CONCURRENT COMPUTER CORP/DE - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED JUNE 30, 1996

COMMISSION FILE NUMBER 0-13150

CONCURRENT COMPUTER CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE 04-2735766
(State of Incorporation) (I.R.S. Employer Identification Number)

2101 WEST CYPRESS CREEK ROAD, FORT LAUDERDALE, FLORIDA 33309-1892 (954) 974-1700
(Address and telephone number of principal executive offices)

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock (par value $0.01 per share)
Preferred Stock Purchase Rights

Indicate by check mark whether 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 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. / /

As of September 20, 1996, there were 42,767,500 shares of Common Stock
outstanding. The aggregate market value of shares of such Common Stock (based
upon the last sale price of $2.15625 of a share as reported for September 26,
1996 on the NASDAQ National Market System) held by non-affiliates was
approximately $91,906,000.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of Registrant's Proxy Statement to be dated October 1,
1996 in connection with Registrant's 1996 Annual Meeting of Stockholders
scheduled to be held on November 8, 1996 are incorporated by reference in Part
III hereof.
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PART I

ITEM 1. BUSINESS

(A) GENERAL DEVELOPMENT OF BUSINESS

Concurrent Computer Corporation ("Concurrent" or the "Company") is a
supplier of high-performance real-time computer systems and services. A
"real-time" system is one specially designed to acquire, process, store and
display large amounts of rapidly changing information in real time -- that is,
with microsecond response as changes occur. Concurrent has nearly 30 years of
experience in real-time systems, including specific expertise in systems,
applications software, productivity tools and networking. Its systems provide
real-time applications for gaming, simulation, air traffic control, weather
analysis, multimedia and mission critical data services such as financial market
information.

The Company was incorporated in Delaware in 1981 under the name
Massachusetts Computer Company.

On June 27, 1996, pursuant to a negotiated agreement (the "Acquisition"),
Concurrent acquired the assets of the Real-Time Division of Harris Computer
Systems Corporation ("HCSC") and 683,178 newly-issued shares of HCSC, which was
renamed CyberGuard Corporation, in exchange for 10,000,000 shares of Common
Stock of Concurrent, 1,000,000 shares of convertible exchangeable preferred
stock of Concurrent with a 9% cumulative annual dividend payable quarterly in
arrears and a mandatory redemption value of $6,263,000, and the assumption of
certain liabilities relating to the HCSC Real-Time Division. The issuance of the
shares in connection with the Acquisition was approved by a special meeting of
shareholders held on June 26, 1996. The Company believes that the Acquisition
offers a number of significant strategic and financial benefits to Concurrent
and its shareholders, as well as its employees and customers. These benefits
include an enhanced competitive position through the combination of the best
technologies of the two businesses; a larger and more diverse market coverage;
significant cost savings primarily obtained through headcount reductions, as
well as facilities cost reductions through the integration of corporate
management and administrative functions, the consolidation of production and
research and development facilities and the consolidation of sales and service
offices.

(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS

The Company considers its products to be one class of products which
accounted for 44.3%, 51.4% and 56.0% of total revenues in the 1996, 1995 and
1994 fiscal years, respectively. Service and other operating revenues (including
maintenance, support and training) accounted for 55.7%, 48.6% and 44.0% of total
revenues in the 1996, 1995 and 1994 fiscal years, respectively.

Financial information about the Company's foreign operations is included in
Note 13 to the financial statements included herein. The Company's Tokyo-based
subsidiary, a joint venture with Nippon Steel Corporation, provides for
marketing and sales in the Japanese market and accounted for approximately $10.4
million in net sales (10.9%) for the 1996 fiscal year. The Company and Nippon
Steel Corporation consider the renewal of the joint venture agreement on an
annual basis. The agreement has been renewed through calendar year 1996. The
Company expects to extend the joint venture agreement through June 30, 1998.

(C) NARRATIVE DESCRIPTION OF BUSINESS

Concurrent's vision is to remain the premier supplier of high-technology
real-time computer systems and services through customer focus, total quality
and the rapid development of standard and custom products with the objective of
profitable growth. Real-time systems concurrently acquire, analyze, store,
display and control data to provide critical information within a predictable
time as real world events occur. Compared to general purpose computer systems,
these unique real-time capabilities are applicable to a wide range of
application requirements, including higher performance processing, higher data
throughput, predictable and repeatable response times, reliably meeting required
deadlines, consistently handling peak loads, and better balancing of system
resources. These benefits are useful for an ever increasing range of existing
and emerging markets.

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Concurrent has nearly thirty years of real-time systems experience,
including specific design, development and manufacturing expertise in system
architectures, system software, application software, productivity tools and
networking. Concurrent's real-time systems are currently used in host, client
server and distributed computing solutions, including software controlled
configurations to provide fault tolerance. The Company sells its systems
worldwide through its sales offices, distributors and strategic alliances to
end-users as well as to original equipment manufacturers, systems integrators,
independent software vendors and value-added resellers. End uses of the
Company's systems include product design and testing; simulation and training
systems; telemetry and range systems; servers for interactive real time
applications, such as video-on-demand and wagering and gaming; power plant
control and simulation; airline reservation systems and cockpit communications;
weather satellite data acquisition and forecasting; intelligence data
acquisition and analysis; financial trading and services; and automated mass
transit control.

Concurrent designs, manufactures, sells, and supports real-time
standards-based open computer systems and proprietary computer systems. It
offers worldwide hardware and software maintenance and support services
("Traditional Services") for its products and for the products of other computer
and peripheral suppliers. The Company routinely offers and successfully delivers
long term service and support of its products for as long as fifteen to twenty
years. The Company also has a long and successful history of customizing systems
with both specialized hardware and software to meet unique customer
requirements. Frequently in demand, these special support services
("Professional Services") have included system integration, performance and
capacity analysis, and application migration.

As the computer market continues its shift in end-user demand to open
systems, the Company has developed a strategy to adjust service offerings to
those more appropriate for open systems, while maintaining support for its
proprietary systems. The Company's strategy also strikes a balance between
appropriate upgrades for proprietary system offerings while predominantly
investing in its open-system computing platforms. The Company is also leveraging
its investment in research and development and enhancing market penetration
through strategic alliances.

Markets

Concurrent focuses its business on the following strategic target markets:
simulation; data acquisition; instrumentation and process control; interactive
real-time systems and telecommunications. Summaries of these markets follows:

Simulation. Concurrent is a recognized leader in real-time systems
for simulation. That position was strengthened by the Acquisition since
HCSC was also a recognized leader in this market. Primary applications
include trainers/simulators for operators in commercial and military
aviation, vehicle operation and power plants, scenario trainers for battle
management, mission planning and rehearsal, engineering design simulation
for avionics and automotive labs and modeling systems for war gaming and
synthetic environments. An emerging new segment of this market is
Hardware-In-The-Loop (HITL), in which accurate simulations are constructed
to verify hardware designs, thereby minimizing or eliminating entirely the
need for expensive prototypes. Concurrent is addressing this segment by
selecting software applications that provide a unique real-time advantage
to its customers and integrating these applications to provide unique
solutions.

Data Acquisition. Concurrent is a leading supplier of systems for
radar data processing and control, data fusion applications and weather
analysis, all of which require the ability to gather, analyze and display
continuous flows of information from simultaneous sources. Primary
applications include environmental analysis and display, Doppler weather
radar, and numerical weather prediction. For example, the Company provides
the computer systems which power the computing requirements for the U.S.
Department of Commerce's Next Generation Radar (NEXRAD) weather program and
Terminal Doppler Weather Radar (TDWR) systems for use in determining wind
shear activity. Other customers typical of this market include Lockheed
Martin Corporation on the Navy's Aegis systems and NASA for the Atlas
Centaur Vehicle.

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Instrumentation and Process Control. Concurrent also manufactures
systems to collect, control, analyze and distribute test data from multiple
high speed sources for industrial automation systems, product test systems
(particularly engine test), Supervisory Control and Data Acquisition
(SCADA) systems, and instrumentation systems. Concurrent's strategy to
serve this market involves the employment of third-party software
applications to provide a unique solution for its customers. Customers
typical of this market include Pratt Whitney for jet engine test,
Weyerhauser for industrial automation, Ford Motor Company for
instrumentation, and Nissin (Japan) for SCADA.

Interactive Real-Time. Concurrent is pursuing an emerging growth
market in which its interactive, time critical video/image on demand
capabilities provide a unique advantage, such as in video-on-demand (VOD),
wagering and gaming, and other transaction-based applications for the
financial services, hotels, airline and entertainment industries.
Concurrent has identified the network server resident in interactive VOD as
an emerging growth market where its real-time systems technology provides
unique market advantages. Concurrent s strategy is to position itself as a
supplier of servers and server technology for interactive VOD applications
which require reliable delivery of multiple streams of high quality video
and simultaneous servicing of interactive requests from multiple users.
Further, Concurrent is a leading provider of systems for the wagering and
gaming industry. Concurrent has provided the processing systems for the
wagering and gaming industry's largest provider of public lottery systems,
the majority of tabulator (off-track betting) systems in Australia and
Asia/Pacific and for large scale casino systems such as Keno.

Telecommunications. Concurrent is focusing on the rapidly expanding
market for digital cellular data communications, digital wireless gateways,
internetworking systems and high-band width switching. The Company has,
together with a telecommunications industry software supplier, developed a
software switch on Concurrent's platforms, which will allow field
upgradeable, flexible systems to be fielded for wireless communications
that require data transfers, store and forward functions, protocol
conversions, and interfaces to on-line service providers.

Series 3200 Systems Installed Base. Concurrent's reputation in the
industry has historically been attributable to its proprietary real-time
computing systems. Now in their fifth generation, these proprietary systems
meet customers' needs in extremely demanding real-time environments. Many
of the applications using the Series 3200 systems, including the U.S.
Department of Commerce's Next Generation Radar (NEXRAD) program, are unique
with long life cycles and "mission critical" demands and are the result of
a significant investment in application software by the customer. The
Company is committed to continuing to meet the needs of its Series 3200
customer base.

Products and Services

The Company considers its products and services a total package to provide
complete value-added real-time solutions. The Company offers two types of
systems, open and proprietary, as well as Traditional Services and Professional
Services. The Acquisition strengthened Concurrent's position in the open systems
markets, where HCSC was a recognized leader that had completed the transition
from proprietary to open systems.

PowerWorks, the Company's real-time technology package, includes an
industry standard UNIX operating system that is enhanced for real-time
performance, a set of tools that allows developers to quickly bring new
real-time applications to market, and a set of compilers that are designed to
obtain maximum real-time performance.

This unique and comprehensive real-time technology package can be purchased
for a wide range of PowerPC(TM) 604 platforms. At the high end, Concurrent
provides the optimum real-time platform with its Night Hawk products. The
Company's Power Maxion is the industry's only 6U VME based symmetrical
multi-processor (SMP). The Power Hawk is a VME based system that provides up to
fourteen "loosely coupled" processors and allows customers to choose between the
top two VME CPU board vendors (Motorola, Inc. and Force Computers, Inc.). The
Company's PowerStack provides desktop convenience and augments the graphics
capabilities of the Night Hawk and the Power Maxion. PowerWorks is also
available on disk to customers with large volume and flexible purchasing needs.

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OPEN SYSTEMS PRODUCT LINE
POWER WORKS -- POWERPC(TM) 604

MAX. NO.
MODEL OF CPUS PRICE RANGE
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Night Hawk 6800..................................................... 8 $40K - $500K
Power Maxion........................................................ 8 $40K - $400K
Power Hawk.......................................................... 14 $15K - $400K
PowerStack.......................................................... 1 $15K
Software Stand Alone................................................ N/A $ 3K - $40K

LEGACY SYSTEMS

MAX. NO.
MODEL OF CPUS CPU PRICE RANGE
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Night Hawk 5800......................................... 8 MC88110 $35K - $350K
Night Hawk 4800......................................... 8 MC88100 $20K - $250K
Maxion.................................................. 4 MIPS $27K - $170K
7000 Series............................................. 2 MC68040 $24K - $150K
3200 Series............................................. 4 Proprietary $55K - $1,350K

Traditional Services. One of the largest benefits to the Company of its
extensive installed customer base is the large and generally predictable revenue
stream generated from Traditional Services. While Traditional Services revenue
has declined and is expected to further decline as a result of the industry
shift to open systems, the Company expects this business to be a significant
source of revenue and cash flow for the foreseeable future. The Company offers a
variety of service and support programs to meet the customer's maintenance needs
for both its hardware and software products. The Company also offers contract
service for selected third party equipment. The service and support programs
offered by Concurrent include rentals and exchanges, diagnostic and repair
service, resident service, and preventive maintenance. The Company routinely
offers long-term service and support of its products for as long as fifteen to
twenty years.

Professional Services and Custom Engineering. Throughout the Company's
history, it has supported its customers through Professional Services and custom
engineering support efforts. This remains true today as customers transition to
open systems and manage their costs through the increased use of outsourcing.
This is especially true for the time constrained, cost sensitive or mission
critical requirements of real-time applications. Custom engineering frequently
assists customers in designing their application systems. In many cases, the
Company also provides custom and integration engineering services to implement
the design. This may include custom modifications to the Company's products or
integration of third party interfaces or devices into the Company's systems.
Many customers use Professional Services to migrate existing applications from
earlier generations of the Company's or competitor's systems to the Company's
state-of-the-art systems. Professional Services also include classroom and
on-site training, system and site performance analysis, and multiple vendor
support planning. Although the total revenues associated with any single
Professional Services or custom engineering effort may be small in comparison to
total revenues, increased customer satisfaction is an integral part of the
business plan of the Company.

Systems and Technology

Concurrent has made a considerable investment in developing its product
lines and today offers computer systems satisfying a broad range of
high-performance requirements for real-time applications. While maintaining a
competitive capability and continued enhancement of the Company's proprietary
product line for a still significant installed base, the primary investments
have been in the evolution of the open systems product line. The Company is
currently developing an enhanced 6000 and new Series of Night Hawk computers,
and the Power Maxion, integrating expected future versions of the IBM
PowerPC(TM) microprocessor chip. The Company has also implemented a new
technology road map to combine the best technologies of its Night Hawk and
MAXION product lines, including a modular operating system approach and
ultimately a

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chip-independent multiprocessing architecture. The Company has delivered a
unique balance of supporting industry standards while providing innovative
superiority in key architectural issues.

Sales and Service

The Company sells its systems in key markets worldwide through direct field
sales and services offices as well as through a network of software suppliers,
distributors and system integrators. The Company does not believe the loss of
any particular distributor or system integrator would have a material impact on
the Company's operating results. The Company's principal customers are original
equipment manufacturers (OEMs), systems integrators, independent software
vendors (ISVs) and value-added resellers (VARs) who combine the Company's
products with other equipment or with additional application software for resale
to end-users. Collectively, these customers account for approximately 65% of
sales, with sales to end-users accounting for the remaining 35%. Several major
customer accounts historically have provided a stable and generally predictable
contribution to revenue.

Servicing the Company's large installed base, particularly its proprietary
systems, is an important element in Concurrent's business strategy and generates
significant revenue and cash flow to the Company. Total service revenue in
fiscal year 1996 was approximately $53.4 million (55.7% of total revenue).
Substantially all of Traditional Services revenue is generated from maintenance
and support contracts which generally run from one to three years with annual
renewal provisions. The Company's existing installed base of proprietary systems
also represents an opportunity for incremental sales of both systems and
Traditional and Professional Services.

No customer, other than the U.S. Government, has accounted for 10% or more
of Concurrent's net sales in the three fiscal years ended June 30, 1996. For the
1996 fiscal year, approximately $16 million of the Company's revenue was
attributable directly or indirectly to entities related to branches of the U.S.
Government. This amount represented approximately 17% of the Company's worldwide
revenue, compared to 28% and 31% for the 1995 and 1994 fiscal years,
respectively. The Company's revenue related to sales to the U.S. Government is
derived from various Federal agencies, no one of which accounted for more than
5% of total revenue (e.g., several agencies participate under the NEXRAD
program). Sales to Unisys Corp., as prime contractor, under the NEXRAD program
are considered sales to the U.S. Government. The NEXRAD program contributed
approximately $0.7, $17.5 and $23 million in revenue in fiscal years 1996, 1995
and 1994, respectively. In an effort to reduce total program costs, sales of
spare parts by Concurrent under the program are now being made directly to the
Government. The program is completed and no significant revenue is planned for
future periods. U.S. Government contracts and subcontracts generally contain
provision for cancellation at the convenience of the Government. Substantially
all of the Company's U.S. Government related orders are subcontracts and most
are for standard catalog equipment which would be available for sale to others
in the event of cancellation. To date, there have been no cancellations that
have had a material impact on the Company's business or results of operations.

Research and Development

The Company's continued success depends heavily on researching and
utilizing the latest available hardware and software computer technology.
Success will also depend significantly on the Company's ability to combine the
best technologies of its Night Hawk and MAXION product lines and to bring new
products to the market in a timely fashion. Concurrent, together with HCSC,
invested $19 million in fiscal year 1996, $26 million in fiscal year 1995, and
$30 million in fiscal year 1994, in research and development. Research and
development investment was made across all of Concurrent's key technology areas
for both open and proprietary systems. New networking products, graphics, data
acquisition sub-systems, enhancements to the proprietary OS/32 and UNIX-based
operating systems, the MAXION multiprocessing open system and the 6000 Series
Night Hawk Series open systems, as well as three new proprietary Series 3200
systems (32-400, 32-600 and 32-850 Series) products resulted from this
investment. Although in terms of absolute dollar amounts total research and
development investment has declined over the past several years, the Company
expects a greater return on its total research and development investment for
two reasons. First, research and development investment is focused solely on
products and applications for its target markets. Second, the

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Company's increasing use of joint research and development and technology
sharing arrangements is expected to leverage the Company's investment in
research and development. The Company's strategy is to acquire or co-develop
technology when the market requires parity with competitive technology and to
develop technology internally when market leadership is possible. This strategy
is expected to give the Company greater flexibility in meeting the technology
requirements of its customers and to allow it to provide increasingly higher
performance products by focusing its research and development resources where it
can add the most value.

Manufacturing Operations

The Company's manufacturing operations are located at its Ft. Lauderdale,
Florida and Oceanport, New Jersey facilities. Manufacturing operations occupy
approximately 60,000 square feet of the Ft. Lauderdale facility. The Company has
entered into an agreement for the sale and partial leaseback of its Oceanport,
New Jersey facility. The transaction is expected to be completed in the quarter
ending December 31, 1996. The Company is reducing its manufacturing operations
in Oceanport, New Jersey as it transitions the manufacture of all of its open
systems to Florida. Approximately 40,000 square feet are expected to be retained
in the Oceanport facility for the manufacture of proprietary systems.
Utilization of manufacturing capacity was approximately 40% based on a limited
two shift operation in fiscal year 1996. The Company leases its Ft. Lauderdale
facility from Harris Corporation pursuant to a lease which expires June 1997.
The Company plans to move its Ft. Lauderdale operations to another facility in
the Southern Florida area prior to the expiration of the lease. Management
believes that the manufacturing capacity available at its existing and future
facilities could be significantly increased (with minimal capital spending) to
meet increased manufacturing requirements either by raising the utilization rate
or by adding assembly personnel on its first and second shift or by adding a
third shift. The Company outsources several subassembly operations, including
some of its printed circuit board subassemblies, which has resulted in
significant cost savings. The Company's manufacturing operations are now focused
on systems assembly, systems integration and systems test. Extensive testing and
burn-in conditioning is performed at the board and subassembly levels and at
final system integration. Because of the wide range of product configurations,
final assembly and test usually occur when a specific customer order is being
prepared for shipment.

Sources of Supply

Concurrent has multiple commercial sources of supply throughout the world
for most of the materials and components it uses to produce its products. In
some cases, components are being purchased by the Company from a single supplier
to obtain the required technology and the most favorable price and delivery
terms. The Company depends on the availability of the Motorola 88110 and 88100
microprocessor chips in the manufacture of its Night Hawk 5800, 4800 and 4400
Series computers. Motorola is the only source of supply for these chips. For its
current and next generation Night Hawk computer systems the Company will depend
on the availability of PowerPC(TM) microprocessor chips provided by both IBM and
Motorola. Although the Company has not experienced any materially adverse impact
on its operating results as a result of a delay in supplier performance, any
delay in delivery of components may cause a delay in shipments by the Company of
certain products. The Company estimates that a lead time of up to 16-24 weeks
may be necessary to switch to an alternate supplier of certain custom
application specific integrated circuits and printed circuit assemblies. A
change in the supplier of these circuits without the appropriate lead time would
result in a delay in shipments by the Company of certain products. Since revenue
is recognized typically upon shipment, any delay in shipment may also result in
a delay in revenue recognition, possibly outside the fiscal period originally
planned, and, as a result, may adversely affect the Company's financial results
for that particular period. A transition from one single supplier to another
could have a similar impact. The Company carefully monitors the ability of any
single supplier to timely meet the Company's requirements, including the
supplier's financial condition. Management believes it has good relationships
with its suppliers, including alternative suppliers, and expects that adequate
sources of supply for components and peripheral equipment will continue to be
available.

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Competition

The Company operates in a highly competitive market driven by rapid
technological innovation. The shift from proprietary systems to standards-based
open systems is expected both to expand market demand for systems with
performance characteristics previously only found in proprietary real-time
computing systems and to increase competition, making product differentiation a
more important factor. Due in part to the range of performance and applications
capabilities of its products, the Company competes in various markets against a
number of companies, many of which have greater financial and operating
resources than the Company. Competition in the high performance real-time
computing systems and applications market comes from four sources: (1) major
computer companies that participate in the real-time marketplace by layering
specialized hardware and software on top of or as an extension of their general
purpose product platforms -- these are principally Digital Equipment Corporation
and Hewlett-Packard Corporation; (2) other computer companies that provide
solutions for applications that address a specific characteristic of real-time,
such as fault tolerance or high-performance graphics -- these computer companies
include Silicon Graphics Inc., Stratus Computer, Inc., and Tandem Computers,
Inc.; (3) general purpose computing companies that provide a platform on which
third party vendors add real-time capabilities -- these computer companies
include International Business Machines Corp. and Sun Microsystems, Inc.; and
(4) single board computer companies that provide board-level processors that are
typically integrated into a customer's computer system -- these computer
companies include Force Computers, Inc. and Motorola, Inc.

Intellectual Property

The Company relies on a combination of contracts and copyright, trademark
and trade secret laws to establish and protect its proprietary rights in its
technology. The Company distributes its products under software license
agreements which grant customers perpetual licenses to the Company's products
and which contain various provisions protecting the Company's ownership and
confidentiality of the licensed technology. The source code of the Company's
products is protected as a trade secret and as an unpublished copyright work. In
addition, in limited instances the Company licenses its products under licenses
that give licensees limited access to the source code of certain of the
Company's products, particularly in connection with its strategic alliances.
Despite precautions taken by the Company, however, there can be no assurance
that the Company's 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. The Company believes that, due to the rapid pace of innovation within
its industry, factors such as the technological and creative skills of its
personnel are more important to establishing and maintaining a technology
leadership position within the industry than are the various legal protections
of its technology.

Concurrent has entered into licensing agreements with several third-party
software developers and suppliers. Generally, such agreements grant to the
Company non-exclusive, worldwide licenses with respect to certain software
provided as part of computers and systems marketed by the Company and terminate
on varying dates. For example, Concurrent is licensed by Santa Cruz Operation
(SCO) to use and sublicense SCO's operating system in the Company's computer
systems. The Company has entered into licensing agreements with SCO for internal
use of source code version of the UNIX operating system and for the sublicensing
of binary version of the UNIX operating system. Both licenses are perpetual
unless terminated in accordance with the notice provisions and address versions
of the UNIX operating system through and including System V, Release 4.0 (SVR4).
The Company pays a royalty to SCO for each computer system shipped using the
UNIX operating system equal to approximately 2% of the list price of the basic
(minimum) configuration of the system.

Employees

As of June 30, 1996, the Company employed approximately 900 employees
worldwide of whom approximately 500 were employed in the United States, compared
to approximately 825 and 1,250 employees worldwide at June 30, 1995 and 1994,
respectively. The Company's employees are not unionized. The Company has
developed a restructuring plan which will reduce the total headcount to
approximately 700 by the end of calendar year 1996.

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Backlog

Generally, the Company records in "backlog" computer orders which it is
anticipated will be shipped during the subsequent six months or, where special
engineering is required, in the subsequent twelve months. The backlog of
unfilled computer systems orders was approximately $12.0 million on June 30,
1996 compared to approximately $9.8 million a year earlier. While the Company
anticipates shipping the majority of backlog during subsequent periods, the
amount of orders in backlog is not necessarily a meaningful indicator of
business trends for the Company because orders may be canceled before shipment
or rescheduled for a subsequent period which may affect the amount of backlog
that may be realized in revenue in any succeeding period. In addition, with the
increasing emphasis on open systems, more customers are placing orders within
the quarter where delivery is expected thus backlog is a less meaningful
measurement of anticipated revenue.

Environmental Matters

The Company purchases, uses and arranges for disposal of chemicals used in
the manufacturing process at its Ft. Lauderdale facility. As a result, the
Company is subject to federal and state environmental protection and community
right-to-know laws. Violations of such laws, in certain circumstances, can
result in the imposition of substantial remediation costs and penalties. The
Company believes it is in compliance with all material environmental laws and
regulations.

(D) 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 Concurrent's foreign and domestic
operations for the fiscal years ended June 30, 1996, 1995 and 1994,
respectively, is presented at Note 13 to the financial statements of the
Registrant included herein.

ITEM 2. PROPERTIES

Listed below are Concurrent's principal facilities as of June 30, 1996.
Management considers all facilities listed below to be suitable for the
purpose(s) for which they are used, including manufacturing, research and
development, sales, marketing, service and administration. Management believes
that its Fort Lauderdale, Florida and Oceanport, New Jersey manufacturing
facilities have more than sufficient capacity to meet the Company's projected
manufacturing requirements. The Company plans to move its Ft. Lauderdale
operations to another Southern Florida location prior to the expiration of its
existing lease. The Company believes there is sufficient, suitable commercial
space available on acceptable terms to meet its requirements; however, there is
no guarantee that the Company will be successful in obtaining such facilities on
favorable terms. Any sustained interruption in manufacturing resulting from such
relocation would likely result in a loss of revenue.

APPROX. FLOOR
OWNED EXPIRATION AREA
LOCATION PRINCIPAL USE OR LEASED DATE OF LEASE (SQ. FEET)
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Corporate Headquarters, Leased June 1997 100,000
2101 West Cypress Creek Road Manufacturing, Sales
Fort Lauderdale, Florida and Service, Marketing

2 Crescent Place Manufacturing Owned (1) n/a(1) 285,000
Oceanport, New Jersey (held for disposition)

227 Barth Rd., Sales/Research & Leased 1998 36,000
Slough, England Development

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(1) The Company has entered into a contingent contract for the sale and
leaseback of its Oceanport, New Jersey facility expected to be completed in
the quarter ending December 31, 1996.

In addition to the facilities listed above, Concurrent also leases space in
various domestic and international industrial centers for use as sales and
service offices and warehousing.

8
10

ITEM 3. LEGAL PROCEEDINGS

From time to time, as a normal incident of the nature and kind of business
in which the Company is engaged, various claims or charges are asserted and
litigation commenced against the Company arising from or related to product
liability; patents; trademarks or trade secrets; breach of warranty; antitrust;
distribution; or contractual relations. Claimed amounts may be substantial, but
may not bear any reasonable relationship to the merits of the claim or the
extent of any real risk of court awards. In the opinion of management, final
judgments, if any, which might be rendered against the Company in such
litigation are reserved against or would not have a material adverse effect on
the financial position or the business of the Company as a whole.

The Company may from time to time be, either individually or in conjunction
with other major U.S. manufacturers or defense contractors, the subject of U.S.
government investigations for alleged criminal or civil violations of
procurement or other federal laws. No criminal charges are presently known to be
filed against the Company and the Company is unable to predict the outcome of
such investigations or to estimate the amounts of claims or other actions that
could be instituted against it, its officers or employees as a result of such
investigations. Under present government procurement regulations, indictment
could result in a government contractor, such as the Company, being suspended or
debarred from eligibility for awards of new government contracts for up to three
years. In addition, the Company s foreign export control licenses could be
suspended or revoked. The Company is currently involved in one such
investigation and is cooperating with the representatives of the responsible
government agencies. Management does not believe that the outcome of this
investigation will have a material adverse effect on the financial position or
the business of the Company.

There are no material legal proceedings pending to which the Company or any
of its subsidiaries is a party or to which any of the Company's or any of its
subsidiaries' property is subject. To Concurrent's knowledge there are no
material legal proceedings to which any director, officer or affiliate of
Concurrent, or any owner of record or beneficially of more than five percent of
Common Stock, or any associate of any of the foregoing, is a party adverse to
Concurrent or any of its subsidiaries. No material legal proceedings were
terminated during the fourth quarter of the fiscal year ended June 30, 1996.

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

The Company held a special meeting of shareholders on June 26, 1996 in
connection with the Acquisition. The three matters submitted to shareholders and
the resulting votes are summarized below:

1. Shareholders approved a proposal for the issuance of both (i)
10,000,000 shares of common stock, par value $0.01 per share ("Concurrent
Common Stock"), and (ii) a maximum of 4,000,000 shares, subject to
anti-dilution adjustment, of Concurrent Common Stock which will be issuable
upon the conversion of the convertible exchangeable preferred stock of
Concurrent to be issued to Harris upon consummation of the Acquisition and
the debentures into which such preferred stock is exchangeable pursuant to
the terms of such stock. 16,386,374 shares voted for the proposal; 865,800
shares voted against; 150,191 shares abstained; and 1,052,262 shares
represented broker non-votes.

2. Shareholders approved an amendment to the Concurrent 1991 Restated
Stock Option Plan (the "Concurrent Stock Plan") to increase the number of
shares of Concurrent Common Stock authorized for issuance under the
Concurrent Stock Plan to 9,000,000 shares of Concurrent Common Stock.
15,629,089 shares voted for the proposal; 1,948,897 shares voted against;
274,339 shares abstained; and 602,302 shares represented broker non-votes.

3. Shareholders approved an amendment to the Concurrent Stock Plan to
(i) increase the number of shares of Concurrent Common Stock underlying the
options initially granted to each non-employee director following the
adoption of such amendment to 20,000 shares of Concurrent Common Stock,
(ii) provide for the automatic grant to continuing non-employee directors
of options to purchase 3,000 shares of Concurrent Common Stock on the date
of each annual meeting of shareholders, and (iii) provide that each option
granted to the non-employee directors shall expire on the earlier of the
tenth anniversary of the date of grant or the resignation or removal (other
than by reason of death or disability) of such non-employee director.
15,644,924 shares voted for the proposal; 1,947,087 shares voted against;
and 862,616 shares abstained; there were no broker non-votes.

9
11

ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT

Executive officers of Concurrent 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 the Company's executive officers as of September 27, 1996:

DIRECTOR OR
EXECUTIVE
NAME POSITION AGE OFFICER
- ----------------------- -------------------------------------------- --- -----------

E. Courtney Siegel..... Director, President and Chief Executive
Officer 46 1996*
George E. Chapman...... Vice President, International Operations 62 1994
Robert E. Chism........ Vice President, Development 43 1996*
Daniel S. Dunleavy..... Vice President, Chief Financial Officer and
Chief Administrative Officer 43 1996*
Karen G. Fink.......... Vice President, General Counsel and
Secretary 40 1996*
Fred R. Lee............ Vice President, Production Operations &
Logistics 68 1996*
Robert T. Menzel....... Vice President, North American Sales 43 1996*
Michael N. Smith....... Vice President, Marketing 43 1996*

- ---------------

* Elected to the position upon completion of the Acquisition in June 1996.

E. COURTNEY SIEGEL. DIRECTOR, PRESIDENT AND CHIEF EXECUTIVE OFFICER. Mr.
Siegel was elected to this position upon completion of the Acquisition in June
1996. He previously served as Chairman, President and Chief Executive Officer of
CyberGuard Corporation (f/k/a Harris Computer Systems Corporation) since its
spin-off from Harris Corporation in October 1994 (the "1994 Spin Off"). Prior to
that time, and since 1990, Mr. Siegel served as Vice President and General
Manager of the Harris Computer Systems Division of Harris Corporation. Mr.
Siegel's twenty year career in the computer technology field includes serving as
vice president of standoff weapons at Rockwell International Corp., a producer
of electronics, aerospace, automotive and graphics equipment, and as vice
president of Harris Government Support Systems Division's Orlando operations.

GEORGE E. CHAPMAN. VICE PRESIDENT, INTERNATIONAL OPERATIONS. Mr. Chapman
was elected to this position in November 1994. During the period January through
June 1996 he also had responsibility for North American Sales as Vice President,
Field Operations. He previously served as Vice President, Marketing from January
to November 1994. He joined Concurrent in 1992 as Director, Business Development
for Weather and Airspace Management. In 1988, after retiring as a Brigadier
General from the United States Air Force, he joined Lockheed Corporation's
Austin Division as Senior Staff Engineer working toward the worldwide commercial
application of high technology systems developed for the U.S. Government. In
December 1989, he received an appointment as Executive Director to the newly
legislated Texas Workers Compensation Commission. His career with the U.S. Air
Force spanned thirty-six years, with the last six years devoted to leadership of
a 5,000 person organization responsible for the long-range technology,
investment and training requirements for the nation's weather prediction and
warning capability supporting U.S. forces throughout the world.

ROBERT E. CHISM. VICE PRESIDENT, DEVELOPMENT. Mr. Chism was elected to
this position upon completion of the Acquisition in June 1996. From the 1994
Spin-Off until the Acquisition, he served as Vice President, Technical and
Production Operations of CyberGuard Corporation (f/k/a Harris Computer Systems
Corporation). He joined the Harris Computer Systems Division of Harris
Corporation in June 1993 as Director, Simulation Business Area. Before joining
the division, he held diverse engineering, program management and marketing
assignments in computer and related industries with General Electric Company
from May 1978 through June 1993, where he was Subsection Manager of Satellite
Command and Data Handling at the time he left to join the Harris Computer
Systems Division.

10
12

DANIEL S. DUNLEAVY. VICE PRESIDENT, CHIEF FINANCIAL OFFICER AND CHIEF
ADMINISTRATIVE OFFICER. Mr. Dunleavy was elected to this position upon
completion of the Acquisition in June 1996. He served in this position with
CyberGuard Corporation (f/k/a Harris Computer Systems Corporation) since the
1994 Spin-Off. Prior to that time and since 1991, he served as Vice President,
Strategic Alliances and International Operations of the Harris Computer Systems
Division. After joining Harris Corporation in 1978, he served in various
positions of increasing responsibility, including Controller, Harris Computer
Systems Division, from 1988 until 1991.

KAREN G. FINK. VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY. Ms. Fink was
elected to this position upon completion of the Acquisition, joining the Company
in July 1996 from Harris Corporation where she served since 1985, most recently
as Counsel and Assistant Secretary. Prior to that time since she was associated
with the law firm of Seward & Kissel in its New York City office.

FRED R. LEE. VICE PRESIDENT, PRODUCTION OPERATIONS AND LOGISTICS. Mr. Lee
was elected to this position upon completion of the Acquisition in June 1996. He
was previously president of TQM TRACKS, INC., a privately held management
services company, since its inception in 1990. From 1984 to 1990, Mr. Lee served
as Director - Operations of Rockwell International Corp. Mr. Lee served in
various positions over a twenty-nine year period at General Dynamics
Electronics, from which he retired in 1984 as Vice President, Production.

ROBERT T. MENZEL. VICE PRESIDENT, NORTH AMERICAN SALES. Mr. Menzel was
elected to this position upon completion of the Acquisition in June 1996. From
April 1995 until the Acquisition, he served as Vice President and General
Manager of the Trusted Systems Division of CyberGuard Corporation (f/k/a Harris
Computer Systems Corporation). From the 1994 Spin-Off until April 1995, he
served as Vice President, National Sales of Harris Computer Systems Corporation.
He joined the Computer Systems Division of Harris Corporation in 1992 as
Manager, Secure Systems Marketing and subsequently assumed responsibility for
the entire Secure Business Area and ultimately became Vice President, National
Sales. Prior to joining the Harris Computer Systems Division, he held positions
of increasing responsibility over a twelve year period at the Aerospace division
of General Electric Company within the Business Development and Marketing Group,
serving as Manager, Army Business Development at the time he joined Harris
Computer Systems Division.

MICHAEL N. SMITH. VICE PRESIDENT, MARKETING. Mr. Smith was elected to this
position upon completion of the Acquisition in June 1996. From April 1995 until
the Acquisition, he served as Vice President and General Manager of the
Real-Time Division of CyberGuard Corporation (f/k/a Harris Computer Systems
Corporation). From the 1994 Spin-Off until April 1995, he served as Vice
President, Marketing of Harris Computer Systems Corporation, a position he
served in from January 1993 with the Harris Computer Systems Division. He joined
the Harris Computer Systems Division in March 1992 as Director, Secure Systems
Business. Prior to that time, he served in positions of increasing
responsibility over a fifteen year period at the Aerospace division of General
Electric Company, serving as Program Manager, Armor Training at the time he
joined the Harris Computer Systems Division.

11
13

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Common Stock is currently traded under the symbol "CCUR" on the NASDAQ
National Market System. The following table sets forth the high and low last
sale information for the Common Stock for the periods indicated, as reported by
NASDAQ.

HIGH LOW
---- ---

Fiscal Year 1996
Quarter Ended:
September 30, 1995......................................................... 2 7/8 1 7/16
December 31, 1995.......................................................... 2 25/32
March 31, 1996............................................................. 1 7/8 3/4
June 30, 1996.............................................................. 3 23/32 1 5/8
Fiscal Year 1995
Quarter Ended:
September 30, 1994......................................................... 2 1/2 1 5/16
December 31, 1994.......................................................... 2 1
March 31, 1995............................................................. 1 7/16 11/16
June 30, 1995.............................................................. 2 3/4 11/16

As of September 20, 1996, there were 42,767,500 shares of Common Stock
outstanding, held of record by approximately 2,280 stockholders.

The Company has never declared or paid any cash dividends on its capital
stock. The Company's present policy is to retain earnings to finance expansion
and growth, and no change in the policy is anticipated. In addition, the terms
of the Company's loan agreement with its lender prohibit the Company from
payment of cash dividends on its capital stock. As a result, it is not
anticipated that cash dividends will be paid in the foreseeable future.

On July 31, 1992, the Board of Directors of the Company declared a dividend
distribution of one Right for each outstanding share of Common Stock and then
outstanding Convertible Preferred Stock of the Company to stockholders of record
at the close of business on August 14, 1992. Each Right entitles the registered
holder to purchase from the Company one one-hundredth of a share of Series A
Participating Cumulative Preferred Stock, par value $.01 per share, at a cash
purchase price of $30.00 per Right, subject to adjustment, which become
exercisable upon the occurrence of certain events. (See Note 17 of Notes to
Consolidated Financial Statements.)

ITEM 6. SELECTED FINANCIAL DATA

This information is set forth in the Selected Financial Data section of the
Consolidated Financial Statements in Item 8 and incorporated into this Item 6.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This information is set forth in the Management's Discussion and Analysis
of Financial Condition and Results of Operations section of the Consolidated
Financial Statements in Item 8 and incorporated into this Item 7.

12
14

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following Consolidated Financial Statements and supplementary data for
Concurrent are attached and incorporated into Item 8.

PAGE
----

Report of Independent Accountants................................... 21
Consolidated Statements of Operations for the years ended June 30,
1996, 1995 and 1994............................................... 22
Consolidated Balance Sheets as of June 30, 1996 and 1995............ 23
Consolidated Statements of Cash Flows for the years ended June 30,
1996, 1995 and 1994............................................... 24
Consolidated Statements of Stockholders' Equity (deficiency) for the
years ended June 30, 1996, 1995 and 1994.......................... 25
Notes to Consolidated Financial Statements.......................... 26
Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 44
Selected Financial Data............................................. 50

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

A change in independent accountants has previously been reported. See the
Company's Report on Form 8-K filed on September 26, 1996.

There have been no disagreements with independent accountants on accounting
and financial disclosure matters.

13
15

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(A) IDENTIFICATION OF DIRECTORS

Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the caption "Election of Directors" in Registrant's
Proxy Statement to be dated October 1, 1996 in connection with its Annual
Meeting of Stockholders to be held on November 8, 1996 ("Registrant's 1996 Proxy
Statement").

(B) IDENTIFICATION OF EXECUTIVE OFFICERS

The information called for hereunder is included in Part I of this Form
10-K under the caption "Executive Officers of the Registrant".

(C) IDENTIFICATION OF CERTAIN SIGNIFICANT EMPLOYEES

Not applicable.

(D) FAMILY RELATIONSHIPS

There is no family relationship between any director and/or executive
officer of the Company.

(E) BUSINESS EXPERIENCE

The Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the caption "Election of Directors" in Registrant's
1996 Proxy Statement with respect to the business experience of Registrant's
directors. The information called for by this Item 10 with respect to executive
officers of Registrant is included in Part I of this Form 10-K under the caption
"Executive Officers of the Registrant".

(F) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS

The Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the caption "Election of Directors" in Registrant's
1996 Proxy Statement.

(G) COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

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 Registrant's 1996 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

The Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the caption "Executive Compensation" in Registrant's
1996 Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

(A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

The Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" in Registrant's 1996 Proxy Statement.

14
16

(B) SECURITY OWNERSHIP OF MANAGEMENT

The Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the caption "Security Ownership of Certain
Beneficial Owners and Management" in Registrant's 1996 Proxy Statement.

(C) CHANGES IN CONTROL

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

The Registrant hereby incorporates by reference in this Form 10-K certain
information contained under the captions "Security Ownership of Certain
Beneficial Owners and Management," "Election of Directors" and "Executive
Compensation" in Registrant's 1996 Proxy Statement.

15
17

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(A) (1) FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT:

Report of Independent Accountants

Consolidated Statements of Operations for the years ended
June 30, 1996, 1995 and 1994

Consolidated Balance Sheets as of June 30, 1996 and 1995

Consolidated Statements of Cash Flows for the years ended
June 30, 1996, 1995 and 1994

Consolidated Statements of Stockholders' Equity (deficiency)
for the years ended June 30, 1996, 1995 and 1994

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, or is not applicable, material or required.

(3) EXHIBITS

EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------

2 -- Purchase and Sale Agreement dated March 26, 1996 as amended and restated on May
23, 1996, between Concurrent Computer Corporation (the "Company") and Harris
Computer Systems Corporation ("HCSC").(a)
3.1 -- Restated Certificate of Incorporation of the Company.(b)
3.2 -- By-laws of the Company.
3.3 -- Certificate of Designation, Preferences and Rights of Class B Convertible
Preferred Stock.(c)
4.1 -- Form of Share Holding Agreement dated June 27, 1996 between the Company and
HCSC. (c)
4.2 -- Form of Common Stock Certificate.(d)
4.3 -- Rights Agreement dated as of July 31, 1992 between the Company and The First
National Bank of Boston, as rights agent.(e)
*10.1(a) -- 1991 Restated Stock Option Plan.(f)
*10.1(b) -- Amendment No. 1 to 1991 Restated Stock Option Plan.(f)
*10.1(c) -- Amendment to 1991 Restated Stock Option Plan dated May 13, 1996.(a)
10.2(a) -- Employee Stock Purchase Plan.(f)
10.2(b) -- Amendment No. 1 to Employee Stock Purchase Plan.(g)
10.3 -- Retirement Savings Plan (f/k/a Profit Sharing and Savings Plan) of former
Concurrent dated August 1, 1985, as restated.(h)
*10.4 -- Form of Severance Agreement between the Company and its executive officers. All
agreements contain substantially the same terms other than annual base salary
and annual target bonus percentage.(i)

16
18

EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------

*10.4(a) -- Employment Agreement dated as of March 25, 1996 between the Company and E.
Courtney Siegel.
*10.5 -- Form of Incentive Stock Option Agreement between the Company and its executive
officers. All agreements contain the same terms with the exception of the
number or shares subject to the option and the vesting schedules.(j)
10.6(a) -- Amended and Restated Credit Agreement dated October 11, 1991 among the Company
and the banks named therein, as amended by Amendment No. 1 dated November 14,
1991.(k)
10.6(b) -- Amendment No. 2 dated as of January 13, 1992 to Amended and Restated Credit
Agreement. (j)
10.6(c) -- Amendment No. 3 dated as of March 1, 1993 to Amended and Restated Credit
Agreement. (i)
10.7(a) -- Second Amended and Restated Credit Agreement.(l)
10.7(b) -- Amendment No. 1 dated September 28, 1993 to Second Amended and Restated Credit
Agreement.(l)
10.7(c) -- Amendment No. 2 dated November 10, 1993 to Second Amended and Restated Credit
Agreement.(m)
10.7(d) -- Amendment No. 3 dated November 18, 1993 to Second Amended and Restated Credit
Agreement.(m)
10.7(e) -- Amendment No. 4 dated February 18, 1994 to Second Amended and Restated Credit
Agreement.(m)
10.7(f) -- Amendment No. 5 dated August 19, 1994 to Second Amended and Restated Credit
Agreement.(m)
10.7(g) -- Amendment No. 6 dated February 28, 1995 to Second Amended and Restated Credit
Agreement.(n)
10.7(h) -- Amendment No. 7 dated March 31, 1995 to Second Amended and Restated Credit
Agreement.(n)
10.7(i) -- Third Amended and Restated Credit Agreement dated June 29, 1995.(n)
10.8 -- AT&T Information Systems Sublicensing Agreement.(b)
10.9 -- Loan and Security Agreement dated June 29, 1995 between the Company and the
lender named therein.(n)
10.9(a) -- Amended and Restated Amendment No. 1 to Loan and Security Agreement dated
October 17, 1995.
10.9(b) -- Amendment No. 2 to Loan and Security Agreement dated October 12, 1995.
10.9(c) -- Amendment No. 3 to Loan and Security Agreement dated December 6, 1995.
10.9(d) -- Amendment No. 4 to Loan and Security Agreement dated January 25, 1996.
10.9(e) -- Amendment No. 5 to Loan and Security Agreement dated February 16, 1996.
10.9(f) -- Amendment No. 6 to Loan and Security Agreement dated February 27, 1996.
10.9(g) -- Amendment No. 7 to Loan and Security Agreement dated April 26, 1996.
10.9(h) -- Amendment No. 8 to Loan and Security Agreement dated June 11, 1996.
10.9(i) -- Amendment No. 9 to Loan and Security Agreement dated June 27, 1996.
10.9(j) -- Amendment No. 10 to Loan and Security Agreement dated August 28, 1996.

17
19

EXHIBIT NO. DESCRIPTION
- ----------- -------------------------------------------------------------------------------

11 -- Statement re: computation of per share earnings.
21 -- Subsidiaries of Registrant.
23 -- Consent of Coopers & Lybrand L.L.P.
27 -- Financial Data Schedule.

- ---------------

*
Management contract or compensatory plan or arrangement.
(a)
Incorporated herein by reference to the Exhibits to the Company's proxy
materials dated May 23, 1996.
(b)
Incorporated herein by reference to the Exhibits to the Company's Amendment
No. 3 to Registration Statement on Form S-2 dated July 14, 1993 (No.
33-62440).
(c)
Incorporated herein by reference to the Exhibits to the Company's Current
Report on Form 8-K, dated April 19, 1996.
(d)
Incorporated herein by reference to Exhibit Number 4.4 of Item 14 of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1992.
(e)
Incorporated herein by reference to the Company's Current Report on Form
8-K dated August 20, 1992.
(f)
Incorporated herein by reference to Notice of 1991 Annual Meeting of
Stockholders and Proxy Statement, dated January 10, 1992.
(g)
Incorporated herein by reference to Notice of 1992 Annual Meeting of
Stockholders and Proxy Statement, dated October 2, 1992.
(h)
Incorporated herein by reference to Exhibit Number 10 of Item 14 of the
Company's Annual Report on Form 10-K for the fiscal year ended July 2,
1988.
(i)
Incorporated herein by reference to Exhibit Number 10 of Item 14 of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1991.
(j)
Incorporated herein by reference to the Exhibits to the Company's Amendment
No. 1 to Registration Statement on Form S-1 dated April 20, 1992. (No.
33-45871).
(k)
Incorporated hereby by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1991.
(l)
Incorporated herein by reference to Exhibit Number 10 of Item 14 of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1993.
(m)
Incorporated herein by reference to Exhibit Number 10 of Item 14 of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1994.
(n)
Incorporated herein by reference to Exhibit Number 10 of Item 14 of the
Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1995.

(B) REPORTS ON FORM 8-K.

During the quarter ended June 30, 1996, the Company filed a report on Form
8-K dated April 19, 1996 reporting that it had entered into a Purchase and Sale
Agreement with Harris Computer Systems Corporation ("HCSC"), dated March 26,
1996, providing for, among other things, the purchase by Concurrent of the real-
time business of HCSC.

18
20

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

CONCURRENT COMPUTER CORPORATION

By: /s/ DANIEL S. DUNLEAVY
------------------------------------
Daniel S. Dunleavy
Vice President, Chief Financial
Officer

Date: September 27, 1996

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of Registrant and in
the capacities and on the date indicated.

NAME CAPACITY
- --------------------------------------------- ------------------------------

/s/ E. COURTNEY SIEGEL Director, President and Chief
- --------------------------------------------- Executive Officer (Principal
E. Courtney Siegel Executive Officer)

/s/ DANIEL S. DUNLEAVY Vice President, Chief
- --------------------------------------------- Financial Officer (Principal
Daniel S. Dunleavy Financial
and Accounting Officer)

/s/ MICHAEL A. BRUNNER Director
- ---------------------------------------------
Michael A. Brunner

/s/ C. FORBES DEWEY, JR. Director
- ---------------------------------------------
C. Forbes Dewey, Jr.

/s/ MORTON E. HANDEL Director September 27, 1996
- ---------------------------------------------
Morton E. Handel

/s/ C. SHELTON JAMES Director
- ---------------------------------------------
C. Shelton James

/s/ MICHAEL F. MAGUIRE Director
- ---------------------------------------------
Michael F. Maguire

/s/ RICHARD P. RIFENBURGH Director
- ---------------------------------------------
Richard P. Rifenburgh

/s/ ROBERT R. SPARACINO Director
- ---------------------------------------------
Robert R. Sparacino

19
21

CONCURRENT COMPUTER CORPORATION
ANNUAL REPORT ON FORM 10-K

ITEM 8
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
YEAR ENDED JUNE 30, 1996

20
22

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and the Board of Directors
of Concurrent Computer Corporation

We have audited the accompanying consolidated balance sheets of Concurrent
Computer Corporation (the "Company") as of June 30, 1996 and 1995, and the
related consolidated statements of operations, shareholders' equity (deficiency)
and cash flows for each of the three years in the period ended June 30, 1996,
and the financial statement schedule listed in Item 14(a) of the Company's 1996
Annual Report on Form 10-K. These financial statements and the financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes 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, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Concurrent
Computer Corporation as of June 30, 1996 and 1995, and the consolidated results
of their operations and their cash flows for each of the three years in the
period ended June 30, 1996, in conformity with generally accepted accounting
principles. In addition, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, present fairly, in all material respects, the information
required to be included therein.

As discussed in Notes 2 and 12 to the consolidated financial statements, in
1994 the Company changed its method of accounting for income taxes and changed
its method of accounting for postretirement benefits other than pensions.

COOPERS & LYBRAND L.L.P.

Parsippany, New Jersey
August 12, 1996,
except for Note 20, as to which
the date is September 27, 1996

21
23

CONCURRENT COMPUTER CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

YEAR ENDED JUNE 30,
------------------------------
1996 1995 1994*
-------- -------- --------

Net sales:
Computer systems............................................. $ 42,430 $ 72,074 $100,293
Service and other............................................ 53,370 68,070 78,738
-------- -------- --------
Total................................................ 95,800 140,144 179,031
-------- -------- --------
Cost of sales:
Computer systems............................................. 27,487 38,639 54,517
Service and other............................................ 33,048 40,838 48,473
-------- -------- --------
Total................................................ 60,535 79,477 102,990
-------- -------- --------
Gross margin................................................... 35,265 60,667 76,041
-------- -------- --------
Operating expenses:
Research and development..................................... 13,837 19,464 23,823
Selling, general and administrative.......................... 29,818 36,921 48,651
Provision for restructuring.................................. 24,480 3,200 12,000
Sales and use tax credit..................................... -- (1,000) (1,440)
-------- -------- --------
Total operating expenses............................. 68,135 58,585 83,034
-------- -------- --------
Operating income (loss)........................................ (32,870) 2,082 (6,993)
Interest expense............................................... (2,316) (2,638) (3,486)
Interest income................................................ 226 513 634
Other non-recurring charge..................................... (1,700) (1,000) --
Other income (expense) -- net.................................. (1,502) 737 (486)
-------- -------- --------
Loss before provision for income taxes, extraordinary loss and
cumulative effect of change in accounting principles......... (38,162) (306) (10,331)
Provision for income taxes..................................... 1,550 1,700 1,300
-------- -------- --------
Loss before extraordinary loss and cumulative effect of change
in accounting principles..................................... (39,712) (2,006) (11,631)
Extraordinary loss on early extinguishment of debt............. -- -- (23,193)
Cumulative effect of change in accounting principles for income
taxes and postretirement benefits............................ -- -- (5,000)
-------- -------- --------
Net loss....................................................... $(39,712) $ (2,006) $(39,824)
======== ======== ========
Loss per share:
Loss before extraordinary loss and cumulative effect of
change in accounting principles........................... $ (1.30) $ (0.07) $ (0.41)
Extraordinary loss on early extinguishment of debt........... -- -- (0.83)
Cumulative effect of change in accounting principles for
income taxes and postretirement benefits.................. -- -- (0.18)
-------- -------- --------
Net loss..................................................... $ (1.30) $ (0.07) $ (1.42)
======== ======== ========

- ---------------

* Reclassified to conform to current year presentation.

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

22
24

CONCURRENT COMPUTER CORPORATION

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

JUNE 30, JUNE 30,
1996 1995*
-------- --------

ASSETS
Current assets:
Cash and cash equivalents............................................ $ 3,562 $ 5,728
Trading securities................................................... 10,077 --
Accounts receivable, less allowance for doubtful accounts of
$1,143 -- 1996; $1,434 -- 1995.................................... 27,948 25,456
Inventories.......................................................... 11,683 14,510
Prepaid expenses and other current assets............................ 2,384 4,303
------- -------
Total current assets......................................... 55,654 49,997
Property, plant and equipment -- net................................... 16,453 38,567
Facilities held for disposal........................................... 4,700 4,000
Other long term assets................................................. 3,407 5,795
------- -------
Total assets........................................................... $ 80,214 $ 98,359
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable........................................................ $ 5,013 $ 6,716
Current portion of long-term debt.................................... 1,241 1,529
Revolving credit facility............................................ 5,014 5,761
Accounts payable and accrued expenses................................ 40,638 29,285
Deferred revenue..................................................... 4,573 4,841
------- -------
Total current liabilities.................................... 56,479 48,132
Long-term debt......................................................... 6,603 9,536
Other long-term liabilities............................................ 4,454 5,521
Commitments and contingencies.......................................... -- --
Class B 9% cumulative convertible, redeemable, exchangeable preferred
stock, mandatory redemption value of $6,263,000, $.01 par value per
share 1,000,000 authorized -- Issued and outstanding 1,000,000 at
June 30, 1996........................................................ 5,610 --
Stockholders' equity:
Shares of preferred stock, par value $.01; authorized 25,000,000..... -- --
Shares of common stock, par value $.01; authorized 100,000,000;
issued 41,223,610 -- 1996 and 30,208,276 -- 1995.................. 412 302
Capital in excess of par value....................................... 84,252 73,112
Accumulated deficit after eliminating accumulated deficit of $81,826
at December 31, 1991, date of quasi-reorganization................ (76,740) (37,028)
Treasury stock, at cost; 840 shares.................................. (58) (58)
Cumulative translation adjustment.................................... (798) (1,158)
------- -------
Total stockholders' equity................................... 7,068 35,170
------- -------
Total liabilities and stockholders' equity................... $ 80,214 $ 98,359
======= =======

- ---------------

* Reclassified to conform to current year presentation.

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

23
25

CONCURRENT COMPUTER CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

YEARS ENDED JUNE 30,
------------------------------
1996 1995 1994*
-------- -------- --------

Cash flows provided by (used by) operating activities:
Net loss............................................................... $(39,712) $ (2,006) $(39,824)
-------- -------- --------
Adjustments to reconcile net loss to net cash provided by (used by)
operating activities:
Depreciation, amortization and other................................. 11,067 12,284 12,527
Provision for inventory reserves..................................... 4,904 5,037 4,461
Non-cash taxes related to the utilization of net operating loss
carryforwards which originated prior to the Company's
quasi-reorganization, effected on December 31, 1991................. -- 300 --
Non-cash interest and amortization of financing costs................ 213 450 1,061
Extraordinary loss on early extinguishment of debt................... -- -- 23,193
Cumulative effect of change in accounting principles................. -- -- 5,000
Provisions for restructuring......................................... 24,480 3,200 12,000
Other non-recurring charge........................................... 1,700 1,000 --
Sales and use tax credit............................................. -- (1,000) (1,440)
Decrease (increase) in current assets:
Accounts receivable................................................ 6,086 10,431 3,690
Inventories........................................................ (157) (2,044) (319)
Prepaid expenses and other current assets.......................... 555 998 1,238
Decrease in current liabilities, other than debt obligations......... (6,104) (18,017) (14,797)
Decrease (increase) in other long-term assets........................ 880 599 (1,790)
(Decrease) increase in other long-term liabilities................... (639) (1,983) 193
-------- -------- --------
Total adjustments to net loss................................... 42,985 11,255 45,017
-------- -------- --------
Net cash provided by operating activities................................ 3,273 9,249 5,193
-------- -------- --------
Cash flows used by investing activities:
Additions to property, plant and equipment............................. (2,513) (5,140) (7,584)
Proceeds from sale of facility......................................... 2,300 -- --
Acquisition of business, net of cash received and non-cash
transactions......................................................... (2,980) -- --
-------- -------- --------
Net cash used by investing activities.................................... (3,193) (5,140) (7,584)
-------- -------- --------
Cash flows provided by (used by) financing activities:
Net (payments) proceeds of notes payable............................... (99) (100) 2,511
Repayment of long-term debt............................................ (3,915) (23,395) (76,602)
Issuance of long-term debt............................................. -- 15,761 708
Net proceeds from issuance of common stock............................. 1,031 150 55,001
-------- -------- --------
Net cash used by financing activities.................................... (2,983) (7,584) (18,382)
-------- -------- --------
Effect of exchange rate changes on cash and cash equivalents............. 737 (171) (275)
-------- -------- --------
Decrease in cash and cash equivalents.................................... $ (2,166) $ (3,646) $(21,048)
======== ======== ========
Cash and cash equivalents -- Beginning of year........................... $ 5,728 $ 9,374 $ 30,422
======== ======== ========
Cash and cash equivalents -- End of year................................. $ 3,562 $ 5,728 $ 9,374
======== ======== ========
Cash paid during the period for:
Interest............................................................. $ 1,931 $ 2,256 $ 2,731
======== ======== ========
Income taxes (net of refunds)........................................ $ 1,659 $ 727 $ 659
======== ======== ========
Non-cash investing/financing activities related to acquisition of
business:
Issuance of common stock............................................... 10,111 -- --
--------
Issuance of preferred stock............................................ 5,610 -- --
--------

- ---------------

* Reclassified to conform to current year presentation.

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

24
26

CONCURRENT COMPUTER CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

PREFERRED STOCK COMMON STOCK TREASURY
------------------ ------------------ CAPITAL IN ACCUMULATED CUMULATIVE STOCK
PAR PAR EXCESS OF EARNINGS TRANSLATION -------------
SHARES VALUE SHARES VALUE PAR VALUE (DEFICIT) ADJUSTMENT SHARES COST TOTAL
---------- ----- ---------- ----- ---------- ----------- ---------- ------ ---- -------

Balance June 30,
1993................ 6,981,706 $ 70 2,579,026 $ 26 $ 15,626 $ 4,802 $ (1,963) (840 ) $(58) $18,503
Issuance of common
stock under
retirement savings
plan................ 324,377 3 1,057 1,060
Issuance of common
stock............... 19,700,000 197 54,803 55,000
Conversion of
preferred stock..... (6,981,706) (70 ) 6,981,706 70 --
Other................. 279 61 61
Net Loss.............. (39,824) (39,824)
Foreign currency
translation
adjustment.......... 248 248
--------- --- ---------- ---- ------- -------- ------- ---- ---- -------
Balance June 30,
1994................ 29,585,388 296 71,547 (35,022) (1,715) (840 ) (58) 35,048
Sale of common stock
under stock plans... 85,358 1 149 150
Issuance of common
stock under
retirement savings
plan................ 368,823 3 762 765
Issuance of common
stock under bonus
plan................ 168,707 2 324 326
Other................. 30 30
Net loss.............. (2,006) (2,006)
Foreign currency
translation
adjustment.......... 557 557
Quasi-reorganization
related adjustments:
Utilization of net
operating loss
carryforwards....... 300 300
--------- --- ---------- ---- ------- -------- ------- ---- ---- -------
Balance June 30,
1995................ -- -- 30,208,276 302 73,112 (37,028) (1,158) (840 ) (58) 35,170
Sale of common stock
under stock plans... 379,679 4 513 517
Issuance of common
stock under
retirement savings
plan................ 270,109 3 516 519
Issuance of common
stock in connection
with acquisition of
business, including
certain advisory
fees................ 10,365,546 103 10,111 10,214
Net loss.............. (39,712) (39,712)
Foreign currency
translation
adjustment.......... 360 360
--------- --- ---------- ---- ------- -------- ------- ---- ---- -------
Balance June 30,
1996................ -- -- 41,223,610 $412 $ 84,252 $ (76,740) $ (798) (840 ) $(58) $ 7,068
========= === ========== ==== ======= ======== ======= ==== ==== =======

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

25
27

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION OF THE COMPANY AND BASIS OF PRESENTATION

Concurrent Computer Corporation ("Concurrent" or the "Company") is a
supplier of high-performance real-time computer systems and services. A
"real-time" system is one specially designed to acquire, process, store and
display large amounts of rapidly changing information in real time -- that is,
with microsecond response as changes occur. Concurrent sells its systems in
strategic target markets worldwide primarily through direct field sales and
services offices. Such target markets include simulation; data acquisition;
instrumentation and process control; interactive real time (includes multimedia
and wagering and gaming) and telecommunications.

During fiscal year 1996, the Company continued to experience a decline in
net sales. In addition, Concurrent incurred a substantial operating loss, cash
flow from operations declined from the previous fiscal year and the Company had
a working capital deficiency at June 30, 1996. Accordingly, the Company
continued to closely manage its resources and, in order to enhance its
competitive position and improve its cost structure and liquidity, on June 27,
1996, the Company acquired the Real-Time Division of Harris Computer Systems
Corporation ("HCSC"), along with 683,178 shares of newly issued shares of HCSC
(see Note 3) which was renamed CyberGuard Corporation ("CyberGuard"). In
addition, on March 20, 1996, the Company completed the sale of its Tinton Falls,
New Jersey facility (see note 10). The acquisition of HCSC's Real-Time Division
and the related business integration and consolidation is expected to improve
Concurrent's liquidity through improved operating performance, additional
borrowing availability and the planned disposition of its Oceanport, New Jersey
facility. The Company may also utilize its CyberGuard common stock holdings as
an additional source of liquidity if needed. The Company anticipates a
continuing decline in its proprietary computer systems sales, however, it
believes the combination of the best technologies of the two businesses will
offset the proprietary systems sales decline through increased open systems
sales. The Company plans to manage its cost structure and cash flow to
anticipated revenue levels and believes its restructuring plans will reduce its
expenses to a level consistent with its forecasted volume. The Company believes
that it will be able to fund its acquisition costs, as well as its fiscal year
1997 operations, through its operating results, existing financing facilities
and the planned disposition of its Oceanport, New Jersey facility. However,
there can be no assurance that the Company's plans will be achieved.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of all
majority-owned domestic and foreign subsidiary companies. All intercompany
transactions and balances have been eliminated.

Foreign Currency

The functional currency of substantially all of the Company's 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 until the entity is sold or substantially liquidated. Gains or losses
resulting from foreign currency transactions are included in the results 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.

Gains (losses) on foreign currency transactions of ($934,000), $175,000 and
($360,000) for the fiscal years ended June 30, 1996, 1995 and 1994,
respectively, are included in Other income (expense) -- net.

26
28

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Cash and Cash Equivalents

For financial statement purposes, short-term investments with original
maturities of ninety days or less from the date of purchase are considered cash
equivalents. Cash equivalents are stated at cost plus accrued interest, which
approximates market, and represents cash invested in U.S. Government securities,
bank certificates of deposit, or commercial paper. Such short-term investments
amounted to $26,000 and $480,000 at June 30, 1996 and 1995, respectively.

At June 30, 1996, the Company had $439,000 of restricted cash primarily
supporting building rental deposits.

Inventories

Inventories are stated at the lower of cost or market, with cost determined
on the first-in, first-out basis. The Company establishes excess and obsolete
inventory reserves based upon historical and anticipated usage.

Property, Plant and Equipment

Property, plant 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 three to forty 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, plant and equipment are included in Other income
(expense) -- net. Expenditures for repairs and maintenance are charged to
operations as incurred and expenditures for major renewals and betterments are
capitalized.

Revenue Recognition

Computer systems sales (hardware and software, including bundled software)
are recorded when the earnings process is complete, typically upon shipment to
customers. Service contract revenue related to hardware and software is
recognized separately and as earned over the respective maintenance period in
accordance with the terms of the applicable contract.

Revenue from long-term development contracts is accounted for by the
percentage of completion method whereby income is recognized based on the
estimated stage of completion of individual contracts using costs incurred as a
percentage of total estimated costs at completion. Losses on long-term contracts
are recognized in the period in which such losses are determined.

Capitalized Software

The Company, in accordance with Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or
Otherwise Marketed", commences capitalization of software production costs upon
the achievement of technological feasibility and ceases capitalization upon the
achievement of customer availability. Such costs are amortized over the greater
of the ratio of the product's current to total revenue stream or the
straight-line method over its estimated useful life. Such amortization period
generally does not exceed three years. For the years ended June 30, 1996, 1995
and 1994, amortization expense relating to software production costs which is
included as a component of cost of sales amounted to $1,070,000, $1,160,000 and
$445,000, respectively.

Accumulated amortization amounted to $2,261,000 and $1,325,000,
respectively, at June 30, 1996 and 1995. Capitalized software (net) amounted to
$29,000 and $965,000 at June 30, 1996 and 1995, respectively.

Research and Development

Research and development expenditures, other than capitalized software, are
expensed when incurred.

27
29

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Loss per Share

Loss per share is computed on the basis of the weighted average number of
common shares outstanding during each year for the period. The number of shares
used in computing loss per share was 30,568,000, 30,095,000 and 28,054,000 for
the years ended June 30, 1996, 1995 and 1994, respectively.

Impairment of Long-Lived Assets

On July 1, 1995, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("FAS No. 121").
This statement establishes accounting standards for when impairment losses
relating to long-lived assets, identifiable intangibles, and goodwill related to
those assets should be reviewed and how the losses should be measured. The
adoption of this standard did not materially affect the Company's earnings,
financial condition or cash flows as this was essentially the same method used
in the past to measure and record asset impairments. The Company's fiscal 1996
provision for restructuring included the recognition of certain asset
impairments as a result of the Company's restructuring plans.

Income Taxes

The Company and its domestic subsidiaries file a consolidated Federal
income tax return. Certain items of revenue and expense are reported for Federal
income tax purposes in different periods than for financial reporting purposes
and are accounted for under the asset and liability method as required by the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("FAS No. 109").

On July 1, 1993, the Company adopted the provisions of FAS No. 109. This
standard requires a change from the deferred method to the asset and liability
method of accounting for income taxes. Under the asset and liability method, a
deferred tax asset or liability is recognized for temporary differences between
financial reporting and income tax bases of assets and liabilities, tax credit
carryforwards and operating loss carryforwards. A valuation allowance is
established to reduce deferred tax assets if it is more likely than not that
such deferred tax assets will not be realized. Utilization of net operating loss
carryforwards and tax credits, which originated prior to the Company's
quasi-reorganization effected on December 31, 1991, are recorded as adjustments
to capital in excess of par value. Prior years' financial statements have not
been restated. The cumulative effect of adopting this standard in fiscal year
1994 resulted in the Company recording a $2.0 million non-cash charge reducing
its deferred tax assets as of the date of adoption.

Postretirement Benefits Other Than Pensions

On July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 106 "Employers' Accounting for Postretirement
Benefits Other Than Pensions" ("FAS No. 106"). This standard requires companies
to accrue postretirement benefits throughout the employees' active service
periods until they attain full eligibility for those benefits. The transition
obligation (the accumulated postretirement benefit obligation at the date of
adoption) may be recognized either immediately or by amortization over the
longer of the average remaining service period for active employees or 20 years.

In connection with the adoption of this standard, in fiscal year 1994, the
Company recorded a non-cash charge of $3.0 million representing the immediate
recognition of the accumulated postretirement benefit obligation at the date of
adoption.

Stock-Based Compensation

In fiscal year 1997, the Company will adopt the provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
("FAS No. 123"). This standard establishes a fair value method for accounting
for stock-based compensation plans based upon the fair value of stock

28
30

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

options and similar instruments, but does not require the adoption of this
preferred method. The Company intends to adopt this standard by disclosing the
pro forma net income and earnings per share amounts assuming the fair value
method was adopted on July 1, 1996. The adoption of this standard will not
impact results of operations, financial position or cash flows.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles 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.

3. ACQUISITION

On June 27, 1996 Concurrent acquired the assets of the Real-Time Division
of Harris Computer Systems Corporation ("HCSC") and 683,178 newly-issued shares
of HCSC, which was renamed CyberGuard Corporation ("CyberGuard"), in exchange
for 10,000,000 shares or $9.7 million of Common Stock of Concurrent, 1,000,000
shares of convertible exchangeable preferred stock of Concurrent with a 9%
cumulative annual dividend payable quarterly in arrears, mandatory redemption
value of $6,263,000 (with an estimated fair value of $5.6 million), and the
assumption of certain liabilities relating to the HCSC Real-Time Division (the
"Acquisition"). The aggregate purchase price of the Acquisition was
approximately $18.7 million, including $3.4 million in transaction expenses
(principally financial advisor, legal and other professional fees). The
Acquisition has been accounted for as a purchase effective June 30, 1996. The
Acquisition resulted in excess of acquired net assets over cost (negative
goodwill) amounting to approximately $8.7 million which has been allocated to
reduce proportionately the values assigned to non-current assets.

In connection with the Acquisition, the Company recorded a $1.4 million
liability for the estimated costs of exiting certain activities of the acquired
business and the cost of termination benefits for employees of the acquired
business. This liability included the estimated costs for workforce reductions,
office closings and other related costs which represented approximately 45%, 45%
and 10% of the provision, respectively.

The following unaudited pro forma financial information gives effect to the
Acquisition as if it had been consummated as of July 1, 1995 and 1994. In
accordance with generally accepted accounting principles, pro forma adjustments
related to the depreciation and amortization of assets, preferred stock
dividends, interest income and certain other adjustments are included in the pro
forma financial information. The pro forma financial information is not
necessarily indicative of the results of operations that would have occurred had
the Acquisition been in effect at the beginning of the periods, nor of the
future results of operations of the combined companies.

YEAR ENDED JUNE 30,
-------------------
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)

Net sales................................................................ $133,871 $180,438
Net loss................................................................. $(44,498) $ (8,102)
Net loss per share....................................................... $ (1.10) $ (0.22)

29
31

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The assets acquired and liabilities assumed as a result of the Acquisition,
after eliminating the excess of acquired net assets over cost by allocating such
excess to reduce proportionately the values assigned to noncurrent assets, were
as follows:

(DOLLARS
IN
THOUSANDS)
---------

Cash............................................................. $ 420
Trading securities............................................... 10,077
Accounts receivable.............................................. 9,695
Inventories...................................................... 3,785
Other current assets............................................. 110
Property, plant and equipment.................................... 921
Other assets..................................................... 376
Accounts payable and accrued liabilities......................... (6,674)
-------
Total -- net........................................... $18,710
=======

The value assigned to trading securities reflects the acquisition of
683,173 shares of CyberGuard common stock at the market price per share on the
date of the Acquisition. The market value of this asset is subject to changes in
the market price of CyberGuard stock. The amount the Company will ultimately
realize from any disposition of these securities could differ materially in the
near term from the amounts reflected in the Company's June 30, 1996 balance
sheet. As of September 20, 1996, the market value of the Company's CyberGuard
stock holdings amounted to approximately $5.5 million.

4. PROVISION FOR RESTRUCTURING

The Company recorded a $1.3 million and a $23.2 million provision for
restructuring during the quarters ended December 31, 1995 and June 30, 1996,
respectively. In October 1995, the Company's management approved a plan to
restructure its operations. This plan provided for a reduction of approximately
55 employees worldwide and the downsizing or closing of certain office
locations, representing approximately 85% and 15% of the related $1.3 million
provision. In connection with the Acquisition, based on formal, approved plans,
the Company recorded a $23.2 million restructuring provision. Such charge
included the estimated costs related to the rationalization of facilities,
workforce reductions, asset writedowns and other costs which represent
approximately 44%, 28%, 26% and 2%, respectively. The rationalization of
facilities includes the planned disposition of the Company's Oceanport, New
Jersey facility (see Notes 10 and 20), as well as the closing or downsizing of
certain offices located throughout the world. The workforce reductions include
the termination of approximately 200 employees worldwide, encompassing
substantially all of the Company's employee groups. The asset writedowns are
primarily related to the planned disposition of duplicative machinery and
equipment. During the year ended June 30, 1996, the actual cash payments related
to the 1996 restructurings amounted to approximately $1.4 million and were
primarily related to employee termination costs.

On May 5, 1992, the Company had entered into an agreement with Industrial
Development Authority (IDA) in Ireland to maintain a presence in Ireland through
April 30, 1998. In connection with the Acquisition, the Company has decided to
close its Ireland operations. As such, the Company may be required to pay
approximately $575,000 (360,000 Irish Pounds) to the IDA. The Company is
currently negotiating this with the IDA.

During the year ended June 30, 1995, the Company recorded a provision for
restructuring of $3.2 million. The provision included costs for workforce
reductions, office closings or downsizings and other related costs which
represented approximately 60%, 30% and 10% of the provision, respectively.
During the year ended June 30, 1996, the actual cash payments related to the
1995 restructuring amounted to approximately $0.7 million and were primarily
related to employee termination and office closing costs.

30
32

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During the year ended June 30, 1994, the Company recorded a provision for
restructuring of $12.0 million in connection with its operational restructuring
to reduce its worldwide cost structure. The provision included workforce
reductions, office closings or downsizings and other related costs which
represented approximately 65%, 25% and 10% of the provision, respectively.
During the year ended June 30, 1996, the actual cash payments related to the
1994 restructuring amounted to approximately $0.9 million and were primarily
related to office closing costs.

5. DEBT AND LINES OF CREDIT

On June 28, 1996, the Company entered into a new agreement providing for a
$19.9 million credit facility which matures August 1, 1999. The facility
includes a $7.2 million term loan (the "New Term Loan") and a $12.7 million
revolving credit facility (the "New Revolver"). The New Revolver represents a
$4.7 million increase to the maximum revolver availability, subject to certain
restrictions. In addition, the Company can borrow up to $3.0 million in standby
letters of credit (the LOC's) in connection with overseas lines of credit. These
LOC's mature on July 31, 1997, at which time the Company must extend the
expiration date of the LOC's to August 1, 1999 or obtain alternative financing
or guarantees in lieu thereof.

At June 30, 1996, the outstanding balances under the New Term Loan and the
New Revolver were $7.2 and $5.0 million, respectively. The entire outstanding
balance of the New Revolver has been classified as a current liability at June
30, 1996. Both the New Term Loan and the New Revolver bear interest at the prime
rate plus 2.0%. The New Term Loan is payable in 28 monthly installments of
approximately $139,000 each, commencing October 1, 1996 and ending January 1,
1999, with the final balance of approximately $3.3 million payable August 1,
1999. The New Revolver may be repaid and reborrowed, subject to certain
collateral requirements, at any time during the term ending August 1, 1999. The
Company has pledged substantially all of its domestic assets as collateral for
the New Term Loan and the New Revolver. The Company may repay the New Term Loan
at any time without penalty. In the event of a sale, or sale/leaseback, of its
Oceanport facility, the Company is required to make a prepayment of the New Term
Loan up to an amount equal to 75% of the net sale proceeds. Certain early
termination fees apply if the Company terminates the facility in its entirety
prior to August 1, 1999.

On August 5, 1996, the Company obtained a waiver of compliance with respect
to certain financial covenants for the year ended June 30, 1996. The new
agreement contains various covenants (for periods subsequent to June 30, 1996)
and restrictions, which among other things (1) place certain limits on corporate
acts of the Company such as fundamental changes in the corporate structure of
the Company, investments in other entities, incurrence of additional
indebtedness, creation of liens or certain distributions or dispositions of
assets, including cash dividends, and (2) require the Company to meet financial
tests on a periodic basis, the most restrictive of which relate to the
maintenance of collateral coverage and debt coverage all as defined in the
agreement. In addition, the new agreement contains a subjective provision
entitling the lender to accelerate payments under the New Term Loan and New
Revolver.

At June 30, 1995, the outstanding balance under the then existing term loan
(the "Old Term Loan") and the then existing revolver (the "Old Revolver"), which
resulted from the refinancing of a previous bank term loan, amounted to $10.0
and $5.8 million, respectively. Both bore interest at the prime rate plus 2.0%.
The Old Term Loan was payable in 36 equal installments of $139,000 each,
commencing August 1, 1995, with a final payment of approximately $5.0 million
payable August 1, 1998. The Company had pledged substantially all of its
domestic assets as collateral for the Old Term Loan and the Old Revolver.

The Company's foreign subsidiaries have certain bank borrowing arrangements
in local currencies which provide for borrowings of up to $6,702,000 at
prevailing rates of interest ranging from 1.625% to 9.3% at June 30, 1996. At
June 30, 1996, $5,013,000 of demand notes were outstanding under such
arrangements of which $1,834,000 is guaranteed by the minority shareholder in
the Company's Japanese subsidiary and $2,734,000 is guaranteed by the Company
(one of these demand notes is not guaranteed by either the

31
33

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Company or the minority shareholder). Foreign unused lines of credit can be
withdrawn at any time at the option of either the Company or the lending
institutions. The joint venture agreement between the Company and the minority
shareholder in the Japanese subsidiary expires on December 31, 1996. Management
expects to extend the joint venture agreement through June 30, 1998. There can
be no assurance that the agreement will be extended and, in the event the
agreement is not extended, the Company may be required to extend its guarantees,
or repay the demand notes and seek alternative financing.

Annual maturities of all the Company's debt (including $5,013,000 of
foreign demand notes) for the fiscal years ended June 30, 1997 through 2001, and
thereafter, are as follows:

ANNUAL
MATURITIES
-----------
(DOLLARS IN
THOUSANDS)

1997........................................................... $11,268
1998........................................................... 2,081
1999........................................................... 1,194
2000........................................................... 3,328
2001........................................................... --
Thereafter..................................................... --
-------
Total................................................ $17,871
=======

6. REFINANCING

On July 21, 1993, the Company completed a comprehensive refinancing (the
"1993 Refinancing"). The 1993 Refinancing consisted of the following: a) the
sale and issuance of 19,700,000 shares of common stock, with a par value of
$0.01, at a price of $3.00 per share for $59.1 million less issuance costs of
approximately $4.1 million (the "Offering"); b) the modification of the
Company's then existing bank term loan to, among other things, extend the
maturity date and reduce the interest rate; and c) the conversion of all of the
6,981,706 outstanding shares of the Company's convertible participating
preferred stock (the "Convertible Preferred Stock") into shares of common stock
at a ratio of one to one.

The net proceeds of the Offering ($55.0 million) together with $11.9
million of Company cash were used to redeem in full the Company's outstanding
12.08% Senior Subordinated Notes due 1997 (the "Subordinated Debt") at face
amount, plus accrued interest, as of July 21, 1993. The Subordinated Debt was
originally recorded with an original issue discount resulting in an effective
yield-to-maturity of 25%. The redemption of the Subordinated Debt resulted in an
extraordinary charge reducing net income by $23.2 million during the first
quarter of fiscal year 1994 based on an aggregate cash redemption price of $66.9
million and a book value of $43.7 million. The 1993 Refinancing, including the
effect of the redemption of the Subordinated Debt and related $23.2 million
extraordinary charge, resulted in a $31.8 million increase to stockholders'
equity as of the date the transactions were completed.

The extraordinary loss on the early extinguishment of debt is determined as
follows:

(DOLLARS IN
THOUSANDS)

Face amount of Subordinated Debt............................... $64,206
Accrued interest on Subordinated Debt.......................... 2,715
Sub-total.................................................... 66,921
Book value of Subordinated Debt................................ (43,728)
-------
Extraordinary loss............................................. $23,193
=======

32
34

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The extraordinary loss on the early extinguishment of debt did not result
in the recognition of a tax benefit due to a difference in the financial
reporting and tax bases of the underlying subordinated debt.

7. CHANGE IN ACCOUNTING ESTIMATE

During the three months ended December 31, 1994 and 1993, the Company
recorded a sales and use tax credit of $1.0 million, or $.03 per share, and $1.4
million, or $.05 per share, respectively, related to a change in the estimate of
state sales and use tax reserves based on a final state audit determination.

8. CONCENTRATION OF CREDIT RISK

Concentration of credit risk with respect to trade receivables is limited
due to the large number of customers comprising the Company's customer base.
Ongoing credit evaluations of customers' financial condition are performed and
collateral is generally not required.

9. INVENTORIES

Inventories consist of:

1996 1995
------- -------
(DOLLARS IN
THOUSANDS)

Raw Materials.................................................. $ 8,789 $ 7,111
Work-in-process................................................ 352 753
Finished goods................................................. 2,542 6,646
------- -------
$11,683 $14,510
======= =======

At June 30, 1996, some portion of the Company's inventory was in excess of
its planned requirements based upon forecasted level of sales for the fiscal
year 1997. Accordingly, the Company has recorded a provision for inventory
reserves to reduce the value of the inventory to its estimated net realizable
value. There can be no assurance that the amounts the Company will ultimately
realize from the disposition of this inventory will not differ materially from
the reported amounts.

10. PROPERTY, PLANT AND EQUIPMENT AND OTHER LONG-TERM ASSETS

Property, plant and equipment consists of:

1996 1995
------- -------
(DOLLARS IN
THOUSANDS)

Land........................................................... $ 2,449 $ 5,346
Buildings...................................................... 3,015 17,158
Machinery and equipment........................................ 55,202 53,636
------- -------
60,666 76,140
Less: Accumulated depreciation................................. (44,213) (37,573)
------- -------
$16,453 $38,567
======= =======

For the years ended June 30, 1996, 1995 and 1994, depreciation and
amortization expense for property plant and equipment amounted to $9,254,000,
$10,641,000 and $11,685,000, respectively.

On March 20, 1996, the Company completed the sale of its Tinton Falls, New
Jersey facility. The net proceeds from this transaction amounted to
approximately $2.3 million. During the quarter ended September 30, 1995, the
Company recorded a non-recurring charge of $1.7 million to adjust the book value
of this facility to its estimated fair value of $2.3 million. Upon completion of
this transaction, the Company made a

33
35

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

mandatory prepayment of $1.7 million (75% of the net proceeds) related to the
Old Term Loan, of which 50% was applied to the next six scheduled monthly
principal payments and 50% was applied to the final maturity payment.

During the quarter ended June 30, 1996, in connection with the Acquisition
and the resulting planned disposition of the Company's Oceanport, New Jersey
facility, the book value of land and building related to this facility was
written down by $6,805,000 to its estimated fair value of $4,700,000 and
classified as a facility held for disposal. While the estimated fair value at
June 30, 1996 was based upon a valuation by independent appraisers, there have
been limited recent sales of comparable properties to consider in preparing such
valuation. The $6,805,000 write down was included in the provision for
restructuring recorded in the quarter ended June 30, 1996 (see Note 4).

11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of:

1996 1995
------- -------
(DOLLARS IN
THOUSANDS)

Accounts payable -- trade.......................................... $ 9,453 $11,023
Accrued payroll, vacation and other employee expenses.............. 7,934 8,510
Restructuring costs................................................ 12,975 2,568
Other accrued expenses............................................. 10,276 7,184
------- -------
$40,638 $29,285
======= =======

12. INCOME TAXES

The domestic and foreign components of income (loss) before provision for
income taxes, extraordinary gain (loss) on early extinguishment of debt, and the
cumulative effect of change in accounting principles are as follows:

1996 1995 1994
-------- ------- --------
(DOLLARS IN THOUSANDS)

United States........................................... $(35,588) $(4,705) $ (5,758)
Foreign................................................. (2,574) 4,399 (4,573)
-------- ------- --------
$(38,162) $ (306) $(10,331)
======== ======= ========

34
36

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The components of the provision for income taxes are as follows:

1996 1995 1994
------ ------ ------
(DOLLARS IN THOUSANDS)

Current:
Federal............................................ $ -- $ --
Foreign............................................ 1,550 1,700 1,300
State.............................................. -- --
------ ------ ------
Total...................................... $1,550 $1,700 $1,300
------ ------ ------
Deferred:
Federal............................................ $ -- $ -- $ --
Foreign............................................ -- --
State.............................................. -- -- --
------ ------ ------
Total...................................... $ -- $ --
------ ------ ------
Total................................................ $1,550 $1,700 $1,300
====== ====== ======

For the fiscal year ended June 30, 1995, the current provision for income
taxes includes an equivalent charge of $300,000, which was fully offset in
capital in excess of par value due to the utilization of tax loss carryforwards
which originated prior to the Company's quasi-reorganization, effected on
December 31, 1991.

A reconciliation of the Federal statutory tax provision to the Company's
provision for income taxes is as follows:

1996 1995 1994
-------- ------- --------
(DOLLARS IN THOUSANDS)

Income (loss) before provision for income taxes,
extraordinary gain (loss) and cumulative effect of
change in accounting principles....................... $(38,162) $ (306) $(10,331)
-------- ------- --------
Tax at Federal statutory rate........................... (12,975) (104) (3,513)
U.S. Federal and non U.S. net operating losses for which
no tax benefit was recorded........................... 12,074 2,890 4,466
Difference between U.S. and non U.S. income tax rates... 70 (1,146) 10
Tax benefit related to permanent differences............ -- --
State income tax........................................ -- --
Other................................................... 2,381 60 337
-------- ------- --------
Provision for income taxes.............................. $ 1,550 $ 1,700 $ 1,300
======== ======= ========

35
37

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of June 30, 1996 and 1995, the Company's deferred tax assets were
comprised of the following:

JUNE 30, JUNE 30,
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)

Gross deferred tax assets related to:
Net operating loss carryforwards............................... $ 40,657 $ 37,740
Accumulated depreciation....................................... 7,579 3,737
Restructuring reserves......................................... 7,833 3,253
Inventory reserves............................................. 5,609 3,300
Accrued compensation........................................... 496 931
Post-retirement benefits....................................... 844 928
Other.......................................................... 1,879 2,426
-------- --------
Total Gross deferred tax assets................................ 64,897 52,315
Valuation Allowance.............................................. (64,897) (52,315)
-------- --------
Net deferred tax assets.......................................... $ 0 $ 0
======== ========

During fiscal year 1994, the deferred tax liability related to the
Company's Subordinated Debt was reversed upon the early extinguishment of such
debt. In connection with this reversal, the Company recorded a corresponding
increase to its deferred tax asset valuation allowance.

Any future benefits attributable to the net operating loss carryforwards
which originated prior to the Company's quasi-reorganization are accounted for
through adjustments to capital in excess of par value. Under Section 382 of the
Internal Revenue Code, future benefits attributable to the net operating loss
carryforwards and tax credits which originated prior to the quasi-reorganization
are limited to approximately $1.3 million per year and those which originated
subsequent to the Company's quasi-reorganization through the date of the 1993
Refinancing are limited to approximately $0.3 million per year. The Company's
net operating loss carryforwards begin to expire in 2004. As of June 30, 1996,
after giving effect to the aforementioned Internal Revenue Code limitation, the
Company has remaining utilizable net operating loss carryforwards of
approximately $119.5 million for income tax purposes. Approximately $61 million
of these net operating loss carryforwards originated prior to the Company's
quasi-reorganization, effected on December 31, 1991. In addition, approximately
$9 million of these net operating loss carryforwards originated subsequent to
the Company's quasi-reorganization through the date of the 1993 Refinancing.

Deferred income taxes have not been provided on approximately $10 million
of undistributed earnings of foreign subsidiaries, which originated subsequent
to the Company's quasi-reorganization, primarily due to either the Company's
required investment in certain subsidiaries or foreign tax rates which exceed
the U.S. tax rate.

Additionally, deferred income taxes have not been provided on approximately
$3 million of undistributed earnings of foreign subsidiaries which originated
prior to the Company's quasi-reorganization. The impact of both the subsequent
repatriation of such earnings and the resulting offset, in full, from the
utilization of net operating loss carryforwards will be accounted for through
adjustments to capital in excess of par value.

36
38

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

13. GEOGRAPHIC INFORMATION

Below is a summary of the Company's 1996, 1995 and 1994 financial data by
geographic area.

1996 1995 1994
-------- -------- --------
(DOLLARS IN THOUSANDS)

Net Sales:
United States................................................ $ 43,119 $ 75,362 $106,256
Intercompany................................................. 10,065 15,265 17,241
-------- -------- --------
53,184 90,627 123,497
-------- -------- --------
Europe....................................................... 27,668 39,431 43,807
Intercompany................................................. 141 127 38
-------- -------- --------
27,809 39,558 43,845
-------- -------- --------
Asia/Pacific................................................. 12,554 14,100 14,380
Japan........................................................ 10,410 7,818 11,759
Other........................................................ 2,049 3,433 2,829
-------- -------- --------
106,006 155,536 28,968
Eliminations................................................. (10,206) (15,392) (17,279)
-------- -------- --------
Total................................................ $ 95,800 $140,144 $179,031
======== ======== ========
Operating income (loss):
United States................................................ $(15,167) $ (2,398) $ (3,836)
Europe....................................................... (18,583) 4,602 (2,432)
Asia/Pacific................................................. 3,457 3,809 2,010
Japan........................................................ (388) (1,792) (103)
Other........................................................ 441 863 853
General corporate expenses................................... (1,943) (2,741) (2,976)
Eliminations................................................. (687) (261) (509)
-------- -------- --------
Total................................................ $(32,870) $ 2,082 $ (6,993)
======== ======== ========

1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)

Identifiable assets:
United States.......................................................... $ 91,674 $106,510
Europe................................................................. 24,520 24,493
Asia/Pacific........................................................... 10,736 7,441
Japan.................................................................. 8,467 11,559
Other.................................................................. 2,438 1,807
Corporate.............................................................. 11,927 5,489
Eliminations........................................................... (69,548) (58,940)
-------- --------
Total.......................................................... $ 80,214 $ 98,359
======== ========

Intercompany transfers between geographic areas are accounted for at prices
similar to those available to comparable unaffiliated customers. Sales to
unaffiliated customers outside the U.S., including U.S. export sales, were
$54,236,000, $66,913,000 and $73,893,000 for the years ended June 30, 1996, 1995
and 1994, respectively, which amounts represented 57%, 48%, and 41% of total
sales for the respective years.

Sales to the U.S. Government and its agencies amounted to approximately
$21,750,000, $39,200,000 and $54,750,000, respectively, for the years ended June
30, 1996, 1995 and 1994, and represented 23%, 28% and 31% of total sales for the
respective years. The Company's revenues are derived from various customer
sources including Unisys Corp., the prime contractor under the U.S. Department
of Commerce's Next Generation

37
39

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Radar (NEXRAD) program and the U.S. Department of Commerce under the NEXRAD
program. Sales to Unisys Corp. amounted to $732,253, $7,473,000 and $22,245,000,
respectively, for the years ended June 30, 1996, 1995 and 1994, which amounts
represented less than 1%, 5% and 12%, respectively, of total revenues.

14. RETIREMENT BENEFITS

The Company has a retirement savings plan (the "Plan") available to U.S.
employees which qualifies as a defined contribution plan under Section 401(k) of
the Internal Revenue Code. Annual Company contributions currently are determined
based upon the achievement of certain return on equity objectives with the
minimum contribution being 2% of employees' eligible earnings, as defined by the
Plan. The Company also matches a portion of employees' before-tax savings.

The Company's annual and matching contributions under this plan are as
follows:

1996 1995 1994
---- ---- ------
(DOLLARS IN
THOUSANDS)

Annual contribution in common stock............................. $326 $518 $ 767
Matching contribution........................................... 147 251 333
---- ---- ------
Total................................................. $473 $769 $1,100
==== ==== ======

The Company's annual contribution under this Plan for the year ended June
30, 1995 was funded in common stock of the Company during the quarter ended
September 30, 1995.

Certain foreign subsidiaries of the Company maintain pension plans for
their employees which conform to the common practice in their respective
countries. The pension expense related to these plans amounted to $263,000,
$381,000 and $213,000 for the years ended June 30, 1996, 1995 and 1994,
respectively.

The Company's net pension expense (income) for the years ended June 30,
1996, 1995 and 1994 consists of the following components:

1996 1995 1994
----- ----- -----
(DOLLARS IN THOUSANDS)

Service cost............................................... $ 449 $ 645 $ 522
Interest cost.............................................. 720 653 546
Return on plan assets...................................... (752) (661) (707)
Net amortization and deferral.............................. (154) (256) (148)
----- ----- -----
$ 263 $ 381 $ 213
===== ===== =====

The funded status of the Company's international pension plans at June 30,
1996 and 1995 was as follows:

1996 1995
------- ------
(DOLLARS IN
THOUSANDS)

Actuarial present value of benefit obligations:
Vested benefit obligation......................................... $ 7,751 $7,624
Accumulated benefit obligation.................................... 7,887 7,783
Projected benefit obligation...................................... 9,556 9,288
Plan assets at fair value......................................... 11,097 9,531
------- ------
Plan assets in excess of projected benefit obligation............. 1,541 243
Unrecognized net asset at transition.............................. (346) (418)
Unrecognized net gain............................................. (2,112) (806)
------- ------
Accrued pension liability......................................... $ (917) $ (981)
======= ======

38
40

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In determining the present value of benefit obligations and the expected
return on plan assets for the Company's foreign pension plans, the following
assumptions were used for the years ended June 30, 1996, 1995 and 1994:

1996 1995 1994
------------ ------------ -------------

Discount rate............................... 6.5% to 9.0% 6.0% to 9.0% 6.0% to 9.0%
Rate of increase in future compensation
levels.................................... 3.5% to 7.0% 4.0% to 7.0% 4.0% to 6.0%
Expected long-term rate of return........... 7.0% to 9.0% 7.0% to 9.0% 7.0% to 10.0%

Plan assets are comprised primarily of investments in managed funds
consisting of common stock, money market and real estate investments.

15. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

On July 1, 1993, the Company adopted the provisions of FAS No. 106. In
connection with the adoption of this standard, the Company recorded a non-cash
charge of $3.0 million representing the immediate recognition of the accumulated
postretirement benefit obligation at the date of adoption.

The Company has a plan for retiree medical and life insurance benefits for
its U.S. employees but does not have any significant foreign plans. Based on the
terms of the U.S. plan, participants must be age 55 with at least 10 years of
service to be eligible for medical benefits. If the retiree is age 55 and has a
minimum of five years of service, but less than 10 years of service, coverage of
certain medical benefits can be purchased through the Company.

The comprehensive plan, which may be amended at the Company's discretion,
provides lifetime coverage for retirees and coverage for spouses until one year
after the death of the retiree. The plan provides that the Company's costs will
be capped at the 1993 level. Eligibility for life insurance is restricted to
employees who retired prior to January 1993.

The unfunded status of the plan at June 30, 1996 and 1995 was as follows:

Accumulated Postretirement Benefit Obligation:

JUNE 30, JUNE 30,
1996 1995
-------- --------
(DOLLARS IN
THOUSANDS)

Active Ineligible Plan Participants............................... $ 458 $ 790
Active Eligible Plan Participants................................. 329 521
Retirees and Dependents........................................... 1,219 1,275
-------- --------
Total accumulated postretirement benefit obligation..... 2,006 2,586
Unrecognized net gain............................................. 495 144
-------- --------
Accrued postretirement benefit obligation......................... $2,501 $2,730
====== ======

39
41

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's net periodic postretirement benefit expense (income) for the
years ended June 30, 1996, 1995 and 1994 consist of the following components:

1996 1995 1994
----- ----- -----
(DOLLARS IN
THOUSANDS)

Service cost................................................... $ 92 $ 116 $ 188
Interest cost.................................................. 186 209 238
Return on plan assets.......................................... -- -- --
Curtailment gain............................................... (299) (422) (300)
----- ----- -----
$ (21) $ (97) $ 126
===== ===== =====

During the years ended June 30, 1996, 1995 and 1994, the Company recorded a
curtailment gain of $299,000, $422,000 and $300,000, respectively as a result of
the reduction in work force in connection with several restructuring initiatives
undertaken by the Company.

In determining the accumulated postretirement benefit obligation for the
year ended June 30, 1996, the assumed weighted discount rate was 7.75% and the
assumed rate of increase in compensation was 5.0%. For the years ended June 30,
1995 and 1994, the assumed weighted average discount rate was 7.5% and the
assumed rate of increase in compensation was 5.0%.

Assumed health care cost increases, estimated to be 7% for the fiscal year
1997, decline at a rate of approximately 0.5% per year to the ultimate trend
rate of 5.0% in the year 2001. Notwithstanding the above, a 1% increase in the
health care cost trend rate would not have an effect on the accumulated
postretirement benefit obligation since the plan provides that the Company's
future costs will be capped at the 1993 level.

As a result of the Acquisition, the Company has made a decision to
terminate the benefits offered under the medical and life insurance plan for
retirees. The Company will offer continued coverage through COBRA programs.
Although the Company has not assessed the full impact of the plan termination, a
curtailment gain is expected to result during the first quarter of fiscal year
1997.

16. EMPLOYEE STOCK PLANS

The Company has a Stock Option Plan providing for the grant of incentive
stock options to employees and non-qualified stock options (NSOs) to employees,
non-employee directors and consultants. The Stock Option Plan is administered by
the Stock Award Committee comprised of members of the Compensation Committee of
the Board of Directors or the Board of Directors, as the case may be. Under the
plan, the Stock Award Committee may award, in addition to stock options, shares
of Common Stock on a restricted basis. The plan also specifically provides for
stock appreciation rights and authorizes the Stock Award Committee to provide,
either at the time of the grant of an option or otherwise, that the option may
be cashed out upon terms and conditions to be determined by the Committee or the
Board. Only stock options, which for the most part contain limited stock
appreciation rights in connection with a change of control followed by certain
subsequent events, have been granted under the plan. The plan terminates on
January 31, 2002. Stockholders have approved the issuance of up to 9,000,000
options under the plan.

40
42

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Changes in options outstanding under the plan during the years ended June
30, 1994, 1995 and 1996 are as follows:

NUMBER OF
OPTIONS PRICE PER OPTION
---------- ----------------

Outstanding at June 30, 1993....................... 1,703,191 $ .10 - $58.75
Granted.......................................... 1,787,596 $1.63 - $ 3.31
Exercised........................................ (283) $1.88 - $ 2.13
Canceled......................................... (697,663) $1.88 - $58.75
---------- ----------------
Outstanding at June 30, 1994....................... 2,792,841 $ .10 - $56.25
Granted.......................................... 3,128,942 $ .875 - $ 2.12
Exercised........................................ -- --
Canceled......................................... (2,685,080) $1.63 - $45.00
---------- ----------------
Outstanding at June 30, 1995....................... 3,236,703 $ .10 - $56.25
Granted.......................................... 3,815,675 $1.56 - $ 2.10
Exercised........................................ (324,596) $ .87 - $ 2.12
Canceled......................................... (457,356) $ .87 - $51.25
---------- ----------------
Outstanding at June 30, 1996....................... 6,270,426 $ .10 - $56.25
========= ==============

Included in the 3,128,942 options granted in fiscal year 1995 are 1,917,493
options granted in a stock option repricing program.

Included in the 1,787,596 options granted in fiscal year 1994 are 777,850
options granted in consideration of the eight-month deferral of worldwide annual
merit salary increases and 117,728 options granted in consideration of the
cancellation of a like number of previously granted stock options and the
restarting of the vesting schedule associated with the canceled options.

Options with respect to 2,620,077 shares of common stock, with an average
exercise price of $1.70, were exercisable at June 30, 1996.

The Company has an Employee Stock Purchase Plan (the "Purchase Plan")
pursuant to which the Company is authorized to grant rights to employees to
purchase up to an aggregate of 1,000,000 shares of common stock in a series of
offerings, each of which generally lasts six to twelve months. Unless extended
by the stockholders, the Purchase Plan expires December 31, 1997. Substantially
all employees are eligible to participate in the Purchase Plan. The purchase
price of shares of common stock is limited to the lesser of 85% of the fair
market value of the common stock on the commencement of the offering and the
last day of the offering. As of June 30, 1996, the Company had issued 432,478
shares and had 567,522 shares of common stock available for issuance pursuant to
the Purchase Plan.

17. RIGHTS PLAN

On July 31, 1992, the Board of Directors of the Company declared a dividend
distribution of one Series A Participating Cumulative Preferred Right for each
share of the Company's common stock and Convertible Preferred Stock. The
dividend was made to stockholders of record on August 14, 1992. Under the rights
plan, each right becomes exercisable unless redeemed (1) after a third party
owns 20% or more of the outstanding shares of the Company's voting stock and
engages in one or more specified self-dealing transactions, (2) after a third
party owns 30% or more of the outstanding voting stock or (3) following the
announcement of a tender or exchange offer that would result in a third party
owning 30% or more of the Company's voting stock. Any of these events would
trigger the rights plan and entitle each right holder to purchase from the
Company one one-hundredth of a share of Series A Participating Cumulative
Preferred Stock at a cash price of $30 per right.

41
43

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Under certain circumstances following satisfaction of third party ownership
tests of the Company's voting stock, upon exercise, each holder of a right would
be able to receive common stock of the Company or its equivalent, or common
stock of the acquiring entity, in each case having a value of two times the
exercise price of the right. The rights will expire on August 14, 2002 unless
earlier exercised or redeemed, or earlier termination of the plan.

The adoption of the plan reinstated a similar rights plan put in place in
July 1989, which was terminated in connection with the recapitalization of the
Company in November 1991 to avoid its inadvertent trigger.

18. QUARTERLY CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)

The following is a summary of quarterly financial results for the years
ended June 30, 1996 and 1995:

THREE MONTHS ENDED
------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1996 1996
------------- ------------ --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

1996
Net sales.............................. $26,452 $ 24,483 $26,173 $ 18,692
Gross margin........................... $11,205 $ 10,587 $10,890 $ 2,583
Net income (loss)(a)................... $(3,632) $ (2,557) $ 533 $(34,056)
Net income (loss) per share............ $ (0.12) $ (0.08) $ 0.02 $ (1.11)

- ---------------

(a) Net income/(loss) for the three months ended December 31, 1995 and June 30,
1996 reflect a provision for restructuring of $1.3 and $23.2 million,
respectively. Net income for the three months ended September 30, 1995
reflects a non-recurring charge of $1.7 million to reduce the carrying
amount of certain assets held for sale. Net income for the three months
ended June 30, 1996 reflects a provision for inventory reserves of $2.6
million.

THREE MONTHS ENDED
------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1994 1994 1995 1995
------------- ------------ --------- --------

1995
Net sales............................... $41,508 $ 37,786 $30,344 $ 30,506
Gross margin............................ $18,777 $ 17,286 $11,384 $ 13,220
Net income (loss)(a).................... $ 1,674 $ 1,040 $(4,985) $ 265
Net income (loss) per share............. $ 0.06 $ 0.03 $ (0.17) $ 0.01

- ---------------

(a) Net income/(loss) for the three months ended March 31, and June 30, 1995
reflect a provision for restructuring of $2.7 and $0.5 million,
respectively. Net income for the three months ended December 31, 1995
reflects a sales and use tax credit of $1.0 million. Net income for the
three months ended June 30, 1995 reflects a provision for inventory
reserves of $0.9 million.

19. COMMITMENTS AND CONTINGENCIES

The Company leases certain sales and service offices, warehousing, and
equipment. The leases expire at various dates through 2001 and generally provide
for the payment of taxes, insurance and maintenance costs. Additionally, certain
leases contain escalation clauses which provide for increased rents resulting
from the pass through of increases in operating costs, property taxes and
consumer price indexes.

At June 30, 1996, future minimum payments under noncancelable operating
leases for the fiscal years ending June 30 of each year are as follows:

42
44

CONCURRENT COMPUTER CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

1997................................................... $3,641
1998................................................... 1,974
1999................................................... 781
2000................................................... 549
2001 and thereafter.................................... 687
------
$7,632
======

Rent expense amounted to $4,871,000, $6,686,000, and $8,369,000 for the
years ended June 30, 1996, 1995 and 1994, respectively.

The Company, from time to time, is involved in litigation incidental to the
conduct of its business. The Company and its counsel believe that such pending
litigation will not have a material adverse effect on the Company's results of
operations or financial condition.

Additionally, the U.S. government has asserted that the Company's prices
for shipments of spare parts prior to 1994 under the U.S. Department of
Commerce's Next Generation Weather Radar (NEXRAD) program were too high. No
claim or action has been filed against the Company. The Company believes that
its pricing practices are in compliance with applicable regulations and intends
to vigorously defend against any claim. Although there can be no assurance, the
Company expects that any resolution of the matter will not have a material
adverse affect on the Company's financial condition or liquidity.

The Company has entered into employment agreements with its executive
officers. In the event an executive officer is terminated directly by the
Company without cause or in certain circumstances constructively by the Company,
the terminated officer will be paid severance compensation for a one-year period
(a two-year period in the case of the Chief Executive Officer) in an annualized
amount equal to the respective officer's annual salary then in effect plus an
amount equal to the then most recent annual bonus paid or, if determined,
payable, to such officer. At June 30, 1996, the maximum contingent liability
under these agreements is approximately $1.6 million. The Company's employment
agreements with its executive officers contain certain offset provisions, as
defined in their respective agreements.

20. SUBSEQUENT EVENT

On September 27, 1996, the Company entered into a Purchase and Sale
Agreement providing for the sale/leaseback of its Oceanport, New Jersey
facility. The transaction is contingent upon the buyer's ability to lease
approximately 100,000 square feet of the 280,000 square foot building. The
transaction is expected to close during the quarter ending December 31, 1996.
The $5.0 million sales price will be reduced by estimated selling costs of
approximately $0.3 million. In accordance with the terms of the agreement under
the New Term Loan, the Company is required to prepay the New Term Loan in an
amount equal to 75% of the net proceeds. Accordingly, the net proceeds will be
applied to the remaining outstanding balance of the New Term Loan (approximately
$3.5 million). The remainder of the net proceeds will be then available for
working capital purposes. However, there can be no assurance that the
transaction will be completed as contemplated.

On September 13, 1996, the Company entered into a working capital
management agreement and a margin loan with an investment bank, which provides
the Company with borrowing availability up to 30% of the value of the Company's
CyberGuard common stock holdings.

As a result of the Acquisition, the Company has made a decision to
terminate the benefits offered under the medical and life insurance plan for
retirees. The Company will offer continued coverage through COBRA programs.
Although the Company has not assessed the full impact of the plan termination, a
curtailment gain is expected to result during the first quarter of fiscal year
1997.

43
45

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

During fiscal year 1996, the Company continued to experience a decline in
net sales. In addition, operating income and cash flow from operations declined
from the previous fiscal year. Accordingly, the Company continued to closely
manage its resources and, in order to enhance its competitive position and
improve cash flow, on June 27, 1996, the Company acquired the Real-Time Division
of Harris Computer Systems Corporation ("HCSC"), along with 683,178 shares of
newly issued shares of HCSC, which was renamed CyberGuard Corporation, in
exchange for 10,000,000 shares of Concurrent common stock, 1,000,000 shares of
convertible exchangeable preferred stock of Concurrent with a 9% cumulative
annual dividend payable quarterly in arrears and a mandatory redemption value of
$6,263,000 and the assumption of certain liabilities relating to the HCSC
Real-Time Division (the "Acquisition"). The aggregate purchase price of this
acquisition was approximately $18.7 million. The Acquisition has been accounted
for as a purchase effective June 30, 1996. Also during fiscal year 1996, to
enhance its liquidity, the Company completed the sale of its Tinton Falls, New
Jersey building and renegotiated its domestic credit facility.

The Acquisition offers a number of significant strategic and financial
benefits to Concurrent, including: an enhanced competitive position through the
combination of the best technologies of the two businesses; a larger and more
diverse market coverage; and, significant cost savings primarily obtained
through headcount reductions, as well as facilities cost reductions through the
integration of corporate management and administrative functions, the
consolidation of production and research and development facilities and the
consolidation of sales and service offices. Obtaining these benefits presents
significant management challenges. There can be no assurance that benefits will
be fully realized, or realized within the time periods contemplated. The
Acquisition and related business integration and consolidation is expected to
improve Concurrent's liquidity through improved operating performance,
additional borrowing availability and the planned disposition of its Oceanport,
New Jersey facility. The Company may also utilize its CyberGuard common stock
holdings as an additional source of liquidity if needed. The Company believes
that it will be able to fund the costs of the Acquisition, as well as its fiscal
year 1997 operations, through its operating results, existing financing
facilities and the planned disposition of its Oceanport, New Jersey facility.

The decline in total revenue during fiscal year 1996 reflects the
anticipated continued decline in proprietary computer systems sales, primarily
related to the revenue decline in the United States attributable to reduced
shipments under the U.S. Department of Commerce's Next Generation Weather Radar
program, and the decline in service revenue, along with the negative impact of
the prolonged Acquisition process. During fiscal year 1996, revenues from
international markets exceeded those of North America, continuing the trend from
the second half of fiscal year 1995. Also in fiscal year 1996, service revenue
exceeded computer system revenue. Prior to fiscal year 1996, computer system
revenue exceeded service revenue.

The Company is focused on the consolidation of the operations of the HCSC
Real-Time business and Concurrent. The consolidation of research and development
efforts has resulted in a single line of products ranging from a software-only
product to an eight-way, multiprocessing computer, all running the Company's
real-time UNIX operating system Power-Max, which combines the best features of
Concurrent's and HCSC's technologies. The Company will use these products to
exploit its three core markets (simulation, data acquisition, instrumentation
and process control) and its two new markets (interactive real-time and
telecommunications). See Markets in the BUSINESS section for further discussion
regarding the Company's markets. The Company believes that the unified focus of
the combined company, as well as the increased and enhanced product line, will
effect a turnaround of the declining trend in product revenue experienced over
the past few years.

The Company anticipates improvements in gross margin resulting from
increased volume due to the acquisition of the HCSC Real-Time business, improved
market focus and cost reductions and efficiencies gained by the closing of its
Cork, Ireland operation and the scale-down of its New Jersey manufacturing
operations from approximately 280,000 square feet to no more than 40,000 square
feet.

44
46

SELECTED OPERATING DATA AS A PERCENTAGE OF NET SALES

The Company considers its computer systems and service business (including
maintenance, support and training) to be one class of products which accounted
for the percentages of net sales set forth below. The following table sets forth
selected operating data as a percentage of net sales for certain items in the
Company's consolidated statements of operations for the periods indicated.

1996 1995 1994*
----- ----- -----

Net sales:
Computer systems.............................................. 44.3% 51.4% 56.0%
Service and other............................................. 55.7 48.6 44.0
----- ----- -----
Total net sales....................................... 100.0 100.0 100.0
Cost of sales (% of respective sales category):
Computer systems.............................................. 64.8 53.6 54.3
Service and other............................................. 61.9 60.0 61.6
----- ----- -----
Total cost of sales................................... 63.2 56.7 57.5
Gross margin.................................................... 36.8 43.3 42.5
Operating expenses:
Research and development...................................... 14.4 13.9 13.3
Selling, general and administrative........................... 31.1 26.3 27.2
Provision for restructuring................................... 25.5 2.3 6.7
Sales and use tax credit...................................... -- (0.7) (0.8)
----- ----- -----
Total operating expenses.............................. 71.1 41.8 46.4
----- ----- -----
Operating income (loss)......................................... (34.3) 1.5 (3.9)
Interest expense................................................ (2.4) (1.9) (1.9)
Interest income................................................. 0.2 0.4 0.3
Other non-recurring charge...................................... (1.7) (0.7) --
Other income (expense) -- net................................... (1.6) 0.5 (0.3)
----- ----- -----
Loss before provision for income taxes, extraordinary loss and
cumulative effect of change in accounting principles.......... (39.8) (0.2) (5.8)
Provision for income taxes...................................... 1.6 1.2 0.7
----- ----- -----
Loss before extraordinary loss and cumulative effect of change
in accounting principles(a)................................... (41.4)% (1.4)% (6.5)%
===== ===== =====

- ---------------

*
Reclassified to conform to current year presentation.
(a) The percentage for the year ended June 30, 1994 excludes a $23.2 million
extraordinary loss on early extinguishment of debt and a $5.0 million
non-cash charge for the cumulative effect of change in accounting
principles.

RESULTS OF OPERATIONS

Fiscal Year 1996 in Comparison to Fiscal Year 1995

Net Sales

Net sales for fiscal year 1996 were $95.8 million, a decrease of $44.3
million from fiscal year 1995, partially reflecting the prolonged acquisition
process. The sales decline was comprised of a decrease of $29.6 million, or
41.1%, in computer systems sales and a decrease of $14.7 million, or 21.6%, in
service and other revenues. The decrease in computer system sales was primarily
due to reduced shipments under the U.S. Department of Commerce's Next Generation
Weather Radar (NEXRAD) program and reduced sales of open systems. The decline in
sales of open systems is attributable to a decline in North America business,
which was partially offset by an ongoing increase in international business. The
decrease in sales is also attributable to the protracted nature of the
Acquisition which created instability in the Company's sales force. The decrease
in service and other revenues was primarily due to the decline in computer
system sales

45
47

experienced in prior periods which resulted in fewer maintenance contracts and a
decline in renewal rates on maturing contracts partially offset by approximately
$0.3 million related to the impact of favorable foreign exchange rates.

Gross Margin

Gross Margin, as measured in dollars and as a percentage of net sales, was
$35.3 million and 36.8%, respectively, for fiscal year 1996 compared to $60.7
million and 43.3%, respectively, for fiscal year 1995. The decrease in gross
margin dollars and percentage was primarily due to the aforementioned decline in
net sales partially offset by cost savings resulting from the operational
restructurings implemented during fiscal year 1995 and fiscal year 1996.
Included in fiscal year 1996 cost of sales is a $4.5 million charge, reflecting
the impact of consolidated product lines and a substantial portion of the
Company's manufacturing operations, comprised of $2.6 million for excess
inventory attributable to a shift in product focus, $0.6 million for the
write-off of customer support inventory and $1.3 million for consolidation of
its manufacturing and customer support operations.

Operating Income (loss)

Operating loss for fiscal year 1996 was $32.9 million compared to operating
income of $2.1 million for fiscal year 1995. The $35.0 million decrease in
operating income was due to the aforementioned $25.4 million decrease in gross
margin, a $21.3 million increase in the provision for restructuring (a $24.5
million provision for restructuring in the current year offset by a $3.2 million
provision for restructuring in the prior year) and a $1.0 million reduction in
the sales and use tax credit, partially offset by the $12.7 million decrease in
operating expenses. The sales and use tax credit in the prior period relates to
a change in the estimate of state sales and use tax reserves based on a final
state audit determination.

The $12.7 million decrease in operating expenses was primarily due to a
$7.1 million decrease in selling, general and administrative expenses and a $5.6
million decrease in net research and development expenses. The $5.6 million
decrease in net research and development expenses reflects a $5.7 million
decrease in gross research and development expenses partially as compared to a
$0.1 million decrease in the amount of software production costs which were
capitalized during the period. The decrease in selling, general and
administrative and gross research and development expenses is primarily due to
cost savings resulting from the operational restructurings implemented during
fiscal year 1995 and fiscal year 1996.

Income (Loss) Before Extraordinary Gain (Loss) and Cumulative Effect of
Change in Accounting Principles

Loss before extraordinary loss and cumulative effect of change in
accounting principles was $39.7 million for fiscal year 1996 compared to a loss
of $2.0 million for fiscal year 1995. The $37.7 million change results from the
$35.0 million decrease in operating income and a $2.7 million net increase in
non-operating expenses. The increase in non-operating expenses was primarily due
to a $2.2 million increase in other expenses, a $0.3 million decrease in
interest income, and a $0.7 million increase in other non-recurring charges
partially offset by a $0.3 million reduction in interest expense and a $0.2
million decrease in the provision for income taxes. The $1.7 million other
non-recurring charge incurred in the current year and the $1.0 million charge
from the previous year was a result of an adjustment of the carrying value to
its estimated fair value based on current market conditions of the Company's
Tinton Falls, New Jersey facilities, respectively. The decrease in the provision
for income taxes relates primarily to international operations.

Fiscal Year 1995 in Comparison to Fiscal Year 1994

Net Sales

Net sales for fiscal year 1995 were $140.1 million, a decrease of $38.9
million from fiscal year 1994. This decrease was due to a decrease of $28.2
million, or 28.1%, in computer systems sales and a decrease of $10.7 million, or
13.5%, in service and other revenues. The decrease in computer system sales was
primarily due to the anticipated decline in sales of proprietary systems and
reduced shipments under the U.S. Department of

46
48

Commerce's Next Generation Weather Radar (NEXRAD) program. Although sales of
open systems remained constant, sales of the Company's MAXION open systems
increased while sales of other open systems declined. The decrease in service
and other revenues was primarily due to the decline in computer system sales
experienced in prior periods which resulted in fewer maintenance contracts and a
decline in renewal rates on maturing contracts partially offset by approximately
$0.3 million related to the impact of favorable foreign exchange rates.

Gross Margin

Gross Margin, as measured in dollars and as a percentage of net sales, was
$60.6 million and 43.3%, respectively, for fiscal year 1995 compared to $76.0
million and 42.5%, respectively, for fiscal year 1994. The decrease in gross
margin dollars was primarily due to the aforementioned decline in net sales
partially offset by cost savings resulting from the operational restructurings
implemented during fiscal year 1994 and fiscal year 1995. The increase in gross
margin as a percentage of net sales was primarily due to cost savings resulting
from the operational restructurings implemented during fiscal year 1994 and
fiscal year 1995 partially offset by the decline in net sales.

Operating Income

Operating income for fiscal year 1995 was $2.1 million compared to
operating loss of $7.0 million for fiscal year 1994. The $9.1 million increase
in operating income was due to a $16.1 million reduction in operating expenses
and a net reduction of $8.8 million in the provision for restructuring (a $3.2
million provision for restructuring in the current year offset by a $12.0
million provision for restructuring in the prior year) partially offset by the
$15.4 million decrease in gross margin and a $0.4 million reduction in the sales
and use tax credit as compared to a similar credit in the prior year. The sales
and use tax credit in both periods relates to a change in the estimate of state
sales and use tax reserves based on a final state audit determination.

The $16.1 million decrease in operating expenses was primarily due to a
$11.7 million decrease in selling, general and administrative expenses and a
$4.4 million decrease in net research and development expenses. The $4.4 million
decrease in net research and development expenses reflects a $5.8 million
decrease in gross research and development expenses partially offset by a $1.4
million decrease in the amount of software production costs which were
capitalized during the period. The decrease in selling, general and
administrative and gross research and development expenses is primarily due to
cost savings resulting from the operational restructurings implemented during
fiscal year 1994 and fiscal year 1995.

Income (Loss) Before Extraordinary Gain (Loss) and Cumulative Effect of
Change in Accounting Principles

Loss before extraordinary loss and cumulative effect of change in
accounting principles was $2.0 million for fiscal year 1995 compared to a loss
of $11.6 million for fiscal year 1994. The $9.6 million change results from the
$9.1 million increase in operating income and a $0.5 million net decrease in
non-operating expenses. The decrease in nonoperating expenses was primarily due
to a $0.8 million decrease in interest expense resulting from the reduction of
the Company's indebtedness, a $0.6 million increase in income related to
minority interest and a $0.5 million decrease in foreign exchange losses
partially offset by a $1.0 million other non-recurring charge incurred in the
current year period and a $0.4 million increase in the provision for income
taxes. The $1.0 million other non-recurring charge incurred in the current year
was a result of an adjustment of the carrying value of the Company's Tinton
Falls, New Jersey facility to its net realizable value based on current market
conditions. The increase in the provision for income taxes relates primarily to
international operations.

Financial Resources and Liquidity

The Acquisition and related business integration and consolidation is
expected to improve Concurrent's liquidity through improved operating
performance, additional borrowing availability and the planned disposition of
its Oceanport, New Jersey facility. The Company may also utilize its CyberGuard
common stock

47
49

holdings as an additional source of liquidity if needed. Concurrent's liquidity
is dependent on many factors, including sales volume, operating profit ratio,
debt service and the efficiency of asset use and turnover. The future liquidity
of Concurrent depends to a significant extent on (i) the actual versus
anticipated decline in sales of proprietary systems and service maintenance
revenue; (ii) revenue growth from open systems; (iii) both the related costs and
the length of time to realize the anticipated benefits from the combination of
the real-time businesses of Concurrent and HCSC; and (iv) ongoing cost control
actions. Liquidity will also be affected by: (i) timing of shipments which
predominately occur during the last month of the quarter; (ii) the percentage of
sales derived from outside the United States where there are generally longer
accounts receivable collection cycles and which receivables are not included in
Concurrent's borrowing base under its revolving credit facility; (iii) the sales
level in the United States where related accounts receivable are included in the
borrowing base of Concurrent's revolving credit facility; and (iv) the number of
countries in which Concurrent will operate, which may require maintenance of
minimum cash levels in each country and, in certain cases, may restrict the
repatriation of cash, such as cash held on deposit for office leases. The
Company believes that it will be able to fund the acquisition costs, as well as
fiscal year 1997 operations, through its operating results, existing financing
facilities and the planned disposition of its Oceanport, New Jersey facility.
There is no assurance that the Company's plans will be achieved.

On June 28, 1996, the Company entered into a new agreement providing for a
$19.9 million credit facility which matures August 1, 1999. The facility
includes a $7.2 million term loan (the "New Term Loan") and a $12.7 million
revolving credit facility (the "New Revolver"). The New Revolver represents a
$4.7 million increase to the maximum revolver amount, subject to certain
restrictions. In addition, the Company can borrow up to $3.0 million in standby
letters of credit (the LOC's) in connection with overseas lines of credit. These
LOC's mature on July 31, 1997, at which time the Company must extend the
expiration date of the LOC's to August 1, 1999 or obtain alternative financing
or guaranties in lieu thereof.

At June 30, 1996, the outstanding balances under the New Term Loan and the
New Revolver were $7.2 and $5.0 million, respectively. The entire outstanding
balance of the New Revolver has been classified as a current liability at June
30, 1996. Both the New Term Loan and the New Revolver bear interest at the prime
rate plus 2.0%. The New Term Loan is payable in 28 monthly installments of
approximately $139,000 each, commencing October 1, 1996 and ending January 1,
1999, with the final balance of approximately $3.3 million payable August 1,
1999. The New Revolver may be repaid and reborrowed, subject to certain
collateral requirements, at any time during the term ending August 1, 1999. The
Company has pledged substantially all of its domestic assets as collateral for
the New Term Loan and the New Revolver. The Company may repay the New Term Loan
at any time without penalty. In the event the Company completes a sale or
sale/leaseback of its Oceanport facility, the Company is required to make a
prepayment of the New Term Loan up to an amount equal to 75% of the net sale
proceeds. Certain early termination fees apply if the Company terminates the
facility in its entirety prior to August 1, 1999.

The Company's joint venture agreement regarding its Japanese subsidiary has
been renewed through calendar year 1996. In the event such agreement is not
further extended, the Company could be required to satisfy the then outstanding
amount of demand notes which are guaranteed by the Company ($2,734,000 at June
30, 1996). There can be no assurance that the agreement will be extended and, in
the event the agreement is not extended, that the Company may be required to
extend its guarantees, or repay the demand notes and seek alternative financing.
The Company expects to extend the joint venture agreement through June 30, 1998.

As of June 30, 1996, the Company had a current ratio of 0.98 to 1, an
inventory turnover ratio of 2.1 times (based on computer systems cost of sales)
and net working capital of ($0.8) million. At June 30, 1996, cash and cash
equivalents amounted to $3.6 million and accounts receivable amounted to $27.9
million.

The Company recorded a $1.3 million and a $23.2 million provision for
restructuring during the quarters ended December 31, 1995 and June 30, 1996,
respectively. In October 1995, the Company's management approved a plan to
restructure its operations. This plan provided for a reduction of approximately
55 employees worldwide and the downsizing or closing of certain office
locations, representing approximately 85% and 15% of the related $1.3 million
provision. In connection with the Acquisition, based on formal, approved plans,
the Company recorded a $23.2 million restructuring provision. Such charge
included the estimated costs related to

48
50

the rationalization of facilities, workforce reductions, asset writedowns and
other costs which represent approximately 44%, 28%, 26% and 2%, respectively.
The rationalization of facilities includes the planned disposition of the
Company's Oceanport, New Jersey facility, as well as the closing or downsizing
of certain offices located throughout the world. The workforce reductions
include the termination of approximately 200 employees worldwide, encompassing
substantially all of the Company's employee groups. The asset writedowns are
primarily related to the planned disposition of duplicative machinery and
equipment.

Although management believes that improvements in cash flow will result
from the Acquisition and its new bank agreement, the short term prospects for
the Company's liquidity are dependent to a significant degree upon the level and
stability of revenue from sales and service of its computer systems and the
Company's ongoing cost control actions. The Company plans to continue to
evaluate and manage its resources to anticipated revenue levels to achieve
improved profitability and quarter to quarter revenue growth during fiscal year
1997. The Company believes that it will be able to meet its obligations when due
through its operating results and its existing financing facilities and the
planned disposition of its Oceanport, New Jersey facility. The Company may also
utilize its CyberGuard common stock holdings as an additional source of
liquidity if needed. However, there can be no assurance that the Company's
operating and financing efforts will be achieved.

In fiscal year 1997 the Company will adopt the provisions of Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
("FAS No. 123"). This standard establishes a fair value method for accounting
for stock-based compensation plans based upon the fair value of stock options
and similar instruments, but does not require the adoption of this preferred
method. The Company intends to adopt this standard by disclosing the pro forma
net income and earnings per share amounts assuming the fair value method was
adopted on July 1, 1996. The adoption of this standard will not impact results
of operations, financial position or cash flows.

49
51

CONCURRENT COMPUTER CORPORATION

SELECTED FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

YEARS ENDED JUNE 30,
----------------------------------------------------
INCOME STATEMENT DATA 1996 1995 1994 1993 1992
- -------------------------------------------- -------- -------- -------- -------- --------

Net sales................................... $ 95,800 $140,144 $179,031 $220,464 $221,572
Gross margin................................ 35,265 60,667 76,041 104,841 104,711
Operating income (loss)..................... (32,870) 2,082 (6,993) 18,738 16,783
Income (loss) before extraordinary gain
(loss) and cumulative effect of change in
accounting principles..................... (39,712) (2,006) (11,631) 3,869 (955)
Net income (loss)........................... $(39,712) $ (2,006) $(39,824) $ 3,869 $ 60,147
Income (loss) per share:
Income (loss) before extraordinary gain
(loss) and cumulative effect of change in
accounting principles..................... $ (1.30) $ (0.07) $ (0.41) $ 0.40 $ (0.13)
Net income (loss)......................... $ (1.30) $ (0.07) $ (1.42) $ 0.40 $ 8.00

AT JUNE 30,
--------------------------------------------------
BALANCE SHEET DATA 1996 1995 1994 1993 1992
- ---------------------------------------------- ------- ------- -------- -------- --------

Cash and short-term investments............... $ 3,562 $ 5,728 $ 9,374 $ 30,422 $ 20,611
Working capital............................... (825) 1,865 (616) 36,673 22,742
Total assets.................................. 80,214 98,359 123,170 157,086 158,136
Long-term debt................................ 6,603 9,536 13,240 67,938 61,613
Redeemable preferred stock.................... 5,610 -- -- -- --
Stockholders' equity.......................... 7,068 35,170 35,048 18,503 14,739
Book value per share.......................... $ 0.17 $ 1.16 $ 1.18 $ 1.94 $ 1.61

50
52

SCHEDULE II

CONCURRENT COMPUTER CORPORATION

VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994
(DOLLARS IN THOUSANDS)

BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS (A) OF YEAR
- -------------------------------------------- ---------- ---------- ---------- ----- --------

Reserves and allowances deducted from asset
accounts:
1996
Reserve for inventory obsolescence and
shrinkage................................. $8,544 $4,904 $ (2,597)(b) $(174) $ 10,677
Allowance for doubtful accounts............. 1,434 135 (155)(c) -- 1,143
1995
Reserve for inventory obsolescence and
shrinkage................................. $6,138 $5,037 $ (2,712)(b) $ 81 $ 8,544
Allowance for doubtful accounts............. 3,405 130 (2,117)(c) 16 1,434
1994
Reserve for inventory obsolescence and
shrinkage................................. $3,167 $4,461 $ (1,753)(b) $ 263 $ 6,138
Allowance for doubtful accounts............. 2,173 2,114 (882)(c) -- 3,405

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(a) Includes adjustments to the reserve account and allowance for doubtful
accounts for foreign currency translation.
(b) Charges and adjustments to the reserve account primarily for inventory
write offs.
(c) Charges to the reserve account for uncollectible amounts written off and
credits issued during the year.

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