-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Otack2SNgXjWwXoXeMWCh7GWMe6Ck3xLO/aDiRePAV1Lp0URRrKcbm4t76yy3QbD b6JgSvTn4XczHkbv67gxXg== 0001206774-08-000451.txt : 20080305 0001206774-08-000451.hdr.sgml : 20080305 20080305141725 ACCESSION NUMBER: 0001206774-08-000451 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20080131 FILED AS OF DATE: 20080305 DATE AS OF CHANGE: 20080305 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNIFY CORP CENTRAL INDEX KEY: 0000880562 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 770427069 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11807 FILM NUMBER: 08667305 BUSINESS ADDRESS: STREET 1: 181 METRO DR STREET 2: 3RD FL CITY: SAN JOSE STATE: CA ZIP: 95110 BUSINESS PHONE: 4084674500 MAIL ADDRESS: STREET 1: 181 METRO DRIVE CITY: SAN JOSE STATE: CA ZIP: 95110 10-Q 1 unify_10q.htm QUARTERLY REPORT

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, 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 January 31, 2008

OR

o	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 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
(Do not check if a smaller reporting company)

Smaller reporting company x

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: 6,752,103 shares of common stock, $0.001 par value, as of January 31, 2008.

UNIFY CORPORATION
FORM 10-Q

INDEX

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements	3

	Unaudited Condensed Consolidated Balance Sheets as of January 31, 2008 and	3
	April 30, 2007

	Unaudited Condensed Consolidated Statements of Operations for the three and nine	4
	months ended January 31, 2008 and 2007

	Unaudited Condensed Consolidated Statements of Cash Flows for the nine months	5
	ended January 31, 2008 and 2007

	Notes to Unaudited Condensed Consolidated Financial Statements	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of	18
	Operations

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 6.	Exhibits	28


SIGNATURE		29

CERTIFICATIONS		30

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

UNIFY CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

	January 31,			April 30,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	1,722		$	2,064
Accounts receivable, net		6,044			4,227
Prepaid expenses and other current assets		695			520
Total current assets		8,461			6,811

Property and equipment, net		174			229
Investments		39			214
Goodwill		5,637			5,283
Intangibles, net		2,359			2,643
Other assets, net		255			474
Total assets	$	16,925		$	15,654

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	194		$	620
Current portion of long term debt		1,211			1,361
Accrued compensation and related expenses		1,305			804
Accrued acquisition costs		215			508
Other accrued liabilities		794			1,284
Deferred revenue		5,889			5,577
Total current liabilities		9,608			10,154

Long term debt, net		2,998			4,910
Other long term liabilities		116			121

Commitments and contingencies		—			—

Stockholders’ equity:
Common stock		7			6
Additional paid-in capital		67,115			64,973
Accumulated other comprehensive income		82			45
Accumulated deficit		(63,001	)		(64,555	)
Total stockholders’ equity		4,203			469
Total liabilities and stockholders’ equity	$	16,925		$	15,654

See accompanying notes to condensed consolidated financial statements.

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

	Three Months Ended						Nine Months Ended
	January 31,						January 31,
	2008			2007			2008			2007
Revenues:
Software licenses	$	2,973		$	1,538		$	6,369		$	2,714
Services		2,869			1,772			8,383			4,520
Total revenues		5,842			3,310			14,752			7,234

Cost of Revenues:
Software licenses		36			217			129			286
Services		407			224			898			756
Total cost of revenues		443			441			1,027			1,042
Gross profit		5,399			2,869			13,725			6,192

Operating Expenses:
Product development		929			789			2,637			1,556
Selling, general and administrative		3,160			2,578			8,716			5,243
Total operating expenses		4,089			3,367			11,353			6,799
Income (loss) from operations		1,310			(498	)		2,372			(607	)
Other income (expense), net		(189	)		(202	)		(669	)		(93	)
Income (loss) from continuing operations before
income taxes		1,121			(700	)		1,703			(700	)
Provision for income taxes		41			77			150			77
Income (loss) from continuing operations		1,080			(777	)		1,553			(777	)
Loss from discontinued operations		—			(505	)		—			(1,445	)
Net income (loss)	$	1,080		$	(1,282	)	$	1,553		$	(2,222	)

Net income (loss) per share:
Basic earnings per share:
Continuing operations	$	0.16		$	(0.13	)	$	0.25		$	(0.13	)
Discontinued operations		—			(0.09	)		—			(0.25	)
Net income (loss)	$	0.16		$	(0.22	)	$	0.25		$	(0.38	)

Dilutive earnings per share:
Continuing operations	$	0.14		$	(0.13	)	$	0.23		$	(0.13	)
Discontinued operations		—			(0.09	)		—			(0.25	)
Net income (loss)	$	0.14		$	(0.22	)	$	0.23		$	(0.38	)


Shares used in computing net income (loss) per share:
Basic		6,626			5,935			6,241			5,915
Dilutive		7,581			5,935			6,789			5,915

See accompanying notes to condensed consolidated financial statements.

UNIFY CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	Nine Months Ended January 31,
	2008			2007
Cash flows from operating activities:
Net income (loss)	$	1,553		$	(2,222	)
Loss from discontinued operations		—			(1,445	)
Income (loss) from continuing operations		1,553			(777	)
Reconciliation of net income (loss) to net cash provided (used) by continuing operating activities:
Gain on sale of other investments		(90	)		—
Depreciation		134			144
Amortization of intangible assets		607			123
Fulfillment of support obligations		(313	)		(90	)
Amortization of discount on notes payable		174			29
Stock based compensation expense		145			105
Changes in operating assets and liabilities:
Accounts receivable		(1,680	)		(10	)
Prepaid expenses and other current assets		(50	)		63
Other long term assets		89			(159	)
Accounts payable		(435	)		(465	)
Accrued compensation and related expenses		470			(529	)
Other accrued liabilities		(226	)		(1,055	)
Accrued acquisition costs		(324	)		684
Deferred revenue		256			1,861
Other long term liabilities		(20	)		20
Net cash provided by (used in) continuing operating activities		290			(56	)
Cash flows from investing activities:
Acquisition, net of cash acquired		(249	)		(5,720	)
Purchases of property and equipment		(73	)		(60	)
Payments on acquisition obligations		(206	)		—
Proceeds from sale of other investments		265			—
Net cash used in investing activities of continuing operations		(263	)		(5,780	)
Cash flows from financing activities:
Proceeds from issuance of common stock		18			—
Short-term borrowings		—			149
Borrowings under revolver		1,000			2,250
Borrowings under debt obligations		—			5,350
Payments on revolver		(1,000	)		—
Principal payments under debt obligations		(434	)		(78	)
Net cash provided by (used in) financing activities from continuing operations		(416	)		7,671
Effect of exchange rate changes on cash		47			(108	)
Cash flows of discontinued operations:
Net cash used in operating activities		—			(1,444	)
Net cash used in discontinued operations		—			(1,444	)
Net increase (decrease) in cash and cash equivalents		(342	)		283
Cash and cash equivalents, beginning of period		2,064			1,881
Cash and cash equivalents, end of period	$	1,722		$	2,164
Supplemental noncash investing and financing activities:
Conversion of convertible debt to equity	$	1,874		$	—
Conversion of acquisition accrued liabilities to equity	$	183		$	—
Acceleration of discount on notes payable	$	(241	)	$	—
Supplemental cash flow information for continuing operations:
Cash paid during the period for:
Interest	$	(808	)	$	(167	)
Taxes	$	(150	)	$	—

See accompanying notes to condensed consolidated financial statements.

UNIFY CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 31, 2008

1. Basis of Presentation

The condensed consolidated financial statements have been prepared by Unify Corporation (the “Company”, “we”, “us”, “our”) 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, 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/A for the fiscal year ended April 30, 2007, as filed with the SEC.

Revenue Recognition – Continuing Operations

The Company generates revenue from software license sales and related services, including maintenance and support, and consulting services. The Company licenses its products to end-user customers, 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 price protection, special acceptance or warranty provisions. The Company recognizes revenue for software license sales in accordance with Statement of Position (“SOP”) 97-2, Software Revenue Recognition. 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, collectibility is probable and persuasive evidence of an arrangement exists.

The Company considers a signed noncancelable license agreement, a customer purchase order, a customer purchase requisition, or a sales quotation signed by and 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 contain multi-element arrangements that include a delivered element (a software license) and undelivered elements (such as maintenance and support and/or consulting). The value allocated to the undelivered elements is unbundled from the delivered element based on vendor-specific objective evidence (VSOE) of the 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 fair value of all undelivered elements is determinable.

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

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

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

Revenue Recognition – Discontinued Operations

For the discontinued product, NavRisk, the Company recognized revenue for software licenses sales in accordance with Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts and Accounting Research Bulletin (“ARB”) 45, Long-Term Construction Type Contracts. The majority of the software license arrangements required significant modification or customization of the underlying software, therefore, revenue was recognized based on contract accounting under the provisions of Accounting Research Bulletin 45, Long-Term Construction Type Contracts and Statement of Position 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts using the completed-contract method. The Company exercised judgment in connection with the determination of the amount of software and services revenue to be recognized in each accounting period. The nature of each licensing arrangement determined how revenues and related costs were recognized.

Recently Issued Accounting Standards

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments – An Amendment of FAS Statements No. 133 and 150. SFAS No. 155: (a) permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, (b) clarifies that certain instruments are not subject to the requirements of SFAS 133, (c) establishes a requirement to evaluate interests in securitized financial assets to identify interests that may contain an embedded derivative requiring bifurcation, (d) clarifies what may be an embedded derivative for certain concentrations of credit risk, and (e) amends SFAS 140 to eliminate certain prohibitions related to derivatives on a qualifying special-purpose entity. SFAS No. 155 became effective for the Company in the first quarter of fiscal year 2008 and did not have a material impact on our financial position, cash flows or results of operations.

In June 2006, the FASB issued Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No. 109. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006 and was applicable for Unify in the first quarter of fiscal year 2008. The adoption of FIN No. 48 did not have a material impact on our financial position, cash flows or results of operations.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. We are currently assessing the impact, if any, of SFAS 157 on our consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value at specified election dates. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently assessing the impact, if any, of SFAS 159 on our consolidated financial statements.

In June 2006, the FASB reached a consensus on EITF Issue No. 06-3, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation). EITF 06-3 indicates that the income statement presentation on either a gross basis or a net basis of the taxes within the scope of the issue is an accounting policy decision that should be disclosed. EITF 06-3 was effective for interim and annual periods beginning after December 15, 2006. We present the taxes within the scope of EITF 06-3 on a net basis.

In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 . The standard changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, Statement 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. Statement 160 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. We are currently assessing the impact, if any, of SFAS 160 on our consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised), Business Combinations. The standard changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. Statement 141(R) is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. We are currently assessing the impact, if any, of SFAS 141(R) on our consolidated financial statements.

In December 2007, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 110 ("SAB 110") to permit entities, under certain circumstances to continue to use the "simplified" method, in developing estimates of expected term of "plain-vanilla" share options in accordance with Statement No. 123R Share-Based Payment. SAB 110 amended SAB 107 to permit the use of the "simplified" method beyond December 31, 2007. We believe that the adoption of SAB 110 will not have a material impact on our consolidated financial statements.

2. Acquisitions and Discontinued Operations

Purchase and Exchange Agreement with Halo Technology Holdings and Discontinued Operations

On September 13, 2006, the Company entered into a Purchase and Exchange Agreement with Halo Technology Holdings, Inc. whereby Unify agreed to purchase all of the outstanding stock of Gupta Technologies LLC (“Gupta”) from Halo in exchange for: (i) the Company’s Insurance Risk Management (“IRM”) division, (ii) the Company’s ViaMode software, (iii) $6,100,000 in cash, and (iv) the amount, if any, by which Gupta’s net working capital exceeds IRM’s net working capital at the close of the transaction. The Company’s acquisition of Gupta was consummated on November 20, 2006. The total purchase price for Gupta was $7.7 million. Gupta was founded in 1984 and is a leading producer of secure, small-footprint, embeddable databases and enterprise application development tools. The acquisition resulted in additional revenue and market share in the Company’s core markets and significantly enhances the distribution channels through which the Company’s products can be sold. Gupta’s headquarters was in Redwood Shores, California with offices in Germany and the UK and has distributors and partners in more than 40 countries around the world. Gupta’s results of operations are included in the Company’s results from the date of acquisition.

On November 20, 2006, the Company entered into various agreements with ComVest Capital LLC (“ComVest”) whereby ComVest, along with participation from Special Situations Funds, provided debt financing for the Gupta acquisition. The debt financing consisted of $5.35 million in convertible term notes and a revolver of up to $2.5 million. There are three tranches that comprise the convertible term notes: Tranche 1 is for $1,000,000, Tranche 2 is for $3,250,000 and Tranche 3 is for $1,100,000. The term loans have an interest rate of 11.25% and have repayment terms of 48 to 60 months. As part of the debt financing the Company provided the lenders with 670,000 warrants to purchase common stock. There are 200,000 warrants to purchase common stock at a price of $1.35 per share, 270,000 warrants at a price of $1.60 per share and 200,000 warrants at a price of $1.90 per share. The warrants have an expiration date of October 31, 2012. In November 2007, ComVest elected to exercise 120,000 warrants to purchase common stock at a price of $1.35 per share. Additionally, the holder of the term notes may, at their option, upon written notice to Unify given at any time and from time to time from the date Unify has sufficient authorized, unissued and unreserved shares of common stock convert the outstanding principal and any accrued interest into shares of Unify common stock. Tranche 1 is convertible at $2.50 per common share and Tranches 2 and 3 are convertible at $5.00 per common share. Unify may require conversion of the convertible term notes if its common stock price closes at or above 160% of the applicable conversion price for 20 or more consecutive market days. In October 2007, the outstanding balance for Tranche 1 of $0.9 million was converted into 352,380 shares of common stock (See Note 6). Additionally, during the third quarter of fiscal 2008, $1.0 million of the outstanding balance for Tranche 2 was converted into 198,670 shares of common stock (See Note 6). The agreement provides for ComVest to have a security interest in substantially all of the Company’s assets. Unify capitalized $238,000 of debt issuance costs associated with the debt financing and also recorded a discount on the notes payable of approximately $743,000 that is attributed to the warrants that were issued in conjunction with the financing. The debt issuance costs and the discount on notes payable are being amortized using the effective interest method over the stated life of the related notes. The amortization of both the debt issuance costs and the discount on the notes payable was approximately $257,000 for the nine months ended January 31, 2008 and is included in interest expense. The unamortized amount of the discount on the notes payable was $190,000 as of January 31, 2008 and $604,000 as of April 30, 2007 and is included in long-term debt, net. As of January 31, 2008 and April 30, 2007 the unamortized portion of debt issuance costs was $100,000 and $214,000, respectively, which is included in other assets, net.

The Gupta purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date, November 20, 2006. The determination of goodwill and intangibles is based on the results of an independent valuation expert’s report. The excess of the purchase price over the fair value of net assets acquired was allocated to goodwill. The Company believes the fair values assigned to the assets acquired and liabilities assumed were based on reasonable assumptions. The following table summarizes the fair values of net assets acquired and represents the opening balance sheet for Gupta Technologies LLC as of the acquisition date, November 20, 2006 (in thousands):

Current assets	$	1,281
Property and equipment, net		99
Long term assets		71
Goodwill		6,161
Intangibles		2,950
Total assets	$	10,562

Current liabilities	$	2,844
Long term liabilities		18
Shareholders' equity		7,700
Total liabilities and shareholders' equity	$	10,562

Active Data Corporation

On May 22, 2007, the Company purchased privately held Active Data Corporation (“ADC”) for approximately $420,000 plus potential earn-out payments over a two year period following the acquisition. ADC provided application migration software that added Microsoft’s .NET functionality to Unify’s Team Developer product and provided an additional application migration solution for the Company. Pursuant to the terms of the purchase agreement, Unify acquired all the outstanding stock of ADC. ADC did not represent the addition of a significant subsidiary as the investment in ADC was less than 10% of the Company’s assets, ADC’s total assets at date of acquisition were less than 10% of Unify’s assets and ADC’s net loss represented less than 10% of Unify’s net loss. The acquisition of Active Data did not have a material impact on the financials of Unify and the results of operations for Active Data Corporation are included in the Company’s results from the date of acquisition. The ADC purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The determination of goodwill and intangibles is based on the results of a report prepared by an independent valuation expert. The excess of the purchase price over the fair value of net assets acquired was allocated to goodwill. The Company believes the fair values assigned to the assets acquired and liabilities assumed were based on reasonable assumptions.

Discontinued Operations

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the results of the Company’s IRM division and ViaMode software product have been reported as discontinued operations for the quarter and nine months ended January 31, 2008 and 2007 respectively. The divestitures of these businesses in November 2006 were made pursuant to the Company’s strategy to refocus on its core software development and embedded database products.

The IRM division sold and marketed the NavRisk application. The NavRisk application is a policy administration and underwriting software application used by underwriters, administrators and risk managers of risk pools, risk retention groups, captives and self-insured entities. ViaMode is a software and services solution that is used for driver performance management within the transportation industry. Both IRM and ViaMode’s historic revenues were the result of sales solely in North America. The IRM division was previously reported as a separate segment and ViaMode was included in the Americas segment. Operating results for the IRM division and ViaMode software product are summarized as follows (in thousands):

	Three Months Ended					Nine Months Ended
	January 31,					January 31,
	2008		2007			2008		2007
Revenue	$	—	$	32		$	—	$	541
Loss from discontinued operations	$	—	$	(505	)	$	—	$	(1,445	)

3. Stock Compensation Information

Effective May 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment, using the modified version of prospective application. Under this method, compensation expense includes the estimated fair value of equity awards vested during the reported period. Expense for equity awards vested is determined based on the grant date fair value previously calculated for pro forma disclosures under SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure—An Amendment of FASB Statement No. 123.” For the quarter and nine months ended January 31, 2008, equity-based compensation expense from operations was comprised of the following (in thousands):

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
	2008		2007		2008		2007
Cost of Sales	$	1	$	—	$	2	$	1
Product Development		8		—		21		5
Selling, General and Administrative		49		1		122		24
Total Equity-Based Compensation, Continuing Operations	$	58	$	1	$	145	$	30
Equity-Based Compensation, Discontinued Operations		—		3		—		32
Total Equity-Based Compensation	$	58	$	4	$	145	$	62

The following table shows remaining unrecognized compensation expense from continuing operations on a pre-tax basis related to all types of nonvested equity awards outstanding as of January 31, 2008. This table does not include an estimate for future grants that may be issued (amounts in thousands).

Fiscal Year Ending April 30,	Amount
Remainder of 2008	$	66
2009		181
2010		163
2011		152
2012		52
Total	$	614

The cost above is expected to be recognized over a weighted-average period of 1.34 years.

The Company continues to use the Black-Scholes option pricing model to estimate fair value of equity awards, which requires the input of highly subjective assumptions, including the expected stock price volatility. The Company’s calculations are made using the Black-Scholes option pricing model, with the following weighted average assumptions for the three months ended January 31, 2008 and 2007, respectively: expected option life, 12 months following vesting; stock volatility of 120% and 195%; risk-free interest rates of 3.1% and 4.65% and no dividends during the expected term. Not all stock options that have been granted will be exercised. Accordingly, the Company’s calculation of equity-based compensation expense includes an adjustment for the estimated number of options that will be forfeited.

Under the 2001 Stock Option Plan (the “2001 Option Plan”), the Company may grant options to purchase up to 595,000 shares of common stock to eligible employees, directors, and consultants at prices not less than the fair market value at the date of grant for incentive stock options and not less than 85% of the fair market value at the date of grant for non-statutory stock options. Options granted under the 2001 Stock Option Plan generally vest over four years, are exercisable to the extent vested, and expire 10 years from the date of grant. Under the 1991 Stock Option Plan (the “1991 Option Plan”) which expired as of March 2001, the Company was able to grant options to eligible employees, directors and consultants at prices not less than the fair market value at the date of grant for incentive stock options and not less than 85% of the fair market value at the date of grant for non-statutory stock options. Options granted under the 1991 Option Plan generally vest over four years, are exercisable to the extent vested, and expire 10 years from the date of grant. On February 22, 2008, the Company’s stockholders approved an increase in the number of options issuable under the 2001 Option Plan to an aggregate of 1,200,000 shares of common stock.

A summary of the Company’s stock option activity for the period ended January 31, 2008 is as follows:

					Weighted
			Weighted		average remaining	Aggregate
			average		contractual	intrinsic
	Shares		exercise price		term (in years)	value (1)
Outstanding at April 30, 2007	453,243		$	2.92	6.46	$	277,608
Granted	374,500		$	3.55
Exercised	(9,994	)	$	1.76
Canceled or expired	(65,400	)	$	3.27
Outstanding at January 31, 2008	752,349		$	3.22	7.5	$	2,759,309

Exercisable at January 31, 2008	317,780		$	3.23	5.05	$	1,327,559

(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.

Total intrinsic value of awards exercised during the quarters ended January 31, 2008 and January 31, 2007 was $0 for both periods as there were no options exercised. The total fair value of awards vested during the quarters ended January 31, 2008 and January 31, 2007 was $48,400 and $130,000, respectively.

A summary of the Company’s nonvested stock option activity for the period ended January 31, 2008 is as follows:

			Weighted
			average fair
	Shares		value
Nonvested at April 30, 2007	118,370		$	1.40
Granted	374,500		$	1.89
Vested	(54,842	)	$	1.88
Canceled or expired	(3,459	)	$	2.34
Nonvested at January 31, 2008	434,569		$	2.42

4. Goodwill and Intangible Assets

The following tables present details of the Company’s goodwill and intangible assets as of January 31, 2008 and April 30, 2007 (in thousands).

	Gross					Net
	carrying		Accumulated			carrying		Estimated
January 31, 2008	amount		amortization			amount		useful life
Infinite Lives:
Goodwill	$	5,637	$	—		$	5,637	—
Finite Lives:
Customer-related		1,536		(356	)		1,180	4 - 5 years
Technology-based		1,338		(354	)		984	4 - 5 years
Trademarks		300		(117	)		183	4 years
Trade name		100		(88	)		12	1 year
Total	$	8,911	$	(915	)	$	7,996

	Gross					Net
	carrying		Accumulated			carrying		Estimated
April 30, 2007	amount		amortization			amount		useful life
Infinite Lives:
Goodwill	$	5,283	$	—		$	5,283	—
Finite Lives:
Customer-related		1,500		(125	)		1,375	5 years
Technology-based		1,050		(109	)		941	4 years
Trademarks		300		(31	)		269	4 years
Trade name		100		(42	)		58	1 year
Total	$	8,233	$	(307	)	$	7,926

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 continuing operations for the nine months ended January 31, 2008, was $607,000. Amortization expense for the fiscal year ended April 30, 2007, was $307,000 and was related entirely to the acquisition of Gupta. The estimated future amortization expense related to intangible assets as of January 31, 2008, is as follows (in thousands):

Fiscal Year Ending April 30,	Amount
Remainder of 2008	$	192
2009		719
2010		719
2011		549
2012		180
Total	$	2,359

Goodwill is included in the Company’s Americas segment as part of corporate assets. Goodwill at January 31, 2008, represents the excess of the Gupta and Active Data Corporation purchase prices over the sum of the amounts assigned to assets acquired less liabilities assumed. The Company believes the acquisition of Gupta and Active Data Corporation will produce the following results:

Increased Market Presence and Opportunities: The combination of the Company with Gupta and Active Data Corporation 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 Gupta and Active Data Corporation should benefit current customers of both companies and provide the combined company with the ability to access new customers.
Operating Efficiencies: The combination of the Company with Gupta and Active Data Corporation provides the opportunity for potential economies of scale and cost savings.

The Company believes these primary factors support the amount of goodwill recognized as a result of the purchase price for Gupta and Active Data Corporation. Goodwill will be 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 in accordance with FASB 142, Goodwill and Other Intangible Assets. The determination of goodwill and intangibles is based on the results of an independent valuation expert’s report.

Changes in the carrying amount of goodwill for fiscal 2008 were as follows (in millions):

Goodwill as of April 30, 2007	$	5,283
Goodwill for Active Date Corporation acquisition		374
Adjustments to Goodwill		(20	)
Goodwill as of January 31, 2008	$	5,637

5. Credit Facility

On November 20, 2006, the Company entered into a revolving credit note agreement with ComVest Capital LLC. Under the terms of the agreement the Company can borrow up to $2.5 million. As of January 31, 2008, $1.85 million was outstanding on the revolver. The amount that can be borrowed under the revolver is based on the amount of eligible foreign and domestic accounts receivable outstanding. The revolver has an expiration date of November 30, 2010, and the Company incurs interest expense on funds borrowed at the prevailing prime rate plus 2.25% per annum (8.25% as of January 31, 2008 and 10.5% as of April 30, 2007).

6. Long-Term Debt

The Company’s debt consists of the following at January 31, 2008 and April 30, 2007 (in thousands):

	January 31,			April 30,
	2008			2007
Convertible notes payable to ComVest Capital LLC, interest rate of 11.25%, payable in
installments through October 31, 2011. These notes include certain negative covenants
and the Company is in compliance with such covenants.	$	2,530		$	5,350

Revolving note payable to ComVest Capital LLC, interest rate of prime plus 2.25% and
a maturity date of November 30, 2010		1,850			1,500

Capital leases payable, payable in monthly installments through June 2010		19			25
		4,399			6,875
Less discount on notes payable, net		(190	)		(604	)
Less current portion		(1,211	)		(1,361	)
Total long term debt, net	$	2,998		$	4,910

Under the terms of the convertible note payable agreements Unify may require conversion of the convertible term notes if its common stock price closes at or above 160% of the applicable conversion price for 20 or more consecutive market days. In the third quarter of fiscal 2008, the Company’s stock price was at a price for 20 consecutive days such that the Company was able to require the conversion of one of the convertible notes into common stock. In October 2007, $0.9 million of debt was converted into 352,380 shares of common stock and in the third quarter of fiscal 2008, $1.0 million of debt was converted into 198,670 shares of common stock. Additionally, as a result of the conversion of convertible debt in to common stock, the related discount on notes payable associated with the converted debt was accelerated by being charged directly to additional paid-in capital. For the three and nine months ended January 31, 2008, the amount of discount that was accelerated as a result of the conversion of the convertible debt was approximately $74,000 and $241,000, respectively.

Subsequent to January 31, 2008, $1.1 million of convertible notes payable with ComVest Capital LLC was converted into 226,000 shares of common stock.

7. Other Long-Term Liabilities

In France, the Company is subject to mandatory employee severance costs associated with a statutory government regulated plan covering all employees. The plan provides for one month of severance for the first five years of service with an employer and one fifth of one year of severance for every one year of service thereafter. In order to receive their severance payment the employee may not retire before age 65 and must be employed at the time of retirement. The balance as of January 31, 2008, and April 30, 2007, was $116,000 and $121,000, respectively and is reflected as other long-term liabilities. Also included in other long term liabilities as of April 30, 2007 is $13,000 in deferred rent.

8. Maintenance Contracts

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

Changes in the Company’s deferred maintenance revenue from continuing operations during the periods are as follows (in thousands):

	Three Months Ended						Nine Months Ended
	January 31,						January 31,
	2008			2007			2008			2007
Deferred maintenance revenue beginning balance	$	4,586		$	1,784		$	5,500		$	2,810
Deferred maintenance revenue recognized during period		(2,734	)		(1,609	)		(7,829	)		(4,055	)
Deferred maintenance revenue of new maintenance contracts		3,675			4,492			7,856			5,912
Deferred maintenance revenue ending balance	$	5,527		$	4,667		$	5,527		$	4,667

9. Income Taxes

The Company adopted the provisions of FASB Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes, on May 1, 2007. As required by Interpretation 48, which clarifies Statement 109, Accounting for Income Taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied Interpretation 48 to all tax positions for which the statute of limitations remained open.

The amount of unrecognized tax benefits as of May 1, 2007, was approximately $18.6 million. Realization of unrecognized tax benefits is dependent upon future earnings, the timing and amount of which are uncertain. Accordingly, the unrecognized tax benefits have been fully offset by a valuation allowance. There have been no material changes in unrecognized tax benefits since May 1, 2007.

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 2004. 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 pursuant to FIN No. 48. The adoption of FIN No. 48 did not have a material effect on the Company’s consolidated financial position or results of operations.

The Company’s policy is to recognized interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of January 31, 2008, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor did the Company record any interest expense in the three months ended January 31, 2008.

10. Comprehensive Income

Comprehensive income (loss) includes net income (loss) and net foreign currency translation adjustments. A comprehensive gain (loss) on foreign currency translations for the three months ended January 31, 2008 and 2007 was $8,000 and ($29,000), respectively. A comprehensive gain (loss) on foreign currency translations for the nine months ended January 31, 2008 and 2007 was $37,000 and ($25,000), respectively.

11. Reverse Stock Split

On June 24, 2007, the Company implemented a 1 for 5 reverse stock split. The reverse stock split had been previously approved by the Company’s stockholders as part of the Company’s March 29, 2007 Annual Meeting.

12. Income (Loss) Per Share

Basic earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. For the three and nine months ended January 31, 2007, because of our reported net loss, potentially dilutive securities were excluded from the per share computations due to their antidilutive effect.

	Three Months Ended					Nine Months Ended
(in thousands, except per share amounts)	January 31,					January 31,
	2008		2007			2008		2007
Income (loss) from continuing operations	$	1,080	$	(777	)	$	1,553	$	(777	)
Loss from discontinued operations		—		(505	)		—		(1,445	)
Net income (loss)	$	1,080	$	(1,282	)	$	1,553	$	(2,222	)

Weighted average shares of common stock outstanding, basic		6,626		5,935			6,241		5,915
Effect of dilutive securities (1)		955		—			548		—
Weighted average shares of common stock outstanding, diluted		7,581		5,935			6,789		5,915

Earnings (loss) per share of common stock:
Basic:
Continuing operations	$	0.16	$	(0.13	)	$	0.25	$	(0.13	)
Discontinued operations		—		(0.09	)		—		(0.25	)
Total	$	0.16	$	(0.22	)	$	0.25	$	(0.38	)

Assuming dilution:
Continuing operations	$	0.14	$	(0.13	)	$	0.23	$	(0.13	)
Discontinued operations		—		(0.09	)		—		(0.25	)
Total	$	0.14	$	(0.22	)	$	0.23	$	(0.38	)

(1)	Potentially dilutive securities are not included in the calculation of diluted net loss because they would be antidilutive were employee stock options of 12,168 and 24,810 for the three and nine months ended January 31, 2007, respectively.

13. Segment Information

FASB Statement No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for reporting information about operating segments. 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 are organized geographically. While our Chief Executive Officer evaluates results in a number of different ways, our geographic structure is the primary basis for which the allocation of resources and financial results are assessed. The Company maintains two segments that sell and market application development software and related services. The segments are the Americas, which includes the Company’s international distributors, and Europe, including the UK, France, Germany and other direct European customers. Previously, the Company also maintained a reportable segment for its Insurance Risk Management (“IRM”) division. The IRM division sold and marketed the NavRisk application. In November 2006, the IRM division and the Company’s ViaMode software product were sold. In the tables below, the IRM division and the Company’s ViaMode software product comprise the amounts presented as discontinued operations.

Included in the European segment there is one customer that represented $1.1 million and $1.6 million of total revenues for the three and nine months ended January 31, 2008, respectively.

Financial information for the Company’s reportable segments is summarized below (in thousands):

	Three Months Ended						Nine Months Ended
	January 31,						January 31,
	2008			2007			2008			2007
Total revenues:
Americas (1)	$	2,838		$	1,422		$	6,734		$	3,259
Europe (1)		3,004			1,888			8,018			3,975
Total revenues from continuing operations		5,842			3,310			14,752			7,234
Total revenues from discontinued operations		—			32			—			541
Total revenues	$	5,842		$	3,342		$	14,752		$	7,775

Operating income (loss):
Americas (2)	$	(800	)	$	(1,516	)	$	(3,124	)	$	(2,260	)
Europe		2,110			1,018			5,496			1,653
Total operating income (loss) from continuing operations		1,310			(498	)		2,372			(607	)
Total operating loss from discontinued operations		—			(505	)		—			(1,445	)
Total operating income (loss)	$	1,310		$	(1,003	)	$	2,372		$	(2,052	)

Interest income (3)	$	3		$	4		$	10		$	40
Interest expense (3)	$	223		$	204		$	799		$	207

Total assets by segment were as follows (in thousands):

	January 31,
	2008		2007
Assets:
Americas	$	12,667	$	14,716
Europe		4,258		3,051
Total assets	$	16,925	$	17,767

Total intersegment revenues were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
	2008		2007		2008		2007
Intersegment revenues:
Americas	$	323	$	175	$	882	$	701
Europe		508		382		1,534		382
Total intercompany revenues:	$	831	$	557	$	2,416	$	1,083

(1)	The Company allocates revenues to operating segments based on the location of the country where the license is installed or service is delivered. The accounting policies of the segments are the same as those described in Note 1.

(2)	Americas operating income (loss) is net of corporate product development and general and administrative expenses.

(3)	Interest income and interest expense were primarily attributable to corporate assets located in the Americas for the periods presented. Interest expense in the third quarter of fiscal 2008 consists primarily of interest incurred on notes payable resulting from a debt financing in conjunction with the acquisition of Gupta and also the amortization of related debt issuance costs.

UNIFY CORPORATION

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 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 under “Business – Risk Factors.” Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. However, readers should carefully review the risk factors set forth in other reports or documents the Company files from time to time with the SEC, particularly the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K.

The following discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and Notes thereto in Part I, Item 1 of this Quarterly Report on Form 10-Q and with the audited Consolidated Financial Statements and Notes thereto, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, which are included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended April 30, 2007, as filed with the SEC.

Overview

Unify (the “Company”, “we”, “us” or “our”) is a global provider of application development and data management software, and Service-Oriented Architecture (SOA) enablement application modernization solutions. Our suite of migration solutions, easy to use development software and no-maintenance-required embedded databases enable customers to enhance their SOA environment by improving time-to-market metrics, increasing collaboration and service-enabling legacy information. Specifically, our products include embedded and enterprise data management systems, application development software for legacy application modernization and rich Internet application development, and SOA application modernization solutions.

Today, Unify’s customers include corporate information technology departments (“IT”), software value-added resellers (“VARs”), solutions integrators (“SIs”) and independent software vendors (“ISVs”) from a variety of industries, including insurance, financial services, healthcare, government, manufacturing, retail, education, and more. We are headquartered in Sacramento, California, with offices in Australia, France, Germany, and the United Kingdom (“UK”). We market and sell products directly in the United States, Europe, and Australia and indirectly through global distributors representing more than 50 countries.

Our mission is to enable customers to modernize mission critical applications while maximizing legacy investments in SOA. Our software and solutions give customers a rich user experience, quality information and a high degree of customer satisfaction.

Our strategy is to work with IT organizations to “Enable SOA.” Our software and solutions help businesses modernize and service-enable mission critical legacy applications in support of enterprise-wide SOA initiatives. Based on market requirements for SOA-based application modernization, our strategy aims to help companies increase speed and agility, consolidate information from multiple sources, improve asset reuse, lower IT costs, reduce business risks and exposures, and free information previously locked within proprietary systems.

The Company sells and markets application development and database software and services and modernization solutions through two segments. The segments are the Americas, which includes the Company’s international distributors, and Europe, which includes the UK, France, Germany and other direct European customers.

Our technology products include Composer for Lotus Notes, NXJ Developer and NXJ Enterprise, Team Developer, ACCELL, VISION, DataServer, SQLBase and SQL Base Treasury, and Sabertooth. Our customers are corporate end-user IT departments, ISVs and worldwide partners and distributors. The Company is committed to providing exceptional technology to this customer base and to continue to meet their current and future technology needs. Services to our extensive customer base include sales and marketing, support, and professional services.

Critical Accounting Policies

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

Revenue Recognition – Continuing Operations

The Company considers a signed noncancelable license agreement, a customer purchase order, a customer purchase requisition, or a sales quotation signed by an officer of the customer to be persuasive evidence that an arrangement exits such that revenue can be recognized.

Revenue Recognition – Discontinued Operations

Valuation of Long-Lived Assets

Our long-lived assets are comprised of long-term investments. At January 31, 2008, we had $39,000 in long-term investments, which are accounted for under the cost method. In September 2007, the Company sold all of its stock in Arango Software International (“ASI”) as part of a stock repurchase plan offered by ASI. At the time of the sale, the Company had a carrying value of $175,000 for the ASI stock. Proceeds from the sale of the ASI stock were $264,000. The gain on the sale of the ASI stock is included in other income. We assess the valuation of long-lived assets whenever circumstances indicate that there is a decline in carrying value below cost that is other-than-temporary. Several factors can trigger an impairment review such as significant underperformance relative to expected historical or projected future operating results and significant negative industry or economic trends. In assessing potential impairment for such investments, we consider these factors as well as the forecasted financial performance. When such decline in value is deemed to be other-than-temporary, we recognize an impairment loss in the current period operating results to the extent of the decline. Future adverse changes in market conditions or poor operating results could result in losses or an inability to recover the carrying value of the long-term investments that is not currently reflected in the investments carrying value, thereby, possibly requiring impairment charges in the future.

Deferred Tax Asset Valuation Allowance

As of January 31, 2008, we had approximately $18.6 million of deferred tax assets related principally to net operating loss carryforwards, reserves and other accruals, deferred revenue, and foreign tax credits. The Company’s ability to utilize net operating loss carryforwards may be subject to certain limitations in the event of a change in ownership. A valuation allowance has been recorded to offset these deferred tax assets. The ability of the Company to ultimately realize its deferred tax assets will be contingent upon the Company achieving taxable income. There can be no assurance that this will occur in amounts sufficient to utilize the deferred tax assets. Should we determine that we would be able to realize the deferred tax assets in the future in excess of the recorded amount, an adjustment to the deferred tax asset would increase income in the period such determination was made. At January 31, 2008, the Company had approximately $41.5 million in federal net operating loss carryforwards that begin to expire in fiscal year 2008 through 2026, approximately $5.9 million in state net operating loss carryforwards that expire in fiscal years 2013 to 2016, approximately $0.6 million in foreign net operating loss carryforwards that do not expire, and approximately $4.0 million in capital loss carryforwards that expire in 2010. The Company’s ability to utilize these net operating loss carryforwards may be subject to certain limitations in the event of a change in ownership.

Results of Operations

The following table sets forth, for the periods indicated, certain financial data as a percentage of total revenue:

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
	2008		2007		2008		2007
Revenues:
Software licenses	50.9%		46.5%		43.2%		37.5%
Services	49.1%		53.5%		56.8%		62.5%
Total revenues	100.0%		100.0%		100.0%		100.0%

Cost of Revenues:
Software licenses	0.6%		6.5%		0.9%		4.0%
Services	7.0%		6.8%		6.1%		10.4%
Total cost of revenues	7.6%		13.3%		7.0%		14.4%

Gross profit	92.4%		86.7%		93.0%		85.6%

Operating Expenses:
Product development	15.9%		23.8%		17.9%		21.5%
Selling, general and administrative	54.1%		77.9%		59.1%		72.5%
Total operating expenses	70.0%		101.7%		77.0%		94.0%
Income (loss) from operations	22.4%		(15.0%	)	16.0%		(8.4%	)
Other income (expense), net	(3.2%	)	(6.1%	)	(4.5%	)	(1.3%	)
Income (loss) from continuing operations before taxes	19.2%		(21.1%	)	11.5%		(9.7%	)
Provision for income taxes	(0.7%	)	(2.3%	)	(1.0%	)	(1.1%	)
Income (loss) from continuing operations	18.5%		(23.4%	)	10.5%		(10.8%	)
Loss from discontinued operations, net of taxes	0.0%		(15.3%	)	0.0%		(19.9%	)
Net income (loss )	18.5%		(38.7%	)	10.5%		(30.7%	)

Total Revenues

The Company generates revenue from software license sales and related services, including maintenance and support, and consulting services. We license our software through our direct sales force in the United States and Europe, and through indirect channels comprised of distributors, ISVs, VARs, and other partners worldwide. International revenues accounted for 78% and 70% of total revenues in the nine months ended January 31 of fiscal year 2008 and 2007, respectively. For the third quarters of fiscal 2008 and 2007, international revenues accounted for 81% and 72% of total revenues, respectively.

Total revenues in the third quarter of fiscal 2008 were $5.8 million, an increase of $2.5 million over the third quarter of fiscal 2007. This represents an increase of 76% over the third quarter of fiscal 2007 revenues of $3.3 million. Total software license revenues in the third quarter of fiscal 2008 were $3.0 million, an increase of $1.4 million over the third quarter of fiscal 2007. This represents an increase of 93% over the third quarter of fiscal 2007 revenues of $1.5 million. The increase in software license revenues in the third quarter of fiscal 2008 was primarily the result of the acquisition of Gupta in November 2006 and the closure of several high dollar value orders. In particular, we closed $1.1 million in Russian orders. The increase in total revenue was primarily due to the acquisition of Gupta in November 2006 which resulted in both an increase in maintenance service revenues and an increase in software license revenue. Total services revenues in the third quarter of fiscal 2008 were $2.9 million, an increase of $1.1 million. This represents an increase of 62% over the third quarter of fiscal 2007 revenues of $1.8 million. Total revenues for the nine months ended January 31, 2008 were $14.8 million, an increase of $7.5 million. This represents an increase of 104% over the nine month period of fiscal 2007 revenues of $7.2 million. Total software license revenues for the nine months ended January 31, 2008 were $6.4 million, an increase of $3.7 million. This represents an increase of 135% increase over the nine month period of fiscal 2007 revenues of $2.7 million. Total services revenues for the nine months ended January 31, 2008 were $8.4 million, an increase of $3.9 million. This represents an increase of 85% over the nine month period of fiscal 2007 revenues of $4.5 million.

Cost of Revenues

Cost of Software Licenses. Cost of software licenses consists primarily of expenses associated with royalty payments and the amortization of purchased technology from third parties that is amortized ratably over the technology’s expected useful life. Cost of software licenses was $36,000 and $217,000 for the third quarter of fiscal 2008 and fiscal 2007, respectively. For the nine months ended January 31, 2008 and 2007, cost of software licenses was $129,000 and $286,000, respectively.

Cost of Services. Cost of services consists primarily of employee, facilities and travel costs incurred in providing customer support under software maintenance contracts and consulting and implementation services. Cost of services was $407,000 and $224,000 for the third quarter of fiscal 2008 and fiscal 2007, respectively. Our cost of services as a percent of services revenues was 14% and 13% in the third quarter of fiscal 2008 and fiscal 2007, respectively. For the nine months ended January 31, 2008 and 2007, cost of services was $0.9 million and $0.8 million, respectively.

Operating Expenses

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 third quarter of fiscal 2008 were $0.9 million compared to $0.8 million in the same period of fiscal 2007. For the nine months ended January 31, 2008 and 2007, product development costs were $2.6 million and $1.6 million, respectively. The increase in product development costs was due to the addition of product development resources resulting from the acquisitions of Gupta and Active Data Corporation, plus additional outsourced development costs in the first and second quarters associated with efforts to develop a new release of Gupta’s Team Developer product.

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 and bad debt expense. SG&A expenses were $3.2 million in the third quarter of fiscal 2008 and $2.6 million for the third quarter of fiscal 2007. The increase in SG&A costs in fiscal 2008 is the result of adding Gupta staff in the areas of sales, marketing and administrative services. In the third quarter of fiscal 2008 and fiscal 2007 our SG&A expenses as a percent of total revenues was 54% and 78%, respectively. The major components of SG&A for the third quarter of fiscal 2008 were sales expenses of $1.5 million, marketing expenses of $0.4 million and general and administrative expenses of $1.3 million. For the third quarter of fiscal 2007, the major components of SG&A were sales expenses of $1.4 million, marketing expenses of $0.2 million and general and administrative expenses of $1.0 million. SG&A expenses were $8.7 million and $5.2 million for the nine months ended January 31, 2008 and 2007, respectively. In the nine months ended January 31, 2008 and 2007, our SG&A expenses as a percent of total revenues was 59% and 72%, respectively. The major components of SG&A for the nine month period ended January 31, 2008 were sales expenses of $4.2 million, marketing expenses of $1.0 million and general and administrative expenses of $3.5 million.

Other Income (Expense), Net. Other income (expense), net consists primarily of interest expense, foreign exchange gains and losses and interest earned by the Company on our cash and cash equivalents. Interest expense for the third quarter of fiscal 2008 and 2007 was $223,000 and $204,000, respectively. Interest expense for the nine months ended January 31, 2008 and 2007 was $799,000 and $207,000, respectively. Fiscal 2008 interest expense consists primarily of interest incurred on notes payable resulting from a debt financing in conjunction with the acquisition of Gupta plus the amortization of related debt issuance costs and the amortization of the discount on notes payable. Under the terms of the convertible note payable agreements, Unify may require conversion of the convertible term notes if its common stock price closes at or above 160% of the applicable conversion price for 20 or more consecutive market days. In the second quarter of fiscal 2008, the Company’s stock price was at a price for 20 consecutive days such that the Company was able to require the conversion of one of the convertible notes into common stock. In October 2007, $0.9 million of debt was converted into 352,380 shares of common stock. In the third quarter of fiscal 2008, $1.0 million of debt was converted into 198,670 shares of common stock voluntarily by the debt holders. As a result of the conversion of convertible debt in to common stock, the related discount on notes payable associated with the converted debt was accelerated by being charged directly to additional paid-in capital. Foreign exchange rate gains for the third quarter of fiscal 2008 were $44,000. Foreign exchange rate losses for the third quarter of fiscal 2007 were $1,300. Foreign exchange rate gains (losses) for the nine months ended January 31, 2008 and 2007 was $100,000 and ($1,400), respectively. Included in other income (expense) in the nine months ended January 31, 2008 is an expense of $116,000 for penalties associated with commitments related a registration statement. Included in other income (expense) for the nine months ended January 31, 2008 is $90,000 relating to the sale of the Company’s Arango Software International stock in September 2007.

Provision for Income Taxes. For the third quarter of fiscal 2008, the Company recorded $29,000 in federal income tax and $12,000 in state income tax. For the nine months ended January 31, 2008, the Company recorded $39,000 in federal income tax, $99,000 in foreign income tax and $12,000 in state income tax. No federal or state tax provisions were recorded in the three and nine months periods ended January 31, 2007, as the Company had net operating loss carryforwards. The Company recorded $77,000 in foreign income taxes for the three months ended January 31, 2007.

Discontinued Operations

In accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the results of the Company’s IRM division and ViaMode software product, which were sold in November 2006, have been reported as discontinued operations for the quarter and nine months ended January 31, 2008 and 2007, respectively. The divestitures of these businesses were made pursuant to the Company’s strategy to refocus on its core software development and embedded database products.

	Three Months Ended					Nine Months Ended
	January 31,					January 31,
	2008		2007			2008		2007
Revenue	$	-	$	32		$	-	$	541
Loss from discontinued operations	$	-	$	(505	)	$	-	$	(1,445	)

Liquidity and Capital Resources

At January 31, 2008, the Company had cash and cash equivalents of $1.7 million, compared to $2.1 million at April 30, 2007. The Company had net accounts receivable of $6.0 million as of January 31, 2008 and $4.2 million as of April 30, 2007.

On November 20, 2006, the Company entered into various agreements with ComVest whereby ComVest, along with participation from Special Situations Funds, provided debt financing for the Gupta acquisition and for working capital, consisting of convertible term loans totaling $5.35 million and a revolving credit facility of up to $2.5 million. The term loans have an interest rate of 11.25% and have terms of 48 to 60 months. The revolver has an interest rate of prime plus 2.25% and has a maturity date of November 30, 2010. In October 2007, the outstanding balance for Tranche 1 of $0.9 million was converted into 352,380 shares of common stock. Additionally, in the third quarter of fiscal 2008, $1.0 million of the outstanding balance of Tranche 2 was converted into 198,670 shares of common stock. As part of the financing, ComVest received 402,000 warrants and Special Situations Funds received 268,000 warrants. The warrants are for the purchase of common stock at prices from $1.35 to $1.90 per share. In November 2007, ComVest elected to exercise 120,000 warrants to purchase common stock at $1.35 per share. The debt financing agreements provide for ComVest to have a security interest in substantially all of the Company’s assets.

We believe that existing cash, $1.7 million as of January 31, 2008, along with forecasted operating cash flows for fiscal year 2008 and the ComVest credit facility will provide us with sufficient working capital for us to meet our operating plan for fiscal year 2008. The fiscal 2008 operating plan assumes normal operations for the Company and required interest and principal payments on debt.

Operating Cash Flow. For the first nine months of fiscal 2008 cash provided by continuing operations was $0.3 million. This compares to cash flows used by continuing operations of $0.1 million for the first nine months of fiscal 2007. Cash flows provided by operations for the first nine months of fiscal 2008 principally resulted from $1.6 million in net income from continuing operations, an increase of $0.5 million in accrued compensation and related expenses, an increase of $0.3 million in deferred revenue, $0.6 million in amortization of intangible assets and $0.2 million of discount on notes payable. Offsetting these amounts was an increase of $1.7 million in accounts receivable, a decrease of $0.4 million in accounts payable, a decrease of $0.3 million in fulfillment of support obligations and a decrease of $0.4 million in accrued acquisition costs.

For the first nine months of fiscal 2007, the cash flows used by continuing operations of $0.1 million principally resulted from $0.8 million in net loss from continuing operations, a decrease of $0.5 million in accrued compensation and related expenses, a decrease of $0.5 million in accounts payable, a decrease of $1.1 million in other accrued liabilities and an increase of $0.2 million in other long term assets. Offsetting this was an increase of $1.9 million in deferred revenue, an increase of $0.7 in accrued acquisition costs, $0.1 million in depreciation and $0.1 million in amortization of intangible assets.

Investing Cash Flows. Cash used in investing activities for continuing operations was $0.3 million for the first nine months of fiscal 2008. The use of cash consisted of $0.4 million expended related to the acquisition of Active Data Corporation and $0.1 million for the purchase of property and equipment. Offsetting this were proceeds from the sale of other assets of $0.3 million as a result of the sale of stock related to our investment in Arango Software International. Cash used in investing activities for continuing operations was $5.8 million for the first nine months of fiscal 2007. The use of cash consisted of $5.7 million expended related to the acquisition of Gupta Technologies LLC and $0.1 million for the purchase of property and equipment.

Financing Cash Flows. Net cash used in financing activities for continuing operations for the first nine months of fiscal 2008 was $0.4 million. Cash used in financing activities was primarily the result of $1.0 million for payments on the Company’s revolver note and $0.4 million of principle payments on the debt obligations. Offsetting this was $1.0 million of borrowings under the revolver. In the first nine months of fiscal 2007, cash provided by financing activities was $7.7 million and was the result of $2.3 million of borrowings under the revolver and $5.4 million of borrowings under debt obligations.

A summary of certain contractual obligations as January 31, 2008 is as follows (in thousands):

	Payments Due by Period
			1 year		2-3		4-5		After 5
Contractual Obligations	Total		or less		years		years		years
Long-term debt	$	2,530	$	1,204	$	984	$	275	$	67
Revolver note		1,850		—		1,850		—		—
Other long-term liabilities		116		—		—		—		116
Capital leases		19		7		12		—		—
Operating leases		3,487		940		782		610		1,155
Total contractual cash obligations	$	8,002	$	2,151	$	3,628	$	885	$	1,338

In January 2008, the Company entered into a lease agreement for office furniture. The lease is expected to commence in April 2008 and will be recorded as a capital lease in the amount of $115,000.

Volatility of Stock Price and General Risk Factors Affecting Quarterly Results

Unify’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 common stock to fluctuate, perhaps substantially, including: announcements of developments related to our business; fluctuations in the operating results and order levels of Unify or its competitors; general conditions in the computer industry or the worldwide economy; announcements of technological innovations; new products or product enhancements from us or our competitors; changes in financial estimates by securities analysts; developments in patent, copyright or other intellectual property rights; and developments in our relationships with our customers, distributors and suppliers; legal proceedings brought against the Company or its officers; and significant changes in our 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, have 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 our common stock.

Unify’s stock trades over-the-counter on the “bulletin board.” Companies whose shares trade over-the-counter generally receive less analyst coverage and their shares are more thinly traded than stock that is traded on the NASDAQ National Market System or a major stock exchange. Our stock is therefore subject to greater price volatility than stock trading on national market systems or major exchanges.

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

Due to the foregoing factors, quarterly revenues and operating results may vary on a quarterly basis. Revenues and quarterly results may vary because software technology is rapidly evolving, and our sales cycle, from initial evaluation to purchase and the providing of maintenance services, can be lengthy and varies substantially from customer to customer. Because we normally deliver products within a short time of receiving an order, we typically do not have a backlog of orders. As a result, to achieve our quarterly revenue objectives, we are dependent upon obtaining orders in any given quarter for shipment in that quarter. Furthermore, because many customers place orders toward the end of a fiscal quarter, we generally recognize a substantial portion of our software license revenues at the end of a quarter. Our expense levels largely reflect our expectations for future revenue and are therefore somewhat fixed in the short term.

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. 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 $1.7 million as of January 31, 2008. Unify had no short-term investments at January 31, 2008.

In November 2006, the Company entered into a revolving credit facility agreement with ComVest whereby ComVest would provide up to $2.5 million through a revolving credit facility. The revolver has an interest rate of prime plus 2.25% and has a maturity date of November 30, 2010. Should the prime interest rate increase during the life of the revolver, the Company would have exposure to interest rate risk if it has a large balance outstanding on the revolver. As of January 31, 2008, there was $1.85 million outstanding on the revolver.

Unify 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 Unify 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 intercompany accounts receivable and intercompany accounts payable related to activities with the Company’s subsidiaries in France, Germany and the UK. At January 31, 2008, the Company had $2.3 million in such payables denominated in euros and a total $2.7 million in receivables denominated in euros and pounds sterling. The Company encourages prompt payment of 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 could have a significant 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.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we evaluated the effectiveness of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls were effective as of the end of the period covered by this quarterly report.

(b) Changes in Internal Controls. There have been no changes in our internal controls over financial reporting that occurred during the first nine months of fiscal year 2008 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

UNIFY CORPORATION

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. The Company intends to vigorously assert its rights and defend itself in any litigation that may arise from such claims. While the ultimate outcome and resolution of these matters could affect the results of operations in future periods, and while there can be no assurance with respect thereto, management believes after final disposition, any financial impact to the Company would not be material to the Company’s consolidated financial position, results of operations and cash flows.

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.

UNIFY CORPORATION
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: March 5, 2008	Unify Corporation
	(Registrant)

	By:

	/s/ STEVEN D. BONHAM
	Steven D. Bonham
	Chief Financial Officer
	(Principal Financial and Accounting Officer)

EX-31.1 2 exhibit31-1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER UNDER SECTION 302

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 Unify Corporation;

2. Based on my knowledge, this quarterly 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 quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly 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)) 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 quarterly report is being prepared;

(b) 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

(c) 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 third 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: March 5, 2008

EX-31.2 3 exhibit31-2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER UNDER SECTION 302

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 Unify Corporation;

(c) 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

(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: March 5, 2008

EX-32.1 4 exhibit32-1.htm CERTIFICATION OF CHIEF EXECUTIVE OFFICER UNDER 18 U.S.C SECTION 1350

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 Unify Corporation (the “Registrant”) on Form 10-Q for the quarter ended January 31, 2008, 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: March 5, 2008	/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 Unify Corporation and will be retained by Unify Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2 5 exhibit32-2.htm CERTIFICATION OF CHIEF FINANCIAL OFFICER UNDER 18 U.S.C SECTION 1350

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 Unify Corporation (the “Registrant”) on Form 10-Q for the quarter ended January 31, 2008, 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: March 5, 2008	/s/ STEVEN D. BONHAM
	Steven D. Bonham
	Chief Financial Officer

-----END PRIVACY-ENHANCED MESSAGE-----