QuickLinks -- Click here to rapidly navigate through this document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

AMENDMENT NO. 2

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

For the quarterly period ended October 31, 1999

OR

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

Commission File Number: 001-11807

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

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

2101 Arena Blvd, Suite 100
Sacramento, California 95834
(Address of principal executive offices)

Telephone: (916) 928-6400
(Registrant's telephone number, including area code)

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

    Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

18,180,904 shares of Common Stock, $0.0005 par value, as of November 30, 1999

UNIFY CORPORATION
FORM 10-Q/A

EXPLANATORY STATEMENT

    In July 2000, Unify Corporation ("Unify" or the "Company") announced that certain matters had come to the attention of the Company's Board of Directors that indicated that the Company had engaged in improper accounting practices. Accordingly, the Company delayed the filing of its Form 10-K for the fiscal year ended April 30, 2000, and the Board of Directors authorized its Audit Committee to conduct an investigation of the Company's accounting and financial reporting practices and to recommend remedial action, if any, as a result of the findings of its investigation. In connection with the ongoing investigation, the Company placed its chief executive officer and its chief financial officer on administrative leave, and in November 2000, the Company terminated its chief executive officer and its chief financial officer resigned. Based on the results of the Audit Committee's investigation, the Company concluded that revenue, and in some cases expenses, had been improperly accounted for in certain transactions during fiscal year 2000, and adjustments were made during the fiscal year ended April 30, 2000 for such transactions, including restatements of previously reported quarterly financial statements. The investigation also included a review of transactions in earlier fiscal years. After evaluating information from the results of the investigation, the Company concluded that its financial statements for the fiscal year ended April 30, 1999 and earlier were not materially misstated. Also, the Company concluded that the effect on the financial statements for fiscal year 2000 of adjustments relating to transactions of earlier years not being made in those years was not material.

    The Company filed its Form 10-K for fiscal year ended April 30, 2000 on December 22, 2000. On January 30, 2001, Unify filed amended Quarterly Reports on Forms 10-Q/A for the fiscal quarters ended July 31, 1999, October 31, 1999 and January 31, 2000. As a result of the Company's conclusion that its financial statements for the fiscal year ended April 30, 2000 and earlier years were not materially misstated as a result of adjustments relating to transactions in 1999 and earlier years not being made in those years, such adjustments were not reflected in the Company's financial statements contained in such Form 10-K and Form 10-Q/As. Subsequently, in connection with comments by the Staff of the Securities and Exchange Commission (the "Staff") relating to the Staff's review of the Company's Form 10-K and Form 10-Q/As for the year ended April 30, 2000, the Company and the Staff had extensive communications regarding the materiality of the adjustments relating to transactions in 1999 and earlier years referred to above. Following such communications, management determined that the Company would record the adjustments in the applicable years. Accordingly, the consolidated financial statements for the fiscal years ended April 30, 2000, 1999 and 1998 have been restated from amounts previously reported to reflect those adjustments. A summary of the effects of the restatement is presented in Notes 16 and 18 to the consolidated financial statements included in the Company's form 10-K/A for the year ended April 30, 2000, a summary of the effects of the restatement on the financial statements for the three and six months period ended October 31, 1999 and 1998 is presented in Note 1.

2

UNIFY CORPORATION
FORM 10-Q/A

INDEX

		PAGE NUMBER
PART I.	FINANCIAL INFORMATION
Item 1.	Consolidated Financial Statements
	Unaudited Condensed Consolidated Balance Sheets as of October 31, 1999 (Restated) and April 30, 1999	4
	Unaudited Condensed Consolidated Statements of Operations (Restated) for the three and six months ended October 31, 1999 and 1998	5
	Unaudited Condensed Consolidated Statements of Cash Flows (Restated) for the six months ended October 31, 1999 and 1998	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Disclosure about Market Rate Risk	16
PART II.	OTHER INFORMATION
Item 4.	Submission of Matters to a Vote of Security Holders	18
Item 6.	Exhibits and Reports on Form 8-K	18
SIGNATURE		19

3

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

UNIFY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)

			October 31, 1999			April 30, 1999
			(As Restated- see Note 1)
Assets
Current assets:
	Cash and cash equivalents		$	8,666		$	5,315
	Investments			4,713			6,072
	Accounts receivable, net			5,581			9,207
	Prepaid expenses and other current assets			708			748
		Total current assets		19,668			21,342
Property and equipment, net				1,240			1,417
Other investments				550
Other assets				1,053			192
		Total assets	$	22,511		$	22,951
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	916		$	1,152
	Notes payable to minority interest stockholders			576			608
	Accrued compensation and related expenses			1,598			1,650
	Other accrued liabilities			3,792			1,584
	Deferred revenue			4,739			4,012
		Total current liabilities		11,621			9,006
Stockholders' equity:
	Common stock			9			9
	Additional paid-in capital			54,852			54,123
	Note receivable from stockholder			(77	)		(125	)
	Accumulated other comprehensive loss			(757	)		(643	)
	Accumulated deficit			(43,137	)		(39,419	)
		Total stockholders' equity		10,890			13,945
		Total liabilities and stockholders' equity	$	22,511		$	22,951

See accompanying notes to unaudited condensed consolidated financial statements.

4

UNIFY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

			Three Months Ended October 31,					Six Months Ended October 31,
			1999			1998		1999			1998
			(As Restated - -see Note 1)			(As Restated - -see Note 1)		(As Restated - -see Note 1)			(As Restated - -see Note 1)
Revenues:
	Software licenses		$	3,692		$	4,558	$	6,850		$	8,709
	Services			2,127			2,354		4,362			4,547
		Total revenues		5,819			6,912		11,212			13,256
Cost of revenues:
	Software licenses			210			236		439			462
	Services			1,129			1,074		2,258			2,127
		Total cost of revenues		1,339			1,310		2,697			2,589
Gross margin				4,480			5,602		8,515			10,667
Operating expenses:
	Product development			1,719			1,484		3,283			2,933
	Selling, general and administrative			4,094			3,606		9,003			7,259
		Total operating expenses		5,813			5,090		12,286			10,192
		Income (loss) from operations		(1,333	)		512		(3,771	)		475
Other income, net				122			109		250			96
		Income (loss) before income taxes		(1,211	)		621		(3,521	)		571
Provision for income taxes				96			44		197			88
		Net income (loss)	$	(1,307	)	$	577	$	(3,718	)	$	483
Net income (loss) per share:
	Basic		$	(0.07	)	$	0.03	$	(0.21	)	$	0.03
	Diluted		$	(0.07	)	$	0.03	$	(0.21	)	$	0.03
Shares used in computing net income (loss) per share:
	Basic			17,767			16,870		17,811			16,828
	Diluted			17,767			17,094		17,811			17,076

See accompanying notes to unaudited condensed consolidated financial statements.

5

UNIFY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

					Six Months Ended October 31,
					1999			1998
					(As Restated - -see Note 1)			(As Restated - -see Note 1)
Cash flows from operating activities:
	Net income (loss)				$	(3,718	)	$	483
	Reconciliation of net income (loss) to net cash provided by (used in) in operating activities:
		Depreciation				496			554
		Changes in operating assets and liabilities:
			Accounts receivable, net			3,767			188
			Prepaid expenses and other current assets			34			32
			Accounts payable			(259	)		188
			Notes payable to minority interest stockholders			(109	)		(198	)
			Accrued compensation and related expenses			(73	)		(239	)
			Other accrued liabilities			2,285			(359	)
			Deferred revenue			561			(775	)
				Net cash provided by (used in) operating activities		2,984			(126	)
Cash flows from investing activities:
	Purchases of available-for-sale securities					(4,713	)		1,160
	Sales of available-for-sale securities					6,072			—
	Purchases of property and equipment					(313	)		(344	)
	Other assets					(1,392	)		12
				Net cash provided by (used in) investing activities		(346	)		828
Cash flows from financing activities:
	Principal payments under debt obligations					—			(22	)
	Proceeds from issuance of common stock, net					729			211
	Repurchase of common stock					—			(91	)
	Collection of note receivable from stockholder, net of interest receivable					49			(5	)
				Net cash provided by financing activities		778			93
Effect of exchange rate changes on cash						(65	)		(25	)
Net increase in cash and cash equivalents						3,351			770
Cash and cash equivalents, beginning of period						5,315			5,279
Cash and cash equivalents, end of period					$	8,666		$	6,049
Supplemental cash flow information:
Cash paid during the period for:
	Interest				$	27		$	81
	Income taxes				$	254		$	54

See accompanying notes to unaudited condensed consolidated financial statements.

6

UNIFY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Restatement of Financial Statements

Investigation and Restatement

    In June 2000, certain matters came to the attention of the Board of Directors of Unify Corporation (the "Company") that indicated that the Company had engaged in improper accounting practices. The Company's Board of Directors authorized its Audit Committee to conduct an investigation of the Company's accounting and financial reporting practices and to recommend remedial action, if any, as a result of the findings of their investigation. In July 2000, in connection with the ongoing investigation, the Company placed its chief executive officer and its chief financial officer on administrative leave, and in November 2000, the Company terminated its chief executive officer and its chief financial officer resigned. Based on the results of the Audit Committee's investigation, the Company concluded that revenue, and in some cases expenses, had been improperly accounted for in certain transactions during the fiscal year ended April 30, 2000, and adjustments were made for such transactions, including restatements of previously reported quarterly financial statements. The investigation also identified commissions, bonuses and other payments made to the Company's former chief executive officer during the fiscal year ended April 30, 2000, which the Company believes were not appropriate. Such payments in the amount of approximately $500,000 have been charged to expense in that fiscal year; however, the Company is seeking to have the amounts repaid by the former chief executive officer. The investigation also included a review of transactions in earlier fiscal years. After evaluating information from the results of the investigation, the Company concluded that its financial statements for the fiscal year ended April 30, 1999 and earlier were not materially misstated. Also, the Company concluded that the effect on the financial statements for fiscal 2000 of adjustments relating to transactions of earlier years not being made in those years was not material.

    Subsequent to the issuance of the Company's financial statements for the fiscal year ended April 30, 2000, and in connection with comments by the Staff of the Securities and Exchange Commission (the "Staff") relating to the Staff's review of the Company's Form 10-K for the year ended April 30, 2000, the Company and the Staff had extensive communications regarding the materiality of the adjustments relating to transactions in 1999 and earlier years referred to above. Following such communications, management determined that the Company would record the adjustments in the applicable years. Accordingly, the condensed consolidated financial statements for the fiscal years ended April 30, 2000, 1999 and 1998 have been restated from amounts previously reported to reflect those adjustments. As a result, the accompanying unaudited condensed consolidated financial statements for the three and six months ended October 31, 1999, 1998 have been restated to give effect to those adjustments applicable to those interim periods.

7

    The following summarizes the significant effects of the restatement on the unaudited condensed consolidated financial statements as of October 31, 1999 and for the three and six month periods ended October 31, 1999 and 1998:

			Three Months Ended October 31,
			1999						1998
			As Previously Reported			As Restated			As Previously Reported		As Restated
			(In thousands, except per share data)
Unaudited Condensed Consolidated Statements of Operation
Revenues:
	Software licenses		$	3,578		$	3,692		$	4,726	$	4,558
	Services		$	2,036		$	2,127		$	2,474	$	2,354
		Total revenues	$	5,614		$	5,819		$	7,200	$	6,912
Gross margin			$	4,275		$	4,480		$	5,890	$	5,602
Selling, general and administrative expense
Other income, net									$	100	$	109
Net income (loss)			$	(1,512	)	$	(1,307	)	$	856	$	577
Basic Earnings (loss) per share			$	(0.09	)	$	(0.07	)	$	0.05	$	0.03
Diluted Earnings (loss) per share			$	(0.09	)	$	(0.07	)	$	0.05	$	0.03

			Six Months Ended October 31,
			1999						1998
			As Previously Reported			As Restated			As Previously Reported		As Restated
			(In thousands, except per share data)
Unaudited Condensed Consolidated Statements of Operation
Revenues:
	Software licenses		$	6,688		$	6,850		$	8,968	$	8,709
	Services		$	4,208		$	4,362		$	4,892	$	4,547
		Total revenues	$	10,896		$	11,212		$	13,860	$	13,256
Cost of services			$	2,272		$	2,258
Gross margin			$	8,185		$	8,515		$	11,271	$	10,667
Selling, general and administrative expense			$	8,100		$	9,003
Other income, net			$	572		$	250		$	123	$	96
Net income (loss)			$	(2,823	)	$	(3,718	)	$	1,114	$	483
Basic Earnings (loss) per share			$	(0.16	)	$	(0.21	)	$	0.07	$	0.03
Diluted Earnings (loss) per share			$	(0.16	)	$	(0.21	)	$	0.07	$	0.03

8

	October 31, 1999
	As Previously Reported			As Restated
Unaudited Condensed Consolidated Balance Sheets
Assets
Accounts receivable, net
Prepaid expenses and other current assets
Other assets	$	1,034		$	1,053
Total assets	$	22,492		$	22,511
Liabilities
Accounts payable
Other accrued liabilities	$	3,793		$	3,792
Deferred revenue	$	4,411		$	4,739
Minority interest
Stockholders' Equity
Accumulated other comprehensive loss	$	(735	)	$	(757	)
Accumulated Deficit	$	(42,851	)	$	(43,137	)
Total stockholders' equity	$	11,198		$	10,890
Total liabilities and stockholders' equity	$	22,492		$	22,511

Basis of Presentation

    The unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). While the interim financial information contained in this filing is unaudited, such financial statements 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/A for the fiscal years ended April 30, 2000 and 1999 as filed with the SEC on April 27, 2001.

Recently Issued Accounting Standards

    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement establishes accounting and reporting standards for derivative instruments and hedging activities and is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The statement requires balance sheet recognition of derivatives as assets or liabilities measured at fair value. Accounting for gains and losses resulting from changes in the values of derivatives is dependent on the use of the derivative and whether it qualifies for hedge accounting. The Company believes that the adoption of SFAS No. 133 will not have a material impact on its financial position or results of operations.

9

2. Notes Due to Minority Interest Stockholders

    In September 1995, Unify Japan entered into a 100 million yen loan agreement with a bank affiliated with Sumitomo Metals Industries, Ltd. ("SMI"). The loan bears interest at the Tokyo International Bank Offered Rate ("TIBOR") plus 50 basis points (approximately 1% at October 31, 1999), and is secured by the assets of Unify Japan.

3. Earnings Per Share

    SFAS No. 128, Earnings Per Share, requires a dual presentation of basic and diluted income (loss) per share ("EPS"). Basic EPS excludes dilution and is computed by dividing net income attributable to common stockholders by the weighted average of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock (e.g. convertible preferred stock, warrants, and common stock options) were exercised or converted into common stock. The effect of dilutive securities (stock options) is excluded in the diluted EPS computation for the three and six months ended October 31, 1999 as their effect would be antidilutive. The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the periods indicated (in thousands, except per share amounts):

	Three Months Ended October 31,					Six Months Ended October 31,
	1999			1998		1999			1998
Net Income (Loss) (Numerator):
Net income (loss), basic and diluted	$	(1,307	)	$	577	$	(3,718	)	$	483
Shares (Denominator):
Weighted average shares of common stock outstanding, basic		17,767			16,870		17,811			16,828
Effect of dilutive securities (stock options)		—			224		—			248
Weighted average shares of common stock outstanding, diluted		17,767			17,094		17,811			17,076
Per Share Amount:
Net income (loss) per share, basic	$	(0.07	)	$	0.03	$	(0.21	)	$	0.03
Effect of dilutive securities (stock options)		—			—		—			—
Net income (loss) per share, diluted	$	(0.07	)	$	0.03	$	(0.21	)	$	0.03
Antidilutive Shares:		1,557			1,056		1,597			1,066

4. Comprehensive Income (Loss)

    The Company's total comprehensive income (loss) for the periods shown was as follows (in thousands):

		Three Months Ended October 31,						Six Months Ended October 31,
		1999			1998			1999			1998
Net income (loss)		$	(1,307	)	$	577		$	(3,718	)	$	483
Foreign currency translation			(74	)		(75	)		(114	)		(41	)
	Total comprehensive income (loss)	$	(1,381	)	$	502		$	(3,832	)	$	442

10

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

The discussion in this Quarterly Report on Form 10-Q/A 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 industry 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. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Such risks and uncertainties include, but are not limited to, those set forth herein under "Volatility of Stock Price and General Risk Factors Affecting Quarterly Results" and in the Company's Annual Report on Form 10-K/A under "Business—Risk Factors." Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the risk factors set forth in other reports or documents the Company files from time to time with the SEC, particularly the Company's Annual Reports on Form 10-K/A, Quarterly Reports on Form 10-Q/A 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/A 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/A for the fiscal years ended April 30, 2000 as filed with the SEC on April 27, 2001.

Results of Operations

    Unify develops, markets and supports Internet software that extends business applications to the Web. The Company provides features-rich products and services for organizations growing their business on the Web, based on open, Java technologies. Unify's products provide enterprise, scalable and affordable software for building and managing online applications. The Company's flagship product line, Unify eWave, includes a Web application server, enterprise application server and commerce framework built on the Java 2 Enterprise Edition ("J2EE") platform technology. These products are designed to enable developers to rapidly build production-ready, scalable Internet and e-commerce applications that are easy to manage and run with minimal down-time.

    In June 2000, certain matters came to the attention of the Company's Board of Directors that indicated that the Company had engaged in improper accounting practices. The Company's Board of Directors authorized its Audit Committee to conduct an investigation of the Company's accounting and financial reporting practices and to recommend remedial action, if any, as a result of the findings of its investigation. In July 2000, in connection with the ongoing investigation, the Company placed its chief executive officer and its chief financial officer on administrative leave, and in November 2000, the Company terminated its chief executive officer and its chief financial officer resigned. Based on the results of the Audit Committee's investigation, the Company concluded that revenue, and in some cases expenses, had been improperly accounted for in certain transactions during the fiscal year ended April 30, 2000, primarily related to the following:

•

Reciprocal agreement transactions for which there was insufficient support for the fair market valuation of inventory, funded development activities, or consulting services received by the Company, or equity investments made by the Company in connection with the Company delivering products or providing services.

12

•

Improper application of AICPA Statement of Position 97-2, Software Revenue Recognition ("SOP 97-2") in which all of the conditions for revenue recognition required by SOP 97-2 had not been met.



•

Contingent revenue transactions in which sales of software, services and other related items were contingent upon future events, including contingencies that were contained in side agreements.



•

Service revenue which was recognized during the first month of the contract, rather than ratably over the term of the contract in accordance with SOP 97-2.



•

Other adjustments including insufficiently supported journal entries and improper recording of marketing co-operative agreements.

    Based on the results of the Audit Committee's investigation, adjustments were made during the fiscal year ended April 30, 2000 for such transactions, including restatements of previously reported quarterly financial statements. The investigation also identified commissions, bonuses and other payments made to the Company's former chief executive officer during the fiscal year ended April 30, 2000, which the Company believes were not appropriate. Such payments in the amount of approximately $500,000 have been charged to expense in that fiscal year; however, the Company is seeking to have these amounts repaid by the former chief executive officer. The investigation also included a review of transactions in earlier fiscal years. After evaluating information from the results of the investigation, the Company concluded that its financial statements for the fiscal year ended April 30, 1999 and earlier were not materially misstated. Also, the Company concluded that the effect on the financial statements for fiscal 2000 of adjustments relating to transactions of earlier years not being made in those years was not material.

    Subsequent to the issuance of the Company's financial statements for the fiscal year ended April 30, 2000, and in connection with comments by the Staff of the Securities and Exchange Commission (the "Staff") relating to the Staff's review of the Company's Form 10-K for the year ended April 30, 2000, the Company and the Staff had extensive communications regarding the materiality of the adjustments relating to transactions in 1999 and earlier years referred to above. Following such communications, management determined that the Company would record the adjustments in the applicable years. Accordingly, the financial statements for the fiscal years ended April 30, 2000, 1999 and 1998 have been restated from amounts previously reported to reflect those adjustments. The significant effects of the restatement on the unaudited condensed consolidated financial statements as of October 31, 1999 and for the three and six months periods ended October 31, 1999 and 1998 are summarized in Note 1. The information in Management's Discussion and Analysis of Financial Condition and Results of Operations as presented herein has been revised to reflect the effects of the restatement.

Revenues

    The Company's strategy is to market and enhance its e-commerce and Internet products. The Company also generates significant revenues from services, including customer maintenance, consulting and training. Total revenue for the three months ended October 31, 1999 decreased $1.1 million (16%) to $5.8 million from $6.9 in the three months ended October 31, 1998. Total revenue for the six months ended October 31, 1999 decreased $2.0 million (15%) to $11.2 million from $13.3 for the six months ended October 31, 1998.

    Software license revenues represented the majority of the decrease in total revenues with a 19% decrease for the three months ended October 31, 1999 and a 21% decrease for the six months ended October 31, 1999 as compared to the same periods in the prior fiscal year. The decrease was primarily related to the Company's shift in focus from its client/server product line to the Unify eWave product line, for which revenues to date have not met expectations. The Company's VISION and client/server

13

software license revenues have also declined as a result of the emphasis on the Unify eWave product line.

    Service revenue for the second quarter ended October 31, 1999 decreased $0.2 million (10%) to $2.1 million from $2.4 for the same quarter in fiscal 1999. Total service revenue for the six months ended October 31, 1999 decreased $0.2 million (4%) to $4.4 million from $4.6 for the six months ended October 31, 1998. Maintenance revenues remained flat for the three month and six month comparative periods at $1.7 million and $3.4 million. With the reduction in sales, new maintenance orders decreased, impacting the generation of addition revenues in this area. The reduction in sales also reduced consulting revenue by $0.2 million for the three month period and $0.1 million for the six month period, compared to the same periods during the prior year.

    International revenues include all software license and service revenues from customers located outside the United States. International revenues from the Company's direct sales organizations in Europe and Japan and from value added resellers, distributors, and other partners in all international locations accounted for 54% and 56% of total revenues in the quarters ended October 31, 1999 and 1998 respectively, and 56% and 55% for the comparative six months period ended October 31, 1999 and 1998 respectively.

Cost of Revenues

    Total cost of revenue for the second quarter ended October 31, 1999 increased 2% over the cost reported during the second quarter ended October 31, 1998. Total cost of revenue for the six months ended October 31, 1999 increased 4% when compared to the same period in the prior year.

    Cost of software licenses represented 5% of software license revenues for the three months ended October 31, 1999 and 5% of software licenses for the six months ended October 31, 1999 and were comparable to cost of software licenses in the same periods of the prior year.

    Cost of services consists primarily of employee, facilities and travel costs incurred in providing customer support under software maintenance contracts and consulting and training services. Cost of services for the three and six months ended October 31, 1999 increased 5% and 6% compared to the same periods of the prior year, primarily due to higher consulting costs associated with the company's pursuit of new Internet consulting opportunities during fiscal 2000. The cost of service has a high component of fixed costs, and therefore does not fluctuate as readily with the changes in revenues.

Product Development

    Product development expenses for the quarters ended October 31, 1999 and 1998 were comparable at $1.7 million and $1.5 million, respectively. Product development expenses for the six months ended October 31, 1999 and 1998 were also stable at approximately $3.3 million and $2.9 million. The slight increases in product development expenses is the result of the development of the Unify eWave family of products and the resources required to maintain and support this product line. The Company believes that a substantial investment in product development is critical to maintaining technological leadership and therefore intends to continue to devote significant resources to product development.

Selling, General and Administrative

    Selling, general and administrative ("SG&A") expenses for the quarter ended October 31, 1999 increased to $4.1 million, or 70% of total revenues, as compared to $3.6 million, or 52% of total revenues, for the same quarter of the prior year. SG&A expenses for the six months ended October 31, 1999 increased to $9.0 million, or 80% of total revenues, as compared to $7.3 million, or 55% of total revenues, for the same period of the prior year. The major components of SG&A for the second three months of fiscal 2000 were sales expenses of $2.2 million, marketing expenses of $0.7 million, general and administrative of $0.7 million and bad debt expenses of $0.5 million. Sales expenses decreased

14

$0.1 million when compared to the same quarter of the prior fiscal year, as a result of the shift in focus to the eWave product line which had not been fully implemented in the first quarter, this expense decrease was partially offset by an increase in marketing expense of $0.2 million as a result of this new product promotion. General and administrative expenses decreased less than $0.1 million for the second three months of fiscal 2000 compared to the comparable period for the prior year. Bad debt expenses increased by $0.5 million during the three months ended October 31, 1999 as compared to the comparable period for the prior fiscal year. For the six months ended October 31, 1999 sales expenses decreased $0.5 million as the result of the shift in focus to the Unify eWave product line; marketing expense increased $0.5 million as a result of the new product promotion; general and administrative expenses increased $0.5 and bad debt expenses were increased by $1.2 million when compared to the same six months period for fiscal 1999. The Company expects that total SG&A expenses may fluctuate from quarter to quarter primarily because of variability in marketing program spending and sales commission expense.

Provision for Income Taxes

    The Company recorded tax provisions for the three and six months ended October 31, 1999 and 1998 which related primarily to foreign income taxes and withholding taxes on software license royalties paid to the Company by certain foreign licensees. For the same periods, the Company recorded no significant federal or state income tax provisions as the Company had substantial net operating loss carryforwards.

Liquidity and Capital Resources

    At October 31, 1999, the Company had cash, cash equivalents and short-term investments of $13.4 million, compared to $11.4 million at April 30, 1999. Working capital decreased to $8.0 million at October 31, 1999 from $12.3 million at April 30, 1999.

    The Company's operating activities generated cash of $2.9 million during the six months ended October 31, 1999, as a result of increases in deferred revenue and accrued liabilities of $2.8 million and a decreases in accounts recievable of $3.7 million partially offset by operating losses of $3.7 million for the first six months of fiscal 2000. Accounts receivable decreased by $3.7 million of which $1.5 million was achieved through the sale of receivables without recourse. Increases in accrued liabilities was due primarily to accrued software and developmental costs. Investing activities during the period reduced cash by $0.3 million, consisting principally of investments in and purchase of other assets and equipment of $1.7 million partially offset with funds provided from the net sale of available-for-sale securities of $1.4 million. Cash provided by financing activities during the period was $.8 million, which primarily represents the issuance of common stock under the Company's stock option and stock purchase plan of $0.7 million.

Recently Issued Accounting Standards

    In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement establishes accounting and reporting standards for derivative instruments and hedging activities and is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. The statement requires balance sheet recognition of derivatives as assets or liabilities measured at fair value. Accounting for gains and losses resulting from changes in the values of derivatives is dependent on the use of the derivative and whether it qualifies for hedge accounting. The Company believes that the adoption of SFAS No. 133 will not have a material impact on its financial position or results of operations.

15

Volatility of Stock Price and General Risk Factors Affecting Quarterly Results

    The Company's common stock price has been and is likely to continue to be subject to significant volatility. A variety of factors could cause the price of the Company's common stock to fluctuate, perhaps substantially, including: announcements of developments related to the Company's business; fluctuations in the Company's or its competitors' operating results and order levels; general conditions in the computer industry or the worldwide economy; announcements of technological innovations; new products or product enhancements by the Company or its competitors; changes in financial estimates by securities analysts; developments in patent, copyright or other intellectual property rights; and developments in the Company's relationships with its customers, distributors and suppliers; legal proceedings brought against the Company or its officers; significant changes in the Company's senior management team. In addition, in recent years the stock market in general, and the market for shares of equity securities of many high technology companies in particular, has experienced extreme price fluctuations which have often been unrelated to the operating performance of those companies. Such fluctuations may adversely affect the market price of the Company's common stock.

    The Company's quarterly operating results have varied significantly in the past, and the Company expects that its operating results are likely to vary significantly from time to time in the future. Such variations result from, among other factors, the following: the size and timing of significant orders and their fulfillment; demand for the Company's products; the number, timing and significance of product enhancements and new product announcements by the Company and its competitors; ability of the Company to attract and retain key employees; seasonality; changes in pricing policies by the Company or its competitors; realignments of the Company's organizational structure; changes in the level of the Company's operating expenses; changes in the Company's sales incentive plans; budgeting cycles of the Company's customers; customer order deferrals in anticipation of enhancements or new products offered by the Company or its competitors; product life cycles; product defects and other product quality problems currency fluctuations; and general domestic and international economic and political conditions. Due to the foregoing factors, quarterly revenues and operating results are difficult to forecast. Revenues are also difficult to forecast because the market for Internet and e-commerce application development software is rapidly evolving, and the Company's sales cycle, from initial evaluation to purchase and the provision of maintenance services, is lengthy and varies substantially from customer to customer. Because the Company normally ships products within a short time after it receives an order, it typically does not have any material backlog. As a result, to achieve its quarterly revenue objectives, the Company is dependent upon obtaining orders in any given quarter for shipment in that quarter. Furthermore, because many customers place orders toward the end of a fiscal quarter, the Company generally recognizes a substantial portion of its revenues at the end of a quarter. As the Company's expense levels are based in significant part on the Company's expectations as to future revenues and are therefore relatively fixed in the short term, if revenue levels fall below expectations operating results are likely to be disproportionately adversely affected. The Company also expects that its operating results will be affected by seasonal trends, and that it may experience relatively weaker demand in fiscal quarters ending July 31 and October 31 as a result of reduced business activity in Europe during the summer months.

Item 3. Disclosures about Market Rate 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 short-term investments. 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 and which hold investments with maturity dates of less than 90 days. The Company does not believe its exposure to interest rate risk is material for these balances, which totaled $8.7 million at October 31, 1999. The securities in the Company's short-term

16

investment portfolio are generally classified as available-for-sale and, consequently, are recorded on the consolidated balance sheet at fair value with unrealized gains or losses reported as a separate component of stockholders' equity. Short-term investments totaled $4.7 million at October 31, 1999 and there were no material realized or unrealized gains or losses on short-term investments during the first six months of fiscal 2000. The Company does not use derivative financial instruments in its investment portfolio, places its investments with high quality issuers and, by policy, limits the amount of credit exposure to any one issuer. The Company is adverse to principal loss and attempts to ensure the safety of its invested funds by limiting default. The Company's short-term investments at October 31, 1999 consisted of $4.7 million in high quality corporate bonds maturing within one year, which the Company does not believe carry any material interest rate exposure. If market interest rates were to change immediately and uniformly by ten percent from levels at October 31, 1999, the fair value of the Company's cash equivalents and short-term investments would change by an insignificant amount.

    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 a material 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. 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. The Company also has currency exchange rate exposures on intercompany accounts receivable owed to the Company as a result of local currency sales of software licenses by the Company's international subsidiaries in the United Kingdom, France and Japan. At October 31, 1999, the Company had $1.3 million, $0.3 million and $0.9 million in such receivables denominated in British pounds, French francs and Japanese yen, respectively. The Company encourages prompt payment of these intercompany balances in order to minimize its exposure to currency fluctuations, but it engages in no hedging activities to reduce the risk of such fluctuations. A hypothetical ten percent change in foreign currency rates would have an insignificant impact on the Company's business, operating results and financial position. The Company has not experienced material exchange losses on intercompany balances 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.

17

PART II. OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security Holders

    At the annual meeting of the Company's stockholders held on October 8, 1999, the following matters were voted upon:

1.

The election of each of the nominees for director were approved with the following votes:

	In Favor	Withheld
Reza Mikailli	8,246,655	189,320
Kurt M. Garbe	8,247,963	188,012
Steven D. Whiteman	8,249,813	186,162

2.

The amendment of the Company's 1991 Stock Option Plan to increase the maximum aggregate number of shares of the Company's Common Stock authorized for issuance from 2,700,000 shares to 3,100,000. Of the total shares voting on the foregoing amendment, 6,663,486 voted in favor, 1,752,134 voted against, and 20,355 abstained.

3.

The appointment of Deloitte & Touche LLP as the Company's independent accountants for the fiscal year ending April 30, 2000. Of the total shares voting on the foregoing resolution, 8,361,935 voted in favor, 60,005 voted against, and 14,035 abstained.

Item 6. Exhibits and Reports on Form 8-K

(a)

Exhibits

Exhibit 27    Financial Data Schedule

(b)

Reports on Form 8-K

The Company filed no reports on Form 8-K during the quarter ended October 31, 1999.

18

SIGNATURE

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

Date: May 11, 2001	Unify Corporation (Registrant)
	By:	/s/ DAVID H. ADAMS David H. Adams Chief Financial Officer

19

QuickLinks

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Disclosures about Market Rate Risk

PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K