Concurrent Computer Corp (CCUR) SEC Annual Report (10-K) for 2016

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Annual Report Pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934

(Mark One)

For the fiscal year ended June 30, 2016

OR

For the transition period from                      to                   

Commission File Number: 001-37706

Concurrent Computer Corporation

(Exact name of registrant as specified in its charter)

Delaware

(State of Incorporation)

04-2735766

(I.R.S. Employer Identification No.)

4375 River Green Parkway, Suite 100, Duluth, Georgia 30096

(Address of principal executive offices, including zip code)

(678) 258-4000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes   ¨      No   x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes   ¨     No   x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definition of "accelerated filer", "large accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer      ¨        Accelerated filer     ¨      Non-accelerated filer    ¨ Smaller reporting company     x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   x

The aggregate market value of the common equity held by non-affiliates of the registrant as of December 31, 2015 was approximately $45,529,184 based on the closing price of $4.95 of our common stock as reported by the NASDAQ Global Market on December 31, 2015. There were 9,630,127 shares of common stock outstanding as of August 25, 2016.

Certain portions of the Registrant's Proxy Statement to be used in connection with Registrant's 2016 Annual Meeting of Stockholders scheduled to be held on October 26, 2016 are incorporated by reference in Part III hereof.

PART I

Certain statements made or incorporated by reference in this Annual Report on Form 10-K may constitute "forward-looking statements" within the meaning of the federal securities laws. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. Certain risks and uncertainties which could affect our financial condition or results are discussed below under the heading "Risk Factors" and in the discussion under the heading "Cautionary Note Regarding Forward-Looking Statement on page 42 herein. Our forward-looking statements are based on current expectations and speak only as of the date of such statements. When we use the terms "Concurrent," "we," "our," and "us," we mean Concurrent Computer Corporation and its subsidiaries. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.

Item 1. Business.

Overview

Concurrent is a global software and solutions company that develops advanced applications on a core foundation of high performance Linux ® and storage technologies. We serve industries and customers that demand uncompromising performance, reliability and flexibility to gain a competitive edge, drive meaningful growth and confidently deliver best-in-class solutions that enrich the lives of millions of people around the world every day. Our business is comprised of two segments for financial reporting purposes, products and services, which we provide for each of these markets.

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 applications including live broadcast video, video-on-demand ("VOD") and time-shifted video services such as cloud-based digital video recording ("cDVR"). Our multi-workload, scale-out storage products are ideally suited for a wide-range of enterprise IT and video applications that require advanced performance, very large storage capacities, and a high degree of reliability. In September 2015, we sold our multi-screen video analytics product line for collecting and analyzing data related to content delivery applications (see Note 5 to the consolidated financial statements).

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.

We were incorporated in Delaware in 1981 under the name Massachusetts Computer Corporation.

As soon as reasonably practicable after filing with the Securities and Exchange Commission ("SEC"), we make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports available, free of charge, on the Investors page of our website ( www.concurrent.com ), under the ‘Company' tab in the SEC Filings section. We have adopted a code of ethics that is applicable to all employees as well as a code of ethics applicable to our principal executive, financial, and accounting officers. Both of these ethics policies are posted on the Investors page of our website ( www.concurrent.com ), under the ‘Company' tab in the Corporate Governance section. Copies of these documents will be furnished upon written request delivered to the following address: Attn: Corporate Secretary, 4375 River Green Parkway, Suite 100, Duluth, Georgia 30096. If we amend or change our code of ethics applicable to our principal executive, financial and accounting officers or grant a waiver under such code, we will disclose these events through our website. No information from our website is incorporated within this filing.

The Content Delivery Market

Our content delivery solutions are used by cable, telecommunications and Internet service providers to offer live broadcast, VOD and time-shifted video services to their consumer customers. Digital video consumption has grown steadily year-over-year and streaming services have become a critical source of revenue for video service providers around the world. In a recent forecast from research and consulting firm Strategy Analytics, consumer spending on streaming services is expected to rise by 22% in 2016 relative to 2015. Nearly two-thirds of global respondents (65%) in a Nielsen online survey in 61 countries say they watch some form of VOD programming. In fact, the same Nielsen survey suggests that VOD is becoming a regular part of consumers' daily viewing habits noting 43% of those who watch VOD programming do so daily.

Consumer use of Internet-based subscription video services is also on the rise. According to eMarketer, for the first time, Internet-based streaming video services are being used in more than 50% of U.S. TV households in 2016, an increase of 8% relative to 2015. According to the NPD Group's Connected Intelligence Smartphone and Tablet Usage Report, mobile usage is also growing with 81% of all U.S. smartphone users now streaming video on their devices.

New services like cDVR are also beginning to roll out, enabling consumers to record and store live video programming in a remote digital network and watch it whenever they choose, on any device, over both fixed and wireless networks. According to market research from Technavio, the global cDVR market is expected to grow at a compounded annual growth rate ("CAGR") of almost 31% between 2016 and 2020.

The Scale-out Storage Market

Scale-out storage is a network-attached storage architecture in which the total amount of disk space can be expanded through the addition of devices in connected arrays whereby new hardware can be added and configured as the need arises. The market for scale-out software-defined storage ("SDS") is growing rapidly. According to global research firm Markets and Markets, the SDS market is estimated to grow from $4.7 billion in 2016 to $22.6 billion in 2021, an estimated CAGR of 36.7% from 2016 to 2019. Growth in the SDS market is powered by a variety of factors, including the need for exabyte capacities and more open, elastic and scalable deployment architectures than can be supported with traditional hardware-based storage solutions. According to the 2016 data center storage market report from RnR Market Research, a key growth driver for SDS will be new data center construction in support of big data analytics, Internet of Things ("IoT") applications, and cloud-based IT services that require more flexible, software-based storage solutions. A study by Gartner, Inc. predicts that SDS systems will surpass traditional enterprise storage markets by 2020, with 70% to 80% of unstructured data being stored in storage hardware managed by SDS systems.

The Real-Time Computing Market

Our real-time products are used in host, client-server, embedded and distributed computing applications in a wide range of markets. Aerospace, defense, energy, manufacturing and automotive companies utilize our operating systems and development tools in their simulation, data acquisition and process control systems. Simulation systems that utilize our real-time products include engines, avionics and automotive subsystems, ground vehicle operation, and mission planning and rehearsal. Data acquisition systems that utilize our real-time products include environmental analysis and display, engine testing, range and telemetry systems, shock and vibration testing, forecasting, analysis, and command and control applications.

Our Linux operating system, debugging software applications and performance optimization tools are used by companies in a variety of industries to improve the performance of their applications on commercial hardware platforms. Our operating system supports real-time applications, delivering ultra-low latency response time of less than five (5) microseconds. Our software tools are designed to provide developers with a better understanding of how applications interact with the underlying Linux operating system, enabling companies to deliver higher performance products in less time, and to run them with greater reliability.

Business Strategy

Content Delivery Product Line

Our content delivery strategy is to develop products that enable service providers to deliver a more compelling video entertainment experience on every screen. Our solutions are designed to provide a seamless evolutionary path that enables customers to support today's business requirements while also taking advantage of next generation technologies that deliver the advanced features required to succeed in tomorrow's video entertainment landscape. We offer flexible and scalable solutions comprised of software bundled with standard commercial hardware, as well as software-only solutions that can be deployed on customer provided hardware. Our proven, best-in-class solutions include features to address both classic televisions as well as Internet connected consumer devices from a common solution architecture. We market products that encode, transcode, record, protect, distribute, intelligently cache, and stream video content to a variety of viewing devices. Our content delivery solutions support live and on-demand services including broadcast TV, multi-screen VOD, time-shifted TV, and cDVR services.

Storage Product Line

Our storage strategy is focused on providing open, scalable storage solutions that serve the multi-workload requirements of a broad range of enterprise IT and video markets. Our solutions are software-defined, enabling them to be more easily managed and configured to support each customer's unique application and scaling requirements. We employ open source storage software along with our core Linux technology and experience to deliver a high performance storage platform that can scale to exabyte capacity levels. We continue to enhance our Aquari™ scale-out storage solution to expand the range of supported features, improve the management and control software, and perform integrations with a variety of technology partners to support market-specific requirements.

Real-Time Product Line

Our real-time strategy is comprised of initiatives designed to maintain and expand our current real-time product line. We provide regular updates to our RedHawk ™ Linux real-time operating system and NightStar ™ suite of software debugging and analysis tools. We are continually expanding the functionality offered on our iHawk ™ and ImaGen ™ integrated hardware platforms, including products such as SIMulation Workbench ™ , SIGnal Workbench ™ and GPU Workbench ™ . We evaluate additional opportunities to cooperate with partners to expand offerings of compatible third-party applications.

Products and Services

Our business is comprised of two segments for financial reporting purposes: products and services. Our products fall into three principal groups, content delivery, storage and real-time. In addition, we provide technical support for our products. For fiscal year 2016, our products segment accounted for 68% of our revenue and our service segment accounted for 32% of our revenue. For more information about the financial results of each of our segments, see Note 12 to the consolidated financial statements.

Content Delivery Products

UpShift ™ Unified Content Delivery Solution. Concurrent's unified content delivery solution combines our innovative video encoding, transcoding, recording, storage and delivery software modules with standard commercial hardware sourced from leading original equipment manufacturers ("OEMs"). Our content delivery products allow video service providers to build regional, national and global content delivery networks ("CDNs") to stream video to any screen. We believe our modular, software-based approach provides our customers with the ability to more easily deploy new systems, expand those deployments, and add services over time. Our unified solution provides a common software framework for delivering video to traditional set-top boxes ("STBs") as well as Internet connected devices over both private and public networks. Our design goal is to provide seamless end-user viewing of the highest quality on any device and to offer a seamless migration path for service providers that are evolving their proprietary video networks toward more flexible IP delivery networks and cloud-based video distribution.

Our content delivery software is integrated with standard commercial hardware components such as servers, disk arrays, solid state storage arrays, and network switching equipment. Our content delivery products are compatible with a wide range of video infrastructure technologies and consumer access devices, including digital head-end equipment, network transport, IP routers/switches, QAMs, DSL technologies, CMTS, STBs, and IP connected consumer electronic devices.

Storage Products

Aquari ™ is an open, software-defined, scale-out storage solution that supports a wide variety of applications and workloads. Powered by our storage-optimized real-time enhancements for Linux, Aquari delivers the scalability and performance required to address the needs of enterprise IT and video customers. Based on open source Ceph storage software, Aquari delivers unmatched flexibility by combining multiple types of storage into a single platform, which means one storage solution can address the storage needs of multiple applications within an organization. With its intuitive controls, single point of management, and resilient, self-healing technology, Aquari reduces the time and effort associated with managing traditional storage solutions.

Real-Time Products

Our real-time products include hardware and software solutions designed for the automotive, aerospace, energy, manufacturing and defense markets. Our software solutions include RedHawk Linux, an open source real-time operating system featuring extremely low latency, advanced tuning features, and real-time determinism. Application performance on the RedHawk Linux OS can be optimized using NightStar tools, a GUI-based set of development tools that enable users to debug, analyze, and tune application software running in CPU and GPU based computing environments. The pairing of our RedHawk Linux OS and NightStar tools offers application developers a greater degree of visibility and control of how their applications run on commercial hardware versus traditional operating systems. Customers can deploy our RedHawk Linux OS on our iHawk and ImaGen servers, which are based on the latest Intel ® and AMD ® -technologies and are optimized for simulation, data acquisition and process-control applications. We also offer application software that is used to support real-time simulation and testing applications. SIMulation Workbench delivers a complete framework for developing and executing real-time hardware-in-the-loop ("HIL") and man-in-the-loop ("MIL") simulations. SIGnal Workbench is a programmable real-time signal conditioning solution and GPU Workbench is a development platform for real-time applications using NVIDIA ® CUDA ® technology.

Services

Product Support . We offer worldwide hardware and software maintenance and support services for our products. Our services include installation, integration, training, on-site maintenance, 24x7 telephone support, return-to-factory warranty, depot repair, troubleshooting, operational support, and software support services.

Managed Services. Prior to the sale of our multi-screen video analytics product line in September 2015 (see Note 5 to the consolidated financial statements), we offered a comprehensive set of professional services to customers using our multi-screen video analytics solutions. Services included monitoring of data transmissions, confirmation of data integrity, system maintenance, installation of updates and monitoring of data delivery between customer systems.

Custom Engineering and Integration Services. We also provide custom engineering and integration services in the design of special hardware and software to help our customers with their specific applications. This may include custom modifications to our products or integration of third-party interfaces or devices into our systems prior to delivery to our customers. Many customers use these services to migrate existing applications from earlier generations of our systems or our competitors' systems.

Professional Services. We offer additional professional services in connection with our solutions, including additional onsite services, enhanced monitoring services, site audits, and other consulting services related to our products.

Sales and Marketing

We sell our solutions in the U.S. primarily through our direct field sales team supported by consultants and our sales support group. Our sales force has significant experience in content delivery, real-time, and storage applications. Outside North America, we utilize a direct sales force based in our facilities in France, Germany, Japan, China, Hong Kong and the United Kingdom. Our global sales efforts are augmented by a variety of channel partners (resellers and system integrators).

Customers

We derive revenue from a limited number of customers. Our products are typically assembled and shipped in the same quarter the purchase order is received, and as a result, we typically have minimal backlog. Our backlog for content delivery, storage and real-time products and services at June 30, 2016 totaled $9.4 million compared to $8.6 million at June 30, 2015.

We have purchase agreements with many customers, but these agreements typically do not require minimum purchases of our products. As a result, sales to specific customers tend to, and are expected to continue to, vary from year-to-year, depending on such customers' budgets for capital expenditures and new product introductions.

A significant portion of our content delivery solutions revenue has come from, and is expected to continue to come from, sales to service providers. Charter Communications/Time Warner Cable ("Charter/TWC"; Charter Communications and Time Warner Cable merged in May 2016) represented 21%, 11% and 17% of our total revenue for the fiscal years ended June 30, 2016, 2015 and 2014, respectively. Cox Communications, Inc. ("Cox") represented 7%, 9% and 15% of our total revenue for the fiscal years ended June 30, 2016, 2015 and 2014, respectively. No other customer of content delivery solutions accounted for more than 10% of our total revenue during fiscal years 2016, 2015 and 2014.

Although we sell our real-time products to large customers, our customer base is generally more diversified than our content delivery business. For the fiscal years ended June 30, 2016, 2015 and 2014, no single real-time customer accounted for more than 10% of total revenue.

We derive a significant portion of our real-time product revenue from the supply of products to U.S. Government prime contractors and agencies of the U.S. Government. The supplied systems include RedHawk, iHawk, ImaGen, and other configurations with certain systems incorporating custom enhancements requested by the customer. We sell these integrated computer systems to prime contractors, including Lockheed Martin Corporation, The Boeing Company, Northrop Grumman Corporation, Raytheon Company and other Fortune 500 companies. We also supply spare parts, upgrades, and engineering consulting services and system maintenance. For the fiscal years ended June 30, 2016, 2015 and 2014, we recorded $9.7 million, $12.0 million and $10.1 million, respectively, in revenue to U.S. Government prime contractors and agencies of the U.S. Government. These amounts represented 16%, 19% and 14% of total revenue in fiscal years 2016, 2015 and 2014, respectively. Government business is subject to many risks, such as delays in funding, reduction or modification of contracts or subcontracts, failure to exercise options, changes in government policies and the imposition of budgetary constraints.

New Product Development

We are committed to the development of new technology and rapid innovation. Research and development costs are expensed when incurred and aggregated $14.2 million, $13.6 million and $13.0 million in fiscal years 2016, 2015 and 2014, respectively. See Part II, Management's Discussion and Analysis of Financial Condition and Results of Operations, for explanations of changes in research and development expenses. The following development strategies are indicative of the general direction of product development activities. Due to the inherent uncertainty involved with product development, we cannot guarantee the availability of future products and features.

Concurrent is focusing our new product development efforts on solutions that leverage our core competencies and strong legacy of high performance and reliability. New product development consists of feature and performance enhancement of our existing products and solutions, as well as new products intended to address our current and new markets. New product initiatives include:

Content Delivery Products. Our research and development strategies for our content delivery products are based on market demands and emerging trends in the content delivery marketplace. We continue to advance the features set and capabilities of our content delivery solutions. We are focused on broadening the range and diversity of customers we serve with our product line and are introducing new features that will enable us to reach beyond our core markets. We are also working on cloud-native solutions that enable our products to operate in new environments to support the needs of Internet-based video service providers that rely on cloud-based infrastructure and over-the-top delivery. We also continue to integrate our own CDN products with technologies provided by third-party vendors and partners, with the goal of providing a complete end-to-end solution that can deliver content to consumers on any device.

Storage Products. Research and development strategies for our storage products are dedicated to improving the ease of use, scaling features, and integration of our solution with third-party systems. We continue to focus on enhancing our management console to make our storage platforms easier to deploy, scale, monitor and maintain. We are also working to improve the performance of our storage solutions in both throughput and capacity to support a wide range of usage scenarios. In support of these different usage scenarios, we are also working with a variety of third-party solution providers to integrate our systems to ensure a seamless and low-risk deployment for our customers.

Real-Time Products. Our research and development strategies for real-time are focused on enhancing our products to serve the needs of our existing customer base and developing new features required to expand our addressable markets. We continue to enhance our RedHawk real-time Linux operating system to advance its low-latency features and improve the capabilities of our related software tools. We are also expanding the number of environments we support, by introducing features targeted at the embedded Linux market. We continue to develop new products and features for the automotive simulation and testing market to make it easier for automakers to model and test new system components using our core real-time technologies. As new hardware platforms are made available, we are also optimizing our solutions to ensure they can take advantage of the latest advances in server technology.

Competition

Our content delivery, storage and real-time products are sold into highly-competitive environments, driven by rapid technological innovation. All of the product groups compete based upon features, reliability, scalability, service, and price. Due in part to the range of performance and applications capabilities of our products, we compete in various markets against a number of companies.

The major competitors of our content delivery solutions currently include the following: Adobe Systems Incorporated, Akamai Technologies, ARRIS Group, Inc., Broadpeak, Cisco Systems, Inc., Edgeware AB, Ericsson AB, Harmonic, Inc., Nokia Corporation and Wowza Media Systems, LLC.

Our storage solutions compete with offerings sold by Formation Data Systems, Nexenta Systems, Inc., Coho Data, Inc., Caringo, Inc., DataDirect Networks and Tegile Systems, Inc.

Our real-time product line competes with a number of companies, including: (1) companies providing competitive Linux and other real-time operating systems or tools for time-critical systems, including Red Hat, Inc., Wind River Systems, Inc. and Lynx Software Technologies, Inc.; (2) companies involved in simulation and data acquisition, including dSpace, GmbH, National Instruments Corporation and Opal RT Technologies, Inc.; (3) customers who may choose to integrate their own in-house, real-time products using standard commercial hardware and open-source Linux operating systems and tools; and (4) computer companies that provide solutions for high-performance image generation, including Quantum3D, Inc. and Rockwell Collins, Inc.

Additional competitors with significant market presence and financial resources, including computer hardware and software companies, content providers and television equipment manufacturers, including digital set-top box manufacturers, may enter our markets, thereby further intensifying competition. Potential future competitors may also include one or more of the parties with whom we currently have a strategic relationship. Although we have copyright and other intellectual property rights with respect to much of the technology incorporated in our content delivery, storage and real-time products, our strategic partners have not agreed to refrain from competing against us. Increased competition could result in price reductions that would adversely affect our business, financial condition and results of operations. Many of our current and potential future competitors have significantly greater financial, technical, sales, marketing and other resources than we do, and greater brand name recognition. In addition, many of our competitors have well-established relationships with our current and potential customers and have extensive knowledge of our markets.

Intellectual Property

We rely on a combination of contracts and copyright, trademark, patent and trade secret laws to establish and protect our proprietary rights in our technology. We distribute our products under software license agreements that grant customers perpetual or term licenses to our products, which contain various provisions protecting our ownership and confidentiality of the licensed technology. The source code of our products is protected as a trade secret and as an unpublished copyright work. However, some of our products utilize open source code that provides limited copyright protection. In addition, in certain instances, we license our products under licenses that give licensees limited access to the source code of certain of our products, particularly in connection with our strategic alliances.

Despite the precautions we have taken, there can be no assurance that our products or technology will not be copied or otherwise obtained and used without authorization. In addition, effective copyright and trade secret protection may be unavailable or limited in certain foreign countries and with respect to open source code utilized in certain of our products. We believe that, due to the rapid pace of innovation within our industry, factors such as the technological and creative skills of our personnel are more important in establishing and maintaining a technology leadership position within the industry than are the various legal protections for our technology.

We own twelve U.S. patents: Nos. 7,877,468, 8,079,052, 8,505,057, 8,522,268, 8,650,601, 8,695,031, 8,763,044, 8,943,218, 8,972,600, 9,241,174, 9,288,536 and 9,113,233 and have multiple patent applications pending in the U.S. We have also obtained a patent license to a patent portfolio (13 patents, 29 patent applications, and all additions, divisionals, continuations, continuations-in-part, extensions, reissues and foreign counterparts thereof) which is now owned by Alcatel-Lucent, now part of Nokia Corporation (the "Patent License"). These patents cover multiple interactive television, targeted advertising, and on-demand technologies. The portfolio includes U.S. Patent Nos. 5,623,595 and 5,805,804 ("Subject Patents"). In addition to our original license, on September 28, 2007, Concurrent obtained a separate patent license to the Subject Patents from Broadband Royalty Corporation ("BBR"), with assurances from its parent company, C-COR Incorporated. BBR co-owns the Subject Patents with Alcatel-Lucent.

We have entered into licensing agreements with several third-party software developers and suppliers. Generally, such agreements grant us non-exclusive, worldwide term licenses to distribute software as part of the solutions we market.

Suppliers

We sometimes purchase product components or subcontract assembled components from a single supplier in order to obtain the required technology and the most favorable price and delivery terms. These components include systems, system boards, memory, CPUs, mother boards, storage devices, software, and chassis. We purchase product components from the following single suppliers: Arrow Electronics, Inc., Avnet, Inc. ("Avnet"), CSP, Inc., Curtiss-Wright Corporation, Dell, Inc., ("Dell"), Dot Hill Systems Corporation ("Dot Hill"), General Electric, General Standards Corporation, Intel Corporation, Kardios Systems Corporation, KMA Systems LLP, MBX Systems ("MBX"), North Atlantic Industries. Inc., Oracle Corporation, Qlogic Corporation, Seagate Technology, LLC, Super Micro Computer, Inc. and Western Digital Technologies, Inc. Comparable products are available from other sources and would conform to our system specifications with moderate engineering effort. Single-source suppliers accounting for 10% or more of these purchases during the fiscal year ended June 30, 2016 were Avnet (18%), MBX (16%) and Dell (13%). During the fiscal year ended June 30, 2015, Dell (20%), Avnet (19%) and Dot Hill (15%), were the only single-source suppliers accounting for 10% or more of these purchases. During the fiscal year ended June 30, 2014, Dot Hill (23%), Dell (18%) and Avnet (13%) were the only single-source suppliers accounting for 10% or more of these purchases.

Seasonality

We have experienced variations in revenue, expenses and operating results from quarter-to-quarter, and it is probable that these variations will continue. We believe that fluctuations in the number of orders for our content delivery products being placed from quarter-to-quarter are principally attributable to the buying patterns and budgeting cycles of our customers. We believe that orders for real-time products are dictated by buying cycles of the government and large government contractors. In addition, for both product lines, orders are often not finalized until the end of a quarter. However, we do not believe seasonality is a significant factor at this time.

Governmental Regulation

We are subject to various international, U.S. federal, state and local laws affecting our business. Any finding that we have been or are in noncompliance with such laws could result in, among other things, governmental penalties. Further, changes in existing laws or new laws may adversely affect our business.

In connection with orders from the U.S. federal government and government contractors, we are in some circumstances subject to U.S. federal government procurement regulations that may provide the buyer with the right to audit and review our performance, as well as our compliance with applicable laws and regulations. In addition, our business is subject to government regulation based on the products we sell, such as obtaining an export license or an end-use certificate from the buyer in certain circumstances. In the U.S., these requirements include, among others, the U.S. Export Administration Regulations, International Traffic in Arms Regulations and the economic sanctions and embargo laws enforced by the Office of Foreign Assets Control. If a government audit uncovers improper or illegal activities, or if we are alleged to have violated any laws or regulations governing the products we sell under our government contracts, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with U.S. federal government agencies.

Several countries where our systems are shipped have adopted rules and regulations governing the labeling of computer hardware which apply to our products. Specifically, we must comply with the Waste of Electronic and Electrical Equipment ("WEEE") and Restriction of Hazardous Substances Directive ("RoHS") enacted in the European Union and the Ministry of Information Order No. 39 in China.

Industries we serve are subject to extensive regulation in the U.S. and other countries. Our content delivery business is dependent upon the continued growth of video services in the U.S. and internationally. Broadband companies in the U.S. are subject to extensive government regulation by the Federal Communications Commission ("FCC") and other federal and state regulatory agencies. Additional regulations could have the effect of limiting capital expenditures by our customers and thus could have a material adverse effect on our business, financial condition and results of operations. The enactment by federal, state or international governments of new laws or regulations could adversely affect our customers, and thereby materially adversely affect our business, financial condition and results of operations.

Environmental Matters

We purchase, use, and arrange for certified disposal of chemicals used in the product assembly process at our Pompano Beach, Florida facility. As a result, we are subject to federal and state environmental protection and community right-to-know laws. Additionally, we export our products around the world where there are additional environmental regulations. These laws could have the effect of limiting our capital expenditures and thus could have a material adverse effect on our business, financial condition and results of operations. Violations of such laws can result in the imposition of substantial remediation costs and penalties. We believe we are in compliance with all material environmental laws and regulations.

Employees

As of June 30, 2016, we had 251 employees and contractors worldwide. Of these employees and contractors, 195 were located in the U.S. and 56 were located internationally. Our employees are not unionized.

Financial Information About Foreign And Domestic Operations And Export Sales

A summary of net sales (consolidated net sales reflects sales to unaffiliated customers) attributable to our foreign and domestic operations for the fiscal years ended June 30, 2016, 2015 and 2014 is presented in Note 12 to the consolidated financial statements included herein.

Item 1A. Risk Factors.

The following are various material risks we currently face. You should carefully consider each of the following risks and all of the other information in this Annual Report on Form 10-K before investing in our securities. If any of the following risks and uncertainties develops into actual events, our business, financial condition and results of operations could be materially and adversely affected. If that happens, the trading prices of our common stock and other securities we may issue in the future could decline significantly. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business.

The risk factors below contain forward-looking statements regarding Concurrent. Actual results could differ materially from those set forth in the forward-looking statements. See "Cautionary Statement Regarding Forward-Looking Statements" on page 42.

Risks Related to Our Business

A significant portion of our revenue has been, and is expected to continue to be, concentrated in a small number of customers and our customer base may be subject to further consolidation. If we are unsuccessful in maintaining or expanding relationships with these customers or lose any of these customers, our business will be adversely affected.

If we are unsuccessful in maintaining key relationships with existing customers, if our existing customers' purchasing levels are reduced or they choose to upgrade their services with solutions from our competitors, or if our existing customers' capital expenditure cycles are interrupted due to consolidation, our business will be materially adversely affected. Further, if we are unsuccessful in establishing relationships with other large companies or experience problems in any of our systems, our ability to attract new customers and sell additional products to existing customers will be materially adversely affected.

Due to our limited customer base and the relative size of each customer compared to Concurrent, our customers may make extensive demands on our business. Such demands may include high levels of contractual service, product-improvement obligations and severe price pressure. In addition, our failure to adequately perform under these contracts could result in liquidated damages. The payment of any liquidated damages or failure to meet our customers' expectations could substantially harm our future business prospects.

We typically do not have written agreements that require customers to purchase fixed minimum quantities of our products. Our sales to specific customers tend to, and are expected to continue to, vary from year-to-year, depending on such customers' budgets for capital expenditures and new product introductions. Further, such expenditures may be reduced, delayed or cancelled as a result of global economic conditions, the performance of each of these customers' businesses, and the impact of changes in capital spending cycles.

In North America, service providers have widely adopted video services over the past decade. Many will be reluctant to change vendors as systems are upgraded due to the integration into their network, and some may opt for internally-developed solutions. In addition, we may focus on smaller service providers in order to expand market penetration and increase revenue and these opportunities may require more sales and marketing resources while resulting in smaller relative order sizes. As a result, future opportunities for new sales of content delivery solutions into these markets may be challenging and/or limited.

We depend on a small number of domestic cable multiple system operators ("MSOs") for a substantial proportion of our domestic revenues. Any decrease or delay in capital spending for advanced technologies harms our operating results, financial condition and cash flows.

The capital spending patterns of our existing and potential customers are dependent on a variety of factors, including:

We expect these sales to continue to constitute a substantial proportion of our revenues for the foreseeable future. Demand for our products will depend on the magnitude and timing of capital spending by service providers on advanced technologies for constructing and upgrading their network infrastructure. Further demand will also depend on customers' continuing to upgrade and expand their offerings with our solutions. Continued slowdowns or delays in this spending would likely have a material adverse impact on our quarterly revenues and could result in net losses.

A loss of our government contracts and/or orders would have a material adverse effect on our business.

We derive a significant portion of our revenues from the supply of systems under government contracts and/or orders. For the fiscal years ended June 30, 2016 and 2015, we recorded $9.7 million and $12.0 million, respectively, in revenue to U.S. Government prime contractors and agencies of the U.S. Government. These sales represent approximately 16% and 19% of our total revenues in the fiscal years ended June 30, 2016 and 2015, respectively. Government business is subject to many risks, such as delays in funding, reduction or modification of contracts or subcontracts, changes in governmental policies or regulations which could significantly increase the cost of doing business with the government and the imposition of budgetary constraints. Many governments are struggling to balance their budgets which could further reduce funding for contracts. A loss of government contract revenues would have a material adverse effect on our business, results of operations and financial condition.

We depend on U.S. Government customers for a significant portion of our revenue, and sequestration (automatic, across-the-board U.S. Government budgetary spending cuts) currently required under the Budget Control Act of 2011 and the Bipartisan Budget Act of 2013 continues to have potential adverse consequences on our future business.

U.S. Government spending priorities and Department of Defense spending levels continue to be uncertain and difficult to predict and may be affected by numerous factors, including whether sequestration is currently required under the Budget Control Act of 2011 and the Bipartisan Budget Act of 2013 and quantifying it actual impact on the Department of Defense budget and other programs. A shift in U.S. Government spending priorities, or a reduction in total U.S. Government spending, could have material adverse consequences on our future business.

If the U.S. Government budget process results in a prolonged shutdown or prolonged operation under a continuing resolution, we may experience further delayed orders, delayed payments, declines in revenues, profitability and cash flows.

Sales to the U.S. Government, prime contractors and agencies of the U.S. Government represented between 16% and 19% of our total revenues in each of the past 2 fiscal years and our expected revenue for fiscal year 2017 and beyond depends, in part, on receiving a similar level of new orders from the U.S. Government, which remains uncertain and difficult to predict. If the U.S. Government budget process results in a prolonged shutdown or prolonged operation under a continuing resolution, we may experience delayed orders, delayed payments, declines in revenues, profitability and cash flows. All of the aforementioned conditions could have a material adverse effect on our business and financial outlook, our operating results and our financial condition.

If revenues forecasted for a particular period are not realized in such period due to the lengthy, complex and unpredictable sales cycles of our products, our operating results, financial condition and cash flows for that or subsequent periods will be adversely affected.

The sales cycles of our products are typically lengthy, complex and unpredictable and usually involve:

For these and other reasons, our sales cycles are generally between 6 and 18 months, but can last longer. If orders forecasted for a specific customer for a particular quarter do not occur in that quarter, our operating results, financial condition and cash flows for that quarter or subsequent quarters could be substantially lower than anticipated. Our quarterly and annual results may fluctuate significantly due to revenue recognition rules and the timing of the receipt of customer orders. Additionally, service revenues such as installation services associated with product sales are impacted by such delays.

We are exploring strategic alternatives, but there can be no assurance that we will be successful in identifying or completing any strategic alternative or that any such strategic alternative will yield additional value for stockholders.

We have commenced a review of strategic alternatives which could result in, among other things, a sale, merger, consolidation or business combination, asset divestiture, partnering or other collaboration agreements, or potential acquisitions or recapitalizations, in one or more transactions, or continuing to operate with our current business plan and strategy. There can be no assurance that the exploration of strategic alternatives will result in the identification or consummation of any transaction. In addition, we may incur substantial expenses associated with identifying and evaluating potential strategic alternatives. The process of exploring strategic alternatives may be time consuming and disruptive to our business operations and if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We also cannot assure that any potential transaction or other strategic alternative, if identified, evaluated and consummated, will provide greater value to our stockholders than that reflected in the current stock price. Any potential transaction would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in our business and the availability of financing to potential buyers on reasonable terms.

If we fail to develop and market new products and product enhancements in a timely manner, our business could be adversely affected.

Our future success is dependent on our development and marketing of new products and solutions that enhance our current products and achieve market acceptance. In addition, services, products or technologies developed by others may render one or more of our products or technologies uncompetitive, unmarketable or obsolete. Our future success will depend on our ability to continue to enhance our existing products, including development of new applications for our technology, and to develop and introduce new products to meet and adapt to changing customer requirements and emerging technologies. Our failure to respond or respond quickly enough to rapidly changing technologies could adversely affect our business, financial condition and results of operations. Our efforts to trim expenses in research and development could have the unintended consequence of impacting our delivery of new products or enhancements to existing products. Our inability to develop, on a timely basis, new products or enhancements to existing products, or the failure of such new products or enhancements to achieve market acceptance could have a material adverse effect on our business, financial condition and results of operations.

We have invested, and will continue to invest, in new storage solutions. The failure of these products to gain market acceptance within the timeframes we expect or the failure of these products to perform well in field deployments could adversely affect our business, financial condition and results of operations. Further, delays in product or feature availability may impact our ability to address market opportunities. Performance problems in lab or field deployments could adversely impact our reputation in new storage markets. Better financed or more established competitors could prevent our entry into, or limit our success, in these new markets. There can be no assurance that we will be successful in pursuing our new storage products.

We are continuing to adapt our content delivery products to add features allowing deployments to cable, IPTV, and Internet CDN providers to enable multi-screen video delivery. The changes require new knowledge sets, especially in research and development, and will require us to develop and sell new products to new customers. A failure to execute on this transition, or execute quickly enough, will adversely affect our business.

Our video expertise for more than fifteen years has been focused on the VOD market. Although we have been successful in VOD, we recognize it is a relatively limited market and, as such, we are transitioning the business to serve video to all devices. We are introducing the products necessary to serve these new markets. We have also invested in new sales professionals to help us sell our existing and new products to a wider customer set. We believe that these steps are necessary, but that they will be expensive. We are making these investments in a challenging macroeconomic environment and may be unable to develop or sell any new marketable products. In addition, we face robust competition both from internally-developed solutions and from large, well-positioned companies. If we are not successful in establishing new products and new customers, we will have expended considerable effort and capital to transition the business and will not have received any economic benefit.

We cannot guarantee that our products and services will keep pace with technological developments and emerging industry standards, address the changing needs of our customers or achieve market acceptance, any of which could materially adversely affect our business.

The markets for our products are characterized by rapidly changing technology, evolving industry standards and new product introductions and enhancements. There can be no assurance that we will be successful in enhancing our current and planned content delivery, storage and real-time products or developing, integrating and marketing new products that satisfy customer needs or achieve market acceptance. In addition, services, products or technologies developed by others may render one or more of our products or technologies uncompetitive, unmarketable or obsolete. Future technological advances may result in the availability of new products and services that could compete with our solutions or reduce the cost of existing products or services. Our future success will depend on our ability to continue to enhance our existing products, including development of new applications for our technology, and to develop and introduce new products to meet and adapt to changing customer requirements and emerging technologies. Further, announcements of currently planned or other new product offerings by our competitors may cause customers to defer purchase decisions or to fail to purchase our existing solutions. Our failure to respond to rapidly changing technologies could adversely affect our business, financial condition and results of operations.

Broadband Internet video services for televisions have gained traction and could replace or dilute revenue associated with current VOD services and limit or eliminate our service provider customers' interest in our content delivery products.

A number of well-funded companies have launched services and are or will be capable of delivering Internet video services for home television viewing. As these products are developed, successfully deployed and embraced by consumers, our customers may discontinue purchases of our content delivery products.

We have experienced competitive pricing pressure for our products and services and expect to continue to experience this pressure. As pricing pressures continue, it may impact our revenue and call into question our ability to achieve and maintain profitability.

Over the years, our industry has experienced a decrease in average selling prices. We anticipate that the average selling prices of our products will continue to decrease in the future in response to competitive pricing pressures, increased sales discounts and new product introductions by our competitors. We may experience substantial decreases in future operating results, financial condition and cash flows due to a decrease of our average selling prices. We also anticipate that our gross margins will fluctuate from period to period as a result of the mix of products we sell in any given period. If our sales of lower margin products significantly expand in future quarterly periods, our overall gross margin levels, operating results, financial condition and cash flows will be adversely impacted.

We incurred net losses in the past and may incur further losses in the future.

We incurred net losses of $11.1 million, $0.2 million, $2.9 million, $3.3 million and $1.0 million in fiscal years ended June 30, 2016, 2015, 2012, 2011 and 2010, respectively. As of June 30, 2016, we had an accumulated deficit of approximately $189.3 million. We may have difficulty sustaining profitable operations and incur additional net losses in the future.

We have taken and continue to take measures to address the variability in the market for our products and services, which could have long-term negative effects on our business or impact our ability to adequately address an increase in customer demand.

We have taken and continue to take measures to address the variability in the market for our products and services, to increase average revenue per unit of our sales and to reduce our operating expenses, rationalize capital expenditure and minimize customer turnover. We cannot ensure that the measures we have taken will not impair our ability to effectively develop and market products and services, to remain competitive in the industries in which we compete, to operate effectively, to operate profitably during slowdowns or to effectively meet a rapid increase in customer demand. These measures may have long-term negative effects on our business by reducing our pool of technical and operational talent, decreasing or slowing improvements in our products and services, making it more difficult to hire and retain talented individuals and to quickly respond to customers or competitors in an upward cycle.

If we are unable to manage change in our operations effectively, our business may be harmed through a diminished ability to monitor and control effectively our operations, and a decrease in the quality of work and innovation of our employees.

Our ability to successfully offer new products and services and implement our business plan in a rapidly evolving market requires effective planning and management. In light of the growing complexities in managing our portfolio of products and services, our anticipated future operations may strain our technical, operational and administrative resources. A failure to manage changes in our volume of business may harm our business through a decreased ability to monitor and control effectively our operations, and a decrease in the quality of products and innovation of our employees upon which our business is dependent. If we fail to meet customers' supply expectations, we could incur penalties, our revenue would be adversely affected and we may lose business, which could materially and adversely affect our operating results, financial condition and cash flows.

Any weaknesses identified in our system of internal controls by us or our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 could have an adverse effect on our business .

Section 404 of the Sarbanes-Oxley Act of 2002 requires that companies evaluate and report on their systems of internal control over financial reporting. We have reported material weaknesses in our financial reporting controls during the last three fiscal years. In future periods, we may identify deficiencies in our system of internal controls over financial reporting that may require remediation. There can be no assurances that any such future deficiencies identified may not be significant deficiencies or material weaknesses that would be required to be reported in future periods. Any control deficiency that we may identify in the future could adversely affect our stock price, results of operations or financial condition.

We face risks associated with the trend of increased stockholder activism .

Publicly-traded companies have increasingly become subject to campaigns by investors seeking to increase short-term stockholder value by advocating corporate actions such as financial restructuring, increased borrowing, special dividends, stock repurchases or even sales of assets or the entire company. Given our market capitalization and other factors, it is possible that stockholders may in the future attempt to effect such changes or acquire control over us. Responding to proxy contests and other actions by activist stockholders would be costly and time-consuming, disrupt our operations and divert the attention of our Board of Directors and senior management from the pursuit of business strategies, which could adversely affect our results of operations and financial condition.

We utilize open source software, which could enable our competitors to gain access to our source code and distribute it without paying any license fee to us.

Key components of our content delivery, storage and real-time products utilize open source software on Linux platforms. Some open source software, especially that provided under the GNU Public License, is provided pursuant to licenses that limit the restrictions that may be placed on the distribution and copying of the provided code. Thus, it is possible that customers or competitors could copy portions of our software and freely distribute it. This could substantially impact our business and our ability to protect our products and future business.

We rely on a combination of contracts and copyright, trademark, patent and trade secret laws to establish and protect our proprietary rights in our technology. If we are unable to protect our intellectual property rights, our competitive position could be harmed or we could be required to incur expenses to enforce our rights. Our business could also be adversely affected if we are found to be infringing on the intellectual property of others.

We typically enter into confidentiality or license agreements with our employees, consultants, customers and vendors, in an effort to control access to and distribution of our proprietary information. Despite these precautions, it may be possible for a third-party to copy or otherwise obtain and use our proprietary technology without authorization. The steps we take may not prevent misappropriation of our intellectual property, and the agreements we enter into may not be enforceable. In addition, effective copyright and trade secret protection may be unavailable or limited in some foreign countries.

Our competitors or other companies may currently own or obtain patents or other proprietary rights that might prevent, limit or interfere with our ability to make, use or sell our products. Further, we have indemnification obligations with numerous customers that could require us to become involved in intellectual property litigation. As a result, we may be found to be infringing on the intellectual property rights of others. In the event of a successful claim of infringement against us or against a customer to which we have an indemnification obligation, our business and operating results, financial condition and cash flows could be adversely affected.

Any litigation or claims brought against us, whether or not valid, could result in substantial costs and diversion of our resources. Intellectual property litigation or claims brought against us could force us to do one or more of the following:

If we are forced to take any of the foregoing actions, we could face substantial costs and our business could be seriously harmed. Although we carry general liability insurance, our insurance may not cover potential claims of this type or be adequate to indemnify us for all liability that may be imposed.

In addition, we may initiate claims or litigation against third parties in the future for infringement of our proprietary rights or to determine the scope and validity of our proprietary rights or the proprietary rights of competitors. These claims could result in costly litigation and the diversion of our technical and management personnel and there can be no guarantee of success in any such action. As a result, our operating results could suffer and our financial condition and cash flows could be harmed.

Protecting our global intellectual property rights and combating unlicensed copying and use of software and other intellectual property is difficult. While piracy may adversely affect U.S. revenue, the impact on revenue from outside the U.S. is likely to be more significant, particularly in countries where laws are less protective of intellectual property rights. Our revenues may be impacted if our intellectual property is copied or otherwise misappropriated and we are not able to successfully assert our rights over our intellectual property. We may be unable to close sales if our intellectual property is copied; we may face increased competition if our trade secrets are disclosed; and our reputation may be negatively impacted if our company or product names are misused. Similarly, the absence of harmonized patent laws makes it more difficult to ensure consistent respect for patent rights, making enforcement more difficult. Reductions in the legal protection for software intellectual property rights could adversely affect revenue.

The markets in which we operate are highly competitive, and we may be unable to compete successfully against our current and future competitors, which would adversely affect our business.

The markets for content delivery, storage and real-time products are extremely competitive. Our competitors include divisions of larger public companies with an established presence in the industry, as well as well-funded start-ups. Further, as we expand the addressable markets for our product offerings, we encounter a different set of competitors. This intense competition has negatively impacted our content delivery solutions revenues and may severely impact our success and ability to earn additional revenue through expanding our content delivery solutions offerings.

A list of the primary competitors we face in both of our markets and a categorization of our competitors is included under the Competition heading in Part I, Item 1., the Business section of this Annual Report on Form 10-K for the year ended June 30, 2016.

We have a significant base of deployed content delivery products that our customers, over time, may decide to replace for products from other companies.

A significant number of our on-demand products have been deployed for several years and may be replaced with newer products or technologies. When our customers evaluate replacing those older products, they may choose a different vendor. If that were to occur, we would lose future revenue opportunities from expansion as well as maintenance revenue.

Continuing uncertainties in the domestic and global economies may reduce demand for our products and services.

The ongoing uncertainty and unevenness in the recovery in the domestic and global economy may negatively affect our operating results, financial condition and operating results. The uncertainty in economic conditions in many of our markets may impact demand for our products and render budgeting and forecasting difficult. The difficulty in forecasting demand increases the difficulty in anticipating our inventory requirements, which may cause us to over-produce finished goods, resulting in inventory impairments, or under-produce finished goods, affecting our ability to meet customer requirements.

Our operating results, financial condition and cash flows may vary based on changes in our customers' capital expenditures. We sell our solutions primarily to large organizations whose businesses fluctuate with general economic and business conditions. As a result, decreased demand for our solutions and services caused by a weakening global economy may cause a decline in our revenue. Historically, economic downturns have resulted in overall reductions in corporate spending. In the future, potential customers may decide to reduce their budgets for capital expenditures by deferring or reconsidering product purchases, which would negatively impact our operating results, financial results and cash flows.

In some cases, we rely on a limited number of suppliers, which entails several risks, including the possibility of defective parts, a shortage of components, an increase in component costs, and reduced control over delivery schedules.

Our reliance on single suppliers entails a number of risks, including the possibility of defective parts, a shortage of components, increase in components costs, and reduced control over delivery schedules. Any of these events could adversely affect our business, results of operations and financial condition. We estimate that a lead-time of 12-16 weeks may be necessary to switch to an alternative supplier of certain custom application specific integrated circuit and printed circuit assemblies. A change in the supplier of these components, without the appropriate lead-time, could result in a material delay in shipments by us of certain products. Where alternative sources are available, qualification of the alternative suppliers and establishment of reliable supplies of components from such sources may also result in delays. Shipping delays may also result in a delay in revenue recognition, possibly outside the fiscal period originally planned, and, as a result, may adversely affect our financial results for that particular period. See the Supplier heading in Part I, Item 1., the Business section of this Annual Report on Form 10-K for additional information.

A large number of our maintenance contracts are for legacy systems that are aging and may be replaced.

A large percentage of the services we provide are to customers who run our legacy hardware and systems. Over time, these systems will be replaced and the customers may not choose to purchase replacement systems from us. In such a case, our service revenue will be materially negatively impacted.

Sales to international customers accounted for approximately 40%, 46% and 42% of our revenue in fiscal years 2016, 2015 and 2014, respectively. Accordingly, our business is susceptible to numerous risks associated with international operations.

We are subject to a number of risks associated with international business activities that could increase our costs, lengthen our sales cycle and require significant management attention. These risks include:

Our efforts to maintain channels to market and sell our products internationally may not be successful.

Our international sales are supported by a combination of direct sales in certain international locations and indirect channel sales through distributor and reseller arrangements with third parties in others. We may not be able to maintain productive reseller and/or distribution agreements and/or may not be able to successfully manage these sales channels. In addition, many of our resellers also sell products from other vendors that compete with our products and may choose to focus on products of those vendors. Additionally, our ability to utilize an indirect sales model in these international markets will depend on our ability to qualify and train those resellers to perform product installations and to provide customer support. If we fail to develop and cultivate relationships with significant resellers, or if these resellers do not succeed in their sales efforts (whether because they are unable to provide support or otherwise), we may be unable to grow or sustain our revenue in international markets.

Product failures or interruptions could cause delays in shipments, require design modifications or field replacement, which may have a negative impact on our business and damage our reputation and customer relationships.

Product failures may adversely affect our business, financial condition and results of operations. Despite our own testing, vendor testing and additional testing by current and potential customers, all errors or failures may not be found in our products prior to being deployed or, if discovered, successfully corrected in a timely manner. These errors or failures could cause delays in product introductions and shipments or require design modifications that could adversely affect our competitive position. Further, some errors may not be detected until the systems are deployed. In such a case, we may have to undertake substantial field replacement programs to correct the problem including the shipment of replacement parts. Our reputation may also suffer if our customers view our products as unreliable, whether based on actual or perceived errors or failures in our products.

In addition, a defect, error or performance problem with content delivery products could cause our customers' offerings to fail for a period of time or be degraded. Any such failure would cause customer service and public relations problems for our customers. As a result, we could experience delayed or lost revenue due to adverse customer reaction, negative publicity regarding us and our products and services and claims for substantial damages against us, regardless of our responsibility for such failure. Any claim could be expensive and require us to spend a significant amount of resources. In circumstances where third-party technology incorporated with or in our systems includes a defect, error or performance problem or fails for any reason, we may have to replace such third-party technology at our expense and be responsible to our customers for their corresponding claims. Such tasks could be expensive, could require us to spend a significant amount of resources and insurance coverage, if available, may be inadequate.

Trends in our business may cause our quarterly operating results to fluctuate; therefore, period-to-period comparisons of our operating results may not necessarily be meaningful.

We have experienced significant variations in the revenue, expenses and operating results from quarter-to-quarter in our business, and it is likely that these variations will continue. We believe that fluctuations in the number of orders for our products being placed from quarter-to-quarter are principally attributable to the buying patterns and budgeting cycles of our customers. In addition, sales cycles associated with the purchase of many of our products are typically lengthy and orders are often not finalized until the end of a quarter. As a result, our results of operations have fluctuated in the past and will likely continue to fluctuate in accordance with this purchasing activity. Therefore, period-to-period comparisons of our operating results may not necessarily be meaningful. In addition, because these factors are difficult for us to forecast, our business, financial condition and results of operations for one quarter or a series of quarters may be adversely affected and below the expectations of securities analysts and investors, which could result in material declines of our stock price.

Our business may be adversely affected if we fail to retain our current key personnel, many of whom would be difficult to replace, or fail to attract additional qualified personnel.

Our future performance depends on the continued service of our senior management, engineering, sales and marketing personnel. Competition for qualified personnel is intense, and we may fail to retain our key employees or to attract or retain other highly qualified personnel. The loss of the services of one or more of our key personnel could seriously impact our business, especially the loss of highly specialized technical personnel. Our future success also depends on our continuing ability to attract, hire, train and retain highly skilled managerial, technical, sales, marketing and customer support personnel. In addition, new employees frequently require extensive training before they achieve desired levels of productivity. We do not carry key person life insurance on any of our employees.

As our products age, we may not be able to purchase necessary parts to support legacy systems currently deployed or to be deployed.

With the passage of time, suppliers of essential parts may stop producing these parts. In such cases, we may be required to redesign our products to accommodate the obsolescence. If that occurs, we will have to spend considerable effort in the redesign and, in some cases, may be forced to have the redesigned products requalified. Requalification may take several months, thereby delaying expected revenue.

We could be exposed to legal liability if our products were used to violate copyright laws.

Our content delivery products enable recording, storing, and delivering video over commercial networks. Thus, our customers could use our products without first obtaining permission from content owners to record and deliver copyrighted video. In such a situation, we could face liability for claims that our products enabled or assisted in breaching copyright laws.

If content providers, such as movie studios, limit the scope of content licensed for use in the digital content delivery market, our business, financial condition and results of operations could be negatively affected because the potential market for our products would be more limited than we currently believe.

The success of the content delivery market is contingent upon content providers, such as movie studios, continuing to permit their content to be licensed for distribution in this market. Content providers may, due to concerns regarding marketing or illegal duplication of the content, limit the extent to which they provide content to the markets served by our customers and potential customers. A limitation of available content would indirectly limit the demand for our content delivery solutions.

Our facilities, especially our Pompano Beach, Florida facility, could be subject to severe weather that could shut down those facilities and halt production.

All of our facilities are, from time to time, subject to severe weather that could result in a temporary shut-down of the impacted facility. However, our Pompano Beach, Florida facility is located in South Florida where there is a high risk of hurricanes. A hurricane could shut down the Pompano Beach facility for extended periods thereby making it impossible for us to assemble and ship real-time products. Further, an extended shut-down could slow the release of software products for our real-time business since most of the developers for those products are located at that facility.

A failure to detect fraud in the business could be serious.

We have observed an increase in minor instances of attempted fraud in the business, including unauthorized use of company credit cards and unauthorized banking transactions. While we are confident that we have comprehensive controls in place, there can be no assurances that all business fraud will be detected and/or thwarted. A loss related to fraud, especially an uninsured loss, could have an adverse effect on our business.

Risks Related to Our Industries

The cable and telecommunications industries are experiencing consolidation, which could result in delays or reductions in purchases of products and services, which could have a material adverse effect on our business.

We are experiencing the consolidation of many participants in the cable and telecommunications industries. When consolidations occur, it is possible that the acquirer will not continue using the same suppliers, possibly resulting in an immediate or future elimination of sales opportunities and future support revenue. Even if sales are not reduced, consolidation can also result in pressure from customers for lower prices or better terms, reflecting the increase in the total volume of products purchased, the elimination of a price differential between the acquiring customer and the company acquired or other factors. Consolidations could also result in delays in purchasing decisions by the affected companies prior to completion of the transaction and by the merged businesses. The purchasing decisions of the merged companies could have a material adverse effect on our business.

Our business is subject to governmental regulation. Any finding that we have been or are currently in noncompliance with such laws could result in, among other things, governmental penalties or class action lawsuits. Further, changes in existing laws or new laws may adversely affect our business.

We are subject to various international, U.S. federal, state and local laws affecting our content delivery, storage and real-time product lines. The television industry is subject to extensive regulation in the U.S. and other countries. Our content delivery solutions revenue is dependent upon the continued growth of the digital television industry in the U.S. and internationally. Broadband companies are subject to extensive government regulation by the FCC and other federal and state regulatory agencies. The 1984 Cable Act, which amended the Communications Act of 1934, established policies in the areas of ownership, channel usage, franchise provisions and renewals, subscriber rates and privacy, obscenity and lockboxes, unauthorized reception of services, equal employment opportunity, and pole attachments. The 1984 Cable Act also defined jurisdictional boundaries among federal, state and local authorities for regulating cable television systems which, among other provisions, allow for expanded regulatory powers when domestic cable penetration exceeds a threshold of 70% of U.S. households. Additional regulations could have the effect of limiting capital expenditures by our customers and thus could have a material adverse effect on our business, financial condition and results of operations. If we were found to be, or believed to be non-compliant with privacy laws, we could face substantial exposure to government fines or privacy litigation. In addition, new ‘net neutrality' legislation or regulations could be implemented or interpreted in a way that curtails certain of our products' uses within our customers' data networks and adversely impacts our customers' ability to operate those networks efficiently or profitably. This could impact our sales of those products. The enactment by federal, state or international governments of new laws or regulations could adversely affect our customers, and thereby materially adversely affect our business, financial condition and results of operations. Our real-time revenue is also subject to strict government regulation as the result of the government work we do. The regulations deal with security clearances, privacy, employment practices, pricing, purchasing, intellectual property and integrity. If we were ever found in violation or if out of compliance, our production and resultant revenues could be halted or significantly delayed.

Our operating results may be adversely affected by continuing economic uncertainty in Europe and elsewhere and by related global economic conditions.

The lingering effects of the European debt crisis and related European financial restructuring efforts may cause the value of the European currencies, including the euro, to further deteriorate, thus reducing the purchasing power of our European customers. One potential outcome of the European financial situation is the re-introduction of individual currencies in one or more Eurozone countries or the dissolution of the euro entirely. Should the euro dissolve entirely, the legal and contractual consequences for holders of euro-denominated obligations would be determined by laws in effect at such time. The potential dissolution of the euro, or market perceptions concerning this and related issues, could adversely affect the value of our euro-denominated assets and obligations. In addition, the European crisis has contributed to instability in global credit markets. If global economic and market conditions, or economic conditions in Europe, the U.S. or other key markets, remain uncertain, persist, or deteriorate further, consumer purchasing power and demand for our products could decline, and we may experience material adverse impacts on our business, operating results, and financial condition.

We may be subject to liability if private information supplied to our customers is misused.

Our content delivery solutions allow companies to collect and store data that many viewers may consider confidential. Unauthorized access or use of this information could result in liability to our customers, and potentially us, and might deter potential on-demand viewers. We have no control over the policy of our customers with respect to the access to this data and the release of this data to third parties.

Other Risks

Fluctuations in our future effective tax rates could affect our future operating results, financial condition and cash flows.

We are required to periodically review our deferred tax assets and determine whether, based on available evidence, a valuation allowance is necessary. Accordingly, we have performed such evaluation, from time to time, based on historical evidence, trends in profitability, expectations of future taxable income and implemented tax planning strategies. Further, although we benefit from net operating loss carryforwards in the U.S., some of our foreign subsidiaries do not have such net operating losses, exposing us to tax liabilities in various countries.

The calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations. We recognize potential liabilities for anticipated tax audit issues in the U.S. and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes will be due. In the event we determine that it is appropriate to create a reserve or increase an existing reserve for any such potential liabilities, the amount of the additional reserve is charged as an expense in the period in which it is determined. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary. If the estimate of tax liabilities proves to be less than the ultimate tax assessment for the applicable period, a further charge to expense in the period such short fall is determined would result. Such a charge to expense could have a material and adverse effect on our results of operations for the applicable period.

During the fourth quarter of fiscal year 2014, we released $13.7 million of valuation allowances against our U.S. deferred tax assets. However, during the fourth quarter of fiscal year 2016, we reestablished $12.5 million of valuation allowances against our U.S. deferred tax assets and as of June 30, 2016, our U.S. deferred tax assets are fully reserved. Changes to our business in the future may require a release of our valuation allowances, which would result in additional tax benefits that would improve our net income. See Note 9 to the consolidated financial statements for further discussion.

We have implemented certain anti-takeover provisions that could make it more difficult for a third-party to acquire us.

Provisions of Delaware law and our restated certificate of incorporation, and amended and restated bylaws, could make it more difficult for a third-party to acquire us, even if doing so would be beneficial to our stockholders.

We are subject to certain Delaware anti-takeover laws regulating corporate takeovers. These anti-takeover laws prevent a Delaware corporation from engaging in a business combination involving a merger or sale of more than 10% of our assets with any stockholder, including affiliates and associates of the stockholder, who owns 15% or more of the outstanding voting stock, for three years following the date that the stockholder acquired 15% or more of the corporation's stock except under limited circumstances.

There are provisions in our restated certificate of incorporation and our amended and restated bylaws that also may delay, deter or impede hostile takeovers or changes of control.

Additionally, see the risk factor below that discusses our Tax Asset Preservation Plan adopted on March 1, 2016 designed to limit our exposure to an ownership change and as further discussed in Note 9 to the consolidated financial statements.

We may engage in future acquisitions that dilute the ownership interest of our stockholders, cause us to incur debt or assume contingent liabilities or present other challenges, such as integration issues, for our business, which if not successfully resolved would adversely affect our business.

As part of our business strategy, we review acquisition prospects that would complement our current product offerings, enhance our technical capabilities or otherwise offer growth opportunities. We periodically review investments in new businesses, and we may acquire businesses, products or technologies in the future. In the event of any future acquisitions, we could issue equity securities that would dilute current stockholders' percentage ownership, incur substantial debt, or assume contingent liabilities. These actions could materially adversely affect our operating results, financial condition and cash flows. Acquisitions also entail numerous risks, including:

We cannot assure that we will be able to successfully integrate any business, products, technologies or personnel that we might acquire in the future. Our failure to do so could materially adversely affect our business, operating results and financial condition.

Future issuances or repurchases of our equity, or transfers of our equity by third parties, may impair our future ability to use a substantial amount of our existing net operating loss carryforwards.

From time to time we complete an analysis of the ownership changes in our stock pursuant to Section 382 of the Internal Revenue Code. As of June 30, 2016, the ownership change was 27.7%, compared to 24.2% (revised from 29.7%) as of June 30, 2015. Future transactions and the timing of such transactions could cause an additional ownership change for Section 382 income tax purposes. Section 382 limits the ability of a company that undergoes an "ownership change," which is generally defined as any change in ownership of more than 50% of its common stock over a three-year period, to utilize its net operating loss carryforwards and certain built-in losses or deductions, as of the ownership change date, that are recognized during the five-year period after the ownership change. Such transactions may include, but are not limited to, additional repurchases or issuances of common stock, or acquisitions or sales of shares of Concurrent stock by certain holders of our shares, including persons who have held, currently hold or may accumulate in the future five percent or more of our outstanding common stock for their own account. Most of these transactions are beyond our control. If an additional ownership change were to occur for purposes of Section 382, we would be required to calculate a new annual restriction on the use of our net operating loss carryforwards to offset future taxable income. Despite the reestablishment of a full valuation allowance on our U.S. net operating loss carryforwards in fiscal year 2016, we could lose all or a substantial part of the benefit of our accumulated net operating loss carryforwards if an ownership change pursuant to Section 382 does occur.

On March 1, 2016, we announced the adoption of a Tax Asset Preservation Plan ("TAPP") designed to limit the Company's exposure to an "ownership change," as defined in Section 382. Such a change would severely limit the Company's ability to use its net loss carryforwards and certain other tax attributes. There is no guarantee that the TAPP will prevent the Company from experiencing an ownership change and losing all or a substantial part of the benefit of the accumulated net operating loss carryforwards.

We currently intend to propose an amendment to our certificate of incorporation at our 2016 Annual Meeting of Stockholders that would establish ownership limitations designed to preserve the value of our net operating loss carryforwards in a manner similar to the TAPP. If our stockholders vote against this amendment, we may once again lose our ability to utilize all or a substantial portion of the benefit of our accumulated net operating loss carryforwards.

We are exposed to fluctuations in currency exchange rates that could negatively impact our financial results and cash flows.

To date, the majority of our revenues have been denominated in U.S. dollars, while a significant portion of our international expenses are incurred in the local currencies of countries in which we operate. Because a portion of our business is conducted outside the U.S., we face exposure to adverse movements in foreign currency exchange rates specifically the Japanese yen, euro and British pound. These exposures may change over time as business practices evolve, and they could have a material adverse impact on our financial results and cash flows. An increase in the value of the dollar could increase the real cost to our customers of our products in those markets outside the U.S. where we often sell in dollars, and a weakened dollar could increase local currency operating costs. In preparing our consolidated financial statements, certain financial information is required to be translated from foreign currencies to the U.S. dollar using either the spot rate or the weighted-average exchange rate. If the U.S. dollar changes relative to applicable local currencies noted above, there is a risk our reported sales, operating expenses, and net income could significantly fluctuate. We are not able to predict the degree of exchange rate fluctuations, nor can we estimate the effect any future fluctuations may have upon our future operations.

Our stock price has been volatile in the past and may be volatile in the future.

Our common stock is traded on the NASDAQ Global Market. For the 12 months ended June 30, 2016, the high and low prices reported on the NASDAQ Global Market were $6.65 and $4.54, respectively. Further, as of August 25, 2016, the closing price as reported on the NASDAQ Global Market was $5.08. The market price of our common stock may fluctuate significantly in the future in response to various factors, some of which are beyond our control, including, among others:

In addition, in recent years, the stock market in general, the NASDAQ Global Market and the market for technology companies in particular, have experienced extreme price and volume fluctuations. In some cases, these fluctuations have been unrelated or disproportionate to the operating performance of these companies. These market and industry factors may materially and adversely affect our stock price, regardless of our operating performance.

In the past, class action litigation often has been brought against companies following periods of volatility in the market price of those companies' common stock. We may become involved in this type of litigation in the future. Litigation is often expensive and diverts management's attention and resources, which could materially and adversely affect our business, financial condition and results of operations.

A sustained period of low stock price brings with it a risk that our stock will not comply with the minimum trading-price rules of the NASDAQ Global Market, and may be subject to delisting, thus significantly impacting the liquidity of our stock and our access to public capital.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our principal facilities as of June 30, 2016 are listed below. All of the principal facilities are leased. Management considers all facilities listed below to be suitable for the purpose(s) for which they are used, including operations, research and development, sales, marketing, service, and administration.

In addition to the facilities listed above, we also lease space in various domestic and international locations for use as development and sales and service offices.

Item 3. Legal Proceedings.

We are not presently involved in any material litigation. However, we are from time to time party to various routine legal proceedings arising out of our business. We cannot predict the outcome of these lawsuits, legal proceedings and claims with certainty. Nevertheless, we believe that the outcome of any currently existing proceedings, even if determined adversely, would not have a material adverse effect on our business, balance sheets or the related consolidated statements of operations, stockholders' equity and comprehensive income (loss), and cash flows in the period ended June 30, 2016.

Item 4A. Executive Officers of the Registrant.

Our officers are elected by the Board of Directors to hold office until their successors have been chosen and qualified or until earlier resignation or removal. Set forth below are the names, positions and ages of executive officers as of August 25, 2016:

Derek Elder, President, Chief Executive Officer, and Director. Mr. Elder joined Concurrent as President, Chief Executive Officer and Director on November 18, 2014. Mr. Elder most recently served as Senior Vice President and General Manager of the DOCSIS & Multiservice Gateway business unit at ARRIS Group, Inc. ("ARRIS") (NASDAQ: ARRS) since April 2013. Mr. Elder has also held a number of other leadership positions at ARRIS in sales, product management and marketing during his ten-year tenure, including serving as Senior Vice President & General Manager, Touchstone Broadband CPE Division from March 2011 to April 2013, Senior Vice President, Product Management & Marketing from May 2008 to May 2011 and Senior Vice President, North American Sales prior thereto. Prior to ARRIS, Mr. Elder was a technology and business leader at Tropic Networks, Cisco Systems and Narad Networks, Inc. Mr. Elder earned his undergraduate degree from the University of Maryland University College and his Masters of Business Administration from The Pennsylvania State University.

Emory O. Berry, Chief Financial Officer and Executive Vice President of Operations. Mr. Berry has served as our Chief Financial Officer and Executive Vice President of Operations since August 1, 2008. In 2009, he assumed responsibility as Vice President and General Manager, Real-Time. Before joining Concurrent, Mr. Berry had been serving as the Company's Chief Financial Officer through the financial management staffing firm TechCFO, LLC ("TechCFO") since March 9, 2007. Mr. Berry was an active partner at TechCFO from August 2006 to August 2008. Mr. Berry has over 20 years of financial and operational leadership experience with private and public firms in the high-tech and healthcare industries. Beginning in August 1999, Mr. Berry served as the Chief Financial Officer of DVT Corporation, until its acquisition in May 2005 by Cognex Corporation, a publicly traded provider of machine vision systems. From May 2005 through January 2007, Mr. Berry assisted Cognex with the financial and operational integration of DVT as a consultant. From June 1998 through March 1999, Mr. Berry served as Chief Financial Officer and Treasurer of Firearms Training Systems, which was a publicly traded company at that time, specializing in simulated weapons training systems. Mr. Berry also served as the Director of Corporate Accounting of Firearms Training Systems from March 1997 through June 1998. He began his career as an auditor with Ernst and Young, LLP. Mr. Berry is a certified public accountant. He earned his undergraduate degree in Accounting from Samford University and his Masters of Business Administration from Georgia State University.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our Common Stock is currently traded under the symbol "CCUR" on the NASDAQ Global Market. The following table sets forth the high and low sales price for our Common Stock for the periods indicated, as reported by the NASDAQ Global Market.

On August 25, 2016, the last reported sale price of our common stock on NASDAQ was $5.08 per share. As of August 25, 2016, there were 636 registered holders of record of our common stock.

In fiscal years 2016 and 2015, we paid four quarterly cash dividends of $0.12 per share of common stock. We intend to pay a regular quarterly cash dividend on our common shares subject to, among other things, our results of operations, cash balances, future cash requirements, financial condition, statutory requirements of Delaware law, and other factors that the Board of Directors may deem relevant. We believe that a portion of our dividends may be treated as a return of capital to stockholders, rather than dividend income, as we believe dividend payments may exceed our cumulative earnings and profits.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the related notes thereto, which appear elsewhere herein. Except for the historical financial information, many of the matters discussed in this Item 7 may be considered "forward-looking" statements that reflect our plans, estimates and beliefs. Actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below, elsewhere herein, including in Item 1A. Risk Factors and under the heading "Cautionary Note Regarding Forward Looking Statements" on page 42 herein.

Overview

We provide software, hardware and professional services for the content delivery market, storage solutions market and the high-performance, real-time market. Our business is comprised of two segments for financial reporting purposes, products and services, which we provide for each of these markets.

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, VOD and time-shifted video applications such as cDVR. We have recently introduced Aquari™, our new unified scale-out storage solutions product to our content delivery and other third-party customers. In September 2015, we sold our multi-screen video analytics product line for collecting and analyzing data related to content delivery applications (see Note 5 to the consolidated financial statements).

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.

Application of Critical Accounting Policies

The SEC defines "critical accounting policies" as those that require application of management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods.

The following is not intended to be a comprehensive list of all of our accounting policies. Our significant accounting policies are more fully described in Note 2 to the consolidated financial statements. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the U.S., with no need for management's judgment in their application. There are also areas in which management's judgment in selecting an available alternative would not produce a materially different result.

We have identified the following as accounting policies critical to us:

Revenue Recognition and Related Matters

The significant majority of the Company's multiple element arrangements are accounted for under ASC 605-25, Multiple Element Arrangements . This guidance pertains to revenue arrangements with multiple deliverables, and accounting guidance on all tangible products containing both software and non-software components that function together to deliver the product's essential functionality. While most of our arrangements contain a software element, because the software components and non-software components of the tangible product function together to deliver the tangible product's essential functionality, we meet the scope exception of ASC-985-605-15-4(e).

We generate revenue from the sale of products and services. We commence revenue recognition when all of the following conditions are met:

Determination of the third and fourth criteria above are based on our judgments regarding the fixed nature of the fee charged for products and services delivered and the collectability of those fees.

Our standard multiple-element contractual arrangements with our customers generally include the delivery of systems with multiple components of hardware and software, certain professional services that typically involve installation and consulting, and ongoing system maintenance. Product revenue is generally recognized when the product is delivered. Professional services that are of a consultative nature may take place prior to, or after, delivery of the system, and installation services typically occur within 90 days after delivery of the system. Professional services revenue is typically recognized as the service is performed. Initial warranty begins after delivery of the system and typically is provided for 90 days to three years after delivery. Maintenance revenue, where applicable, will be recognized ratably over the maintenance period. Our product sales are predominantly system sales whereby software and equipment function together to deliver the essential functionality of the combined product.

Prior to the sale of our multi-screen video analytics product line in September 2015 (see Note 5 to the consolidated financial statements), our sales model for multi-screen video analytics software products included the option for customers to purchase a perpetual license, a term license, or software as a service. Customers also have the option to purchase maintenance or managed services with their license. Revenue from these sales generally was recognized over the term of the various customer arrangements. Professional services attributable to implementation of our multi-screen video analytics software products or managed services are essential to the customers' use of these products and services. We deferred commencement of revenue recognition for the entire arrangement until we had delivered the essential professional services or have made a determination that the remaining professional services are no longer essential to the customer. We recognized revenue for managed services and software-as-a-service arrangements once we commence providing the managed or software services and recognize the service revenue ratably over the term of the various customer contracts. In circumstances whereby we sold a term or perpetual license and maintenance or managed services, we commenced revenue recognition after both the software and service were made available to the customer and recognized the revenue from the entire arrangement ratably over the longer of the term license or service period, because we did not have vendor specific objective evidence (" VSOE") for either our term licenses or our maintenance and managed services for multi-screen video analytics software solutions.

We evaluate each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within our control. Our various systems have standalone value because we have either routinely sold them on a standalone basis or we believe that our customers could resell the delivered system on a standalone basis. Professional services have standalone value because we have routinely sold them on a standalone basis, there are similar third-party vendors that routinely provide similar professional services, and certain customers perform the installation themselves. Our maintenance has standalone value because we have routinely sold maintenance separately.

We allocate revenue to each element in an arrangement based on the following selling price hierarchy: the selling price for a deliverable is based on its VSOE, if available, TPE, if VSOE is not available, or ESP, if neither VSOE nor TPE is available. We have typically been able to establish VSOE of fair value for our maintenance and services. We determine VSOE of fair value for professional services and maintenance by examining the population of selling price for the same or similar services when sold separately and on a standalone basis, and determining that the pricing population for each VSOE classification is within a very narrow range of the median selling price. For each element, we evaluate at least annually whether or not we have maintained VSOE of fair value based on our review of the actual selling price of each element over the previous 12-month period.

Our product deliverables are typically comprised of complete systems with numerous hardware and software components that operate together to provide essential functionality, and we are typically unable to establish VSOE or TPE of fair value for our products. Due to the custom nature of our products, we must determine ESP at the individual component level whereby our estimated selling price for the total system is determined based on the sum of the individual components. ESP for components of our real-time products is typically based upon list price, which is representative of our actual selling price. ESP for components of our content delivery products are based upon our most frequent selling price ("mode") of standalone and bundled sales, based upon a 12-month historical analysis. If a mode selling price is not available, then ESP will be the median selling price of all such component sales based upon a 12-month historical analysis, unless facts and circumstances indicate that another selling price, other than the mode or median selling price, is more representative of our estimated selling price. Our methodology for determining estimated selling price requires judgment, and any changes to pricing practices, the costs incurred to integrate products, the nature of our relationships with our customers, and market trends could cause variability in our estimated selling prices or cause us to re-evaluate our methodology for determining estimated selling price. We update our analysis of mode and median selling price at least annually, unless facts and circumstances indicate that more frequent analysis is required.

In addition, we also sell software under multiple-element arrangements that do not include hardware. Under these software arrangements, we allocate revenue to the various elements based on VSOE of fair value. Our VSOE of fair value is determined based on the price charged when the same element is sold separately. If VSOE of fair value does not exist for all elements in a multiple-element arrangement, but does exist for undelivered elements, we recognize revenue using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement is recognized as revenue. Where fair value of undelivered elements has not been established, the total arrangement is recognized over the period during which the services are performed.

Inventory Valuation

We provide for inventory obsolescence based upon assumptions about future demand, market conditions and anticipated timing of the release of next generation products. If actual market conditions or future demand are less favorable than those projected, or if next generation products are released earlier than anticipated, additional inventory write-downs may be required. We also review, on a quarterly basis, the value of inventory on hand for which a newer and more advanced technology or product is currently, or will soon be, available. When we believe that we will not be able to sell the products in inventory at or above cost, we mark the inventory down to market value.

We also provide for obsolescence of our spares inventories. As these service parts age over the related product post-installation service life covered by a warranty, we reduce the net carrying value of our spare parts inventory to account for the excess that builds over the service life. For certain spare parts, our assessment also includes recent usage under the associated warranties. The post-installation warranty service life of our systems is generally three to five years and, at the end of the service life, the carrying value for these parts is typically reduced to zero.

Income Taxes

As part of the process of preparing our consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. The provision for income taxes is determined using the asset and liability approach for accounting for income taxes. A current liability is recognized for the estimated taxes payable for the current year. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted tax rates in effect for the year in which the timing differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates or tax laws are recognized in the provision for income taxes in the period that includes the enactment date.

Valuation allowances are established when necessary to reduce deferred tax assets to the amount more-likely-than-not to be realized. To the extent we establish or change the valuation allowance in a period, the tax effect will generally flow through the consolidated statement of operations. In the case of an acquired or merged entity, we will record any valuation allowance on a deferred tax asset established through purchase accounting procedures as an adjustment to goodwill at the acquisition date. Any subsequent change to a valuation allowance established during purchase accounting that occurs within the measurement period of the acquisition (a period not to exceed 12 months) will also be recorded as an adjustment to goodwill, provided that such a change relates to new information about the facts and circumstances that existed on the acquisition date. All other changes to a valuation allowance established during purchase accounting will flow through the consolidated statement of operations.

The determination of our provision for income taxes requires significant judgment, the use of estimates and the interpretation and application of complex tax laws. We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and recording the related tax assets and liabilities. In the ordinary course of our business, there are transactions and calculations for which the ultimate tax determination is uncertain. In spite of our belief that we have appropriate support for all the positions taken on our tax returns, we acknowledge that certain positions may be successfully challenged by the taxing authorities. Therefore, an accrual for uncertainty in income taxes is provided for, when necessary. In the event that we have accruals for uncertainty in income taxes, these accruals are reviewed quarterly and reversed upon being sustained under audit, the expiration of the statute of limitations, new information, or other determination by the taxing authorities. The provision for income taxes includes the impact of changes in uncertainty in income taxes. Although we believe our recorded tax assets and liabilities are reasonable, tax laws and regulations are subject to interpretation and inherent uncertainty; therefore our assessments can involve both a series of complex judgments about future events and rely on estimates and assumptions. Although we believe these estimates and assumptions are reasonable, the final determination could be materially different than that which is reflected in our provision for income taxes and recorded tax assets and liabilities.

In the calculation of our quarterly provision for income taxes, we use an annual effective rate based on expected annual income and statutory tax rates, which may require judgments and estimates. The tax (or benefit) applicable to significant unused or infrequently occurring items, discontinued operations or extraordinary items are separately recognized in the income tax provision in the quarter in which they occur.

In assessing the realizability of deferred tax assets, we consider whether it is more-likely-than-not that some portion or all of our deferred tax assets will not be realized. In determining whether or not a valuation allowance for deferred tax assets is needed, we evaluate all available evidence, both positive and negative, including: trends in operating income or losses; currently available information about future years; future reversals of existing taxable temporary differences; future taxable income exclusive of reversing temporary differences and carryforwards; taxable income in prior carryback years if carryback is permitted under the tax law; and tax planning strategies that would accelerate taxable amounts to utilize expiring carryforwards, change the character of taxable and deductible amounts from ordinary income or loss to capital gain or loss, or switch from tax-exempt to taxable investments. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

As of June 30, 2016, we maintain a full valuation allowance on our net deferred tax assets in all jurisdictions except Japan and the U.K. We believe that it is more-likely-than-not that the deferred tax assets will not be realized in the jurisdictions in which we maintain a full valuation allowance. We evaluated the recent trend operating results in the U.S. and concluded during the fourth quarter of fiscal year 2016 that it is now more-likely-than-not that we will be unable to realize our U.S. deferred tax asset. Based upon our recent operating losses and our estimate of future U.S. earnings due to our continued investment in our storage solutions product line, we reestablished a full valuation allowance in the U.S. during the fourth quarter of fiscal year 2016 resulting in a charge of approximately $12.5 million in our consolidated statement of operations. In Japan and the U.K., we believe that it is more-likely-than-not that we will realize our entire deferred tax inventory, and no valuation allowance is needed. See Note 9 to the consolidated financial statements for more information.

Indemnifications and Warranties

We recognize the fair value of guarantee and indemnification arrangements issued or modified by us, if these arrangements are within the scope of the interpretation. In addition, we must continue to monitor the conditions that are subject to the indemnifications, as required under previously existing accounting principles generally accepted in the U.S. ("U.S. GAAP"), in order to identify if a loss has occurred. If we determine that it is probable that a loss has occurred, then any such estimable loss would be recognized under those indemnifications. Under our standard software license, services and maintenance agreement, we often agree to indemnify, defend and hold harmless our licensees from and against certain losses, damages and costs arising from claims alleging the licensees' use of our software infringes the intellectual property rights of a third-party. Historically, we have not been required to pay material amounts in connection with claims asserted under these provisions and, accordingly, we have not recorded a liability relating to such provisions.

Under our software licenses, services and maintenance agreements, we also represent and warrant to licensees that our software products will operate substantially in accordance with our published specifications regarding the product, and that the services we perform will be undertaken by qualified personnel in a professional manner conforming to generally accepted industry standards and practices. Historically, only minimal costs have been incurred relating to the satisfaction of product warranty claims.

Other potential obligations could arise from promises to indemnify, defend and hold harmless each of our executive officers, non-employee directors and certain key employees from and against losses, damages and costs incurred by each such individual in administrative, legal or investigative proceedings arising from alleged wrongdoing by the individual while acting in good faith within the scope of his or her job duties on our behalf. Historically, minimal costs have been incurred relating to such indemnifications and, as such, no amount has been accrued for these types of potential obligations.

Defined Benefit Pension Plan

We maintain defined benefit pension plans (the "Pension Plans") for a number of former employees of our German subsidiary ("participants"). In 1998, the Pension Plans were closed to new employees and no existing employees are eligible to participate, as all eligible participants are no longer employed by Concurrent. The Pension Plans provide benefits to be paid to all participants at retirement based primarily on years of service with Concurrent and compensation rates in effect near retirement. Our policy is to fund benefits attributed to participants' services to date. The determination of our Pension Plans' benefit obligations and expenses are dependent on our selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions include, among others, the weighted average discount rate, the weighted average expected rate of return on plan assets and the weighted average rate of compensation increase. To the extent that these assumptions change, our future benefit obligation and net periodic pension expense may be positively or negatively impacted.

Selected Operating Data as a Percentage of Total Revenue

The following table sets forth our consolidated historical operating information, as a percentage of total revenues (unless otherwise noted) for the periods indicated:

Results of Operations

We recognize revenue for product sales in accordance with the appropriate accounting guidance as described in our critical accounting policies. We recognize revenue from customer service plans ratably over the term of each plan, which are typically between one and three years. Our business is comprised of two operating segments for financial reporting purposes, products and services, which we provide for each of these markets.

Custom engineering services are often completed within 90 days from receipt of an order. Revenues from these services are recognized upon completion and delivery of the product to the customer. In certain instances, our customers require significant customization of both the software and hardware products. In these situations, the services are considered essential to the functionality of the software and, therefore, the revenue from the arrangement, with the exception of maintenance, is recognized in conformity with accounting standards governing long term construction-type contracts and performance of construction-type and certain production-type contracts. If we are able to determine reasonable estimates of the cost of the arrangement, we record the value of the entire arrangement (excluding maintenance) as the project progresses based on actual costs incurred compared to the total costs expected to be incurred through completion. If we are unable to reasonably estimate the costs to complete the arrangement, all revenue is deferred until the contract is completed.

Cost of sales consists of the cost of the computer systems sold, including amortization of software development costs, depreciation, labor, material, overhead and third-party product costs. Cost of sales also includes the salaries, benefits and other costs of the maintenance, service and help desk personnel associated with product installation and support activities.

Sales and marketing expenses consist primarily of the salaries, benefits, overhead, and travel expenses of employees responsible for acquiring new business and maintaining existing customer relationships, as well as marketing expenses related to trade publications, advertisements, trade shows and depreciation costs of demo equipment.

Research and development expenses are comprised of salaries, benefits, overhead, and travel expenses of employees involved in hardware and software product enhancement and development, cost of outside contractors engaged to perform quality assurance, hardware and software product enhancement and development. Development costs are expensed as incurred.

General and administrative expenses consist primarily of salaries, benefits, overhead, and travel expenses of management and administrative personnel, human resources, information systems, insurance, investor relations, accounting and fees for legal, board of director expenses, and other professional services.

Amounts related to fiscal year 2015 give effect to the immaterial restatement as described in Note 4 to the consolidated financial statements.

Fiscal Year 2016 in Comparison to Fiscal Year 2015

The following table sets forth summarized consolidated financial information for each of the fiscal years ended June 30, 2016 and 2015, as well as comparative data showing increases and decreases between periods (dollars in thousands).

(1) NM denotes percentage is not meaningful

Product Revenue . Total product revenue for fiscal year 2016 was $41.5 million, a decrease of $2.4 million, or 5.6%, from $43.9 million for fiscal year 2015 primarily due to a decrease in our content delivery product revenue, as described below.

Content delivery product revenue decreased $2.4 million, or 9.9%, for fiscal year 2016 compared to fiscal year 2015. Fiscal year 2016 includes $2.0 million of revenue from our new Aquari storage product solution (compared to $0.7 million of our predecessor storage product in fiscal year 2015). The year-over-year decline in content delivery product revenue resulted from the following:

Fluctuation in content delivery product revenue is often due to the fact that we have a small number of customers making periodic large purchases that account for a significant percentage of revenue. Our content delivery product revenue is also subject to customers' capital spending cycles and may be impacted in the future by consolidation of the industry in which our customers operate.

Overall real-time product revenue remained flat and decreased $0.1 million, or less than 1%, for fiscal year 2016 compared to fiscal year 2015. The year-over-year decline in real-time product revenue resulted primarily from the following:

Revenue from defense contractors and government customers tend to vary by quarter and year, and are dependent upon government initiatives and funding availability.

Service Revenue. Total service revenue for fiscal year 2016 was $19.7 million, a decrease of $0.8 million, or 4.1%, from $20.5 million for fiscal year 2015. This decrease was primarily due to a decrease in content delivery service revenue of $1.3 million, or 11.9%, partially offset by an increase in real-time service revenue of $0.5 million, or 5.5% . The decrease in content delivery service revenues is primarily due to a decrease of $2.1 million in service revenues as a result of the sale of our multi-screen video analytics product line in September 2015. We expect to show higher service revenues in future periods as a result of increased service and maintenance revenues associated with our new Aquari storage product sales in the future.

Product Gross Margin. Product gross margin was $24.4 million for fiscal year 2016, a decrease of $0.7 million, or 2.9%, from $25.1 million for fiscal year 2015. Product gross margin as a percentage of product revenue increased to 58.8% for fiscal year 2016 from 57.2% for fiscal year 2015 primarily due a higher proportion of software-only sales in our real-time business partially offset by lower than average gross margin recognized on the sales of our new Aquari storage products in the current year. Product gross margin decreased in terms of dollars during fiscal year 2016, compared to fiscal year 2015, due to the lower volume of our product sales to our content delivery customers.

Service Gross Margin . Service gross margin was $11.9 million for fiscal year 2016, an increase of $0.6 million, or 5.4%, from $11.3 million for fiscal year 2015. Gross margin on service revenue increased to 60.3% of service revenue for fiscal year 2016 from 54.9% of service revenue for fiscal year 2015. The increase in service margin as a percentage of service revenue was primarily due the elimination of fixed costs used to support our service organization. Additionally, the $1.4 million decrease in service cost of sales primarily resulted from (1) a $0.8 million decrease in overall service cost of sales as a result of the sale of our multi-screen video analytics product line in September 2015, primarily in customer service personnel costs, (2) a $0.3 million decrease in service personnel costs in the U.S. (excluding the personnel related to the sale of our multi-screen video analytics product line) and (3) a $0.4 million decrease in excess and obsolescence charges for our spare parts inventories used in warranty-related services.

Sales and Marketing. Sales and marketing expenses increased approximately $1.2 million, or 8.4%, to $15.7 million for fiscal year 2016 from $14.5 million for fiscal year 2015. This year-over-year increase primarily resulted from (1) a $1.2 million increase in personnel and contractor costs primarily to support our new sales organization structure including the launch of our new Aquari storage product, (2) a $0.3 million increase in commissions, (3) a $0.3 million increase in recruiting fees, partially offset by (4) a $0.6 million decrease in overall sales and marketing expenses as a result of the sale of our multi-screen video analytics product line in September 2015, primarily related to personnel costs.

Research and Development. Research and development expenses increased approximately $0.7 million, or 5.2%, to $14.3 million for fiscal year 2016 from $13.6 million for fiscal year 2015. This increase was primarily due to (1) a $1.4 million increase in personnel costs during fiscal year 2016 resulting from an increase in development personnel to support our product and strategic growth initiatives, including our new Aquari storage product, (2) a $0.4 million increase in facilities and information technology costs resulting from our new research and development office in downtown Atlanta, partially offset by (3) a $1.3 million decrease in overall research and development expenses as a result of the sale of our multi-screen video analytics product line in September 2015, primarily related to personnel costs and (4) a $0.2 million decrease in recruiting fees as we utilized more referrals and in-house recruiting capabilities in fiscal year 2016.

General and Administrative. General and administrative expenses increased approximately $0.7 million, or 8.2%, to $8.4 million for fiscal year 2016 from $7.7 million for fiscal year 2015. This increase was primarily due to (1) a $0.3 million bonus paid to our chief executive officer in connection with the execution of an amendment to his employment agreement in October 2015, (2) a $0.5 million general corporate bonus accrual, (2) $0.4 million in professional fees, including costs related to our tax asset preservation plan and review of strategic alternatives, (3) a $0.3 million increase in personnel costs, partially offset by (4) a $1.0 million decrease in chief executive officer transition costs incurred during fiscal year 2015 that did not reoccur in fiscal year 2016.

Gain on Sale of Product Line, net. During fiscal year 2016, we sold the customer contracts and intellectual property related to our multi-screen video analytics product line for $3.5 million. The recorded net gain of $4.1 million included (1) customer contracts and intellectual property with a net book value of $0.2 million, (2) related assets and liabilities not sold or transferred in the transaction of $1.0 million (net liability, consisting primarily of unearned deferred revenue) and (3) legal, accounting and other expenses of $0.2 million that would not have been incurred otherwise.

Gain on Sale of Intangible Assets, net. During fiscal year 2015, we sold two blocks of IPv4 addresses to two buyers for cash. These blocks of non-strategic IPv4 addresses, which were both recorded at $0 book value, had not been a material part of our ongoing operations. The aggregate $0.7 million gain on the sale of these IPv4 addresses is net of broker fees incurred to consummate the transaction.

Other Income (Expense), net . During fiscal year 2016, we recognized approximately $0.7 million of realized currency translation gains compared to $0.6 million of realized currency translation losses in fiscal 2015. These gains and losses result from the impact of the changes in value of the British pound, euro and Japanese yen, relative to the U.S. dollar, on foreign currency transactions related to short-term intercompany accounts which are settled in the normal course of business by our European and Japanese subsidiaries for which the British pound, euro and Japanese yen are the functional currencies.

Provision for Income Taxes. We recorded a $13.9 million income tax provision for fiscal year 2016 compared to a $0.8 million income tax provision for fiscal year 2015. The amount for fiscal year 2016 is primarily due to $12.5 million in non-cash income tax expense related to the reestablishment of a full valuation allowance based on our evaulation that it is more-likely-than-not that some portion or all of the U.S. deferred tax assets will not be realized as a result of our recent trend of negative operating results in the U.S. expectations for future taxable income in the U.S. due to the continued investment in our new storage solutions product line. The foreign tax expense component is higher than the prior year primarily due to (1) higher pretax book income in Japan and the U.K. offset by (2) a reduction in the statutory tax rate in Japan.

In jurisdictions other than the U.K. and Japan, we either generate net operating losses or occasionally utilize some of the net operating loss carryforward amounts. However, because of the cumulative accounting losses in those jurisdictions, we maintain a full valuation allowance on those losses. This results in no net income tax provision impact in those jurisdictions as of June 30, 2016.

Net Loss. Our net loss for fiscal year 2016 was $11.1 million, or $1.21 loss per basic and diluted share, compared to a net loss for fiscal year 2015 of $0.2 million, or $0.02 loss per basic and diluted share.

Fiscal Year 2015 in Comparison to Fiscal Year 2014

The following table sets forth summarized consolidated financial information for each of the fiscal years ended June 30, 2015 and 2014, as well as comparative data showing increases and decreases between periods (dollars in thousands).

(1) NM denotes percentage is not meaningful

Product Revenue . Total product revenue for fiscal year 2015 was $43.9 million, a decrease of $4.0 million, or 8.3%, from $47.9 million for fiscal year 2014. The decrease in product revenue resulted from a $2.7 million, or 9.9%, decrease in content delivery product revenue for fiscal year 2015 compared to the prior year. The year-over-year decline in content delivery product revenue resulted from the following:

Fluctuation in content delivery product revenue is often due to the fact that we have a small number of customers making periodic large purchases that account for a significant percentage of revenue. Our content delivery product revenue is also subject to customers' capital spending cycles and may be impacted in the future by consolidation of the industry in which our customers operate.

The decrease in product revenue also resulted from a $1.3 million, or 6.1%, decrease in real-time product revenue for fiscal year 2015 compared to the prior year. The year-over-year decline in real-time product revenue resulted from the following:

Revenue from defense contractors and the government tend to vary by quarter and year, and are dependent upon government initiatives and funding availability.

Service Revenue. Total service revenue for fiscal year 2015 was $20.5 million, a decrease of $2.8 million, or 11.8%, from $23.3 million for fiscal year 2014. This decrease was due to a $2.9 million, or 20.3%, decrease in content delivery service revenue. Approximately $1.2 million of the decrease in content delivery service revenue resulted from a multi-screen video analytics software managed service contract that we completed during our fiscal year 2014 that was not renewed. Additionally, in the prior year, we recognized $0.7 million of multi-screen video analytics software reporting services revenue that did not recur in the current year. The remaining decrease in our content delivery service revenue was attributable to a decrease in our content delivery maintenance revenue. During fiscal year 2014, a customer that accounted for 5.4% of our total service revenue indicated that it was winding down its purchase of maintenance services from us. Our loss of maintenance revenue from this customer accounted for a $1.2 million decrease in maintenance service revenue for fiscal year 2015, compared to the same period in the prior year.

Product Gross Margin. Product gross margin was $25.1 million for fiscal year 2015, a decrease of $2.4 million, or 8.6%, from $27.5 million for fiscal year 2014. Product gross margin as a percentage of product revenue decreased slightly to 57.2% for fiscal year 2015 from 57.4% for fiscal year 2014. Product gross margin decreased in terms of dollars during fiscal year 2015, compared to the same period in the prior year, due to the lower volume of our product sales to content delivery customers and the impact of foreign currency rate changes particularly in Japan.

Service Gross Margin . Service gross margin was $11.3 million for fiscal year 2015, a decrease of $1.6 million, or 12.8%, from $12.9 million for fiscal year 2014. Gross margin on service revenue decreased slightly to 54.9% of service revenue for fiscal year 2015 from 55.5% of service revenue for fiscal year 2014. The decrease in service margin as a percentage of service revenue was primarily due to the year-over-year decrease in service revenue by a greater amount than the year-over-year decrease in service costs. Additionally, the $1.1 million decrease in service cost of sales primarily resulted from (1) a $0.5 million decrease in costs to support multi-screen video analytics software managed services contracts that have ended (along with the end of the related service contract revenue) at the end of the prior fiscal year and (2) a $0.2 million decrease in amortization of purchased technology related to our multi-screen video analytics software solutions, as the amortization period for this intangible ended in the second quarter of the prior fiscal year, (3) a $0.2 million decrease in customer service personnel costs, due to lower headcount primarily in the U.S. and (4) a $0.2 million decrease due to the effect of foreign currency rate changes, primarily in Japan and Germany, partially offset by (5) a $0.3 million increase in the provision for excess and obsolescence related to our spare parts inventories.

Sales and Marketing. Sales and marketing expenses increased approximately $0.2 million, or 1.3%, to $14.5 million for fiscal year 2015 from $14.3 million for fiscal year 2014. This year-over-year increase primarily resulted from (1) a $0.7 million increase in personnel costs during fiscal year 2015, as we have increased our sales and sales support presence in both Europe and the U.S. to pursue new business and support existing customers, offset by (2) a $0.3 million decrease in bonus incentive compensation as our current year bonus performance criteria were not met and (3) a $0.4 million decrease due to the effect of foreign currency rate changes, primarily in Japan and Germany.

Research and Development. Research and development expenses increased approximately $0.6 million, or 4.4%, to $13.6 million for fiscal year 2015, from $13.0 million for fiscal year 2014. This increase was primarily due to (1) a $0.7 million increase in personnel costs during fiscal year 2015 resulting from an increase in development personnel to support product and strategic growth initiatives, (2) an increase of $0.3 million in recruiting fees related to the increase in personnel, (3) a $0.2 million increase in development costs as fewer development projects for sale were ordered by our customers (typically this results in a transfer of costs from research and development to cost of sales), offset by (4) a decrease of $0.5 million in bonus incentive compensation as our current year bonus performance criteria were not met.

General and Administrative. General and administrative expenses were $7.7 million for both fiscal year 2015 and fiscal year 2014. While general and administrative expenses were flat year-over-year, there was an expense increase of $1.0 million for Chief Executive Officer ("CEO") transition costs (as discussed in the next paragraph) during fiscal year 2015 , offset by a decrease of $0.8 million and $0.1 million in bonus incentive compensation and performance-based restricted stock expense, respectively, as our current year bonus and restricted stock performance criteria were not met.

In regards to the $1.0 million in CEO transition costs, on November 18, 2014, our Board of Directors appointed Mr. Derek Elder as our President and Chief Executive Officer, effective immediately upon the departure of Mr. Dan Mondor. Mr. Elder received a $0.1 million sign-on bonus as part of his employment. Effective November 21, 2014, Mr. Mondor, our former President and Chief Executive Officer departed the Company. Mr. Mondor will receive severance compensation approximating $0.7 million, which has been accrued and expensed in fiscal year 2015, in accordance with the provisions in his amended and restated employment agreement regarding termination without due cause, as described in our Current Report on Form 8-K filed with the Securities and Exchange Commission on October 4, 2010. Furthermore, we incurred approximately $0.2 million of recruiting costs as part of our executive search during fiscal year 2015 .

Gain on Sale of Intangible Assets, net. During fiscal year 2015, we sold two blocks of IPv4 addresses to two buyers for cash. These blocks of non-strategic IPv4 addresses, which were both recorded at $0 book value, had not been a material part of our ongoing operations. The aggregate $0.7 million gain on the sale of these IPv4 addresses is net of broker fees incurred to consummate the transaction.

Other Expense, net . During fiscal year 2015, we incurred approximately $0.6 million of realized currency translation losses compared to $0.2 million of realized currency translation losses in fiscal year 2014. These losses resulted from the impact of the continued decrease in value of both the euro and Japanese yen, relative to the U.S. dollar, on foreign currency transactions related to short-term intercompany accounts which are settled in the normal course of business by our European and Japanese subsidiaries for which the euro and yen are the respective functional currencies.

Provision (Benefit) for Income Taxes. We recorded an $0.8 million income tax provision for fiscal year 2015 and a $13.4 million income tax benefit for fiscal year 2014. Our tax provision recorded during fiscal year 2015 was primarily attributable to income tax provisions on profitable operations in Japan. Additionally, our U.S. tax provision in the current year is primarily non-cash, as we are able to utilize our U.S. net operating losses to offset most cash taxes that would otherwise be owed. In the fourth quarter of fiscal year 2014, we concluded that it was more-likely-than-not that we will realize a portion of our U.S. deferred tax asset as a result of our trend of positive operating results in the U.S. As a result, we realized a $13.7 million non-cash tax benefit related to the release of a portion of our valuation allowance that represented the amount of our U.S. deferred tax asset that we expect to realize in future years. This release was based upon our estimate of U.S. future taxable earnings. See Note 9 to the consolidated financial statements for more information.

Our tax provision recorded in the prior year was primarily attributable to the income tax provision recorded by our subsidiary in Japan as a result of pretax income earned in the period. However, most of this was offset on a consolidated basis by the release of all valuation allowances against our deferred tax assets in the U.K., during the first half of our fiscal year 2014. A change in U.K. tax law relative to treatment of research and development tax credits allowed us to release valuation allowances against approximately $0.2 million of deferred tax assets that we believe are now realizable as a result of the current period tax law change.

In jurisdictions other than the U.S., U.K. and Japan, we either generate net operating losses or occasionally utilize some of the net operating loss carryforward amounts. However, because of the cumulative accounting losses in those jurisdictions, we maintain a full valuation allowance on those losses. This results in no net income tax provision impact in those jurisdictions, as of June 30, 2015.

Net Income (Loss). Our net loss for fiscal year 2015 was $0.2 million, or $0.02 of loss per basic and diluted share, compared to net income for fiscal year 2014 of $18.5 million, or $2.08 per basic and $2.04 per diluted share.

Liquidity and Capital Resources

Our liquidity is dependent upon many factors, including sales volume, product and service costs, operating results and the efficiency of asset use and turnover. Our future liquidity will be affected by, among other things:

Uses and Sources of Cash

We used $2.2 million and generated $3.5 million and $6.2 million of cash from operating activities during fiscal years 2016, 2015 and 2014, respectively. Operating cash flows in fiscal year 2016 were primarily driven by the timing of customer billings and payments to suppliers at the end of the fiscal year. Operating cash flows in fiscal year 2015 were primarily due to non-cash charges recorded during the year. Operating cash flows in fiscal year 2014 were primarily generated by operating profits during the year.

We invested $2.3 million, $1.9 million and $1.3 million in property and equipment during fiscal years 2016, 2015 and 2014, respectively. Capital additions during each of these periods were primarily related to: (1) development and test equipment for our development groups, including our new Aquari storage systems development group in the 2016 fiscal year, (2) demonstration systems used by our sales and marketing group and (3) facilities improvements.

During the year ended June 30, 2016, we sold the customer contracts and intellectual property related to our multi-screen video analytics product line for $3.5 million in cash.

During fiscal year 2015, we sold two blocks of IPv4 addresses to two buyers for cash. These blocks of non-strategic IPv4 addresses, which were both recorded at $0 book value, had not been a material part of our ongoing operations. The aggregate $0.7 million proceeds on the sale of these IPv4 addresses are net of broker fees incurred to consummate the transaction.

We paid four quarterly cash dividends, each for $0.12 per share, during each of fiscal years 2016 and 2015. During fiscal years 2016 and 2015, we also paid an additional $0.1 million of dividends in each year that had been held as dividends payable from previous declarations to restricted stockholders for whom restrictions lapsed during each respective fiscal year. We intend to pay a regular quarterly cash dividend on our common shares subject to, among other things, our results of operations, cash balances, future cash requirements, financial condition, statutory requirements of Delaware law, and other factors that the Board of Directors may deem relevant. We believe that a portion of our dividends may be treated as a return of capital to stockholders, rather than dividend income, as we believe dividend payments may exceed our cumulative earnings and profits.

We paid $0.1 million for the repurchase and retirement of shares to settle minimum tax withholdings for employees whose restricted stock awards released during fiscal year 2014. The tax settlement method was limited to a short period of time and we do not anticipate any additional repurchases of stock for this purpose.

Although we do not have any outstanding debt or borrowing facilities in place at June 30, 2016, we periodically review the need for credit arrangements. However, based upon our existing cash balances, historical cash usage, and anticipated operating cash flow in the near term, we believe that existing cash balances will be sufficient to meet our anticipated working capital, capital expenditure requirements and any dividend payments for at least the next twelve months.

We had working capital (current assets less current liabilities) of $22.6 million, $25.1 million and $28.5 million and cash and cash equivalents of $20.3 million, $25.5 million and $28.1 million at June 30, 2016, 2015 and 2014, respectively. At June 30, 2016, we had no material commitments for capital expenditures.

As of June 30, 2016, approximately $3.1 million, or 15.1% of our cash is in foreign accounts and there is no expectation that any foreign cash would need to be transferred from these foreign accounts to cover U.S. operations in the next 12 months. Based upon our existing cash balances and short-term investments, historical cash usage, and anticipated operating cash flow in the current fiscal year, we believe that existing U.S. cash balances will be sufficient to meet our anticipated working capital, dividend payments and capital expenditure requirements for at least the next 12 months.

Off-Balance Sheet Arrangements

We enter into agreements in the ordinary course of business with customers, resellers, distributors, integrators and suppliers that often require us to defend and/or indemnify the other party against intellectual property infringement claims brought by a third-party with respect to our products. We evaluate estimated losses for such indemnifications under ASC Topic 460-10-25, Guarantees . We consider factors such as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. To date, we have not encountered material costs as a result of such obligations and have not accrued any material liabilities related to such indemnifications in our financial statements. See Note 17 to the consolidated financial statements for additional disclosures regarding indemnification.

Contractual Obligations

The following table summarizes our significant contractual obligations as of June 30, 2016:

Recent Accounting Guidance

Recently Adopted Accounting Guidance

In April 2014, the Financial Accounting Standards Board ("FASB") issued 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"). ASU 2014-08 requires that a disposal representing a strategic shift that has (or will have) a major effect on an entity's financial results or a business activity classified as held for sale should be reported as discontinued operations. ASU 2014-08 also expands the disclosure requirements for discontinued operations and adds new disclosures for individually significant dispositions that do not qualify as discontinued operations. ASU 2014-08 was effective for us beginning July 1, 2015 and was considered in regards to the sale of our multi-screen video analytics product line in September 2015.

In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic 740) - Balance Sheet Classification of Deferred Taxes ("ASU 2015-17"). ASU 2015-17 was issued by the FASB as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). Current GAAP requires an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. To simplify the presentation of deferred income taxes, the amendments in ASU 2015-17 require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments of ASU 2015-17. ASU 2015-17 is effective for financial statements issued for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption as of the beginning of an interim or annual reporting period is permitted. The amendments may be applied prospectively or retrospectively. The Company early adopted ASU 2015-17 on a retrospective basis, and deferred taxes previously classified as components of current assets and current liabilities were reclassified to non-current assets and non-current liabilities, respectively, as of June 30, 2015.

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.

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.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements made or incorporated by reference in this annual report may constitute "forward-looking statements" within the meaning of the federal securities laws. When used or incorporated by reference in this report, the words "believes," "expects," "estimates," "anticipates," and similar expressions, are intended to identify forward-looking statements. Statements regarding future events and developments, our future performance, market share, new market growth, payment of dividends, ability to utilize our net deferred tax assets and availability of earnings and profits with respect to dividend income, as well as our expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. Examples of our forward-looking statements in this report include, but are not limited to, the impact of our content delivery strategy on our business, the impact of our new Aquari storage solution strategy on our business, the impact of any strategic initiatives we may undertake; the impact of the current reestablishment of and potential for future release of our tax valuation allowances on future income tax provisions and income taxes paid, expected level of capital additions, our expected cash position, the impact of interest rate changes and fluctuation in currency exchange rates, our sufficiency of cash, the impact of litigation and the payment of dividends. These statements are based on beliefs and assumptions of our management, which are based on currently available information. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. The risks and uncertainties which could affect our financial condition or results of operations include, without limitation: the potential consolidation of the markets that we serve; U.S. Government sequestration; European austerity measures; the impact of the U.K. exiting the European Union; delays or cancellations of customer orders; non-renewal of maintenance and support service agreements with customers; changes in product demand; economic conditions; various inventory risks due to changes in market conditions; margins of the content delivery business to capture new business; fluctuations and timing of large content delivery orders; risks associated with our operations in the People's Republic of China; uncertainties relating to the development and ownership of intellectual property; uncertainties relating to our ability and the ability of other companies to enforce their intellectual property rights; the pricing and availability of equipment, materials and inventories; the concentration of our customers; failure to effectively manage change; delays in testing and introductions of new products; the impact of reductions in force on our operations; rapid technology changes; system errors or failures; reliance on a limited number of suppliers and failure of components provided by those suppliers; uncertainties associated with international business activities, including foreign regulations, trade controls, taxes and currency fluctuations; the impact of competition on the pricing of content delivery products; failure to effectively service the installed base; the entry of new, well-capitalized competitors into our markets; the success of new content delivery products, including acceptance of our new storage solutions; the success of our relationships with technology and channel partners; capital spending patterns by a limited customer base; the current challenging macroeconomic environment; continuing unevenness of the global economic recovery; global terrorism; privacy concerns over data collection; our ability to utilize net operating losses to offset cash taxes in the event of an ownership change as defined by the Internal Revenue Service; earthquakes, tsunamis, floods and other natural disasters in areas in which our customers and suppliers operate; the process of evaluation of strategic alternatives; and the availability of debt or equity financing to support our liquidity needs.

Our forward-looking statements are based on current expectations and speak only as of the date of such statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise.

Item 8. Consolidated Financial Statements and Supplementary Data.

The following consolidated financial statements and supplementary data are included herein.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Not applicable.

Item 9A. Controls and Procedures.

Evaluation of Controls and Procedures

We conducted an evaluation as of June 30, 2016, under the supervision and with the participation of our management, including our chief executive officer ("CEO") and chief financial officer ("CFO"), of the effectiveness of the design and operation of our disclosure controls and procedures. The term "disclosure controls and procedures," as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based upon that evaluation, our CEO and CFO concluded that, as of such date, our disclosure controls and procedures were effective as of the end of the period covered by this report.

In connection with our evaluation of the immaterial errors in our consolidated balance sheet, consolidated statement of operations and consolidated statement of cash flows as of and for the year ended June 30, 2015 discussed in Note 4 to our consolidated financial statements included herein, management concluded that because of the material weakness identified in our internal control over financial reporting discussed below, our disclosure controls and procedures were not effective as of June 30, 2015.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

We identified a material weakness in internal control over financial reporting during the first quarter of our 2016 fiscal year relating to the grant of 120,000 restricted stock awards to our president and CEO upon his commencement of employment in November 2014. Because the grant was determined to be non-compliant under the terms of the 2011 Stock Incentive Plan under which it was granted, in October 2015, the grant was retroactively rescinded as of the date it was granted. As a result, we determined that a material weakness existed in the operation of our internal controls over financial reporting, specifically involving those controls relating to the identification of applicable limitations on equity awards issued under our stock incentive plans. A material weakness was determined to be present due to the following factors: (1) the error was identified in connection with issues raised in a third-party demand letter and (2) had the error not been identified, the potential for a material error at a point in the future was a reasonable possibility. Management has concluded that our controls were not properly operating related to the preparation and review of our consolidated balance sheet, consolidated statement of operations and consolidated statement of cash flows as of and for the year ended June 30, 2015, including interim periods within that year.

Notwithstanding the material weakness identified, management believes the consolidated financial statements included in this Annual Report on Form 10-K fairly represent in all material respects our consolidated financial condition, results of operations and cash flows as of and for the periods presented.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Pursuant to the rules and regulations of the SEC, internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

Under the supervision and with the participation of our management, including our CEO and CFO, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on criteria established in "Internal Control-Integrated Framework" (originally issued in 1992 and updated in 2013) by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our management concluded that our internal control over financial reporting was effective as of June 30, 2016.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm in accordance with recent amendments to Section 404 of the Sarbanes-Oxley Act of 2002 pursuant to Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act that permit us to provide only management's report in this Annual Report on Form 10-K.

Remediation of Identified Material Weakness

In response to the material weakness described above we implemented new internal control procedures. Such procedures include (1) a review of all awards by the Company's chief financial officer and corporate controller before the grant is made and (2) a written policy statement or checklist outlining the procedural steps and timeline for granting equity awards. As described further in Note 17 to our consolidated financial statements, an independent committee determined that other than the new internal control procedures implemented, no additional action needs be taken by the Company in regards to this grant or any other grants of equity awards issued under our stock incentive plans.

Changes in Internal Control

Other than the remediation of the material weakness described above, there were no changes to our internal controls over financial reporting during the quarter ended June 30, 2016 that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Information regarding the Registrant's executive officers is located in Item 4A of this Form 10-K.

The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the caption "Election of Directors" in the Registrant's Proxy Statement to be used in connection with its Annual Meeting of Stockholders to be held on October 26, 2016 ("Registrant's 2016 Proxy Statement").

The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the Registrant's 2016 Proxy Statement.

The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the caption "Election of Directors – Corporate Governance and Committees of the Board of Directors" in the Registrant's 2016 Proxy Statement.

Item 11. Executive Compensation.

The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the caption "Compensation Discussion and Analysis" (Other than the Compensation Committee Report) and "Compensation of Directors" in the Registrant's 2016 Proxy Statement.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The Registrant hereby incorporates by reference in this Form 10-K certain information contained under the captions "Common Stock Ownership of Management and Certain Beneficial Owners" and "Equity Compensation Plan Information" in the Registrant's 2016 Proxy Statement.

The Registrant knows of no contractual arrangements, including any pledge by any person of securities of the Registrant, the operation of which may at a subsequent date result in a change in control of the Registrant.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The Registrant herein incorporates by reference in this Form 10-K certain information under the caption "Certain Relationships and Related Party Transactions" in the Registrant's 2016 Proxy Statement.

Item 14. Principal Accountant Fees and Services.

The registrant hereby incorporates by reference in this Form 10-K certain information under the caption "Principal Accountant Fees and Services" in the Registrant's 2016 Proxy Statement.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) (1) Financial Statements Filed As Part of This Report:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of June 30, 2016 and 2015

Consolidated Statements of Operations for each of the three years in the period ended June 30, 2016

Consolidated Statements of Comprehensive Income (Loss) for each of the three years in the period ended June 30, 2016

Consolidated Statements of Stockholders' Equity for each of the three years in the period ended June 30, 2016

Consolidated Statements of Cash Flows for each of the three years in the period ended June 30, 2016

Notes to Consolidated Financial Statements

(2) Financial Statement Schedules

Schedule II Valuation and Qualifying Accounts

All other financial statements and schedules not listed have been omitted since the required information is included in the Consolidated Financial Statements or the Notes thereto, is not applicable, material or required.

(3) Exhibits

* Included herewith.

CONCURRENT COMPUTER CORPORATION

ANNUAL REPORT ON FORM 10-K

Item 8

Consolidated Financial Statements and Supplementary Data

Year Ended June 30, 2016

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheets of Concurrent Computer Corporation and subsidiaries (the "Company") as of June 30, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows for each of the three years in the period ended June 30, 2016. Our audits also included the financial statement schedule listed in the Index at Item 15(a)(2). These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Concurrent Computer Corporation and subsidiaries as of June 30, 2016 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2016, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ DELOITTE & TOUCHE LLP

Atlanta, Georgia

August 30, 2016

CONCURRENT COMPUTER CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share and per share data)

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

Concurrent Computer Corporation

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share and per share data)

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

Concurrent Computer Corporation

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Amounts in thousands)

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

CONCURRENT COMPUTER CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

For each of the three years in the period ended June 30, 2016

(Amounts in thousands, except share data)

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

Concurrent Computer Corporation

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

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

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except for share and per share data)

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. Our business is comprised of two segments for financial reporting purposes, products and services, which we provide for each of these markets.

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. We have recently introduced Aquari™, our new unified scale-out storage solutions product to our content delivery and other third-party customers. In September 2015, we sold our multi-screen video analytics product line for collecting and analyzing data related to content delivery applications (see Note 5 –Sales of Assets – Sale of Product Line).

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.

Principles of Consolidation

The consolidated financial statements include the accounts of Concurrent and all wholly-owned domestic and foreign subsidiaries. We have no unconsolidated entities and no special purpose entities. All intercompany transactions and balances have been eliminated in consolidation.

Smaller Reporting Company

We meet the Securities and Exchange Commission's ("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 accounting principles generally accepted in the U.S. ("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.

Foreign Currency

The functional currency of all of our foreign subsidiaries is the applicable local currency. The translation of the applicable foreign currencies into U.S. dollars is performed for balance sheet accounts using current exchange rates in effect at the balance sheet date and for revenue and expense accounts using average rates of exchange prevailing during the fiscal year. Adjustments resulting from the translation of foreign currency financial statements are accumulated in a separate component of stockholders' equity. Gains or losses resulting from foreign currency transactions are included in the consolidated statements of operations, except for those relating to intercompany transactions of a long-term investment nature, which are accumulated in a separate component of stockholders' equity.

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

(Amounts in thousands, except for share and per share data)

Gains (losses) on foreign currency transactions of $694, $(626) and $(257) for the years ended June 30, 2016, 2015 and 2014, respectively, are included in other expense, net in the consolidated statements of operations.

Cash and Cash Equivalents

Cash balances and short-term investments with original maturities of 90 days or less at the date of purchase are considered cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates market value, and represent cash and cash invested in money market funds.

Inventories

Inventories are stated at the lower of cost or market. Cost is computed using standard cost, which approximates actual cost, determined on a first-in, first-out basis. The cost of inventories is comprised of material, labor and overhead. We reduce the recorded value of excess and obsolete inventory to its market value based upon historical and anticipated usage.

Our provision for excess and obsolescence of inventories was $194, $28 and $33 for the years ended June 30, 2016, 2015 and 2014, respectively.

Property and Equipment

Property and equipment are stated at acquired cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful lives of assets ranging from one to five years. Leasehold improvements are amortized over the shorter of the useful lives of the improvements or the terms of the related lease. Gains and losses resulting from the disposition of property and equipment are included in operations. Expenditures for repairs and maintenance are charged to operations as incurred and expenditures for major renewals and betterments are capitalized.

Spare Parts Inventory

We maintain a supply of repairable and reusable spare parts for possible use in future warranty repairs of our installed systems. We have classified this inventory within other long-term assets in our consolidated balance sheets.

As these service parts age over the related product post-installation service life covered by a warranty, we reduce the net carrying value of our spare parts inventory to account for the excess that builds over the service life. For certain spare parts, our assessment also includes recent usage under the associated warranties. The post-installation warranty service life of our systems is generally three to five years and, at the end of the service life, the carrying value for these parts is reduced to zero.

Our provision for excess and obsolescence of our spare parts inventory was $139, $578 and $323 for the years ended June 30, 2016, 2015 and 2014, respectively.

Revenue Recognition Policy

The significant majority of the Company's multiple element arrangements are accounted for under ASC 605-25, Multiple Element Arrangements . This guidance pertains to revenue arrangements with multiple deliverables, and accounting guidance on all tangible products containing both software and non-software components that function together to deliver the product's essential functionality. While most of our arrangements contain a software element, because the software components and non-software components of the tangible product function together to deliver the tangible product's essential functionality, we meet the scope exception of Accounting Standards Codification ("ASC") 985-605-15-4(e), Software .

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

(Amounts in thousands, except for share and per share data)

We generate revenue from the sale of products and services. We commence revenue recognition when all of the following conditions are met:

Our standard multiple-element contractual arrangements with our customers generally include the delivery of systems with multiple components of hardware and software, certain professional services that typically involve installation and consulting, and ongoing systems maintenance. Product revenue is generally recognized when the product is delivered. Professional services that are of a consultative nature may take place before, or after, delivery of the system, and installation services typically occur within 90 days after delivery of the system. Professional services revenue is typically recognized as the services are performed. Initial maintenance begins after delivery of the system and typically is provided for one to three years after delivery. Maintenance revenue is recognized ratably over the maintenance period.

Prior to the sale of our multi-screen video analytics product line in September 2015 (see Note 5 – Sales of Assets - Sale of Product Line), our sales model for multi-screen video analytics products included the option for customers to purchase a perpetual license, a term license, or software as a service. Customers also have the option to purchase maintenance or managed services with their license. Revenue from these sales generally was recognized over the term of the various customer arrangements. Professional services attributable to implementation of our multi-screen video analytics software products or managed services are essential to the customers' use of these products and services. We deferred commencement of revenue recognition for the entire arrangement until we had delivered the essential professional services or have made a determination that the remaining professional services are no longer essential to the customer. We recognized revenue for managed services and software-as-a-service arrangements once we commence providing the managed or software services and recognize the service revenue ratably over the term of the various customer contracts. In circumstances whereby we sold a term or perpetual license and maintenance or managed services, we commenced revenue recognition after both the software and service were made available to the customer and recognized the revenue from the entire arrangement ratably over the longer of the term license or service period, because we did not have vendor specific objective evidence (" VSOE") for our term licenses, maintenance, or managed services for multi-screen video analytics software solutions.

We evaluate each element in a multiple-element arrangement to determine whether it represents a separate unit of accounting. An element constitutes a separate unit of accounting when the delivered item has standalone value and delivery of the undelivered element is probable and within our control. Our various systems have standalone value because we have either routinely sold them on a standalone basis or we believe that our customers could resell the delivered system on a standalone basis. Professional services have standalone value because we have routinely sold them on a standalone basis, there are similar third-party vendors that routinely provide similar professional services, and certain customers perform the installation themselves. Our maintenance has standalone value because we have routinely sold maintenance separately.

We allocate revenue to each element in an arrangement based on a selling price hierarchy. The selling price for a deliverable is based on its VSOE, if available, third-party evidence ("TPE"), if VSOE is not available, or estimated selling price ("ESP"), if neither VSOE nor TPE is available. We have typically been able to establish VSOE of fair value for our maintenance and services. W e determine VSOE of fair value for professional services and maintenance by examining the population of selling prices for the same or similar services when sold separately, and determining that the pricing population for each VSOE classification is within a very narrow range of the median selling price. For each element, we evaluate at least annually whether or not we have maintained VSOE of fair value based on our review of the actual selling price of each element over the previous 12-month period.

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

(Amounts in thousands, except for share and per share data)

Our product deliverables are typically complete systems comprised of numerous hardware and software components that operate together to provide essential functionality, and we are typically unable to establish VSOE or TPE of fair value for our products. Due to the custom nature of our products, we must determine ESP at the individual component level whereby our ESP for the total system is determined based on the sum of the individual components. ESP for components of our real-time products is typically based upon list price, which is representative of our actual selling price. ESP for components of our content delivery products is based upon our most frequent selling price ("mode") of standalone and bundled sales, based upon a 12-month historical analysis. If a mode selling price is not available, then ESP will be the median selling price of all such component sales based upon a 12-month historical analysis, unless facts and circumstances indicate that another selling price, other than the mode or median selling price, is more representative of our ESP. Our methodology for determining ESP requires judgment, and any changes to pricing practices, the costs incurred to integrate products, the nature of our relationships with our customers, and market trends could cause variability in our ESP or cause us to re-evaluate our methodology for determining ESP. We update our analysis of mode and median selling price at least annually, unless facts and circumstances indicate that more frequent analysis is required.

Occasionally, we sell software under multiple-element arrangements that do not include hardware. Under these software arrangements, we allocate revenue to the various elements based on VSOE of fair value. Our VSOE of fair value is determined based on the price charged when the same element is sold separately. If VSOE of fair value does not exist for all elements in a multiple-element arrangement, but does exist for undelivered elements, we recognize revenue using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement is recognized as revenue. Where fair value of undelivered elements has not been established, the total arrangement is recognized over the period during which the services are performed.

Shipping and Handling Costs

Shipping and handling amounts we bill to our customers are included in product revenues and the related shipping and handling costs we incur are included in product cost of sales.

Taxes Collected from Customers and Remitted to Governmental Authorities

Taxes assessed by a governmental authority that are imposed on revenue transactions between us and our customers are presented on a net basis in our consolidated statements of operations.

Allowance for Doubtful Accounts

The allowance for doubtful accounts receivable is based on an analysis of our historical charge-off ratio, our aging of accounts receivable and our assessment of the collectability of our receivables. If there is a deterioration of one of our customer's credit worthiness or actual account defaults are higher than our historical trends, our reserve estimates could be adversely impacted.

Deferred Revenue

Deferred revenue consists of billings for maintenance contracts and for products that are pending completion of the revenue recognition process. Maintenance revenue, whether bundled with the product or priced separately, is recognized ratably over the maintenance period. For contracts extending beyond one year, deferred revenue related to the contract period extending beyond 12 months is classified among long-term liabilities.

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

(Amounts in thousands, except for share and per share data)

Defined Benefit Pension Plan

We maintain defined benefit pension plans (the "Pension Plan") for a number of former employees ("participants") of our German subsidiary. In 1998, the Pension Plans were closed to new employees and no existing employees are eligible to participate, as all eligible participants are no longer employed by Concurrent. The Pension Plans provide benefits to be paid to all participants at retirement based primarily on years of service with Concurrent and compensation rates in effect near retirement. Our policy is to fund benefits attributed to participants' services to date as well as service expected to be earned in the future. The determination of our Pension Plans' benefit obligations and expenses are dependent on our selection of certain assumptions used by actuaries in calculating such amounts. Those assumptions include, among others, the weighted average discount rate, the weighted average expected rate of return on plan assets and the weighted average rate of compensation increase. To the extent that these assumptions change, our future benefit obligation and net periodic pension expense may be positively or negatively impacted.

Intangible Assets

Intangible assets, net of $143 at June 30, 2016 consist of patents and an internet domain name (www.concurrent.com) acquired during the year ended June 30, 2016 for $35. The domain name is considered an indefinite lived intangible asset and is not amortizable. Intangible assets, net of $323 at June 30, 2015 consist of purchased technology, customer relationships and patents. The purchased technology and customer relationships were sold with our multi-screen video analytics product line sold in September 2015 (see Note 5 –Sales of Assets - Sale of Product Line). Intangible assets are included in other long-term assets, net in our consolidated balance sheets.

Amortization expense related to finite-lived intangible assets was $45, $182 and $381 for the years ended June 30, 2016, 2015 and 2014, respectively. Estimated amortization expense related to our finite-lived intangible assets is $11 for the next five years ending June 30.

Capitalized Software

We account for software development costs in accordance with ASC Topic 985-20, Software ("ASC 985-20"). Under ASC 985-20, the costs associated with software development are required to be capitalized after technological feasibility has been established. We cease capitalization upon the achievement of customer availability. Costs incurred by us between technological feasibility and the point at which the products are ready for market are generally insignificant and as a result we had minimal software development costs capitalized at June 30, 2016 and 2015.

Research and Development

Research and development expenditures are expensed as incurred. These expenditures include compensation costs, materials, other direct expenses and allocated costs of information technology and facilities.

Basic and Diluted Net (Loss) Income 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 188,467, 170,679 and 110,635 for the years ended June 30, 2016, 2015 and 2014, respectively, were excluded from the calculation as their effect was anti-dilutive.

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

(Amounts in thousands, except for share and per share data)

The following table presents a reconciliation of the numerators and denominators of basic and diluted income (loss) per share for the periods indicated:

Valuation of Long-Lived Assets

We evaluate the recoverability of long-lived assets, other than indefinite lived intangible assets, for impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived assets to be held and used, we recognize an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measure the impairment loss based on the difference between the carrying amount and fair value based on discounted cash flows. As a result of these evaluations, we have not recorded any impairment losses related to long-lived assets, for any of the years ended June 30, 2016, 2015 and 2014.

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:

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

(Amounts in thousands, except for share and per share data)

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 June 30, 2016 are as follows:

Our financial assets that are measured at fair value on a recurring basis as of June 30, 2015 are as follows: