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SECURITIES AND EXCHANGE COMMISSION

Quarterly report [Sections 13 or 15(d)]

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Commission File Number: 001-11807

__________________________

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

Address of principal executive offices: 600 E. Las Colinas Blvd., Suite 1500, Irving, Texas 75039

Registrants telephone number, including area code: (214) 584-6400

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 ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES ☒ NO ☐

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.

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

YES ☐ NO ☒

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date: 16,388,826 shares of common stock, $0.001 par value, as of September 14, 2015.

DAEGIS INC.

FORM 10-Q

INDEX

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

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

See accompanying notes to unaudited condensed consolidated financial statements .

3

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

See accompanying notes to unaudited condensed consolidated financial statements .

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

See accompanying notes to unaudited condensed consolidated financial statements .

5

DAEGIS INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2015

1. Basis of Presentation

The condensed consolidated financial statements prepared by Daegis Inc. (the Company, we, us, our) have been derived from our audited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations.

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 we consider 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 Managements Discussion and Analysis of Financial Condition and Results of Operations, which are included in the Companys Annual Report on Form 10-K for the fiscal year ended April 30, 2015, as filed with the SEC.

In fiscal 2014, we completed the restructuring and realignment of our Company to meet customer and market needs, and to operate with a more effective cost structure. We combined our Archive and eDiscovery businesses to offer a complete, cohesive information governance solution that provides end-to-end data preservation and litigation readiness for our customers and clients. In the second quarter of fiscal 2015, we announced the Company will move from selling products through business divisions to a holistic approach by product line featuring information governance, migration, and development solutions. In the fourth quarter of fiscal 2015, we completed the transformation of our Information Governance and Migration and Development Tools business under common functional leadership as well as an integrated sales and marketing approach. In the first quarter of fiscal 2016, we announced that we are de-emphasizing the eDiscovery services component of our business. Accordingly, we no longer provide results on a segment basis as discrete financial information is not available. Today we sell our software solutions through three product lines: Information Governance, Development Tools, and Migration.

2. Recent Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (ASU) No. 2014-09 Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting periods with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption. We are currently evaluating the impact of our pending adoption of ASU 2014-09 on our consolidated financial statements and do not expect adoption of the provision to have a material impact. In July 2015 the FASB extended the effective date of the guidance for annual periods beginning after December 15, 2017.

In August 2014, the FASB issued ASU 2014-15 Preparation of Financial Statements Going Concern (Subtopic 205-40), Disclosures of Uncertainties about an Entitys Ability to Continue as a Going Concern (ASU 2014-05) . ASU 2014-05 requires management to assess each annual and interim period if there is substantial doubt about the entitys ability to continue as a going concern; provides principles for considering the mitigating effect of managements plans; requires certain disclosures when substantial doubt is alleviated as a result of managements plans, and requires an express statement and other disclosures when substantial doubt is not alleviated. The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter with early application permitted. We are currently evaluating the new guidance and do not expect it will have an impact on our consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08, Reporting Discontinued Operations and Disclosures of Components of an Entity , which updates the definition of discontinued operations. Going forward, only those disposals of components of an entity that represent a strategic shift that has (or will have) a major effect on an entity's operations and financial results will be reported as discontinued operations in the financial statements. Previously, a component of an entity that is a reportable segment, an operating segment, a reporting unit, a subsidiary, or an asset group was eligible for discontinued operations presentation. Additionally, the condition that the entity not have any significant continuing involvement in the operations of the component after the disposal transaction has been removed. The effective date for the revised standard is for applicable transactions that occur within annual periods beginning on or after December 15, 2014. We do not expect the guidance to have a material impact on the Company.

In April 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of Debt Issuance Costs , ("ASU 2015-03"). ASU 2015-03 requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The amendments in this Update are effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. We do not expect the guidance to have a material impact on the Company.

In April 2015, the FASB issued ASU No. 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangemen t, ("ASU 2015-05"). ASU 2015-05 provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the customer should account for the software license element of the arrangement consistent with the acquisition of other software license. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The guidance will not change GAAP for a customer's accounting for service contracts. The amendments in the Update are effective for interim and annual periods beginning after December 15, 2015. The Company is currently assessing the impact that adopting this new accounting guidance will have on its consolidated financial statements and footnote disclosures.

3. Intangible Assets

Intangible asset balances by major asset class are as follows (in thousands):

Acquired finite-lived intangible assets are generally amortized on a straight-line basis over their estimated useful lives. The useful life of finite-lived intangible assets is the period over which the asset is expected to contribute directly or indirectly to future cash flows of the Company. Intangible amortization expense for the three months ended July 31, 2015 and 2014 was $0.3 million and $0.4 million, respectively. The estimated future amortization expense related to intangible assets as of July 31, 2015, is as follows (in thousands):

4. Accrued Restructuring Charge

On December 3, 2013, we announced the completion of our organizational alignment in which the Archive and eDiscovery businesses were combined. The alignment included movement of our operations, workforce reductions, abandonment of excess facilities and other charges in the Information Governance (formerly Archive and eDiscovery) reportable segment.

A summary of the restructuring and other costs recognized as of July 31, 2015, are as follows:

For the three months ended July 31, 2015, we had no cost associated with the restructuring. For the three months ended July 31, 2014, we incurred total cost of $171 thousand which included $150 thousand related to lease abandonment cost and $21 thousand of other cost.

At July 31, 2015, the accrued liability associated with the realignment consisted of an accrual for lease abandonment as follows:

The restructuring and other related charges are included in the selling, general and administrative expense line item in the Unaudited Condensed Consolidated Statements of Operations.

5. Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the exit price) in an orderly transaction between market participants at the measurement date.

In determining fair value, we use various valuation approaches and establish a hierarchy for inputs used in measuring fair value that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect our estimates of assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:

We value our common stock warrant liability on a recurring basis based on open form option pricing models which, based on the relevant inputs, render the fair value estimate Level 3. Changes in the fair value of the warrants are reflected in the Unaudited Condensed Consolidated Statements of Operations as Gain from change in fair value of common stock warrant liability.

Fair Value on a Recurring Basis

The following table summarizes the activity of Level 3 inputs measured on a recurring basis for the three months ended July 31, 2015:

6. Long-Term Debt

In June 2011, the Company entered into a credit agreement with Wells Fargo Capital Finance (the Credit Agreement). The Credit Agreement consisted of two term notes and a revolving credit line agreement. Effective July 31, 2014, the Company entered into an amendment to its Credit Agreement. In order to secure its obligations under the Credit Agreement, we granted the lender a first priority security interest in substantially all of our assets. The total amount that is allowed under the Credit Agreement is based on a multiplier factor of the trailing twelve months of maintenance and Software-as-a-Service revenue.

The amendment extended the term of the Credit Agreement through June 30...


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