SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of
--- the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2002
or
Transition Report Pursuant to Section 13 or 15(d) of
--- the Securities Exchange Act of 1934
For the Transition Period from ____ to ____
Commission File No. 0-13150
_____________
CONCURRENT COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2735766
(State of Incorporation) (I.R.S. mployer Identification No.)
4375 River Green Parkway, Duluth, GA 30096
(Address of principal executive offices)
Telephone: (678) 258-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Number of shares of the Registrant's Common Stock, par value $0.01 per share,
outstanding as of November 8, 2002 was 61,861,993.
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONCURRENT COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
SEPTEMBER 30,
2002 2001
-------- --------
Revenues:
Product:
Real-time systems $ 4,092 $ 5,336
Video-on-demand systems 12,449 3,254
-------- --------
Total product revenues 16,541 8,590
Service:
Real-time systems 4,678 5,253
Video-on-demand systems 922 259
-------- --------
Total service revenues 5,600 5,512
-------- --------
Total revenues 22,141 14,102
Cost of sales:
Product:
Real-time systems 1,776 2,501
Video-on-demand systems 5,241 1,888
-------- --------
Total product cost of sales 7,017 4,389
Service:
Real-time systems 2,607 2,849
Video-on-demand systems 660 404
-------- --------
Total service cost of sales 3,267 3,253
-------- --------
Total cost of sales 10,284 7,642
-------- --------
Gross margin 11,857 6,460
Operating expenses:
Sales and marketing 4,404 4,154
Research and development 4,447 3,461
General and administrative 2,328 1,909
-------- --------
Total operating expenses 11,179 9,524
-------- --------
Operating income (loss) 678 (3,064)
Interest income - net 196 215
Other expense - net (47) (11)
-------- --------
Income (loss) before income taxes 827 (2,860)
Provision for income taxes 207 150
-------- --------
Net income (loss) $ 620 $(3,010)
======== ========
Net income (loss) per share
Basic $ 0.01 $ (0.05)
======== ========
Diluted $ 0.01 $ (0.05)
======== ========
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-1-
CONCURRENT COMPUTER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, JUNE 30,
2002 2002
--------------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 29,124 $ 30,519
Accounts receivable - net 18,484 23,894
Inventories 6,679 6,822
Deferred tax asset 870 870
Prepaid expenses and other current assets 2,219 1,009
--------------- ----------
Total current assets 57,376 63,114
Property, plant and equipment - net 11,135 10,696
Purchased developed computer software - net 1,346 1,393
Goodwill 10,744 10,744
Investment in minority owned companies 7,826 7,814
Note receivable from minority owned companies 6,000 3,000
Deferred tax asset 1,087 1,087
Other long-term assets - net 800 840
--------------- ----------
Total assets $ 96,314 $ 98,688
=============== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 12,099 $ 15,514
Deferred revenue 4,106 4,055
--------------- ----------
Total current liabilities 16,205 19,569
Long-term liabilities:
Deferred revenue 1,902 1,677
Deferred tax liability 1,634 1,634
Other 6,894 6,584
--------------- ----------
Total liabilities 26,635 29,464
Stockholders' equity:
Common stock 618 618
Capital in excess of par value 172,982 172,929
Accumulated deficit (97,757) (98,377)
Treasury stock (58) (58)
Accumulated other comprehensive loss (6,106) (5,888)
--------------- ----------
Total stockholders' equity 69,679 69,224
--------------- ----------
Total liabilities and stockholders' equity $ 96,314 $ 98,688
=============== ==========
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-2-
CONCURRENT COMPUTER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
SEPTEMBER 30,
2002 2001
-------- --------
OPERATING ACTIVITIES
Net income (loss) $ 620 $(3,010)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Write-off of in-process research and development
Accrual of non-cash warrants (54) 571
Depreciation and amortization 1,183 1,174
Non-cash income tax provision 120 -
Other non cash expenses 82 118
Changes in operating assets and liabilities:
Accounts receivable 5,405 332
Inventories 66 (41)
Prepaid expenses and other current assets (1,210) (376)
Other long-term assets 6 (60)
Accounts payable and accrued expenses (3,415) (2,840)
Short-term deferred revenue 51 (428)
Long-term liabilities 556 77
-------- --------
Total adjustments to net income (loss) 2,790 (1,473)
-------- --------
Net cash provided by (used in) operating activities 3,410 (4,483)
INVESTING ACTIVITIES
Net additions to property, plant and equipment (1,533) (915)
Note receivable from minority owned company (3,000) -
Other (29) -
-------- --------
Net cash used in investing activities (4,562) (915)
FINANCING ACTIVITIES
Net repayment of capital lease obligation (21) (19)
Proceeds from sale and issuance of common stock 4 25,176
-------- --------
Net cash provided by (used in) financing activities (17) 25,157
Effect of exchange rates on cash and cash equivalents (226) 204
-------- --------
Increase (decrease) in cash and cash equivalents (1,395) 19,963
Cash and cash equivalents at beginning of period 30,519 9,460
-------- --------
Cash and cash equivalents at end of period $29,124 $29,423
======== ========
Cash paid during the period for:
Interest $ 5 $ 20
======== ========
Income taxes (net of refunds) $ 56 $ 175
======== ========
<FN>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
-3-
CONCURRENT COMPUTER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed, consolidated interim financial statements of Concurrent
Computer Corporation ("Concurrent") are unaudited and reflect all adjustments
(consisting of only normal recurring adjustments) necessary for a fair
statement of Concurrent's financial position, results of operations and cash
flows at the dates and for the periods indicated. These financial statements
should be read in conjunction with the Annual Report on Form 10-K for the year
ended June 30, 2002. There have been no significant changes to Concurrent's
Accounting Policies as disclosed in the Annual Report on Form 10-K for the year
ended June 30, 2002. Certain reclassifications have been made to prior year
amounts to conform with the current year presentation. The results reported in
these condensed, consolidated quarterly financial statements should not be
regarded as necessarily indicative of results that may be expected for the
entire year.
2. BASIC AND DILUTED NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share is computed by dividing net income (loss)
by the weighted average number of common shares outstanding during each year.
Diluted net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of shares including dilutive common share
equivalents. Under the treasury stock method, incremental shares representing
the number of additional common shares that would have been outstanding if the
dilutive potential common shares had been issued are included in the
computation. Common share equivalents of 4,509,000 and 6,142,000 for the three
month periods ended September 30, 2002 and 2001, respectively, were excluded
from the calculation as their effect was antidilutive. The following table
presents a reconciliation of the numerators and denominators of basic and
diluted income (loss) per share for the periods indicated:
(DOLLARS AND SHARE DATA IN THOUSANDS, THREE MONTHS ENDED
EXCEPT PER SHARE AMOUNTS) SEPTEMBER 30, 2002
--------------------
BASIC DILUTED
--------- ---------
Average outstanding shares 61,860 61,860
Dilutive effect of options and warrants - 508
--------- ---------
Equivalent shares 61,860 62,368
========= =========
Net income $ 620 $ 620
========= =========
Income per share $ 0.01 $ 0.01
========= =========
THREE MONTHS ENDED
SEPTEMBER 30, 2001
BASIC DILUTED
--------- ---------
Average outstanding shares 59,564 59,564
Dilutive effect of options and warrants - -
--------- ---------
Equivalent shares 59,564 59,564
========= =========
Net loss $ (3,010) $ (3,010)
========= =========
Loss per share $ (0.05) $ (0.05)
========= =========
3. REVENUE RECOGNITION AND RELATED MATTERS
Video-on-demand ("VOD") and real-time system revenues are recognized based
on the guidance in American Institute of Certified Public Accountants Statement
of Position ("SOP") 97-2, "Software Revenue Recognition". Concurrent recognizes
revenue from video-on-demand and real-time systems when persuasive evidence of
-4-
an arrangement exists, the system has been shipped, the fee is fixed or
determinable and collectibility of the fee is probable. Under multiple element
arrangements, Concurrent allocates revenue to the various elements based on
vendor-specific objective evidence ("VSOE") of fair value. Concurrent's VSOE of
fair value is determined based on the price charged when the same element is
sold separately.
In certain limited instances, Concurrent's customers require significant
customization of both the software and hardware products and, therefore, the
revenues are recognized as long term contracts in conformity with Accounting
Research Bulletin ("ARB") No. 45, "Long Term Construction Type Contracts", SOP
81-1, "Accounting for Performance of Construction-Type and Certain
Production-Type Contracts" and SOP 97-2, "Software Revenue Recognition". For
long-term contracts, revenue is recognized using the percentage-of-completion
method of accounting based on costs incurred on the project compared to the
total costs expected to be incurred through completion.
Concurrent recognizes revenue from customer service plans ratably over the
term of each plan, typically one year for real-time customers, and between one
and three years for VOD customers.
Custom engineering and integration services performed by the Real-Time
division are typically completed within 90 days from receipt of an order.
Revenues from these services are recognized upon completion and delivery of such
services to the customer.
4. INVENTORIES
Inventories are valued at the lower of cost or market, with cost being
determined by using the first-in, first-out ("FIFO") method. The components of
inventories are as follows:
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, JUNE 30,
2002 2002
-------------- ---------
Raw materials $ 5,064 $ 5,030
Work-in-process 1,395 1,633
Finished goods 220 159
-------------- ---------
$ 6,679 $ 6,822
============== =========
5. INVESTMENTS IN AND RECEIVABLE FROM MINORITY OWNED COMPANIES
In March 2002, Concurrent invested cash of $4 million and issued 291,461
shares of its common stock (valued at $10.29 per share) in exchange for
1,220,601 series C shares of Thirdspace Living Limited ("Thirdspace"), giving
Concurrent a 14.4% ownership interest in all shares outstanding as of the
investment date. The resale of the 291,461 shares was registered under a resale
registration statement filed with the Securities and Exchange Commission and
declared effective on June 20, 2002. Thirdspace is a closely held United
Kingdom global software services corporation that offers interactive and
on-demand television solutions for DSL (digital subscriber line) and other
broadband networks. In exchange for its investment, Concurrent also received a
warrant for 400,000 series C shares of Thirdspace. The warrant is exercisable
beginning December 19, 2002. If the fair market value of the warrant on the
date of exercise is less than $5.73 per share, then the exercise price will be
the then current fair market value. If the fair market value of the warrant on
the date of exercise is equal to or greater than $5.73 per share, then the
exercise price will be the greater of $5.73 or 85% of the then current fair
market value. Although the fair market value of the Thirdspace series C common
stock and the Thirdspace warrant are not readily determinable, management
believes that its book value approximates the fair value.
-5-
Concurrent also loaned Thirdspace $6 million in exchange for two $3 million
long-term convertible notes receivable, bearing interest at 8% annually, with
interest payments first due December 31, 2002, and semi-annually, thereafter.
The notes are convertible into series C shares of Thirdspace, at the option of
Concurrent, beginning six months after the issuance of the notes (March 19, 2002
and September 3, 2002) and ending 48 months after the issuance of the notes, and
are based on the then fair market value of the common stock. Concurrent has a
security interest in all of the assets of Thirdspace, which is subject to a
prior lien on Thirdspace's intellectual property securing an obligation of $5
million. Other than the prior lien on Thirdspace's intellectual property,
Concurrent's security interest ranks ratably with those of other secured
creditors.
Concurrent is accounting for its investment in the common stock and warrant
of Thirdspace using the cost method, as Concurrent does not believe it exercises
significant influence on Thirdspace. The investment is reviewed for impairment
on a quarterly basis. The convertible note is recorded at fair value, in
accordance with SFAS 115, "Accounting for Certain Investments in Debt and Equity
Securities", with changes in fair value recorded as a component of other
comprehensive income.
In the ordinary course of business, Concurrent sells equipment to
Thirdspace. During the three months ended September 30, 2002, Concurrent sold
$40,000 of equipment to Thirdspace.
In April 2002, Concurrent invested cash of $500,000 in Everstream Holdings,
Inc. ("Everstream") in exchange for 480,770 shares of Series C Preferred stock
giving Concurrent a 4.9% ownership interest. Everstream is a privately held
company specializing in broadband advertising systems, software, infrastructure
and related integration services. Concurrent is accounting for its investment
in the Series C Preferred stock of Everstream using the cost method, as
Concurrent does not believe it exercises significant influence on Everstream.
The investment is reviewed for impairment on a quarterly basis.
In the ordinary course of business, Concurrent sells equipment to
Everstream and purchases consulting services from Everstream. During the three
months ended September 30, 2002, Concurrent purchased $235,000 of contract
software development services from Everstream.
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
The components of accounts payable and accrued expenses are as follows:
(DOLLARS IN THOUSANDS)
SEPTEMBER 30, JUNE 30,
2002 2002
-------------- ---------
Accounts payable, trade $ 3,966 $ 5,351
Accrued payroll, vacation and
other employee expenses 3,989 5,872
Warranty accrual 2,345 2,272
Other accrued expenses 1,799 2,019
-------------- ---------
$ 12,099 $ 15,514
============== =========
-6-
7. COMPREHENSIVE INCOME
Concurrent's total comprehensive income (loss) is as follows:
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
SEPTEMBER 30,
2002 2001
---------- ----------
Net income (loss) $ 620 $ (3,010)
Other comprehensive income (loss):
Foreign currency translation income (loss) (218) 273
---------- ----------
Total comprehensive income (loss) $ 402 $ (2,737)
========== ==========
8. SEGMENT INFORMATION
Concurrent operates its business in two divisions: Real-Time and Xstreme.
Its Real-Time division is a leading provider of high-performance, real-time
computer systems, solutions and software for commercial and government markets
focusing on strategic market areas that include hardware-in-the-loop and
man-in-the-loop simulation, data acquisition, industrial systems, and software
and embedded applications. Its Xstreme division is a leading supplier of
digital video server systems to a wide range of industries serving a variety of
markets, including the broadband cable and DSL, education, intranet/distance
learning, and other related markets. Shared expenses are primarily allocated
based on either revenues or headcount. Corporate costs include costs related to
the offices of the Chief Executive Officer, Chief Financial Officer, General
Counsel, Investor Relations and other administrative costs including annual
audit and tax fees, legal fees, Board of Director fees and similar costs.
-7-
The following summarizes the operating income (loss) by segment for the
three-month periods ended September 30, 2002 and September 30, 2001,
respectively:
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED SEPTEMBER 30, 2002
(UNAUDITED)
----------------------------------------------
REAL-TIME XSTREME CORPORATE TOTAL
---------- ----------- ----------- --------
Revenues:
Product $ 4,092 $ 12,449 $ - $16,541
Service 4,678 922 - 5,600
---------- ----------- ----------- --------
Total 8,770 13,371 - 22,141
Cost of sales:
Product 1,776 5,241 - 7,017
Service 2,607 660 - 3,267
---------- ----------- ----------- --------
Total 4,383 5,901 - 10,284
---------- ----------- ----------- --------
Gross margin 4,387 7,470 - 11,857
Operating expenses
Sales and marketing 1,844 2,404 156 4,404
Research and development 1,399 3,048 - 4,447
General and administrative 429 563 1,336 2,328
---------- ----------- ----------- --------
Total operating expenses 3,672 6,015 1,492 11,179
---------- ----------- ----------- --------
Operating income (loss) $ 715 $ 1,455 $ (1,492) $ 678
========== =========== =========== ========
THREE MONTHS ENDED SEPTEMBER 30, 2001
(UNAUDITED)
----------------------------------------------
REAL-TIME XSTREME CORPORATE TOTAL
---------- ----------- ----------- --------
Revenues:
Product $ 5,336 $ 3,254 $ - $ 8,590
Service 5,253 259 - 5,512
---------- ----------- ----------- --------
Total 10,589 3,513 - 14,102
Cost of sales:
Product 2,501 1,888 - 4,389
Service 2,849 404 - 3,253
---------- ----------- ----------- --------
Total 5,350 2,292 - 7,642
---------- ----------- ----------- --------
Gross margin 5,239 1,221 - 6,460
Operating expenses
Sales and marketing 1,637 2,364 153 4,154
Research and development 1,232 2,229 - 3,461
General and administrative 359 308 1,242 1,909
---------- ----------- ----------- --------
Total operating expenses 3,228 4,901 1,395 9,524
---------- ----------- ----------- --------
Operating income (loss) $ 2,011 $ (3,680) $ (1,395) $(3,064)
========== =========== =========== ========
-8-
9. ISSUANCE AND ACCRUAL OF NON-CASH WARRANTS
On March 29, 2001, Concurrent entered into a three-year definitive purchase
agreement with Comcast Cable, providing for the purchase of VOD equipment. As
part of that agreement, Concurrent agreed to issue three different types of
warrants.
Concurrent issued a warrant to purchase 50,000 shares of its Common Stock
on March 29, 2001, exercisable at $5.196 per share over a four-year term. This
warrant is referred to as the "Initial Warrant."
Concurrent is also generally obligated to issue new warrants to purchase
shares of its Common Stock to Comcast at the end of each quarter through March
31, 2004, based upon specified performance goals which are measured by the
number of Comcast basic cable subscribers that have the ability to utilize the
VOD service. The incremental number of subscribers that have access to VOD at
each quarter end as compared to the prior quarter end multiplied by a specified
percentage is the number of additional warrants that were earned during the
quarter. These warrants are referred to as the "Performance Warrants".
Concurrent issued to Comcast a performance warrant for 4,431 shares on October
9, 2001, exercisable at $6.251 per share over a four-year term, a performance
warrant for 52,511 shares on January 15, 2002, exercisable at $15.019 per share
over a four-year term, and a performance warrant for 1,502 shares on August 10,
2002, exercisable at $5.707 per share over a four-year term.
The resale of the shares issuable upon exercise of the warrants to purchase
50,000 shares and 4,431 shares were registered under a registration statement
filed with the Securities and Exchange Commission and declared effective on
November 20, 2001.
Concurrent will also issue additional warrants to purchase shares of its
Common Stock, if at the end of any quarter the then total number of Comcast
basic cable subscribers with the ability to utilize the VOD system exceeds
specified threshold levels. These warrants are referred to as the "Cliff
Warrants".
Concurrent is recognizing the value of the Performance Warrants and the
Cliff Warrants over the term of the agreement as Comcast purchases additional
VOD servers from Concurrent and makes the service available to its customers.
For the three months ended September 30, 2002, Concurrent recognized $57,000 as
an increase in revenue for the Performance Warrants and Cliff Warrants that have
been earned but unissued. This increase was due to a decrease in the value of
the unissued warrants using the Black-Scholes valuation model. For the three
months ended September 30, 2001, Concurrent recognized $405,000 as a reduction
to revenue for the Performance Warrants and Cliff Warrants that were earned.
The value of the warrants is determined using the Black-Scholes valuation
model. The weighted-average assumptions used for the quarter ended September
30, 2002 were: expected dividend yield of 0%; risk-free interest rate of 2.57%;
expected life of 4 years; and an expected volatility of 116%. Concurrent will
adjust the value of the earned but unissued warrants on a quarterly basis using
the Black-Scholes valuation model until the warrants are actually issued. The
value of the new warrants earned and any adjustments in value for warrants
previously earned will be determined using the Black-Scholes valuation model and
recognized as part of revenue on a quarterly basis.
The exercise price of the warrants is subject to adjustment for stock
splits, combinations, stock dividends, mergers, and other similar
recapitalization events. The exercise price is also subject to adjustment for
issuance of additional equity securities at a purchase price less than the then
current fair market value of Concurrent's Common Stock. Based on the
information that is currently available, Concurrent does not expect the warrants
to be issued to Comcast to exceed 1% of its outstanding shares of Common Stock
over the term of the agreement. The exercise price of the warrants to be issued
to Comcast will equal the average closing price of Concurrent's Common Stock for
the 30 trading days prior to the applicable warrant issuance date and will be
exercisable over a four-year term.
-9-
In accordance with a five-year definitive agreement with Scientific
Atlanta, Inc. ("SAI") executed in August of 1998, Concurrent agreed to issue
warrants to SAI upon achievement of pre-determined revenue targets. The value
of these warrants cannot exceed 5% of applicable revenue and the number of
shares of Concurrent common stock related to the warrant are determined using
the Black-Scholes valuation model and cannot exceed 888,888 shares for every $30
million of revenue from the sale of VOD servers using the SAI platform. The
value of these warrants cannot impact gross margin by more than $1.5 million per
$30 million of applicable revenue. Concurrent accrues for this cost as a part
of cost of sales at the time of recognition of applicable revenue. For the
three months ended September 30, 2002 and September 30, 2001, Concurrent accrued
$3,000 and $166,000, respectively, as a part of VOD systems cost of sales for
SAI performance warrants that have been earned but unissued. As a result of the
cumulative revenue from sales of VOD servers using the SAI platform reaching the
first $30 million revenue target, Concurrent issued to SAI a warrant for 261,164
shares on April 1, 2002, exercisable at $7.106 per share over a four-year term.
10. REVOLVING CREDIT FACILITY
Concurrent has a revolving credit facility with a bank that expires on
December 31, 2002 and which provides for borrowings up to $5 million at an
interest rate of prime (4.75% at September 30, 2002) plus 0.75% or between LIBOR
plus 2.25% and LIBOR plus 3.00% depending on Concurrent's ratio of Consolidated
Funded Debt (as defined in the credit facility) to EBITDA. Concurrent has
pledged substantially all of its assets as collateral for the facility. No
borrowings were outstanding at September 30, 2002 under the credit facility.
Concurrent is investigating the extension of this credit facility.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
APPLICATION OF CRITICAL ACCOUNTING POLICIES
Revenue Recognition
Video-on-demand and real-time system revenues are recognized based on the
guidance in American Institute of Certified Public Accountants Statement of
Position 97-2, "Software Revenue Recognition". Concurrent recognizes revenue
from video-on-demand and real-time systems when: (1) persuasive evidence of an
arrangement exists; (2) the system has been shipped; (3) the fee is fixed or
determinable; and (4) collectibility of the fee is probable. Under multiple
element arrangements, Concurrent allocates revenue to the various elements based
on vendor-specific objective evidence ("VSOE") of fair value. Concurrent's VSOE
of fair value is determined based on the price charged when the same element is
sold separately. Determination of criteria (3) and (4) are based on
management's judgements regarding the fixed nature of the fee charged for
products and services delivered and the collectibility of those fees. Should
changes in conditions cause management to determine these criteria are not met
for certain future transactions, revenue recognized for any reporting period
could be adversely affected.
In certain limited instances, Concurrent's customers require significant
customization of both software and hardware products and, therefore, revenues
are recognized as long term contracts using the percentage-of-completion method,
which relies on estimates of total expected contract revenue and costs.
Concurrent follows this method since reasonably dependable estimates of the
revenue and costs applicable to various stages of a contract can be made.
Recognized revenues and profit are subject to revisions as the contract
progresses to completion. Revisions in profit estimates are charged to income in
the period in which the facts that give rise to the revision become known.
Valuation and Accrual of Non-Cash Warrants
Concurrent entered into a three-year definitive purchase agreement with
Comcast Cable in March of 2001, providing for the sale of VOD equipment. As part
of that agreement, Concurrent agreed to issue three types of warrants (See note
9 to the condensed consolidated financial statements).
-10-
Concurrent recognized the value of the Initial Warrant as a reduction of
revenue in the quarter ended March 31, 2001. Concurrent recognizes the value of
Performance Warrants and Cliff Warrants as an adjustment to revenue over the
term of the agreement as Comcast purchases additional VOD servers from
Concurrent and makes the service available to its customers.
The value of the warrants is determined using the Black-Scholes valuation
model. The weighted assumptions used for the quarter ended September 30, 2002
were: expected dividend yield - 0%; risk free interest rate - 2.57%; expected
life - 4 years; and expected volatility - 116%. Concurrent will adjust the
value of the earned but unissued warrants on a quarterly basis using the
valuation option-pricing model until the warrants are actually issued. The
value of the new warrants earned, but unissued, and any adjustments in value for
warrants previously earned, but unissued, will be determined using the
Black-Scholes valuation model and recognized as part of revenue on a quarterly
basis. To the extent the above assumptions change on a periodic basis, or the
number of subscribers capable of receiving VOD increases or decreases, revenue
and gross margins may be positively or negatively impacted.
In accordance with a five-year definitive agreement with Scientific
Atlanta, Inc. ("SAI") executed in August of 1998, Concurrent agreed to issue
warrants to SAI upon achievement of pre-determined revenue targets. The value of
these warrants cannot exceed 5% of applicable revenue and the number of shares
related to the warrant are determined using the Black-Scholes valuation model
and cannot exceed 888,888 shares for every $30 million of revenue from the sale
of VOD servers using the SAI platform. The value of these warrants cannot impact
gross margin by more than $1.5 million per $30 million of applicable revenue.
Concurrent accrues for this cost as a part of cost of sales at the time of
recognition of applicable revenue.
Warranty Accrual/Maintenance Revenue Deferral
Concurrent either accrues the estimated costs to be incurred in performing
warranty services at the time of revenue recognition and shipment of the
servers, or defers revenue associated with the maintenance services to be
provided during the warranty period based upon the value for which Concurrent
would sell such services separately, depending upon the specific terms of the
customer agreement. Concurrent's estimate of costs to service its warranty
obligations is based on historical experience and expectation of future
conditions. To the extent Concurrent experiences increased warranty claim
activity or increased costs associated with servicing those claims, its warranty
accrual will increase resulting in decreased gross margin.
Inventory Valuation Reserves
Concurrent provides for inventory obsolescence based upon assumptions about
future demand, market conditions and anticipated timing of the release of next
generation products. If actual market conditions or future demand are less
favorable than those projected by management, or if next generation products are
released earlier than anticipated, additional inventory write-downs may be
required.
Impairment of Goodwill
At September 30, 2002, Concurrent had $10.7 million of goodwill. In
assessing the recoverability of Concurrent's goodwill, the Company must make
assumptions regarding estimated future cash flows and other factors to determine
the fair value of the respective assets. If the estimates or their related
assumptions change in the future, Concurrent may be required to record
impairment charges for these assets not previously recorded. In connection with
the adoption of SFAS 142, Concurrent was required to perform an impairment
assessment within six months of its July 1, 2001 adoption. As of September 30,
2001, Concurrent completed this transitional impairment test and deemed that no
impairment loss was necessary. As of September 30, 2002, Concurrent performed
an additional assessment reaffirming that no impairment loss is necessary. Any
subsequent impairment losses, if any, will be reflected in operating income in
the income statement.
-11-
Valuation of Deferred Tax Assets
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. At September 30, 2002 and
June 30, 2002, substantially all of the deferred tax assets have been fully
reserved due to the operating losses for the past several years and the
inability to assess as more likely than not the likelihood of generating
sufficient future taxable income to realize such benefits.
Investment In and Receivable from Minority Owned Company
At September 30, 2002, Concurrent had a $7 million minority interest in
Thirdspace, as well as two long-term notes receivable due from Thirdspace that
total $6 million. The fair value of the long-term investment in and notes
receivable from Thirdspace is dependent on the performance of Thirdspace, as
well as the volatility inherent in the external markets for Thirdspace. In
assessing potential impairment for this investment and these notes receivable,
Concurrent will consider these factors as well as forecasted financial
performance of Thirdspace. If actual results do not meet previous forecasts,
or if substantial changes in forecasts occur, Concurrent may have to record
impairment charges not previously recognized.
-12-
SELECTED OPERATING DATA AS A PERCENTAGE OF TOTAL REVENUE
The following table sets forth selected operating data as a percentage of
total revenue, unless otherwise indicated, for certain items in Concurrent's
consolidated statements of operations for the periods indicated.
THREE MONTHS ENDED
SEPTEMBER 30,
2002 2001
--------- ---------
(Unaudited)
Net sales:
Product sales (% of total sales):
Real-time systems 18.5% 37.8%
Video-on-demand systems 56.2 23.1
--------- ---------
Total product sales 74.7 60.9
Service:
Real-time systems 21.1 37.3
Video-on-demand systems 4.2 1.8
--------- ---------
Total service sales 25.3 39.1
--------- ---------
Total 100.0 100.0
Cost of sales (% of respective sales category):
Product:
Real-time systems 43.4 46.9
Video-on-demand systems 42.1 58.0
--------- ---------
Total product cost of sales 42.4 51.1
Service:
Real-time systems 55.7 54.2
Video-on-demand systems 71.6 156.0
--------- ---------
Total service cost of sales 58.3 59.0
--------- ---------
Total cost of sales 46.4 54.2
--------- ---------
Gross margin 53.6 45.8
Operating expenses:
Sales and marketing 19.9 29.5
Research and development 20.1 24.5
General and administrative 10.5 13.5
--------- ---------
Total operating expenses 50.5 67.5
--------- ---------
Operating income (loss) 3.1 (21.7)
Interest income - net 0.9 1.5
Other expense - net (0.2) (0.1)
--------- ---------
Income (loss) before income taxes 3.7 (20.3)
Provision for income taxes 0.9 1.1
--------- ---------
Net income (loss) 2.8% (21.3)%
========= =========
-13-
RESULTS OF OPERATIONS
THE QUARTER ENDED SEPTEMBER 30, 2002 COMPARED TO THE QUARTER ENDED SEPTEMBER 30,
2001
Product Sales. Total product sales were $16.5 million for the three months
ended September 30, 2002, an increase of $8.0 million or 92.6% from $8.6 million
for the three months ended September 30, 2001. This increase resulted from VOD
product sales increasing by $9.2 million to $12.4 million in the three month
period ended September 30, 2002 from $3.3 million for the same period in 2001.
The increase in VOD product sales is due to the increase in VOD server purchases
from three North American multiple system cable operators, which accounted for
approximately 41.0%, 34.1%, and 11.6% of VOD system revenue, respectively, in
the quarter ended September 30, 2002. Sales of Real-Time products decreased
23.3% to $4.1 million in the three month period ended September 30, 2002 from
$5.3 million in the three month period ended September 30, 2001 due primarily to
a prior year, non-recurring product sale to one particular customer, partially
offsetting the increase in VOD product sales. Sales to a single customer
accounted for approximately 45.4% of Real-Time product sales in the quarter
ended September 30, 2002.
Service Sales. Service sales increased $0.1 million or 1.6% to $5.6 million
for the three months ended September 30, 2002 from $5.5 million for the three
months ended September 30, 2001. The increase resulted from VOD service revenue
increasing $0.6 million to $0.9 million in the three month period ended
September 30, 2002 from $0.3 million for the same period in 2001 as the Xstreme
division continues to build its VOD customer base that requires installation,
training, and technical support. This increase was partially offset by the $0.6
million decrease in Real-Time service revenue to $4.7 million in the three month
period ended September 30, 2002 from $5.3 million for the same period in the
prior year. Real-Time service revenue continues to decline primarily due to
customers switching from proprietary real-time systems to Concurrent's open
systems which are less expensive to maintain, and due to the cancellation of
other proprietary computer maintenance contracts as the machines are removed
from service.
Product Gross Margin. The gross margin increased 83.5% to $11.9 million
for the three months ended September 30, 2002 from $6.5 million for the three
months ended September 30, 2001. The gross margin as a percentage of sales
increased to 53.6% in the three month period ended September 30, 2002 from 45.8%
in the three month period ended September 30, 2001, due to increases in both VOD
and Real-Time product margins in the current year quarter. VOD product gross
margins increased to 57.9% in the three month period ended September 30, 2002
from 42.0% in the three month period ended September 30, 2001, due to improved
efficiencies in the new MediaHawk model 3000 server and a favorable product mix.
Real-Time product gross margins increased to 56.6% for the three months ended
September 30, 2002 from 53.1% for the three months ended March 31, 2001,
primarily due to a favorable product mix and strong margins on hardware product
sales to one particular customer.
Service Gross Margin. The gross margin on service sales increased to 41.7%
for the three months ended September 30, 2002 from 41.0% for the same period in
2001. This increase results from a $0.4 million increase in VOD service margins
to 28.4% of VOD service revenue during the three months ended September 30, 2002
compared to a negative margin of 56.0% of VOD service revenue during the same
period in the prior year. VOD service margins have increased as the Xstreme
division continues to build revenue from its growing customer base that requires
installation, training, and technical support at a faster rate than the costs to
support such services are growing. The increase in VOD service margins was
partially offset by the decline in Real-Time service margins to 44.3% during the
three months ended September 30, 2002 compared to 45.8% during the same period
in the prior year. The gross margin on Real-Time service revenues declined
because, as Real-Time service revenues continue to decline, Real-Time service
expenses have been reduced on a less than pro-rata basis to ensure quality
service and fulfill contractual agreements.
Sales and Marketing. Sales and marketing expenses decreased as a
percentage of sales to 19.9% for the three months ended September 30, 2002 from
29.5% for the three months ended September 30, 2001. These expenses increased
to $4.4 million during the three month period ended September 30, 2002 from $4.2
million in the three month period ended September 30, 2001. The Real-Time
-14-
division's sales and marketing expenses increased $0.1 million due primarily to
severance expense associated with international personnel in the three months
ended September 30, 2002 that did not occur during the same period of the prior
year. The Xstreme division's sales and marketing expenses increased $0.1
million in the three months ended September 30, 2002 compared to the same period
in the prior year due to a $0.2 million increase in commission expense related
to VOD product sales to one particular customer in the current period, offset by
$0.1 million less severance and travel expenses.
Research and Development. Research and development expenses decreased as a
percentage of sales to 20.1% for the three month period ended September 30, 2002
from 24.5% for the three month period ended September 30, 2001. These expenses
increased $1.0 million to $4.4 million during the three month period ended
September 30, 2002 from $3.5 million during the same period ended September 30,
2001. The Real-Time division's research and development expenses increased $0.2
million during the three months ended September 30, 2002, when compared to the
same period in the prior year, due to personnel additions required for
development of the Linux based real-time operating system. The Xstreme
division also added new development staff to focus on electronic program guide
and set-top box software integrations, targeted and interactive advertising
integration, and development of next generation server and server architectures,
and employed outside consultants to assist with development of improved business
management system functionality. These additions resulted in a $0.6 million
increase in VOD research and development expenses in the three months ended
September 30, 2002 when compared to the same period in the prior year. The
increased headcount also added $0.1 million in facility costs during the three
months ended September 30, 2002, when compared to the same period in the prior
year.
General and Administrative. General and administrative expenses decreased
as a percentage of sales to 10.5% for the three months ended September 30, 2002
from 13.5% during the same period in the prior year. These expenses increased to
$2.3 million during the three month period ended September 30, 2002 from $1.9
million during the same period ended September 30, 2001, primarily due to a $0.2
million increase in corporate insurance costs. In addition, since September 30,
2001, Concurrent has strengthened its legal and investor relations departments
and hired a new Xstreme division president, resulting in a $0.2 million increase
in general and administrative salaries and benefits in the three months ended
September 30, 2002, when compared to the same period in the prior year.
Income Taxes. Concurrent recorded income tax expense for its domestic and
foreign subsidiaries of $0.2 million during each of the three month periods
ended September 30, 2002 and 2001. This expense is based on pre-tax income of
$0.8 million and a pre-tax loss of $2.9 million in the three month period ended
September 30, 2002 and 2001, respectively, resulting from the inability to
recognize the deferred tax benefits of net operating loss carryforwards both
domestically and internationally due to the fact that future taxable income is
not reasonably assured in those locations. In addition, for the quarter ended
September 30, 2002, Concurrent utilized certain net operating loss carryovers
that were generated prior to the 1991 quasi-reorganization, the benefit of which
was recorded directly to equity rather than as a reduction to federal income tax
expense as required by SFAS No. 109, "Accounting for Income Taxes."
Net Income. Concurrent recorded net income of $0.6 million or $0.01 per
basic and diluted share for the three months ended September 30, 2002, compared
to a net loss of $3.0 million or $0.05 per basic and diluted share for the three
months ended September 30, 2001.
-15-
LIQUIDITY AND CAPITAL RESOURCES
Concurrent's liquidity is dependent on many factors, including sales
volume, operating profit and the efficiency of asset use and turnover.
Concurrent's future liquidity will be affected by, among other things:
- The potential continued decline in real-time systems and service
revenue;
- Revenue from VOD systems and the pace at which MSOs implement VOD
technology;
- Ongoing cost control actions and expenses, including for example,
research and development and capital expenditures;
- The margins on the VOD and real-time businesses;
- The ability to raise additional capital, if necessary;
- Timing of product shipments which occur primarily during the last
month of the quarter;
- The percentage of sales derived from outside the United States where
there are generally longer accounts receivable collection cycles and
which receivables are not included in the borrowing base of the
revolving credit facility; and
- The number of countries in which Concurrent operates, which may
require maintenance of minimum cash levels in each country and, in
certain cases, may restrict the repatriation of cash, such as cash
held on deposit to secure office leases.
Concurrent provided cash of $3.4 million from operating activities during
the three months ended September 30, 2002 compared to using cash of $4.5 million
during the three months ended September 30, 2001, primarily due to the Xstreme
division generating $1.5 million operating profit during the three months ended
September 30, 2002 compared to the $3.7 million operating loss generated by the
Xstreme division during the three months ended September 30, 2001. Concurrent
has available a $5 million revolving credit facility with Wachovia Bank which
expires December 31, 2002. Borrowings under the facility are limited to 85% of
eligible accounts receivable and bear interest at between prime plus .75% or
between LIBOR plus 2.25% and LIBOR plus 3.00% depending on Concurrent's ratio of
Consolidated Funded Debt (as defined in the credit facility) to EBITDA.
Concurrent has pledged substantially all of its assets as collateral for the
facility. No borrowings were outstanding under the credit facility at September
30, 2002. The credit facility contains financial covenants which limit the ratio
of total liabilities to tangible net worth, the ratio of funded debt to EBITDA,
and which require Concurrent to achieve on a quarterly basis minimum EBITDA in
each of Concurrent's operating divisions. Concurrent was in compliance with
these covenants as of September 30, 2002. Concurrent is investigating the
extension of its line of credit.
Concurrent invested $1.5 million in property, plant and equipment during
the three months ended September 30, 2002 compared to $0.9 million during the
three months ended September 30, 2001. Current year capital expenditures relate
primarily to leasehold improvements, product development, testing and
demonstration equipment for Concurrent's Xstreme division. Concurrent completed
its obligation of providing an additional $3 million loan to Thirdspace in
September of 2002. This note has a four year term and bears interest at 8% per
annum, with interest payments commencing on December 31, 2002, and
semi-annually, thereafter.
Concurrent received $24.0 million in net proceeds from a private placement
of 5.4 million shares of common stock on July 19, 2001, such shares having
subsequently been registered with the Securities and Exchange Commission in a
filing on Form S-3. In addition, Concurrent received $4,000 and $1.2 million
from the issuance of common stock to employees and directors who exercised stock
options during the three month periods ended September 30, 2002 and 2001,
respectively.
At September 30, 2002, Concurrent had working capital of $41.2 million and
had no material commitments for capital expenditures. Management of Concurrent
believes that the existing cash balances, the available credit facility and
funds generated by operations will be sufficient to meet the anticipated working
capital and capital expenditure requirements for the next 12 months.
-16-
Concurrent maintains pension plans for certain employees and former
employees in the United Kingdom and Germany. The projected benefit obligation
for the benefit plans at June 30, 2002 and June 30, 2001 as determined in
accordance with FAS No. 87, "Employers Accounting for Pensions", was $17.0
million and $15.4 million, respectively, and the value of the plans assets was
$12.0 million and $12.4 million, respectively. As a result, the plans were
underfunded by $5.0 million at June 30, 2002 and by $2.9 million at June 30,
2001. Since June 30, 2002, the value of the plan assets has continued to decline
to $10.6 million at September 30, 2002. Due to the decline in the fair market
value of the plans assets, it is likely that the amount of Concurrent
contributions to the plans will increase from the $320,000 of contributions made
in fiscal 2002. In addition, management expects the pension cost to be
recognized in the financial statements will increase from the $465,000
recognized in fiscal 2002 to approximately $800,000 in fiscal 2003, of which
approximately $200,000 was recognized in the first quarter ended September 30,
2002. The expense to be recognized in future periods could increase further,
depending upon the amount of the change in the fair market value of the plan
assets and the change in the projected benefit obligation.
As a result of the overall decline in market interest rates, Concurrent may
decide it is necessary to use a lower discount rate in the calculation of its
projected benefit obligation. The use of a lower discount rate combined with
the decrease in the market value of plan assets is likely to cause the amount of
the underfunded status to increase. Though we have not yet determined the exact
amount of such underfunding, after completion of the actuarial valuations in the
fourth quarter of fiscal 2003 Concurrent could be required to record an
additional reduction to stockholders' equity. Concurrent recorded reductions to
stockholders' equity in fiscal 2002 and 2001 amounting to $1.6 million and $2.8
million, respectively. However, we do not believe the underfunded status of the
pension plans will materially affect our results of operations, financial
position or cash flows. Moreover, given the impact that the discount rate and
stock market performance have on the projected benefit obligation and market
value of plan assets, future changes in either one of these may significantly
reduce our pension plan underfunding.
CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
Concurrent's only significant contractual obligations and commitments
relate to certain operating leases for sales, service and manufacturing
facilities in the United States, Europe and Asia.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made or incorporated by reference in this report on Form
10-Q may constitute "forward-looking statements" within the meaning of the
federal securities laws. When used or incorporated by reference in this
prospectus, the words "believes," "expects," "estimates" and similar expressions
are intended to identify forward-looking statements. Statements regarding
future events and developments and our future performance, as well as our
expectations, beliefs, plans, estimates or projections relating to the future,
are forward-looking statements within the meaning of these laws. All
forward-looking statements are subject to certain risks and uncertainties that
could cause actual events to differ materially from those projected. The risks
and uncertainties which could affect Concurrent's financial condition or results
of operations include, without limitation:
- availability of video-on-demand content;
- delays or cancellations of customer orders;
- changes in product demand;
- economic conditions;
- various inventory risks due to changes in market conditions;
- uncertainties relating to the development and ownership of
intellectual property;
- uncertainties relating to our ability and the ability of other
companies to enforce their intellectual property rights;
- the pricing and availability of equipment, materials and inventories;
- the limited operating history of our video-on-demand segment;
- the concentration of our customers;
- failure to effectively manage growth;
- delays in testing and introductions of new products;
- rapid technology changes;
- demand shifts from high-priced, proprietary real-time systems to
low-priced, open server systems;
- system errors or failures;
- reliance on a limited number of suppliers;
- uncertainties associated with international business activities,
including foreign regulations, trade controls, taxes, and currency
fluctuations;
- the highly competitive environment in which we operate; and
- the entry of new well-capitalized competitors into our markets.
-17-
Other important risk factors are discussed in our Annual Report on Form
10-K for the fiscal year ended June 30, 2002.
Our forward-looking statements are based on current expectations and speak
only as of the date of such statements. Concurrent undertakes no obligation to
publicly update or revise any forward-looking statement, whether as a result of
future events, new information or otherwise.
-18-
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Concurrent is exposed to market risk from changes in interest rates and
foreign currency exchange rates. Concurrent is exposed to the impact of
interest rate changes on its short-term cash investments, which are backed by
U.S. government obligations, and other investments in respect of institutions
with the highest credit ratings, all of which have maturities of three months or
less. These short-term investments carry a degree of interest rate risk.
Concurrent believes that the impact of a 10% increase or decline in interest
rates would not be material to its investment income.
Concurrent conducts business in the United States and around the world.
The most significant foreign currency transaction exposures relate to the United
Kingdom, those Western European countries that use the Euro as a common
currency, Australia, and Japan. Concurrent does not hedge against fluctuations
in exchange rates and believes that a hypothetical 10% upward or downward
fluctuation in foreign currency exchange rates relative to the United States
dollar would not have a material impact on future earnings, fair values, or cash
flows.
ITEM 4. CONTROLS AND PROCEDURES
As required by SEC rules, Concurrent has evaluated the effectiveness of the
design and operation of its disclosure controls and procedures within 90 days of
the filing date of this quarterly report. This evaluation was carried out under
the supervision and with the participation of our management, including our
principal executive officer and principal financial officer. Based on this
evaluation, these officers have concluded that the design and operation of
Concurrent's disclosure controls and procedures are effective. There were no
significant changes to Concurrent's internal controls or in other factors that
could significantly affect internal controls subsequent to the date of their
evaluation.
Disclosure controls and procedures are Concurrent's controls and other
procedures that are designed to ensure that information required to be disclosed
by Concurrent in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by Concurrent in the reports that Concurrent files
under the Exchange Act is accumulated and communicated to our management,
including Concurrent's principal executive officer and principal financial
officer, as appropriate, to allow timely decisions regarding required
disclosure.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, Concurrent may be involved in litigation relating to
claims arising out of its ordinary course of business. Concurrent is not
presently involved in any material litigation, but has the following matters
pending:
- SeaChange International, Inc. v. Putterman, et al, Arkansas Court of
---------------------------------------------------
Appeals, Case No. CA 01-1126. The suit was filed on June 14, 1999
alleging that Concurrent defamed SeaChange International, Inc.
("SeaChange"). On June 14, 2000, Concurrent counterclaimed against
SeaChange alleging that SeaChange defamed Concurrent. On January 4,
2001, the court granted Concurrent's motion to dismiss all claims
against it. SeaChange subsequently appealed and the appeal was granted
on October 2, 2002. Concurrent has filed a Petition for Review of the
appellate court ruling with the Supreme Court of Arkansas and the
petition is currently pending.
-19-
- Eason v. Concurrent Computer Corp, et al.,Superior Court of New
------------------------------------------------
Jersey, Case Mon-L-3284-94. This suit arose out of personal injury
claim filed in 1994 alleging that plaintiff was injured when a lamp
post in Concurrent's parking lot fell. The case against Concurrent was
dismissed in 1995, but in 2000 the plaintiff amended the cause of
action and refiled against Concurrent alleging spoliation of evidence.
The plaintiff obtained a default judgment for $119,800 in December
2001 which was vacated in August 2002. Plaintiff subsequently refiled
and Concurrent sought to have the matter dismissed. The court has
denied Concurrent's motion to dismiss, and the case is scheduled for
trial in February 2003.
Concurrent is involved in various other legal proceedings. Management of
Concurrent believes that any liability to Concurrent which may arise as a result
of these proceedings, including the proceedings specifically discussed above,
will not have a material adverse effect on Concurrent's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Concurrent's Annual Meeting of Stockholders was held on October 25, 2002.
The results of voting were as follows:
- The following persons were elected as directors to serve until the
next annual meeting of stockholders: Alex B. Best (44,956,740 votes
for, 238,245 votes withheld), Michael A. Brunner (44,828,330 votes
for, 366,655 votes withheld), Jack A. Bryant (44,981,740 votes for,
213,245 votes withheld), Morton E. Handel (44,783,330 votes for,
411,655 votes withheld), Bruce N. Hawthorne (44,926,971 votes for,
268,014 votes withheld), C. Shelton James (44,783,340 votes for,
411,645 votes withheld) and Steve G. Nussrallah (44,378,291 votes for,
816,694 votes withheld).
- The selection by the Board of Directors of Deloitte & Touche LLP as
Concurrent's independent auditors for the fiscal year ending June 30,
2002 was ratified (44,739,342 votes for, 417,869 votes against, 37,774
votes abstained).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 - Restated Certificate of Incorporation of the Registrant
(incorporated by reference to the Registrant's Registration Statement
on Form S-2 (No. 33-62440)).
3.2 - Amended and Restated Bylaws of the Registrant (incorporated by
reference to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended December 28, 1996).
3.3 - Certificate of Correction to Restated Certificate of Incorporation
of the Registrant (incorporated by reference to the Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 2002).
3.4 - Amended Certificate of Designations of Series A Participating
Cumulative Preferred Stock (incorporated by reference to the Form
8-A/A, dated August 9, 2002).
3.5 - Amendment to Amended Certificate of Designations of Series A
Participating Cumulative Preferred Stock (incorporated by reference
to the Form 8-A/A, dated August 9, 2002).
4.1 - Form of Common Stock Certificate (incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
June 30, 1992).
4.2 - Form of Rights Certificate (incorporated by reference to the
Registrant's Current Report on Form 8-K/A filed August 12, 2002).
4.3 - Amended and Restated Rights Agreement dated as of August 7, 2002
between the Registrant and American Stock Transfer & Trust Company,
as Rights Agent (incorporated by reference to the Registrant's
Current Report on Form 8-K/A filed on August 12, 2002).
11.1* - Statement Regarding Composition of Per Share Earnings.
99.1 - Certification of Chief Executive Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 - Certification of Chief Financial Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
* Data required by Statement of Financial Accounting Standards No. 128,
"Earnings per Share," is provided in the Notes to the condensed consolidated
financial statements in this report.
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the period covered by
this report:
- Current Report on Form 8-K/A filed on August 12, 2002 relating to
amendment and restatement of the section entitled "Anti-takeover
Provisions - Restated Certificate of Incorporation and Amended
and Restated Bylaw Provisions - Rights Plan" of the Current
Report on Form 8-K filed on August 25, 1992.
- Current Report on Form 8-K filed on August 23, 2002 relating to
financial results for the fiscal year ended June 30, 2002.
-20-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this quarterly report for the quarter ended September
30, 2002 to be signed on its behalf by the undersigned thereunto duly
authorized.
Date: November 13, 2002 CONCURRENT COMPUTER CORPORATION
By: /s/ Steven R. Norton
-------------------------
Steven R. Norton
Executive Vice President,
Chief Financial Officer and Secretary
(Principal Financial and Accounting
Officer, Authorized Officer)
-21-
CERTIFICATIONS
--------------
I, Jack A. Bryant, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Concurrent
Computer Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 13, 2002
/s/ Jack A. Bryant
---------------------------------
Name: Jack A. Bryant
Title: President and Chief Executive Officer
-22-
I, Steven R. Norton, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Concurrent
Computer Corporation;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Date: November 13, 2002
/s/ Steven R. Norton
---------------------------------
Name: Steven R. Norton
Title: Executive Vice President, Chief
Financial Officer, and Secretary
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EXHIBIT INDEX
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3.1 - Restated Certificate of Incorporation of the Registrant
(incorporated by reference to the Registrant's Registration Statement
on Form S-2 (No. 33-62440)).
3.2 - Amended and Restated Bylaws of the Registrant (incorporated by
reference to the Registrant's Quarterly Report on Form 10-Q for the
fiscal quarter ended December 28, 1996).
3.3 - Certificate of Correction to Restated Certificate of Incorporation
of the Registrant (incorporated by reference to the Registrant's
Annual Report on Form 10-K for the fiscal year ended June 30, 2002).
3.4 - Amended Certificate of Designations of Series A Participating
Cumulative Preferred Stock (incorporated by reference to the Form
8-A/A, dated August 9, 2002).
3.5 - Amendment to Amended Certificate of Designations of Series A
Participating Cumulative Preferred Stock (incorporated by reference
to the Form 8-A/A, dated August 9, 2002).
4.1 - Form of Common Stock Certificate (incorporated by reference to the
Registrant's Annual Report on Form 10-K for the fiscal year ended
June 30, 1992).
4.2 - Form of Rights Certificate (incorporated by reference to the
Registrant's Current Report on Form 8-K/A filed August 12, 2002).
4.3 - Amended and Restated Rights Agreement dated as of August 7, 2002
between the Registrant and American Stock Transfer & Trust Company,
as Rights Agent (incorporated by reference to the Registrant's
Current Report on Form 8-K/A filed on August 12, 2002).
11.1* - Statement Regarding Composition of Per Share Earnings.
99.1 - Certification of Chief Executive Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 - Certification of Chief Financial Officer, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
* Data required by Statement of Financial Accounting Standards No. 128,
"Earnings per Share," is provided in the Notes to the condensed consolidated
financial statements in this report.