FORGENT
NETWORKS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
|
|
OCTOBER 31,
2007
|
|
JULY 31,
2007
|
|
|
|
(UNAUDITED)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
Cash and equivalents
|
|
$
|
15,925
|
|
$
|
33,524
|
|
Short-term investments
|
|
3,551
|
|
1,538
|
|
Accounts receivable, net of allowance for
doubtful accounts of $56 and
$21 at October 31, 2007 and July 31, 2007, respectively
|
|
1,476
|
|
1,040
|
|
Prepaid expenses and other current assets
|
|
285
|
|
211
|
|
Total Current Assets
|
|
21,237
|
|
36,313
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
1,108
|
|
767
|
|
Goodwill
|
|
6,993
|
|
|
|
Intangible assets, net
|
|
5,161
|
|
|
|
Other assets
|
|
129
|
|
212
|
|
|
|
$
|
34,628
|
|
$
|
37,292
|
|
LIABILITIES AND STOCKHOLDERS EQUITY
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
Accounts payable
|
|
$
|
4,058
|
|
$
|
10,970
|
|
Accrued compensation and benefits
|
|
586
|
|
557
|
|
Other accrued liabilities
|
|
778
|
|
855
|
|
Deferred revenue
|
|
1,392
|
|
1,076
|
|
Total Current Liabilities
|
|
6,814
|
|
13,458
|
|
|
|
|
|
|
|
Long-Term Liabilities:
|
|
|
|
|
|
Deferred revenue
|
|
33
|
|
28
|
|
Other long-term obligations
|
|
1,060
|
|
1,186
|
|
Total Long-Term Liabilities
|
|
1,093
|
|
1,214
|
|
|
|
|
|
|
|
Stockholders Equity:
|
|
|
|
|
|
Preferred stock, $.01 par value; 10,000
shares authorized; none issued or outstanding
|
|
|
|
|
|
Common stock, $.01 par value; 40,000 shares
authorized; 32,487 and 27,388 shares issued; 30,697 and 25,598 shares
outstanding at October 31, 2007 and July 31, 2007, respectively
|
|
325
|
|
274
|
|
Treasury stock at cost, 1,790 shares at
October 31, 2007 and July 31, 2007
|
|
(4,815
|
)
|
(4,815
|
)
|
Additional paid-in capital
|
|
270,590
|
|
265,647
|
|
Accumulated deficit
|
|
(239,424
|
)
|
(238,506
|
)
|
Accumulated other comprehensive income
|
|
45
|
|
20
|
|
Total Stockholders Equity
|
|
26,721
|
|
22,620
|
|
|
|
$
|
34,628
|
|
$
|
37,292
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
3
FORGENT NETWORKS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share data)
|
|
FOR THE THREE
MONTHS ENDED
OCTOBER 31,
|
|
|
|
2007
|
|
2006
|
|
|
|
(UNAUDITED)
|
|
REVENUES:
|
|
|
|
|
|
Software & service
|
|
$
|
1,875
|
|
$
|
962
|
|
Intellectual property licensing
|
|
|
|
8,134
|
|
Total Revenues
|
|
1,875
|
|
9,096
|
|
|
|
|
|
|
|
COST OF SALES:
|
|
|
|
|
|
Software & service
|
|
330
|
|
310
|
|
Intellectual property licensing
|
|
|
|
3,540
|
|
Total Cost of Sales
|
|
330
|
|
3,850
|
|
|
|
|
|
|
|
GROSS MARGIN
|
|
1,545
|
|
5,246
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
Selling, general and administrative
|
|
2,440
|
|
2,500
|
|
Research and development
|
|
291
|
|
116
|
|
Amortization of intangible assets
|
|
36
|
|
4
|
|
Total Operating Expenses
|
|
2,767
|
|
2,620
|
|
|
|
|
|
|
|
(LOSS) INCOME FROM OPERATIONS
|
|
(1,222
|
)
|
2,626
|
|
|
|
|
|
|
|
OTHER INCOME AND (EXPENSES):
|
|
|
|
|
|
Interest income
|
|
338
|
|
155
|
|
Interest expense and other
|
|
(20
|
)
|
(32
|
)
|
Total Other Income and (Expenses)
|
|
318
|
|
123
|
|
|
|
|
|
|
|
(LOSS) INCOME FROM OPERATIONS, BEFORE
INCOME TAXES
|
|
(904
|
)
|
2,749
|
|
Provision for income taxes
|
|
(14
|
)
|
|
|
NET (LOSS) INCOME
|
|
$
|
(918
|
)
|
$
|
2,749
|
|
|
|
|
|
|
|
BASIC AND DILUTED (LOSS) INCOME PER SHARE:
|
|
|
|
|
|
Net (loss) income per share - basic and
diluted
|
|
$
|
(0.03
|
)
|
$
|
0.11
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING:
|
|
|
|
|
|
Basic
|
|
27,094
|
|
25,381
|
|
Diluted
|
|
27,094
|
|
25,522
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
4
FORGENT NETWORKS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
|
|
FOR THE THREE
MONTHS ENDED
OCTOBER 31,
|
|
|
|
2007
|
|
2006
|
|
|
|
(UNAUDITED)
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
(Loss) income from operations
|
|
$
|
(918
|
)
|
$
|
2,749
|
|
Adjustments to reconcile net (loss) income
to net cash used in operations:
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
141
|
|
239
|
|
Amortization of leasehold advance and lease
impairment
|
|
(97
|
)
|
(106
|
)
|
Provision for doubtful accounts
|
|
(2
|
)
|
1
|
|
Share-based compensation
|
|
5
|
|
128
|
|
Foreign currency translation gain
|
|
7
|
|
5
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
Accounts receivable
|
|
137
|
|
(5,392
|
)
|
Prepaid expenses and other current assets
|
|
22
|
|
(87
|
)
|
Accounts payable
|
|
(8,041
|
)
|
1,170
|
|
Accrued expenses and other long-term
obligations
|
|
(248
|
)
|
140
|
|
Deferred revenue
|
|
(70
|
)
|
94
|
|
Net cash used in operating activities
|
|
(9,064
|
)
|
(1,059
|
)
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
Net sales of short-term investments
|
|
(1,483
|
)
|
|
|
Net purchases of property and equipment
|
|
(18
|
)
|
(32
|
)
|
Change in other assets
|
|
164
|
|
|
|
Acquisition of iSarla, Inc., net of
cash acquired
|
|
(7,213
|
)
|
|
|
Net cash used in by investing activities
|
|
(8,550
|
)
|
(32
|
)
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
Net proceeds from issuance of stock
|
|
2
|
|
2
|
|
Payments on notes payable and capital
leases
|
|
(1
|
)
|
(89
|
)
|
Net cash provided by (used in) financing
activities
|
|
1
|
|
(87
|
)
|
|
|
|
|
|
|
Effect of translation exchange rates
|
|
14
|
|
10
|
|
|
|
|
|
|
|
Net decrease in cash and equivalents
|
|
(17,599
|
)
|
(1,168
|
)
|
Cash and equivalents at beginning of period
|
|
33,524
|
|
16,206
|
|
Cash and equivalents at end of period
|
|
$
|
15,925
|
|
$
|
15,038
|
|
|
|
|
|
|
|
SUPPLEMENTAL CASH FLOW
INFORMATION:
|
|
|
|
|
|
Issuance of stock for
acquisition of iSarla, Inc.
|
|
$
|
4,987
|
|
$
|
|
|
The
accompanying notes are an integral part of these condensed consolidated
financial statements.
5
FORGENT NETWORKS, INC.
NOTES TO
THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except per share data
unless otherwise noted)
NOTE 1 - GENERAL AND BASIS OF FINANCIAL
STATEMENTS
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission and accordingly, do not include all
information and footnotes required under
U.S. generally accepted accounting principles for
complete financial statements. In the opinion of management, these interim
financial statements contain all adjustments, consisting of normal, recurring
adjustments, necessary for a fair presentation of the financial position of
Forgent Networks, Inc. (Forgent or the Company) as of October 31,
2007 and July 31, 2007, and the results of operations and cash flows for
the three months ended October 31, 2007 and 2006. These condensed
consolidated financial statements should be read in conjunction with the
Companys audited consolidated financial statements and notes thereto filed
with the Securities and Exchange Commission in the Companys annual report on Form 10-K/A
for the fiscal year ended July 31, 2007.
The results for the interim periods are not necessarily indicative of
results for a full fiscal year.
NOTE 2 - ACQUISITION
On October 5, 2007, Forgent acquired all of
the outstanding capital stock of iSarla Inc., a Delaware corporation and
application service provider that offers on-demand workforce management
solutions that help simplify the Human Resource process and improve employee
productivity by managing and communicating human resources, employee benefits
and payroll information. iSarla Inc. conducts its business under the trade name
iEmployee and provides hosted application services, including Time &
Attendance, Timesheets, Human Resource Benefits, Expenses and other
solutions. iEmployee is a profitable
business with a high percentage of recurring revenues and delivers its software
as a service under the SaaS model. The
acquisition expands Forgents current target markets, significantly augments
the Companys product and service offerings to customers, and increases
revenues from its software and services segment considerably. Due to these factors, the Company purchased
the iEmployee business at a premium (i.e. goodwill) over the fair value of the
net assets acquired.
In consideration for the acquisition, Forgent paid approximately
$12,661, including $6,602
in cash,
5,095 shares of its Common Stock, valued at approximately $4,987 and
transaction cost of approximately $1,072.
The shares of Common Stock issued were valued based upon the price of
$0.98 when the number of shares to be issued became fixed. Upon closing, $990 in cash and 764 shares
totaling $748 of the purchase price were held in escrow for representations and
warranties. The purchase agreement did
not include provisions for any other contingent payments, options or commitments.
As a result of the acquisition, iEmployees
results of operations since October 5, 2007 have been included in the
Companys Consolidated Statement of Operations for the three months ended October 31,
2007.
The business combination was
accounted for under
Financial Accounting Standard Board (FASB)
Statement No. 141,
Business Combinations.
The application of purchase
accounting under Statement No. 141 requires the total purchase price to be
allocated to the fair value of assets acquired and liabilities assumed based on
their fair values at the acquisition date, with amounts exceeding fair value
being recorded as goodwill. The Company
is currently in the process of assessing and finalizing the fair value of the
assets acquired and the liabilities assumed.
The following table summarizes the preliminary estimated fair values of
the iEmployee assets acquired and liabilities assumed:
Assets Acquired
|
|
|
|
Cash
|
|
$
|
460
|
|
Short-term investments
|
|
526
|
|
Accounts receivable
|
|
577
|
|
Prepaid assets
|
|
96
|
|
Fixed assets
|
|
416
|
|
Goodwill
|
|
6,993
|
|
Intangible assets
|
|
5,209
|
|
Other assets
|
|
22
|
|
Total assets acquired
|
|
14,299
|
|
|
|
|
|
|
6
Liabilities assumed
|
|
|
|
Accounts payable
|
|
(1,099
|
)
|
Accrued compensation and benefits
|
|
(110
|
)
|
Accrued other liabilities
|
|
(33
|
)
|
Deferred revenue
|
|
(396
|
)
|
Total liabilities assumed
|
|
(1,638
|
)
|
|
|
|
|
Net assets acquired
|
|
$
|
12,661
|
|
|
|
|
|
|
Through the acquisition of the iEmployee business, Forgents workforce
grew by 142 employees, 121 of whom are located in Mumbai, India.
The co-founders of iEmployee now serve
as Forgents Vice-Presidents of the iEmployee operations.
The
following summary presents unaudited pro forma consolidated financial
information for the three months ended October 31, 2007 and 2006, as if
the iEmployee acquisition had occurred as of August 1, 2006. The pro forma information does not purport to
be indicative of the actual results which would have occurred had the
acquisition been completed as of August 1, 2006, nor is it necessarily
indicative of the results of operations which may occur in the future.
|
|
OCTOBER 31, 2007
|
|
OCTOBER 31, 2006
|
|
|
|
AS
REPORTED
|
|
PRO
FORMA
|
|
AS
REPORTED
|
|
PRO
FORMA
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,875
|
|
$
|
2,888
|
|
$
|
9,096
|
|
$
|
10,455
|
|
Net (loss) income
|
|
(918
|
)
|
(773
|
)
|
2,749
|
|
2,946
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per common share:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.03
|
)
|
$
|
(0.03
|
)
|
$
|
0.11
|
|
$
|
0.10
|
|
Diluted
|
|
(0.03
|
)
|
(0.03
|
)
|
0.11
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
27,094
|
|
30,749
|
|
25,381
|
|
30,476
|
|
Diluted
|
|
27,094
|
|
30,749
|
|
25,522
|
|
30,617
|
|
NOTE 3 - COMPREHENSIVE INCOME (LOSS)
In accordance
with the disclosure requirements of Statement of Financial Accounting Standard No. 130,
Reporting Comprehensive Income,
the
Companys comprehensive income (loss) is comprised of net income (loss),
foreign currency translation adjustments and unrealized gains and losses on
short-term investments held as available-for-sale securities. Comprehensive
loss for the three months ended October 31, 2007 was $893
and comprehensive income for the three
months ended October 31, 2006 was $2,751.
NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
In February 2007,
the FASB issued Statement No. 159,
The
Fair Value Option for Financial Assets and Financial Liabilities.
Statement
No. 159 provides companies with an option to report selected financial
assets and liabilities at fair value. The standards objective is to reduce
both complexity in accounting for financial instruments and the volatility in
earnings caused by measuring related assets and liabilities differently. The standard requires companies to provide
additional information that will help investors and other users of financial
statements to more easily understand the effect of the companys choice to use
fair value on its earnings. It also requires companies to display the fair
value of those assets and liabilities for which the company has chosen to use
fair value on the face of the balance sheet. This new statement does not
eliminate disclosure requirements included in other accounting standards,
including requirements for disclosures about fair value measurements included
in Statement No. 157,
Fair Value
Measurements,
and Statement No. 107,
Disclosures about Fair Value of Financial
Instruments.
7
Statement No. 159 is
effective as of the beginning of fiscal years beginning after November 15,
2007. Forgent is currently evaluating the effect that the adoption of Statement
No. 159 will have on its financial position and results of operations.
In September 2006,
the FASB issued Statement No. 157,
Fair
Value Measurements.
Statement No. 157 defines fair
value, establishes a framework for measuring fair value in U.S. generally
accepted accounting principles and expands disclosures about fair value
measurements. Statement No. 157 is effective for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal
years. Forgent is currently evaluating the effect that the adoption of
Statement No. 157 will have on its financial position and results of
operations.
NOTE 5 SHARE BASED COMPENSATION
Share based compensation for the Companys
stock option, restricted stock and stock purchase plans for the three months
ended October 31, 2007 and 2006 was $5 and $24,
respectively. The Company issued 4 and 45 shares of common stock
related to exercises of stock options granted from its Stock Option and Stock
Purchase Plans for the three months ended October 31, 2007 and 2006, respectively.
NOTE 6 INCOME TAXES
In
June 2006, the FASB issued Interpretation No. 48,
Accounting for Uncertainty in Income Taxesan interpretation of FASB
Statement No. 109
(FIN 48). FIN 48 clarifies the
accounting for uncertainty in income taxes recognized in an entitys financial
statements in accordance with Statement No. 109,
Accounting for Income Taxes.
We
adopted FIN 48 as of August 1, 2007. FIN 48 applies to all tax positions
accounted for under SFAS No. 109. FIN 48 refers to tax positions as
positions taken in a previously filed tax return or positions expected to be
taken in a future tax return which are reflected in measuring current or
deferred income tax assets and liabilities reported in the financial
statements. FIN 48 further clarifies a tax position to include, but not be
limited to, the following:
|
|
|
An allocation
or a shift of income between taxing jurisdictions;
|
|
|
|
|
|
|
|
The
characterization of income or a decision to exclude reporting taxable income
in a tax return;
|
|
|
|
|
|
|
|
A decision to
classify a transaction, entity, or other position in a tax return as tax
exempt.
|
|
FIN
48 provides that a tax benefit may be reflected in the financial statements
only if it is more likely than not that a company will be able to sustain the
tax return position, based on its technical merits. If a tax benefit meets this
criterion, it should be measured and recognized based on the largest amount of
benefit that is cumulatively greater than 50% likely to be realized. This
approach is a change from previous practice under which a tax benefit could be
recognized only if it was probable a tax position could be sustained.
FIN 48 requires
we make qualitative and quantitative disclosures, including a discussion of
reasonably possible changes that might occur in unrecognized tax benefits over
the next twelve months, a description of open tax years by major jurisdictions
and a roll-forward of all unrecognized tax benefits, presented as a
reconciliation of the beginning and ending balances of the unrecognized tax
benefits on an aggregated basis.
We and certain
of our subsidiaries file income tax returns in the U.S. federal jurisdiction,
various state jurisdictions, and certain foreign jurisdictions. Generally, we
are no longer subject to examinations for U.S. federal income taxes for years
prior to 2003 and for state income taxes for years prior to 2002. Examinations
for foreign income taxes for previous years remain open, but tax considerations
in those jurisdictions are not material to us.
The adoption of
FIN 48 did not have a material impact on our financial statements or
disclosures. As of August 1, 2007 and October 31, 2007, we did not
recognize any assets or liabilities for unrecognized tax benefits relative to
uncertain tax positions. We anticipate no significant increase or decrease to
gross unrecognized tax benefits will be recorded during the next twelve months.
Any interest or penalties resulting from examinations will be recognized as a
component of the income tax provision. However, since there are no unrecognized
tax benefits as a result of tax positions taken, we have no accrued interest
and penalties.
NOTE 7 RELATED PARTY TRANSACTIONS
As a result of the iEmployee acquisition, the
Company leases
approximately
9,000 square feet of office space in Mumbai, India for sales, marketing,
development and support efforts. The
property is leased from a foreign company that is controlled by stockholders
and officers of the Company. Under the
lease agreement, the Company pays monthly rent of approximately $13 until the
lease expires in July 2009. During
the three months ended October 31, 2007, the Company incurred $13 in rent
expenses related to this lease.
NOTE
8 - SEGMENT INFORMATION
Currently,
the Company operates in two distinct segments: software and services and
intellectual property licensing. Forgents
software and services business provides customers with scheduling software,
asset management software, workforce management software as well as software
maintenance and support, installation and training services and hardware
devices. Under Forgents intellectual
property licensing segment, the Company settled with the remaining defendants
in the litigations related to its technologies embodied in U.S. Patent No. 4,698,672
and its foreign counterparts, as well as in U.S. Patent No. 6,285,746
during fiscal year 2007. Going forward,
Forgent does not anticipate generating additional licensing revenues related to
these patents. However, the Companys
intellectual property licensing segment continues to explore its patent
portfolio for additional opportunities.
In order to evaluate the software and services segment and the
intellectual property licensing segment as stand-alone businesses, the Company
records all unallocated corporate operating expenses in the Corporate segment.
The Company evaluates the performance as well as the financial results
of its segments. Included in the segment operating income (loss) is an
allocation of certain corporate operating expenses. The Company does not
8
identify assets or capital expenditures by
reportable segments, and the Companys Chief Executive Officer and Chief
Financial Officer do not evaluate the segments based on these criteria.
The table below presents segment information about
revenue from unaffiliated customers, gross margins and operating income (loss)
for the three months ended October 31, 2007 and 2006:
|
|
Software &
Services
|
|
Intellectual
Property
Licensing
|
|
Corporate
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Month Period Ending
October 31, 2007
|
|
|
|
|
|
|
|
|
|
Revenues from unaffiliated customers
|
|
$
|
1,875
|
|
$
|
|
|
$
|
|
|
$
|
1,875
|
|
Gross margin
|
|
1,545
|
|
|
|
|
|
1,545
|
|
Operating income (loss)
|
|
(28
|
)
|
(82
|
)
|
(1,112
|
)
|
(1,222
|
)
|
|
|
|
|
|
|
|
|
|
|
For the Three Month Period Ending
October 31, 2006
|
|
|
|
|
|
|
|
|
|
Revenues from unaffiliated customers
|
|
$
|
962
|
|
$
|
8,134
|
|
$
|
|
|
$
|
9,096
|
|
Gross margin
|
|
652
|
|
4,594
|
|
|
|
5,246
|
|
Operating income (loss)
|
|
(289
|
)
|
3,800
|
|
(885
|
)
|
2,626
|
|
NOTE
9 CONTINGENCIES
Forgent is the defendant or plaintiff in various actions that arose in
the normal course of business.
With the exception of the proceedings described below, none of the
pending legal proceedings to which the Company is a party are material to the
Company.
Litigation with Jenkens & Gilchrist, P.C.
On July 16, 2007, Jenkens &
Gilchrist, P.C. (Jenkens), Forgents former legal counsel, filed a complaint
against Forgent and Compressions Labs, Inc., in the District Court of
Dallas County, Texas. In its complaint,
Jenkens alleges a breach of contract and is seeking a declaratory
judgment. Forgent disputes Jenkens
claims and is seeking relief through the court system.
After Forgent terminated Jenkens, the Company entered into a Resolution
Agreement with Jenkens in December 2004.
Under the Resolution Agreement, the Company believes Jenkens is entitled
to $1.4 million for all related contingency fees and expenses related to the
settlements from the litigation regarding the Companys U.S. Patent No. 6,285,746
(the 746 patent). Jenkens interprets
the Resolution Agreement on broader terms and now believes it is entitled to
$3.4 million, including attorneys fees related to the litigation and
interest. Management currently cannot
predict how long it may take to resolve the Jenkens lawsuit. However, until the Jenkens litigation is
finalized, the related contingency fees and expenses may be adjusted in a
future period and could have a material impact to the Companys consolidated
financial statements.
Litigation with Wild Basin
On September 6, 2007, Forgent filed a
petition against Wild Basin One & Two, Ltd. (Wild Basin) in the
District Court of Travis County, Texas.
The petition claims Wild Basin is in breach of contract relating to
Forgents lease agreement by unreasonably withholding and delaying its consent
to a pending lease assignment. On October 19,
2007, Forgent amended its petition to include claims of fraud and breach of
fiduciary duty against Wild Basin.
Forgent is seeking to recover all damages as a result of the delay in
closing its pending assignment, among other damages.
9
ITEM 2.
MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following
review of Forgents financial position as of October 31, 2007 and July 31,
2007 and for the three months ended October 31, 2007 and 2006 should be
read in conjunction with the Companys 2007 Annual Report on Form 10-K/A
filed with the Securities and Exchange Commission. Forgents internet website address is
http://www.asuresoftware.com. The Companys annual reports on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 are available through the
investor relations page of the Companys internet website free of charge
as soon as reasonably practicable after they are electronically filed, or
furnished to, the Securities and Exchange Commission. Forgents internet
website and the information contained therein or connected thereto are not
intended to be incorporated into this Quarterly Report on Form 10-Q.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in
this Report represent forward-looking statements. These statements involve
known and unknown risks, uncertainties and other factors that may cause actual
results of operations, levels of activity, economic performance, financial
condition or achievements to be materially different from future results of
operations, levels of activity, economic performance, financial condition or
achievements as expressed or implied by such forward-looking statements.
Forgent
has attempted to identify these forward-looking statements with the words believes,
estimates, plans, expects, anticipates, may, could and other
similar expressions. Although these forward-looking statements reflect
managements current plans and expectations, which are believed to be
reasonable as of the filing date of this report, they inherently are subject to
certain risks and uncertainties. Such
risks and uncertainties include, but are not limited to, those described under Risk
Factors in this report and other risks indicated in Forgents filings with the
Securities and Exchange Commission from time to time. Additionally, Forgent is under no obligation
to update any of the forward-looking statements after the date of this Form 10-Q
to conform such statements to actual results.
RESULTS OF OPERATIONS
The
following table sets forth for the fiscal periods indicated the percentage of
total revenues represented by certain items in Forgents Consolidated
Statements of Operations:
|
|
FOR THE THREE
MONTHS ENDED
OCTOBER 31,
|
|
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
Software and services revenues
|
|
100
|
%
|
11
|
%
|
Intellectual property licensing
revenues
|
|
|
|
89
|
|
Gross margin
|
|
82
|
|
58
|
|
Selling, general and
administrative
|
|
130
|
|
28
|
|
Research and development
|
|
16
|
|
1
|
|
Total operating expenses
|
|
148
|
|
29
|
|
Other income, net
|
|
17
|
|
1
|
|
Net income (loss)
|
|
(49
|
)%
|
30
|
%
|
THREE MONTHS ENDED
OCTOBER 31, 2007 AND 2006
Revenues
Revenues for the three months ended October 31,
2007 were $1.9 million, a decrease of $7.2 million, or 79%, from the $9.1 million
reported for the three months ended October 31, 2006.
Consolidated revenues represent the combined
revenues of the Company and its subsidiaries, including sales of the Companys scheduling software, asset management software,
workforce management software, software maintenance and support services,
10
professional services, installation and training
services and hardware devices, as well as royalties and settlements received
from licensing the Companys intellectual property.
In September 2007, the Company announced a change in the name under
which it does business by adopting the dba Asure Software to reflect the
Companys focus on its software and services segment for its future
growth. E
ffective September 13,
2007, the Company now trades in the NASDAQ Global Market System under the
symbol ASUR.
Software and Services
Business
Software and services
revenues for the three months ended October 31, 2007 were $1.9 million, an
increase of $0.9 million, or 95%, from the $1.0 million reported for the three
months ended October 31, 2006.
Software and services revenues as a percentage of total revenues were
100% and 11% for the three months ended October 31, 2007 and 2006,
respectively.
Revenues from this line of business include sales of Forgents
NetSimplicity scheduling and asset management software, including Meeting Room Manager (MRM) and Visual
Asset Manager (VAM), and sales of the Companys iEmployee workforce
management software
.
Also included in this segments revenues are
software maintenance and support services, professional services, such as add-on
software customization, installation and training, and hardware devices.
During the first fiscal quarter of 2008,
increases in software subscription revenues,
software license revenues and maintenance revenues accounted for approximately
83% of the $0.9 million increase in the software and services segments total
revenues. In October 2007, the
Company acquired the iEmployee workforce management software. The workforce management software, as well as
the Companys MRM On Demand software, are delivered to customers under the SaaS
model, which is software as a service on a subscription basis. The SaaS model allows customers to use
Forgents software without installing or maintaining it on their own
servers. The acquisition of iEmployee
and the continued growth of MRM On Demand led to a $0.3 million increase in
service revenues. Software license
revenues increased $0.3 million due primarily to continued focus on divisions
of enterprises and larger customers, which is driving sales with higher average
sales prices during the three months ended October 3,1 2007, and increased
focus on international sales. The increase in software license sales, as well
as the continued pursuit of maintenance renewals, led to additional sales of
maintenance and support contracts, which increased maintenance revenues by $0.1
million.
Forgent will continue to target North American and
international companies in the education, governmental, healthcare and legal
sectors, which generated approximately 53% of its software and services
revenues during the three months ended October 31, 2007. As the Company continues to fully integrate
the iEmployee operations, develop its sales force to increase sales
performance, and release new software updates and enhancements, management
believes its software and services revenues will continue to increase.
Intellectual Property Licensing Business
The Company did not have
any intellectual property licensing revenues for the three months ended October 31,
2007, which led to a decrease of $8.1 million, or 100%, from the $8.1 million
reported for the three months ended October 31, 2006. Intellectual
property licensing revenues as a percentage of total revenues were 0% and 89%
for the three months ended October 31, 2007 and 2006, respectively
In prior fiscal years, the Companys intellectual property licensing
revenues have been derived from licensing
U.S. Patent No. 4,698,672
(the 672 patent) and U.S. Patent No 6,285,746 (the 746 patent).
However, the 672 patent has expired and the 746 patent will be expiring
in May 2011. Additionally, the
litigations related to these two patents were concluded in fiscal year 2007.
Therefore, management does not anticipate any additional licensing revenues
from these patents. Although Forgent
continues to explore its patent portfolio for additional opportunities, there
can be no assurance that the Company will be able to continue to license its
technology to others. Additionally,
management believes any revenues to be generated from the Companys remaining
patent portfolio may be less than those generated historically.
11
Gross
Margin
Gross
margins for the three months ended October 31, 2007 were $1.5 million, a
decrease of $3.7 million, or 71%, from the $5.2 million reported for the three
months ended October 31, 2006. Gross margins as a percentage of total
revenues were 82% and 58% for the three months ended October 31, 2007 and
2006, respectively.
For
the three months ended October 31, 2006, the intellectual property
licensing segment generated 88% of the total gross margins. As such, the $3.7 million decrease in gross
margin for the three months ended October 31, 2007, is due primarily to
the $4.6 million decrease in gross margin resulting from licensing revenues
generated during first fiscal quarter of 2007.
Since the litigations related to the 672 patent and the 746
patent were concluded during fiscal year 2007, the decline in intellectual
property licensing revenues has adversely affected the Companys total gross
margin. However, gross margin as a
percentage of total revenues has improved during the three months ended October 31,
2007 due to the accomplishments achieved by the software and services segment
during the first fiscal quarter of 2008.
Software and Services Business
Software
and services gross margins
for
the three months ended October 31, 2007 were $1.6 million, an increase of
$0.9 million, or 137%, from the $0.7 million reported for the three months
ended October 31, 2006. Software and services gross margins as a
percentage of total revenues were 82% and 7% for the three months ended October 31,
2007 and 2006, respectively.
The cost of sales
associated with the software and services segment is relatively fixed and
results primarily from the amortization of the Companys purchased software
costs and compensation expenses. During
the three months ended October 31, 2007, cost of sales from the software
and services segment increased slightly.
During the first fiscal quarter of 2007, the Company fully amortized its
purchased software costs related to the acquisition of its NetSimplicity
software products, thereby decreasing the cost of sales by $0.1 million during
the three months ended October 31, 2006.
In October 2007, the Company acquired the iEmployee software
products. This acquisition resulted in a
$0.1 million increase in cost of sales due to the amortization of the newly
purchased software costs, as well as the compensation expenses related to the
iEmployee operations. Despite the
overall increase in cost of sales, the increase in software and services
revenues caused the gross margins as a percentage of revenues for the software
and services segment to increase from 68% for the three months ended October 31,
2006 to 82% for the three months ended October 31, 2007. S
ince Forgent expects to
generate more business from this segment, management expects gross margins from
the software and services segment to improve during the next fiscal quarter, in
terms of total dollars, and to remain relatively consistent in terms of
percentage of revenues for the segment.
Selling, General and
Administrative
Selling,
general and administrative expenses for the three months ended October 31,
2007 were $2.4 million, a decrease of $0.1 million or 2%, from the $2.5 million
reported for the three months ended October 31, 2006. Selling, general and
administrative (SG&A) expenses as a percentage of revenues were 130% and
28% for the three months ended October 31, 2007 and 2006, respectively.
Although total SG&A
expenses decreased slightly during the three months ended October 31,
2007, the net decrease was due primarily to two driving factors. Due to the conclusion of the litigations
related to the 672 patent and the 746 patent in fiscal year 2007, legal
expenses for the intellectual property licensing segment decreased by $0.2
million during the first fiscal quarter of 2008. This decrease was offset by an increase of
$0.1 million in SG&A expenses incurred by the acquired iEmployee
operations. Additionally, the decrease
in compensation expenses for the intellectual property licensing segment was
offset by an increase in sales and marketing compensation expenses for the
software and services segment during the three months ended October 31,
2007. In order to increase revenues from
its software business, the Company hired additional sales and marketing
personnel during the first fiscal quarter of 2008 and will continue to hire
additional sales personnel. Management
believes the additional personnel have contributed to the increase in software
and services revenues during the three months ended October 31, 2007 and
anticipates further increases in revenues as the Company continues to expand
its sales force.
Forgent will also
continue to evaluate and reduce
any unnecessary SG&A expenses that do not directly support the generation
of revenues for the Company.
12
Research
and Development
Research
and development expenses for the three months ended October 31, 2007 were
$0.3 million, an increase of $0.2 million, or 150%, from the $0.1 million
reported for the three months ended October 31, 2006. Research and development
(R&D) expenses as a percentage of revenues were 16% and 1% for the three
months ended October 31, 2007 and 2006, respectively.
During the three months
ended October 31, 2007, Forgent continued developing its MRM product and
released several minor versions, which included stronger compatibility with
Microsoft Outlook©. R&D efforts
related to MRM will remain focused on supporting the Companys larger
enterprise customers with a robust software platform that they can standardize
on and on enhancing the MRM Outlook Scheduling plug-in and Active Directory
support. Also during the first fiscal
quarter of 2008, the Company released VAM 5.7.
This new version of VAM introduced the new VAM importer module, which
enables customers to import data from legacy or external sources into VAM and
provides a technological foundation for further development efforts for
gathering and depositing data into VAM.
The
majority of the increase in R&D expenses during the three months ended October 31,
2007 is due to the acquisition of the iEmployee R&D workforce in October 2007. As the Company integrates the iEmployee
R&D workforce into the existing R&D team, management is exploring
opportunities to create synergies within the group and is investigating all
methods for managing its R&D efforts in the most cost-effective
manner. Although R&D expenses will
increase during the next fiscal quarter due to the acquisition, management will attempt to maintain R&D
expenses at reasonable levels in terms of percentage of revenue.
Net (Loss) Income
Forgent
generated a net loss of $0.9 million, or $0.03 per share, during the three
months ended October 31, 2007, compared to a net income of $2.7 million,
or $0.11 per share, during the three months ended October 31, 2006. Net (loss) income as a percentage of total
revenues were (49%) and 30% for the three months ended October 31, 2007
and 2006, respectively. The $3.6 million decrease in the Companys net income
is primarily attributable to the $3.7 million decrease in gross margin, which
is mainly associated with the reduction in intellectual property licensing
revenues during the first fiscal quarter of 2008.
LIQUIDITY AND CAPITAL RESOURCES
|
|
FOR THE THREE
MONTHS ENDED
OCTOBER 31,
|
|
|
|
2007
|
|
2006
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
14,423
|
|
$
|
14,063
|
|
Cash, cash equivalents and short-term investments
|
|
19,476
|
|
15,038
|
|
Cash used in operating activities
|
|
(9,064
|
)
|
(1,059
|
)
|
Cash used in investing activities
|
|
(8,550
|
)
|
(32
|
)
|
Cash provided by (used in) financing activities
|
|
1
|
|
(87
|
)
|
|
|
|
|
|
|
|
|
Cash
used in operating activities was $9.1 million for the three months ended October 31,
2007 due primarily to a $8.0 million decrease in accounts payable and $0.9
million in net loss. Cash used in
operating activities was $1.1 million for the three months ended October 31,
2006 due primarily to a $5.4 million increase in accounts receivable, which was
offset by the $2.8 million in net income and a $1.2 million increase in
accounts payable. During the three
months ended October 31, 2007, Forgent paid its legal counsel $7.4 million
in contingency fees related to its 746 patents settlement and license
agreements. The Company will pay the
related contingency fees to Jenkens & Gilchrist, P.C. (Jenkens) in a
future period, once the litigation with Jenkens is finalized.
Forgents average days sales outstanding
for its software and services segment was 49 days for the first fiscal quarter
of 2008, consistent with the 50 days for the first and fourth fiscal quarters
of 2007.
Cash
used in investing activities was $8.6 million for the three months ended October 31,
2007 due primarily to $7.2 million paid in cash related to the iEmployee
acquisition and $1.5 million purchase of short-term
13
investments.
Cash used in investing activities was $32 thousand for the three months ended October 31,
2006 due to purchases of fixed assets.
Forgent manages its investments portfolio in order to fulfill corporate
liquidity requirements and maximize investment returns while preserving the
quality of the portfolio. During the
first fiscal quarter of 2008, Forgent shifted its investment portfolio to
investments with slightly longer maturities in order to maximize its interest
income. As a result of this shift and
the increase in the average cash equivalents and short-term investment balances
during the three months ended October 31, 2007, Forgent achieved a 117%
increase in interest income during the three months ended October 31,
2007, as compared to the three months ended October 31, 2006.
The
acquired iEmployee business has on-going capital requirements. Management is currently reviewing these
requirements to determine how best to manage operations without expending
significant additional resources. Additionally,
as the Company evaluates facilitating its growth within its existing office
space, Forgent will be investing in leasehold improvements in the next fiscal
quarter to accommodate this growth.
Management anticipates spending approximately $0.1 million during the
remainder of fiscal year 2008 to fulfill these requirements.
The Company leases office space and equipment under
non-cancelable operating leases that expire at various dates through 2013.
Certain leases obligate Forgent to pay property taxes, maintenance and
insurance and include escalation clauses.
The total amount of base
rentals over the term of the Companys leases is charged to expense on a
straight-line basis, with the amount of the rental expense in excess of the
lease payments recorded as a deferred rent liability. Forgent may periodically
make other commitments and thus become subject to other contractual
obligations. Forgents future minimum
lease payments under all operating and capital leases as
of October 31, 2007 are
as follows:
|
|
Payments Due By Period
|
|
|
|
(in thousands)
|
|
|
|
Total
|
|
Less than
1 year
|
|
1 - 3 years
|
|
3- 5 years
|
|
More than
5 years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease obligations
|
|
$
|
18,812
|
|
$
|
3,754
|
|
$
|
6,997
|
|
$
|
6,836
|
|
$
|
1,225
|
|
Capital lease obligations
|
|
1
|
|
1
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,813
|
|
$
|
3,755
|
|
$
|
6,997
|
|
$
|
6,836
|
|
$
|
1,225
|
|
Approximately 95% of the Companys operating lease
obligations relates to its corporate office location at Wild Basin in Austin,
Texas. As of October 31, 2007,
Forgent had $4.0
million in future
minimum lease payments receivable under non-cancelable sublease
arrangements. Additionally, Forgent had
a $0.7 million liability related to impairment charges for the economic value
of the lost sublease rental income related to its Austin property.
Cash provided by financing activities was $1 thousand
for the three months ended October 31, 2007. Cash used in financing
activities was $87 thousand for the three months ended October 31, 2006
due primarily to $0.1 million in notes payable payments.
As of October 31,
2007, Forgent had $1.0 million available
from a credit line from Silicon Valley Bank, although no debt was outstanding at
quarter-end. Advances obtained from the Silicon Valley Bank
credit line will be notes payables that bear interest at prime plus 0.75% and
require monthly installments over a three year term. The Silicon Valley Bank credit line expires
on May 1, 2008. If Forgent renews
this source of financing, the Company may not be able to obtain similar terms
for the future credit line.
Forgents stock repurchase program allows the Company to
purchase up to three million shares of the Companys common stock. No shares
were repurchased during the three months ended October 31, 2007 or
2006. As of October 31, 2007,
Forgent had repurchased 1,790,401 shares
for approximately $4.8 million
and had the authority to repurchase approximately 1.2 million additional
shares. Management will periodically assess repurchasing additional shares
during fiscal year 2008, depending on the Companys cash position, market
conditions and other factors.
As of October 31,
2007, Forgents principal sources of liquidity consisted of $19.5 million of
cash, cash equivalents and short-term investments. Management currently plans to utilize its
cash balances to further develop its software operations by making additional
prudent investments to grow organically, continue exploring potential
14
opportunities in
acquiring a growing and profitable public or privately held technology business
or product line, and may repurchase outstanding shares. T
here is no assurance that the Company will be able to limit its cash
consumption and preserve its cash balances, and it is possible that the Companys
future business demands may lead to cash utilization at levels greater than
recently experienced due to the iEmployee acquisition, potential other
acquisitions and other factors. Management believes that the Company has
sufficient capital and liquidity to fund and cultivate the growth of its
current and future operations for the next 12 months and thereafter. However, due to uncertainties related to the
timing and costs of these efforts, Forgent may need to raise additional capital
in the future. Yet, there is no
assurance that the Company will be able to raise additional capital if and when
it is needed.
CRITICAL ACCOUNTING POLICY
The
Companys condensed consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles and include the
accounts of Forgents wholly owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in the consolidation.
Preparation of the condensed consolidated financial statements in conformity
with U.S. generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of the assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The more significant estimates made by management
include the valuation allowance for the gross deferred tax asset, contingency
reserves, useful lives of fixed assets, the determination of the fair value of
its long-lived assets and the fair value of assets acquired and liabilities
assumed during the recent acquisition. These estimates could be materially
different under different conditions and assumptions. Additionally, the actual amounts could differ
from the estimates made. Management periodically evaluates estimates used in
the preparation of the financial statements for continued reasonableness.
Appropriate adjustments, if any, to the estimates used are made prospectively
based upon such periodic evaluation.
Management believes the
following represents Forgents critical accounting policy:
Revenue
Recognition
The
Company recognizes revenue when persuasive evidence of an arrangement exists,
delivery has occurred, the fee is fixed or determinable and collectibility is
probable. The Company recognizes
software license revenue in accordance with Statement of Position (SOP) 97-2,
Software Revenue Recognition,
as
amended by SOP 98-4,
Deferral of the Effective
Date of a Provision of SOP 97-2,
and SOP 98-9,
Modification of SOP 97-2 With Respect to Certain
Transactions,
Securities and Exchange Commission Staff
Accounting Bulletin 104,
Revenue
Recognition,
and Emerging Issues Task Force (EITF) Issue No. 00-21,
Revenue Arrangements with Multiple
Deliverables.
The Company recognizes software subscription revenue
in accordance with EITF Issue No. 00-3,
Application
of AICPA Statement of Position 97-2 to Arrangements That Include the Right to
Use Software Stored on Another Entitys Hardware
and EITF Issue No. 00-21.
Software and service
revenue consists of software license, software subscription and service
fees. Revenue from the software element
is earned through the licensing or right to use the Companys software and from
the sale of specific software products.
Service fee income is earned through the sale of maintenance and
technical support, training and installation.
Revenue from the sale of hardware devices is
recognized upon shipment of the hardware.
Forgent sells multiple elements within a single sale. For software license arrangements, the
Company allocates the total fee to the various elements based on the relative
fair values of the elements specific to the Company. For software subscription arrangements, the
Company recognizes the total contract value ratably over the contract term.
The Company determines
the fair value of each element in the arrangement based on vendor-specific
objective evidence (VSOE) of fair value.
VSOE of fair value for the software, maintenance, and training and
installation services are based on the prices charged for the software,
maintenance and services when sold separately.
Revenue allocated to maintenance and technical support is recognized
ratably over the maintenance term (typically one year). Revenue allocated to installation and
training is recognized upon completion of these services. The Companys training and installation
services are not essential to the functionality of its products as such
services can be provided by a third party or the customers themselves.
For
instances in which VSOE cannot be determined for undelivered elements, and
these undelivered elements do not provide significant customization or
modification of its software product, Forgent recognizes the entire contract
amount ratably over the period during which the services are expected to be
performed.
15
Intellectual property
licensing revenue is derived from the Companys Patent Licensing Program, which
has generated licensing revenues relating to the Companys technologies
embodied in the 672 patent and the 746
patent. Gross intellectual
property licensing revenue is recognized at the time a license agreement has
been executed and collection has been deemed probable. Related costs are recorded as cost of
sales. The cost of sales in the
intellectual property licensing business relates to
contingent
legal fees incurred on successfully achieving signed agreements, as
well as legal fees incurred based upon legal counsels time.
The
Company does not recognize revenue for agreements with rights of return,
refundable fees, cancellation rights or acceptance clauses until such rights of
return, refund or cancellation have expired or acceptance has occurred. The Companys arrangements with resellers do
not allow for any rights of return.
Deferred
revenue includes amounts received from customers in excess of revenue
recognized, and is comprised of deferred maintenance, service and other
revenue. Deferred revenues are
recognized in the Condensed Consolidated Statements of Operations when the
service is completed and over the terms of the arrangements, primarily ranging
from one to three years.
Impairment
of Goodwill, Intangible Assets and Long-Lived Assets
Goodwill
and other intangible assets
with indefinite lives
are not required
to be amortized
under Financial Accounting Standard Board (FASB)
Statement No. 142,
Goodwill and Other
Intangible Assets,
and accordingly, the Company
reviews its
goodwill for possible impairment on an annual basis, or whenever specific
events warrant. Events that may create an impairment review include, but are
not limited to: significant and sustained decline in the Companys stock price
or market capitalization, significant underperformance of operating units and
significant changes in market conditions and trends. Forgent uses a two-step
process and
a discounted cash flow model
to evaluate its
assets for impairment.
If the carrying amount of the goodwill or asset
exceeds its implied fair value, an impairment loss is recognized in an amount
equal to the excess during that fiscal period.
Intangible assets that are not deemed to have indefinite lives are
amortized over their useful lives and are tested for impairment in accordance
with FASB Statement No. 144,
Accounting
for the Impairment or Disposal of Long-Lived Assets.
In
accordance with Statement No. 144, Forgent reviews and evaluates its
long-lived assets for impairment whenever events or changes in circumstances
indicate that their net book value may not be recoverable. When such
factors and circumstances exist, including those noted above, the Company
compares the assets carrying amounts against the estimated undiscounted cash
flows to be generated by those assets over their estimated useful lives.
If the carrying amounts are greater than the undiscounted cash flows, the
fair values of those assets are estimated by discounting the projected cash
flows. Any excess of the carrying amounts
over the fair values are recorded as impairments in that fiscal period.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Companys primary market risk exposure relates to
interest rate risk. Forgents interest income is sensitive to changes in U.S.
interest rates. However, due to the
short-term nature of the Companys investments, Forgent does not consider these
risks to be significant.
For
additional Quantitative and Qualitative Disclosures about Market Risk,
reference is made to Part II, Item 7A, Quantitative and Qualitative
Disclosures about Market Risk, in the Companys Annual Report on Form 10-K/A
for the year ended July 31, 2007.
ITEM 4. CONTROLS AND PROCEDURES
The Companys management is responsible for
establishing and maintaining adequate internal control over financial reporting
for the Company. The Company maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the reports it files under the Securities and Exchange
Act of 1934, as amended, is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the Securities and
Exchange Commission. Such controls
include those designed to ensure that information for disclosure is
communicated to management, including the Chairman of the Board and the Chief
Executive Officer (CEO), as appropriate to allow timely decisions regarding
required disclosure.
The CEO and Chief Financial Officer, with the
participation of management, have evaluated the effectiveness of the Companys
disclosure controls and procedures as of October 31, 2007. Based on their
16
evaluation, they have concluded, to the best
of their knowledge and belief, that the disclosure controls and procedures are
effective. No changes were made in the
Companys internal controls over financial reporting during the quarter ended October 31,
2007, that have materially affected, or are reasonably likely to materially
affect, the Companys internal controls over financial reporting. In making this assessment, management used
the criteria set forth in
Internal
Control-Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
Due to the
acquisition of iEmployee in October 2007, Forgent is required to implement
internal controls related to those operations. As of October 31, 2007, the
Company has not tested the operating effectiveness of the internal controls
related to iEmployee or the integration of iEmployee. In compliance with the
Public Company Accounting Oversight Boards and the Securities and Exchange
Commissions regulations and guidance, Forgent will not report on the
effectiveness of iEmployees internal controls over financial reporting under
the Sarbanes-Oxley Act of 2002 until its Annual Report on Form 10-K for
fiscal 2008.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Forgent
is the defendant or plaintiff in various actions that arose in the normal
course of business.
With the exception of the proceedings described
below, none of the pending legal proceedings to which the Company is a party
are material to the Company.
Litigation with Jenkens & Gilchrist, P.C.
On July 16, 2007, Jenkens &
Gilchrist, P.C. (Jenkens), Forgents former legal counsel, filed a complaint
against Forgent and Compressions Labs, Inc., in the District Court of
Dallas County, Texas. In its complaint,
Jenkens alleges a breach of contract and is seeking a declaratory
judgment. Forgent disputes Jenkens
claims and is seeking relief through the court system.
After Forgent terminated Jenkens, the Company
entered into a Resolution Agreement with Jenkens in December 2004. Under the Resolution Agreement, the Company
believes Jenkens is entitled to $1.4 million for all related contingency fees
and expenses related to the settlements from the litigation regarding the
Companys U.S. Patent No. 6,285,746 (the 746 patent). Jenkens interprets the Resolution Agreement
on broader terms and now believes it is entitled to $3.4 million, including
attorneys fees related to the litigation and interest. Management currently cannot predict how long
it may take to resolve the Jenkens lawsuit.
However, until the Jenkens litigation is finalized, the related
contingency fees and expenses may be adjusted in a future period and could have
a material impact to the Companys consolidated financial statements.
Litigation with Wild Basin
On September 6, 2007, Forgent filed a
petition against Wild Basin One & Two, Ltd. (Wild Basin) in the
District Court of Travis County, Texas.
The petition claims Wild Basin is in breach of contract relating to
Forgents lease agreement by unreasonably withholding and delaying its consent
to a pending lease assignment. On October 19,
2007, Forgent amended its petition to include claims of fraud and breach of
fiduciary duty against Wild Basin.
Forgent is seeking to recover all damages as a result of the delay in
closing its pending assignment, among other damages.
Re-examination
of United States Patent No. 6,285,746
On
October 2, 2006, the United States Patent and Trademark Office (the USPTO)
ordered an
inter partes
re-examination of the 746
patent and issued its first office action related to this re-examination on October 30,
2006. This first action, which is not
the final conclusion of the re-examination, rejected the five claims in the 746
patent. Forgent responded to the USPTO,
but the USPTO has not issued any additional office actions related to this
re-examination.
17
Re-examination of United States Patent No. 4,698,672
On January 31,
2006, the USPTO granted a petition to re-examine the Companys U.S. Patent No. 4,698,672
(the 672 patent) and subsequently issued its first office action on May 25,
2006. Forgent responded to this first
office action, which confirmed 27 of the 46 claims in the 672 patent. On March 26, 2007, the USPTO issued its
final office action, which affirmed its first office action. Forgent responded to the USPTO on May 11,
2007 and is currently waiting for the USPTOs reply.
ITEM 1A. RISK FACTORS
Many
factors affect Forgents business, prospects, liquidity and the results of
operations, some of which are beyond the Companys control. The following is a
discussion of important risk factors that may cause the actual results of the
Companys operations in future periods to differ materially from those
currently expected or desired. Additional risks not presently known to
management or risks that are currently believed to be immaterial but which may
become material, may also affect the Companys business, prospects, liquidity
and results of operations.
SOFTWARE
AND SERVICES BUSINESS
The Company may encounter problems related to its acquisition
of iEmployee, which could create business difficulties and adversely affect
operations.
The
Company may have difficulties integrating the services, technologies, personnel
and operations of iEmployee into the Companys existing software business.
These difficulties could disrupt Forgents ongoing business, distract
management and other personnel, increase expenses and adversely affect
operating results. If Forgent is unable
to fully integrate iEmployee with its existing operations, the Company may not
achieve all the intended benefits of the acquisition.
If
Forgent is unable to successfully market and sell its software products and
services, future software and services revenues will decline.
The future success of the Company is dependent
on its ability to generate demand for its NetSimplicity and iEmployee software
products and services. To this end, Forgents marketing and sales operations
must increase market awareness of the Companys products and services to
generate increased revenue. All new hires within the sales and marketing departments
will require training and may take time to achieve full productivity. Forgent
cannot be certain that its new hires will become as productive as
necessary. The Company also cannot be
certain that it will be able to hire enough qualified individuals or retain
existing employees in the future, and therefore, cannot be certain that it will
be successful in its efforts to market and sell its products and services. If Forgent is not successful in building
greater market awareness and generating increased sales, future software and
services revenues will decline.
Lack of new customers or additional sales from current
customers could negatively affect the Companys ability to grow revenues.
Forgents future success and
business model depends significantly on its ability to expand the use of its
software and services. The Company must
execute on its growth objectives by increasing its market share, maintaining
and increasing recurring revenues from new and existing customers, and selling
additional products and services to new and existing customers. If the Company fails to grow its customer
base or generate repeat and expanded business from its current customers,
Forgents software and services revenues could be adversely affected.
Since
NetSimplicitys maintenance and other service fees depend largely on the size
and number of licenses that are sold, any downturn in NetSimplicitys software
license revenue would negatively impact the Companys deployment services
revenue and future maintenance revenue. Additionally, if customers elect not to
renew their maintenance agreements, NetSimplicitys maintenance revenue could
be adversely affected.
Increased competition may have an adverse effect on the Companys
operating results.
The Company may encounter new entrants or
competition from vendors in some or all aspects of its software business. The
Company currently competes on the basis of price, technology, availability,
performance, quality, reliability, service and support. However, there can be
no assurance that the Company will be able to maintain a competitive advantage
with respect to any of these factors. Some of Forgents competitors, both
current and future, may have greater financial, technical and marketing
resources than the Company and, therefore, may be able to respond quicker to
new or emerging technologies and changes in customer requirements. As a result, they
18
may compete more effectively on price and other
terms. Additionally, these competitors
may devote greater resources in developing products or in promoting and selling
their products to achieve greater market acceptance. Such competition could adversely affect the
Companys operating results.
Open source software may increase
competition, resulting in decreases in the prices of Forgents software
products.
Many
different formal and informal groups of software developers and individuals
have created a wide variety of software and have made that software available
for use, distribution and modification, often free of charge. Such open source
software has been gaining in popularity among business users, particularly
small to medium sized businesses, which are some of Forgents targeted
customers. Although management is currently unaware of any competing open
source software, if developers make scheduling, asset management or workforce
management software applications available to the open source community, and
that software has competitive features, Forgent may need to change its pricing
and distribution strategy in order to compete.
A systems
failure or any other service interruption could result in substantial expenses
to the Company, loss of customers and claims by customers for damages caused by
any losses they incur.
The
Company offers hosting services through both its NetSimplicity and iEmployee
product lines. These services, which are
supported by hardware, infrastructure, ongoing maintenance and back-up
services, must be operated reliably on a 24 hours per day, seven days per week
basis without interruption or data loss.
If Forgent cannot protect its infrastructure, equipment and customer
data files against damage from human error, power loss or telecommunication
failures, intentional acts of vandalism, or any other catastrophic occurrences,
services to its customers may be interrupted.
If services are interrupted,
·
Customers may not be able to retrieve their data;
·
The Company could incur significant expenses to
replace existing equipment or purchase services from an alternative data
center;
·
Customers may not renew their services or cancel
their contracts;
·
Customers may seek reimbursement for losses that
they incur; and/or
·
The Companys reputation may be impaired, making it
difficult to attract new customers.
Although disaster recovery
plans and strategies are in place, Forgent may not be successful in mitigating
the effects of any systems failure or other service interruptions. Such
failures or interruptions could significantly impair the Companys operations
and adversely affect the Companys financial results.
If Forgents business, systems and/or IT security is
breached, the Companys businesses may be adversely affected.
A
security breach in the Companys business processes and/or systems has the
potential to impact the Companys customer information. Any issues of data privacy as they relate to
unauthorized access to or loss of customer information could result in the
potential loss of business, damage to the Companys reputation and
litigation. To prevent unauthorized
access to confidential information or attempts to breach the Companys
security, Forgent continues to invest in the security of its IT systems and
improve the controls within its IT systems and business processes. However,
there is no assurance that the Companys business and/or systems will not be
breached. If Forgents security is breached
or confidential information is accessed, the Companys business and operating
results may be adversely affected.
Claims of
intellectual property infringement by third parties may adversely affect
Forgents business.
The Company
may
become subjected to claims of intellectual property infringement by third
parties as the number of competitors and available software products continue
to grow and the functionality of such products increasingly overlaps. Any
infringement claims, with or without merit, could be time-consuming, result in
costly litigation, divert managements attention and financial resources, cause
the loss or deferral of sales or require the Company to enter into royalty or
license agreements. In the event of a successful claim of intellectual property
infringement against Forgent, the Companys business, operating results and
financial condition could be materially adversely affected, unless the Company
is able to either license the technology or similar technology or develop an
alternative technology on a timely basis.
Even if Forgent is able to license the technology, such royalty or
license agreements may not be available on terms acceptable to the Company.
19
If Forgent cannot prevent piracy
of its software products, revenues may decline.
Although the Company is unable to
determine the extent to which piracy of its software products occurs, software
piracy could be a problem. Since Forgent
has international resellers and customers, piracy may occur in foreign
countries where laws do not protect proprietary rights to the same extent as
the laws in the United States. Piracy may cause the Companys revenues to
decline. Forgent seeks to protect its
assets through a combination of patent and trademark laws as well as
confidentiality procedures and contractual provisions. These legal protections
afford only limited protection and enforcement of these rights may be time
consuming and expensive. Furthermore,
competitors may also independently develop similar, but not infringing,
technology or design around the Companys products.
The
Companys software products functionality may be impaired if third-party
hardware devices associated with the software do not operate successfully.
In
addition to its software products, Forgent currently sells hardware devices
from partnered vendors to its customers.
The effective implementation of the Companys software products depends
upon the successful operation of these third-party hardware products. Any undetected
defects in these third-party products could prevent the implementation of or
impair the functionality of the Companys software or blemish Forgents
reputation.
If customers cease using Microsoft Outlook© or if Microsoft
changes its Outlook application significantly, revenues may decline and/or the
Company may incur significant expenses to update its MRM Enterprise software.
The
Companys MRM Enterprise software is designed to operate with Microsoft
Outlook©. Although management believes
that Microsoft Outlook© is currently and widely utilized by businesses in the
Companys target markets, there are no assurances that businesses will continue
to use Microsoft Outlook© as anticipated, will migrate from older versions to
newer versions of Microsoft Outlook©, or will not adopt alternative
technologies that are incompatible with MRM Enterprise. Forgent may not be timely in updating its MRM
Enterprise software to be compatible with Microsoft Outlook©. As a result, software revenues may
decline. Additionally, the Company may
incur significant expenses updating its MRM Enterprise software to be
compatible with changes in Microsoft Outlook©.
If Forgent fails to introduce new versions and releases of
functional and scalable software products in a cost-effective and timely
manner, customers may license competing products and Forgents revenues will
decline.
The technology industry is
characterized by continuing improvements in technology, resulting in the
frequent introduction of new products, short product life cycles, changes in
customer needs and continual improvement in product performance
characteristics. Forgent expects that
its future financial performance will depend, in part, on revenue generated
from future software products and enhancements as well as other software
related products that the Company plans to develop and/or acquire. To be
successful, Forgent must be cost-effective and timely in enhancing its existing
software applications, developing new software technology and solutions that address
the increasingly sophisticated and varied needs of its existing and prospective
clients, and anticipating technological advances and evolving industry
standards and practices.
Forgent
spends a large portion of its research and development resources on product
upgrades and may need to invest further in research and development in order to
keep its software applications and solutions viable in the rapidly changing
marketplace. This research and development effort, which may require
significant resources, could ultimately be unsuccessful if Forgent does not
achieve market acceptance for its new products or enhancements. Additionally, if the Company fails to
anticipate and respond effectively to technological improvements or if Forgents
competitors release new products that are superior to Forgents products in
performance and/or price, demand for the Companys software products may
decline and Forgent may lose sales and fail to achieve anticipated revenues.
Errors or defects in Forgents software could reduce demand
for its software and result in decreased revenues, decreased market acceptance
and injury to the Companys reputation.
Errors or defects in the
Companys software, sometimes called bugs, may be found from time-to-time,
particularly when new versions or enhancements are released. Any significant
software errors or defects may result in loss of sales, decreased revenues,
delay in market acceptance and injury to the Companys reputation. Despite
extensive product testing during development, new versions or enhancements of
Forgents software may still have errors after commercial shipments begin. Forgent corrects the bugs and delivers the
corrections in subsequent maintenance releases, patches and on-going
service. However, errors or defects
could put the Company at a competitive disadvantage and can be costly and
time-consuming to correct.
20
If Forgent is unable to develop or maintain strategic
relationships with its resellers and vendor partners who market and sell the
Companys products, revenues may decline.
Forgent supplements its
direct sales force by contracting with resellers and vendor partners to
generate additional sales. Forgents
revenue growth will depend, in part, on adding new resellers and partners to
expand the Companys sales channels, as well as leveraging the Companys
relationships with existing resellers and partners. If Forgent is unable to
enter into successful new strategic relationships in the future or if the Companys
current relationships with its resellers and partners deteriorate or terminate,
Forgent may lose sales and revenues may decline.
INTELLECTUAL
PROPERTY LICENSING BUSINESS
If the Company is unable to obtain new license agreements,
revenues will decline.
In
prior fiscal years, the Companys intellectual property licensing revenues have
been derived primarily from the 672 patent and the 746 patent. However,
the 672 patent has expired and the 746 patent will be expiring in May 2011. Additionally, the Company considers the
litigations related to these two patents to be concluded. Therefore, management
does not anticipate any additional licensing revenues from these patents.
Although
Forgent continues to explore its patent portfolio for additional opportunities,
there can be no assurance that the Company will be able to continue to license
its technology to others. Additionally,
the Companys Patent Licensing Program involves risks inherent in licensing
intellectual property, including risks of protracted delays, legal or
regulatory challenges that would lead to disruption or curtailment of the
program, increasing expenditures associated with the pursuit of the program and
other risks. Management believes any
revenues to be generated from the Companys remaining patent portfolio may be
less than those generated historically.
OTHER
If
Forgents common stock is delisted from NASDAQ, its stockholders ability to
sell their shares and the Companys ability to raise capital may be adversely
affected.
In the past, the Company
has received
Nasdaq
staff
deficiency letters indicating that, for 30
consecutive business days, the bid price per share of the Companys common
stock closed below the minimum $1.00 per share requirement. Therefore, its common stock was subject to
potential delisting from the
Nasdaq
Global Market
Exchange pursuant to Nasdaq Marketplace Rule 4450(a)(5). Although the
Company regained bid price compliance after maintaining a share price in excess
of $1.00 for ten consecutive business days and currently
does not face a potential delisting from the Nasdaq Global Market Exchange,
Forgent
cannot
give investors in its common stock any assurance that the Company will be able
to maintain compliance with the $1.00 per share minimum price requirement for
continued listing on NASDAQ or that its stock will not be delisted by NASDAQ in
the future.
If
in the future the Companys common stock is delisted from NASDAQ, the market
liquidity of the Companys common stock will be significantly limited, which
would reduce stockholders ability to sell their Company securities in the
secondary market. Additionally, any such
delisting would harm Forgents ability to raise capital through alternative
financing sources on acceptable terms, if at all, and may result in the loss of
confidence in the Companys financial stability by vendors, customers and
employees.
Forgent may face problems in connection with future
acquisitions, which could create business difficulties and adversely affect
operations.
As
part of the Companys business strategy, Forgent may acquire additional
businesses, products and technologies that could complement or expand its
ongoing business. However, the Company
may be unable to identify suitable acquisitions or investment candidates. Even
if Forgent identifies suitable candidates, there are no assurances that the
Company will be able to make the acquisitions or investments on favorable
terms. Negotiations of potential acquisitions could divert management time and
resources and the Company may incorrectly judge the value or worth of an
acquired business, product or technology. Additionally, Forgent may incur
significant debt or be required to issue equity securities to pay for such
future acquisitions or investments.
21
Historically, the Company has not
been profitable and Forgent may continue to incur losses, which may result in
decreases in revenues if customers raise viability concerns.
Although
Forgent generated net income for the year ended July 31, 2007, the Company
incurred losses during the prior fiscal years and during the three months ended
October 31, 2007. The net income
during fiscal year 2007 was due to the income generated from the intellectual
property licensing segment and is not expected to continue. Additionally
as of October 31, 2007,
Forgent had an accumulated deficit of $239.4
million
and may incur additional losses in the future.
Continued losses may cause existing and new customers to question the
Companys viability and be reluctant to purchase from the Company. If Forgent is unable to increase its sales
due to such concerns, revenues will decline, which would further adversely
affect the Companys operating results. Therefore, there are no assurances that
the Company can achieve or generate sufficient revenues to realize
profitability.
Forgent may not be able to
protect or enforce its intellectual property rights, which could adversely
affect the Companys operations.
The
Company seeks to protect its assets through patent and trademark laws. Forgent currently has several patents and
trademarks, as well as patent applications and trademark registrations. However, the Companys patent applications or
trademark registrations may not be approved. Additionally, even if approved,
the resulting patents or trademarks may not provide the Company with any
competitive advantage or may be challenged by third parties. If challenged, patents and trademarks might
not be upheld or claims could be narrowed. Any challenges or litigation
surrounding the Companys rights could force Forgent to divert important
financial and other resources away from business operations.
If Forgent elects to raise
additional capital, funds may not be available or, if available, may not be on
favorable terms to the Company.
In the future, Forgent may elect to raise
additional capital to fund its operations and/or acquisitions. However, Forgent
cannot be certain that it will be able to obtain financing on favorable
terms. If Forgent takes out loans, the
Company may incur significant interest expense, which could adversely affect
operating results. If Forgent issues
equity securities, its stockholders percentage of ownership would be reduced
and the new equity securities may have rights, preferences or privileges senior
to those existing stockholders of the Companys common stock. If Forgent is unable to raise funds on
acceptable terms, Forgent may not be able to acquire additional businesses,
products or technologies, develop or enhance its existing products, respond to
competitive pressures or unanticipated requirements, or take advantage of
future opportunities, all of which could adversely affect the Companys
business, operating results and financial condition.
Forgent may experience fluctuations in its quarterly results
and if the Companys future results are below expectations, the price for the
Companys common stock may decline.
In
the past, the Companys revenues and operating results have varied
significantly from quarter to quarter due to the various events experienced by
the intellectual property licensing segment.
Although management expects that revenues and operating results may
fluctuate less from quarter to quarter due to the conclusion of the
intellectual property licensing segments litigations, any fluctuation may lead
to reduced prices for the Companys common stock. Several factors may cause the quarterly
results to fluctuate, including:
·
market
demand for the Companys software products and services;
·
timing
of customers budget cycles;
·
timing
of customer orders and deployment of the Companys software products and
services;
·
mix
of software license and services revenues;
·
timing of introducing new
products and services or enhancements to existing products and services;
·
new product releases or
pricing policies by Forgents competitors;
·
seasonal
fluctuations in capital spending;
·
changes
in the rapidly evolving market for web-based applications;
·
managements
ability to manage operating costs, a large portion of which are relatively
fixed in advance of any particular quarter;
·
timing
and costs related to potential additional acquisitions of
businesses,
products or technologies;
·
costs
of attracting, retaining and training skilled personnel;
·
managements
ability to manage future growth;
·
changes in U.S. generally
accepted accounting principles; and
·
general
economic climate.
22
Some of these factors are within managements
control while others are not.
Accordingly, management believes that quarter-to-quarter comparisons of
the Companys revenues and operating results are not necessarily meaningful and
that market analysts and investors should not rely on the results of any
particular quarter as an indication of future performance.
The
loss of key management and personnel could hinder the development of Forgents
technology and otherwise adversely affect the Companys business.
Forgent relies on the
continued contributions of its senior management, and its sales and marketing,
professional services and finance personnel.
Forgents success depends upon its
ability to attract, hire and retain
highly qualified and experienced personnel, especially software
developers and engineers who design and develop software applications in order to keep pace with client demand for
rapidly evolving technologies and varying client needs. The Companys operations are also dependent
on the continued efforts of its executive officers and senior management,
including iEmployees senior management and the senior management of any
business it may acquire in the future.
If any of the Companys key personnel or senior management are unable or
unwilling to continue in his or her present role, or if Forgent is unable to attract,
train, retain and manage its employees effectively,
Forgent could encounter
difficulties in developing new products and product enhancements,
generating revenue through increased sales efforts and providing high quality
customer service.
Although Forgent has executed a shareholders rights plan,
there are no assurances that a change of control will not occur.
In
December 2005, the Companys Board of Directors approved and executed a
shareholder rights plan (Rights Plan) whereby one preferred share purchase
right was distributed for each outstanding share of the Companys common stock
for all stockholders of record on December 31, 2005. The Rights Plan, which was not adopted in response
to any threat to the Company, was designed to guard against any proposed
takeover, partial tender offers, open market accumulations and other tactics
designed to gain control of the Company. Under the Rights Plan, the preferred
share purchase rights become exercisable if a person or group thereafter
acquires 15% or more of the Companys common stock or announces a tender offer
for 15% or more of the Companys common stock. Such events, or if the Company
is acquired in a merger or other business combination transaction after a
person or group acquires 15% or more of its common stock, would entitle the
right holder to purchase, at an exercise price of $13.00 per share, a number of
shares of common stock having a market value at that time equal to twice the
rights exercise price. The Rights Plan may have the effect of discouraging,
delaying or preventing unsolicited acquisition proposals, but there are no
assurances a change of control will not occur.
Due
to the risk factors noted above and elsewhere in
Managements Discussion and Analysis of Financial Condition and
Results of Operations,
Forgents past earnings and stock price have
been, and future earnings and stock price potentially may be, subject to
significant volatility, particularly on a quarterly basis. Past financial
performance should not be considered a reliable indicator of future performance
and investors are cautioned in using historical trends to anticipate results or
trends in future periods. Any shortfall in revenue or earnings from the levels
anticipated by market analysts and investors could have an immediate and
significant effect on the trading price of the Companys common stock.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On October 5,
2007, the Company issued 5,095,000 shares of its Common Stock to the former
stockholders and option holders of iEmployee
as part of the
consideration for the iEmployee acquisition. As indicated in Note 2 of
the Notes to the Condensed Consolidated Financial Statements in this Report,
such shares had a total value of approximately $4,987,000. The shares
were not
registered with the Securities Exchange Commission at the time of
issuance and were issued in reliance on an exemption from registration
under the Securities Act of 1933, as amended (the Securities Act).
Specifically, the shares were sold pursuant to Rule 506 of Regulation D
under the Securities Act to accredited investors only, such sales
being further evidenced by the Companys filing of a Form D with the
Securities Exchange Commission.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM
6. EXHIBITS
Exhibits:
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2.2*
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Agreement
and Plan of Merger, dated as of September 11, 2007 by and among Forgent
Networks, Inc., Cheetah Acquisition Company, Inc. and iSarla Inc.
|
|
|
|
3.1
|
|
Restated
Certificate of Incorporation (incorporated by reference to Exhibit 3.1
to the Companys quarterly report on Form 10-Q for the three months
ended October 31, 2004).
|
|
|
|
3.2
|
|
Restated
Bylaws (incorporated by reference to Exhibit 3.2 to the Companys
quarterly report on Form 10-Q for the three months ended
October 31, 2004).
|
|
|
|
4.1
|
|
Specimen
Certificate for the Common Stock (incorporated by reference to
Exhibit 4.1 to the Companys Registration Statement on Form S-1,
File No. 33-45876, as amended).
|
|
|
|
4.2
|
|
Rights
Agreement, dated as of December 19, 2005 between Forgent
Networks, Inc. and American Stock Transfer & Trust Company,
which includes the form of Series A Preferred Stock, $.01 par value, the
form of Rights Certificate, and the Summary of Rights (incorporated by
reference to Exhibit 4.1 to the Companys Current Report on Form 8-K
dated December 19, 2005).
|
|
|
|
10.42*
|
|
Employment
Agreement with Fenil Shah dated October 5, 2007.
|
|
|
|
10.43*
|
|
Employment Agreement with Snehal Shah dated October 5, 2007.
|
|
|
|
31.1*
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2*
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1*
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2*
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
* Filed herewith
24
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
FORGENT
NETWORKS, INC.
|
|
|
|
|
December 17,
2007
|
By:
|
/s/ RICHARD N. SNYDER
|
|
|
Richard
N. Snyder
|
|
|
Chief
Executive Officer
|
|
|
|
|
December 17,
2007
|
By:
|
/s/ JAY C. PETERSON
|
|
|
Jay C. Peterson
|
|
|
Chief
Financial Officer
|
|
|
|
|
25
INDEX TO
EXHIBITS
EXHIBIT
NUMBER
|
|
DESCRIPTION
|
|
|
|
2.2
|
|
Agreement
and Plan of Merger, dated as of September 11, 2007 by and among Forgent
Networks, Inc., Cheetah Acquisition Company, Inc. and iSarla Inc.
|
|
|
|
3.1
|
|
Restated
Certificate of Incorporation (incorporated by reference to Exhibit 3.1
to the Companys quarterly report on Form 10-Q for the three months ended
October 31, 2004).
|
|
|
|
3.2
|
|
Restated
Bylaws (incorporated by reference to Exhibit 3.2 to the Companys
quarterly report on Form 10-Q for the three months ended
October 31, 2004).
|
|
|
|
4.1
|
|
Specimen
Certificate for the Common Stock (incorporated by reference to
Exhibit 4.1 to the Companys Registration Statement on Form S-1,
File No. 33-45876, as amended).
|
|
|
|
4.2
|
|
Rights
Agreement, dated as of December 19, 2005 between Forgent
Networks, Inc. and American Stock Transfer & Trust Company,
which includes the form of Series A Preferred Stock, $.01 par value, the
form of Rights Certificate, and the Summary of Rights (incorporated by
reference to Exhibit 4.1 to the Companys Current Report on
Form 8-K dated December 19, 2005).
|
|
|
|
10.42
|
|
Employment
Agreement with Fenil Shah dated October 5, 2007.
|
|
|
|
10.43
|
|
Employment Agreement with Snehal Shah dated October 5, 2007.
|
|
|
|
31.1
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.1
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
32.2
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
|
26
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