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 October 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) 865-3300

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 October 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 October 31, 2012 and April 30, 2012	3
	Unaudited Condensed Consolidated Statements of Operations for the three and six months ended October 31, 2012 and 2011	4
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the three and six months ended October 31, 2012 and 2011	5
	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended October 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	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
SIGNATURE		29
CERTIFICATIONS		30

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

	October 31,			April 30,
	2012			2012
ASSETS
Current assets:
Cash and cash equivalents	$	4,037		$	4,752
Accounts receivable, net of allowances of $259 at October 31, 2012, and $345 at
April 30, 2012		8,956			10,968
Prepaid expenses and other current assets		1,327			1,805
Total current assets		14,320			17,525
Property and equipment, net of accumulated depreciation of $5,393 at October 31,
2012 and $4,837 at April 30, 2012		2,438			2,827
Goodwill		11,706			11,706
Intangibles, net		7,921			8,690
Other assets		1,010			1,121
Total assets	$	37,395		$	41,869
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	398		$	450
Current portion of long term debt		1,190			2,945
Accrued compensation and related expenses		2,032			2,465
Common stock warrant liability		298			569
Other accrued liabilities		999			819
Deferred revenue		6,602			8,412
Total current liabilities		11,519			15,660
Long term debt, net of current portion		17,364			18,306
Deferred tax liabilities, net		841			734
Other long term liabilities		1,165			1,148
Total liabilities		30,889			35,848
Commitments and contingencies		—			—
Stockholders’ equity:
Preferred stock		2			2
Common stock		15			15
Additional paid-in capital		99,989			99,860
Accumulated other comprehensive income		289			341
Accumulated deficit		(93,789	)		(94,197	)
Total stockholders’ equity		6,506			6,021
Total liabilities and stockholders’ equity	$	37,395		$	41,869

Seeaccompanyingnotestounauditedcondensedconsolidatedfinancialstatements.

3

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

	Three Months Ended						Six Months Ended
	October 31,						October 31,
	2012			2011			2012			2011
Revenues:
eDiscovery	$	4,043		$	5,529		$	8,116		$	11,555
Database, archive, and migration		6,302			5,546			11,867			11,034
Total revenues		10,345			11,075			19,983			22,589
Operating expenses:
Direct costs of eDiscovery revenue		2,222			2,234			4,377			4,632
Direct costs of database, archive, and migration revenue		1,273			1,352			2,555			2,700
Product development		1,802			1,863			3,686			3,838
Selling, general and administrative		4,146			4,428			9,179			9,376
Sale of intangible trade name		-			-			(1,000	)		-
Total operating expenses		9,443			9,877			18,797			20,546
Income from operations		902			1,198			1,186			2,043
Other income (expenses)
Loss on extinguishment of debt		-			-			-			(2,166	)
Gain (loss) from change in fair value of common stock warrant
liability		(188	)		158			271			602
Interest expense		(400	)		(469	)		(842	)		(1,369	)
Other, net		(16	)		(24	)		(108	)		26
Total other income (expenses)		(604	)		(335	)		(679	)		(2,907	)
Income (loss) before income taxes		298			863			507			(864	)
Provision for income taxes		46			68			98			119
Net income (loss)	$	252		$	795		$	409		$	(983	)
Income (loss) per share:
Basic	$	0.01		$	0.05		$	0.01		$	(0.08	)
Diluted	$	0.01		$	0.05		$	0.01		$	(0.08	)
Weighted-average shares used in computing income (loss) per share:
Basic		14,718			14,657			14,718			14,629
Diluted		14,729			14,809			14,723			14,629

Seeaccompanyingnotestounauditedcondensedconsolidatedfinancialstatements.

4

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

	Three Months Ended					Six Months Ended
	October 31,					October 31,
	2012		2011			2012			2011
Net income (loss)	$	252	$	795		$	409		$	(983	)
Other comprehensive income (loss):
Foreign currency translation adjustments		38		(9	)		(52	)		(18	)
Comprehensive income (loss)	$	290	$	786		$	357		$	(1,001	)

Seeaccompanyingnotestounauditedcondensedconsolidatedfinancialstatements.

5

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

	Six Months Ended
	October 31,
	2012			2011
Cash flows from operating activities:
Net income (loss)	$	409		$	(983	)
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation		555			509
Amortization of intangible assets		769			1,123
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		330			473
Gain from change in fair value of common stock warrant liability		(271	)		(602	)
Changes in operating assets and liabilities:
Accounts receivable		2,011			4,356
Prepaid expenses and other current assets		478			(210	)
Other assets		112			114
Accounts payable		(52	)		(693	)
Accrued compensation and related expenses		(433	)		(883	)
Other accrued liabilities		44			(820	)
Deferred revenue		(1,674	)		(1,365	)
Other long term liabilities		(12	)		(237	)
Net cash provided by operating activities		1,266			3,071
Cash flows from investing activities:
Proceeds from sale of intangible trade name		1,000			-
Purchases of property and equipment		(166	)		(608	)
Net cash provided by (used in) investing activities		834			(608	)
Cash flows from financing activities:
Proceeds from issuance of common stock		-			148
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		(2,500	)		(24,089	)
Principal payments on capital leases		(197	)		(167	)
Net cash used in financing activities		(2,763	)		(1,525	)
Effect of exchange rate changes on cash and cash equivalents		(52	)		(42	)
Net increase (decrease) in cash and cash equivalents		(715	)		896
Cash and cash equivalents, beginning of year		4,752			4,577
Cash and cash equivalents, end of year	$	4,037		$	5,473
Supplemental cash flow information:
Cash paid for interest	$	758		$	984
Cash paid for income taxes	$	172		$	64
Supplemental non-cash investing and financing activities:
Accrued preferred stock dividends	$	136		$	135
Property and equipment acquired through capital leases	$	-		$	493

Seeaccompanyingnotestounauditedcondensedconsolidatedfinancialstatements.

6

DAEGIS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 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.

During the second quarter of fiscal 2013, an adjustment was made to the diluted earnings per share of common stock amount and the weighted-average number of diluted common stock outstanding that was previously reported for the second quarter of fiscal year 2012. The adjustment was immaterial and had no effect on net income.

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 is known, uncertainties regarding customer acceptance have been 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 October 31, 2012 and April 30, 2012 the Company had $43,000 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.

Recently Issued Accounting Standards

The FASB did not issue any authoritative guidance during the three months ended October 31, 2012 that would have a material effect on the Company’s consolidated financial statements. Additionally, there is no previously issued authoritative guidance that has not been adopted at October 31, 2012 that would 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 and six months ended October 31, 2012 and 2011, equity-based compensation expense from operations was comprised of the following (in thousands):

	Three Months Ended				Six Months Ended
	October 31,				October 31,
	2012		2011		2012		2011
Direct costs of revenue	$	8	$	19	$	18	$	37
Product development		23		40		48		79
Selling, general and administrative		123		187		264		357
Total equity-based compensation	$	154	$	246	$	330	$	473

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 October 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	$	285
2014		371
2015		211
2016		74
2017		2
Total	$	943

The cost above is expected to be recognized over a weighted-average period of 1.19 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 six months ended October 31, 2012 and 2011, were as follows:

	Six Months Ended
	October 31,
	2012			2011
Expected term (in years)		4.0			4.0
Risk-free interest rate		0.5	%		0.8	%
Volatility		80	%		89	%
Dividend yield		-			-
Weighted-average fair value of stock options granted during the year	$	1.02		$	2.39

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 common stock 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 six months ending October 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.

A summary of the Company’s stock option activity for the six months ended October 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	384,500			1.27
Exercised	-			-
Cancelled/expired	(421,468	)		2.70
Outstanding at October 31, 2012	2,595,147		$	2.97	7.19	$	32,377

(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.

9

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

			Weighted-
			average
			grant date
	Shares		fair value
Nonvested at April 30, 2012	1,005,036		$	1.61
Granted	384,500			1.02
Vested	(250,605	)		1.59
Cancelled/expired	(233,743	)		1.51
Nonvested at October 31, 2012	905,188			1.34

The total intrinsic value of awards exercised during the six months ended October 31, 2012 and 2011 was $0 and $26,614, respectively. The total fair value of awards vested during the six months ended October 31, 2012 and 2011 was $0.4 million and $0.6 million, respectively. The total fair value of awards granted during the six months ended October 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 October 31, 2012 consisted of prepaid expenses of $0.6 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 October 31, 2012 and April 30, 2012 (in thousands).

	Gross					Net		Weighted-
	carrying		Accumulated			carrying		average
October 31, 2012	amount		amortization			amount		useful life
Indefinite Lives:
Goodwill	$	11,706	$	-		$	11,706	-
Finite Lives:
Customer-related		6,236		(3,383	)		2,853	7 years
Technology-based		2,638		(1,566	)		1,072	5 years
Trademarks		4,600		(604	)		3,996	10 years
Trade name		100		(100	)		-	2 years
Total	$	25,280	$	(5,653	)	$	19,627
	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 October 31, 2012 and 2011 was $0.4 million and $0.6 million, respectively. Intangible assets amortization expense for the six months ended October 31, 2012 and 2011 was $0.8 million and $1.1 million, respectively. The estimated future amortization expense related to intangible assets as of October 31, 2012 is as follows (in thousands):

Fiscal Year Ending April 30	Amount
Remainder of 2013	$	769
2014		1,538
2015		1,512
2016		1,096
2017		814
Thereafter		2,192
Total	$	7,921

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

Goodwill at October 31, 2012, represents the excess of purchase price 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 October 31, 2012.

Pursuant to the accounting guidance for goodwill and other intangible assets, the Company performs a qualitative assessment to test a business unit’s goodwill for impairment. Based on our qualitative assessment, 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, the two step impairment test will be 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 Database, eDiscovery, and Archive.

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 October 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 October 31, 2012) and has a maturity date of June 30, 2015. As of October 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 October 31, 2012 (in thousands):

	Fair value		Fair value measurement using
	October 31, 2012		Level 1		Level 2		Level 3
Common stock warrant liability	$	298	$	-	$	-	$	298

The following table summarizes the activity of Level 3 inputs measured on a recurring basis for the six months ended October 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		(271	)
Balance at October 31, 2012	$	298

7. Long-Term Debt

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

	October 31,			April 30,
	2012			2012
Term Note A payable to Wells Fargo Capital Finance, LLC. Interest is incurred at the prevailing LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at October 31, 2012), payable monthly. Principal is payable over four years with principal payments of $239 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. As a result of prior free cash flow payments, the quarterly principal payment was decreased from $300 to $239. 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 October 31, 2012.	$	8,600		$	11,100
Term Note B payable to Wells Fargo Capital Finance, LLC. Interest is incurred at the prevailing LIBOR rate plus 10.0% per annum with a minimum rate of 12.0% (12.0% at October 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 October 31, 2012), payable June 30, 2015.		5,500			5,500
Capital leases, payable in monthly installments through July 2015.		454			651
		18,554			21,251
Less current portion		(1,190	)		(2,945	)
Total long term debt, net	$	17,364		$	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.

13

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 minimum liquidity 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 October 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 principal payments on long-term debt obligations as of October 31, 2012 is as follows (in thousands):

Fiscal Year Ending April 30,	Amount
Remainder of 2013	$	626
2014		1,104
2015		1,081
2016		15,743
	$	18,554

The summary of future principal 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.

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 October 31, 2012 and April 30, 2012 (in thousands).

	October 31,		April 30,
	2012		2012
Deferred rent related to :
Roseville office	$	42	$	83
New York office		117		128
San Francisco office		79		74
Unfavorable lease terms related to:
New Jersey office		254		294
New York office		162		194
Other:
Severance for French employees		123		123
Long term deferred support revenue		388		252
	$	1,165	$	1,148

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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, generally on an annual basis 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						Six Months Ended
	October 31,						October 31,
	2012			2011			2012			2011
Deferred maintenance revenue beginning balance	$	7,153		$	7,367		$	8,302		$	8,420
Deferred maintenance revenue recognized during
period		(4,346	)		(3,903	)		(8,028	)		(7,770	)
Deferred maintenance revenue of new maintenance
contracts		3,795			3,338			6,328			6,152
Deferred maintenance revenue ending balance	$	6,602		$	6,802		$	6,602		$	6,802

Of the deferred maintenance revenue at October 31, 2012 and April 30, 2012, $0.4 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

For the second quarter of fiscal 2013, the Company recorded $46,000 in federal, state, and foreign income tax expense. For the second quarter of fiscal 2012, the Company recorded $68,000 in federal, state, and foreign income tax expense. For the six months ended October 31, 2012 the Company recorded $98,000 in federal, state, and foreign income tax expense. For the six months ended October 31, 2011 the Company recorded $119,000 in federal, state, and foreign income tax expense.

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 October 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 six months ended October 31, 2012 and 2011.

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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 six months ended October 31, 2012, the Company paid $66,000 in preferred stock dividends ($0.04 per preferred share). As of October 31, 2012, the Company had accrued $136,000 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 six months ended October 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						Six Months Ended
	October 31,						October 31,
	2012			2011			2012			2011
Net income (loss)	$	252		$	795		$	409		$	(983	)
Dividends paid and payable on preferred stock		(101	)		(101	)		(202	)		(135	)
Net income (loss) available to common stockholders	$	151		$	694		$	207		$	(1,118	)
Weighted-average shares of common stock outstanding, basic		14,718			14,657			14,718			14,629
Effect of dilutive securities		11			152			5			-
Weighted-average shares of common stock outstanding, diluted		14,729			14,809			14,723			14,629
Income (loss) per share of common stock:
Basic	$	0.01		$	0.05		$	0.01		$	(0.08	)
Diluted	$	0.01		$	0.05		$	0.01		$	(0.08	)

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 aggregating a weighted average of 2,629,497 shares and common stock warrants of 909,042 for the three months ended October 31, 2012. Potentially dilutive securities that are not included in the diluted net income calculation because they would be antidilutive are employee stock options aggregating a weighted average of 2,223,869 shares and common stock warrants of 909,042 for the three months ended October 31, 2011. Potentially dilutive securities that are not included in the diluted net income calculation because they would be antidilutive are employee stock options aggregating a weighted average of 2,724,519 shares and common stock warrants of 909,042 for the six months ended October 31, 2012. Potentially dilutive securities that are not included in the diluted net loss calculation because they would be antidilutive are employee stock options aggregating a weighted average of 2,783,065 shares and common stock warrants of 1,344,986 for the six months ended October 31, 2011. Potentially dilutive securities that are not included in the diluted net income (loss) calculation because they would be antidilutive include 1,666,667 shares of convertible preferred stock for the three and six months ended October 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 Note 1 of Part III, Item 15 of our Annual Report on Form 10-K for our fiscal year ended April 30, 2012. 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 second quarter of fiscal 2013 and 2012, total revenue from the United States was $6.7 million and $8.2 million, respectively. Total revenue from all other countries in the second quarter of fiscal 2013 and 2012 was $3.6 million and $2.9 million, respectively. For the six months ended October 31, 2012 and 2011, total revenue from the United States was $13.6 million and $16.6 million, respectively. Total revenue from all other countries for the six months ended October 31, 2012 and 2011 was $6.4 million and $6.0 million, respectively. Total long-lived assets as of October 31, 2012 and April 30, 2012, for the United States, were $23.1 million and $24.3 million, respectively. Total long-lived assets in all other countries were $3,000 as of October 31, 2012 and $5,000 as of April 30, 2012.

	Three Months Ended						Six Months Ended
(in thousands)	October 31,						October 31,
	2012			2011			2012			2011
Total revenues:
eDiscovery	$	4,043		$	5,529		$	8,116		$	11,555
Database, archive, and migration		6,302			5,546			11,867			11,034
Total revenues	$	10,345		$	11,075		$	19,983		$	22,589
Operating expenses:
eDiscovery	$	4,326		$	4,933		$	9,433		$	9,915
Database, archive, and migration		3,577			3,597			7,130			7,240
Unallocated corporate expenses		1,540			1,347			2,234			3,391
Total operating expenses	$	9,443		$	9,877		$	18,797		$	20,546
Income (loss) from operations:
eDiscovery	$	(283	)	$	596		$	(1,317	)	$	1,640
Database, archive, and migration		2,725			1,949			4,737			3,794
Unallocated corporate expenses		(1,540	)		(1,347	)		(2,234	)		(3,391	)
Total income (loss) from operations	$	902		$	1,198		$	1,186		$	2,043
	October 31,			April 30,
	2012			2012
Total assets:
eDiscovery	$	27,093		$	29,657
Database, archive, and migration		10,302			12,212
Total assets	$	37,395		$	41,869

Included in unallocated corporate expenses for the six months ended October 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 in the Company’s Annual Report on Form 10-K under “Business – Risk Factors” and in the Company’s other filings with the SEC. 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 and Estimates

Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP) as set forth in the Financial Accounting Standards Board’s Accounting Standards Codification (Codification) and consider the various staff accounting bulletins and other applicable guidance issued by the SEC. GAAP, as set forth within the Codification, requires us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. To the extent there are differences between these estimates, judgments or assumptions and actual results, our financial statements will be affected. The accounting policies that reflect our more significant estimates, judgments and assumptions and which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

• Revenue Recognition
• Goodwill and Intangible Assets
• Deferred Tax Asset Valuation Allowance
• Account Receivable and Allowances for Doubtful Accounts
• Accounting for Stock-based Compensation
• Fair Value of Common Stock Warrant Liability

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting among available alternatives would not produce a materially different result. Our senior management has reviewed these critical accounting policies and related disclosures with the Finance and Audit Committee of the Board of Directors.

During the second quarter of fiscal 2013, there were no significant changes to our critical accounting policies and estimates. Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in Part II, Item 7 of our Annual Report on Form 10-K for our fiscal year ended April 30, 2012 provides a more complete discussion of our critical accounting policies and estimates.

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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						Six Months Ended
	October 31,						October 31,
	2012			2011			2012			2011
Revenues:
eDiscovery	39.1		%	49.9		%	40.6		%	51.2		%
Database, archive, and migration	60.9			50.1			59.4			48.8
Total revenues	100.0			100.0			100.0			100.0
Operating expenses:
Direct costs of eDiscovery revenue	21.5			20.2			21.9			20.5
Direct costs of database, archive, and migration revenue	12.3			12.2			12.8			12.0
Product development	17.4			16.8			18.5			17.0
Selling, general and administrative	40.1			40.0			45.9			41.5
Sale of intangible trade name	-			-			(5.0	)		-
Total operating expenses	91.3			89.2			94.1			91.0
Income from operations	8.7			10.8			5.9			9.0
Other income (expense):
Loss on extinguishment of debt	-			-			-			(9.6	)
Gain (loss) from change in fair value of common stock
warrant liability	(1.8	)		1.4			1.4			2.7
Interest expense	(3.9	)		(4.2	)		(4.2	)		(6.1	)
Other, net	(0.1	)		(0.2	)		(0.6	)		0.1
Total other income (expenses)	(5.8	)		(3.0	)		(3.4	)		(12.9	)
Income (loss) before income taxes	2.9			7.8			2.5			(3.9	)
Provision for income taxes	0.5			0.6			0.5			0.5
Net income (loss)	2.4			7.2			2.0			(4.4	)

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 second quarter of fiscal 2013 were $10.3 million, a decrease of $0.8 million from the second quarter of fiscal 2012. This represents a decrease of 7% from the second quarter of fiscal 2011 revenues of $11.1 million. Total revenues for the six months ended October 31, 2012 were $20.0 million, a decrease of $2.6 million. This represents a decrease of 12% over revenues from the six months ended October 31, 2011 of $22.6 million. Total eDiscovery revenues in the second quarter of fiscal 2013 were $4.0 million, a decrease of $1.5 million from the second quarter of fiscal 2012. This represents a decrease of 27% over the second quarter of fiscal 2012 revenues of $5.5 million. Total eDiscovery revenues for the six months ended October 31, 2012 were $8.1 million, a decrease of $3.5 million from the six months ended October 31, 2011. This represents a decrease of 30% in revenue from the six months ended October 31, 2011 revenues of $11.6 million. The decrease in eDiscovery revenue for the three and six months ended October 31, 2012 is primarily related to customers having fewer large legal matters in process during the period compared to the three and six months ended October 31, 2011. Total database, archive, and migration revenues in the second quarter of fiscal 2013 were $6.3 million, an increase of $0.8 million from the second quarter of fiscal 2012. This represents an increase of 14% from the second quarter of fiscal 2012 revenues of $5.5 million. Total database, archive, and migration revenues for the six months ended October 31, 2012 were $11.9 million, an increase of $0.9 million from the six months ended October 31, 2011. This represents an increase of 8% in revenue from the six months ended October 31, 2011 revenues of $11.0 million. The increase in database, archive, and migration revenue for the three and six and months ending October 31, 2012 is primarily due to increased activity in the current year on large government migration projects, the receipt of a large maintenance renewal, and an increase in archive license sales.

20

For the second quarter of fiscal 2013 and 2012, total revenues from the United States were 65% and 74% of total revenues, respectively. Total revenue from the United States in absolute dollars was $6.7 million for the second quarter of fiscal 2013 and $8.2 million for the second quarter of fiscal 2012. Total revenue from all other countries was $3.6 million in the second quarter of fiscal 2013 and $2.9 million for the second quarter of fiscal 2012. On a percentage basis, revenue from other countries was 35% for the second quarter of fiscal 2013 and 26% for the second quarter of fiscal 2012.

For the six months ended October 31, 2012 and 2011, total revenues from the United States were 68% and 74% of total revenues, respectively. Total revenue from the United States in absolute dollars was $13.6 million and $16.6 million for the six months ended October 31, 2012 and 2011, respectively. For the six months ended October 31, 2012 and 2011, total revenues from all other countries were 32% and 26% of total revenues, respectively. Total revenue from all other countries in absolute dollars was $6.4 million and $6.0 million for the six months ended October 31, 2012 and 2011, respectively.

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. A majority of these costs are fixed in nature and generally don’t fluctuate with changes in revenue. Direct costs of eDiscovery revenue were $2.2 million for the second quarter of both fiscal 2013 and fiscal 2012. For the six months ended October 31, 2012 and 2011, the direct costs of eDiscovery revenue were $4.4 million and $4.6 million, 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 migration revenue were $1.3 million and $1.4 million for the second quarter of fiscal 2013 and fiscal 2012, respectively. For the six months ended October 31, 2012 and 2011, direct costs of database, archive, and migration revenue were $2.6 million and $2.7 million, respectively.

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 second quarter of fiscal 2013 were $1.8 million compared to $1.9 million in the same period of fiscal 2012. For the six months ended October 31, 2012 and 2011, product development expenses were $3.7 million and $3.8 million, respectively.

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 $4.1 million in the second quarter of fiscal 2013 and $4.4 million for the second quarter of fiscal 2012. For the second quarter of fiscal 2013, the major components of SG&A were sales expenses of $1.7 million, marketing expenses of $0.4 million and general and administrative expenses of $2.0 million. The major components of SG&A for the second quarter of fiscal 2012 were sales expenses of $1.9 million, marketing expenses of $0.5 million and general and administrative expenses of $2.0 million. As a percentage of total revenue, SG&A expenses were 40% in the second quarter of fiscal 2013 and 40% in the second quarter of fiscal 2012. In the six months ended October 31, 2012 and 2011, our SG&A expenses were $9.2 million and $9.4 million, respectively. The major components of SG&A for the six month period ended October 31, 2012 were sales expenses of $3.9 million, marketing expenses of $0.8 million and general and administrative expenses of $4.5 million. The major components of SG&A for the six month period ended October 31, 2011 were sales expenses of $3.8 million, marketing expenses of $1.2 million and general and administrative expenses of $4.4 million. As a percentage of total revenue, SG&A expenses were 46% in the first six months of fiscal 2013 and 42% in the first six months 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.

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Gain (Loss) from Change in Fair Value of Common Stock Warrant Liability.The change in fair value of common stock warrant liability for the three and six months ended October 31, 2012 resulted in a loss of $0.2 million and a gain of $0.3 million, respectively. The change in fair value of common stock warrant liability for the three and six months ended October 31, 2011 resulted in a gain of $0.2 million and $0.6 million, respectively. The gains are due primarily to a decrease in the Company’s common stock share price during the period. The loss is due primarily to an increase in the Company’s common stock share price during the period.

Interest Expense. Interest expense is primarily the result of interest on outstanding debt. Interest expense for the second quarter of fiscal 2013 and 2012 was $0.4 million and $0.5 million, respectively. For the six months ended October 31, 2012 and 2011, interest expense was $0.8 million and $1.4 million, respectively. The decrease in the interest expense for the six months ended October 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 second quarter of fiscal 2013 and 2012 were $17,000 and $26,000, respectively. Foreign exchange rate losses for the six months ended October 31, 2012 were $112,000. Foreign exchange rate gains for the six months ended October 31, 2011 were $21,000. Other income for the second quarter of fiscal 2013 and 2012 was $1,000 and $2,000, respectively. Other income for the six months ended October 31, 2012 and October 31, 2011 was $4,000 and $5,000, respectively.

Provision for Income Taxes. For the second quarter of fiscal 2013, the Company recorded $46,000 in federal, state, and foreign income tax expense. For the second quarter of fiscal 2012, the Company recorded $68,000 in federal, state, and foreign income tax expense. For the six months ended October 31, 2012 the Company recorded $98,000 in federal, state, and foreign income tax expense. For the six months ended October 31, 2011 the Company recorded $119,000 in federal, state, and foreign income tax expense.

Liquidity and Capital Resources

At October 31, 2012, the Company had cash and cash equivalents of $4.0 million, compared to $4.8 million at April 30, 2012. The Company had net accounts receivable of $9.0 million as of October 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 $239,000 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. As a result of prior free cash flow payments, the quarterly principal payment was decreased from $300,000 to $239,000. The Company incurs interest at the prevailing LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at October 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 October 31, 2012). As of October 31, 2012 there is $12.6 million outstanding on the term notes of which $1.0 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 October 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 October 31, 2012, the Company was eligible to borrow the entire amount of $8.0 million. As of October 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.

22

The Company is obligated to maintain certain minimum consolidated adjusted EBITDA levels, certain minimum liquidity 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 October 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 six months ended October 31, 2012, the Company paid $66,000 in preferred stock dividends. As of October 31, 2012, the Company had accrued $136,000 of dividends payable on preferred stock.

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

As of October 31, 2012, the Company has $0.5 million in capital leases payable, $0.2 million of which is current.

Operating Cash Flows. For the first six months of fiscal year 2013 cash provided by operations was $1.3 million. Cash flows provided by operations for the first six months of fiscal 2013 principally resulted from net income of $0.4 million, a decrease in accounts receivable of $2.0 million, a decrease in prepaid expenses and other current assets of $0.5 million, a decrease in other assets of $0.1 million, amortization of intangible assets of $0.8 million, depreciation of $0.6 million, and stock based compensation expense of $0.3 million. Offsetting these amounts was a decrease in account payables of $0.1 million, a decrease in accrued compensation and related expenses of $0.4 million, a decrease in deferred revenue of $1.7 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 $0.3 million.

For the first six months of fiscal year 2012 cash provided by operations was $3.1 million. Cash flows provided by operations for the first six months of fiscal 2012 principally resulted from a decrease in accounts receivable of $4.4 million, a decrease in other assets of $0.1 million, amortization of intangible assets of $1.1 million, depreciation of $0.5 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 $0.5 million. Offsetting these amounts was a net loss of $1.0 million, an increase in prepaid expenses and other current assets of $0.2 million, a decrease in accounts payable of $0.7 million, a decrease in accrued compensation and related expenses of $0.9 million, a decrease in other accrued liabilities of $0.8 million, a decrease in deferred revenue of $1.4 million, a decrease in other long term liabilities of $0.2 million, and a gain from change in fair value of common stock warrant liability of $0.6 million.

Investing Cash Flows. Net cash provided by investing activities was $0.8 million for the first six 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 $0.2 million. Cash flows used in investing activities was $0.6 million for the first six 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 six months of fiscal 2013 was $2.8 million. Cash used in financing activities was the result of $2.5 million of principal payments on debt obligations, $0.2 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 six 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 on debt obligations, $0.2 million of principal payments on capital leases, $3.0 million of payments on the revolving line of credit, $0.6 million of payment of loan costs, and $0.4 million of prepayment penalty on extinguishment of debt.

23

A summary of certain contractual obligations as October 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	$	18,100	$	956	$	17,144	$	-	$	-
Estimated interest expense		3,507		1,370		2,137		-		-
Other liabilities		123		-		-		-		123
Capital lease obligations		454		234		220		-		-
Operating leases		4,736		1,493		2,189		1,054		-
Total contractual cash obligations	$	26,920	$	4,053	$	21,690	$	1,054	$	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 $4.0 million as of October 31, 2012. The Company had no short-term investments at October 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 October 31, 2012 is approximately 0.86%. 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 October 31, 2012, there was $12.6 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 October 31, 2012 the Company had cash held in foreign currencies of $0.6 million in Euros, $40,000 in Canadian dollars, $0.2 million in pounds sterling, and $0.3 million in Australian dollars. At October 31, 2012 the Company had accounts receivable in foreign currencies of $1.2 million in Euros, $0.5 million in pounds sterling, $0.2 million in Australian dollars, $35,000 in Japanese yen, and $14,000 in Polish zloty. 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 October 31, 2012. The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. 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.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5) or combination of control deficiencies such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected.

As of October 31, 2012, our management identified a material weakness in our internal control over financial reporting surrounding our contract modification process. Management identified and corrected the financial impact resulting from the material weakness prior to the release of any external financial information so there is no effect on any previously released information.

Management is currently considering additional internal controls surrounding our contract modification process as part of a remediation plan and intends to implement such controls in prompt manner.

(b) Changes in Internal Controls. There have been no changes in our internal control over financial reporting that occurred during the three months ended October 31, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control 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 October 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 and our Quarterly Report on Form 10-Q for the quarter ended July 31, 2012. There have been no material changes in our risks from such descriptions.

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

None

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosure

Not applicable

Item 5. Other Information

None

27

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.

28

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: December 14, 2012	Daegis Inc.
	(Registrant)
	By:
	/s/ STEVEN D. BONHAM
	Steven D. Bonham
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

29

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: December 14, 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: December 14, 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 October 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: December 14, 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 October 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: December 14, 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	Oct. 31, 2012
Goodwill And Intangible Assets [Abstract]
Remainder of 2013	$ 769
2014	1,538
2015	1,512
2016	1,096
2017	814
Therafter	2,192
Finite-lived intangible assets, Net carrying amount	$ 7,921

XML

Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011	Oct. 31, 2012	Oct. 31, 2011
Income Taxes [Abstract]
Income tax expense	$ 46	$ 68	$ 98	$ 119

XML

Other Long-Term Liabilities (Schedule Of Other Long-Term Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Oct. 31, 2012	Apr. 30, 2012
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	$ 1,165	$ 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	388	252
Roseville Office [Member] | Deferred Rent [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	42	83
New York Office [Member] | Deferred Rent [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	117	128
New York Office [Member] | Unfavorable Lease Terms [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	162	194
San Francisco Office [Member] | Deferred Rent [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	79	74
New Jersey Office [Member] | Unfavorable Lease Terms [Member]
Other Long-Term Liabilities [Line Items]
Other Liabilities, Noncurrent	$ 254	$ 294

XML

Stock Compensation Information (Summary Of Fair Value Assumptions) (Details) (USD $)	6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011
Stock Compensation Information [Abstract]
Expected term (in years)	4 years	4 years
Risk-free interest rate	0.50%	0.80%
Volatility	80.00%	89.00%
Dividend yield
Weighted-average fair value of stock options granted during the year	$ 1.02	$ 2.39

XML

Other Long-Term Liabilities (Tables)

6 Months Ended

Oct. 31, 2012

Other Long-Term Liabilities [Abstract]

Schedule Of Other Long-Term Liabilities

		October 31,		April 30,
		2012		2012
Deferred rent related to :
Roseville office	$	42	$	83
New York office		117		128
San Francisco office		79		74
Unfavorable lease terms related to:
New Jersey office		254		294
New York office		162		194
Other:
Severance for French employees		123		123
Long term deferred support revenue		388		252
	$	1,165	$	1,148

XML

Earnings (Loss) Per Share (Narrative) (Details)	3 Months Ended		6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011	Oct. 31, 2012	Oct. 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	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	2,629,497	2,223,869	2,724,519	2,783,065
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	909,042	909,042	909,042	1,344,986

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	6 Months Ended
	Oct. 31, 2012
Fair Value Of Financial Instruments [Abstract]
Balance at April 30, 2012	$ 569
Change in fair value of common stock warrant liability	(271)
Balance at October 31, 2012	$ 298

XML

Goodwill And Intangible Assets (Narrative) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011	Oct. 31, 2012	Oct. 31, 2011
Goodwill And Intangible Assets [Abstract]
Intangible assets amortization expense	$ 400	$ 600	$ 769	$ 1,123

XML

Segment Information (Narrative) (Details) (USD $)	3 Months Ended		6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011	Oct. 31, 2012	Oct. 31, 2011	Apr. 30, 2012
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	$ 10,345,000	$ 11,075,000	$ 19,983,000	$ 22,589,000
Contra expense			1,000,000
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	6,700,000	8,200,000	13,600,000	16,600,000
Long-Lived Assets	23,100,000		23,100,000		24,300,000
All Other Countries [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Revenues	3,600,000	2,900,000	6,400,000	6,000,000
Long-Lived Assets	$ 3,000		$ 3,000		$ 5,000

XML

Maintenance Contracts (Schedule Of Deferred Maintenance Revenue) (Details) (USD $)	3 Months Ended		6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011	Oct. 31, 2012	Oct. 31, 2011	Apr. 30, 2012
Maintenance Contracts [Abstract]
Deferred maintenance revenue beginning balance	$ 7,153,000	$ 7,367,000	$ 8,302,000	$ 8,420,000
Deferred maintenance revenue recognized during period	(4,346,000)	(3,903,000)	(8,028,000)	(7,770,000)
Deferred maintenance revenue of new maintenance contracts	3,795,000	3,338,000	6,328,000	6,152,000
Deferred maintenance revenue ending balance	6,602,000	6,802,000	6,602,000	6,802,000
Long-term deferred maintenance revenue	$ 400,000		$ 400,000		$ 300,000

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Prepaid Expenses and Other Current Assets

6 Months Ended

Oct. 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 October 31, 2012 consisted of prepaid expenses of $0.6 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 $)	6 Months Ended	3 Months Ended
	Oct. 31, 2011	Jul. 31, 2011 Hercules Term Loan and Credit Facility [Member]
Debt Instrument [Line Items]
Loss on extinguishment of debt	$ (2,166,000)	$ 2,200,000
Unamortized loan costs		1,000,000
Warrant discounts		800,000
Prepayment fees		$ 400,000

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Basis of Presentation (Details) (USD $)	Oct. 31, 2012	Apr. 30, 2012
Basis of Presentation [Abstract]
Sales taxes payable	$ 43,000	$ 48,000

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Segment Information (Tables)

6 Months Ended

Oct. 31, 2012

Segment Information [Abstract]

Schedule of Segment Reporting Information, by Segment

		Three Months Ended				Six Months Ended
(in thousands)		October 31,				October 31,
		2012		2011		2012		2011
Total revenues:
eDiscovery	$	4,043	$	5,529	$	8,116	$	11,555
Database, archive, and migration		6,302		5,546		11,867		11,034
Total revenues	$	10,345	$	11,075	$	19,983	$	22,589
Operating expenses:
eDiscovery	$	4,326	$	4,933	$	9,433	$	9,915
Database, archive, and migration		3,577		3,597		7,130		7,240
Unallocated corporate expenses		1,540		1,347		2,234		3,391
Total operating expenses	$	9,443	$	9,877	$	18,797	$	20,546
Income (loss) from operations:
eDiscovery	$	(283)	$	596	$	(1,317)	$	1,640
Database, archive, and migration		2,725		1,949		4,737		3,794
Unallocated corporate expenses		(1,540)		(1,347)		(2,234)		(3,391)
Total income (loss) from operations	$	902	$	1,198	$	1,186	$	2,043
		October 31,		April 30,
		2012		2012
Total assets:
eDiscovery	$	27,093	$	29,657
Database, archive, and migration		10,302		12,212
Total assets	$	37,395	$	41,869

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Long-Term Debt (Schedule Of Long-Term Debt) (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011	Apr. 30, 2012
Debt Instrument [Line Items]
Long-term Debt, Gross	$ 18,554		$ 21,251
Capital leases, payable in monthly installments through July 2015	454		651
Less: current maturities of long-term debt obligations	1,190		2,945
Long term debt, net of current portion	17,364		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%
Note payable maturity date	Jun. 30, 2015
Term Note A [Member]
Debt Instrument [Line Items]
Long-term Debt, Gross	8,600		11,100
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%
Note payable, durational period	four
Quarterly principal payment	239
Initial 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
Reference rate	LIBOR
Basis spread on variable reference rate	10.00%
Stated interest rate, minimum	12.00%
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%
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 $)	6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011
Stock Compensation Information [Abstract]
Pricing model expected dividend yield	0.00%
Forfeiture rate	20.00%
Total intrinsic value of awards exercised	$ 0	$ 26,614
Fair value of awards vested	400,000	600,000
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		6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011	Oct. 31, 2012	Oct. 31, 2011
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity based compensation	$ 154	$ 246	$ 330	$ 473
Direct Costs of Revenue [Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity based compensation	8	19	18	37
Product Development
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity based compensation	23	40	48	79
Selling, General and Administrative[Member]
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total equity based compensation	$ 123	$ 187	$ 264	$ 357

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Stock Compensation Information

6 Months Ended

Oct. 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 and six months ended October 31, 2012 and 2011, equity-based compensation expense from operations was comprised of the following (in thousands):

		Three Months Ended				Six Months Ended
		October 31,				October 31,
		2012		2011		2012		2011
Direct costs of revenue	$	8	$	19	$	18	$	37
Product development		23		40		48		79
Selling, general and administrative		123		187		264		357
Total equity-based compensation	$	154	$	246	$	330	$	473

The following table shows remaining unrecognized compensation expense on a pre-tax basis related to all types of nonvested equity awards outstanding as of October 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	$	285
2014		371
2015		211
2016		74
2017		2
Total	$	943

The cost above is expected to be recognized over a weighted-average period of 1.19 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 six months ended October 31, 2012 and 2011, were as follows:

		Six Months Ended
		October 31,
		2012		2011
Expected term (in years)		4.0		4.0
Risk-free interest rate		0.5	%	0.8	%
Volatility		80	%	89	%
Dividend yield		-		-
Weighted-average fair value of stock options granted during the year	$	1.02	$	2.39

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 common stock 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 six months ending October 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.

A summary of the Company’s stock option activity for the six months ended October 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	384,500		1.27
Exercised	-		-
Cancelled/expired	(421,468)		2.70
Outstanding at October 31, 2012	2,595,147	$	2.97	7.19	$	32,377

(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 October 31, 2012 is as follows:

			Weighted-
			average
			grant date
	Shares		fair value
Nonvested at April 30, 2012	1,005,036	$	1.61
Granted	384,500		1.02
Vested	(250,605)		1.59
Cancelled/expired	(233,743)		1.51
Nonvested at October 31, 2012	905,188		1.34

The total intrinsic value of awards exercised during the six months ended October 31, 2012 and 2011 was $0 and $26,614, respectively. The total fair value of awards vested during the six months ended October 31, 2012 and 2011 was $0.4 million and $0.6 million, respectively.  The total fair value of awards granted during the six months ended October 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	6 Months Ended
	Oct. 31, 2012
Schedule Of Employee Service Share-Based Compensation, Allocation Of Not Yet Recognized Period Costs [Line Items]
Nonvested equity awards outstanding, unrecognized compensation expense	$ 943
Cost recognition, weighted-average period, years	1 year 2 months 9 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	285
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	371
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	211
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	74
2017 [Member]
Schedule Of Employee Service Share-Based Compensation, Allocation Of Not Yet Recognized Period Costs [Line Items]
Nonvested equity awards outstanding, unrecognized compensation expense	$ 2

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Credit Facility (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Oct. 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%
Note payable maturity date	Jun. 30, 2015
Amount outstanding	$ 5.5

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Segment Information (Schedule Of Segment Reporting Information By Segment) (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011	Oct. 31, 2012	Oct. 31, 2011	Apr. 30, 2012
Segment Reporting Information [Line Items]
Revenues	$ 10,345	$ 11,075	$ 19,983	$ 22,589
Operating Expenses	9,443	9,877	18,797	20,546
Operating Income (Loss)	902	1,198	1,186	2,043
Assets	37,395		37,395		41,869
Ediscovery [Member]
Segment Reporting Information [Line Items]
Revenues	4,043	5,529	8,116	11,555
Operating Expenses	4,326	4,933	9,433	9,915
Operating Income (Loss)	(283)	596	(1,317)	1,640
Assets	27,093		27,093		29,657
Database, Archive And Migration [Member]
Segment Reporting Information [Line Items]
Revenues	6,302	5,546	11,867	11,034
Operating Expenses	3,577	3,597	7,130	7,240
Operating Income (Loss)	2,725	1,949	4,737	3,794
Assets	10,302		10,302		12,212
Unallocated Corporate Expenses [Member]
Segment Reporting Information [Line Items]
Operating Expenses	1,540	1,347	2,234	3,391
Operating Income (Loss)	$ (1,540)	$ (1,347)	$ (2,234)	$ (3,391)

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Oct. 31, 2012	Apr. 30, 2012
ASSETS
Cash and cash equivalents	$ 4,037	$ 4,752
Accounts receivable, net of allowances of $259 at October 31, 2012, and $345 at April 30, 2012	8,956	10,968
Prepaid expenses and other current assets	1,327	1,805
Total current assets	14,320	17,525
Property and equipment, net of accumulated depreciation of $5,393 at October 31, 2012 and $4,837 at April 30, 2012	2,438	2,827
Goodwill	11,706	11,706
Intangibles, net	7,921	8,690
Other assets	1,010	1,121
Total assets	37,395	41,869
Current liabilities:
Accounts payable	398	450
Current portion of long term debt	1,190	2,945
Accrued compensation and related expenses	2,032	2,465
Common stock warrant liability	298	569
Other accrued liabilities	999	819
Deferred revenue	6,602	8,412
Total current liabilities	11,519	15,660
Long term debt, net of current portion	17,364	18,306
Deferred tax liabilities, net	841	734
Other long term liabilities	1,165	1,148
Total liabilities	30,889	35,848
Commitments and contingencies
Stockholders' equity:
Preferred stock	2	2
Common stock	15	15
Additional paid-in capital	99,989	99,860
Accumulated other comprehensive income	289	341
Accumulated deficit	(93,789)	(94,197)
Total stockholders' equity	6,506	6,021
Total liabilities and stockholders' equity	$ 37,395	$ 41,869

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Long-Term Debt (Schedule Of Maturities Of Long-term Debt) (Details) (USD $) In Thousands, unless otherwise specified	Oct. 31, 2012
Long-Term Debt [Abstract]
Remainder of 2013	$ 626
2014	1,104
2015	1,081
2016	15,743
Long-term Debt, Total	$ 18,554

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Condensed Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011
Cash flows from operating activities:
Net income (loss)	$ 409	$ (983)
Reconciliation of net income (loss) to net cash provided by operating activities:
Depreciation	555	509
Amortization of intangible assets	769	1,123
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	330	473
Gain from change in fair value of common stock warrant liability	(271)	(602)
Changes in operating assets and liabilities:
Accounts receivable	2,011	4,356
Prepaid expenses and other current assets	478	(210)
Other assets	112	114
Accounts payable	(52)	(693)
Accrued compensation and related expenses	(433)	(883)
Other accrued liabilities	44	(820)
Deferred revenue	(1,674)	(1,365)
Other long term liabilities	(12)	(237)
Net cash provided by operating activities	1,266	3,071
Cash flows from investing activities:
Proceeds from sale of intangible trade name	1,000
Purchases of property and equipment	(166)	(608)
Net cash provided by (used in) investing activities	834	(608)
Cash flows from financing activities:
Proceeds from issuance of common stock		148
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	(2,500)	(24,089)
Principal payments on capital leases	(197)	(167)
Net cash used in financing activities	(2,763)	(1,525)
Effect of exchange rate changes on cash and cash equivalents	(52)	(42)
Net increase (decrease) in cash and cash equivalents	(715)	896
Cash and cash equivalents, beginning of year	4,752	4,577
Cash and cash equivalents, end of year	4,037	5,473
Supplemental cash flow information:
Cash paid for interest	758	984
Cash paid for income taxes	172	64
Supplemental non-cash investing and financing activities:
Accrued preferred stock dividends	136	135
Property and equipment acquired through capital leases		$ 493

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Stock Compensation Information (Summary Of Non-Vested Stock Option Activity) (Details) (USD $)	6 Months Ended
	Oct. 31, 2012
Stock Compensation Information [Abstract]
Shares, Nonvested at April 30, 2012	1,005,036
Shares, Granted	384,500
Shares, Vested	(250,605)
Shares, Cancelled or expired	(233,743)
Shares, Nonvested at October 31, 2012	905,188
Weighted average grant date fair value, Nonvested at April 30, 2012	$ 1.61
Weighted average grant date fair value, Granted	$ 1.02
Weighted average grant date fair value, Vested	$ 1.59
Weighted average grant date fair value, Cancelled or expired	$ 1.51
Weighted average grant date fair value, Nonvested at October 31, 2012	$ 1.34

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Goodwill And Intangible Assets (Tables)

6 Months Ended

Oct. 31, 2012

Goodwill And Intangible Assets [Abstract]

Schedule of Intangible Assets and Goodwill

		Gross				Net	Weighted-
		carrying		Accumulated		carrying	average
October 31, 2012		amount		amortization		amount	useful life
Indefinite Lives:
Goodwill	$	11,706	$	-	$	11,706	-
Finite Lives:
Customer-related		6,236		(3,383)		2,853	7 years
Technology-based		2,638		(1,566)		1,072	5 years
Trademarks		4,600		(604)		3,996	10 years
Trade name		100		(100)		-	2 years
Total	$	25,280	$	(5,653)	$	19,627
		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	$	769
2014		1,538
2015		1,512
2016		1,096
2017		814
Thereafter		2,192
Total	$	7,921

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Prepaid Expenses and Other Current Assets (Details) (USD $) In Millions, unless otherwise specified	Oct. 31, 2012	Apr. 30, 2012
Prepaid Expenses and Other Current Assets [Abstract]
Prepaid expenses	$ 0.6	$ 1.1
Other current assets	$ 0.7	$ 0.7

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Long-Term Debt (Tables)

6 Months Ended

Oct. 31, 2012

Long-Term Debt [Abstract]

Schedule of Long-Term Debt

		October 31,		April 30,
		2012		2012
Term Note A payable to Wells Fargo Capital Finance, LLC. Interest is incurred at the prevailing LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at October 31, 2012), payable monthly. Principal is payable over four years with principal payments of $239 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.  As a result of prior free cash flow payments, the quarterly principal payment was decreased from $300 to $239.  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 October 31, 2012.	$	8,600	$	11,100
Term Note B payable to Wells Fargo Capital Finance, LLC. Interest is incurred at the prevailing LIBOR rate plus 10.0% per annum with a minimum rate of 12.0% (12.0% at October 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 October 31, 2012), payable June 30, 2015.		5,500		5,500
Capital leases, payable in monthly installments through July 2015.		454		651
		18,554		21,251
Less current portion		(1,190)		(2,945)
Total long term debt, net	$	17,364	$	18,306

Schedule of Maturities of Long-term Debt

Fiscal Year Ending April 30,		Amount
Remainder of 2013	$	626
2014		1,104
2015		1,081
2016		15,743
	$	18,554

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Basis of Presentation

6 Months Ended

Oct. 31, 2012

Basis of Presentation [Abstract]

Basis Of Presentation

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.

During the second quarter of fiscal 2013, an adjustment was made to the diluted earnings per share of common stock amount and the weighted-average number of diluted common stock outstanding that was previously reported for the second quarter of fiscal year 2012. The adjustment was immaterial and had no effect on net income.

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 is known, uncertainties regarding customer acceptance have been 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 October 31, 2012 and April 30, 2012 the Company had $43,000 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.

Recently Issued Accounting Standards

The FASB did not issue any authoritative guidance during the three months ended October 31, 2012 that would have a material effect on the Company’s consolidated financial statements.  Additionally, there is no previously issued authoritative guidance that has not been adopted at October 31, 2012 that would 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	Oct. 31, 2012	Apr. 30, 2012
Condensed Consolidated Balance Sheets [Abstract]
Accounts receivable, allowance	$ 259	$ 345
Property and equipment, accumulated depreciation	$ 5,393	$ 4,837

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Preferred Stock

6 Months Ended

Oct. 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 six months ended October 31, 2012, the Company paid $66,000 in preferred stock dividends ($0.04  per preferred share).  As of October 31, 2012, the Company had accrued $136,000 of dividends payable on preferred stock included in other accrued liabilities.

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Document And Entity Information	6 Months Ended
	Oct. 31, 2012
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Oct. 31, 2012
Document Fiscal Period Focus	Q2
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

6 Months Ended

Oct. 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 six months ended October 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				Six Months Ended
		October 31,				October 31,
		2012		2011		2012		2011
Net income (loss)	$	252	$	795	$	409	$	(983)
Dividends paid and payable on preferred stock		(101)		(101)		(202)		(135)
Net income (loss) available to common stockholders	$	151	$	694	$	207	$	(1,118)
Weighted-average shares of common stock outstanding, basic		14,718		14,657		14,718		14,629
Effect of dilutive securities		11		152		5		-
Weighted-average shares of common stock outstanding, diluted		14,729		14,809		14,723		14,629
Income (loss) per share of common stock:
Basic	$	0.01	$	0.05	$	0.01	$	(0.08)
Diluted	$	0.01	$	0.05	$	0.01	$	(0.08)

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 aggregatinga weighted average of 2,629,497 shares and common stock warrants of 909,042 for the three months ended October 31, 2012.  Potentially dilutive securities that are not included in the diluted net income calculation because they would be antidilutive are employee stock options aggregatinga weighted average of 2,223,869shares and common stock warrants of 909,042 for the three months ended October 31, 2011.  Potentially dilutive securities that are not included in the diluted net income calculation because they would be antidilutive are employee stock options aggregatinga weighted average of 2,724,519shares and common stock warrants of 909,042 for the six months ended October 31, 2012.  Potentially dilutive securities that are not included in the diluted net loss calculation because they would be antidilutive are employee stock options aggregatinga weighted average of 2,783,065shares and common stock warrants of 1,344,986 for the six months ended October 31, 2011.  Potentially dilutive securities that are not included in the diluted net income (loss) calculation because they would be antidilutive include1,666,667 shares of convertible preferred stock for the three and six months ended October 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		6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011	Oct. 31, 2012	Oct. 31, 2011
Revenues:
eDiscovery	$ 4,043	$ 5,529	$ 8,116	$ 11,555
Database, archive, and migration	6,302	5,546	11,867	11,034
Total revenues	10,345	11,075	19,983	22,589
Operating expenses:
Direct costs of eDiscovery revenue	2,222	2,234	4,377	4,632
Direct costs of database, archive, and migration revenue	1,273	1,352	2,555	2,700
Product development	1,802	1,863	3,686	3,838
Selling, general and administrative	4,146	4,428	9,179	9,376
Sale of intangible trade name			(1,000)
Total operating expenses	9,443	9,877	18,797	20,546
Income from operations	902	1,198	1,186	2,043
Other income (expenses):
Loss on extinguishment of debt				(2,166)
Gain (loss) from change in fair value of common stock warrant liability	(188)	158	271	602
Interest expense	(400)	(469)	(842)	(1,369)
Other, net	(16)	(24)	(108)	26
Total other income (expenses)	(604)	(335)	(679)	(2,907)
Income (loss) before income taxes	298	863	507	(864)
Provision for income taxes	46	68	98	119
Net income (loss)	$ 252	$ 795	$ 409	$ (983)
Income (loss) per share:
Basic	$ 0.01	$ 0.05	$ 0.01	$ (0.08)
Diluted	$ 0.01	$ 0.05	$ 0.01	$ (0.08)
Weighted-average shares used in computing income (loss) per share:
Basic	14,718	14,657	14,718	14,629
Diluted	14,729	14,809	14,723	14,629

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Fair Value Of Financial Instruments

6 Months Ended

Oct. 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 October 31, 2012 (in thousands):

		Fair value		Fair value measurement using
		October 31, 2012		Level 1		Level 2		Level 3
Common stock warrant liability	$	298	$	-	$	-	$	298

The following table summarizes the activity of Level 3 inputs measured on a recurring basis for the six months ended October 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			(271)
Balance at October 31, 2012	$		298

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Credit Facility

6 Months Ended

Oct. 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 October 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 October 31, 2012) and has a maturity date of June 30, 2015.  As of October 31, 2012, there was $5.5 million outstanding on the revolver.

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Fair Value Of Financial Instruments (Tables)

6 Months Ended

Oct. 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
		October 31, 2012		Level 1		Level 2		Level 3
Common stock warrant liability	$	298	$	-	$	-	$	298

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			(271)
Balance at October 31, 2012	$		298

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Segment Information

6 Months Ended

Oct. 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 Note 1 of Part III, Item 15 of our Annual Report on Form 10-K for our fiscal year ended April 30, 2012.  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 second quarter of fiscal 2013 and 2012, total revenue from the United States was $6.7 million and $8.2 million, respectively. Total revenue from all other countries in the second quarter of fiscal 2013 and 2012 was $3.6 million and $2.9 million, respectively. For the six months ended October 31, 2012 and 2011, total revenue from the United States was $13.6 million and $16.6 million, respectively. Total revenue from all other countries for the six months ended October 31, 2012 and 2011 was $6.4 million and $6.0 million, respectively. Total long-lived assets as of October 31, 2012 and April 30, 2012, for the United States, were $23.1 million and $24.3 million, respectively. Total long-lived assets in all other countries were $3,000 as of October 31, 2012 and $5,000 as of April 30, 2012.

		Three Months Ended				Six Months Ended
(in thousands)		October 31,				October 31,
		2012		2011		2012		2011
Total revenues:
eDiscovery	$	4,043	$	5,529	$	8,116	$	11,555
Database, archive, and migration		6,302		5,546		11,867		11,034
Total revenues	$	10,345	$	11,075	$	19,983	$	22,589
Operating expenses:
eDiscovery	$	4,326	$	4,933	$	9,433	$	9,915
Database, archive, and migration		3,577		3,597		7,130		7,240
Unallocated corporate expenses		1,540		1,347		2,234		3,391
Total operating expenses	$	9,443	$	9,877	$	18,797	$	20,546
Income (loss) from operations:
eDiscovery	$	(283)	$	596	$	(1,317)	$	1,640
Database, archive, and migration		2,725		1,949		4,737		3,794
Unallocated corporate expenses		(1,540)		(1,347)		(2,234)		(3,391)
Total income (loss) from operations	$	902	$	1,198	$	1,186	$	2,043
		October 31,		April 30,
		2012		2012
Total assets:
eDiscovery	$	27,093	$	29,657
Database, archive, and migration		10,302		12,212
Total assets	$	37,395	$	41,869

Included in unallocated corporate expenses for the six months ended October 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

6 Months Ended

Oct. 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, generally on an annual basis 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				Six Months Ended
		October 31,				October 31,
		2012		2011		2012		2011
Deferred maintenance revenue beginning balance	$	7,153	$	7,367	$	8,302	$	8,420
Deferred maintenance revenue recognized during period		(4,346)		(3,903)		(8,028)		(7,770)
Deferred maintenance revenue of new maintenance contracts		3,795		3,338		6,328		6,152
Deferred maintenance revenue ending balance	$	6,602	$	6,802	$	6,602	$	6,802

Of the deferred maintenance revenue at October 31, 2012 and April 30, 2012, $0.4 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

6 Months Ended

Oct. 31, 2012

Long-Term Debt [Abstract]

Long-Term Debt

7.   Long-Term Debt

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

		October 31,		April 30,
		2012		2012
Term Note A payable to Wells Fargo Capital Finance, LLC. Interest is incurred at the prevailing LIBOR rate plus 5.0% per annum with a minimum rate of 6.50% (6.50% at October 31, 2012), payable monthly. Principal is payable over four years with principal payments of $239 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.  As a result of prior free cash flow payments, the quarterly principal payment was decreased from $300 to $239.  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 October 31, 2012.	$	8,600	$	11,100
Term Note B payable to Wells Fargo Capital Finance, LLC. Interest is incurred at the prevailing LIBOR rate plus 10.0% per annum with a minimum rate of 12.0% (12.0% at October 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 October 31, 2012), payable June 30, 2015.		5,500		5,500
Capital leases, payable in monthly installments through July 2015.		454		651
		18,554		21,251
Less current portion		(1,190)		(2,945)
Total long term debt, net	$	17,364	$	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. 

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 minimum liquidity 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 October 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 principal payments on long-term debt obligations as of October 31, 2012 is as follows (in thousands):    

Fiscal Year Ending April 30,		Amount
Remainder of 2013	$	626
2014		1,104
2015		1,081
2016		15,743
	$	18,554

The summaryof future principal 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

6 Months Ended

Oct. 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.  Additionallythere areliabilities 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 October 31, 2012 and April 30, 2012 (in thousands).

		October 31,		April 30,
		2012		2012
Deferred rent related to :
Roseville office	$	42	$	83
New York office		117		128
San Francisco office		79		74
Unfavorable lease terms related to:
New Jersey office		254		294
New York office		162		194
Other:
Severance for French employees		123		123
Long term deferred support revenue		388		252
	$	1,165	$	1,148

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Income Taxes

6 Months Ended

Oct. 31, 2012

Income Taxes [Abstract]

Income Taxes

10.   Income Taxes

For the second quarter of fiscal 2013, the Company recorded $46,000 in federal, state, and foreign income tax expense. For the second quarter of fiscal 2012, the Company recorded $68,000 in federal, state, and foreign income tax expense. For the six months ended October 31, 2012 the Company recorded $98,000 in federal, state, and foreign income tax expense.  For the six months ended October 31, 2011 the Company recorded $119,000 in federal, state, and foreign income tax expense.

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 October 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 six months ended October 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	6 Months Ended		12 Months Ended
	Oct. 31, 2012		Apr. 30, 2012	Oct. 31, 2012
Stock Compensation Information [Abstract]
Shares, Outstanding at April 30, 2012	2,632,115
Shares, Granted	384,500
Shares, Cancelled or expired	(421,468)
Shares, Outstanding at October 31, 2012	2,595,147		2,632,115
Weighted average exercise price, Outstanding at April 30, 2012	$ 3.18
Weighted average exercise price, granted	$ 1.27
Weighted average exercise price, canceled or expired	$ 2.70
Weighted average exercise price, Outstanding at October 31, 2012	$ 2.97		$ 3.18
Weighted average remaining contractual term (in years), Outstanding April 30, 2012	7 years 2 months 9 days		7 years 2 months 27 days
Aggregate intrinsic value, Outstanding at April 30, 2012	$ 4,449	[1]		$ 32,377	[1]
Weighted average remaining contractual term (in years), Outstanding at October 31, 2012	7 years 2 months 9 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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Earnings (Loss) Per Share (Schedule Of Earnings (Loss) Per Share) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011	Oct. 31, 2012	Oct. 31, 2011
Earnings (Loss) Per Share [Abstract]
Net income (loss)	$ 252	$ 795	$ 409	$ (983)
Dividends paid and payable on preferred stock	(101)	(101)	(202)	(135)
Net income (loss) available to common stockholders	$ 151	$ 694	$ 207	$ (1,118)
Weighted-average shares of common stock outstanding, basic	14,718	14,657	14,718	14,629
Effect of dilutive securities	11	152	5
Weighted-average shares of common stock outstanding, diluted	14,729	14,809	14,723	14,629
Basic	$ 0.01	$ 0.05	$ 0.01	$ (0.08)
Diluted	$ 0.01	$ 0.05	$ 0.01	$ (0.08)

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Stock Compensation Information (Tables)

6 Months Ended

Oct. 31, 2012

Stock Compensation Information [Abstract]

Schedule Of Equity-Based Compensation Expense From Operations

		Three Months Ended				Six Months Ended
		October 31,				October 31,
		2012		2011		2012		2011
Direct costs of revenue	$	8	$	19	$	18	$	37
Product development		23		40		48		79
Selling, general and administrative		123		187		264		357
Total equity-based compensation	$	154	$	246	$	330	$	473

Summary Of Remaining Unrecognized Compensation Expense

Fiscal Year Ending April 30,		Amount
Remainder of 2013	$	285
2014		371
2015		211
2016		74
2017		2
Total	$	943

Summary Of Fair Value Assumptions

		Six Months Ended
		October 31,
		2012		2011
Expected term (in years)		4.0		4.0
Risk-free interest rate		0.5	%	0.8	%
Volatility		80	%	89	%
Dividend yield		-		-
Weighted-average fair value of stock options granted during the year	$	1.02	$	2.39

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	384,500		1.27
Exercised	-		-
Cancelled/expired	(421,468)		2.70
Outstanding at October 31, 2012	2,595,147	$	2.97	7.19	$	32,377

(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	384,500		1.02
Vested	(250,605)		1.59
Cancelled/expired	(233,743)		1.51
Nonvested at October 31, 2012	905,188		1.34

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Maintenance Contracts (Tables)

6 Months Ended

Oct. 31, 2012

Maintenance Contracts [Abstract]

Schedule Of Deferred Maintenance Revenue

		Three Months Ended				Six Months Ended
		October 31,				October 31,
		2012		2011		2012		2011
Deferred maintenance revenue beginning balance	$	7,153	$	7,367	$	8,302	$	8,420
Deferred maintenance revenue recognized during period		(4,346)		(3,903)		(8,028)		(7,770)
Deferred maintenance revenue of new maintenance contracts		3,795		3,338		6,328		6,152
Deferred maintenance revenue ending balance	$	6,602	$	6,802	$	6,602	$	6,802

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Preferred Stock (Details) (Convertible Preferred Stock [Member], USD $)	1 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Oct. 31, 2012
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			$ 136,000

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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	Oct. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liability	$ 298
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liability
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liability
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liability	$ 298

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Condensed Consolidated Statements Of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Oct. 31, 2012	Oct. 31, 2011	Oct. 31, 2012	Oct. 31, 2011
Statement of Other Comprehensive Income [Abstract]
Net income (loss)	$ 252	$ 795	$ 409	$ (983)
Other comprehensive income (loss):
Foreign currency translation adjustments	38	(9)	(52)	(18)
Comprehensive income (loss)	$ 290	$ 786	$ 357	$ (1,001)

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Goodwill And Intangible Assets

6 Months Ended

Oct. 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 October 31, 2012 and April 30, 2012 (in thousands).

		Gross				Net	Weighted-
		carrying		Accumulated		carrying	average
October 31, 2012		amount		amortization		amount	useful life
Indefinite Lives:
Goodwill	$	11,706	$	-	$	11,706	-
Finite Lives:
Customer-related		6,236		(3,383)		2,853	7 years
Technology-based		2,638		(1,566)		1,072	5 years
Trademarks		4,600		(604)		3,996	10 years
Trade name		100		(100)		-	2 years
Total	$	25,280	$	(5,653)	$	19,627
		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 October 31, 2012 and 2011 was $0.4 million and $0.6 million, respectively. Intangible assets amortization expense for the six months ended October 31, 2012 and 2011 was $0.8 million and $1.1 million, respectively. The estimated future amortization expense related to intangible assets as of October 31, 2012 is as follows (in thousands):

Fiscal Year Ending April 30		Amount
Remainder of 2013	$	769
2014		1,538
2015		1,512
2016		1,096
2017		814
Thereafter		2,192
Total	$	7,921

There wasno activity in the Company's goodwill account during the three and six months ended October 31, 2012 and 2011.    

Goodwill at October 31, 2012, represents the excess of purchase price 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 October 31, 2012.    

Pursuant to the accounting guidance for goodwill and other intangible assets, the Company performs a qualitative assessment to test a business unit’s goodwill for impairment.  Based on our qualitative assessment, 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, the two step impairment test will be 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 Database, eDiscovery, and Archive.

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Earnings (Loss) Per Share (Tables)

6 Months Ended

Oct. 31, 2012

Earnings (Loss) Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

(in thousands, except per share amounts)		Three Months Ended				Six Months Ended
		October 31,				October 31,
		2012		2011		2012		2011
Net income (loss)	$	252	$	795	$	409	$	(983)
Dividends paid and payable on preferred stock		(101)		(101)		(202)		(135)
Net income (loss) available to common stockholders	$	151	$	694	$	207	$	(1,118)
Weighted-average shares of common stock outstanding, basic		14,718		14,657		14,718		14,629
Effect of dilutive securities		11		152		5		-
Weighted-average shares of common stock outstanding, diluted		14,729		14,809		14,723		14,629
Income (loss) per share of common stock:
Basic	$	0.01	$	0.05	$	0.01	$	(0.08)
Diluted	$	0.01	$	0.05	$	0.01	$	(0.08)

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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
	Oct. 31, 2012	Apr. 30, 2012
Finite-Lived Intangible Assets [Line Items]
Goodwill, Gross carrying amount	$ 11,706	$ 11,706
Goodwill, Net carrying amount	11,706	11,706
Finite-lived intangible assets, Accumulated amortization	(5,653)	(4,884)
Finite-lived intangible assets, Net carrying amount	7,921
Intangible assets, Gross carrying amount	25,280	25,280
Intangible assets, Net carrying amount	19,627	20,396
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	(3,383)	(3,043)
Finite-lived intangible assets, Net carrying amount	2,853	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	(1,566)	(1,410)
Finite-lived intangible assets, Net carrying amount	1,072	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	(604)	(331)
Finite-lived intangible assets, Net carrying amount	3,996	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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Basis of Presentation (Policy)

6 Months Ended

Oct. 31, 2012

Basis of Presentation [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 is known, uncertainties regarding customer acceptance have been 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 October 31, 2012 and April 30, 2012 the Company had $43,000 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.

Recently Issued Accounting Standards

Recently Issued Accounting Standards

The FASB did not issue any authoritative guidance during the three months ended October 31, 2012 that would have a material effect on the Company’s consolidated financial statements.  Additionally, there is no previously issued authoritative guidance that has not been adopted at October 31, 2012 that would have a material effect on the Company’s consolidated financial statements.