenues from this
      patent are finite and, if such revenues are not replaced, net income and the
      market price of Forgent’s common stock will decline following the expiration of
      the '672 patent or the resolution of the '672 Litigation.





22


**Forgent’s
      ‘672 patent is currently being re-examined by the United States Patent and
      Trademark Office and the Federal Trade Commission is conducting a non-public
      inquiry into the Company’s Patent Licensing Program. Any negative results from
      the re-examination or the inquiry would reduce the Company’s ability to generate
      licensing revenues.**


See
      Part
      II, Item 1 “Legal Proceedings” for information regarding the United States
      Patent and Trademark Office’s (“USPTO”) re-examination of the ‘672 patent and
      the Federal Trade Commission’s (“FTC”) non-public inquiry associated with the
      Company’s Patent Licensing Program. This re-examination and inquiry can cause
      Forgent to incur significant legal expenses to defend its ‘672 patent and
      licensing program. Additionally, if the USPTO certain claims of the ‘672 patent,
      the Company’s licensing abilities would be affected, which could result in
      significantly decreased licensing revenues. If the FTC proceeds with its inquiry
      and thereafter determines that the Company acted improperly, further proceedings
      before the FTC could ensue, which could result in a challenge to the Company’s
‘672 patent licensing process. Any successful challenge to the licensing process
      would reduce the Company’s ability to negotiate settlements with defendants and
      new licenses with other companies, which would materially and adversely affect
      Forgent’s licensing revenues.





**Forgent’s
      licensing cycle is lengthy and costly, which could require the Company to incur
      significant legal expenditures, causing earnings to fluctuate.**


Forgent’s
      licensing cycle for its Patent Licensing Program is lengthy and costly,
      including expenditures related to various legal costs, consultant fees and
      travel costs. Due to multiple negotiations and legal due diligence required,
      the
      licensing process cannot necessarily be expedited. As a result, the Company's
      intellectual property licensing revenues will fluctuate from quarter to quarter,
      making it difficult for Forgent to predict its revenues. Additionally, these
      fluctuations may lead to reduced prices for the Company’s common stock.





**Forgent
      may not prevail in its litigation proceedings, which could cause the Company
      to
      incur significant legal expenditures without any related earnings.**


The
      Company has initiated the ‘672 Litigation against multiple companies for
      infringement of its ‘672 patent. Additionally, the Company has initiated the
‘746 Litigation against several companies for the infringement of its ‘746
      patent. As with any litigation, the outcome is uncertain, and although the
      Company intends to vigorously pursue its claims, there are no guarantees that
      the Company can protect its intellectual property rights in its current
      litigation or prevent the unauthorized use of its technology in the future.
      The
      litigation will be lengthy and costly. Additionally, unintended consequences
      of
      the Company’s litigations may adversely affect the Company’s business,
      including, without limitation, that the Company may have to devote significant
      time and financial resources to pursuing the litigations, that the Company
      may
      become subject to counterclaims or lawsuits and that the expenses of pursuing
      the litigations could increase based upon new developments occurring. These,
      and
      other factors not currently known to or deemed material by management, could
      have a material and adverse impact on the Company’s business, prospects,
      liquidity and results of operations.





**If
      Forgent is unable to retain qualified legal counsel to advise the Company in
      connection with its Patent Licensing Program, the Company’s operating results
      and financial condition could suffer.**


The
      Patent Licensing Program is dependent on intensive legal due diligence and
      negotiations. The Company may encounter a number of other risks associated
      with
      its legal counsel, including but not limited to (1) turnover of individual
      attorneys working on the Company’s Patent Licensing Program; (2) availability of
      key attorneys working on the program; (3) financial and other resources
      available to legal counsel; and (4) the financial position of legal counsel.
      These risks may cause delays in Forgent's ability to proceed with its Patent
      Licensing Program, which could require significant additional legal expenditures
      and could result in declining revenues and earnings for the
      Company.





**Forgent
      may not be able to protect or enforce its intellectual property rights which
      could cause the Company’s ability to license its technologies to be
      impaired.**


The
      Company's success and ability to compete are substantially dependent on its
      proprietary technology and trademarks. The Company seeks to protect these assets
      through a combination of patent and trademark laws, as well as confidentiality
      procedures and contractual provisions. These legal protections afford only
      limited protection and enforcement of these rights may be time consuming and
      expensive. If Forgent cannot protect or enforce these rights, the Company’s
      ability to obtain future licenses could be impaired. Furthermore, despite best
      efforts, the Company may be unable to prevent third parties from infringing
      upon
      or misappropriating its intellectual property. Competitors may also
      independently develop similar, but not infringing, technology, duplicate
      products or design around the Company's patents or other intellectual property.
      Additionally, the Company's patent applications or trademark registrations
      may
      not be approved. Moreover, even if approved, the resulting patents or trademarks
      may not provide Forgent with any competitive advantage or may be challenged
      by
      third parties. If challenged, patents might not be upheld or claims could be
      narrowed. Any litigation surrounding the Company's rights would force Forgent
      to
      divert important financial and other resources away from business operations.





23


**If
      Forgent is unable to successfully market and sell its software products and
      services, future software revenues may decline.**


The
      future success of the Company’s software segment is dependent in significant
      part on its ability to generate demand for its software products and services.
      To this end, Forgent's sales operations must increase market awareness of its
      products to generate increased revenue. All sales new hires will require
      training and may take time to achieve full productivity. Forgent cannot be
      certain that its new hires will become as productive as necessary or that it
      will be able to hire enough qualified individuals or retain existing employees
      in the future. The Company cannot be certain that it will be successful in
      its
      efforts to market and sell its products, and if it is not successful in building
      greater market awareness and generating increased sales, future software
      revenues may decline.





**Lack
      of new customers or additional sales from current customers could negatively
      affect the Company’s ability to grow revenues.**


Forgent’s
      business model depends on the expanded use of its software within its current
      and new customers’ organizations. Therefore, Forgent must execute on its growth
      objectives. If the Company fails to grow its customer base or generate repeat
      and expanded business from its current customers, Forgent’s software revenues
      could be adversely affected. Since the Company’s maintenance and other service
      fees depend largely on the size and number of licenses that are sold, any
      downturn in Forgent’s software license revenue would negatively impact the
      Company’s deployment services revenue and future maintenance revenue.
      Additionally, if customers elect not to renew their maintenance agreements,
      Forgent’s maintenance revenue could be adversely affected.





**If
      Forgent cannot develop new or enhanced technologies for its software products,
      technological changes could adversely affect the Company’s operating results.**


The
      technology industry is characterized by continuing improvements in technology,
      resulting in the frequent introduction of new products, short product life
      cycles and continual improvement in product performance characteristics. Forgent
      expects that its future financial performance will depend, in part, on revenue
      generated from its existing and future software products and the related
      products that the Company plans to develop or acquire. To be successful, Forgent
      must be cost-effective and timely in enhancing its existing software
      applications, developing new software technology and solutions that address
      the
      increasingly sophisticated and varied needs of its existing and prospective
      clients, and anticipating technological advances and evolving industry standards
      and practices. Forgent may need to invest further in research and development
      in
      order to keep its software applications and solutions viable in the rapidly
      changing marketplace. This research and development effort may require
      significant resources and could ultimately be unsuccessful. If the Company
      fails
      to anticipate and respond effectively to technological improvements and new
      product introductions, these improvements could render the Company's products
      noncompetitive and adversely affect the Company’s operating results as well as
      its liquidity.





**If
      Forgent is unable to meet customer needs or expectations, the Company’s sales
      may suffer.**


Forgent
      cannot be certain that its existing or future software product offerings will
      meet customer performance needs or expectations when shipped or that they will
      be free of significant software defects or bugs. If the Company's products
      do
      not meet customer needs or expectations, for whatever reason, the Company's
      sales would be adversely affected and furthermore, upgrading or enhancing the
      Company’s products could be costly and time consuming. Such upgrades or
      enhancements could have an adverse effect on the Company’s results of operations
      and liquidity.





**Increased
      competition may have an adverse effect on the Company’s
      profitability.**


The
      Company may encounter new entrants or competition from competitors in some
      or
      all aspects of its business. The Company currently competes on the basis of
      price, technology, availability, performance, quality, reliability, service
      and
      support. There can be no assurance that the Company will be able to maintain
      a
      competitive advantage with respect to any of these factors. Many of the
      Company's current and possibly future competitors have greater resources than
      the Company and, therefore, may be able to compete more effectively on price
      and
      other terms.





24


**Forgent
      may experience significant fluctuations in its quarterly results and if the
      Company’s future results are below expectations from market analysts or
      investors, the price for the Company’s common stock may
      decline.**


In
      the
      past, Forgent’s revenues and operating results have varied significantly from
      quarter to quarter. Additionally, management expects that revenues and operating
      results will continue to fluctuate significantly from quarter to quarter. These
      fluctuations may lead to reduced prices for the Company’s common stock. Several
      factors may cause the quarterly results to fluctuate, including:




·
            timing
                of intellectual property license agreements and related recording
                of
                licensing revenues;





·
            results
                of the claims construction hearing for the ‘672
                Litigation;





·
            resolution
                of the USPTO’s re-examination of the ‘672
                patent;





·
            resolution
                of the FTC’s non-public
                investigation;





·
            timing
                and costs related to the Company’s patent litigation;





·
            market
                demand for the Company’s software products and
                services;





·
            timing
                of customers’ budget cycles;





·
            timing
                of customer orders and deployment of Forgent’s software products and
                services;





·
            the
                mix of software license and services
                revenue;





·
            seasonal
                fluctuations in capital spending;





·
            changes
                in the rapidly evolving market for web-based
                applications;





·
            management’s
                ability to manage operating costs, a large portion of which are relatively
                fixed in advance of any particular quarter;





·
            timing
                and costs related to possible acquisitions of technology or
                businesses;





·
            costs
                of attracting, retaining and training skilled
                personnel;





·
            management’s
                ability to manage future growth;
                and





·
            general
                economic climate.




Some
      of
      these factors are within management’s control while others are not. Accordingly,
      management believes that quarter-to-quarter comparisons of the Company’s
      revenues and operating results are not necessarily meaningful. Therefore, market
      analysts and investors should not rely on the results of any particular quarter
      as an indication of future performance.





**The
      loss of key management and personnel could hinder the development of Forgent’s
      technology and otherwise adversely affect the Company’s
      business.**


Forgent’s
      success depends upon its ability to attract, hire and retain highly trained
      and
      experienced software developers and engineers to design and develop software
      applications in order to keep pace with client demand for rapidly evolving
      technologies and varying client needs. The Company’s operations are also
      dependent on the continued efforts of its executive officers and senior
      management. If any of the Company’s key personnel or senior management are
      unable or unwilling to continue in his or her present role, or if Forgent is
      unable to retain, hire, train and integrate new personnel effectively, Forgent’s
      business could be adversely affected.





25


**Compliance
      with changing laws and regulations could cause the Company to incur additional
      expenses.**


As
      a
      result of assessing, implementing and complying with proposed and enacted
      changes in the laws and regulations affecting public companies, including but
      not limited to, the Sarbanes-Oxley Act of 2002, management anticipates increased
      accounting, audit and legal fees, as well as increased costs for certain types
      of insurance. Additionally, the new and proposed rules could also make it more
      difficult for Forgent to retain qualified individuals to serve on its Board
      of
      Directors. Although management continually monitors and evaluates developments
      with respect to these new and proposed laws and regulations, management cannot
      estimate the amount of the additional costs the Company may incur or the timing
      of such costs at this time. However, such increased costs could materially
      affect Forgent’s results of operations.





**Due
      to Forgent’s limited operating history in its current lines of business, the
      Company may not be able to accurately predict future operating results, which
      could cause the Company to miss market analysts’ and investors’
expectations.**


Although
      founded in 1985, Forgent has a limited operating history in its current lines
      of
      business due to the Company's transition to a licensor of intellectual property
      and a provider of scheduling and asset management software and services. As
      a
      result of this limited operating history, Forgent cannot forecast revenues
      and
      operating expenses based on historical results. Additionally, the Company's
      ability to forecast quarterly revenue accurately is limited because of the
      relative unpredictability of its intellectual property licensing revenues.
      The
      Company's business, operating results and financial condition will be materially
      adversely affected if revenues do not meet projections and if results in a
      given
      quarter do not meet expectations.





**Although
      Forgent has divested its non-core operations, the Company may not strengthen
      its
      core operations and achieve profitability.**


As
      a
      result of Forgent's transition to a licensor of intellectual property and a
      provider of scheduling and asset management software and services, the Company
      has divested certain non-core operations, including its ALLIANCE software and
      services business, a videoconferencing hardware services business, an
      integration business and a videoconferencing endpoint manufacturing business.
      There can be no assurance that, having divested such non-core operations,
      Forgent will be able to achieve greater or any profitability, strengthen its
      core operations or compete more effectively in existing or new markets. In
      addition, the Company continues to evaluate the profitability realized or that
      is likely to be realized by its existing businesses and operations. Forgent
      reviews from a strategic standpoint, which, if any, of its businesses or
      operations should be divested. Entering into, evaluating or consummating
      divestiture transactions may entail risks and uncertainties in addition to
      those
      which may result from the divestiture-related change in the Company's business
      operations, including but not limited to extraordinary transaction costs,
      unknown indemnification liabilities and unforeseen administrative complications,
      any of which could result in reduced revenues, increased charges or
      post-transaction administrative costs, or could otherwise have a material
      adverse effect on Forgent's business, financial condition or results of
      operations.





Due
      to
      the risk factors noted above and elsewhere in “Management’s Discussion and
      Analysis of Financial Condition and Results of Operations of the Company,”
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 market analysts and investors
      could have an immediate and significant effect on the trading price of the
      Company’s common stock in any given period.





**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**





None





**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





None





26


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





On
      May
      23, 2006, an annual meeting of the stockholders was held in Austin, Texas,
      whereby the stockholders voted on the following proposals:





1. Proposal
      to elect six directors to the board of directors to hold office until the next
      annual meeting of stockholders or until their respective successors are duly
      elected and qualified. The stockholders approved the proposal by the following
      vote:





**Nominees**
            **For**
            **Withheld**Richard
                N. Snyder
            23,194,741
            1,127,715Richard
                J. Agnich
            23,204,797
            1,117,659Kathleen
                A. Cote
            23,106,221
            1,216,235Lou
                Mazzucchelli
            23,190,379
            1,132,077Ray
                R. Miles
            23,206,730
            1,115,726James
                H. Wells
            23,227,069
            1,095,387





2. Proposal
      to ratify the board of directors appointment of Ernst & Young LLP,
      independent accountants, as the Company’s independent auditors for the year
      ending July 31, 2006. The stockholders approved the proposal by the following
      vote:





**For**
            **Against**
            **Abstain**24,124,501
            164,947
            33,008





3. Proposal
      to amend the Company’s 1998 Restricted Stock Plan. The stockholders approved the
      proposal by the following vote:




**For**
            **Against**
            **Abstain**
            **Broker
                Non-Votes**5,282,435
            1,251,017
            32,094
            17,756,910





4.  Proposal
      to transact such other business as may properly come before the meeting or
      any
      adjournment thereof. The stockholders approved the proposal by the following
      vote:





**For**
            **Against**
            **Abstain**21,935,892
            2,227,015
            159,548





**ITEM
      5. OTHER INFORMATION**





None





**ITEM
      6. EXHIBITS**





Exhibits:





3.1
            Restated
                Certificate of Incorporation (incorporated by reference to Exhibit
                3.1 to
                the Company’s quarterly report on Form 10-Q for the three months ended
                October 31, 2004).





3.2
            Restated
                Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s
                quarterly report on Form 10-Q for the three months ended October
                31,
                2004).





4.1
            Specimen
                Certificate for the Common Stock (incorporated by reference to Exhibit
                4.1
                to the Company's Registration Statement on Form S-1, File No. 33-45876,
                as
                amended).




4.2
              Rights
                  Agreement, dated as of December 19, 2005, between Forgent Networks,
                  Inc. and American Stock Transfer & Trust Company, which includes the
                  form of Series A Preferred Stock, $0.01 par value, the form of
                  Rights
                  Certificate, and the Summary of Rights (incorporated by reference
                  to
                  Exhibit 4.1 to the Company's Current Report on Form 8-K dated December
                  15,
                  1995).
 27
 10.33
                  Legal
                      Services Fee Agreement, effective April 14, 2006, by and among
                      Forgent
                      Networks, Inc., Hagans, Bobb & Burdine, P.C. and Bracewell &
                      Giuliani, L.L.P.
  10.34
                    Amended Restricted Stock Plan, effective
                      May 23,
                      2006.
  31.1
                      Certification
                          pursuant to Section 302 of the Sarbanes-Oxley Act of
                          2002.
  31.2
                        Certification
                            pursuant to Section 302 of the Sarbanes-Oxley Act of
                            2002.
  32.1
                          Certification
                              pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                              to Section 906 of
                              the Sarbanes-Oxley Act of 2002.
  32.2
                            Certification
                                pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                                to Section 906 of
                                the Sarbanes-Oxley Act of
                                2002.
 28


**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.Date: June
              14, 2006
            By:
            /s/ RICHARD
              N. SNYDERRichard
                N. Snyder
              Chief
                Executive Officer




Date: June
              14, 2006
            By:
            /s/ JAY
              C.
              PETERSONJay
                C. Peterson
              Chief
                Financial Officer


29







**INDEX
      TO EXHIBITS**






**EXHIBIT**
 **NUMBER** ****  DESCRIPTION
 3.1
              Restated
                  Certificate of Incorporation (incorporated by reference to Exhibit
                  3.1 to
                  the Company’s quarterly report on Form 10-Q for the three months ended
                  October 31, 2004).
 
 3.2
              Restated
                  Bylaws (incorporated by reference to Exhibit 3.2 to the Company’s
                  quarterly report on Form 10-Q for the three months ended October
                  31,
                  2004).
 
 4.1
              Specimen
                  Certificate for the Common Stock (incorporated by reference to
                  Exhibit 4.1
                  to the Company's Registration Statement on Form S-1, File No. 33-45876,
                  as
                  amended).
  4.2
                Rights
                    Agreement, dated as of December 19, 2005, between Forgent Networks,
                    Inc. and American Stock Transfer & Trust Company, which includes the
                    form of Series A Preferred Stock, $0.01 par value, the form of
                    Rights
                    Certificate, and the Summary of Rights (incorporated by reference
                    to
                    Exhibit 4.1 to the Company's Current Report on Form 8-K dated
                    December 15,
                    1995).
 10.33
                    Legal
                        Services Fee Agreement, effective April 14, 2006, by and
                        among Forgent
                        Networks, Inc., Hagans, Bobb & Burdine, P.C. and Bracewell &
                        Giuliani, L.L.P.
  10.34
                      Amended Restricted Stock Plan, effective
                        May 23,
                        2006.
  31.1
                        Certification
                            pursuant to Section 302 of the Sarbanes-Oxley Act of
                            2002.
  31.2
                          Certification
                              pursuant to Section 302 of the Sarbanes-Oxley Act of
                              2002.
  32.1
                            Certification
                                pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                                to Section 906 of
                                the Sarbanes-Oxley Act of 2002.
  32.2
                              Certification
                                  pursuant to 18 U.S.C. Section 1350, as adopted
                                  pursuant to Section 906 of
                                  the Sarbanes-Oxley Act of
                                  2002.
 30