10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

_______________________________

Form 10-Q

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended July 31, 2012

OR

o Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission File Number: 001-11807

_______________________________

DAEGIS INC.(Exact name of registrant as specified in its charter)

Delaware	94-2710559
(State or other jurisdiction of	(I.R.S. Employer Identification
incorporation or organization)	Number)

Address of principal executive offices: 1420 Rocky Ridge Drive, Suite 380, Roseville, California 95661

Registrant’s telephone number, including area code: (916) 218-4700

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES xNO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o	Non-accelerated filer o	Smaller reporting company x
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act),

YES o      NO x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 14,717,777 shares of common stock, $0.001 par value, as of July 31, 2012.

DAEGIS INC.
FORM 10-Q

INDEX

PART I.	FINANCIAL INFORMATION	3
Item 1.	Financial Statements	3
	Unaudited Condensed Consolidated Balance Sheets as of July 31, 2012 and April 30, 2012	3
	Unaudited Condensed Consolidated Statements of Operations for the three months ended July 31, 2012 and 2011	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three months ended July 31, 2012 and 2011	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended July 31, 2012 and 2011	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25
Item 4.	Controls and Procedures	26
PART II.	OTHER INFORMATION	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosure	28
Item 5.	Other Information	28
Item 6.	Exhibits	29
SIGNATURE		30
CERTIFICATIONS		31

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

DAEGIS INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

		July 31,			April 30,
		2012			2012
ASSETS
Current assets:
Cash and cash equivalents	$	4,347		$	4,752
Accounts receivable, net of allowances of $181 at July 31, 2012, and $345 at
April 30, 2012		8,834			10,968
Prepaid expenses and other current assets		1,377			1,805
Total current assets		14,558			17,525
Property and equipment, net of accumulated depreciation of $5,115 at July 31,
2012 and $4,837 at April 30, 2012		2,581			2,827
Goodwill		11,706			11,706
Intangibles, net		8,305			8,690
Other assets		1,073			1,121
Total assets	$	38,223		$	41,869
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	573		$	450
Current portion of long term debt		2,002			2,945
Accrued compensation and related expenses		2,005			2,465
Common stock warrant liability		109			569
Other accrued liabilities		766			819
Deferred revenue		7,316			8,412
Total current liabilities		12,771			15,660
Long term debt, net of current portion		17,451			18,306
Deferred tax liabilities, net		760			734
Other long term liabilities		1,079			1,148
Total liabilities		32,061			35,848
Commitments and contingencies		—			—
Stockholders’ equity:
Preferred stock		2			2
Common stock		15			15
Additional paid-in capital		99,935			99,860
Accumulated other comprehensive income		251			341
Accumulated deficit		(94,041	)		(94,197	)
Total stockholders’ equity		6,162			6,021
Total liabilities and stockholders’ equity	$	38,223		$	41,869

Seeaccompanyingnotestounauditedcondensedconsolidatedfinancialstatements.

3

DAEGIS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

		Three Months Ended
		July 31,
		2012			2011
Revenues:
eDiscovery	$	4,073		$	6,026
Database, archive, and migration		5,565			5,488
Total revenues		9,638			11,514
Operating expenses:
Direct costs of eDiscovery revenue		2,155			2,397
Direct costs of database, archive, and migration revenue		1,282			1,349
Product development		1,884			1,976
Selling, general and administrative		5,033			4,947
Sale of intangible trade name		(1,000	)		-
Total operating expenses		9,354			10,669
Income from operations		284			845
Other income (expenses)
Loss on extinguishment of debt		-			(2,166	)
Gain from change in fair value of common stock warrant liability		460			445
Interest expense		(442	)		(900	)
Other, net		(93	)		49
Total other income (expenses)		(75	)		(2,572	)
Income (loss) before income taxes		209			(1,727	)
Provision for income taxes		52			51
Net income (loss)	$	157		$	(1,778	)
Income (loss) per share:
Basic	$	0.00		$	(0.12	)
Diluted	$	0.00		$	(0.12	)
Weighted-average shares used in computing income (loss) per share:
Basic		14,718			14,601
Diluted		14,718			14,601

Seeaccompanyingnotestounauditedcondensedconsolidatedfinancialstatements.

4

DAEGIS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)

		Three Months Ended
		July 31,
		2012			2011
Net income (loss)	$	157		$	(1,778	)
Other comprehensive loss:
Foreign currency translation adjustments, net of tax		(90	)		(9	)
Comprehensive income (loss)	$	67		$	(1,787	)

Seeaccompanyingnotestounauditedcondensedconsolidatedfinancialstatements.

5

DAEGIS INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

		Three Months Ended
		July 31,
		2012			2011
Cash flows from operating activities:
Net income (loss)	$	157		$	(1,778	)
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation		278			230
Amortization of intangible assets		384			565
Sale of intangible trade name		(1,000	)		-
Loss on extinguishment of debt		-			2,166
Amortization of discount on notes payable		-			43
Interest added to long term debt principal		-			80
Stock based compensation expense		176			228
Gain from change in fair value of common stock warrant liability		(460	)		(445	)
Changes in operating assets and liabilities:
Accounts receivable	2,134				2,413
Prepaid expenses and other current assets		427			(154	)
Other assets		49			73
Accounts payable		123			(87	)
Accrued compensation and related expenses		(463	)		(704	)
Other accrued liabilities		(89	)		(692	)
Deferred revenue		(1,102	)		(835	)
Other long term liabilities		(35	)		(120	)
Net cash provided by operating activities		579			983
Cash flows from investing activities:
Proceeds from sale of intangible trade name		1,000			-
Purchases of property and equipment		(32	)		(301	)
Net cash provided by (used in) investing activities		968			(301	)
Cash flows from financing activities:
Proceeds from issuance of common stock		-			92
Proceeds from issuance of preferred stock, net of issuance costs		-			3,966
Payment of preferred stock dividends		(66	)		-
Prepayment penalty on extinguishment of debt		-			(368	)
Payments of loan costs		-			(565	)
Payments on revolving line of credit		-			(2,950	)
Borrowings on revolving line of credit		-			6,500
Borrowings on term loan		-			16,000
Principal payments under debt obligations		(1,700	)		(24,089	)
Principal payments on capital leases		(98	)		(74	)
Net cash used in financing activities		(1,864	)		(1,488	)
Effect of exchange rate changes on cash and cash equivalents		(88	)		(27	)
Net decrease in cash and cash equivalents		(405	)		(833	)
Cash and cash equivalents, beginning of year		4,752			4,577
Cash and cash equivalents, end of year	$	4,347		$	3,744
Supplemental cash flow information:
Cash paid for interest	$	400		$	556
Cash paid for income taxes	$	131		$	119
Supplemental non-cash investing and financing activities:
Accrued preferred stock dividends	$	35		$	34
Property and equipment acquired through leases	$	-		$	493

Seeaccompanyingnotestounauditedcondensedconsolidatedfinancialstatements.

6

DAEGIS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSJuly 31, 2012

1. Basis of Presentation

The condensed consolidated financial statements have been prepared by Daegis Inc. (the “Company”, “we”, “us”, “our”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated financial statements include our accounts and those of our subsidiaries that we control due to ownership of a controlling interest. Intercompany transactions and balances have been eliminated. While the interim financial information contained in this filing is unaudited, such financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for a fair presentation. The results for interim periods are not necessarily indicative of the results to be expected for the entire fiscal year. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2012, as filed with the SEC.

Revenue Recognition

The Company generates revenue from software license sales and related services, including maintenance and support, hosting, and consulting and implementation services. The Company licenses its products to end-user customers, including corporate legal and IT departments, law firms, independent software vendors (“ISVs”), international distributors and value-added resellers (“VARs”). The Company’s products are generally sold with a perpetual license. The Company’s contracts with ISVs, VARs and international distributors do not include special considerations such as rights of return, stock rotation, price protection or special acceptance. The Company exercises judgment in connection with the determination of the amount of revenue to be recognized in each accounting period. The nature of each contractual arrangement determines how revenues and related costs are recognized.

For software license arrangements that do not require significant modification or customization of the underlying software, revenue is recognized when the software product or service has been shipped or electronically delivered, the license fees are fixed and determinable, uncertainties regarding customer acceptance are resolved, collectability is probable and persuasive evidence of an arrangement exists.

For fixed price arrangements that require significant modification or customization of software, the Company uses the percentage-of-completion method for revenue recognition. Under the percentage-of-completion method, progress towards completion is generally measured by labor hours.

The Company considers a signed non-cancelable license agreement, a customer purchase order, a customer purchase requisition, or a sales quotation signed by an authorized purchaser of the customer to be persuasive evidence that an arrangement exists such that revenue can be recognized.

The Company’s customer contracts may include multiple-element arrangements that include a delivered element (a software license) and undelivered elements (such as maintenance and support and/or consulting). The value allocated to the undelivered elements is unbundled from the delivered element based on vendor-specific objective evidence (“VSOE”) of fair value of the maintenance and support and/or consulting, regardless of any separate prices stated within the contract. VSOE of fair value is defined as: (i) the price charged when the same element is sold separately, or (ii) if the element has not yet been sold separately, the price for the element established by management having the relevant authority when it is probable that the price will not change before the introduction of the element into the marketplace. The Company then allocates the remaining balance to the delivered element (a software license) regardless of any separate prices stated within the contract using the residual method as the VSOE of fair value of all undelivered elements is determinable.

We defer revenue for any undelivered elements, and recognize revenue for delivered elements only when the VSOE of fair value of undelivered elements are known, uncertainties regarding customer acceptance are resolved, and there are no customer-negotiated refund or return rights affecting the revenue recognized for delivered elements. If we cannot objectively determine the fair value of any undelivered element included in bundled software and service arrangements, we defer revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements.

7

An assessment of the ability of the Company’s customers to pay is another consideration that affects revenue recognition. In some cases, the Company sells to undercapitalized customers. In those circumstances, revenue recognition is deferred until cash is received, the customer has established a history of making timely payments or the customer’s financial condition has improved. Furthermore, once revenue has been recognized, the Company evaluates the related accounts receivable balance at each period end for amounts that we believe may no longer be collectible. This evaluation is largely done based on a review of the financial condition via credit agencies and historical experience with the customer. Any deterioration in credit worthiness of a customer may impact the Company’s evaluation of accounts receivable in any given period.

Revenue from support and maintenance activities, which consist of fees for ongoing support and unspecified product updates, are recognized ratably over the term of the maintenance contract, typically one year, and the associated costs are expensed as incurred. Consulting and implementation services are performed on a “best efforts” basis and may be billed under time-and-materials or fixed price arrangements. Revenues and expenses relating to providing consulting services are generally recognized as the services are performed. Revenue from hosting activities, which consist of fees for storing customer data, are recognized as the services are performed, and the associated costs are expensed as incurred.

Taxes collected from customers and remitted to the government are presented on a gross basis on the consolidated balance sheet and are not included in revenue on the consolidated statement of operations. At July 31, 2012 and April 30, 2012 the Company had $8,000 and $48,000 of sales taxes payable.

Goodwill and Intangible Assets

Goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is not amortized. Goodwill is tested for impairment on an annual basis as of April 30, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. Intangible assets are amortized using the straight-line method over their estimated period of benefit. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization. As a result of the most recent impairment test, the Company recorded $15.0 million in the fourth quarter of fiscal 2012 for the impairments of goodwill and intangible assets of the eDiscovery business unit. The Unify and AXS-One business units were not at risk of failing step one of the impairment test.

Recently Issued Accounting Standards

In June 2011, the FASB issued authoritative guidance on the presentation of other comprehensive income. Under the new guidance, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The new guidance became effective for Daegis beginning May 1, 2012. The Company has elected to present the total of comprehensive income, the components of net income, and the components of other comprehensive income in two separate but consecutive statements. This guidance does not a have a material effect on the Company’s consolidated financial statements.

2. Stock Compensation Information

Share-based compensation expense includes the estimated fair value for share-based awards. Share-based compensation expenses are recognized over the vesting period of the awards, net of estimated forfeitures. For the three months ended July 31, 2012 and 2011, equity-based compensation expense from operations was comprised of the following (in thousands):

		Three Months Ended
		July 31,
		2012		2011
Direct costs of revenue	$	10	$	18
Product development		25		39
Selling, general and administrative		141		171
Total equity-based compensation	$	176	$	228

8

The following table shows remaining unrecognized compensation expense on a pre-tax basis related to all types of nonvested equity awards outstanding as of July 31, 2012. This table does not include an estimate for future grants that may be issued (in thousands).

Fiscal Year Ending April 30,		Amount
Remainder of 2013	$	477
2014		428
2015		233
2016		72
Total	$	1,210

The cost above is expected to be recognized over a weighted-average period of 1.24 years.

We estimate the fair value of our share-based awards using the Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates various assumptions including expected term, interest rates and expected volatility. Changes in the assumptions can materially affect the fair value estimates and ultimately how much we recognize as stock-based compensation expense. The fair values of our stock options are estimated at the date of grant. The weighted-average input assumptions used and resulting fair values for three months ended July 31, 2012 and 2011, were as follows:

		Three Months Ended
		July 31,
		2012			2011
Expected term (in years)		4.0			4.0
Risk-free interest rate		0.5	%		1.1	%
Volatility		77	%		89	%
Dividend yield		-			-
Weighted-average fair value of stock options granted during the year	$	1.09		$	2.42

The Company bases its expected term assumption on its historical experience and on the terms and conditions of the stock awards it grants to employees. The risk-free interest rate is based upon United States Treasury interest rates appropriate for the expected term of the awards. The expected volatility is based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected term of the Company’s stock options. The Company did not pay cash dividends in fiscal 2012 or year to date in fiscal 2013, and does not anticipate paying any cash dividends in the foreseeable future. Consequently, an expected dividend yield of zero is used in the Black-Scholes option pricing model.

We recognize expense only for the stock-based awards that are ultimately expected to vest. Therefore, the Company has developed an estimate of the number of awards expected to be forfeited prior to vesting (“forfeiture rate”). The Company uses a forfeiture rate that is estimated based on historical forfeiture experience, and is applied to all stock-based awards. The forfeiture rate used for the three months ending July 31, 2012 and 2011 is 20%. The Company recognizes stock-based compensation cost as an expense ratably on a straight-line basis over the requisite service period.

In the second quarter of fiscal 2011, the Company’s shareholders approved the 2010 Stock Plan (the “2010 Stock Plan”). Under the 2010 Stock Plan the Company may make awards to issue up to 1,500,000 shares of common stock to eligible employees, consultants and directors. Stock options granted under the 2010 Stock Plan generally vest over four years, are exercisable to the extent vested and expire 10 years from the date of grant. Under the 2010 Stock Plan the Company may grant options at prices not less than the fair market value at the date of grant. Under the 2001 Stock Option Plan (the “2001 Option Plan”) which expired as of September 2010, the Company was able to grant options to eligible employees, directors, and consultants at prices not less than the fair market value at the date of grant for incentive stock options and not less than 85% of the fair market value at the date of grant for non-statutory stock options. Options granted under the 2001 Option Plan generally vest over four years, are exercisable to the extent vested, and expire 10 years from the date of grant.

9

A summary of the Company’s stock option activity for the three months ended July 31, 2012 is as follows:

				Weighted-	Weighted-
				average	average remaining		Aggregate
				exercise	contractual		intrinsic
	Shares			price	term (in years)		value (1)
Outstanding at April 30, 2012	2,632,115		$	3.18	7.24	$	4,449
Granted	329,500			1.34
Exercised	-			-
Cancelled/expired	(243,531	)		2.70
Outstanding at July 31, 2012	2,718,084			3.00	7.43	$	-

(1) Aggregate intrinsic value is defined as the difference between the current market value and the exercise price and is estimated using the closing price of the Company’s common stock on the last trading day of the periods ended as of the dates indicated.

A summary of the Company’s nonvested stock option activity for the period ended July 31, 2012 is as follows:

				Weighted-
				average
				grant date
	Shares			fair value
Nonvested at April 30, 2012	1,005,036		$	1.61
Granted	329,500			1.09
Vested	(133,159	)		1.61
Cancelled/expired	(114,176	)		1.47
Nonvested at July 31, 2012	1,087,201			1.65

The total intrinsic value of awards exercised during the quarters ended July 31, 2012 and 2011 was $0 and $25,000, respectively. The total fair value of awards vested during the quarters ended July 31, 2012 and 2011 was $0.2 million and $0.3 million, respectively. The total fair value of awards granted during the quarters ended July 31, 2012 and 2011 was $0.4 million and $1.0 million, respectively.

3. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets at July 31, 2012 consisted of prepaid expenses of $0.7 million and other current assets of $0.7 million. Prepaid expenses and other current assets at April 30, 2012 consisted of prepaid expenses of $1.1 million and other current assets of $0.7 million.

10

4.Goodwill and Intangible Assets

The following tables present details of the Company’s goodwill and intangible assets as of July 31, 2012 and April 30, 2012 (in thousands).

		Gross					Net	Weighted-
		carrying		Accumulated			carrying	average
July 31, 2012		amount		amortization			amount	useful life
Indefinite Lives:
Goodwill	$	11,706	$	-		$	11,706	-
Finite Lives:
Customer-related		6,236		(3,213	)		3,023	7 years
Technology-based		2,638		(1,488	)		1,150	5 years
Trademarks		4,600		(468	)		4,132	10 years
Trade name		100		(100	)		-	2 years
Total	$	25,280	$	(5,269	)	$	20,011
		Gross					Net	Weighted-
		carrying		Accumulated			carrying	average
April 30, 2012		amount		amortization			amount	useful life
Indefinite Lives:
Goodwill	$	11,706	$	-		$	11,706	-
Finite Lives:
Customer-related		6,236		(3,043	)		3,193	7 years
Technology-based		2,638		(1,410	)		1,228	5 years
Trademarks		4,600		(331	)		4,269	10 years
Trade name		100		(100	)		-	2 years
Total	$	25,280	$	(4,884	)	$	20,396

Acquired finite-lived intangibles are generally amortized on a straight-line basis over their estimated useful life. The useful life of finite-lived intangibles is the period over which the asset is expected to contribute directly or indirectly to future cash flows of the Company. Intangible assets amortization expense for the three months ended July 31, 2012 and 2011 was $0.4 million and $0.6 million, respectively. The estimated future amortization expense related to intangible assets as of July 31, 2012 is as follows (in thousands):

Fiscal Year Ending April 30		Amount
Remainder of 2013	$	1,153
2014		1,538
2015		1,512
2016		1,096
2017		814
Thereafter		2,192
Total	$	8,305

There was no activity in the Company's goodwill account during the three months ended July 31, 2012 and 2011.

Goodwill at July 31, 2012, represents the excess of purchase prices over the sum of the amounts assigned to assets acquired less liabilities assumed. The Company believes these acquisitions will produce the following results:

• Increased Market Presence and Opportunities: The addition of the acquired companies should increase the combined company’s market presence and opportunities for growth in sales and earnings.
   
• Enhanced Product Mix: The complementary nature of the Company’s products with those of the acquired companies should benefit current customers and provide the combined company with the ability to access new customers.
   

• Operating Efficiencies: The combination of the Company and the acquired companies provides the opportunity for potential economies of scale and cost savings.

11

The Company believes these primary factors support the amount of goodwill recorded as a result of the purchase price for companies it has acquired. Goodwill is tested for impairment on an annual basis as of April 30, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. No indicators of potential impairment existed at July, 31 2012.

Pursuant to the accounting guidance for goodwill and other intangible assets, the measurement of impairment of goodwill consists of two steps. If the Company determines it is not more likely than not that the fair value of a business unit is less than its carrying amount, then the first step is performed. In the first step, the fair value of the Company is compared to its carrying value. The Company determined that the asset group to be tested for recoverability is at the business unit level as it is the lowest level at which cash flows are identifiable. The seconds step is to determine the implied fair values of the business units’ goodwill, and to compare them to the carrying values of the business units’ goodwill. This second step includes valuing all of the tangible and intangible assets and liabilities of the business units as if they had been acquired in a business combination to determine the implied fair values of goodwill. The business units that contain the goodwill and intangible assets are Unify, Daegis, and AXS-One.

5. Credit Facility

On June 30, 2011, the Company entered into a revolving credit note agreement with Wells Fargo. Under the terms of the agreement, the Company is entitled to borrow up to $8.0 million. The total amount that can be borrowed under the revolver is based on a multiplier factor of the trailing twelve months of maintenance revenue. As of July 31, 2012, the Company was eligible to borrow the entire $8.0 million. Interest expense is recorded on funds borrowed at the prevailing LIBOR rate plus 5.00% per annum with a minimum rate of 6.50% (6.50% as of July 31, 2012) and has a maturity date of June 30, 2015. As of July 31, 2012, there was $5.5 million outstanding on the revolver.

6. Fair Value of Financial Instruments

We have adopted the FASB guidance on fair value measurements and disclosures, which defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements.

Under this guidance, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company values its warrants based on open form option pricing models which, based on the relevant inputs, render the fair value estimate Level 3. The Company bases its estimates of fair value for liabilities on the amount it would pay a third-party market participant to transfer the liability and incorporates inputs such as equity prices, historical and implied volatilities, dividend rates and prices of convertible securities issued by comparable companies maximizing the use of observable inputs when available. The fair value hierarchy for valuation inputs gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

• Level 1 – Quoted prices in active markets for identical assets and liabilities.
• Level 2 – Observable inputs other than those included in Level 1, such as quoted market prices for similar assets and liabilities in active markets or quoted prices for identical assets in inactive markets.
• Level 3 – Unobservable inputs are used when little or no market data is available and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

12

Fair Value on a Recurring Basis

The table below categorizes assets and liabilities measured at fair value on a recurring basis as of July 31, 2012 (in thousands):

		Fair value		Fair value measurement using
		July 31, 2012		Level 1		Level 2		Level 3
Common stock warrant liability	$	109	$	-	$	-	$	109

The following table summarizes the activity of Level 3 inputs measured on a recurring basis for the quarter ended July 31, 2012:

(in thousands)		Common stock warrants
Balance at April 30, 2012	$	569
Issuance of common stock warrants		-
Change in fair value of common stock warrant liability		(460	)
Balance at July 31, 2012	$	109

7. Long-Term Debt

The Company’s long-term debt consists of the following at July 31, 2012 and April 30, 2012 (in thousands):

		July 31,			April 30,
		2012			2012
Term Note A payable to Wells Fargo Capital Finance, LLC, which was entered into
in conjunction with the acquisition of Daegis. Interest is incurred at the prevailing
LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at July 31,
2012), payable monthly. Principal is payable over four years with principal
payments of $300 quarterly (beginning November 2011) plus an additional annual
payment based on the Company’s free cash flow for the year with any remaining
amount due at maturity, June 30, 2015. This note is secured by an interest in
substantially all of the Company's assets. This note includes certain financial
covenants and the Company is in compliance with such covenants at July 31, 2012.	$	9,400		$	11,100
Term Note B payable to Wells Fargo Capital Finance, LLC, which was entered in
conjunction with the acquisition of Daegis. Interest is incurred at the prevailing
LIBOR rate plus 10.0% per annum with a minimum rate of 12.0% (12.0% at July
31, 2012) payable monthly. Principal is due in full at maturity, June 30, 2015.		4,000			4,000
Wells Fargo Capital Finance, LLC, revolving line of credit, interest rate at prevailing
LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at July 31,
2012), payable June 30, 2015.		5,500			5,500
Capital leases, payable in monthly installments through July 2015.		553			651
		19,453			21,251
Less current portion		(2,002	)		(2,945	)
Total long term debt, net	$	17,451		$	18,306

In June 2011 the Company incurred a loss on extinguishment of debt of $2.2 million as a result of the refinancing of the Hercules Term Loan and Credit Facility. The loss included $1.0 million of unamortized loan costs and $0.8 million of warrant discounts on notes payable that were associated with the borrowings under the Hercules Term Loan and Credit Facility. Additionally, the Company was assessed prepayment fees of $0.4 million.

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In June 2011 the Company entered into the Wells Fargo Credit Agreement. The Wells Fargo Credit Agreement consists of a $12.0 million Term Note A, a $4.0 million Term Note B, and a revolving credit note agreement whereby Wells Fargo would provide up to $8.0 million. The Term Note A, Term Note B, and revolving line of credit have interest rate of LIBOR plus 5.00%, 10.00% and 5.00%, respectively. The minimum LIBOR used in the interest rate is 1.50% for Term Note A and the revolving line of credit and 2.00% for Term Note B. The Company capitalized $0.6 million of loan costs related to Wells Fargo Credit Agreement.

The Wells Fargo Credit Agreement requires ongoing compliance with certain affirmative and negative covenants. The affirmative covenants include, but are not limited to: (i) maintenance of existence and conduct of business; (ii) compliance with laws; (iii) use of proceeds; and (iv) books and records and inspection. The negative covenants set forth in the Wells Fargo Credit Agreement include, but are not limited to, restrictions on the ability of the Company (and the Company’s subsidiaries): (i) with certain limited exceptions, to create, incur, assume or allow to exist indebtedness; (ii) with certain limited exceptions, to create, incur, assume or allow to exist liens on properties; (iii) with certain limited exceptions, to make certain payments, transfers of property, or investments; or (iv) with certain limited exceptions, to make acquisitions.

The Company is obligated to maintain certain minimum consolidated adjusted EBITDA levels, certain total leverage ratios, and certain fixed charge coverage ratios, all as calculated in accordance with the terms and definitions determining such amounts as contained in the Wells Fargo Credit Agreement. The Wells Fargo Credit Agreement also contains various information and financial reporting requirements. The Company is in compliance with all such covenants and requirements at July 31, 2012.

The Wells Fargo Credit Agreement also contains customary events of default, including without limitation events of default based on payment obligations, repudiation of guaranty obligations, material inaccuracies of representations and warranties, covenant defaults, insolvency proceedings, monetary judgments in excess of certain amounts, change in control, certain ERISA events, and defaults under certain other obligations.

A summary of future payments on long-term debt obligations as of July 31, 2012 is as follows (in thousands):

Fiscal Year Ending April 30,		Amount
Remainder of 2013	$	1,647
2014		1,348
2015		1,326
2016		15,132
	$	19,453

The summary of future payments on long-term debt obligations does not account for the annual payments based on the Company’s free cash flow under Term Note A as noted above. The amount of these payments is not known; however, when they are determined it will accelerate the payment schedule outlined above.

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8. Other Long-Term Liabilities

Included in other long term liabilities is deferred rent resulting from escalation clauses related to office leases and liabilities related to the unfavorable lease terms associated with the acquisitions of AXS-One, Inc. and Daegis. Additionally there are liabilities related to mandatory employee severance costs associated with a French statutory government regulated plan covering all France employees and long-term deferred maintenance revenue. See the schedule below for details of balances at July 31, 2012 and April 30, 2012 (in thousands).

		July 31,		April 30,
		2012		2012
Deferred rent related to :
Roseville office	$	62	$	83
New York office		120		128
San Francisco office		76		74
Unfavorable lease terms related to:
New Jersey office		274		294
New York office		178		194
Other:
Severance for French employees		123		123
Long term deferred support revenue		246		252
	$	1,079	$	1,148

9. Maintenance Contracts

The Company offers maintenance contracts to its customers at the time they enter into a product license agreement and renew those contracts, at the customers’ option, annually thereafter. These maintenance contracts are priced as a percentage of the value of the related license agreement. The specific terms and conditions of these initial maintenance contracts and subsequent renewals vary depending upon the product licensed and the country in which the Company does business. Generally, maintenance contracts provide the customer with unspecified product maintenance updates and customer support services. Revenue from maintenance contracts is initially deferred and then recognized ratably over the term of the agreements.

Changes in the Company’s deferred maintenance revenue were as follows (in thousands):

		Three Months Ended
		July 31,
		2012			2011
Deferred maintenance revenue beginning balance	$	8,302		$	8,420
Deferred maintenance revenue recognized during period		(3,683	)		(3,867	)
Deferred maintenance revenue of new maintenance contracts		2,534			2,814
Deferred maintenance revenue ending balance	$	7,153		$	7,367

Of the deferred maintenance revenue at July 31, 2012 and April 30, 2012, $0.2 million and $0.3 million, respectively, is long-term and is included in other long-term liabilities in the consolidated balance sheet.

10. Income Taxes

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

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The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In general, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the fiscal years before 2006. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. Therefore, no reserves for uncertain income tax positions have been recorded.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of July 31, 2012 and April 30, 2012, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor did the Company record any interest expense associated with any unrecognized tax benefits in the three months ended July 31, 2012 and 2011.

11. Preferred Stock

In June 2011, the Company issued through a private placement 1,666,667 shares of preferred stock to a group of related party institutional investors at a price of $2.40 per share for a total of $4.0 million. The preferred stock will automatically convert on a 1-for-1 basis into shares of common stock of the Company upon the earlier of the second anniversary of the financing, June 30, 2013, or the date on which the Company’s common stock has an average closing price above $4.00 per share during the preceding 30 trading days. The preferred stock includes an annual dividend of 10% payable in cash or stock at the Company’s option. The preferred stock has no other provisions or preferences. During the three months ended July 31, 2012, the Company paid $66,000 in preferred stock dividends ($0.04 per preferred share). As of July 31, 2012, the Company had accrued $35,000 of dividends payable on preferred stock included in other accrued liabilities.

12. Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net earnings (loss) less dividends payable on preferred stock by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. For the three months ended July 31, 2011, because of our net loss available to shareholders, potentially dilutive securities were excluded from the per share computations due to their anti-dilutive effect.

(in thousands, except per share amounts)		Three Months Ended
		July 31,
		2012			2011
Net income (loss)	$	157		$	(1,778	)
Dividends paid and payable on preferred stock		(101	)		(34	)
Net income (loss) available to common stockholders	$	56		$	(1,812	)
Weighted-average shares of common stock outstanding, basic		14,718			14,601
Effect of dilutive securities		-			-
Weighted-average shares of common stock outstanding, diluted		14,718			14,601
Income (loss) per share of common stock:
Basic	$	0.00		$	(0.12	)
Diluted	$	0.00		$	(0.12	)

The dilutive securities above represent only those stock options, warrants, convertible debt, and preferred stock whose exercise prices were less than the average market price of the stock during the respective periods and therefore were dilutive. Potentially dilutive securities that are not included in the diluted net income calculation because they would be antidilutive are employee stock options of 2,718,084 and common stock warrants of 1,344,986 for the three months ended July 31, 2012. Potentially dilutive securities that are not included in the diluted net loss calculation because they would be antidilutive are employee stock options of 2,787,768 and common stock warrants of 1,344,986 for the three months ended July 31, 2011. Potentially dilutive securities that are not included in the diluted net income (loss) calculation because they would be antidilutive are 1,666,667 shares of convertible preferred stock for the three months ended July 31, 2012 and 2011.

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13. Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer. We have evaluated our approach for making operating decisions and assessing the performance of our business and, beginning in the first quarter of fiscal year 2012, we determined that we have two reportable segments: (i) eDiscovery and (ii) database, archive, and migration. The accounting policies of the segments are the same as those described in Note 1. We evaluate performance based on income from operations (total revenues less operating costs). We do not allocate certain corporate costs to each segment and therefore disclose these amounts separately in our segment table.

For the first quarter of fiscal 2013 and 2012, total revenue from the United States was $6.8 million and $8.5 million, respectively. Total revenue from all other countries in the first quarter of fiscal 2013 and 2012 was $2.8 million and $3.0 million, respectively. Total long-lived assets as of July 31, 2012 and April 30, 2012, for the United States, were $23.7 million and $24.3 million, respectively. Total long-lived assets in all other countries were $4,000 as of July 31, 2012 and $5,000 as of April 30, 2012.

		Three Months Ended
(in thousands)		July 31,
		2012			2011
Total revenues:
eDiscovery	$	4,073		$	6,026
Database, archive, and migration		5,565			5,488
Total revenues	$	9,638		$	11,514
Operating expenses:
eDiscovery	$	5,107		$	4,982
Database, archive, and migration		3,553			3,643
Unallocated corporate expenses		694			2,044
Total operating expenses	$	9,354		$	10,669
Income (loss) from operations:
eDiscovery	$	(1,034	)	$	1,044
Database, archive, and migration		2,012			1,845
Unallocated corporate expenses		(694	)		(2,044	)
Total income (loss) from operations	$	284		$	845
		July 31,			April 30,
		2012			2012
Total assets:
eDiscovery	$	27,926		$	29,657
Database, archive, and migration		10,297			12,212
Total assets	$	38,223		$	41,869

Included in unallocated corporate expenses for the three months ended July 31, 2012 is a contra expense of $1.0 million related to the sale of an intangible trade name.

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DAEGIS INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion in this Quarterly Report on Form 10-Q contains forward-looking statements that have been made pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations, estimates and projections about the software and eDiscovery industries and certain assumptions made by the Company’s management. Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, variations of such words and similar expressions are intended to identify such forward-looking statements. In addition, statements that refer to the anticipated impacts of acquisitions, statements made on goodwill, intangible assets, and impairment, statements about the ability to utilize deferred tax assets, and statements about other characterizations of future events or circumstances are forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Such risks and uncertainties include, but are not limited to, those set forth herein under “Volatility of Stock Price and General Risk Factors Affecting Quarterly Results” and in the Company’s Annual Report on Form 10-K under “Business – Risk Factors.” Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the risk factors set forth in other reports or documents the Company files from time to time with the SEC, particularly the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.

The following discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and Notes thereto in Part I, Item 1 of this Quarterly Report on Form 10-Q and with the audited Consolidated Financial Statements and Notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2012, as filed with the SEC.

Overview

Daegis Inc. (the “Company”, “we”, “us” or “our”) is a global provider of eDiscovery, application development, data management, migration, and archiving software solutions. The Company sells its solutions through two segments. The segments are the eDiscovery segment and the database, archive, and migration segment.

Our customers include corporate legal departments, law firms, information technology (“IT”) departments, software value-added resellers (“VARs”), solutions integrators (“SIs”) and independent software vendors (“ISVs”) from a variety of industries. We are headquartered in Roseville, California, with offices in San Francisco, New York, Chicago, New Jersey, Canada, Australia, France, Germany, and the United Kingdom (“UK”). We market and sell our solutions directly in the United States, Europe, Canada, Japan, Singapore and Australia and indirectly through global distributors and resellers on a worldwide basis.

Our eDiscovery solutions include technology and services that address the full spectrum of eDiscovery needs for corporate counsel and law firms. Our eDiscovery platform delivers a comprehensive solution that helps clients lower costs in all phases of the eDiscovery lifecycle from information management through search and analysis to review and production. Our services include managed document review, project management, search analytics, consulting, and hosting of data.

Our database, archive, and migration business includes application development, data management and application modernization. Our tools and database software help companies to maximize value and reduce cost in the development, deployment, management and retention of business applications and data. Our application development and data management software products include Team Developer, SQLBase, Unify NXJ, DataServer, VISION and ACCELL. Our application modernization solutions include Composer Notes, Composer Sabertooth, Composer CipherSoft and Composer Mainframe. Our enterprise archiving software enables our customers to preserve, manage, and dispose of their electronically stored information (“ESI”) for regulatory compliance and information governance.

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Critical Accounting Policies

The following discussion and analysis of the Company’s financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. On an ongoing basis, management evaluates its estimates and judgments. Actual results may differ from these estimates under different assumptions or conditions. The areas that require significant judgment are as follows.

Revenue Recognition

The Company generates revenue from software license sales and related services, including maintenance and support, hosting, and consulting and implementation services. The Company licenses its products to end-user customers, including corporate legal and IT departments, law firms, ISVs, international distributors and VARs. The Company’s products are generally sold with a perpetual license. The Company’s contracts with ISVs, VARs and international distributors do not include special considerations such as rights of return, stock rotation, price protection or special acceptance. The Company exercises judgment in connection with the determination of the amount of revenue to be recognized in each accounting period. The nature of each contractual arrangement determines how revenues and related costs are recognized.

For software license arrangements that do not require significant modification or customization of the underlying software, revenue is recognized when the software product or service has been shipped or electronically delivered, the license fees are fixed and determinable, uncertainties regarding customer acceptance are resolved, collectability is probable and persuasive evidence of an arrangement exists.

For fixed price arrangements that require significant modification or customization of software, the Company uses the percentage-of-completion method for revenue recognition. Under the percentage-of-completion method, progress towards completion is generally measured by labor hours.

The Company considers a signed non-cancelable license agreement, a customer purchase order, a customer purchase requisition, or a sales quotation signed by an authorized purchaser of the customer to be persuasive evidence that an arrangement exists such that revenue can be recognized.

The Company’s customer contracts may include multi-element arrangements that include a delivered element (a software license) and undelivered elements (such as maintenance and support and/or consulting). The value allocated to the undelivered elements is unbundled from the delivered element based on VSOE of fair value of the maintenance and support and/or consulting, regardless of any separate prices stated within the contract. VSOE of fair value is defined as: (i) the price charged when the same element is sold separately, or (ii) if the element has not yet been sold separately, the price for the element established by management having the relevant authority when it is probable that the price will not change before the introduction of the element into the marketplace. The Company then allocates the remaining balance to the delivered element (a software license) regardless of any separate prices stated within the contract using the residual method as the VSOE of fair value of all undelivered elements is determinable.

We defer revenue for any undelivered elements, and recognize revenue for delivered elements only when the VSOE of fair value of undelivered elements are known, uncertainties regarding customer acceptance are resolved, and there are no customer-negotiated refund or return rights affecting the revenue recognized for delivered elements. If we cannot objectively determine the fair value of any undelivered element included in bundled software and service arrangements, we defer revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements.

An assessment of the ability of the Company’s customers to pay is another consideration that affects revenue recognition. In some cases, the Company sells to undercapitalized customers. In those circumstances, revenue recognition is deferred until cash is received, the customer has established a history of making timely payments or the customer’s financial condition has improved. Furthermore, once revenue has been recognized, the Company evaluates the related accounts receivable balance at each period end for amounts that we believe may no longer be collectible. This evaluation is largely done based on a review of the financial condition via credit agencies and historical experience with the customer. Any deterioration in credit worthiness of a customer may impact the Company’s evaluation of accounts receivable in any given period.

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Revenue from support and maintenance activities, which consist of fees for ongoing support and unspecified product updates, are recognized ratably over the term of the maintenance contract, typically one year, and the associated costs are expensed as incurred. Consulting and implementation services are performed on a “best efforts” basis and may be billed under time-and-materials or fixed price arrangements. Revenues and expenses relating to providing consulting services are generally recognized as the services are performed. Revenue from hosting activities, which consist of fees for storing customer data, are recognized as the services are performed, and the associated costs are expensed as incurred.

Taxes collected from customers and remitted to the government are presented on a gross basis on the consolidated balance sheet. At July 31, 2012 and April 30, 2012 the Company had $8,000 and $48,000, respectively, of sales taxes payable.

Goodwill and Intangible Assets

Goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is not amortized. Goodwill is tested for impairment on an annual basis as of April 30, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. Intangible assets are amortized using the straight-line method over their estimated period of benefit. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization. As a result of the most recent impairment test, the Company recorded $15.0 million in the fourth quarter of fiscal 2012 for the impairments of goodwill and intangible assets of the eDiscovery business unit. The Unify and AXS-One business units were not at risk of failing step one of the impairment test.

Deferred Tax Asset Valuation Allowance

Deferred taxes are recorded for the difference between the financial statement and tax basis of the Company’s assets and liabilities and net operating loss carryforwards. A valuation allowance is recorded to reduce deferred tax assets to an amount whose realization is more likely than not. U.S. income taxes are not provided on the undistributed earnings of foreign subsidiaries as they are considered to be permanently reinvested.

As of April 30, 2012, the Company had $19.2 million of deferred tax assets related principally to net operating loss and capital loss carryforwards, reserves and other accruals, and various tax credits. The Company’s ability to utilize net operating loss carryforwards may not be fully realized because of certain limitations imposed by the tax law related to changes in ownership. In addition, the Company’s ability to ultimately realize its deferred tax assets is contingent upon the Company achieving taxable income in the future. There is no assurance that this will occur in amounts sufficient to utilize the deferred tax assets. Accordingly, management concluded that a valuation allowance be recorded to offset these deferred tax assets. Should we determine that Daegis would be able to realize the deferred tax assets in the future in excess of the recorded amount, an adjustment to the valuation allowance would be recognized in the period such determination was made.

Account Receivable and Allowance for Doubtful Accounts

We record trade accounts receivable at the invoiced amount and they do not bear interest. We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We make these estimates based on an analysis of accounts receivable using available information on our customers’ financial status and payment histories as well as the age of the account receivable. Historically, bad debt losses have not differed materially from our estimates.

Accounting for Stock-based Compensation

For our share-based payment awards, we make estimates and assumptions to determine the underlying value of stock options, including volatility, expected life and forfeiture rates. Changes to these estimates and assumptions may have a significant impact on the value and timing of stock-based compensation expense recognized, which could have a material impact on our financial statements.

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Fair Value of Common Stock Warrant Liability

The Company values its warrants based on open form option pricing models which, based on the relevant inputs, render the fair value estimate Level 3. The Company bases its estimates of fair value for warrant liabilities on the amount it would pay a third-party market participant to transfer the liability and incorporates inputs such as equity prices, historical and implied volatilities, dividend rates and prices of convertible securities issued by comparable companies maximizing the use of observable inputs when available. Changes in the fair value of the warrants are reflected in the consolidated statement of operations as “Gain from change in fair value of common stock warrant liability.”

Results of Operations

The following table sets forth our consolidated statement of operations expressed as a percentage of total revenues for the periods indicated:

	Three Months Ended
	July 31,
	2012			2011
Revenues:
eDiscovery	42.3		%	52.3		%
Database, archive, and migration	57.7			47.7
Total revenues	100.0			100.0
Operating expenses:
Direct costs of eDiscovery revenue	22.4			20.8
Direct costs of database, archive, and migration revenue	13.3			11.7
Product development	19.5			17.2
Selling, general and administrative	52.2			43.0
Sale of intangible trade name	(10.3	)		-
Total operating expenses	97.1			92.7
Income from operations	2.9			7.3
Other income (expense):
Loss on extinguishment of debt	-			(18.8	)
Gain from change in fair value of common stock warrant liability	4.8			3.9
Interest expense	(4.6	)		(7.8	)
Other, net	(1.0	)		0.4
Total other income (expenses)	(0.8	)		(22.3	)
Income (loss) before income taxes	2.1			(15.0	)
Provision for income taxes	0.5			0.4
Net income (loss)	1.6			(15.4	)

Total Revenues

The Company generates revenue from eDiscovery software and service sales. All of our eDiscovery software and services sales are sold by our direct sales force in the United States. The Company also generates database, archive, and migration revenue from software license sales and related services, including maintenance, support and consulting services. We sell our database, archive, and migration solutions through our direct sales force in the United States and Europe, and through indirect channels comprised of distributors, ISVs, VARs, and other partners worldwide.

Total revenues in the first quarter of fiscal 2013 were $9.6 million, a decrease of $1.9 million from the first quarter of fiscal 2012. This represents a decrease of 16% from the first quarter of fiscal 2012 revenues of $11.5 million. Total eDiscovery revenues in the first quarter of fiscal 2013 were $4.1 million, a decrease of $1.9 million from the first quarter of fiscal 2012. This represents a decrease of 32% over the first quarter of fiscal 2012 revenues of $6.0 million. The decrease in eDiscovery revenue for the first quarter of fiscal 2013 is primarily related to customers having fewer large legal matters in process in the first quarter of fiscal 2013 compared to the first quarter of fiscal 2012. Total database, archive, and migration revenues in the first quarter of fiscal 2013 were $5.6 million, an increase of $0.1 million from the first quarter of 2012. This represents an increase of 1% from the first quarter of fiscal 2012 revenues of $5.5 million.

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For the first quarter of fiscal 2013 and 2012, total revenues from the United States were 71% and 74% of total revenues, respectively. Total revenue from the United States in absolute dollars was $6.8 million for the first quarter of fiscal 2013 and $8.5 million for the first quarter of fiscal 2012. Total revenue from all other countries was $2.8 million in the first quarter of fiscal 2013 and $3.0 million for the first quarter of fiscal 2012. On a percentage basis, revenue from other countries was 29% for the first quarter of fiscal 2013 and 26% for the first quarter of fiscal 2012.

Operating Expenses

Direct Costs of eDiscovery Revenue. Direct costs of eDiscovery revenue consist primarily of expenses related to employees, facilities, and third party assistance that were directly related to the generation of eDiscovery revenue. Direct costs of eDiscovery revenue were $2.2 million and $2.4 million for the first quarter of fiscal 2013 and fiscal 2012, respectively.

Direct Costs of Database, Archive, and Migration Revenue. Direct costs of database, archive, and migration revenue consist primarily of expenses related to employees, facilities, third party assistance, royalty payments, and the amortization of purchased technology from third parties that were directly related to the generation of database, archive, and migration revenue. Direct costs of database, archive, and migrations revenue were $1.3 million for both the first quarter of fiscal 2013 and fiscal 2012.

Product Development. Product development expenses consist primarily of employee and facilities costs incurred in the development and testing of new products and in the porting of new and existing products to additional hardware platforms and operating systems. Product development costs in the first quarter of fiscal 2013 were $1.9 million compared to $2.0 million in the same period of fiscal 2012.

Selling, General and Administrative.Selling, general and administrative (“SG&A”) expenses consist primarily of salaries and benefits, marketing programs, travel expenses, professional services, facilities expenses, amortization of intangible assets, and bad debt expense. SG&A expenses were $5.0 million in the first quarter of fiscal 2013 and $4.9 million for the first quarter of fiscal 2012. The increase is primarily due to $0.4 million of severance related expenses in the first quarter of fiscal 2013 that did not exist in the first quarter of fiscal 2012. This is partially offset by a decrease in the amortization of intangible assets of $0.2 million. The major components of SG&A for the first quarter of fiscal 2013 were sales expenses of $2.1 million, marketing expenses of $0.4 million and general and administrative expenses of $2.5 million. For the first quarter of fiscal 2012, the major components of SG&A were sales expenses of $1.9 million, marketing expenses of $0.6 million and general and administrative expenses of $2.4 million. As a percentage of total revenue, SG&A expenses were 52% in the first quarter of fiscal 2013 and 43% in the first quarter of fiscal 2012.

Sale of Intangible Trade Name. The sale of intangible trade name is due to the sale of a trade name for $1.0 million that occurred in the first quarter of fiscal 2013.

Loss on Extinguishment of Debt. The loss on extinguishment of debt is the result of the refinancing of the Hercules Term Loan and Credit Facility on June 30, 2011. The Company expensed $1.8 million of unamortized loan costs and warrant discounts on notes payable that were associated with the borrowings under the Hercules Term Loan and Credit Facility. Additionally, the Company was assessed prepayment fees of $0.4 million.

Gain from Change in Fair Value of Common Stock Warrant Liability.The change in fair value of common stock warrant liability for the three months ended July 31, 2012 resulted in a gain of $0.5 million. The change in fair value of common stock warrant liability for the three months ended July 31, 2011 resulted in a gain of $0.4 million. The gains are due primarily to a decrease in the Company’s common stock share price during the period.

Interest Expense. Interest expense is primarily the result of interest from outstanding debt. Interest expense for the first quarter of fiscal 2013 and 2012 was $0.4 million and $0.9 million, respectively. The decrease in the interest expense for the three months ended July 31, 2012 is due primarily to the lower interest rates on debt that resulted from our refinancing that occurred in the first quarter of fiscal 2012.

Other, Net. Other, net consists primarily of foreign exchange rate gains and losses and other income. Foreign exchange rate losses for the first quarter of fiscal 2013 were $95,000. Foreign exchange rate gains for the first quarter of 2012 were $46,000. Other income for the first quarter of fiscal 2013 and 2012 was $2,000 and $3,000, respectively.

Provision for Income Taxes. For the first quarter of fiscal 2013, the Company recorded $52,000 in federal, state, and foreign income tax expense. For the first quarter of fiscal 2012, the Company recorded $51,000 in federal, state, and foreign income tax expense.

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Liquidity and Capital Resources

At July 31, 2012, the Company had cash and cash equivalents of $4.3 million, compared to $4.8 million at April 30, 2012. The Company had net accounts receivable of $8.8 million as of July 31, 2012, and $11.0 million as of April 30, 2012.

In June 2011, the Company entered into a new Revolving Credit and Term Loan Agreement with Wells Fargo (the “Wells Fargo Credit Agreement”). In order to secure its obligations under the Wells Fargo Credit Agreement, the Company has granted the lender a first priority security interest in substantially all of its assets. The Wells Fargo Credit Agreement consists of two term notes and a revolving credit note agreement. Term Note A is for $12.0 million payable over four years with principal payments of $300,000 quarterly plus an additional annual payment based on the Company’s free cash flow for the year with any remaining amount due at maturity, June 30, 2015. The Company incurs interest at the prevailing LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at July 31, 2012). Term Note B is a four year note for $4.0 million payable in full at maturity, June 30, 2015. The Company incurs interest at the prevailing LIBOR rate plus 10% per annum with a minimum rate of 12.0% (12.0% at July 31, 2012). As of July 31, 2012 there is $13.4 million outstanding on the term notes of which $1.7 million is current. Under the terms of the revolver, the Company can borrow up to $8.0 million. The Company incurs interest expense on funds borrowed at the prevailing LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at July 31, 2012). The revolver has a maturity date of June 30, 2015. The total amount that can be borrowed under the Term Note A and the revolver is based on a multiplier factor of the trailing twelve months of maintenance revenue. As of July 31, 2012, the Company was eligible to borrow the entire amount of $8.0 million. As of July 31, 2012 there is $5.5 million borrowed on the revolving line of credit, none of which is current.

The Wells Fargo Credit Agreement requires ongoing compliance with certain affirmative and negative covenants. The affirmative covenants include, but are not limited to: (i) maintenance of existence and conduct of business; (ii) compliance with laws; (iii) use of proceeds; and (iv) books and records and inspection. The negative covenants set forth in the Wells Fargo Credit Agreement include, but are not limited to, restrictions on the ability of the Company (and the Company’s subsidiaries): (i) with certain limited exceptions, to create, incur, assume or allow to exist indebtedness; (ii) with certain limited exceptions, to create, incur, assume or allow to exist liens on properties; (iii) with certain limited exceptions, to make certain payments, transfers of property, or investments; or (iv) with certain limited exceptions, to make acquisitions.

The Company is obligated to maintain certain minimum consolidated adjusted EBITDA levels, certain total leverage ratios, and certain fixed charge coverage ratios, all as calculated in accordance with the terms and definitions determining such amounts as contained in the Wells Fargo Credit Agreement. The Wells Fargo Credit Agreement also contains various information and financial reporting requirements. The Company is in compliance with all such covenants and requirements at July 31, 2012.

The Wells Fargo Credit Agreement also contains customary events of default, including without limitation events of default based on payment obligations, repudiation of guaranty obligations, material inaccuracies of representations and warranties, covenant defaults, insolvency proceedings, monetary judgments in excess of certain amounts, change in control, certain ERISA events, and defaults under certain other obligations.

In June 2011, the Company issued through a private placement 1,666,667 shares of preferred stock to a group of related party institutional investors at a price of $2.40 per share for a total of $4.0 million. The preferred stock will automatically convert on a 1-for-1 basis into shares of common stock of the Company upon the earlier of the second anniversary of the financing, June 30, 2013, or the date on which the Company’s common stock has an average closing price above $4.00 per share during the preceding 30 trading days. The preferred stock includes an annual dividend of 10% payable in cash or stock at the Company’s option. The preferred stock has no other provisions or preferences. During the three months ended July 31, 2012, the Company paid $66,000 in preferred stock dividends. As of July 31, 2012, the Company had accrued $35,000 of dividends payable on preferred stock.

Except for the Wells Fargo Credit Agreement, as of July 31, 2012 the Company had no other notes payable outstanding.

As of July 31, 2012, the Company has $0.6 million in capital leases payable, $0.3 million of which is current.

Operating Cash Flows. For the first three months of fiscal year 2013 cash provided by operations was $0.6 million. Cash flows provided by operations for the first three months of fiscal 2013 principally resulted from net income of $0.2 million, a decrease in accounts receivable of $2.1 million, a decrease in prepaid expenses and other current assets of $0.4 million, and increase in account payables of $0.1 million, amortization of intangible assets of $0.4 million, depreciation of $0.3 million, and stock based compensation expense of $0.2 million. Offsetting these amounts was a decrease in accrued compensation and related expenses of $0.5 million, a decrease in other accrued liabilities of $0.1 million, a decrease in deferred revenue of $1.1 million, a sale of an intangible trade name of $1.0 million, and a gain from change in fair value of common stock warrant liability of $0.5 million.

23

For the first three months of fiscal year 2012 cash provided by operations was $1.0 million. Cash flows provided by operations for the first three months of fiscal 2012 principally resulted from a decrease in accounts receivable of $2.4 million, a decrease in other assets of $0.1 million, amortization of intangible assets of $0.6 million, depreciation of $0.2 million, loss on extinguishment of debt of $2.2 million, interest added to long term debt principal of $0.1 million, and stock based compensation expense of $0.2 million. Offsetting these amounts was a net loss of $1.8 million, an increase in prepaid expenses and other current assets of $0.2 million, a decrease in accounts payable of $0.1 million, a decrease in accrued compensation and related expenses of $0.7 million, a decrease in other accrued liabilities of $0.7 million, a decrease in deferred revenue of $0.8 million, a decrease in other long term liabilities of $0.1 million, and a gain from change in fair value of common stock warrant liability of $0.4 million.

Investing Cash Flows. Net cash provided by investing activities was $1.0 million for the first three months of fiscal 2013 and was the result of proceeds from the sale of an intangible trade name of $1.0 million. This was partially offset by cash used for the purchase of property and equipment of $32,000. Cash flow used in investing activities was $0.3 million for the first three months of fiscal 2012 and was the result of cash used for the purchase of property and equipment.

Financing Cash Flows. Net cash used in financing activities for the first three months of fiscal 2013 was $1.9 million. Cash used in financing activities was the result of $1.7 million of principal payments on debt obligations, $0.1 million of principal payments on capital leases, and $0.1 million of payments of preferred stock dividends. Net cash used in financing activities for the first three months of fiscal 2012 was $1.5 million. Cash from financing activities was the result of borrowings on the term loan of $16.0 million, borrowings on the revolving line of credit of $6.5 million, proceeds from the issuance of common stock of $0.1 million, and proceeds from the issuance of preferred stock of $4.0 million. Offsetting this amount was $24.1 million of principal payments under debt obligations, $0.1 million of principal payments on capital leases, $3.0 million of payments on the revolving line of credit, $0.6 million of loan cost payments, and $0.4 million prepayment penalty on the extinguishment of debt.

A summary of certain contractual obligations as July 31, 2012 is as follows (in thousands):

	Payments Due by Period
				1 year						After
Contractual Obligations		Total		or less		2-3 years		4-5 years		5 years
Debt financing	$	18,900	$	1,700	$	17,200	$	-	$	-
Estimated interest expense		3,806		1,386		2,420		-		-
Other liabilities		123		-		-		-		123
Capital lease obligations		553		302		251		-		-
Operating leases		5,161		1,550		2,313		1,298		-
Total contractual cash obligations	$	28,543	$	4,938	$	22,184	$	1,298	$	123

Other liabilities primarily include mandatory severance costs associated with a French statutory government regulated plan covering all France employees.

24

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk. The Company’s exposure to market rate risk for changes in interest rates relates primarily to its investment portfolio, which consists of cash equivalents, and its long term debt, which contains notes with variable interest rates. Cash equivalents are highly liquid investments with original maturities of three months or less and are stated at cost. Cash equivalents are generally maintained in money market accounts which have as their objective preservation of principal. The Company does not believe its exposure to interest rate risk is material for cash and cash equivalents, which totaled $4.3 million as of July 31, 2012. The Company had no short-term investments at July 31, 2012.

In June 2011, the Company entered into the Wells Fargo Credit Agreement. The Wells Fargo Credit Agreement consists of a $12.0 million Term Note A, a $4.0 million Term Note B, and a revolving credit note agreement whereby Wells Fargo would provide up to $8.0 million. The Term Note A, Term Note B, and revolving line of credit have interest rate of LIBOR plus 5.00%, 10.00% and 5.00%, respectively. The minimum LIBOR used in the interest rate is 1.50% for Term Note A and the revolving line of credit and 2.00% for Term Note B. LIBOR at July 31, 2012 is approximately 1.06%. Should the LIBOR interest rate increase above 1.50% during the life of the term loans and of the revolver, the Company would have exposure to interest rate risk. As of July 31, 2012, there was $13.4 million outstanding on the term notes and $5.5 million outstanding on the revolver.

The Company does not use derivative financial instruments in its short-term investment portfolio, and places its investments with high quality issuers only and, by policy, limits the amount of credit exposure to any one issuer. The Company is averse to principal loss and attempts to ensure the safety of its invested funds by limiting default, market and reinvestment risk.

Foreign Currency Exchange Rate Risk. As a global concern, the Company faces exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and could have an adverse impact on the Company’s business, operating results and financial position. Historically, the Company’s primary exposures have related to local currency denominated sales and expenses in Europe, Japan and Australia. For example, when the U.S. dollar strengthens against the major European currencies, it results in lower revenues and expenses recorded for those regions when translated into U.S. dollars.

Due to the substantial volatility of currency exchange rates, among other factors, the Company cannot predict the effect of exchange rate fluctuations on its future operating results. Although the Company takes into account changes in exchange rates over time in its pricing strategy, it does so only on an annual basis, resulting in substantial pricing exposure as a result of foreign exchange volatility during the period between annual pricing reviews. The Company also has currency exchange rate exposures on cash and accounts receivable balances related to activities with the Company’s operations in France, Germany, UK, Australia and Canada. At July 31, 2012 the Company had cash held in foreign currencies of $0.6 million in Euros, $0.1 million in Canadian dollars, $0.2 million in pounds sterling, and $0.2 million in Australian dollars. At July 31, 2012 the Company had accounts receivable in foreign currencies of $1.2 million in Euros, $0.1 million in pounds sterling, $0.2 million in Australian dollars, $16,000 in Canadian dollars, $0.1 million in Japanese yen, $14,000 in Polish zloty, and $9,000 in Malaysian ringgit. We do not believe we would be subject to any material adverse tax impact or significantly inhibited by any country in which we do business from the repatriation of funds to the United States. The Company engages in no hedging activities to reduce the risk of such fluctuations. A hypothetical ten percent change in foreign currency rates could have a significant impact on the Company’s business, operating results and financial position. The Company has not experienced material exchange losses in the past; however, due to the substantial volatility of currency exchange rates, among other factors, it cannot predict the effect of exchange rate fluctuations on its future business, operating results and financial position.

25

Item 4. Controls and Procedures

(a)Evaluation of Disclosure Controls and Procedures. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of July 31, 2012. The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls were effective as of the end of the period covered by this quarterly report. Management recognizes that any disclosure controls and procedures no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

(b) Changes in Internal Controls. There have been no changes in our internal controls over financial reporting that occurred during the first three months of fiscal year 2013 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

26

DAEGIS INC.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Litigation

The Company is subject to legal proceedings and claims arising in the ordinary course of business. If such matters arise, the Company cannot assure that it would prevail in such matters, nor can it assure that any remedy could be reached on mutually agreeable terms, if at all. Due to the inherent uncertainties of litigation, were there any such matters, the Company would not be able to accurately predict their ultimate outcome. As of July 31, 2012, there were no current proceedings or litigation involving the Company that management believes would have a material adverse impact on its financial position, results of operations, or cash flows.

Item 1A. Risk Factors

A description of the risks associated with our business, financial condition, and results of operations is set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended April 30, 2012. Other than the risk factor below, there have been no material changes in our risks from such description.

Our quarterly operating results may be subject to fluctuations and seasonal variability.

The Company’s quarterly operating results have varied significantly in the past and we expect that they could vary significantly in the future. Such variations could result from the following factors: the size and timing of significant orders and their fulfillment; demand for our products; the quantity, timing and significance of our product enhancements and new product announcements or those of our competitors; our ability to attract and retain key employees; seasonality; changes in our pricing or our competitors’; realignments of our organizational structure; changes in the level of our operating expenses; incurrence of extraordinary operating expenses, changes in our sales incentive plans; budgeting cycles of our customers; customer order deferrals in anticipation of enhancements or new products offered by us or our competitors; product life cycles; product defects and other product quality problems; currency fluctuations; and general domestic and international economic and political conditions.

Due to the foregoing factors, quarterly revenues and operating results may vary on a quarterly basis. Revenues and quarterly results may vary because software technology is rapidly evolving, and our sales cycle, from initial evaluation to purchase and the providing of maintenance services, can be lengthy and vary substantially from customer to customer. With the exception of our migration services, we normally deliver products within a short time of receiving an order and therefore we typically do not have a backlog of orders. As a result, to achieve our quarterly revenue objectives, we are dependent upon obtaining orders in any given quarter for shipment in that quarter. Furthermore, because many customers place orders toward the end of a fiscal quarter, we generally recognize a substantial portion of our software license revenues at the end of a quarter. Our expense levels largely reflect our expectations for future revenue and are therefore somewhat fixed in the short term. Our migration services typically span multiple quarters, which results in a backlog of orders at the end of each of our fiscal periods. As we frequently work with governmental agencies, which are subject to changing budgets and resource availability, the timing and completion of migration services are difficult to predict and the recognition of the related revenue is difficult to forecast.

We expect that our operating results will continue to be affected by the continually challenging IT economic environment as well as by seasonal trends. In particular, we anticipate relatively weaker demand in the fiscal quarters ending July 31 and October 31 as a result of reduced business activity in Europe during the summer months.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities

None

27

Item 4. Mine Safety Disclosure

Not applicable

Item 5. Other Information

None

28

Item 6. Exhibits

	Exhibits
31.1	Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer under 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer under 18 U.S.C Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase.
101.LAB	XBRL Taxonomy Extension Label Linkbase.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase.
101.DEF	XBRL Taxonomy Extension Definition Linkbase.

29

DAEGIS INC.SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: September 12, 2012	Daegis Inc.
	(Registrant)
	By:
	/s/ STEVEN D. BONHAM
	Steven D. Bonham
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

30

EX-31.1

Exhibit 31.1

CERTIFICATION OF
CHIEF EXECUTIVE OFFICER

I, Todd E. Wille, certify that:

       1.I have reviewed this quarterly report on Form 10-Q of Daegis Inc.;

       2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

       3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

       4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

       (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

       (b) designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles; and 

       (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and 

       (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

       5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

       (a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

       (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ TODD E. WILLE

Todd E. Wille

President and Chief Executive

Officer

(Principal Executive Officer)

Dated: September 12, 2012

EX-31.2

Exhibit 31.2

CERTIFICATION OF
CHIEF FINANCIAL OFFICER

I, Steven D. Bonham, certify that:

       1.I have reviewed this quarterly report on Form 10-Q of Daegis Inc.;

       2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

       3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

       4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

       (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

       (b) designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the financial statements for external purposes in accordance with generally accepted accounting principles; and 

       (c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and 

       (d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

       5.The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

       (a) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

       (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ STEVEN D. BONHAM

Steven D. Bonham

Chief Financial Officer

(Principal Financial and Accounting

Officer)

Dated: September 12, 2012

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Daegis Inc. (the “Registrant”) on Form 10-Q for the quarter ended July 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Todd E. Wille, Chief Executive Officer of the Registrant, do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

       (1) the Report fully complies with the requirements of section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and 

       (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: September 12, 2012	/s/ TODD E. WILLE
	Todd E. Wille
	Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Daegis Inc. and will be retained by Daegis Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Daegis Inc. (the “Registrant”) on Form 10-Q for the quarter ended July 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven D. Bonham, Chief Financial Officer of the Registrant, do hereby certify in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, based on my knowledge:

       (1) the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and

       (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: September 12, 2012	/s/ STEVEN D. BONHAM
	Steven D. Bonham
	Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Daegis Inc. and will be retained by Daegis Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Goodwill And Intangible Assets (Estimated Amortization Of Intangible Assets) (Details) (USD $) In Thousands, unless otherwise specified	Jul. 31, 2012
Goodwill And Intangible Assets [Abstract]
Remainder of 2013	$ 1,153
2014	1,538
2015	1,512
2016	1,096
2017	814
Therafter	2,192
Finite-lived intangible assets, Net carrying amount	$ 8,305

XML

Preferred Stock (Details) (Convertible Preferred Stock [Member], USD $)	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Convertible Preferred Stock [Member]
Class of Stock [Line Items]
Stock issued during period, shares, new issues		1,666,667
Stock issued during period, per share, new issues		$ 2.40
Stock issued during period, value, new issues		$ 4,000,000
Average price of common stock to induce conversion	$ 4.00
Preferred stock conversion date	Jun. 30, 2013
Period used to calculate average price of common stock to induce conversion	30 days
Convertible preferred stock, shares of common stock issued upon conversion	1
Preferred stock annual dividend rate, percentage	10.00%
Dividends, preferred stock	66,000
Preferred stock cash dividend paid	$ 0.04
Dividends payable	$ 35,000

XML

Other Long-Term Liabilities (Schedule Of Other Long-Term Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Jul. 31, 2012	Apr. 30, 2012
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	$ 1,079	$ 1,148
Other - Severance For French Employees [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	123	123
Other - Long Term Deferred Support Revenue [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	246	252
Roseville Office [Member] | Deferred Rent [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	62	83
New York Office [Member] | Deferred Rent [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	120	128
New York Office [Member] | Unfavorable Lease Terms [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	178	194
San Francisco Office [Member] | Deferred Rent [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	76	74
New Jersey Office [Member] | Unfavorable Lease Terms [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	$ 274	$ 294

XML

Stock Compensation Information (Summary Of Fair Value Assumptions) (Details) (USD $)	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Stock Compensation Information [Abstract]
Expected term (in years)	4 years	4 years
Risk-free interest rate	0.50%	1.10%
Volatility	77.00%	89.00%
Weighted-average fair value of stock options granted during the year	$ 1.09	$ 2.42

XML

Other Long-Term Liabilities (Tables)

3 Months Ended

Jul. 31, 2012

Other Long-Term Liabilities [Abstract]

Schedule Of Other Long-Term Liabilities

		July 31,		April 30,
		2012		2012
Deferred rent related to :
Roseville office	$	62	$	83
New York office		120		128
San Francisco office		76		74
Unfavorable lease terms related to:
New Jersey office		274		294
New York office		178		194
Other:
Severance for French employees		123		123
Long term deferred support revenue		246		252
	$	1,079	$	1,148

XML

Earnings (Loss) Per Share (Schedule Of Earnings (Loss) Per Share) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Earnings (Loss) Per Share [Abstract]
Net income (loss)	$ 157	$ (1,778)
Dividends paid and payable on preferred stock	(101)	(34)
Net loss available to common stockholders	$ 56	$ (1,812)
Weighted-average shares of common stock outstanding, basic	14,718	14,601
Effect of dilutive securities
Weighted-average shares of common stock outstanding, diluted	14,718	14,601
Basic	$ 0.00	$ (0.12)
Diluted	$ 0.00	$ (0.12)

XML

Fair Value Of Financial Instruments (Summary Of Activity Of Level 3 Inputs Measured On A Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jul. 31, 2012
Fair Value Of Financial Instruments [Abstract]
Balance at April 30, 2012	$ 569
Change in fair value of common stock warrant liability	(460)
Balance at July 30, 2012	$ 109

XML

Goodwill And Intangible Assets (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Goodwill And Intangible Assets [Abstract]
Intangible assets amortization expense	$ 384	$ 565

XML

Segment Information (Schedule Of Segment Reporting Information By Segment) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Apr. 30, 2012
Segment Reporting Information [Line Items]
Revenues	$ 9,638	$ 11,514
Operating Expenses	9,354	10,669
Operating Income (Loss)	284	845
Assets	38,223		41,869
Ediscovery [Member]
Segment Reporting Information [Line Items]
Revenues	4,073	6,026
Operating Expenses	5,107	4,982
Operating Income (Loss)	(1,034)	1,044
Assets	27,926		29,657
Database, Archive And Migration [Member]
Segment Reporting Information [Line Items]
Revenues	5,565	5,488
Operating Expenses	3,553	3,643
Operating Income (Loss)	2,012	1,845
Assets	10,297		12,212
Unallocated Corporate Expenses [Member]
Segment Reporting Information [Line Items]
Operating Expenses	694	2,044
Operating Income (Loss)	$ (694)	$ (2,044)

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Maintenance Contracts (Schedule Of Deferred Maintenance Revenue) (Details) (USD $)	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Apr. 30, 2012
Maintenance Contracts [Abstract]
Deferred maintenance revenue beginning balance	$ 8,302,000	$ 8,420,000
Deferred maintenance revenue recognized during period	(3,683,000)	(3,867,000)
Deferred maintenance revenue of new maintenance contracts	2,534,000	2,814,000
Deferred maintenance revenue ending balance	7,153,000	7,367,000
Long-term deferred maintenance revenue	$ 200,000		$ 300,000

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Prepaid Expenses and Other Current Assets

3 Months Ended

Jul. 31, 2012

Prepaid Expenses and Other Current Assets [Abstract]

Prepaid Expenses and Other Current Assets

3.Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets at July 31, 2012 consisted of prepaid expenses of $0.7 million and other current assets of $0.7 million.Prepaid expenses and other current assets at April 30, 2012 consisted of prepaid expenses of $1.1 million and other current assets of $0.7 million.

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Long-Term Debt (Narrative) (Details) (USD $)	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Apr. 30, 2012
Debt Instrument [Line Items]
Loss on extinguishment of debt		$ (2,166,000)
Revolving credit agreement, amount	8,000,000
Term loan amount	19,453,000		21,251,000
Reference rate	LIBOR
Basis spread on variable reference rate	5.00%
Stated interest rate, minimum	6.50%
Line of Credit Facility, Amount Outstanding	5,500,000
Term Note A [Member]
Debt Instrument [Line Items]
Term loan amount	9,400,000	12,000,000	11,100,000
Reference rate	LIBOR
Basis spread on variable reference rate	5.00%	5.00%
Stated interest rate, minimum	6.50%	1.50%
Term Note B [Member]
Debt Instrument [Line Items]
Term loan amount	4,000,000	4,000,000	4,000,000
Reference rate	LIBOR
Basis spread on variable reference rate	10.00%	10.00%
Stated interest rate, minimum	12.00%	2.00%
Wells Fargo Revolving Line Of Credit [Member]
Debt Instrument [Line Items]
Loan costs related to agreement		600,000
Revolving credit agreement, amount		8,000,000
Term loan amount	5,500,000		5,500,000
Reference rate	LIBOR
Basis spread on variable reference rate	5.00%	5.00%
Stated interest rate, minimum	6.50%
Hercules Term Loan and Credit Facility [Member]
Debt Instrument [Line Items]
Loss on extinguishment of debt		2,200,000
Unamortized loan costs		1,000,000
Warrant discounts		800,000
Prepayment fees		$ 400,000

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The Company and Summary of Significant Accounting Policies (Details) (USD $)			3 Months Ended
	Jul. 31, 2012	Apr. 30, 2012	Apr. 30, 2012 Ediscovery [Member]
Sales taxes payable	$ 8,000	$ 48,000
Impairments of goodwill and intangible assets			$ 15,000,000

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Segment Information (Tables)

3 Months Ended

Jul. 31, 2012

Segment Information [Abstract]

Schedule of Segment Reporting Information, by Segment

		Three Months Ended
(in thousands)		July 31,
		2012		2011
Total revenues:
eDiscovery	$	4,073	$	6,026
Database, archive, and migration		5,565		5,488
Total revenues	$	9,638	$	11,514
Operating expenses:
eDiscovery	$	5,107	$	4,982
Database, archive, and migration		3,553		3,643
Unallocated corporate expenses		694		2,044
Total operating expenses	$	9,354	$	10,669
Income (loss) from operations:
eDiscovery	$	(1,034)	$	1,044
Database, archive, and migration		2,012		1,845
Unallocated corporate expenses		(694)		(2,044)
Total income (loss) from operations	$	284	$	845
		July 31,		April 30,
		2012		2012
Total assets:
eDiscovery	$	27,926	$	29,657
Database, archive, and migration		10,297		12,212
Total assets	$	38,223	$	41,869

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Long-Term Debt (Schedule Of Long-Term Debt) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Apr. 30, 2012
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 19,453		$ 21,251
Capital leases, payable in monthly installments through July 2015	553		651
Less: current maturities of long-term debt obligations	2,002		2,945
Long term debt, net of current portion	17,451		18,306
Reference rate	LIBOR
Basis spread on variable reference rate	5.00%
Stated interest rate, minimum	6.50%
Effective interest rate at period end	6.50%
Term Note A [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	9,400	12,000	11,100
Reference rate	LIBOR
Basis spread on variable reference rate	5.00%	5.00%
Stated interest rate, minimum	6.50%	1.50%
Effective interest rate at period end	6.50%
Frequency of payments	quarterly
Note payable, durational period	four
Quarterly principal payment	300
Note payable maturity date	Jun. 30, 2015
Term Note B [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	4,000	4,000	4,000
Reference rate	LIBOR
Basis spread on variable reference rate	10.00%	10.00%
Stated interest rate, minimum	12.00%	2.00%
Effective interest rate at period end	12.00%
Note payable maturity date	Jun. 30, 2015
Wells Fargo Revolving Line Of Credit [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 5,500		$ 5,500
Reference rate	LIBOR
Basis spread on variable reference rate	5.00%	5.00%
Stated interest rate, minimum	6.50%
Effective interest rate at period end	6.50%
Note payable maturity date	Jun. 30, 2015

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Stock Compensation Information (Narrative) (Details) (USD $)	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Oct. 31, 2011 2010 Stock Plan [Member]	Oct. 31, 2011 2001 Option Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Pricing model expected dividend yield	0.00%
Forfeiture rate	20.00%
Number of shares available for issuance			1,500,000
Share vesting period, years			4 years	4 years
Stock options granted, expiration period, years			10 years	10 years
Option purchase price, percentage of fair value				85.00%
Total intrinsic value of awards exercised	$ 0	$ 25,000
Fair value of awards vested	200,000	300,000
Fair value of awards granted	$ 400,000	$ 1,000,000

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Stock Compensation Information (Summary Of Equity-Based compensation Expense From Operations) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity based compensation	$ 176	$ 228
Direct Costs of Revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity based compensation	10	18
Product Development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity based compensation	25	39
Selling, General and Administrative[Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity based compensation	$ 141	$ 171

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Stock Compensation Information

3 Months Ended

Jul. 31, 2012

Stock Compensation Information [Abstract]

Stock Compensation Information

2.Stock Compensation Information

Share-based compensation expense includes the estimated fair value for share-based awards. Share-based compensation expenses are recognized over the vesting period of the awards, net of estimated forfeitures.For the three months ended July 31, 2012 and 2011, equity-based compensation expense from operations was comprised of the following (in thousands):

		Three Months Ended
		July 31,
		2012		2011
Direct costs of revenue	$	10	$	18
Product development		25		39
Selling, general and administrative		141		171
Total equity-based compensation	$	176	$	228

The following table shows remaining unrecognized compensation expense on a pre-tax basis related to all types of nonvested equity awards outstanding as of July 31, 2012. This table does not include an estimate for future grants that may be issued (in thousands).

Fiscal Year Ending April 30,		Amount
Remainder of 2013	$	477
2014		428
2015		233
2016		72
Total	$	1,210

The cost above is expected to be recognized over a weighted-average period of 1.24 years.

We estimate the fair value of our share-based awards using the Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates various assumptions including expected term, interest rates and expected volatility. Changes in the assumptions can materially affect the fair value estimates and ultimately how much we recognize as stock-based compensation expense. The fair values of our stock options are estimated at the date of grant. The weighted-average input assumptions used and resulting fair values for three months ended July 31, 2012 and 2011, were as follows:

		Three Months Ended
		July 31,
		2012		2011
Expected term (in years)		4.0		4.0
Risk-free interest rate		0.5	%	1.1	%
Volatility		77	%	89	%
Dividend yield		-		-
Weighted-average fair value of stock options granted during the year	$	1.09	$	2.42

The Company bases its expected term assumption on its historical experience and on the terms and conditions of the stock awards it grants to employees. The risk-free interest rate is based upon United States Treasury interest rates appropriate for the expected term of the awards. The expected volatility is based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected term of the Company’s stock options. The Company did not pay cash dividends in fiscal 2012 or year to date in fiscal 2013, and does not anticipate paying any cash dividends in the foreseeable future. Consequently, an expected dividend yield of zero is used in the Black-Scholes option pricing model.

We recognize expense only for the stock-based awards that are ultimately expected to vest. Therefore, the Company has developed an estimate of the number of awards expected to be forfeited prior to vesting (“forfeiture rate”). The Company uses a forfeiture rate that is estimated based on historical forfeiture experience, and is applied to all stock-based awards. The forfeiture rate used for the three months ending July 31, 2012 and 2011 is 20%.The Company recognizes stock-based compensation cost as an expense ratably on a straight-line basis over the requisite service period.

In the second quarter of fiscal 2011, the Company’s shareholders approved the 2010 Stock Plan (the “2010 Stock Plan”).Under the 2010 Stock Plan the Company may make awards to issue up to 1,500,000 shares of common stock to eligible employees, consultants and directors. Stock options granted under the 2010 Stock Plan generally vest over four years, are exercisable to the extent vested and expire 10 years from the date of grant. Under the 2010 Stock Plan the Company may grant options at prices not less than the fair market value at the date of grant. Under the 2001 Stock Option Plan (the “2001 Option Plan”) which expired as of September 2010, the Company was able to grant options to eligible employees, directors, and consultants at prices not less than the fair market value at the date of grant for incentive stock options and not less than 85% of the fair market value at the date of grant for non-statutory stock options. Options granted under the 2001 Option Plan generally vest over four years, are exercisable to the extent vested, and expire 10 years from the date of grant.

A summary of the Company’s stock option activity for the three months ended July 31, 2012 is as follows:

			Weighted-	Weighted-
			average	average remaining		Aggregate
			exercise	contractual		intrinsic
	Shares		price	term (in years)		value (1)
Outstanding at April 30, 2012	2,632,115	$	3.18	7.24	$	4,449
Granted	329,500		1.34
Exercised	-		-
Cancelled/expired	(243,531)		2.70
Outstanding at July 31, 2012	2,718,084		3.00	7.43	$	-

(1) Aggregate intrinsic value is defined as the difference between the current market value and the exercise price and is estimated using the closing price of the Company’s common stock on the last trading day of the periods ended as of the dates indicated.

A summary of the Company’s nonvested stock option activity for the period ended July 31, 2012 is as follows:

			Weighted-
			average
			grant date
	Shares		fair value
Nonvested at April 30, 2012	1,005,036	$	1.61
Granted	329,500		1.09
Vested	(133,159)		1.61
Cancelled/expired	(114,176)		1.47
Nonvested at July 31, 2012	1,087,201		1.65

The total intrinsic value of awards exercised during the quarters ended July 31, 2012 and 2011 was $0 and $25,000, respectively. The total fair value of awards vested during the quarters ended July 31, 2012 and 2011 was $0.2 million and $0.3 million, respectively.The total fair value of awards granted during the quarters ended July 31, 2012 and 2011 was $0.4 million and $1.0 million, respectively.

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Stock Compensation Information (Summary Of Remaining Unrecognized Compensation Expense) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Apr. 30, 2013
Schedule Of Employee Service Share-Based Compensation, Allocation Of Not Yet Recognized Period Costs [Line Items]
Nonvested equity awards outstanding, unrecognized compensation expense	$ 1,210
Cost recognition, weighted-average period, years	1 year 2 months 27 days
Remainder Of 2013 [Member]
Schedule Of Employee Service Share-Based Compensation, Allocation Of Not Yet Recognized Period Costs [Line Items]
Nonvested equity awards outstanding, unrecognized compensation expense	477
2014 [Member]
Schedule Of Employee Service Share-Based Compensation, Allocation Of Not Yet Recognized Period Costs [Line Items]
Nonvested equity awards outstanding, unrecognized compensation expense	428
2015 [Member]
Schedule Of Employee Service Share-Based Compensation, Allocation Of Not Yet Recognized Period Costs [Line Items]
Nonvested equity awards outstanding, unrecognized compensation expense	233
2016 [Member]
Schedule Of Employee Service Share-Based Compensation, Allocation Of Not Yet Recognized Period Costs [Line Items]
Nonvested equity awards outstanding, unrecognized compensation expense	$ 72

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Credit Facility (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended
	Jul. 31, 2012
Credit Facility [Abstract]
Revolving credit line, maximum borrowing capacity	$ 8.0
Revolving credit line, current borrowing capacity	8.0
Basis spread on variable reference rate	5.00%
Reference rate	LIBOR
Stated interest rate, minimum	6.50%
Effective interest rate at period end	6.50%
Amount outstanding	$ 5.5

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jul. 31, 2012	Apr. 30, 2012
ASSETS
Cash and cash equivalents	$ 4,347	$ 4,752
Accounts receivable, net of allowances of $181 at July 31, 2012, and $345 at April 30, 2012	8,834	10,968
Prepaid expenses and other current assets	1,377	1,805
Total current assets	14,558	17,525
Property and equipment, net of accumulated depreciation of $5,115 at July 31, 2012 and $4,837 at April 30, 2012	2,581	2,827
Goodwill	11,706	11,706
Intangibles, net	8,305	8,690
Other assets	1,073	1,121
Total assets	38,223	41,869
Current liabilities:
Accounts payable	573	450
Current portion of long term debt	2,002	2,945
Accrued compensation and related expenses	2,005	2,465
Common stock warrant liability	109	569
Other accrued liabilities	766	819
Deferred revenue	7,316	8,412
Total current liabilities	12,771	15,660
Long term debt, net of current portion	17,451	18,306
Deferred tax liabilities, net	760	734
Other long term liabilities	1,079	1,148
Total liabilities	32,061	35,848
Commitments and contingencies
Stockholders' equity:
Preferred stock	2	2
Common stock	15	15
Additional paid-in capital	99,935	99,860
Accumulated other comprehensive income	251	341
Accumulated deficit	(94,041)	(94,197)
Total stockholders' equity	6,162	6,021
Total liabilities and stockholders' equity	$ 38,223	$ 41,869

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Long-Term Debt (Schedule Of Maturities Of Long-term Debt) (Details) (USD $) In Thousands, unless otherwise specified	Jul. 31, 2012
Long-Term Debt [Abstract]
Remainder of 2013	$ 1,647
2014	1,348
2015	1,326
2016	15,132
Long-term Debt, Total	$ 19,453

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Condensed Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Cash flows from operating activities:
Net income (loss)	$ 157	$ (1,778)
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation	278	230
Amortization of intangible assets	384	565
Sale of intangible trade name	(1,000)
Loss on extinguishment of debt		2,166
Amortization of discount on notes payable		43
Interest added to long term debt principal		80
Stock based compensation expense	176	228
Gain from change in fair value of common stock warrant liability	(460)	(445)
Changes in operating assets and liabilities:
Accounts receivable	2,134	2,413
Prepaid expenses and other current assets	427	(154)
Other assets	49	73
Accounts payable	123	(87)
Accrued compensation and related expenses	(463)	(704)
Other accrued liabilities	(89)	(692)
Deferred revenue	(1,102)	(835)
Other long term liabilities	(35)	(120)
Net cash provided by operating activities	579	983
Cash flows from investing activities:
Proceeds from sale of intangible trade name	1,000
Purchases of property and equipment	(32)	(301)
Net cash provided by (used in) investing activities	968	(301)
Cash flows from financing activities:
Proceeds from issuance of common stock		92
Proceeds from issuance of preferred stock, net of issuance costs		3,966
Payment of preferred stock dividends	(66)
Prepayment penalty on extinguishment of debt		(368)
Payments of loan costs		(565)
Payments on revolving line of credit		(2,950)
Borrowings on revolving line of credit		6,500
Borrowings on term loan		16,000
Principal payments under debt obligations	(1,700)	(24,089)
Principal payments on capital leases	(98)	(74)
Net cash used in financing activities	(1,864)	(1,488)
Effect of exchange rate changes on cash and cash equivalents	(88)	(27)
Net decrease in cash and cash equivalents	(405)	(833)
Cash and cash equivalents, beginning of year	4,752	4,577
Cash and cash equivalents, end of year	4,347	3,744
Supplemental cash flow information:
Cash paid for interest	400	556
Cash paid for income taxes	131	119
Supplemental non-cash investing and financing activities:
Accrued preferred stock dividends	35	34
Property and equipment acquired through leases		$ 493

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Stock Compensation Information (Summary Of Non-Vested Stock Option Activity) (Details) (USD $)	3 Months Ended
	Jul. 31, 2012
Stock Compensation Information [Abstract]
Shares, Nonvested at April 30, 2012	1,005,036
Shares, Granted	329,500
Shares, Vested	(133,159)
Shares, Cancelled or expired	(114,176)
Shares, Nonvested at July 31, 2012	1,087,201
Weighted average grant date fair value, Nonvested at April 30, 2012	$ 1.61
Weighted average grant date fair value, Granted	$ 1.09
Weighted average grant date fair value, Vested	$ 1.61
Weighted average grant date fair value, Cancelled or expired	$ 1.47
Weighted average grant date fair value, Nonvested at July 31, 2012	$ 1.65

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Goodwill And Intangible Assets (Tables)

3 Months Ended

Jul. 31, 2012

Goodwill And Intangible Assets [Abstract]

Schedule of Intangible Assets and Goodwill

		Gross				Net	Weighted-
		carrying		Accumulated		carrying	average
July 31, 2012		amount		amortization		amount	useful life
Indefinite Lives:
Goodwill	$	11,706	$	-	$	11,706	-
Finite Lives:
Customer-related		6,236		(3,213)		3,023	7 years
Technology-based		2,638		(1,488)		1,150	5 years
Trademarks		4,600		(468)		4,132	10 years
Trade name		100		(100)		-	2 years
Total	$	25,280	$	(5,269)	$	20,011
		Gross				Net	Weighted-
		carrying		Accumulated		carrying	average
April 30, 2012		amount		amortization		amount	useful life
Indefinite Lives:
Goodwill	$	11,706	$	-	$	11,706	-
Finite Lives:
Customer-related		6,236		(3,043)		3,193	7 years
Technology-based		2,638		(1,410)		1,228	5 years
Trademarks		4,600		(331)		4,269	10 years
Trade name		100		(100)		-	2 years
Total	$	25,280	$	(4,884)	$	20,396

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Fiscal Year Ending April 30		Amount
Remainder of 2013	$	1,153
2014		1,538
2015		1,512
2016		1,096
2017		814
Thereafter		2,192
Total	$	8,305

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Prepaid Expenses and Other Current Assets (Details) (USD $) In Millions, unless otherwise specified	Jul. 31, 2012	Apr. 30, 2012
Prepaid Expenses and Other Current Assets [Abstract]
Prepaid expenses	$ 0.7	$ 1.1
Other current assets	$ 0.7	$ 0.7

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Long-Term Debt (Tables)

3 Months Ended

Jul. 31, 2012

Long-Term Debt [Abstract]

Schedule of Long-Term Debt

		July 31,		April 30,
		2012		2012
Term Note A payable to Wells Fargo Capital Finance, LLC, which was entered into in conjunction with the acquisition of Daegis. Interest is incurred at the prevailing LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at July 31, 2012), payable monthly. Principal is payable over four years with principal payments of $300 quarterly (beginning November 2011) plus an additional annual payment based on the Company’s free cash flow for the year with any remaining amount due at maturity, June 30, 2015. This note is secured by an interest in substantially all of the Company's assets. This note includes certain financial covenants and the Company is in compliance with such covenants at July 31, 2012.	$	9,400	$	11,100
Term Note B payable to Wells Fargo Capital Finance, LLC, which was entered in conjunction with the acquisition of Daegis. Interest is incurred at the prevailing LIBOR rate plus 10.0% per annum with a minimum rate of 12.0% (12.0% at July 31, 2012) payable monthly.Principal is due in full at maturity, June 30, 2015.		4,000		4,000
Wells Fargo Capital Finance, LLC, revolving line of credit, interest rate at prevailing LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at July 31, 2012), payable June 30, 2015.		5,500		5,500
Capital leases, payable in monthly installments through July 2015.		553		651
		19,453		21,251
Less current portion		(2,002)		(2,945)
Total long term debt, net	$	17,451	$	18,306

Schedule of Maturities of Long-term Debt

Fiscal Year Ending April 30,		Amount
Remainder of 2013	$	1,647
2014		1,348
2015		1,326
2016		15,132
	$	19,453

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The Company and Summary of Significant Accounting Policies

3 Months Ended

Jul. 31, 2012

The Company and Summary of Significant Accounting Policies [Abstract]

Basis Of Presentation

DAEGIS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

July 31, 2012

1.Basis of Presentation

The condensed consolidated financial statements have been prepared by Daegis Inc. (the “Company”, “we”, “us”, “our”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The accompanying condensed consolidated financial statements include our accounts and those of our subsidiaries that we control due to ownership of a controlling interest. Intercompany transactions and balances have been eliminated. While the interim financial information contained in this filing is unaudited, such financial statements, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for a fair presentation. The results for interim periods are not necessarily indicative of the results to be expected for the entire fiscal year. These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2012, as filed with the SEC.

Revenue Recognition

The Company generates revenue from software license sales and related services, including maintenance and support, hosting, and consulting and implementation services. The Company licenses its products to end-user customers, including corporate legal and IT departments, law firms, independent software vendors (“ISVs”), international distributors and value-added resellers (“VARs”). The Company’s products are generally sold with a perpetual license. The Company’s contracts with ISVs, VARs and international distributors do not include special considerations such as rights of return, stock rotation, price protection or special acceptance. The Company exercises judgment in connection with the determination of the amount of revenue to be recognized in each accounting period. The nature of each contractual arrangement determines how revenues and related costs are recognized.

For software license arrangements that do not require significant modification or customization of the underlying software, revenue is recognized when the software product or service has been shipped or electronically delivered, the license fees are fixed and determinable, uncertainties regarding customer acceptance are resolved, collectability is probable and persuasive evidence of an arrangement exists.

For fixed price arrangements that require significant modification or customization of software, the Company uses the percentage-of-completion method for revenue recognition. Under the percentage-of-completion method, progress towards completion is generally measured by labor hours.

The Company considers a signed non-cancelable license agreement, a customer purchase order, a customer purchase requisition, or a sales quotation signed by an authorized purchaser of the customer to be persuasive evidence that an arrangement exists such that revenue can be recognized.

The Company’s customer contracts may include multiple-element arrangements that include a delivered element (a software license) and undelivered elements (such as maintenance and support and/or consulting). The value allocated to the undelivered elements is unbundled from the delivered element based on vendor-specific objective evidence (“VSOE”) of fair value of the maintenance and support and/or consulting, regardless of any separate prices stated within the contract. VSOE of fair value is defined as: (i) the price charged when the same element is sold separately, or (ii) if the element has not yet been sold separately, the price for the element established by management having the relevant authority when it is probable that the price will not change before the introduction of the element into the marketplace. The Company then allocates the remaining balance to the delivered element (a software license) regardless of any separate prices stated within the contract using the residual method as the VSOE of fair value of all undelivered elements is determinable.

We defer revenue for any undelivered elements, and recognize revenue for delivered elements only when the VSOE of fair value of undelivered elements are known, uncertainties regarding customer acceptance are resolved, and there are no customer-negotiated refund or return rights affecting the revenue recognized for delivered elements. If we cannot objectively determine the fair value of any undelivered element included in bundled software and service arrangements, we defer revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements.

An assessment of the ability of the Company’s customers to pay is another consideration that affects revenue recognition. In some cases, the Company sells to undercapitalized customers. In those circumstances, revenue recognition is deferred until cash is received, the customer has established a history of making timely payments or the customer’s financial condition has improved. Furthermore, once revenue has been recognized, the Company evaluates the related accounts receivable balance at each period end for amounts that we believe may no longer be collectible. This evaluation is largely done based on a review of the financial condition via credit agencies and historical experience with the customer. Any deterioration in credit worthiness of a customer may impact the Company’s evaluation of accounts receivable in any given period.

Revenue from support and maintenance activities, which consist of fees for ongoing support and unspecified product updates, are recognized ratably over the term of the maintenance contract, typically one year, and the associated costs are expensed as incurred. Consulting and implementation services are performed on a “best efforts” basis and may be billed under time-and-materials or fixed price arrangements. Revenues and expenses relating to providing consulting services are generally recognized as the services are performed. Revenue from hosting activities, which consist of fees for storing customer data, are recognized as the services are performed, and the associated costs are expensed as incurred.

Taxes collected from customers and remitted to the government are presented on a gross basis on the consolidated balance sheet and are not included in revenue on the consolidated statement of operations.At July 31, 2012 and April 30, 2012 the Company had $8,000 and $48,000 of sales taxes payable.

Goodwill and Intangible Assets

Goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is not amortized. Goodwill is tested for impairment on an annual basis as of April 30, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach.Intangible assets are amortized using the straight-line method over their estimated period of benefit. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization. As a result of the most recent impairment test, the Company recorded $15.0 million in the fourth quarter of fiscal 2012 for the impairments of goodwill and intangible assets of the eDiscovery business unit. The Unify and AXS-One business units were not at risk of failing step one of the impairment test.

Recently Issued Accounting Standards

In June 2011, the FASB issued authoritative guidance on the presentation of other comprehensive income.Under the new guidance, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements.The new guidance became effective for Daegis beginning May 1, 2012.The Company has elected to present the total of comprehensive income, the components of net income, and the components of other comprehensive income in two separate but consecutive statements.This guidance does not a have a material effect on the Company’s consolidated financial statements.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, unless otherwise specified	Jul. 31, 2012	Apr. 30, 2012
Condensed Consolidated Balance Sheets [Abstract]
Accounts receivable, allowance	$ 181	$ 345
Property and equipment, accumulated depreciation	$ 5,115	$ 4,837

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Preferred Stock

3 Months Ended

Jul. 31, 2012

Preferred Stock [Abstract]

Preferred Stock

11.Preferred Stock

In June 2011, the Company issued through a private placement 1,666,667 shares of preferred stock to a group of related party institutional investors at a price of $2.40 per share for a total of $4.0 million.The preferred stock will automatically convert on a 1-for-1 basis into shares of common stock of the Company upon the earlier of the second anniversary of the financing, June 30, 2013, or the date on which the Company’s common stock has an average closing price above $4.00 per share during the preceding 30 trading days. The preferred stock includes an annual dividend of 10% payable in cash or stock at the Company’s option.The preferred stock has no other provisions or preferences.During the three months ended July 31, 2012, the Company paid $66,000 in preferred stock dividends ($0.04 per preferred share).As of July 31, 2012, the Company had accrued $35,000 of dividends payable on preferred stock included in other accrued liabilities.

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Document And Entity Information	3 Months Ended
	Jul. 31, 2012
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jul. 31, 2012
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2013
Entity Registrant Name	DAEGIS INC.
Entity Central Index Key	0000880562
Current Fiscal Year End Date	--04-30
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding	14,717,777
Entity Current Reporting Status	Yes
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No

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Earnings (Loss) Per Share

3 Months Ended

Jul. 31, 2012

Earnings (Loss) Per Share [Abstract]

Earnings (Loss) Per Share

12.Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net earnings (loss) less dividends payable on preferred stock by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.For the three months ended July 31, 2011, because of our net loss available to shareholders, potentially dilutive securities were excluded from the per share computations due to their anti-dilutive effect.

(in thousands, except per share amounts)		Three Months Ended
		July 31,
		2012		2011
Net income (loss)	$	157	$	(1,778)
Dividends paid and payable on preferred stock		(101)		(34)
Net income (loss) available to common stockholders	$	56	$	(1,812)
Weighted-average shares of common stock outstanding, basic		14,718		14,601
Effect of dilutive securities		-		-
Weighted-average shares of common stock outstanding, diluted		14,718		14,601
Income (loss) per share of common stock:
Basic	$	0.00	$	(0.12)
Diluted	$	0.00	$	(0.12)

The dilutive securities above represent only those stock options, warrants, convertible debt, and preferred stock whose exercise prices were less than the average market price of the stock during the respective periods and therefore were dilutive. Potentially dilutive securities that are not included in the diluted net income calculation because they would be antidilutive are employee stock options of 2,718,084 and common stock warrants of 1,344,986 for the three months ended July 31, 2012.Potentially dilutive securities that are not included in the diluted net loss calculation because they would be antidilutive are employee stock options of 2,787,768 and common stock warrants of 1,344,986 for the three months ended July 31, 2011.Potentially dilutive securities that are not included in the diluted net income (loss) calculation because they would be antidilutive are 1,666,667 shares of convertible preferred stock for the three months ended July 31, 2012 and 2011.

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Condensed Consolidated Statements Of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Revenues:
eDiscovery	$ 4,073	$ 6,026
Database, archive, and migration	5,565	5,488
Total revenues	9,638	11,514
Operating expenses:
Direct costs of eDiscovery revenue	2,155	2,397
Direct costs of database, archive, and migration revenue	1,282	1,349
Product development	1,884	1,976
Selling, general and administrative	5,033	4,947
Sale of intangible trade name	(1,000)
Total operating expenses	9,354	10,669
Income from operations	284	845
Other income (expenses):
Loss on extinguishment of debt		(2,166)
Gain from change in fair value of common stock warrant liability	460	445
Interest expense	(442)	(900)
Other, net	(93)	49
Total other income (expenses)	(75)	(2,572)
Income (loss) before income taxes	209	(1,727)
Provision for income taxes	52	51
Net income (loss)	$ 157	$ (1,778)
Income (loss) per share:
Basic	$ 0.00	$ (0.12)
Diluted	$ 0.00	$ (0.12)
Weighted-average shares used in computing income (loss) per share:
Basic	14,718	14,601
Diluted	14,718	14,601

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Fair Value Of Financial Instruments

3 Months Ended

Jul. 31, 2012

Fair Value Of Financial Instruments [Abstract]

Fair Value Of Financial Instruments

6. Fair Value of Financial Instruments

We have adopted the FASB guidance on fair value measurements and disclosures, which defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements.

Under this guidance, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company values its warrants based on open form option pricing models which, based on the relevant inputs, render the fair value estimate Level 3. The Company bases its estimates of fair value for liabilities on the amount it would pay a third-party market participant to transfer the liability and incorporates inputs such as equity prices, historical and implied volatilities, dividend rates and prices of convertible securities issued by comparable companies maximizing the use of observable inputs when available. The fair value hierarchy for valuation inputs gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows:

· Level 1 – Quoted prices in active markets for identical assets and liabilities.

· Level 2 – Observable inputs other than those included in Level 1, such as quoted market prices for similar assets and liabilities in active markets or quoted prices for identical assets in inactive markets.

· Level 3 – Unobservable inputs are used when little or no market data is available and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability.

Fair Value on a Recurring Basis

The table below categorizes assets and liabilities measured at fair value on a recurring basis as of July 31, 2012 (in thousands):

		Fair value		Fair value measurement using
		July 31, 2012		Level 1		Level 2		Level 3
Common stock warrant liability	$	109	$	-	$	-	$	109

The following table summarizes the activity of Level 3 inputs measured on a recurring basis for the quarter ended July 31, 2012:

(in thousands)		Common stock warrants
Balance at April 30, 2012	$		569
Issuance of common stock warrants			-
Change in fair value of common stock warrant liability			(460)
Balance at July 31, 2012	$		109

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Credit Facility

3 Months Ended

Jul. 31, 2012

Credit Facility [Abstract]

Credit Facility

5.Credit Facility

On June 30, 2011, the Company entered into a revolving credit note agreement with Wells Fargo. Under the terms of the agreement, the Company is entitled to borrow up to $8.0 million. The total amount that can be borrowed under the revolver is based on a multiplier factor of the trailing twelve months of maintenance revenue.As of July 31, 2012, the Company was eligible to borrow the entire $8.0 million.Interest expense is recorded on funds borrowed at the prevailing LIBOR rate plus 5.00% per annum with a minimum rate of 6.50% (6.50% as of July 31, 2012) and has a maturity date of June 30, 2015.As of July 31, 2012, there was $5.5 million outstanding on the revolver.

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Fair Value Of Financial Instruments (Tables)

3 Months Ended

Jul. 31, 2012

Fair Value Of Financial Instruments [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

		Fair value		Fair value measurement using
		July 31, 2012		Level 1		Level 2		Level 3
Common stock warrant liability	$	109	$	-	$	-	$	109

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation

(in thousands)		Common stock warrants
Balance at April 30, 2012	$		569
Issuance of common stock warrants			-
Change in fair value of common stock warrant liability			(460)
Balance at July 31, 2012	$		109

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Segment Information

3 Months Ended

Jul. 31, 2012

Segment Information [Abstract]

Segment Information

13.Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer. We have evaluated our approach for making operating decisions and assessing the performance of our business and, beginning in the first quarter of fiscal year 2012, we determined that we have two reportable segments: (i) eDiscovery and (ii) database, archive, and migration. The accounting policies of the segments are the same as those described in Note 1. We evaluate performance based on income from operations (total revenues less operating costs).We do not allocate certain corporate costs to each segment and therefore disclose these amounts separately in our segment table.

For the first quarter of fiscal 2013 and 2012, total revenue from the United States was $6.8 million and $8.5 million, respectively. Total revenue from all other countries in the first quarter of fiscal 2013 and 2012 was $2.8 million and $3.0 million, respectively. Total long-lived assets as of July 31, 2012 and April 30, 2012, for the United States, were $23.7 million and $24.3 million, respectively. Total long-lived assets in all other countries were $4,000 as of July 31, 2012 and $5,000 as of April 30, 2012.

		Three Months Ended
(in thousands)		July 31,
		2012		2011
Total revenues:
eDiscovery	$	4,073	$	6,026
Database, archive, and migration		5,565		5,488
Total revenues	$	9,638	$	11,514
Operating expenses:
eDiscovery	$	5,107	$	4,982
Database, archive, and migration		3,553		3,643
Unallocated corporate expenses		694		2,044
Total operating expenses	$	9,354	$	10,669
Income (loss) from operations:
eDiscovery	$	(1,034)	$	1,044
Database, archive, and migration		2,012		1,845
Unallocated corporate expenses		(694)		(2,044)
Total income (loss) from operations	$	284	$	845
		July 31,		April 30,
		2012		2012
Total assets:
eDiscovery	$	27,926	$	29,657
Database, archive, and migration		10,297		12,212
Total assets	$	38,223	$	41,869

Included in unallocated corporate expenses for the three months ended July 31, 2012 is a contra expense of $1.0 million related to the sale of an intangible trade name.

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Maintenance Contracts

3 Months Ended

Jul. 31, 2012

Maintenance Contracts [Abstract]

Maintenance Contracts

9.Maintenance Contracts

The Company offers maintenance contracts to its customers at the time they enter into a product license agreement and renew those contracts, at the customers’ option, annually thereafter. These maintenance contracts are priced as a percentage of the value of the related license agreement. The specific terms and conditions of these initial maintenance contracts and subsequent renewals vary depending upon the product licensed and the country in which the Company does business. Generally, maintenance contracts provide the customer with unspecified product maintenance updates and customer support services. Revenue from maintenance contracts is initially deferred and then recognized ratably over the term of the agreements.

Changes in the Company’s deferred maintenance revenue were as follows (in thousands):

		Three Months Ended
		July 31,
		2012		2011
Deferred maintenance revenue beginning balance	$	8,302	$	8,420
Deferred maintenance revenue recognized during period		(3,683)		(3,867)
Deferred maintenance revenue of new maintenance contracts		2,534		2,814
Deferred maintenance revenue ending balance	$	7,153	$	7,367

Of the deferred maintenance revenue at July 31, 2012 and April 30, 2012, $0.2 million and $0.3 million, respectively, is long-term and is included in other long-term liabilities in the consolidated balance sheet.

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Long-Term Debt

3 Months Ended

Jul. 31, 2012

Long-Term Debt [Abstract]

Long-Term Debt

7.Long-Term Debt

The Company’s long-term debt consists of the following at July 31, 2012 and April 30, 2012 (in thousands):

		July 31,		April 30,
		2012		2012
Term Note A payable to Wells Fargo Capital Finance, LLC, which was entered into in conjunction with the acquisition of Daegis. Interest is incurred at the prevailing LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at July 31, 2012), payable monthly. Principal is payable over four years with principal payments of $300 quarterly (beginning November 2011) plus an additional annual payment based on the Company’s free cash flow for the year with any remaining amount due at maturity, June 30, 2015. This note is secured by an interest in substantially all of the Company's assets. This note includes certain financial covenants and the Company is in compliance with such covenants at July 31, 2012.	$	9,400	$	11,100
Term Note B payable to Wells Fargo Capital Finance, LLC, which was entered in conjunction with the acquisition of Daegis. Interest is incurred at the prevailing LIBOR rate plus 10.0% per annum with a minimum rate of 12.0% (12.0% at July 31, 2012) payable monthly.Principal is due in full at maturity, June 30, 2015.		4,000		4,000
Wells Fargo Capital Finance, LLC, revolving line of credit, interest rate at prevailing LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at July 31, 2012), payable June 30, 2015.		5,500		5,500
Capital leases, payable in monthly installments through July 2015.		553		651
		19,453		21,251
Less current portion		(2,002)		(2,945)
Total long term debt, net	$	17,451	$	18,306

In June 2011 the Company incurred a loss on extinguishment of debt of $2.2 million as a result of the refinancing of the Hercules Term Loan and Credit Facility.The loss included $1.0 million of unamortized loan costs and $0.8 million of warrant discounts on notes payable that were associated with the borrowings under the Hercules Term Loan and Credit Facility.Additionally, the Company was assessed prepayment fees of $0.4 million.

In June 2011 the Company entered into the Wells Fargo Credit Agreement.The Wells Fargo Credit Agreement consists of a $12.0 million Term Note A, a $4.0 million Term Note B, and a revolving credit note agreement whereby Wells Fargo would provide up to $8.0 million. The Term Note A, Term Note B, and revolving line of credit have interest rate of LIBOR plus 5.00%, 10.00% and 5.00%, respectively. The minimum LIBOR used in the interest rate is 1.50% for Term Note A and the revolving line of credit and 2.00% for Term Note B.The Company capitalized $0.6 million of loan costs related to Wells Fargo Credit Agreement.

The Wells Fargo Credit Agreement requires ongoing compliance with certain affirmative and negative covenants. The affirmative covenants include, but are not limited to: (i) maintenance of existence and conduct of business; (ii) compliance with laws; (iii) use of proceeds; and (iv) books and records and inspection. The negative covenants set forth in the Wells Fargo Credit Agreement include, but are not limited to, restrictions on the ability of the Company (and the Company’s subsidiaries): (i) with certain limited exceptions, to create, incur, assume or allow to exist indebtedness; (ii) with certain limited exceptions, to create, incur, assume or allow to exist liens on properties; (iii) with certain limited exceptions, to make certain payments, transfers of property, or investments; or (iv) with certain limited exceptions, to make acquisitions.

The Company is obligated to maintain certain minimum consolidated adjusted EBITDA levels, certain total leverage ratios, and certain fixed charge coverage ratios, all as calculated in accordance with the terms and definitions determining such amounts as contained in the Wells Fargo Credit Agreement. The Wells Fargo Credit Agreement also contains various information and financial reporting requirements.The Company is in compliance with all such covenants and requirements at July 31, 2012.

The Wells Fargo Credit Agreement also contains customary events of default, including without limitation events of default based on payment obligations, repudiation of guaranty obligations, material inaccuracies of representations and warranties, covenant defaults, insolvency proceedings, monetary judgments in excess of certain amounts, change in control, certain ERISA events, and defaults under certain other obligations.

A summary of future payments on long-term debt obligations as of July 31, 2012 is as follows (in thousands):

Fiscal Year Ending April 30,		Amount
Remainder of 2013	$	1,647
2014		1,348
2015		1,326
2016		15,132
	$	19,453

The summary of future payments on long-term debt obligations does not account for the annual payments based on the Company’s free cash flow under Term Note A as noted above. The amount of these payments is not known; however, when they are determined it will accelerate the payment schedule outlined above.

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Other Long-Term Liabilities

3 Months Ended

Jul. 31, 2012

Other Long-Term Liabilities [Abstract]

Other Long-Term Liabilities

8.Other Long-Term Liabilities

Included in other long term liabilities is deferred rent resulting from escalation clauses related to office leases and liabilities related to the unfavorable lease terms associated with the acquisitions of AXS-One, Inc. and Daegis.Additionally there are liabilities related to mandatory employee severance costs associated with a French statutory government regulated plan covering all France employees and long-term deferred maintenance revenue.See the schedule below for details of balances at July 31, 2012 and April 30, 2012 (in thousands).

		July 31,		April 30,
		2012		2012
Deferred rent related to :
Roseville office	$	62	$	83
New York office		120		128
San Francisco office		76		74
Unfavorable lease terms related to:
New Jersey office		274		294
New York office		178		194
Other:
Severance for French employees		123		123
Long term deferred support revenue		246		252
	$	1,079	$	1,148

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Income Taxes

3 Months Ended

Jul. 31, 2012

Income Taxes [Abstract]

Income Taxes

10.Income Taxes

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In general, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the fiscal years before 2006. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. Therefore, no reserves for uncertain income tax positions have been recorded.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of July 31, 2012 and April 30, 2012, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor did the Company record any interest expense associated with any unrecognized tax benefits in the three months ended July 31, 2012 and 2011.

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Stock Compensation Information (Summary Of Stock Option Activity) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		12 Months Ended
	Jul. 31, 2012		Apr. 30, 2012
Stock Compensation Information [Abstract]
Shares, Outstanding at April 30, 2012			2,632,115
Shares, Granted	329,500
Shares, Canceled or expired	(243,531)
Shares, Outstanding at July 31, 2012	2,718,084
Weighted average exercise price, Outstanding at April 30, 2012	$ 3.18
Weighted average exercise price, granted	$ 1.34
Weighted average exercise price, canceled or expired	$ 2.70
Weighted average exercise price, Outstanding at July 31, 2012	$ 3.00		$ 3.18
Weighted average remaining contractual term (in years), Outstanding April 30, 2012	7 years 5 months 5 days		7 years 2 months 27 days
Aggregate intrinsic value, Outstanding at April 30, 2012	$ 4,449	[1]
Weighted average remaining contractual term (in years), Outstanding at July 31, 2012	7 years 5 months 5 days		7 years 2 months 27 days

[1] Aggregate intrinsic value is defined as the difference between the current market value and the exercise price and is estimated using the closing price of the Company’s common stock on the last trading day of the periods ended as of the dates indicated.

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Segment Information (Narrative) (Details) (USD $)	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011	Apr. 30, 2012
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 9,638,000	$ 11,514,000
Contra expense	1,000,000
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	6,800,000	8,500,000
Long-Lived Assets	23,700,000		24,300,000
All Other Countries [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	2,800,000	3,000,000
Long-Lived Assets	$ 4,000		$ 5,000

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Stock Compensation Information (Tables)

3 Months Ended

Jul. 31, 2012

Stock Compensation Information [Abstract]

Schedule Of Equity-Based Compensation Expense From Operations

		Three Months Ended
		July 31,
		2012		2011
Direct costs of revenue	$	10	$	18
Product development		25		39
Selling, general and administrative		141		171
Total equity-based compensation	$	176	$	228

Summary Of Remaining Unrecognized Compensation Expense

Fiscal Year Ending April 30,		Amount
Remainder of 2013	$	477
2014		428
2015		233
2016		72
Total	$	1,210

Summary Of Fair Value Assumptions

		Three Months Ended
		July 31,
		2012		2011
Expected term (in years)		4.0		4.0
Risk-free interest rate		0.5	%	1.1	%
Volatility		77	%	89	%
Dividend yield		-		-
Weighted-average fair value of stock options granted during the year	$	1.09	$	2.42

Summary Of Stock Option Activity

			Weighted-	Weighted-
			average	average remaining		Aggregate
			exercise	contractual		intrinsic
	Shares		price	term (in years)		value (1)
Outstanding at April 30, 2012	2,632,115	$	3.18	7.24	$	4,449
Granted	329,500		1.34
Exercised	-		-
Cancelled/expired	(243,531)		2.70
Outstanding at July 31, 2012	2,718,084		3.00	7.43	$	-

(1) Aggregate intrinsic value is defined as the difference between the current market value and the exercise price and is estimated using the closing price of the Company’s common stock on the last trading day of the periods ended as of the dates indicated.

Summary Of Non-Vested Stock Option Activity

			Weighted-
			average
			grant date
	Shares		fair value
Nonvested at April 30, 2012	1,005,036	$	1.61
Granted	329,500		1.09
Vested	(133,159)		1.61
Cancelled/expired	(114,176)		1.47
Nonvested at July 31, 2012	1,087,201		1.65

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Maintenance Contracts (Tables)

3 Months Ended

Jul. 31, 2012

Maintenance Contracts [Abstract]

Schedule Of Deferred Maintenance Revenue

		Three Months Ended
		July 31,
		2012		2011
Deferred maintenance revenue beginning balance	$	8,302	$	8,420
Deferred maintenance revenue recognized during period		(3,683)		(3,867)
Deferred maintenance revenue of new maintenance contracts		2,534		2,814
Deferred maintenance revenue ending balance	$	7,153	$	7,367

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Earnings (Loss) Per Share (Narrative) (Details)	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Convertible Debt Securities [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities that are not included in the diluted net loss calculation	1,666,667	1,666,667
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities that are not included in the diluted net loss calculation	2,718,084	2,787,768
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities that are not included in the diluted net loss calculation	1,344,986	1,344,986

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Fair Value Of Financial Instruments (Schedule Of Assets And Liabilities Measured At Fair Value On A Recurring Basis) (Details) (USD $) In Thousands, unless otherwise specified	Jul. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liability	$ 109
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liability	$ 109

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Condensed Consolidated Statements Of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Jul. 31, 2012	Jul. 31, 2011
Statement of Other Comprehensive Income [Abstract]
Net income (loss)	$ 157	$ (1,778)
Other comprehensive loss:
Foreign currency translation adjustments, net of tax	(90)	(9)
Comprehensive income (loss)	$ 67	$ (1,787)

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Goodwill And Intangible Assets

3 Months Ended

Jul. 31, 2012

Goodwill And Intangible Assets [Abstract]

Goodwill And Intangible Assets

4.Goodwill and Intangible Assets

The following tables present details of the Company’s goodwill and intangible assets as of July 31, 2012 and April 30, 2012 (in thousands).

		Gross				Net	Weighted-
		carrying		Accumulated		carrying	average
July 31, 2012		amount		amortization		amount	useful life
Indefinite Lives:
Goodwill	$	11,706	$	-	$	11,706	-
Finite Lives:
Customer-related		6,236		(3,213)		3,023	7 years
Technology-based		2,638		(1,488)		1,150	5 years
Trademarks		4,600		(468)		4,132	10 years
Trade name		100		(100)		-	2 years
Total	$	25,280	$	(5,269)	$	20,011
		Gross				Net	Weighted-
		carrying		Accumulated		carrying	average
April 30, 2012		amount		amortization		amount	useful life
Indefinite Lives:
Goodwill	$	11,706	$	-	$	11,706	-
Finite Lives:
Customer-related		6,236		(3,043)		3,193	7 years
Technology-based		2,638		(1,410)		1,228	5 years
Trademarks		4,600		(331)		4,269	10 years
Trade name		100		(100)		-	2 years
Total	$	25,280	$	(4,884)	$	20,396

Acquired finite-lived intangibles are generally amortized on a straight-line basis over their estimated useful life. The useful life of finite-lived intangibles is the period over which the asset is expected to contribute directly or indirectly to future cash flows of the Company.Intangible assets amortization expense for the three months ended July 31, 2012 and 2011 was $0.4 million and $0.6 million, respectively. The estimated future amortization expense related to intangible assets as of July 31, 2012 is as follows (in thousands):

Fiscal Year Ending April 30		Amount
Remainder of 2013	$	1,153
2014		1,538
2015		1,512
2016		1,096
2017		814
Thereafter		2,192
Total	$	8,305

There was no activity in the Company's goodwill account during the three months ended July 31, 2012 and 2011.

Goodwill at July 31, 2012, represents the excess of purchase prices over the sum of the amounts assigned to assets acquired less liabilities assumed.The Company believes these acquisitions will produce the following results:

·Increased Market Presence and Opportunities: The addition of the acquired companies should increase the combined company’s market presence and opportunities for growth in sales and earnings.
 

·Enhanced Product Mix: The complementary nature of the Company’s products with those of the acquired companies should benefit current customers and provide the combined company with the ability to access new customers.
 

·Operating Efficiencies: The combination of the Company and the acquired companies provides the opportunity for potential economies of scale and cost savings.

The Company believes these primary factors support the amount of goodwill recorded as a result of the purchase price for companies it has acquired. Goodwill is tested for impairment on an annual basis as of April 30, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach.No indicators of potential impairment existed at July, 31 2012.

Pursuant to the accounting guidance for goodwill and other intangible assets, the measurement of impairment of goodwill consists of two steps. If the Company determines it is not more likely than not that the fair value of a business unit is less than its carrying amount, then the first step is performed.In the first step, the fair value of the Company is compared to its carrying value. The Company determined that the asset group to be tested for recoverability is at the business unit level as it is the lowest level at which cash flows are identifiable.The seconds step is to determine the implied fair values of the business units’ goodwill, and to compare them to the carrying values of the business units’ goodwill. This second step includes valuing all of the tangible and intangible assets and liabilities of the business units as if they had been acquired in a business combination to determine the implied fair values of goodwill.The business units that contain the goodwill and intangible assets are Unify, Daegis, and AXS-One.

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Earnings (Loss) Per Share (Tables)

3 Months Ended

Jul. 31, 2012

Earnings (Loss) Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

(in thousands, except per share amounts)		Three Months Ended
		July 31,
		2012		2011
Net income (loss)	$	157	$	(1,778)
Dividends paid and payable on preferred stock		(101)		(34)
Net income (loss) available to common stockholders	$	56	$	(1,812)
Weighted-average shares of common stock outstanding, basic		14,718		14,601
Effect of dilutive securities		-		-
Weighted-average shares of common stock outstanding, diluted		14,718		14,601
Income (loss) per share of common stock:
Basic	$	0.00	$	(0.12)
Diluted	$	0.00	$	(0.12)

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Goodwill And Intangible Assets (Schedule Of Inangible Assets And Goodwill) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Jul. 31, 2012	Apr. 30, 2012
Finite-Lived Intangible Assets [Line Items]
Goodwill, Net carrying amount	$ 11,706	$ 11,706
Finite-lived intangible assets, Accumulated amortization	(5,269)	(4,884)
Finite-lived intangible assets, Net carrying amount	8,305
Intangible assets, Gross carrying amount	25,280	25,280
Intangible assets, Net carrying amount	20,011	20,396
Goodwill [Member]
Finite-Lived Intangible Assets [Line Items]
Goodwill, Gross carrying amount	11,706	11,706
Goodwill, Net carrying amount	11,706	11,706
Customer-Related [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, Gross carrying amount	6,236	6,236
Finite-lived intangible assets, Accumulated amortization	(3,213)	(3,043)
Finite-lived intangible assets, Net carrying amount	3,023	3,193
Finite-lived intangible assets, Weighted-average useful life	7 years	7 years
Technology-Based [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, Gross carrying amount	2,638	2,638
Finite-lived intangible assets, Accumulated amortization	(1,488)	(1,410)
Finite-lived intangible assets, Net carrying amount	1,150	1,228
Finite-lived intangible assets, Weighted-average useful life	5 years	5 years
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, Gross carrying amount	4,600	4,600
Finite-lived intangible assets, Accumulated amortization	(468)	(331)
Finite-lived intangible assets, Net carrying amount	4,132	4,269
Finite-lived intangible assets, Weighted-average useful life	10 years	10 years
Trade Names [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, Gross carrying amount	100	100
Finite-lived intangible assets, Accumulated amortization	$ (100)	$ (100)
Finite-lived intangible assets, Weighted-average useful life	2 years	2 years

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The Company and Summary of Significant Accounting Policies (Policy)

3 Months Ended

Jul. 31, 2012

The Company and Summary of Significant Accounting Policies [Abstract]

Revenue Recognition

Revenue Recognition

The Company generates revenue from software license sales and related services, including maintenance and support, hosting, and consulting and implementation services. The Company licenses its products to end-user customers, including corporate legal and IT departments, law firms, independent software vendors (“ISVs”), international distributors and value-added resellers (“VARs”). The Company’s products are generally sold with a perpetual license. The Company’s contracts with ISVs, VARs and international distributors do not include special considerations such as rights of return, stock rotation, price protection or special acceptance. The Company exercises judgment in connection with the determination of the amount of revenue to be recognized in each accounting period. The nature of each contractual arrangement determines how revenues and related costs are recognized.

For software license arrangements that do not require significant modification or customization of the underlying software, revenue is recognized when the software product or service has been shipped or electronically delivered, the license fees are fixed and determinable, uncertainties regarding customer acceptance are resolved, collectability is probable and persuasive evidence of an arrangement exists.

For fixed price arrangements that require significant modification or customization of software, the Company uses the percentage-of-completion method for revenue recognition. Under the percentage-of-completion method, progress towards completion is generally measured by labor hours.

The Company considers a signed non-cancelable license agreement, a customer purchase order, a customer purchase requisition, or a sales quotation signed by an authorized purchaser of the customer to be persuasive evidence that an arrangement exists such that revenue can be recognized.

The Company’s customer contracts may include multiple-element arrangements that include a delivered element (a software license) and undelivered elements (such as maintenance and support and/or consulting). The value allocated to the undelivered elements is unbundled from the delivered element based on vendor-specific objective evidence (“VSOE”) of fair value of the maintenance and support and/or consulting, regardless of any separate prices stated within the contract. VSOE of fair value is defined as: (i) the price charged when the same element is sold separately, or (ii) if the element has not yet been sold separately, the price for the element established by management having the relevant authority when it is probable that the price will not change before the introduction of the element into the marketplace. The Company then allocates the remaining balance to the delivered element (a software license) regardless of any separate prices stated within the contract using the residual method as the VSOE of fair value of all undelivered elements is determinable.

We defer revenue for any undelivered elements, and recognize revenue for delivered elements only when the VSOE of fair value of undelivered elements are known, uncertainties regarding customer acceptance are resolved, and there are no customer-negotiated refund or return rights affecting the revenue recognized for delivered elements. If we cannot objectively determine the fair value of any undelivered element included in bundled software and service arrangements, we defer revenue until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements.

An assessment of the ability of the Company’s customers to pay is another consideration that affects revenue recognition. In some cases, the Company sells to undercapitalized customers. In those circumstances, revenue recognition is deferred until cash is received, the customer has established a history of making timely payments or the customer’s financial condition has improved. Furthermore, once revenue has been recognized, the Company evaluates the related accounts receivable balance at each period end for amounts that we believe may no longer be collectible. This evaluation is largely done based on a review of the financial condition via credit agencies and historical experience with the customer. Any deterioration in credit worthiness of a customer may impact the Company’s evaluation of accounts receivable in any given period.

Revenue from support and maintenance activities, which consist of fees for ongoing support and unspecified product updates, are recognized ratably over the term of the maintenance contract, typically one year, and the associated costs are expensed as incurred. Consulting and implementation services are performed on a “best efforts” basis and may be billed under time-and-materials or fixed price arrangements. Revenues and expenses relating to providing consulting services are generally recognized as the services are performed. Revenue from hosting activities, which consist of fees for storing customer data, are recognized as the services are performed, and the associated costs are expensed as incurred.

Taxes collected from customers and remitted to the government are presented on a gross basis on the consolidated balance sheet and are not included in revenue on the consolidated statement of operations.At July 31, 2012 and April 30, 2012 the Company had $8,000 and $48,000 of sales taxes payable.

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is not amortized. Goodwill is tested for impairment on an annual basis as of April 30, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach.Intangible assets are amortized using the straight-line method over their estimated period of benefit. We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization. As a result of the most recent impairment test, the Company recorded $15.0 million in the fourth quarter of fiscal 2012 for the impairments of goodwill and intangible assets of the eDiscovery business unit. The Unify and AXS-One business units were not at risk of failing step one of the impairment test