The accompanying notes are an integral part
of the condensed consolidated financial statements
The accompanying notes are an integral part
of the condensed consolidated financial statements
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Amounts in thousands, except for share
and per share data)
|
1.
|
Overview of Business and Basis of Presentation
|
References herein to “Concurrent,”
the “Company,” “we,” “our,” or “us” refer to Concurrent Computer Corporation and
its subsidiaries unless the context specifically indicates otherwise.
We provide software, hardware and professional
services for the content delivery market, storage solutions market and the high-performance, real-time market. Effective July 1,
2016, we changed the way our chief operating decision maker views our operating results by providing more discrete segment financial
information. As a result, our reportable operating segments now consist of Content Delivery and Real-Time.
Our content delivery solutions consist of
software, hardware and services for intelligently streaming video content to a variety of consumer devices and storing and managing
content in the network. Our streaming video and storage products and services are deployed by service providers to support consumer-facing
video services including live broadcast video, video-on-demand and time-shifted video applications such as cloud-based digital
video recording. In fiscal year 2016, we introduced Aquari™, our new unified scale-out storage solutions product to our content
delivery customers.
Our real-time solutions consist of real-time
Linux
®
operating system versions, development and performance optimization tools, simulation software and other
system software combined, in many cases, with computer platforms and services. These real-time products are sold to a wide variety
of companies seeking high performance, real-time computer solutions in the defense, aerospace, financial and automotive markets
around the world.
The accompanying unaudited condensed consolidated
financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting principles of the United States of America (“U.S. GAAP”)
have been condensed or omitted pursuant to applicable rules and regulations. In the opinion of management, all adjustments of a
normal recurring nature which were considered necessary for fair presentation have been included. The year-end condensed consolidated
balance sheet data as of June 30, 2016 was derived from our audited consolidated financial statements but do not include all disclosures
required by U.S. GAAP. The results of operations for the three and six months ended December 31, 2016 are not necessarily indicative
of the results to be expected for the entire year. These condensed consolidated financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year
ended June 30, 2016 filed with the SEC on August 30, 2016.
There have been no changes to our Significant
Accounting Policies as disclosed in Note 2 of the consolidated financial statements included in our Annual Report on Form 10-K
for the year ended June 30, 2016. The results reported in these condensed consolidated financial statements should not be regarded
as necessarily indicative of results that may be expected for the entire year.
Smaller Reporting Company
We meet the SEC’s definition of a
“Smaller Reporting Company,” and therefore qualify for the SEC’s reduced disclosure requirements for smaller
reporting companies.
Use of Estimates
The preparation of financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
|
2.
|
Recent Accounting Guidance
|
Recently Adopted Accounting Guidance
In April 2015, the Financial Accounting
Standards Board (“FASB”) issued ASU No. 2015-05,
Intangibles – Goodwill and Other – Internal-Use Software
(Subtopic 350-40)
(“ASU 2015-05”).
The pronouncement was issued to provide guidance concerning accounting
for fees in a cloud computing arrangement. The pronouncement was effective for us on July 1, 2016, and we adopted the guidance
prospectively. The adoption of ASU 2015-05 did not have a significant impact on our consolidated financial statements.
Recent Accounting Guidance Not Yet Adopted
In May 2014, the FASB issued ASU No. 2014-09,
Revenue from Contracts with Customers (Topic 606)
(“ASU 2014-09”), as part of its ongoing efforts to assist
in the convergence of U.S. GAAP and International Financial Reporting Standards, the FASB issued a new standard related to revenue
recognition. Under ASU 2014-09, recognition of revenue occurs when a customer obtains control of promised goods or services
in an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services. In
addition, the standard requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from
contracts with customers. In July 2015, the FASB issued ASU No. 2015-14,
Revenue from Contracts with Customers (Topic 606)
:
Deferral of the Effective
Date
and deferred the original effective date of ASU 2014-09 by one year. As a result,
ASU 2014-09 will be effective for us beginning July 1, 2018. Early adoption is not permitted. Additionally, in March 2016,
the FASB issued ASU No. 2016-08,
Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting
Revenue Gross versus Net
) (“ASU 2016-08”); in April 2016, the FASB issued ASU No. 2016-10,
Revenue from
Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing
(“ASU 2016-10”); and in
May 2016, the FASB issued ASU No. 2016-12,
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and
Practical Expedients
(“ASU 2016-12”), all of which provide additional clarification on certain topics addressed
in ASU 2014-09. ASU 2016-08, ASU 2016-10 and ASU 2016-12 follow the same implementation guidelines as ASU 2014-09 and
ASU 2015-14. We anticipate that ASU 2014-09 and its related standards may have a material impact, and we are currently evaluating
the impact these standards will have on our consolidated financial statements.
In August 2014, the FASB issued ASU No.
2014-15,
Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an
Entity’s Ability to Continue as a Going Concern
(“ASU 2014-15”), which provides guidance on determining when
and how to disclose going concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim
period and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial
statements are issued. An entity must provide certain disclosures if “conditions or events raise substantial doubt about
the entity’s ability to continue as a going concern.” ASU 2014-15 applies to all entities and is effective for annual
periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. We do not expect ASU 2014-15
to have a material impact on our consolidated financial statements or disclosures.
In July 2015, the FASB issued ASU No. 2015-11,
Inventory (Topic 330): Simplifying the Measurement of Inventory
(“ASU 2015-11”). This amendment requires that
an entity measure its inventory at the “lower of cost and net realizable value.” Net realizable value is the estimated
selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.
Current literature requires measurement of inventory at “lower of cost or market.” Market could be replacement cost,
net realizable value, or net realizable value less an approximate normal profit margin. ASU 2015-11 applies to all entities and
is effective for annual periods beginning after December 15, 2016, and interim periods thereafter, with early adoption permitted.
We do not expect ASU 2015-11 to have a material impact on our consolidated financial statements or disclosures.
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
In February 2016, the FASB issued ASU No.
2016-02,
Leases (Topic 842)
(“ASU 2016-02”). ASU 2016-02 requires a lessee to recognize a lease liability for
the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. ASU
2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early
adoption is permitted. We are currently evaluating the effect that ASU 2016-02 will have on our consolidated financial statements
and related disclosures.
In March 2016, the FASB issued ASU No. 2016-09,
Compensation – Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting
(“ASU
2016-09”). ASU 2016-09 provides for simplification of certain aspects of employee share-based payment accounting including
income taxes, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU
2016-09 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2016. Early
adoption is permitted, including adoption in an interim period. We do not expect ASU 2016-09 to have a material impact on our consolidated
financial statements or disclosures.
In August 2016, the FASB issued ASU 2016-15,
Clarification of Certain Cash Receipts and Cash Payments
(“ASU 2016-15”), which eliminates the diversity in
practice related to the classification of certain cash receipts and payments in the statement of cash flows, by adding or clarifying
guidance on eight specific cash flow issues. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017, including
interim periods within those fiscal years, with early adoption permitted. The amendments in this update should be applied retrospectively
to all periods presented, unless deemed impracticable, in which case, prospective application is permitted. We do not expect ASU
2016-15 to have a material impact on our consolidated financial statements or disclosures.
|
3.
|
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 267,481 and 187,332 for the three months ended December 31, 2016 and 2015, respectively, and 265,845 and 123,733 for the
six months ended December 31, 2016 and 2015, respectively, were excluded from the calculation as their effect was anti-dilutive.
The following table presents a reconciliation
of the numerators and denominators of basic and diluted net income per share for the periods indicated:
|
|
Three Months Ended
December 31,
|
|
|
Six Months Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
Basic and diluted EPS calculation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(88
|
)
|
|
$
|
(283
|
)
|
|
$
|
(3,016
|
)
|
|
$
|
2,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average number of shares outstanding
|
|
|
9,244,590
|
|
|
|
9,161,407
|
|
|
|
9,216,967
|
|
|
|
9,137,149
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Restricted shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,950
|
|
Diluted weighted average number of shares outstanding
|
|
|
9,244,590
|
|
|
|
9,161,407
|
|
|
|
9,216,967
|
|
|
|
9,201,099
|
|
Basic EPS
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
0.32
|
|
Diluted EPS
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
0.32
|
|
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
|
4.
|
Fair Value Measurements
|
Fair value is defined as the price that
would be received from selling an asset or paid to transfer a liability in an orderly fashion between market participants at the
measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be either recorded
or disclosed at fair value, we consider the most advantageous market in which it would transact and assumptions that market participants
would use when pricing the asset or liability.
The Accounting Standards Codification requires
certain disclosures around fair value and establishes a fair value hierarchy for valuation inputs. The hierarchy prioritizes the
inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair
value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to
the fair value measurement in its entirety. These levels are:
|
·
|
Level 1 Quoted prices (unadjusted) in active markets
for identical assets or liabilities;
|
|
·
|
Level 2 Inputs other than quoted prices included
within Level 1 that are either directly or indirectly observable; and
|
|
·
|
Level 3 Assets or liabilities for which fair value
is based on valuation models with significant unobservable pricing inputs and which result in the use of management estimates.
|
We have money market funds that are highly
liquid and have a maturity of three months or less, and as such, are considered cash equivalents and fall within Level 1 of the
fair value hierarchy. We have no financial assets that are measured on a recurring basis that fall within Level 2 or Level 3 of
the fair value hierarchy.
Our financial assets that are measured at
fair value on a recurring basis as of December 31, 2016 are as follows:
|
|
Total
Fair Value
|
|
|
Quoted
Prices in
Active Markets
(Level 1)
|
|
|
Observable
Inputs
(Level 2)
|
|
|
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
8,732
|
|
|
$
|
8,732
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Money market funds
|
|
|
10,072
|
|
|
|
10,072
|
|
|
|
-
|
|
|
|
-
|
|
Cash and cash equivalents
|
|
$
|
18,804
|
|
|
$
|
18,804
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Our financial assets that are measured at
fair value on a recurring basis as of June 30, 2016 are as follows:
|
|
Total
Fair Value
|
|
|
Quoted
Prices in
Active Markets
(Level 1)
|
|
|
Observable
Inputs
(Level 2)
|
|
|
Unobservable
Inputs
(Level 3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
10,213
|
|
|
$
|
10,213
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Money market funds
|
|
|
10,055
|
|
|
|
10,055
|
|
|
|
-
|
|
|
|
-
|
|
Cash and cash equivalents
|
|
$
|
20,268
|
|
|
$
|
20,268
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
Components of Provision (Benefit) for
Income Taxes
The domestic and foreign components of income
(loss) before the provision (benefit) for income taxes are as follows:
|
|
Three Months Ended
December 31,
|
|
|
Six Months Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
(17
|
)
|
|
$
|
(431
|
)
|
|
$
|
(3,331
|
)
|
|
$
|
2,323
|
|
Foreign
|
|
|
32
|
|
|
|
103
|
|
|
|
546
|
|
|
|
439
|
|
Income (loss) before income taxes
|
|
$
|
15
|
|
|
$
|
(328
|
)
|
|
$
|
(2,785
|
)
|
|
$
|
2,762
|
|
We recorded income tax expense for our domestic
and foreign subsidiaries of $103 and an income tax benefit of $45 during the three months ended December 31, 2016 and 2015, respectively,
and an income tax expense of $231 and an income tax benefit of $162 during the six months ended December 31, 2016 and 2015, respectively.
The components of the provision (benefit) for income taxes are as follows:
|
|
Three Months Ended
December 31,
|
|
|
Six Months Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
8
|
|
|
$
|
(159
|
)
|
|
$
|
16
|
|
|
$
|
(410
|
)
|
Foreign
|
|
|
95
|
|
|
|
114
|
|
|
|
215
|
|
|
|
248
|
|
Provision (benefit) for income taxes
|
|
$
|
103
|
|
|
$
|
(45
|
)
|
|
$
|
231
|
|
|
$
|
(162
|
)
|
For the three and six months ended December
31, 2016, the domestic tax expense is higher than the prior year due to the full valuation allowance that is now being applied
to any tax benefit generated from operating losses. The domestic expense is primarily attributable to interest and penalties on
uncertain tax positions and minimum state taxes in a number of jurisdictions for the three and six months ended December 31, 2016.
The foreign tax expense is lower than the prior year primarily due to a reduction in the statutory tax rate in Japan for the three
and six months ended December 31, 2016, compared to the same periods from the prior year.
Net Operating Losses
As of June 30, 2016, we had U.S. federal
net operating loss carryforwards (“NOLs”) of approximately $89,937 for income tax purposes, of which none expire in
fiscal year 2017, and the remainder expire at various dates through fiscal year 2035. We recently completed an evaluation of the
potential effect of Section 382 of the Internal Revenue Code (the “Code”) on our ability to utilize these net operating
losses. The study concluded that we have not had an ownership change for the period from July 22, 1993 to June 30, 2016. If we
experience an ownership change as defined in Section 382 of the Code, our ability to use these NOLs will be substantially limited,
which could therefore significantly impair the value of that asset. On March 1, 2016, we adopted a Tax Asset Preservation Plan
(“TAPP”) in order to protect the value of our NOLs. At our 2016 Annual Meeting held on October 26, 2016, our shareholders
adopted a formal amendment to our certificate of incorporation with terms substantially similar to the TAPP. The TAPP terminated
in accordance with its terms on November 3, 2016 concurrent with the effectiveness of the amendment to our certificate of incorporation.
As of June 30, 2016, we had state NOLs of
$51,346 and foreign NOLs of $28,208. The state NOLs expire between fiscal year 2017 and fiscal year 2035. The foreign NOLs expire
according to the rules of each country. Currently, none of the jurisdictions in which the Company has foreign NOLs are subject
to expiration due to indefinite carryforward periods.
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
Valuation Allowance
Realization of our deferred tax assets is
dependent primarily on the generation of future taxable income. In reviewing the need for a valuation allowance, we consider
our historical and future projected operations along with other positive and negative evidence in assessing if sufficient future
taxable income will be generated to use the existing deferred tax assets. The following summarizes our conclusions on the need
for a valuation allowance in each jurisdiction as of December 31, 2016:
U.S.
– As of June 30, 2016,
we believed the weight of negative evidence was greater than the existing positive evidence and concluded that it was more-likely-than-not
that we would be unable to realize our U.S. net deferred tax assets. As a result, a full valuation allowance was established on
our U.S. net deferred tax assets which continue to remain in place as of December 31, 2016. For future periods in which we remain
in a full valuation allowance position, we would expect our U.S. tax provision expense to be limited to the alternative minimum
tax (if applicable) for federal tax purposes, which approximates 2% of earnings before income taxes, state taxes in various jurisdictions,
and interest and penalties on our uncertain tax positions.
U.K.
- During our fiscal year 2014,
a change in U.K. tax law relative to treatment of research and development expenses allowed us to release $214 of valuation allowances
against deferred tax assets that we believe are now realizable as a result of the current period tax law change. We believe that
in light of this law change, we will now generate sufficient taxable income to fully utilize our net deferred tax assets in the
U.K.
Japan
- Our subsidiary in Japan has
a long history of profitable operations, and we continue to project profitability in Japan for the foreseeable future. Therefore,
we continue to believe that we will fully realize the net deferred tax assets in Japan, and no valuation allowance is needed.
Other Foreign Jurisdictions
- We
also evaluated the need for a continued full valuation allowance against our foreign deferred tax assets in other jurisdictions.
We concluded that a full valuation allowance against our deferred tax assets for other foreign jurisdictions was warranted due
to, among other reasons, (i) the realized cumulative accounting losses, (ii) our long history of taxable losses and (iii) our uncertainty
with respect to generating future taxable income in the near term given our recently completed projections and other inherent uncertainties
in our business.
We are beginning to show greater profitability
in our German operations. While we continue to have cumulative losses over a 12-quarter period, it is possible that we could become
cumulatively profitable over a 12-quarter period in the next 12 to 24 months should profitable operations continue. We will continue
to monitor results in Germany to determine if a change in our valuation allowance conclusion is needed.
Each quarter, we assess the total weight
of positive and negative evidence and evaluate whether release of all or any portion of the valuation allowance is appropriate.
Should we come to the conclusion that a release of our valuation allowances is required, or that additional valuation allowance
is required, there could be a significant increase or decrease in net income and earnings per share in the period of release, or
the additional valuation allowance, due to the impact on the tax rate.
Unrecognized Tax Benefits
The Company has evaluated its unrecognized
tax benefits and determined that there has not been a material change in the amount of such benefits for the three or six months
ended December 31, 2016.
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
|
6.
|
Share-Based Compensation
|
As of December 31, 2016, we had share-based
compensation plans which are described in Note 10 of the consolidated financial statements included in our Annual Report on Form
10-K for the year ended June 30, 2016. We recognize stock compensation expense over the requisite service period of the individual
grantees, which generally equals the vesting period. As of December 31, 2016, we had 65,138 stock options outstanding and 636,824
restricted shares outstanding. During the six months ended December 31, 2016, no stock options were granted or exercised; however,
19,281 stock options were cancelled. We recorded share-based compensation related to the issuance of restricted stock to employees
and board members as follows:
|
|
Three Months Ended
December 31,
|
|
|
Six Months Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
included in the consolidated statement of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
6
|
|
|
$
|
7
|
|
|
$
|
14
|
|
|
$
|
8
|
|
Sales and marketing
|
|
|
98
|
|
|
|
43
|
|
|
|
170
|
|
|
|
73
|
|
Research and development
|
|
|
21
|
|
|
|
48
|
|
|
|
29
|
|
|
|
78
|
|
General and administrative
|
|
|
184
|
|
|
|
117
|
|
|
|
338
|
|
|
|
223
|
|
Total
|
|
$
|
309
|
|
|
$
|
215
|
|
|
$
|
551
|
|
|
$
|
382
|
|
A summary of the activity of our time-based,
service condition restricted shares during the six months ended December 31, 2016, is presented below:
Restricted Stock Awards
|
|
Shares
|
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
|
|
|
|
|
|
|
Non-vested at July 1, 2016
|
|
|
464,117
|
|
|
$
|
5.39
|
|
Granted
|
|
|
221,000
|
|
|
|
5.56
|
|
Vested
|
|
|
(78,611
|
)
|
|
|
5.35
|
|
Forfeited
|
|
|
(19,682
|
)
|
|
|
5.72
|
|
Non-vested at December 31, 2016
|
|
|
586,824
|
|
|
$
|
5.45
|
|
In conjunction with the resignation of one
of our directors (See Note 17 – Commitments and Contingencies – Board Representation and Standstill Agreement), we
accelerated the vesting of 5,400 shares of restricted stock. This acceleration of vesting resulted in stock compensation expense
of $27 during the six months ended December 31, 2016.
During the six months ended December 31,
2016, we issued 50,000 performance-based restricted shares (“PSAs”) to senior and executive management. The PSAs issued
in fiscal year 2016 will be released only if certain company financial performance criteria are achieved over a cumulative three-year
performance period. The weighted-average grant date fair value per share for these PSAs was established on the date the cumulative
three-year performance criteria was approved by our Board of Directors (“Board”).
During the six months ended December 31,
2016, 5,387 previously granted performance-based restricted shares were forfeited due to a failure to meet performance goals associated
with our fiscal year 2016 financial results. A summary of the activity of our performance-based restricted shares during the three
months ended December 31, 2016, is presented below:
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
Performance Stock Awards
|
|
Shares
|
|
|
Weighted-
Average
Grant Date
Fair Value
|
|
|
|
|
|
|
|
|
Non-vested at July 1, 2016
|
|
|
5,387
|
|
|
$
|
5.14
|
|
Granted
|
|
|
50,000
|
|
|
|
5.49
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
(5,387
|
)
|
|
|
5.14
|
|
Non-vested at December 31, 2016
|
|
|
50,000
|
|
|
$
|
5.49
|
|
|
7.
|
Pensions and Other Postretirement Benefits
|
Defined Contribution Plans
We maintain a retirement savings plan available
to U.S. employees that qualifies as a defined contribution plan under Section 401(k) of the Internal Revenue Code. We match 50%
of the first 5% of the participants’ compensation invested by the employee in the 401(k) plan. We made matching contributions
of $88 during each of the three months ended December 31, 2016 and 2015, respectively, and $221 and $212 during the six months
ended December 31, 2016 and 2015, respectively.
We also maintain a defined contribution
plan (the “Stakeholder Plan”) for our U.K. based employees. The Stakeholder Plan provides for discretionary matching
contributions of between 4% and 7% of the employee’s salary. We contributed $7 and $12 to the Stakeholder Plan for the three
months ended December 31, 2016 and 2015, respectively, and $20 and $26 to the Stakeholder Plan for the six months ended December
31, 2016 and 2015, respectively.
Defined Benefit Plans
The following table provides the components
of net periodic pension cost of our German defined benefit pension plans recognized in earnings for the three and six months ended
December 31, 2016 and 2015:
|
|
Three Months Ended
December 31,
|
|
|
Six Months Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Periodic Benefit Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest cost
|
|
$
|
12
|
|
|
$
|
24
|
|
|
$
|
25
|
|
|
$
|
48
|
|
Expected return on plan assets
|
|
|
(3
|
)
|
|
|
(5
|
)
|
|
|
(7
|
)
|
|
|
(11
|
)
|
Recognized actuarial loss
|
|
|
18
|
|
|
|
12
|
|
|
|
38
|
|
|
|
25
|
|
Net periodic benefit cost
|
|
$
|
27
|
|
|
$
|
31
|
|
|
$
|
56
|
|
|
$
|
62
|
|
We contributed $3 and $4 to our German defined
benefit pension plans for the three months ended December 31, 2016 and 2015, respectively, and $7 and $8 to for the six months
ended December 31, 2016 and 2015, respectively. We expect to make additional, similar, quarterly contributions during the remaining
quarters of our fiscal year 2017.
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
Inventories consist of the following:
|
|
December 31,
2016
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
|
Raw materials
|
|
$
|
1,087
|
|
|
$
|
1,233
|
|
Work-in-process
|
|
|
78
|
|
|
|
133
|
|
Finished goods
|
|
|
836
|
|
|
|
2,129
|
|
|
|
$
|
2,001
|
|
|
$
|
3,495
|
|
|
9.
|
Property and Equipment, net
|
Property and equipment consists of the following:
|
|
December 31,
2016
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
$
|
2,710
|
|
|
$
|
2,750
|
|
Machinery and equipment
|
|
|
14,461
|
|
|
|
15,000
|
|
|
|
|
17,171
|
|
|
|
17,750
|
|
Less: Accumulated depreciation
|
|
|
(14,408
|
)
|
|
|
(14,689
|
)
|
|
|
$
|
2,763
|
|
|
$
|
3,061
|
|
Depreciation expense for property and equipment
was $459 and $427 for the three months ended December 31, 2016 and 2015, respectively, and $914 and $822 for the six months
ended December 31, 2016 and 2015, respectively.
|
10.
|
Intangible Assets, net
|
Intangible assets, net of $137 and $143
at December 31, 2016 and June 30, 2016, respectively, consist of patents and an internet domain name (www.concurrent.com). The
domain name is considered an indefinite lived intangible asset and is not amortizable. Intangible assets are included in other
long-term assets, net in our consolidated balance sheets.
Amortization expense related to finite-lived
intangible assets was $3 for each of the three months ended December 31, 2016 and 2015, respectively, and $6 and $39 for the six
months ended December 31, 2016 and 2015, respectively.
|
11.
|
Accounts Payable and Accrued Expenses
|
Accounts payable and
accrued expenses consist of the following:
|
|
December 31,
2016
|
|
|
June 30,
2016
|
|
|
|
|
|
|
|
|
Accounts payable, trade
|
|
$
|
2,316
|
|
|
$
|
4,767
|
|
Accrued payroll, vacation and other employee expenses
|
|
|
2,175
|
|
|
|
2,757
|
|
Accrued income taxes
|
|
|
127
|
|
|
|
389
|
|
Dividend payable
|
|
|
100
|
|
|
|
95
|
|
Other accrued expenses
|
|
|
1,190
|
|
|
|
1,183
|
|
|
|
$
|
5,908
|
|
|
$
|
9,191
|
|
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
On September 9, 2015, we sold the customer
contracts and intellectual property related to our multi-screen video analytics product line for $3,500 pursuant to an Asset Purchase
Agreement (“APA”) dated August 31, 2015 with Verimatrix, Inc. (“Verimatrix”), a privately-held video revenue
security company based in San Diego, California. The APA included customary terms and conditions, including provisions that require
the Company to indemnify Verimatrix for certain losses that it incurs as a result of a breach by the Company of its representations
and warranties in the APA and certain other matters. Proceeds from the sale were payable to the Company as follows: (1) a $2,750
payment to the Company in cash (received on September 10, 2015), (2) a $375 deferred payment (received in full on June
30, 2016) and (3) $375 placed in escrow (released and received in full on June 30, 2016). No amounts were held back pusuant
to indemnification provisions in the APA.
The customer contracts and intellectual
property sold had a net book value of $188 (which was included in intangible assets, net in our consolidated balance sheet). As
a result of the sale, we also included $1,016 (net liability, consisting primarily of unearned deferred revenue) of related assets
and liabilities not sold or transferred in the transaction in the calculation of the recorded gain. Additionally, through September
30, 2015, we incurred $212 in legal, accounting and other expenses that would not have been incurred otherwise. As a result, we
recorded a net gain of $4,116 in our consolidated statement of operations for the six months ended December 31, 2015.
On July 1, 2015, we had adopted ASU No.
2014-08,
Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued
Operations and Disclosures of Disposals of Components of an Entity
(“ASU 2014-08”). As a result, we evaluated the
sale of our multi-screen video analytics product line in light of this new standard. We concluded that the sale of our multi-screen
video analytics product line in September 2015 was not a “material shift” (as defined in ASU 2014-08) for us and therefore,
was not considered a discontinued operation. The operating profit related to the multi-screen video analytics product line for
the six months ended December 31, 2015 (through the date of sale) was $179.
Reportable Operating
Segments
The “management approach” has
been used to present the following segment information. This approach is based upon the way the management organizes segments within
the Company for making operating decisions and assessing performance. Financial information is reported on the basis that it is
used internally by the chief operating decision maker (“CODM”) for evaluating segment performance and deciding how
to allocate resources to segments. The Company’s chief executive officer has been identified as the CODM.
Effective July 1, 2016, we changed the way
our CODM views our operating results by providing more discrete segment financial information. As a result, our reportable operating
segments now consist of Content Delivery and Real-Time.
|
·
|
Content Delivery
- Our content delivery solutions product line consists of software, hardware and services for intelligently
streaming video content to a variety of consumer devices and storing and managing content in the network. Our streaming video and
storage products and services are deployed by service providers to support consumer-facing video services including live broadcast
video, video-on-demand and time-shifted video applications such as cloud based digital video recording. The Content Delivery segment
also includes Aquari, our unified scale-out storage solutions product line currently marketed to our content delivery and other
third-party customers. Additionally, the Content Delivery segment for the three and six months ended December 31, 2015 includes
the results of our multi-screen data analytics product line sold on September 9, 2015 (through the date of sale).
|
|
·
|
Real-Time
- Our real-time solutions product line consists of real-time Linux operating system versions, development
and performance optimization tools, simulation software and other system software combined, in many cases, with computer platforms
and services. These real-time products are sold to a wide variety of companies seeking high performance, real-time computer solutions
in the defense, aerospace, financial and automotive markets around the world.
|
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
These operating segments were determined
based on the nature of the products and services offered and the nature and industry of customers serviced. The measures that are
used to assess the reportable segment’s operating performance are sales and operating income. Operating income for reportable
segments is defined as gross margin less selling and marketing, research and development expenses, and certain general and administrative
expenses. Any transactions between operating segments are eliminated in consolidation.
Additionally, corporate and unallocated
costs include certain corporate sales and marketing and corporate general and administrative expenses (executive, finance, legal,
risk management and human resources). These expenses are not included in the measure of segment operating income but are included
in the reconciliation to income (loss) before income taxes.
Segment assets may be either directly attributable
or allocated to the operating segment depending on their nature. However, segment assets are not regularly reviewed by the CODM
for evaluating performance or allocating resources and therefore, are not presented.
The table below represents information about
the Company’s reportable operating segments for the three and six months ended December 31, 2016 and 2015:
|
|
Three Months Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Content
Delivery
|
|
|
Real-Time
|
|
|
Total
|
|
|
Content
Delivery
|
|
|
Real-Time
|
|
|
Total
|
|
Product
|
|
$
|
4,916
|
|
|
$
|
5,330
|
|
|
$
|
10,246
|
|
|
$
|
6,174
|
|
|
$
|
3,800
|
|
|
$
|
9,974
|
|
Services
|
|
|
2,321
|
|
|
|
2,980
|
|
|
|
5,301
|
|
|
|
2,433
|
|
|
|
2,492
|
|
|
|
4,925
|
|
Revenue from external customers
|
|
$
|
7,237
|
|
|
$
|
8,310
|
|
|
$
|
15,547
|
|
|
$
|
8,607
|
|
|
$
|
6,292
|
|
|
$
|
14,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
4,309
|
|
|
$
|
5,140
|
|
|
$
|
9,449
|
|
|
$
|
5,616
|
|
|
$
|
3,760
|
|
|
$
|
9,376
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
(2,339
|
)
|
|
|
(1,631
|
)
|
|
|
(3,970
|
)
|
|
|
(2,174
|
)
|
|
|
(1,426
|
)
|
|
|
(3,600
|
)
|
Research and development
|
|
|
(1,832
|
)
|
|
|
(984
|
)
|
|
|
(2,816
|
)
|
|
|
(2,798
|
)
|
|
|
(964
|
)
|
|
|
(3,762
|
)
|
General and administrative
|
|
|
(75
|
)
|
|
|
(150
|
)
|
|
|
(225
|
)
|
|
|
(60
|
)
|
|
|
(176
|
)
|
|
|
(236
|
)
|
Operating income for reportable segments
|
|
$
|
63
|
|
|
$
|
2,375
|
|
|
|
2,438
|
|
|
$
|
584
|
|
|
$
|
1,194
|
|
|
|
1,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and unallocated costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
|
|
|
|
|
|
|
|
(398
|
)
|
|
|
|
|
|
|
|
|
|
|
(197
|
)
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
(2,088
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(2,486
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,136
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
|
|
|
|
|
|
|
|
(48
|
)
|
|
|
|
|
|
|
|
|
|
|
(358
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
13
|
|
|
|
|
|
|
|
|
|
|
|
6
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
24
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
|
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
$
|
(328
|
)
|
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
|
|
Six Months Ended December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
Content
Delivery
|
|
|
Real-Time
|
|
|
Total
|
|
|
Content
Delivery
|
|
|
Real-Time
|
|
|
Total
|
|
Product
|
|
$
|
7,356
|
|
|
$
|
10,749
|
|
|
$
|
18,105
|
|
|
$
|
10,123
|
|
|
$
|
8,345
|
|
|
$
|
18,468
|
|
Services
|
|
|
5,000
|
|
|
|
5,558
|
|
|
|
10,558
|
|
|
|
4,930
|
|
|
|
4,852
|
|
|
|
9,782
|
|
Revenue from external customers
|
|
$
|
12,356
|
|
|
$
|
16,307
|
|
|
$
|
28,663
|
|
|
$
|
15,053
|
|
|
$
|
13,197
|
|
|
$
|
28,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin
|
|
$
|
6,834
|
|
|
$
|
9,798
|
|
|
$
|
16,632
|
|
|
$
|
9,342
|
|
|
$
|
7,891
|
|
|
$
|
17,233
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
(4,955
|
)
|
|
|
(3,091
|
)
|
|
|
(8,046
|
)
|
|
|
(4,084
|
)
|
|
|
(2,755
|
)
|
|
|
(6,839
|
)
|
Research and development
|
|
|
(4,057
|
)
|
|
|
(2,066
|
)
|
|
|
(6,123
|
)
|
|
|
(5,669
|
)
|
|
|
(1,930
|
)
|
|
|
(7,599
|
)
|
General and administrative
|
|
|
(148
|
)
|
|
|
(283
|
)
|
|
|
(431
|
)
|
|
|
(117
|
)
|
|
|
(294
|
)
|
|
|
(411
|
)
|
Operating income (loss) for reportable segments
|
|
$
|
(2,326
|
)
|
|
$
|
4,358
|
|
|
|
2,032
|
|
|
$
|
(528
|
)
|
|
$
|
2,912
|
|
|
|
2,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate and unallocated costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing
|
|
|
|
|
|
|
|
|
|
|
(797
|
)
|
|
|
|
|
|
|
|
|
|
|
(352
|
)
|
General and administrative
|
|
|
|
|
|
|
|
|
|
|
(4,226
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,542
|
)
|
Gain on sale of product line, net
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
4,116
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,023
|
)
|
|
|
|
|
|
|
|
|
|
|
222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
|
|
|
|
|
|
|
|
(2,991
|
)
|
|
|
|
|
|
|
|
|
|
|
2,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
|
|
|
|
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Other income, net
|
|
|
|
|
|
|
|
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
147
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
|
|
|
$
|
(2,785
|
)
|
|
|
|
|
|
|
|
|
|
$
|
2,762
|
|
Geographic Information
We attribute revenues to individual countries
and geographic areas based upon location of our customers. A summary of our revenue by geographic area is as follows:
|
|
Three Months Ended
December 31,
|
|
|
Six Months Ended
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
9,262
|
|
|
$
|
8,125
|
|
|
$
|
16,043
|
|
|
$
|
16,730
|
|
Canada
|
|
|
290
|
|
|
|
2,455
|
|
|
|
1,191
|
|
|
|
3,571
|
|
Total North America
|
|
|
9,552
|
|
|
|
10,580
|
|
|
|
17,234
|
|
|
|
20,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japan
|
|
|
3,158
|
|
|
|
2,038
|
|
|
|
5,793
|
|
|
|
4,135
|
|
Other Asia-Pacific
|
|
|
1,152
|
|
|
|
389
|
|
|
|
2,498
|
|
|
|
691
|
|
Total Asia-Pacific
|
|
|
4,310
|
|
|
|
2,427
|
|
|
|
8,291
|
|
|
|
4,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe
|
|
|
1,316
|
|
|
|
1,889
|
|
|
|
2,769
|
|
|
|
3,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
South America
|
|
|
369
|
|
|
|
3
|
|
|
|
369
|
|
|
|
9
|
|
Total revenue
|
|
$
|
15,547
|
|
|
$
|
14,899
|
|
|
$
|
28,663
|
|
|
$
|
28,250
|
|
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
|
14.
|
Concentration of Risk
|
The following table summarizes revenues
by significant customer where such revenue accounted for 10% or more of total revenues for any one of the indicated periods:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer A
(1)
|
|
|
21
|
%
|
|
|
16
|
%
|
|
|
14
|
%
|
|
|
20
|
%
|
Customer B
|
|
|
<10
|
%
|
|
|
14
|
%
|
|
|
<10
|
%
|
|
|
<10
|
%
|
Customer C
|
|
|
<10
|
%
|
|
|
10
|
%
|
|
|
<10
|
%
|
|
|
<10
|
%
|
(1)
Data for all periods reflects the merger of two
customers consummated in the year ended June 30, 2016. consummated in the year ended June 30, 2016.
We assess credit risk through ongoing credit
evaluations of customers’ financial condition, and collateral is generally not required. The following summarizes accounts
receivable by significant customers for whom accounts receivable were 10% or more of total accounts receivables for any one of
the indicated periods:
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2016
|
|
|
|
|
|
|
|
|
Customer D
|
|
|
11
|
%
|
|
|
<10
|
%
|
Customer A
(1)
|
|
|
<10
|
%
|
|
|
37
|
%
|
(1)
Data for all periods reflects the merger of two
customers consummated in the year ended June 30, 2016. consummated in the year ended June 30, 2016.
The following summarizes purchases from
significant vendors where such purchases accounted for 10% or more of total purchases for any one of the indicated periods:
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor A
|
|
|
16
|
%
|
|
|
<10
|
%
|
|
|
15
|
%
|
|
|
11
|
%
|
Vendor B
|
|
|
12
|
%
|
|
|
<10
|
%
|
|
|
<10
|
%
|
|
|
<10
|
%
|
Vendor C
|
|
|
<10
|
%
|
|
|
<10
|
%
|
|
|
14
|
%
|
|
|
<10
|
%
|
Vendor D
|
|
|
<10
|
%
|
|
|
22
|
%
|
|
|
13
|
%
|
|
|
18
|
%
|
Vendor E
|
|
|
<10
|
%
|
|
|
20
|
%
|
|
|
<10
|
%
|
|
|
19
|
%
|
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
During the six months ended December 31,
2016, our Board approved quarterly cash dividends as follows:
|
|
|
|
|
|
Dividends Declared
|
|
Record Date
|
|
Payment Date
|
|
Type
|
|
Per Share
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
September 13, 2016
|
|
September 27, 2016
|
|
Quarterly
|
|
$
|
0.12
|
|
|
$
|
1,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 14, 2016
|
|
December 28, 2016
|
|
Quarterly
|
|
$
|
0.12
|
|
|
$
|
1,187
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,369
|
|
As of December 31, 2016, we recorded $336
of dividends payable to holders of restricted common stock who held restricted shares at the time of the dividend record dates
and still hold those restricted shares as of December 31, 2016. Such dividends will be paid when the restrictions on a holder’s
restricted common shares lapse. This dividend payable is divided between current payable and non-current payable in the amounts
of $100 and $236, respectively, based upon the expected vesting date of the underlying shares. These holders of restricted common
stock will receive the dividend payments as long as they remain eligible at the vesting date of the shares. For the six months
ended December 31, 2016, $25 of dividends payable were forfeited and returned to capital for restricted shares that were forfeited
prior to meeting vesting requirements. Because the participants are not entitled to these dividends unless they complete the requisite
service period for the shares to vest, they are not “participating dividends” as defined under ASC Topic 260-10,
Earnings
per Share
.
|
16.
|
Accumulated Other Comprehensive Income (Loss)
|
The following table summarizes the changes
in accumulated other comprehensive income (loss) by component, net of taxes, for the six months ended December 31, 2016:
|
|
Pension and
Postretirement
Benefit
Plans
|
|
|
Currency
Translation
Adjustments
|
|
|
Total
|
|
Balance at June 30, 2016
|
|
$
|
(1,637
|
)
|
|
$
|
1,092
|
|
|
$
|
(545
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications
|
|
|
69
|
|
|
|
(291
|
)
|
|
|
(222
|
)
|
Amounts reclassified from accumulated other comprehensive income (loss)
|
|
|
38
|
|
|
|
-
|
|
|
|
38
|
|
Net current period other comprehensive income (loss)
|
|
|
107
|
|
|
|
(291
|
)
|
|
|
(184
|
)
|
Balance at December 31, 2016
|
|
$
|
(1,530
|
)
|
|
$
|
801
|
|
|
$
|
(729
|
)
|
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
|
17.
|
Commitments and Contingencies
|
From time to time, we are involved in litigation
incidental to the conduct of our business. We believe that such pending litigation will not have a material adverse effect on our
results of operations or financial condition.
We enter into agreements in the ordinary
course of business with customers that often require us to defend and/or indemnify the customer against intellectual property infringement
claims brought by a third-party with respect to our products. For example, we were notified that certain of our customers have
settled with or been sued by the following companies, in the noted jurisdictions, regarding the listed patents:
Asserting Party
|
|
Jurisdiction
|
|
Patents at Issue
|
Broadband iTV, Inc.
|
|
U.S. District Court of Hawaii
|
|
U.S. Patent No. 7,361,336
|
|
|
|
|
|
Sprint Communications Company, L.P.
|
|
U.S. District Court
Eastern District of Pennsylvania
|
|
U.S. Patent Nos. 6,754,907 and 6,757,907
|
|
|
|
|
|
FutureVision.com LLC
|
|
U.S. District Court
Eastern District of Texas
|
|
U.S. Patent No. 5,877,755
|
We continue to review our potential obligations
under our indemnification agreements with these customers and the indemnity obligations to these customers from other vendors that
also provided systems and services to these customers. From time to time, we also indemnify customers and business partners for
damages, losses and liabilities they may suffer or incur relating to personal injury, personal property damage, product liability,
and environmental claims relating to the use of our products and services or resulting from our acts or omissions, our employees,
authorized agents or subcontractors. We have not accrued any material liabilities related to such indemnifications in our financial
statements and do not expect any other material costs as a result of such obligations. The maximum potential amount of future payments
that we could be required to make is unlimited, and we are unable to estimate any possible loss or range of possible loss.
Severance Arrangements
Pursuant to the terms of the employment
agreements with our executive officers and certain other employees, employment may be terminated by either the respective executive
officer or us at any time. In the event the employee voluntarily resigns (except as described below) or is terminated for cause,
compensation under the employment agreement will end. In the event an agreement is terminated by us without cause or in certain
circumstances constructively by us, the terminated employee will receive severance compensation for a period from 6 to 12 months,
depending on the officer, in an annualized amount equal to the respective employee's base salary then in effect. In the event our
CEO resigns within three months of a change in control or the CEO’s agreement is terminated by us within one year of a change
of control other than for due cause, disability or non-renewal by our CEO, our CEO will be entitled to severance compensation multiplied
by two, as well as incremental medical costs. Additionally, if terminated, our CEO and CFO may be entitled to bonuses during the
severance period. At December 31, 2016, the maximum contingent liability under these agreements is $2,194. Our employment
agreements with certain of our employees contain certain offset provisions, as defined in their respective agreements.
Concurrent
Computer Corporation
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited) - continued
(Amounts in thousands, except for share
and per share data)
Board Representation and Standstill Agreement
As previously disclosed in our Form 8-K
filed on August 29, 2016, the Company entered into a Board Representation and Standstill Agreement (the “Standstill Agreement”)
with an investor and its affiliated party. Pursuant to the terms of the Standstill Agreement, in consideration for certain restrictions
applicable to the investor, our Board, among other things (1) agreed to appoint a nominee of the investor to serve on the Company’s
Board until the 2016 Annual Meeting of Stockholders of the Company (the nominee was subsequently elected as a director of the Company
at the 2016 Annual Meeting held on October 26, 2016) and (2) agreed to pay up to $235 for fees and expenses incurred
by the investor and its affiliated party in connection with the Standstill Agreement.
Additionally, pursuant to the Standstill
Agreement, effective as of August 29, 2016, one of our directors tendered his resignation from the Board and all Board committees
thereof. In connection with this resignation, the Company agreed to accelerate the vesting of 5,400 shares of restricted stock
held by this director and to make a one-time payment to him of $48 (including $2 of accrued dividends released upon the acceleration
of the vesting of the restricted stock).
We have evaluated subsequent events through
the date these financial statements were issued and determined that there were no other material subsequent events that require
recognition or additional disclosure in our consolidated financial statements.