8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549-1004

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OFTHE SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): February 25, 2005

UNIFY CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization) 001-11807 (Commission File No.) 94-2710559 (I.R.S. Employer Identification No.)

2101 Arena Blvd. Sacramento, California (Address of principal executive offices) 95834 (Zip Code)

(916) 928-6400

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Result of Operations and Financial Condition

The information in this Form 8-K and the Exhibits attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

On February 22, 2005, Unify Corporation (the “Company”) issued a press release regarding the Company’s financial results for its third fiscal quarter ended January 31, 2005. The full text of the Company’s press release is attached hereto as Exhibit 99.1

In the press release the Company provided certain non-GAAP financial measures, specifically, the reconciliation of GAAP net income to non-GAAP net income (loss) for both the most recently completed third quarter and the prior year third quarter, as well as a comparison on a year-to-date basis, year over year.

Reflected in the reconciliation were certain adjustments included in the measurement of GAAP net income that the Company believes are useful in explaining to investors its net income (loss) from ongoing operations.  The Company believes this non-GAAP measure is useful because it permits investors to evaluate important expense and recovery components that may not be apparent from use of the most directly comparable GAAP financial measure.

In the conference call referred to in the press release, the Company provided certain non-GAAP financial measures, including, the affect of certain adjustments on GAAP basis operating expenses in determining non-GAAP operating expenses, in comparison on a year-to-date basis, year over year, which the Company believes is useful because it permits investors to evaluate important expense and recovery components that may not be apparent from use of the most directly comparable GAAP financial measure.  A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is set forth below:

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Reconciliation of GAAP Net Loss to Non-GAAP Net Income (Loss):
	Quarter Ended Jan 31, 2005			Quarter Ended Jan 31, 2004			Nine Months ended Jan 31, 2005			Nine Months ended Jan 31, 2004
GAAP Net Income (Loss)	$	(651,000	)	$	(470,000	)	$	(1,759,000	)	$	(553,000	)
Adjustments :
Severance & Restructuring Charges	700,000						700,000			200,000
Acquisition related expenses	130,000						130,000
Write-down of Other Investments										175,000
Special Charges (Recoveries) (1)	(150,000		)	8,000			(150,000		)	110,000
Non-GAAP Net Income (Loss)	$	29,000		$	(462,000	)	$	(1,079,000	)	$	(68,000	)

(1) Special charges (recoveries) related primarily to litigation expenses

In the conference call referred to in the press release, the Company also provided the ratio of “end user” software license revenues to “indirect” software license revenues for the most recently completed third quarter.

These non-GAAP financial measures exclude from the directly comparable GAAP measures, where applicable, the revenue that is being compared.  For example, the calculation of end user revenues excluded indirect revenues and vice versa.  A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is set forth below.  The Company believes these non-GAAP measures are useful because they permit investors to evaluate changes in important revenue components that may not be apparent from use of the most directly comparable GAAP financial measure.

Software License Revenue

	Quarter End Jan. 31, 2005		%		Quarter End  Jan. 31, 2004		%		Nine Months End Jan. 31, 2005		%		Nine Months End Jan. 31, 2004		%
End user revenue	$	615,000	42	%	$	783,000	66	%	$	1,941,000	49	%	$	1,533,000	35	%
Indirect revenue	853,000		58	%	402,000		34	%	1,992,000		51	%	2,894,000		65	%
Total Revenue (GAAP)	$	1,468,000	100	%	$	1,185,000	100	%	$	3,933,000	100	%	$	4,427,000	100	%

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The Company’s management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating the Company’s operating performance.  Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as reported by the Company may not be comparable to similarly titled items reported by other companies.  A transcript of the portions of the conference call discussing Non-GAAP financial measures is attached hereto as Exhibit 99.2.

ITEM 9.01. Financial Statements and Exhibits

c. Exhibits

Exhibit Number	Description
99.1	Press release dated February 22, 2005
99.2	Transcript of Portion of February 22, 2005 Conference Call

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SIGNATURE

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

Unify Corporation

(Registrant)

Date: February 25, 2005

By:	/s/  Peter J. DiCorti
	Peter J. DiCorti
	Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit Number	Description
99.1	Press release dated February 22, 2005
99.2	Transcript of Portion of February 22, 2005 Conference Call

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EX-99.1

Exhibit 99.1

Unify Corporation 2101 Arena Blvd. Sacramento, CA 95834 916-928-6400 www.unify.com

Unify Reports Third Quarter 2005 Results

Quarter over Quarter Software License Revenues Increased 24 Percent

SACRAMENTO, Calif., — Feb. 22, 2005 — Unify Corporation (OTC BB: UNFY) today announced financial results for the third quarter of fiscal 2005 ended Jan. 31, 2005.

Total revenues in the third quarter were $3.0 million, a 13 percent increase, compared to total revenues of $2.6 million for the third quarter of fiscal 2004.  Third quarter software license revenues increased 24 percent to $1.5 million, compared to $1.2 million in the same period last year.  Services revenues increased four percent to $1.5 million for the quarter, compared to $1.5 million in the third quarter last year.

GAAP net loss for the third quarter was $651,000, or $0.02 loss per share, compared to third quarter fiscal 2004 net loss of $470,000, or $0.02 loss per share. Gross margin for the quarter was 85 percent, compare to 80 percent in the same period last year.  Third quarter non-GAAP net income was $29,000, compared to a non-GAAP net loss of $462,000 in the third quarter of fiscal 2004.  Non-GAAP net income excludes severance and restructuring charges, acquisition related expenses and special charges (recoveries).  

Reconciliation of GAAP Net Loss to Non-GAAP Net Income (Loss):
	Quarter Ended Jan 31, 2005			Quarter Ended Jan 31, 2004			Nine Months ended Jan 31, 2005			Nine Months ended Jan 31, 2004
GAAP Net Income (Loss)	$	(651,000	)	$	(470,000	)	$	(1,759,000	)	$	(553,000	)
Adjustments :
Severance & Restructuring Charges	700,000						700,000			200,000
Acquisition related expenses	130,000						130,000
Write-down of Other Investments										175,000
Special Charges (Recoveries) (1)	(150,000		)	8,000			(150,000		)	110,000
Non-GAAP Net Income (Loss)	$	29,000		$	(462,000	)	$	(1,079,000	)	$	(68,000	)

(1) Special charges (recoveries) related primarily to litigation expenses

“We had a good execution this quarter including the expansion of our strategy into specialty vertical markets,” said Todd Wille, CEO of Unify.  “We had renewed investments in our technology from some long-time customers, reorganized our European operations and planned for the acquisition of Acuitrek.  We are confident and excited about our prospects in the coming year.”

The Company had $3.9 million in cash and cash equivalents at Jan. 31, 2005, up from $2.8 million at January 31, 2004, but down from $6.6 million as of April 30, 2004.  Stockholders’ equity at January 31, 2005 was $2.9 million, compared to $1.3 million at January 31, 2004, and compared to $4.5 million at April 30, 2004.

For the nine months ended January 31, 2005, total revenues were $8.5 million, a two percent decrease, compared to $8.7 million for the same nine-month period last year. GAAP net loss for the first nine months was $1.8 million or $0.06 loss per share, compared to a GAAP net loss of $553,000 or $0.03 loss per share for the first nine months of last year.  On a Non-GAAP basis, net loss for the first nine months was $1.1 million, compared to a Non-GAAP net loss of $68,000 for same nine-month period last year.

During the third quarter, Unify:

·Executed on its expanded strategy to target specialty vertical markets with its business process automation technology.

·Centralized its European sales and support operations into a European headquarters in Paris.

·Announced the creation of Unify Business Solutions focused on building and sustaining active partnerships with independent software vendors (ISVs) resellers (VARs) and global distributors.

·Earned business from several long-standing customers including Business Console, CNA Insurance Group, Credit Lyonnaise Group Management, Glaxo, Pan Systems, SE Software Engineering, GE Healthcare, and Vision Data Equipment Corp.

Conference Call

Unify will hold its quarterly conference call, open to all interested parties, on Feb. 22, 2005, beginning at 2 p.m. Pacific Time.  Listeners should dial 800-370-0740 prior to the start of the conference call.  The conference call will also be Webcast.  Online listeners should visit www.unify.com/investors prior to the start of the call for login information.  A replay of the conference call will be available until March 4, 2005 by dialing 877-519-4471 and entering the passcode 5674828.

About Unify
Unify (OTCBB: UNFY) provides business process automation solutions, including market leading applications for specialty markets within the insurance, retail and transportation industries.  Unify’s solutions deliver a broad set of capabilities for

automating business processes, integrating existing information systems and delivering collaborative information.  Through its industry expertise and market leading technologies, Unify helps organizations drive business optimization, apply governance and increase customer service. For more than 25 years, Unify has served more than 2,000 agencies, corporations and independent software vendors. Unify is headquartered in Sacramento, Calif. with offices in London and Paris, and a worldwide network of global distributors. Contact Unify at 916-928-6400 or visit www.unify.com.

This press release contains “forward-looking statements” as that term is defined in Section 21E of the Securities Exchange Act of 1934 as amended. Forward looking statements are denoted by words such as “anticipates”, “expects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, and other variations of such words and similar expressions are intended to identify such forward-looking statements.  These forward looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by our forward looking statements. Such risks and uncertainties include, but are not limited to general economic conditions in the computer and software industries, domestically and worldwide, the Company’s ability to keep up with technological innovations in relation to its competitors, product defects or delays, developments in the Company’s relationships with its customers, distributors and suppliers, changes in pricing policies of the Company or its competitors and the Company’s ability to attract and retain employees in key positions. In addition, Unify’s forward looking statements should be considered in the context of other risks and uncertainties discussed in our SEC filings available for viewing on its web site at “Investor Relations,” “SEC filings” or from the SEC at www.sec.gov.

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UNIFY CORPORATION

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

	January 31, 2005			April 30, 2004
Assets
Current assets:
Cash and cash equivalents	$	3,915		$	6,606
Accounts receivable, net	3,259			2,848
Prepaid expense & other current assets	691			543
Total current assets	7,865			9,997
Property and equipment, net	385			338
Other investments	214			214
Other assets	177			194
Total assets	$	8,641		$	10,743
Liabilities and Stockholders’ Equity
Current liabilities:
Current portion of long term debt	$	161		$	146
Account payable	341			523
Other accrued liabilities	1,148			1,340
Accrued compensation and related expenses	736			812
Deferred revenue	3,301			3,360
Total current liabilities	5,687			6,181
Other long term liabilities	79			70
Long term debt	12			—
Commitments and contingencies
Stockholders’ equity:
Common stock	28			27
Additional paid in capital	63,275			63,205
Accumulated other comprehensive loss	77			18
Accumulated deficit	(60,517		)	(58,758		)
Total stockholders’ equity	2,863			4,492
Total liabilities and stockholders’ equity	$	8,641		$	10,743

UNIFY CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Three Months Ended January31,							Nine Months Ended January 31,
	2005				2004			2005				2004
Revenues:
Software Licenses	$	1,469			$	1,185		$		3,934		$	4,427
Services	1,518				1,459			4,596				4,322
Total revenues	2,987				2,644			8,530				8,749
Cost of Revenues:
Software licenses	96				226			264				413
Services	351				302			1,077				950
Total cost of revenues	447				528			1,341				1,363
Gross profit	2,540				2,116			7,189				7,386
Operating Expenses:
Product development	678				618			2,110				2,297
Selling, general and administrative	2,544				1,968			6,866				5,454
Write-down of other investments	—				—			—				175
Total operating expenses	3,222				2,305			8,976				7,926
Income (loss) from operations	(682			)	(470		)	(1,787			)	(540		)
Other income (expense), net	34				(4		)	35				(7		)
Income (loss) before income taxes	(648			)	(474		)	(1,752			)	(547		)
Provision (recovery) for income taxes	3				(4		)	7				6
Net income (loss)	$		(651	)	$	(470	)	$		(1,759	)	$	(553	)
Net income (loss) per share:
Basic	$		(0.02	)	$	(0.02	)	$	(0.06		)	$	(0.03	)
Dilutive	$		(0.02	)	$	(0.02	)	$	(0.06		)	$	(0.03	)
Shares used in computing net income (loss) per share:
Basic	27,692				21,596			27,606				21,471
Dilutive	27,692				21,596			27,606				21,471

EX-99.2

Exhibit 99.2

Transcript of Portion of February 22, 2005 Conference Call Discussing
Certain Non-GAAP Financial Measures

Todd E. Wille (CEO):

On a pro forma basis, net income for the third quarter was $29,000. GAAP net loss was $651,000.  We incurred a significant number of one time charges for restructuring and acquisition costs related to merger with Acuitrek.

Peter J. DiCorti (CFO):

End user license revenue was 42 percent, ISVs and VARs 47 percent, and distributors 11 percent of total licenses revenues.

Operating expenses for the quarter were $3.2 million, a 25 percent increase from $2.6 million last year, primarily because of increases in selling, general and administrative expenses.  SG&A increased 30 percent to $2.5 million.  The SG&A variance is the result of reorganization costs for the UK subsidary and the North American Sales team.  We estimate the Q4 run rate for SG&A expenses will approximate $2 million, including Acuitrek operating expenses.  Product development expenses increased 10 percent to $678,000.

GAAP net loss for the third quarter was $651,000, or $0.02 cent loss per share, compared to a net loss of $470,000 or $0.02 cent loss per share in Q3 last year.  Non-GAAP net income was $29,000, compared to Non-GAAP net loss of $462,000 in Q3 last year.

Nine-month total revenues were down 2 percent to $8.5 million.  GAAP net loss for the first nine months was $1.8 million or $0.06 cent loss per share, compared to a $553,000 GAAP net loss or $0.03 cent loss per share in the same period last year.

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