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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-K

ý

Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended October 31, 2010.Oro

Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period
from                        to                
        .


Commission file number: 000-28540

VERSANT CORPORATION(Exact name of Registrant as specified in its Charter)

California(State or other jurisdiction
of incorporation or organization)

94-3079392(I.R.S. Employer
Identification No.)


255 Shoreline Drive, Suite 450, Redwood City, California 94065(Address of principal executive offices) (Zip code)

(650) 232-2400(Registrant's telephone number, including area code)

Securities
registered pursuant to Section 12(b) of the Act:Common Stock, no par value

Securities
registered pursuant to Section 12(g) of the Act:None

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
o No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes
o No ý

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 ý No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter)
is not contained herein and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ý

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. (check one).

Large Accelerated Filer o

Accelerated Filer o

Non-Accelerated Filer o (Do not check if a Smaller Reporting Company)

Smaller Reporting Company ý


Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o No ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates (assuming, for purposes of this calculation
only, that the registrant's directors, executive officers and greater than 10% shareholders are affiliates of the registrant) computed by reference to the price at which the common equity was last
sold, or the average bid and asked price of such common equity, as of April 30, 2010 (the last business day of the registrant's most recently completed second fiscal quarter): $44,710,656.

The
number of shares outstanding of each of the issuer's classes of common stock, as of January 26, 2011, was 3,186,909 shares of Common Stock, no par value.

DOCUMENTS
INCORPORATED BY REFERENCE

Portions
of the Registrant's definitive proxy statement relating to its Annual Meeting of Shareholders to be held in 2011 are incorporated by reference in Part III of this Annual
Report on Form 10-K where indicated.



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VERSANT CORPORATION  ANNUAL REPORT ON FORM 10-K  For the Fiscal Year Ended October 31, 2010    TABLE OF CONTENTS



Item No.

Name of Item

PagePART IItem 1.

Business

1Item 1A.

Risk Factors

11Item 1B.

Unresolved Staff Comments

21Item 2.

Properties

21Item 3.

Legal Proceedings

21Item 4.

Reserved

21PART IIItem 5.

Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

22Item 6.

Selected Financial Data

25Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

26Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

53Item 8.

Financial Statements and Supplementary Data

54Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

93Item 9A.

Controls and Procedures

93Item 9B.

Other Information

94PART IIIItem 10.

Directors, Executive Officers and Corporate Governance

94Item 11.

Executive Compensation

94Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

94Item 13.

Certain Relationships and Related Transactions, and Director Independence

94Item 14.

Principal Accountant Fees and Services

94PART IVItem 15.

Exhibits and Financial Statement Schedules

94SIGNATURES

95CERTIFICATIONS


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Without limitation, Versant Object Database, Versant®, FastObjects, db4o, db4objects and other Versant product names referred to herein are trademarks
of Versant in the United States and/or other countries. All other corporate or trade names or service marks referred to in this report are the names or marks of their respective owners in the United
States and/or other countries.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-K contains forward-looking statements within the meaning of Section 21E
of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. These forward-looking statements include, among other things, statements regarding the Company's expected
future financial performance, assets, liquidity and trends anticipated for the Company's business. These statements are based on the Company's current expectations, assumptions, estimates and
projections about the Company's business, the Company's industry and the market for the Company's goods and services, which are based on information that is reasonably available to the Company as of
the date of this report. Forward-looking statements may include words such as "believes," "anticipates," "expects," "intends," "plans," "will," "may," "should," "estimates," "predicts," "forecasts,"
"guidance," "potential," "continue" or the negative of such terms, other variants of such terms or other similar expressions.

We caution investors that forward-looking statements are only predictions, forecasts or estimates based upon our current expectations about future events. The
forward-looking statements are not guarantees or assurances of our future performance and are subject to significant risks and uncertainties that are inherently difficult to assess and predict,
particularly in light of the continuing recessionary environment in the United States and the global economy. Consequently, our actual future results and performance may differ materially from the
results and performance anticipated by any forward-looking statements due to these risks and uncertainties. Some of the important risks and factors that could cause our results and performance to
differ from results or performance anticipated by this report are discussed in Item 1A of this report, "Risk Factors"which you should read carefully. We undertake no
obligation to revise or update any forward-looking statements in order to reflect events or circumstances that may arise or occur after the date of this report or for any other reason. Readers are
urged to carefully review and consider the various disclosures made by Versant in this report and in our other reports filed with the Securities and Exchange Commission that attempt to advise
interested parties of risks and factors that may affect our business.

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PART I



Item 1.    Business

Overview of the Company

We are a leading provider of object-oriented data management software that forms a critical component of the infrastructure of
enterprise computing. We design, develop, market and support object-oriented database management system products that companies use to solve complex data management and data integration problems. We
also provide related product support, training, and consulting services to assist users of our products in developing and deploying software applications based on our products. We operate our business
within a single operating segment that we refer to as "Data Management".

Our
mission is to be a preferred vendor of core data management solutions to world-class enterprises whose businesses require the successful management of large and complex bodies of
data. To achieve this goal our general strategy has been to develop and offer powerful, scalable and highly reliable data management solutions capable of handling a wide array of challenging
applications for sophisticated customers in many industries. For example, we market our products to companies in the telecommunications and defense industries, as well as to customers in several
vertical markets including technology, financial services, transportation and health care. Our software has been used in strategic distributed applications such as network modeling and management,
fault diagnosis, fraud prevention, service activation and assurance, and customer billing, scheduling and other applications. We strive to continually improve our core data management products and
related tools to make our solutions even more useful, reliable and performance oriented. In our research and development efforts we also strive to make our products usable and accessible by customers
using different computing or software platforms, in order to expand the markets and industries we serve.

We
were incorporated in California in August 1988 under the name Object Sciences Corporation and completed our initial public offering of our common stock under the name of Versant
Object Technology Company in July 1996. The name of the company was changed to Versant Corporation on July 15, 1998. In March 2004, we acquired Poet Holdings, Inc. (Poet) through a
merger. Prior to that merger, Poet was a provider of object-oriented data management software headquartered in the United States, whose stock was publicly traded on the Frankfurt Stock Exchange. In
June 2004, we acquired the JDO Genie product line and its customers from JDO Genie (PTY) Ltd., a privately held South African company and in July 2004, we acquired FastObjects, Inc., a
private company that held North American distribution rights with respect to Poet's FastObjects database management product. In August of 2005, we effected a 1-for-10 reverse
split of our outstanding common stock. In February 2006, we sold our WebSphere consulting business. On December 1, 2008 we acquired the assets of the database software business of
privately-held Servo Software, Inc. (formerly named db4objects, Inc.), which included an open source object database software solution targeting the embedded device market.
Our principal executive offices are located at 255 Shoreline Drive, Suite 450, Redwood City, California 94065 and our telephone number is (650) 232-2400.

Our
website URL is www.versant.com. Except as otherwise expressly set forth in this report on Form 10-K, the information contained in, or
referred to on, our website is not a part of this report.

We
conduct most of our administrative operations from our U.S headquarters in Redwood City, California and the offices of our German subsidiary, Versant GmbH, which is
headquartered in Hamburg, Germany. Our research and development activities are primarily conducted by our German subsidiary, Versant GmbH. In September 2009, a restructuring plan was undertaken
to consolidate the Company's research and development efforts into one location in Germany and to close a facility in India. This restructuring plan was substantially completed as of April 30,
2010.

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Industry Background

Computerized data management has evolved significantly over the past few decades. As business computing became more sophisticated,
network and hierarchical databases emerged in the 1970s to serve growing business data requirements. In the 1980s, these types of databases were largely superseded by relational database technology,
which continues to be a widely prevalent database technology today. The mid to late 1980s saw the emergence of object-oriented software programming. In object-oriented programming, smaller software
building blocks called "objects", which can perform specific functions, are aggregated with other objects in order to create larger software systems. With the advent of object-oriented software
programming, it became possible to incorporate the unique features and advantages of object-based software into database management solutions. Our principal products are object-based database
management software solutions, which we believe have advantages over relational database technology. In particular, we believe that object-based database management solutions are especially well
suited for successfully addressing the complex and challenging data management and analytical requirements of companies who need to rapidly source, update, analyze and use very large changing bodies
of complex data for a wide variety of business applications.

Certain Industry Terms

For reference purposes we have listed below certain well-known technical terms often used in our data management industry
to assist readers in better understanding the information provided in this report:



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Overview of Our Products and Services

We provide sophisticated data management solutions designed to address complex data management needs. Our Versant Object Database
product is used primarily by larger enterprises which have significant large-scale data management requirements, such as technology providers, telecommunications carriers, government defense agencies,
defense contractors, healthcare companies and companies in the financial services and transportation industries. Since the incorporation of Poet's FastObjects solution into our product line in March
2004, we expanded the scope of our solutions to also address the data management needs of smaller systems. With our acquisition of db4o in December 2008, we added a database solution for the embedded
space which we plan to continue to develop and support.

The
data management needs of our customers usually involve many business functions, ranging from usage and management of the customer's internal data to the processing of externally
originated information such as customer enrollment, billing and payment transaction data. Our solutions have also been used to solve complex data management issues such as fraud detection, risk
analysis, yield management, and a host of other problems that require an application specific data management solution.

In
addition to our product offerings, to assist users in their development and deployment of applications based on the Versant Object Database, FastObjects and db4o, we offer a variety
of related services, including consulting, training, and technical support services. We also provide customers with maintenance and support services with respect to our products.

Benefits of Versant Solutions

Our products provide customers the following benefits for specialized data management:



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Products

Versant Object Database (VOD)

VOD, an eighth generation object database management system, is Versant's flagship product and is designed to support
multi-user, commercial applications in distributed computing environments. VOD enables users to store, manage, and distribute
information that often cannot be administered effectively through traditional database technologies, including the following types of information:



The
object-oriented, balanced client-server architecture of VOD provides the basis for high-performance, scalable distributed applications. We believe that VOD's performance
is superior compared to relational database management systems, particularly for complex data applications, for which VOD has the capability of processing a wide variety of abstract data types in a
highly concurrent,

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high
performance manner. We also believe that use of VOD allows our customers to reduce the time they need to develop applications for their data management systems and improves their system
performance.

VOD
is designed to integrate up to 65,000 databases connected over a like number of locations on a variety of hardware and software platforms. Each database has a theoretical storage
capacity of 4.6 million terabytes, an amount far beyond the actual capacity of most existing operating systems. VOD implements a variety of database features, including two-phase
commitment for distributed transaction integrity and "database triggers" to monitor changing events and data and to notify users and applications when specified events occur. In addition,
on-line management utilities enable routine maintenance to be performed while the database is running. These include utilities to perform backup operations, manage log files, dynamically
evolve database schema,
add, delete and compress volumes on disk storage and related functions. These utilities provide multiple levels of administrative access and application security.

Version
8.0 of VOD includes our core object database management system, C++, Java and .NET language interfaces (proprietary JVI and standards-based JDO), and XML for import and export of
data into the database. By bundling these components with VOD, we believe we are enhancing the solution that we are offering, thereby making it easier for customers to deploy applications requiring
these components.

As
part of the VOD family of solutions, we also offer a range of add-on options that a customer can use in situations requiring advanced capabilities, including the
following:



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FastObjects

FastObjects is an object database management system designed to provide minimal administration and to work natively with the customer's
product. The primary target application for our FastObjects product line is for use as an embedded data management system to be integrated in a customer's products. FastObjects is used in a vast range
of applications, including medical devices, vending machines, telecom equipment, and defense systems. The majority of FastObjects installations are now running under the Microsoft Windows Operating
System.

db4o

db4o is an open source object database that enables Java and .NET developers to store and retrieve any application object with only one
line of code, eliminating the need
to predefine or maintain a separate, rigid data model. The db4o product targets embedded applications and embedded operating system deployments.

Services

We derived approximately 47% of our revenues from services in fiscal 2010, predominantly from maintenance services. Our services
include maintenance and support programs for our data management products, consulting services and the development of customer-specific extensions to our products.

Maintenance Services.We provide maintenance and technical support services for our products that are generally available at an annual
fee that
varies depending on the type and level of support the customer requires. Maintenance and support contracts, which typically have twelve-month terms, are offered concurrently with the initial license
of our product and entitle a customer to telephone support, product upgrades, and documentation updates. For additional fees, customers may purchase a special support package that provides dedicated
support engineers and telephone support available for 24 hours per day and seven days a week. Maintenance contracts are typically renewable annually and typically are paid for in advance for
all products, but in some instances maintenance and support fees are paid in arrears. For the support of older versions of our products, we offer specific obsolescence support options.

Professional Services.We also provide a variety of training and consulting services to assist customers in the design, development,
training and
management of applications that are built based on our core products. Training services are offered for a variety of Versant-specific and other object-related technologies and range from beginning to
advanced levels. Consulting services are available for analysis and design assistance, mentoring and technical information transfer, application coding, design reviews and performance analysis. In
addition, we provide custom development services to customers that request unique or proprietary product extensions.

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Our Customers

We categorize our customers into two broad groups, End-Users and Value Added Resellers ("VARs"). End-Users are
companies who use our products internally and do not redistribute our products outside their corporate organizations. VAR customers, on the other hand, include traditional Value Added Resellers,
Systems Integrators, OEMs and other vendors who redistribute Versant products to third party customers, either individually or as part of an integrated product.

We
license our data management products through two types of perpetual licensesdevelopment licenses and deployment licenses. Development licenses, typically sold on a per
seat basis, authorize a customer to develop an application program that uses our software product. Under a deployment license, a customer is permitted to deploy an application that it has developed
under a development license from us. End-Users generally purchase deployment licenses based on the number of central processing units (CPUs) accessing the server that will run the
application using our database management system. For certain applications, we offer deployment licenses priced on a per user basis. Pricing of Versant Object Database and FastObjects varies according
to several factors, including the number of CPUs/Cores per server on which the applications run, and the number of users that are able to access the server at any particular time. Customers may elect
to simultaneously purchase development and deployment licenses for their
projects, or instead may initially purchase only a development license and purchase a deployment license later when their applications developed on our software are completed. Pricing of db4o also
varies according to several factors, including the number of CPUs/Cores per server on which the applications run, and the number of users that are able to access the server at any particular time.
However, due to the open source nature of the db4o product, for db4o at this time we only offer use/deployment licenses (and not development licenses).

VARs
and distributors purchase development licenses from us on a per seat basis and on terms similar to those of development licenses that we sell directly to End-Users. VARs
are authorized to sublicense directly to the End-User deployment copies of our data management products, which are either bundled or embedded in the VARs' applications. VARs are required
to report the distribution of our software to us and are charged a royalty that is based either on the number of copies of the application software that are distributed or computed as a percentage of
the selling price charged by the VAR to its end-user customers. These royalties may be prepaid in full or paid upon deployment.

Frequently
a significant portion of our total revenues have been derived from a limited number of large organizations who tend to change from year to year. In fiscal year 2010, one
customer accounted for 13% of our total revenues for the first quarter; two customers accounted for 12% and 17%, respectively, of our total revenues for the second quarter; one customer accounted for
15% of our total revenues for the third quarter; and two customers accounted for 12% and 13%, respectively, of our total revenues in the fourth quarter. One customer accounted for 12% of our total
revenues for the fiscal year ended October 31, 2010. In fiscal year 2009, no one customer accounted for 10% or more of our total revenues for the fiscal year or in any fiscal quarter as we
experienced smaller average license transactions in fiscal 2009. In fiscal 2008, one customer accounted for 23% of our total revenues for the first quarter; two customers accounted for 15% and 14%,
respectively, of our total revenues for the second quarter of fiscal 2008; and two customers accounted for 22% and 11%, respectively, of our total revenues for the third quarter of fiscal 2008;
although no one customer accounted for 10% or more of our total revenues for the fourth quarter of fiscal 2008 or for fiscal 2008.

Our Vertical Markets

Versant Object Database and FastObjects are licensed for development or deployment, or both, and db4o is licensed only for deployment,
in a wide range of applications. A substantial amount of our sales is for applications in the telecommunications, transportation, technology, healthcare, financial services, media and defense sectors.
Many of our customers have licensed multiple copies of our products for use in different applications.

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Our
future performance will depend in significant part on achieving increased usage and sales of the Versant Object Database and FastObjects in telecommunications, transportation,
technology, healthcare, financial market applications, media, defense and online gaming, the continued acceptance of our products within these industries and achieving use and acceptance of our
products in other industries.

Sales and Marketing

Sales Channels.We market and sell our products principally through our direct sales force and through value-added resellers, systems
integrators,
and distributors.

Direct Sales.Our direct sales organization is based in our corporate offices in Redwood City, California and Hamburg, Germany, and in
some regional
and other offices in the U.S. and Europe. The direct sales organization includes field sales personnel, who are responsible for account management, and systems engineers, who answer technical
questions and assist customers in running benchmarks against competitive products and in developing prototype applications.

Indirect Sales.Part of our sales strategy is to further develop indirect distribution channels, such as value-added resellers and
systems
integrators who address new markets or industries. Systems integrators may integrate our products with their own or those of other vendors, in order to provide a complete solution to their customers.
Under their agreements with Versant, value-added resellers and systems integrators are typically not subject to any minimum purchase or resale requirements and can cease marketing our products at any
time. Some of our value-added resellers and systems integrators offer products they produced by themselves or by other vendors, which may in some cases compete with our products. In addition we
distribute our products in certain markets through distributors who resell our products without integrating them in other solutions.

Marketing.The primary objective of our marketing efforts is to build increased visibility for Versant and its products and to generate
sales leads
for our business. Our marketing programs have included our efforts at cultivating media and analyst relations, fostering valuable investor communications, speakers' programs, online marketing,
partner-marketing programs, sponsoring database technology scholarship programs at the university level, participation in conferences and tradeshows and in some cases preparation of white papers or
other marketing / advertising initiatives targeting a discrete industry or market.

Sales Process.The cycle for a complete sale of our products to new and large enterprise customers can often exceed six months and may
extend to a
year or beyond. For existing customers with successfully deployed applications, sales cycles for new applications of our core products are generally shorter. During the sales cycle, meetings involving
both Versant technical and management staff are conducted frequently at the prospective customer's site and at our headquarters. As part of their product selection process, our prospective customers
typically perform a detailed technical evaluation or benchmark of our object-based technologies, often directly comparing them to competitive products. Upon completion of the evaluation, a customer
that chooses our solution may purchase one or more development licenses, which entitle the customer to develop applications that use a Versant software product. The number of development licenses a
customer may acquire depends upon the number of programmers who will develop and build the customer's application. Additionally, a customer may purchase technical support, training courses and
consulting services. Our customers may also purchase deployment licenses from us that enable them to sell and market product applications developed under a Versant development license. In some cases
our customers purchase deployment licenses at the same time they purchase development licenses. In other cases customers may instead defer their purchase of deployment licenses and related maintenance
until they complete the application development under their development license (a process that typically takes at least six months and can exceed one year).

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Shipping and Backlog.Our software may be either physically or electronically delivered to the customer. If physically delivered, our
software
product is shipped from either our Redwood City or Hamburg facilities and is delivered to the customer upon receipt of an approved order and a signed license agreement. We typically do not have a
material backlog of unfilled license orders at any given time, and we do not consider backlog to be a meaningful indicator of our future performance.

International Sales and Marketing.Our international sales are primarily recorded by our subsidiary in Germany, which sells our
products through
distributors and value-added resellers, as well as directly to end-users. In fiscal 2009, we partnered with a distributor in China to access potential long-term growth
opportunities in that geographic region and continued that activity in fiscal 2010. For fiscal 2010, our international revenues derived from customers outside North America made up approximately 60%
of our total revenues, compared to 62% for fiscal 2009 and 63% for fiscal 2008. Risks particularly associated with our international sales are discussed below in Item 1A under the risk factor
captioned "International Operations pose unique risks".

Competition

Our software products compete with products of companies offering object and relational database management systems. Our competitors,
especially Oracle and Progress Software, have longer operating histories, significantly greater financial, technical, marketing, service and other resources, significantly greater name recognition,
broader product offerings, larger and more established distribution channels and a larger installed base of customers than does Versant. In addition, many of our competitors have
well-established relationships with our current and potential customers and may offer broader suites of products with a wide array of complementary applications which may incentivize
customers to purchase these competitors' data management products. We may not be able to compete successfully against current or future competitors, and competitive pressures could have a material
adverse effect on the business, pricing, operating results and financial condition of the company.

Research and Development

Currently our research and development activities are conducted primarily in Hamburg, Germany and consist primarily of the development
of enhancements of and improvements to our existing product line, (quality assurance engineering) and development of add-on option solutions used with our principal products. In fiscal
2010, fiscal 2009 and fiscal 2008, our research and development expenses were $3.8 million, $4.0 million and $4.1 million, respectively. Our research and development expenses
consist primarily of personnel and related expenses, including payroll and employee benefits, expenses for facilities and payments made to outside software development contractors and, to a lesser
degree, depreciation of capital equipment.

Intellectual Property and Other Proprietary Rights

We consider our products as proprietary. We attempt to protect our technology by relying primarily on a combination of copyright and
trademark laws, trade secrets, confidentiality procedures and contractual provisions to protect our proprietary technology. For example, we license our software pursuant to signed license agreements
and, to a lesser extent, "shrink-wrap" licenses displayed in evaluation downloads and in software installation screens, which impose certain restrictions on the licensee's ability to
utilize our software. In addition, we take steps to avoid disclosure of our trade secrets, such as requiring persons with access to our proprietary information to execute non-disclosure
agreements, and we restrict access to our software source code. We seek to protect our software, documentation and other written materials under trade secret and copyright laws, which afford only
limited protection. We were awarded a United States patent (No. 5,822,759) for our proprietary cache system used within our product suites, which expires in 2015. We also have certain
trademarks and service marks for certain of our products and services.

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Employees

As of October 31, 2010, we and our subsidiaries had a total of 61 full time employees, of whom 19 were based in the United
States and 42 in Europe. As of October 31, 2010, 31 employees were engaged in engineering and technical services, 14 were engaged in sales and marketing and the remaining 16 were engaged in
general administration and finance. To the best of our knowledge, none of our employees is represented by a labor union. We have not experienced any organized work stoppage to date and believe that
our relationship with our employees is generally good.

Our
future performance depends mostly upon the continued service of our key technical, sales, and senior management personnel. The loss of the services of one or more of our key
employees could have a material adverse effect on our business, operating results and financial condition.

Restructuring

In September 2009, a restructuring plan was undertaken to consolidate the Company's research and development efforts into one location
in Germany in order to streamline operations, create management efficiencies and increase productivity. The Company committed to closing its research and development facility in Pune, India and
winding down the affairs of its subsidiary, Versant India Private Limited. The restructuring was substantially completed during the second fiscal quarter ended April 30, 2010. See
Note 13 of our "Notes to Consolidated Financial Statements" in Item 8 of this report for more information regarding this transaction.

As
part of restructuring efforts to refocus the Company on its core object database management business, in February 2006, we sold our WebSphere consulting business in exchange for a
one-time cash payment plus certain contingent payments payable over a 24-month period following the close of the transaction. As a result, the results of operations of our
WebSphere consulting practice for fiscal 2008 were reflected as discontinued operations. Therefore, reported revenues for this period no longer include any revenues from the WebSphere consulting
practice. The results from the discontinued WebSphere operations, however, are reported as net income from discontinued operations, net of income taxes. See Note 15 of our "Notes to
Consolidated Financial Statements" in Item 8 of this report for more information regarding this transaction.

Investor Information

We are subject to the informational requirements of the Securities Exchange Act of 1934, or the "Exchange Act" pursuant to which we
file our periodic reports on Forms 10-Q, 10-K, 8-K, proxy statements and other information with the Securities and Exchange Commission, or "the SEC". These
reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the SEC at 100 F Street, NE, Room 1580, Washington, DC 20549. Information on the
operation of the SEC's Public Reference Room may be obtained by calling the SEC at 1(800) SEC-0330. In addition, the SEC maintains an Internet site (at http://www.sec.gov) that
contains reports, proxy and information statements and other information regarding issuers that file electronically.

Information
regarding our revenues, net income, total assets and other financial information for our fiscal years ended October 31, 2010, 2009 and 2008 can be found in
Item 8 of this report on Form 10-K, which is incorporated here by reference.

Financial
and other information about Versant can also be accessed at our Investor Relations website. The address of Versant's website is: (www.versant.com).
We make available, free of charge, copies of our annual reports, annual reports on Forms 10-K, quarterly reports on Forms 10-Q, current reports on
Form 8-K and amendments to those reports, filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after filing such
materials with the SEC.

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Item 1A.    Risk Factors.

This annual report on Form 10-K contains forward-looking statements regarding the Company that involve risks and uncertainties,
including, but not limited to, those set forth below in this Item 1A, that could cause our actual results of operations and financial condition to differ materially from those contemplated in
the forward-looking statements. The risks and uncertainties set forth below should be carefully considered when evaluating our business and prospects.

Current economic conditions may harm our business and results of operations.Global economic conditions and financial markets
have continued to be
challenging to the enterprise software market, as many economies and financial markets continue to experience a deep recession stemming from a multitude of factors, including adverse credit
conditions, slower economic activity, concerns about the debt levels and financial viability of certain European countries and the instability of financial institutions and other businesses, inflation
and deflation, continuing high rates of unemployment, reduced corporate capital spending, adverse business conditions and liquidity concerns and other factors. Economic growth in the U.S. and many
other countries has remained very slow and the length of time these adverse economic conditions may persist are unknown. During challenging economic times and in tight credit markets, many prospective
customers delay or reduce technology purchases. This has resulted, and could continue to result in, reductions in sales of our products and services, longer sales cycles, smaller sales levels,
difficulties in collection of accounts receivable, slower adoption of new technologies and increased price competition. Continued softness in corporate information technology spending would have a
direct adverse impact on our business and any of these events would likely materially harm our
business, including by decreasing our revenues, decreasing cash provided by operating activities and negatively impacting our liquidity. We cannot predict the duration of these economic conditions or
the impact they will have on our customers or business.

We are dependent on a limited number of products, especially Versant Object Database or "VOD".Most of our license revenues to
date have been derived
from our VOD product, its predecessors and related products that add to or extend the capabilities of VOD. Consequently, if our ability to generate revenues from VOD were negatively impacted, our
business, cash flows and results of operations would be materially and adversely affected. Many factors could negatively impact our ability to generate revenues from Versant Object Database, including
without limitation softness in demand in the North American or European markets for enterprise software, the current downturn in the global economy and any slowness in the U.S. or European economies
or in key industries we serve, such as the telecommunications and defense industries, the success of competitive products of other vendors, reduction in the prices we can obtain for our products due
to competitive or economic factors, the adoption of new technologies or standards that make our products technologically obsolete and customer reluctance to invest in object-oriented technologies.
Although we have taken steps to diversify our product line through our 2004 acquisition of Poet and its FastObjects data management product and our December 2008 acquisition of db4o, we still expect
that sales of VOD will continue to be very critical to our revenues for the foreseeable future. Accordingly, any significant reduction in revenue levels from our VOD product can be expected to have a
material negative impact on our business and results of operation.

Efforts to expand and diversify our product line may adversely affect our operating results and may not result in the development of successful new
products.In order to sustain our revenues, we may need to develop new products to expand and diversify our product offerings beyond our core products, VOD,
FastObjects and db4o. However expanding our product line will likely require substantial marketing, research and development and sales expenditures, and in some cases product acquisition costs, with
no assurance that we will receive incremental additional revenue from such new products. To develop successful new products typically requires us to incur significant marketing expenditures to
determine the viability of new products and applications and target customers, as well as substantial research and development expenditures and additional sales expense associated with selling new
products to new

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customers.
A significant portion of such expenses would likely be incurred well in advance of our recognition of any revenues from such new products, and thus could adversely affect our results of
operations and cash flows for certain fiscal periods before we derive any significant revenues from such new products. In addition, there can be no assurance that any new products will be accepted in
the marketplace or generate meaningful amounts of revenue or net income. Failure to develop successful new products may adversely affect our ability to successfully market other products and our
future revenues. Consequently, the Company must act carefully when making product or technology development decisions. In December 2008 we acquired the db4o database assets of Servo Software, with the
objective of giving us a new product, as well as access to new customers and additional revenue opportunities. However the financial costs of this acquisition and associated operational costs
have adversely affected our results of operations for fiscal years 2010 and 2009 and may continue to do so.

Reduced demand for our products and services may prevent us from achieving targeted revenues and profitability.Our revenues and
our ability to
achieve and sustain profitability depend on continuing or increasing the level of overall demand for the software products and services we offer. Reduced demand for our product line may result from
alternative technologies offered by competitors, negative customer perception of our object-oriented technology or other causes, including economic conditions that adversely affect the industries of
our most significant customers, such as the defense and telecommunications industries. In addition, we have experienced continued hesitancy on the part of our existing and potential customers to
commit to additional products or services from us, particularly in our North American markets. Any significant reduction in the demand for our products or services could have a material adverse effect
on our business and results of operations.

Our products face significant competition from larger competitors.Our VOD, FastObjects and db4o products compete with products
of other companies
that offer database management systems. We face substantial competition from substantially larger and well-established relational database management companies including Oracle, Computer
Associates, Sybase, IBM, and Microsoft. We also face competition from object database companies including Progress Software Corporation and Objectivity. Additionally, some of our prospective customers
might attempt to build specialized data storage capability themselves using their own internal engineering resources, sometimes starting with low level operating system functionality, and other times
utilizing lower level data storage routines that are commercially available, such as Oracle Berkeley DB, a simplified database without query processing capability. Many of our competitors have longer
operating histories, significantly greater financial, technical, marketing, service and other resources, better and wider name recognition, broader suites of product offerings, stronger sales and
distribution channels and a much larger installed base of customers than ours. In addition, many of our competitors have well-established relationships with our current and potential
customers. Our competitors may be able to devote greater resources to the development, promotion, and sale of their products. They may also have more direct access to corporate decision-makers of key
customers based on their previous relationships with these customers. Our competitors may also be able to respond more quickly to new or emerging technologies and changes in customer requirements, and
may have the competitive advantage of being able to sell products competitive to ours through package sales of a suite of a variety of products for different applications that we do not offer. We may
not be able to compete successfully against our current or future competitors, and competitive pressures could cause us to lose revenues or lower the prices for our products to increase or maintain
our sales revenues, or to take other market-responsive actions, any of which could have a material adverse effect on our business, operating results and financial condition.

Our customer concentration increases the potential volatility of our operating results.Due to the nature of our products a
significant portion of
our total revenues has been, and we believe will continue to be, derived from a limited number of significant orders placed by large organizations. In

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fiscal
year 2010, one customer accounted for 13%, 12%, 15% and 9% of our total revenues in the first, second, third and fourth fiscal quarter, respectively, and 12% of total revenues for the fiscal
year. Another customer accounted for 17% of our total revenues in the second fiscal quarter of 2010. Two different customers accounted for 12% and 13% of our total revenues in our fourth fiscal
quarter of 2010. In fiscal year 2009, no one customer accounted for 10% or more of our total revenues in any fiscal quarter. The timing of large orders and their fulfillment has caused, and in the
future is likely to cause, material fluctuations in our operating results, particularly on a quarterly basis. In addition, our major customers tend to change from year to year. The loss of any one or
more of our major customers, or our inability to replace a customer making declining purchases with a new customer of comparable significance, could each have a material adverse effect on our
business.

Our quarterly revenue levels are not predictable.Our revenues have fluctuated (in some cases significantly) on a quarterly basis,
 and we expect this
trend to continue. For example, in fiscal 2010, our quarterly revenues fluctuated from a high of $4.5 million in the first quarter of 2010 to a low of $3.4 million in the third quarter
of 2010. These quarterly fluctuations result from a number of factors, including but not limited to the following:



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Our future revenues are substantially dependent upon our installed customers continuing to license Versant products and renew their maintenance agreements for our products. Our
future
professional services and maintenance revenues are dependent on future sales of our software products.We depend heavily on our installed customer base for future
revenues from licenses of additional products or upgrades of existing products and related fees from the renewal of maintenance and support agreements. If our existing customers do not purchase
additional products, upgrade existing products or renew their maintenance and support agreements with us, this could materially and adversely affect our business and future quarterly and annual
operating results. The terms of our standard license arrangements provide for a one-time license fee and a prepayment of one year of software maintenance and support fees. Our maintenance
agreements are generally renewable annually at the option of the customer, and there are no minimum payment obligations or obligations to license additional software. Therefore, our current customers
may not necessarily generate significant maintenance revenues in future periods if they choose not to renew our maintenance services or renew them at lower service levels. This risk may be increased
in the case of long-term customers who have not upgraded our products which they license. In addition, our customers may choose not to purchase additional products, upgrades or
professional services. Our professional services and maintenance revenues are also dependent upon the continued use of our products by our installed customer base. Consequently, any downturn in our
software license revenues would likely have a corresponding negative impact on the growth of our professional service and maintenance revenues.

We plan to increase our sales and marketing efforts and related expense in fiscal 2011, which may adversely affect our operating results if these efforts are
unsuccessful.As we did in fiscal 2010, in fiscal 2011 we again anticipate increasing our sales and marketing efforts and associated sales and marketing expense in
order to attract new customers and to find new applications for our products with existing customers. If our enhanced sales and marketing activities do not result in additional revenues and new
customers, the related increased sales and marketing expenses associated with these efforts would likely adversely affect our results of operations. Further, even if our increased sales and marketing
efforts are successful, due to the relatively long sales cycles of our products, the benefits of these efforts likely will not be realized until future fiscal periods, so that such increased sales and
marketing expenses will still be likely to adversely affect our results of operations in the fiscal periods in which they are incurred.

We depend on successful technology development.We believe that it will be necessary for us to continue to incur significant
research and development
expenditures in order for us to remain competitive. While we believe our research and development expenditures will improve our product lines, because of the uncertainty of software development
projects and risks posed by the current economic downturn, these expenditures will not necessarily result in successful product introductions or sustained revenue levels. Uncertainties affecting the
success of software development project introductions include technical difficulties, delays in the introductions of new products, market conditions, competitive products, and customer acceptance of
and demand for new products and the operating systems they run on. We also face certain challenges in integrating third-party technology embedded in our products. These challenges include the
technological challenges of integration, which may result in development delays, and uncertainty regarding the economic terms of our relationship with our third-party technology providers, which may
result in delays of the commercial release of new products. In addition, if we are required to adopt cost-conservation measures, we may be compelled to reduce the amounts of our investment
in research and development activities, which could adversely affect our ability to maintain the competitiveness of our existing products, our ability to develop new products, and our future research
and development capabilities. Failure to continue to timely develop technologies and products necessary for us to remain competitive is likely to have a material and adverse effect on our business.

Our products have a lengthy sales cycle.The sales cycle for our VOD, FastObjects and db4o products varies substantially from
customer to customer.
This sale cycle often exceeds six months and

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can
sometimes extend to a year or more, especially for sales to defense sector customers. Due in part to the critical and strategic nature of our products and the level of expenditures associated with
their purchase, our potential customers are typically very cautious in making decisions to acquire our products. In order for us to influence our customers' decision to license our products we often
must provide a significant level of education to prospective customers regarding the uses and benefits of our products, and we frequently commit to provide that education without any charge or
reimbursement. Generally, pre-sales support efforts, such as assistance in performing benchmarking and application prototype development, are also conducted with no charge to customers.
Because of the lengthy sales cycle for our products and the relatively large average dollar size of our individual
licenses, a lost or delayed sales transaction could potentially have a significant negative impact on our operating results for a particular fiscal period.

We may not be able to manage our costs effectively given the unpredictability of our revenues.We expect to continue to maintain
a relatively high
percentage of fixed expenses. Inasmuch as we completed a restructuring in fiscal 2005 and 2006 to significantly reduce our operating expenses, reduced the rent expense for our U.S. headquarters in
fiscal 2007 and restructured our former Indian operations in fiscal 2009 and 2010, we might be unable to further reduce certain fixed expenses in order to accommodate any revenue reductions.
Additionally, we expect our sales and marketing expenses to continue to increase as we invest in efforts to expand our customer base. Consequently, if our forecasted revenue does not materialize, our
business, financial condition and results of operations will be materially harmed.

We rely on revenues from the telecommunications and to a lesser degree, certain other industries; and these industries are characterized by complexity, intense competition and
changes in
purchasing cycles.Historically, we have been highly dependent upon the telecommunications industry and, more recently, we are also becoming increasingly dependent
upon the transportation, information technology, medical and finance industries for sales of VOD. Our success in these markets depends, to a large extent, on the general economic conditions affecting
these industries, our ability to compete with other technology providers of solutions that directly compete with, or provide alternatives to, our products, our ability to develop products that can
successfully interoperate in different computing environments and whether our existing and potential customers believe we have the expertise and financial stability necessary to provide effective
solutions and support in these markets on an ongoing basis. If these conditions, among others, are not satisfied, we may not be successful in generating additional opportunities in these markets. As
previously noted, the current global economy is in a recession and, in the past, general economic downturns have also adversely affected our ability to generate revenues from customers in the
telecommunications and other industries. In addition, the types of applications and commercial products for the telecommunications and other markets are continuing to develop and are rapidly changing,
and these markets are characterized by an increasing number of new entrants whose products may compete with ours. As a result, we cannot predict the future growth of (or whether there will be future
growth in) these markets, and demand for object-oriented databases applications in these markets may not develop or be sustainable. We also may not be successful in attaining a significant share of
these markets due to competition and other factors, such as our limited size and working capital. Moreover, potential customers in these markets generally develop sophisticated and complex
applications that require substantial consulting expertise to implement and optimize. There can be no assurance that we can hire and retain adequate skilled personnel to provide such ongoing
consulting services.

We rely on a substantial portion of our revenues being generated through our international operations and will continue to do so in the future.A
large portion of our revenues is derived from customers located outside North America, and it is critical for us to maintain these international revenues. Following our 2004 acquisition of Poet, which
had a strong European presence, international revenues have represented a larger percentage of our total revenues than they had prior to that time.

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Consequently,
we maintain a significant portion of our workforce in Germany and must conduct our operations internationally and maintain a significant presence in international markets. For fiscal
2010, international revenues derived from customers outside North America made up approximately 60% of our total revenues for the fiscal year, compared to 62% for fiscal 2009 and 63% for fiscal 2008.
Our North American revenues were 40% of total revenues for fiscal 2010, compared to 38% for fiscal 2009 and 37% for fiscal 2008. Most of our non-North American revenues are derived from
Europe, but we recently have taken initial steps to develop a new distribution channel in China in an effort to expand our customer base and future revenues. We have substantially less experience in
the sale and marketing of our products and services in China and there can be no assurance that our efforts to develop new customers there will be successful or will not result in increased sales and
marketing costs that may not generate corresponding revenue, which would adversely affect our operating results. We expect international revenues to continue to be critical to our operations and cash
flows.

International Operations pose unique risks.Our international operations are subject to a number of unique risks in addition to
the risks faced by
our domestic operations. These risks include, but are not limited to the following areas:



In
addition, in light of increasing concerns about global security and terrorism, and the recent global economic downturn, there may be additional risks of disruption to our
international sales activities. Any prolonged disruption in the markets in which we derive significant revenues may potentially have a material adverse impact on our revenues and results of
operations.

In order to be successful, Versant must attract, retain and motivate key employees, for whom competition is intense; and failure to do so could seriously harm the Company,
particularly
given the smaller size of our executive management team.In order to effectively execute our business strategy, we must attract, retain and motivate our executives
and other key employees, including those in managerial, sales and technical positions. Our future performance depends in significant part upon the continued service of our key technical, sales and
senior management personnel. The loss of the services of one or more of our key employees could have a material adverse effect on our business, particularly so given the relatively smaller size of our
executive management team, which currently consists of Jochen Witte, our President and Chief Executive Officer, and Jerry Wong, our Vice President Finance, Chief Financial

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Officer
and Secretary. For example, in December 2008, the employment of our Germany-based Executive VP of Field Operations terminated, and as a result, that officer's duties were partially assumed by
Jochen Witte, Versant's President and Chief Executive Officer, increasing his responsibilities. Although in May 2009, we hired a manager to assume responsibility for our North American sales team and
in April 2010, we hired a manager to take charge of our global marketing initiatives, Mr. Witte has continued to be the executive manager of our sales and marketing functions. Our future
success also depends on our continuing ability to attract, train and motivate highly qualified technical, sales and managerial personnel. Constraints on our ability to offer compensation at levels
that may be offered by larger competitors and other circumstances may adversely affect our ability to attract and retain key management in the future. We must continue to motivate our employees and
keep them focused on the achievement of our strategies and goals. We now employ a sizable German workforce subject to German employment law, which generally provides greater financial protection to
terminated employees than does United States law. Consequently, failure to retain our German employees may cause us to incur significant severance costs, which could adversely affect our operating
results and financial condition.

Our personnel, management team and operations are located in different countries and as a result, we may experience difficulty in coordinating our activities and successfully
implementing Company goals.Following our 2004 merger with Poet, we acquired significant operations and personnel in Europe and now have approximately 42 employees
based in Europe, whose activities must be well coordinated with those of our U.S. workforce and our other employees. Our management team resides in both our U.S. headquarters in Redwood City,
California, where our Chief Financial Officer is located, and in our offices in Hamburg, Germany, where our Chief Executive Officer resides. The significant geographic dispersion of our management
team and our workforce may make it more difficult for us to successfully manage our long-term objectives, coordinate activity across the Company, and integrate our operations and business
plans, and causes us to incur certain additional travel and other expenses to maintain communications between our various offices.

We are subject to litigation and the risk of future litigation.During fiscal 2006, we settled a litigation that commenced in the
last quarter of
fiscal 2004 when we were sued by Systems America, Inc., a privately held company, in an action which alleged that, prior to our acquisition of a smaller privately-held company in
November 2002, persons associated with that company misappropriated trade secrets and confidential information of Systems America, unfairly competed with Systems America with respect to its customer
relationships, and infringed Systems America's trademarks and trade names. Additionally, during fiscal 2008, we settled another related litigation in which a prior customer was seeking indemnification
from us for costs the customer had incurred in defending a suit brought against it by Systems America Inc., which alleged that a Versant product that was discontinued in 2004 infringed Systems
America's intellectual party. Litigation can be expensive to defend, can consume significant amounts of management time and can result in judgments or settlements that could have adverse effects on
our results of operations, financial condition and cash reserves.

Our ability to use our net operating loss carry forwards and certain other tax attributes may be limited.Under Section 382
of the Internal
Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change" (generally defined as a greater than 50% change (by value) in its equity ownership over a three year period), the
corporation's ability to use its pre-change net operating loss carry forwards and other pre-change tax attributes (such as research tax credits) to offset its
post-change income may be limited. We may experience ownership changes in the future as a result of shifts in our stock ownership which are beyond our control. As a result, if we earn net
taxable income, our ability to use our pre-change net operating loss carry forwards to offset United States federal taxable income may be subject to limitations, which could potentially
result in increased tax liability to us in the future.

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Although we believe our internal control over financial reporting is effective, there remain risks that our controls may become inadequate. Since we are required to assess our
internal
control over financial reporting on an annual basis, any future adverse results from such an assessment could result in a loss of investor confidence in our financial reports and have an adverse
effect on our stock price.Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 ("SOX 404"), and the rules and regulations promulgated by the SEC to
implement SOX 404, we are required to furnish an annual report in our Form 10-K regarding the effectiveness of our internal control over financial reporting. The report's assessment
of our internal control over financial reporting as of the end of our fiscal year must include disclosure of any material weaknesses in our internal control over financial reporting identified by
management. Management's assessment of internal control over financial reporting requires management to make subjective judgments and therefore, we may have difficulties in accurately assessing the
effectiveness of our internal controls. In addition, if we are unable to assert that our internal control over financial
reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have an adverse effect on our stock price.

Adoption and application of accounting regulations and related interpretations and policies regarding revenue recognition could cause us to defer recognition of revenue or
recognize
lower revenues and profits.Although we use standardized license agreements designed to meet current revenue recognition criteria under generally accepted
accounting principles, we must often negotiate and revise terms and conditions of these standardized agreements, particularly with new customers and in multi-element or multi-year
transactions. Negotiation of mutually acceptable terms and conditions with our customers can extend the sales cycle for our products and, in certain situations, may require us to defer recognition of
revenue on such licenses. We believe that we are in compliance with ASC 985-605,Software, Revenue Recognition; however, these future, more
complex, multi-element, multi-year license transactions, which may require additional accounting analysis to account for them accurately, could lead to unanticipated changes in our current
revenue accounting practices and may contain terms affecting the timing of our revenue recognition.

Failure to adequately protect our intellectual property could impair our ability to successfully compete.Despite our efforts to
protect our
proprietary rights, third parties may attempt to misappropriate or copy aspects of our products or our technologies, obtain or wrongfully use information we regard as proprietary or use or make
unauthorized copies of our products or technologies in violation of license agreements. Policing unauthorized use of our products is difficult and enforcing our proprietary rights is potentially
expensive. In addition, the laws of many jurisdictions do not protect our proprietary rights to as great an extent as do the laws of the United States. Shrink-wrap licenses may be wholly
or partially unenforceable under the laws of certain jurisdictions and copyright and trade secret protection for software may be unavailable or very difficult to effectively enforce in certain foreign
countries. Our means of protecting our proprietary rights may not be adequate, and our competitors may independently develop similar technologies, which they could then market and sell to our
customers, which could have an adverse impact on our revenues.

We may be subject to claims of intellectual property infringement.Developers of software such as the Company are frequently
subject to intellectual
property infringement claims as the number of products, competitors and patents in our industry sector grows. Intellectual property infringement litigation can also arise when we acquire businesses or
assets. For example, in 2004 we were the subject of a suit alleging that a company we purchased misappropriated intellectual property and the plaintiff in this litigation also brought an action
against one of our customers on related facts, which resulted in that customer making a claim for indemnification against us. Although these suits were settled, any claim of this type, whether
meritorious or not, could be time-consuming, could result in significant litigation expenses, could cause product shipment delays and require us to enter into royalty or licensing
agreements or pay amounts in settlement of the claims or pursuant to judgments. If any of our products or technologies were found to infringe third-party rights, royalty or licensing agreements to

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use
such third-party rights might not be available on terms acceptable to us, or at all, and we might be enjoined from marketing an infringing product or technology, each of which circumstances could
have a material adverse effect on our business, operating results and financial condition.

Our use of open source software could negatively impact our ability to sell our products.The products, services or technologies
we acquire, license,
provide or develop may incorporate or use open source software. We monitor our use of open source software in an effort to avoid unintended consequences, such as reciprocal license grants, patent
retaliation clauses, and the requirement to license our products at no cost. There is little or no legal precedent for interpreting the terms of these open source licenses, therefore we may be subject
to unanticipated obligations regarding our products that incorporate open source software. In addition, disclosing the content of our source code could limit the intellectual property protection we
can obtain or maintain for that source code or the products containing that source code and could facilitate intellectual property infringement claims against us.

We may engage in future acquisitions of businesses or assets that could dilute our shareholders and cause us to incur debt or assume contingent
liabilities.As part of our strategy, we may from time to time review opportunities to buy other businesses or technologies that would complement our current
products, expand the breadth of our markets or enhance our technical capabilities, or that may otherwise offer us growth opportunities. In the event of any future acquisitions, we potentially might
take any or all of the following actions:



Such
acquisitions also involve numerous risks, including the following:



For
example, in December 2008 we acquired for cash from privately-held Servo Software Inc., assets associated with Servo Software's db4o open source database solution
for the embedded device market. We acquired these assets with the objective of expanding our product line and obtaining access to new customers and additional revenue opportunities. However this
acquisition continues to be subject to many of the risks of acquisitions outlined above, including the fact that this product may generate losses for future fiscal periods and adversely affect our
results of operations. In addition, the db4o business employees are located in many different countries, and thus, we face additional challenges in integrating these new personnel and retaining or
replacing them.

There
can be no assurance that we will be able to successfully integrate the db4o business or any other businesses, products or technologies that we might purchase in the future.

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Our common stock is listed on the NASDAQ Capital Market.The listing of our common stock on The NASDAQ Capital Market may be
perceived as a negative
by investors and may adversely affect the liquidity and trading price of our common stock. We may be unable to list our common stock on The NASDAQ Global Market System, or NGMS.

Charges to earnings resulting from our acquisition of businesses or assets may adversely affect the market value of our common stock.In accordance
with U.S. generally accepted accounting principles, we account for our merger with Poet, our acquisition of FastObjects, Inc. and our fiscal 2009 acquisition of the db4o assets of Servo
Software using the purchase method of accounting, which result in charges to earnings that could have a material adverse effect on the market value of our common stock. Under the purchase method of
accounting, we have allocated the total estimated purchase price of Poet, FastObjects and db4o to net tangible assets and amortizable intangible assets based on their fair values
as of the respective dates of the closing of these acquisitions, and recorded the excess of the purchase price over those fair values as goodwill. We will incur additional amortization expense over
the useful lives of certain intangible assets acquired in connection with these acquisitions, which will extend into future fiscal years. In addition, to the extent the value of goodwill or intangible
assets is impaired we may be required to incur material charges relating to the impairment of those assets. Such amortization and potential impairment charges could have a material impact on our
results of operations.

An impairment loss could have a material adverse impact on our financial condition and results of operations.The continued
global economic crisis,
resulting in, among other things, lower demand for our offerings and disruption of capital and credit markets could significantly affect our stock price and market capitalization. It is possible that
further decline of economic conditions would result in a goodwill impairment loss that could have a material adverse impact on our financial condition and results of operations.

Our stock price is volatile.Our revenues, operating results and stock price have historically been and may continue to be
subject to significant
volatility, particularly on a quarterly basis. We have previously experienced revenues and earnings results that were significantly below levels expected by investors, which have had an immediate and
significant adverse effect on the trading price of our common stock. This may occur again in the future. Additionally, as a significant portion of our revenues are often realized late in a fiscal
quarter, we may not be aware of any revenue shortfall until late in a fiscal quarter and an unanticipated announcement of such a revenue shortfall, could result in an even more immediate and adverse
effect on the trading price of our common stock. In addition, we have a relatively smaller number of holders of our stock and the market for our common stock is characterized by relatively small sales
volumes, which contributes to the volatility of our stock price and its sensitivity to larger trades of stock. In December 2008, our Board of Directors approved a stock repurchase program under which
the Company repurchased $3.2 million worth of our outstanding common shares. In November 2009, our Board of Directors approved a stock repurchase program under which the Company repurchased
$4.3 million worth of our outstanding common shares. In November 2010, our Board of Directors approved a new stock repurchase program pursuant to which the Company is authorized to potentially
repurchase up to $5.0 million of its common stock in fiscal year 2011. Repurchases of our shares will reduce the number of our outstanding common shares and might incrementally increase the
potential for volatility in our stock by reducing the potential volumes at which our common shares may trade in the public markets.

The Company may face risks associated with the trend of increased shareholder activism.Publicly traded companies have
increasingly become subject to
campaigns by investors seeking to increase short-term shareholder value by advocating corporate actions such as financial restructuring, increased borrowing, special dividends, stock
repurchases or even sales of assets or the entire company. Given the Company's market capitalization and other factors, it is possible that shareholders may in the future

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attempt
to effect such changes or acquire control over the Company. Responding to proxy contests and other actions by activist shareholders would be costly and time-consuming, disrupting
our operations and diverting the attention of our Board of Directors and senior management from the pursuit of business strategies, which could adversely affect the Company's results of operations and
financial condition.

Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.Our
worldwide operations
could be subject to natural disasters and other business disruptions, which could seriously harm our revenue and financial condition and increase our costs and expenses. Our corporate headquarters in
Redwood City, California, is located near major earthquake faults. The ultimate impact on us and our general infrastructure of being located near major earthquake faults is unknown, but our revenue,
profitability and financial condition could suffer in the event of a major earthquake or other natural disaster. Losses and interruptions could also be caused by earthquakes, power shortages,
telecommunications failures, water shortages, floods, fires, extreme weather conditions, medical epidemics and other natural or manmade disasters.

Item 1B.    Unresolved Staff Comments.

None.

Item 2.    Properties.

Our principal administrative, sales and marketing operations are headquartered at an approximately 6,800 square foot office facility we
lease that is located at 255 Shoreline Drive, Suite 450, Redwood City, California 94065. Our current lease of this facility expires in May 2013.

Our
international subsidiary in Hamburg, Germany entered into a lease which commenced in December 2009 for a term of 60 months ending in November 2014. Our prior Hamburg office
lease expired by its terms on December 31, 2009. Our Pune, India office lease expired by its terms on February 28, 2010. We believe that all of our current facilities are in reasonably
good operating condition and will be adequate for our requirements for the next several years. Based on current commercial real estate market conditions, we believe that we will be able to lease
alternative comparable facilities in Germany or in the U.S. if required to do so.

Item 3.    Legal Proceedings.

We may from time to time be subject to legal proceedings in the ordinary course of business. Currently, we are not subject to any
material legal proceedings required to be disclosed under this Item 3.

Item 4.    Reserved.

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Price Range of Common Stock

Our common stock is listed on the Nasdaq Capital Market (formerly the Nasdaq SmallCap Market) under the symbol "VSNT." Our common stock
commenced trading on the Nasdaq National Market on July 18, 1996. From July 19, 1999 until March 7, 2000, our common stock was traded on the Nasdaq SmallCap Market. From
March 8, 2000 until September 30, 2002, our common stock was traded on the Nasdaq National Market. Our common stock has been traded on the Nasdaq Capital Market since October 1,
2002. We requested that listing of our common stock be transferred to the Nasdaq Capital Market as of October 1, 2002 since at that time it seemed unlikely that, in the near term, we would
continue to be able to satisfy the then-applicable listing criteria of the Nasdaq National Market System.

The
following table lists the high and low selling price of our common stock, based on the last daily sale reported on the Nasdaq Capital Market for the periods indicated during the last
two fiscal years.

Fiscal year ended October 31, 2010

High

LowFourth quarter

$
11.94

$
10.58Third quarter

$
15.05

$
10.63Second quarter

$
15.58

$
14.35First quarter

$
19.31

$
14.70




Fiscal year ended October 31, 2009Fourth quarter

$
19.59

$
14.86Third quarter

$
15.99

$
13.34Second quarter

$
17.69

$
11.90First quarter

$
16.70

$
11.50


Shareholders

There were approximately 91 holders of record of our common stock as of January 19, 2011. We believe that a significant number
of beneficial owners of our common stock hold their shares in street name.

Dividend Policy

We have neither declared nor paid any cash dividends on our common stock in the past. We currently intend to retain future earnings, if
any, to fund development and growth of our business and, therefore, do not at this time anticipate that we will declare or pay cash dividends on our common stock in the foreseeable future.

Recent Sales of Unregistered Securities

Versant made no issuances of unregistered securities in fiscal 2010.

Issuer Purchases of Equity Securities

On December 1, 2008, Versant's Board of Directors approved a stock repurchase program authorizing Versant to repurchase up to
$5.0 million worth of its outstanding common shares from time to time on the open market, in block trades or otherwise. That stock repurchase program expired by its

22

---



Table of Contents

terms
on October 31, 2009. Versant acquired 222,688 common shares on the open market for approximately $3.2 million at an average purchase price of $14.52 per share under this stock
repurchase program.

On
November 30, 2009, our Board of Directors approved a new stock repurchase program authorizing Versant to repurchase up to $5.0 million worth of its outstanding common
shares from time to time on the open market, in block trades or otherwise (the "fiscal 2010 stock repurchase program"), which expired by its terms on October 31, 2010. Pursuant to this fiscal
2010 stock repurchase program, Versant acquired 356,104 common shares on the open market and in block trades for approximately $4.3 million at an average purchase price of $12.06 per share.

The
stock repurchase activity under our stock repurchase program during the three months and fiscal year ended October 31, 2010 is summarized in the following table:

Total
Number of
Shares
Purchased

Average
Price
Paid
Per Share(1)

Total Number of
Shares Purchased
as Part of Publicly
Announced Program(2)

Approximate
Dollar Value
of Shares That May
Yet be Purchased
Under the Program(2)Period:August 1, 2010August 31, 2010


4,010

$
10.55


4,010

$
1,339,662September 1, 2010September 30, 2010


54,916

$
11.49


54,916

$
708,543October 1, 2010October 31, 2010


400

$
11.64


400

$
703,887Three months ended October 31, 2010


59,326

$
11.43


59,326December 1, 2009July 31, 2010


296,778

$
12.19


296,778Fiscal year 2010 stock repurchase activity


356,104

$
12.06


356,104


---

On November 29, 2010 our Board of Directors approved a new stock repurchase program pursuant to which the Company is authorized to
repurchase up to $5.0 million of its common stock in fiscal year 2011. The stock repurchase program is currently scheduled to expire upon the earlier of October 31, 2011, or such time as
Versant has expended $5.0 million to repurchase outstanding common shares under the program; however the program may be suspended, discontinued, terminated or extended at any time by the
Company.

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Table of Contents

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth certain information as of October 31, 2010 with respect to compensation plans under which our
equity securities are authorized for issuance:

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(a)

(b)

(c)Plan category:Equity compensation plans approved by security holders(1)


515,287

$
16.84


219,808Equity compensation plans not approved by security holders








Total


515,287

$
16.84


219,808


---

Stock Price Performance Graph and Cumulative Total Return

The graph below compares the cumulative total stockholder return on Versant common stock with the cumulative total return on the Nasdaq
Composite Index and the Nasdaq Computer and Data Processing Index for each of the last five fiscal years ended October 31, 2010, assuming an investment of $100 at the beginning of such period
and the reinvestment of any dividends. The comparisons in the graphs below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*  Among Versant Corporation, The NASDAQ Composite Index  And The NASDAQ Computer & Data Processing Index

GRAPHIC



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Item 6.    Selected Financial Data

The following selected consolidated financial data are qualified by reference to, and should be read in conjunction with, "Management's
Discussion and Analysis of
Financial Condition and Results of Operations" contained in Item 7 of this report and the Consolidated Financial Statements and related Notes of Versant included in Item 8 of this
report. The selected consolidated balance sheet data as of October 31, 2010 and 2009 and selected consolidated statements of income data for the years ended October 31, 2010, 2009 and
2008, are derived from our audited consolidated financial statements included elsewhere in this report. The selected consolidated balance sheet data as of October 31, 2008, 2007 and 2006 and
the selected consolidated statements of operations data for the years ended October 31, 2007 and 2006 were derived from audited consolidated financial statements not included in this report.
Our historical results are not necessarily indicative of our future results.

Fiscal Year Ended October 31,2010

2009

2008

2007

2006Consolidated statements of operations data:Total revenues

$
15,766

$
18,150

$
25,298

$
21,150

$
16,745Gross profit

$
13,653

$
15,919

$
23,116

$
19,112

$
13,654Income from operations(1)(2)(3)(4)

$
1,971

$
4,045

$
9,951

$
7,664

$
3,515Net income from continuing operations before income taxes

$
2,121

$
4,277

$
10,822

$
8,196

$
3,992Net income from continuing operations(5)

$
1,654

$
4,839

$
9,391

$
7,329

$
3,602Net income

$
1,654

$
4,839

$
9,489

$
7,633

$
4,301Net income from continuing operations, basic

$
0.48

$
1.33

$
2.52

$
2.01

$
1.01Net income from continuing operations, diluted

$
0.48

$
1.32

$
2.48

$
1.98

$
1.01Net income, basic

$
0.48

$
1.33

$
2.54

$
2.09

$
1.20Net income, diluted

$
0.48

$
1.32

$
2.51

$
2.06

$
1.20




October 31,2010

2009

2008

2007

2006Consolidated balance sheets data:Cash and cash equivalents

$
24,911

$
27,812

$
27,234

$
19,086

$
8,231Total assets(6)

$
39,129

$
41,373

$
38,561

$
30,466

$
20,261Total long-term liabilities

$
205

$
272

$
374

$
674

$
770Total stockholders' equity(7)(8)

$
34,444

$
36,257

$
33,154

$
23,165

$
13,792


---

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Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operations

As indicated in the paragraph above Item 1 of this report, this report on Form 10-K
(including this Item 7) contains certain forward-looking statements within the meaning of the Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933. These
forward-looking statements include, among other things, statements regarding the Company's expected future financial performance, assets, liquidity and trends anticipated for the Company's business.
These statements are based on the Company's current expectations, assumptions, estimates and projections about the Company's business, the Company's industry and the market for the Company's goods and
services, which are based on information that is reasonably available to the Company as of the date of this report. Forward-looking statements may include words such as "believes," "anticipates,"
"expects," "intends," "plans," "will," "may," "should," "estimates," "predicts," "forecasts," "guidance," "potential," "continue" or the negative of such terms, other variants of such terms or other
similar expressions.

We caution readers that these forward-looking statements are not assurances of our future performance or financial condition and are subject to and involve
significant known and unknown risks, uncertainties and other factors that may cause the Company's actual operating results, financial condition, levels of activity, performance or achievement to be
materially different from any future operating results, financial condition, levels of activity, performance or achievements that are expressed, estimated, forecasted, projected, implied in,
anticipated or contemplated by the forward-looking statements. These known and unknown risks, uncertainties and other factors include, but are not limited to, those risks, uncertainties and factors
discussed in Item 1A of this report under the heading "Risk Factors." Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other
reports filed with the Securities and Exchange Commission that attempt to advise interested parties of the risks and factors that may affect our business, financial performance or financial condition.
Versant undertakes no obligation to revise or update any forward-looking statement in order to reflect events or circumstances that may arise or occur after the date of this
report.

Background and Overview

We design, develop, market and support high performance, object-oriented database management software solutions and provide related
maintenance and professional services. Our products and services address the complex data management needs of enterprises and providers of products requiring data management functions. Our products
and services collectively comprise our single operating segment, which we call "Data Management."

Our
end-user customers typically use our products to manage data for business systems and to enable these systems to access and integrate data necessary for the customers'
data management applications. Our data management products and services offer customers the ability to manage real-time, XML and other types of hierarchical and navigational data. We
believe that by using our data management solutions, customers cut their hardware costs, accelerate and simplify their development efforts, significantly reduce administration costs and deliver
products and services with a significant competitive edge.

Our
Data Management business is currently comprised of the following key products:



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Our
Versant Object Database product offerings are used primarily by larger organizations, such as technology providers, telecommunications carriers, government defense agencies, defense
contractors, healthcare companies and companies in the financial services and transportation industries, each of which have significant large-scale data management requirements. With the incorporation
of the FastObjects solution into our product line following our March 2004 merger with Poet Holdings, Inc., we expanded the scope of our solutions to also address the data management needs of
smaller business systems. By our recent acquisition of db4o in December 2008, we further expanded the scope of our solutions to include the embedded device market.

Our
customers' data management needs can involve many business functions, ranging from management of the use and sharing of a company's internal enterprise data to the processing of
externally originated information such as customer enrollment, billing and payment transaction data. Our solutions have also been used to solve complex data management issues such as fraud detection,
risk analysis and yield management and can be adapted for use with many different applications.

In
addition to our product offerings, we provide maintenance and technical support services to assist users in using our products. We also offer a variety of consulting and training
services to assist users in developing and deploying applications based on Versant Object Database, FastObjects and db4o.

We
license our products and sell associated maintenance, training and consulting services to end-users through our direct sales force and through value-added resellers,
systems integrators and distributors.

In
addition to these products and services, we resell related software developed by third parties. To date, substantially all of our revenues have been derived from the following data
management products and related services:



Continued Adverse Global Economic Conditions Are Negatively Impacting Our Business

The United States and global economies and financial markets have experienced a prolonged downturn stemming from a multitude of
factors, including adverse credit conditions, slower economic activity, the more recent crises relating to concerns about the debt and financial stability of certain European countries, concerns about
failures or the instability of major financial institutions and other businesses, inflation and deflation, high rates of unemployment, reduced corporate profits and capital spending, adverse business
conditions, liquidity concerns and other factors. The severity of these economic and financial market conditions and the length of time they may persist are unknown.

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Our
business has been negatively affected by these ongoing worldwide economic conditions. It is unclear when or to what extent the macroeconomic environment may improve. During fiscal
2010, our selling environment remained very challenging, causing customers to delay or reduce technology purchases or to make smaller investments in our solutions and services. We are seeing
continuing pressures on our customers' budgets, and as they are facing uncertainty and cost pressures in their own businesses, some of our customers are deferring purchases of our products. The
current difficult and uncertain economic conditions are causing some of our customers to face financial challenges and they may continue to face such challenges for the foreseeable future. The current
economic downturn in our customers' industries has contributed to the substantial reduction in both our license and maintenance revenues and could continue to harm our business, operating results and
financial condition.

Financial Highlights for Fiscal 2010



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Fiscal 2010 and Beyond

During fiscal 2010, we focused our sales and marketing efforts on our data management products, (Versant Object Database, FastObjects
and db4o) and on related maintenance, consulting and training services. Versant Object Database was the key focus of our marketing efforts and the major source of our license and service revenues in
fiscal 2010.

We
again expect to derive most of our revenues in fiscal 2011 from Versant Object Database, FastObjects and db4o licenses and related services.

On
December 1, 2008 we acquired the assets of the database software business of privately-held Servo Software, Inc. (formerly db4objects, Inc.) for
$2.6 million in cash. db4o is an open source object database software solution targeting the embedded device market. It is distributed under free open source licenses to a large, open source
community of approximately 100,000 registered members located around the world, and in some cases is licensed on a fee-bearing basis to certain customers for redistribution.

Like
many other software companies, we do not operate with a significant backlog of orders. Our license revenues, in particular, are difficult to forecast. The outlook into the Company's
anticipated performance in fiscal 2011 is uncertain, due principally to the prolonged worldwide recession and economic instability. In addition, Versant has plans to increase its sales and marketing
spending levels by approximately 21% in fiscal 2011 compared to the prior fiscal year. The Company expects to recognize benefits from these additional sales and marketing expenditures over the medium
term, and currently expects its total revenues in fiscal year 2011 to increase modestly from the fiscal year 2010 total revenues of $15.8 million. Due to the projected increased spending in
sales and marketing, the Company is currently projecting income from operations to remain relatively stable for fiscal year 2011. Without limitation, the estimates, forecasts and other statements in
this paragraph are forward-looking statements.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amount of
our assets and liabilities at the date of our financial statements and of our revenues and expenses during the reporting period covered by our financial statements. We base these estimates and
judgments on information reasonably available to us, such as our historical experience and trends, industry, economic and seasonal fluctuations and on our own internal projections that we derive from
that information. Although we believe our estimates to be reasonable under the circumstances, there can be no assurances that such estimates will be accurate given that the application of these
accounting policies necessarily involves the exercise of subjective judgment and the making of assumptions regarding many future variables and uncertainties. We consider "critical" those accounting
policies that require our most difficult, subjective or complex judgments, and that are most important to the portrayal of our financial condition and results of operations. These critical accounting
policies relate to revenue recognition, goodwill and acquired intangible assets, and income taxes.

Revenue Recognition

We recognize revenues in accordance with accounting principles generally accepted in the United States of America ("GAAP"), as set
forth in:



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Our revenues consist mainly of revenues earned under software license agreements, maintenance support agreements (otherwise known as post-contract
customer support or "PCS") and, to a lesser degree, agreements for consulting and training activities.

We
use the residual method to recognize revenues when a license agreement includes one or more elements to be delivered by us at a future date. If there is an undelivered element under
the license arrangement, we defer revenues based on vendor-specific objective evidence ("VSOE") of the fair value of the undelivered element, as determined by the price charged when the element is
sold separately. If VSOE of fair value does not exist for all undelivered elements of a transaction, we defer all revenues from that transaction until sufficient evidence of the fair value exists or
until all elements have been delivered. Under the residual method, discounts are allocated only to the delivered elements in a multiple element arrangement, with any undelivered elements being
deferred based on the vendor-specific objective evidence of the fair value of such undelivered elements. We typically do not offer discounts on future undeveloped products.

We
have established VSOE of fair value of our PCS as evidenced by stand alone renewal transactions using the "bell shaped curve approach." PCS of our Versant Object Database is priced as
a percentage of the original software license fees. We perform quarterly analysis on a transaction by transaction basis to document the range of pricing in PCS renewals. We conclude that we have
established VSOE of fair value for our PCS, if substantial majorities (greater than 80%) of our stand-alone renewal transactions are priced within a reasonably narrow range (plus or minus 15% from the
midpoint of the range). For
the year ended October 31, 2010, the pricing of over 95% of our stand alone PCS renewal transactions fell within the predefined pricing range.

Revenues
from software license arrangements, including prepaid license fees, are recognized when all of the following criteria are met:



If
an acceptance period or other contingency exists, revenues are not recognized until customer acceptance or expiration of the acceptance period, or until satisfaction of the
contingency, as applicable. Our license fees are generally non-cancelable and non-refundable. Also, our customer agreements for prepaid deployment licenses typically do not
make payment of our license fees contingent upon the actual deployment of the software. Therefore, a customer's delay or acceleration in its deployment schedule generally does not impact our revenue
recognition in the case of a prepaid deployment license.

Revenues
from related PCS for all product lines are usually billed in advance of the service being provided and are deferred and recognized on a straight-line basis over the
term in which the PCS is to be performed, which is generally twelve months. In some cases PCS revenues are paid in arrears of the service being provided and are recognized as revenues at the time the
customer provides a report to us for deployments made during a given time period. Training and consulting revenues are recognized when a purchase order is received, the services have been performed
and collection is deemed probable. Consulting services are billed on an hourly, daily or monthly rate. Training classes are billed based on group or individual attendance.

We
categorize our customers into two broad groups, End-Users and Value Added Resellers (VARs). End-User customers are companies who use our products internally
and do not redistribute

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our
product outside of their corporate organizations. VAR customers include traditional Value Added Resellers, Systems Integrators, Original Equipment Manufacturers ("OEMs") and other vendors who
redistribute our products to their external third party customers, either separately or as part of an integrated product.

We
license our data management products through two types of perpetual licensesdevelopment licenses and deployment licenses. Development licenses are typically sold on a per
seat basis and authorize a customer to develop and test an application program that uses our software product. Before an End-User customer may deploy an application that it has developed
under our development license, it must purchase deployment licenses in which the license fees are based on the number of computers connected to the server that will run the application using our
product, or for certain applications, are based on the number of users. Pricing of Versant Object Database and FastObjects licenses varies according to several factors, including the number of
computer servers on which the application runs and the number of users that are able to access the server at any one time. Customers may elect to simultaneously purchase development and deployment
licenses for an entire project. These development and deployment licenses may also provide for prepayment to us of a nonrefundable amount for future deployment.

VARs
and distributors purchase development licenses from us on a per seat basis on terms similar to those of development licenses that we sell directly to End-Users. VARs are
authorized to sublicense deployment copies of our data management products that are either bundled or embedded in the VAR's applications and sold directly to End-Users. VARs are required
to report their distribution of our software and are charged a royalty that is either based on the number of copies of the application software that are distributed or computed as a percentage of the
selling price charged by the VARs to their end-user customers. These royalties from VARs may be prepaid in full or paid upon deployment. Our VAR agreements for prepaid royalty arrangements
are non-cancelable, non-refundable and do not make payment of our license fees contingent upon the actual deployment of our software, and therefore, the future deployment
schedules of our VARs have no impact on revenue recognition. Provided that all other conditions for revenue recognition have been met, revenues from arrangements with VARs are recognized,
(i) as to prepaid license arrangements, when the prepaid licenses are sold to the VAR, and (ii) as to other license arrangements, at the time the VAR provides a royalty report to us for
sales made by the VAR during a given period.

Revenues
from our resale of third-party products or services are recorded at total contract value with the corresponding cost included in the cost of sales when we act as a principal in
these transactions by assuming the risks and rewards of ownership (including the risk of loss for collection, delivery or
returns). When we do not assume the risks and rewards of ownership, revenues from the resale of third-party products or services are recorded at contract value net of the cost of sales.

On
occasion, at a customer's request, we perform engineering work to port our products to an unsupported platform, to customize our software for specific functionality, or to perform
other non-routine technical assignments for a customer. In these instances, we recognize revenues in accordance with ASC 605-35,
Construction-Type and Production-Type Contracts, and use either the time and material percentage of completion method or the completed contract method
for recognizing revenues. We use the percentage of completion method if we can make reasonable and dependable estimates of labor costs and hours required to complete the work in question. We
periodically review these estimates in connection with the work performed and rates actually charged and recognize any losses when identified. Progress to completion is determined using the
cost-to-cost method, whereby cost incurred to date as a percentage of total estimated cost determines the percentage completed and

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revenue
recognized. When using the percentage of completion method, the following conditions must exist:



The
completed contract method is used when reasonable or dependable estimates of labor costs and time to complete the work cannot be made. As a result, in such situations, we defer all
revenues until such time as the work is fully completed.

Management
makes significant judgments and estimates in connection with the determination of the revenue we recognize in each accounting period. If we had made different judgments or
utilized
different estimates for any period, material differences in the amount and timing of revenue recognized would have resulted.

Goodwill and Acquired Intangible Assets

We account for purchases of acquired companies in accordance with ASC 805,Business
Combinations, and allocate the cost of the acquired companies to the identifiable tangible and intangible assets acquired according to their respective fair values as of the
date of completion of the acquisition, with the remaining amount being classified as goodwill.

In
accordance with ASC 350, IntangiblesGoodwill and Other,we test for any goodwill impairment within our single Data
Management operating segment and reporting unit. All our goodwill reflected in the financial statements included in this report has been aggregated from, and acquired in connection with, the following
acquisitions:



Financial
Accounting Standards Board ("FASB") guidance requires that goodwill be tested for impairment at the reporting unit level, at least annually and more frequently upon the
occurrence of certain events. We use the market approach to assess the fair value of our assets and this value is compared with the carrying value of those assets to test for impairment. The total
fair value of our assets is estimated by summing the fair value of our equity (as indicated by Versant's publicly traded share price and shares outstanding plus an estimated control premium) less our
liabilities. Under this approach, if the estimated fair value of our assets is greater than their carrying value, then there is no goodwill impairment. If the estimated fair value of our assets is
less than their carrying value, then we allocate the reporting unit's estimated fair value to its assets and liabilities as though the reporting unit had just been acquired in a business combination.
The impairment loss is the amount, if any, by which the implied fair value of goodwill allocable to the reporting unit is less than that reporting unit's goodwill carrying amount and would be recorded
in operating results during the period of such impairment.

Identifiable
intangibles are currently amortized using the straight-line method over five years in relation to the JDO Genie (PTY) Ltd acquisition, six years in
relation to the FastObjects, Inc.

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acquisition,
seven years in relation to our acquisition of Poet, nine years in relation to the acquisition of the db4o customer relationships, and five years for other db4o related acquired intangible
assets.

We
performed our annual valuation and analysis of goodwill in October 2010, October 2009 and October 2008. We did not perform impairment tests related to our intangible assets during
fiscal 2010, fiscal 2009 and fiscal 2008, as there were no triggering events which might indicate impairment. As a result, we determined that the value of our goodwill and intangible assets had been
fairly recorded in our financial statements, and therefore no impairment charges were recorded against our goodwill and intangible assets in fiscal 2010, fiscal 2009 and fiscal 2008.

Income Taxes

We account for income taxes using the asset and liability method provided by ASC 740,Income
taxes.We estimate our income taxes in each of the jurisdictions in which we operate and account for income taxes payable as part of the preparation of our consolidated
financial statements. This process involves estimating our actual current tax expense as well as assessing temporary differences resulting from differing treatment of items, such as depreciation and
amortization, for financial and tax reporting purposes. These differences result in deferred tax assets and liabilities, which are included in our consolidated balance sheet to the extent deemed
realizable. We assess the likelihood that, and the extent to which, our deferred tax assets will be realized and establish a valuation allowance to reduce deferred tax assets to an amount for which
realization is more
likely than not. If we establish or release a valuation allowance then we must increase or decrease the tax provision in our statements of income.

Significant
management judgment is required in determining any valuation allowance recorded against our net deferred tax assets. Based upon our operating results in recent years and
through October 31, 2010 as well as an assessment of our expected future results of operations, we determined that it is more likely than not that we will realize the benefit of a portion of
our net deferred tax assets in Germany to the extent of our expected taxable income for fiscal 2011. Due to uncertainties related to our ability to utilize the balance of our deferred tax assets, we
have maintained a valuation allowance at October 31, 2010 of $33.9 million. As of October 31, 2009, we had a valuation allowance of $36.4 million for our deferred tax
assets.

As
required by ASC 740,Income taxes, we recognize 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.

We
are subject to U.S. federal income taxes and to income taxes in various states in the U.S. as well as in 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. With few exceptions, we are no longer subject to U.S. federal, state and local, or foreign tax
examinations by tax authorities for tax years before 2005. With respect to prior tax years no longer subject to examination due to expiration of the statute of limitations, income may nevertheless be
recomputed for the purpose of determining the amount of NOL that may be carried over to "open" years.

We
recognize interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes for all periods presented, which were not significant.

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Results of Operations

The following table sets forth the historical results of operations for Versant for our three fiscal years ended October 31,
2010, 2009 and 2008, expressed as a percentage of our total revenues for the fiscal year in question.

Percentage of Revenues Fiscal Year Ended October 31,2010

2009

2008Revenues:License


53
%

50
%

63
%Maintenance


46


49


36Professional services


1


1


1Total revenues


100


100


100Cost of revenues:License


2


1


1Amortization of intangible assets


2


2


1Maintenance


9


8


6Professional services





1


1Total cost of revenues


13


12


9Gross profit


87


88


91Operating expenses:Sales and marketing


30


22


14Research and development


24


22


16General and administrative


20


20


22Restructuring





1


Total operating expenses


74


65


52Income from operations


13


23


39Interest and other income, net


1


1


4Income from continuing operations before income taxes


14


24


43Income tax benefit (expense)


(3
)

3


(6
)Net income from continuing operations


11


27


37Net income from discontinued operations, net of income taxes








1Net income


11
%

27
%

38
%


Revenues

Total Revenues:The following table summarizes our total revenues (in thousands, except percentages) for fiscal 2010, 2009 and
2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageTotal revenues

$
15,766

$
18,150

$
25,298

$
(2,384
)

(13
%)
$
(7,148
)

(28
%)


Total
revenues are comprised of license fees and fees for maintenance, training, consulting, technical and other support services. Fluctuations in our total revenues can be attributed to
changes in economic and industry conditions, product and customer mix, general trends in information technology

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spending,
changes in geographic mix, and the corresponding impact of fluctuations in foreign currency exchange rates. Further, product life cycles impact revenues periodically as old contracts expire
and new products are released. Our revenues as shown in the above table and in the accompanying
statements of income included in this report do not include revenues from our disposed WebSphere consulting practice. Instead, as required by generally accepted accounting principles, our financial
statements report former WebSphere activities as "net income from discontinued operations, net of income taxes". See Note 15 of our "Notes To Consolidated Financial Statements" in Item 8
of this report for more information regarding this transaction.

Our
total revenues decreased by $2.4 million (or 13%) in fiscal 2010 compared to fiscal 2009. This decrease resulted primarily from a decrease of $1.5 million (or 17%) in
maintenance revenues and from a decrease of $703,000 (or 8%) in license revenues in fiscal 2010 compared to fiscal 2009. The decrease in maintenance revenues in fiscal 2010 was principally due to
fewer back maintenance transactions and customers choosing less expensive support options. We believe the principal factors that caused our license revenues to decrease in fiscal 2010 included adverse
global economic conditions, smaller license transactions and fewer license transactions.

Our
total revenues decreased by $7.1 million (or 28%) in fiscal 2009 compared to fiscal 2008. This decrease resulted primarily from a decrease of $6.9 million (or 43%) in
license revenues in fiscal 2009 compared to fiscal 2008. The decrease in total revenues also included approximately $1.2 million resulting from unfavorable foreign currency exchange rate
fluctuations which comprised 17% of the $7.1 million decrease in total revenues. We believe factors that caused our license revenues to decrease in fiscal 2009 included the adverse global
economic conditions, the relative absence of larger license transactions, fewer license transactions and the stronger U.S. Dollar as compared to the Euro in fiscal 2009, which resulted in lower
consolidated revenues in fiscal 2009 compared to fiscal 2008. Maintenance revenues remained relatively stable in fiscal 2009 over fiscal 2008, decreasing by $208,000 (or 2%).

In
fiscal year 2010, one customer accounted for 12% of our total revenues for the fiscal year. Two different customers accounted for 12% and 13% of our total revenues in our fourth
fiscal quarter of 2010. No one customer accounted for 10% or more of our total revenues in fiscal 2009 and fiscal 2008 and for the quarters ended October 31, 2009 and October 31, 2008.

The
inherently unpredictable business cycle of an enterprise software company makes discernment of continued and meaningful business trends difficult. In terms of license revenues, we
are still experiencing lengthy sales cycles and customers' preference for licensing our software on an "as needed" basis where payment is tied to actual usage or deployment of our software, versus the
older historical practice of prepaying license fees in advance of usage, a factor which can adversely affect the amount of our license revenues. License revenues also are a critical factor in driving
the amount of our services revenues, as new license customers typically enter into support and maintenance agreements with us, from which our maintenance revenues are derived over future fiscal
periods. The outlook into the Company's anticipated performance in fiscal 2011 is uncertain, due principally to the significant worldwide economic slowdown.

We
are currently expecting our total revenues for fiscal 2011 to increase approximately 5% from fiscal 2010.

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Table of Contents

Revenues by Category:The following table summarizes our revenues by category (in thousands, except percentages) in fiscal 2010,
2009 and 2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageTotal revenues by category:License

$
8,342

$
9,045

$
15,922

$
(703
)

(8
)%
$
(6,877
)

(43
)%Maintenance


7,331


8,833


9,041


(1,502
)

(17
)

(208
)

(2
)Professional services


93


272


335


(179
)

(66
)

(63
)

(19
)Total

$
15,766

$
18,150

$
25,298

$
(2,384
)

(13
)%
$
(7,148
)

(28
)%Percentage of revenues by category:License


53
%

50
%

63
%Maintenance


46


49


36Professional services


1


1


1Total


100
%

100
%

100
%


Fiscal
2010 Compared to Fiscal 2009

License revenues:License revenues represent perpetual license fees received and recognized from our
End-Users and Value Added Resellers.

License
revenues were $8.3 million (or 53% of total revenues) for fiscal 2010, a decrease of approximately $703,000 (or 8%) from $9.0 million (or 50% of total revenues)
reported for fiscal 2009. The reduced license revenues in absolute dollars for fiscal 2010 were mainly attributable to fewer and smaller license transactions. The decrease in license revenues from
fiscal 2010 compared to fiscal 2009 included unfavorable foreign currency fluctuations of approximately $14,000. The majority of our license revenues in fiscal 2010 continued to be transactions with
existing VAR customers in the telecommunications industry, which was our largest vertical market in fiscal 2010.

Maintenance revenues:Maintenance and technical support revenues include revenues derived from maintenance agreements,
under which we provide customers with internet and telephone access to support personnel and software upgrades, dedicated technical assistance and emergency response support options.

Maintenance
revenues were $7.3 million (or 46% of total revenues) for fiscal 2010, a decrease of $1.5 million (or 17%) from $8.8 million (or 49% of total revenues)
reported for fiscal 2009. The decrease in maintenance revenues for fiscal 2010 was partially due to an approximate decrease of $671,000 in recognized back maintenance compared to fiscal 2009 and an
approximate decrease of $441,000 resulting from certain customers electing less expensive support and maintenance options in fiscal 2010. The decrease in maintenance revenues from fiscal 2010 compared
to fiscal 2009 included unfavorable foreign currency fluctuations of approximately $27,000.

Professional services revenues:Professional services revenues consist of revenues from consulting, training and
technical support, as well as billable travel expenses incurred by our professional services organization.

Professional
services revenues were $93,000 (or 1% of total revenues) in fiscal 2010, a decrease of $179,000 (or 66%) from $272,000 (or 1% of total revenues) reported in fiscal 2009.
This decrease in the absolute dollar amount of professional services revenues for fiscal 2010 compared to fiscal 2009 was attributable to decreases in consulting and training revenues in both the US
and the European

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operations
including the absence in fiscal 2010 of $62,000 of consulting revenue derived from one customer and recognized in fiscal 2009 that was not repeated in fiscal 2010.

Fiscal
2009 Compared to Fiscal 2008

License revenues:License revenues were $9.0 million (or 50% of total revenues) for fiscal 2009, a decrease of
approximately $6.9 million (or 43%) from $15.9 million (or 63% of total revenues) reported for fiscal 2008. The reduced license revenues for fiscal 2009 were mainly attributable to fewer
larger license transactions in fiscal 2009 and included unfavorable foreign currency fluctuations of approximately $677,000 comprising approximately 10% of the $6.9 million decrease in license
revenues. During fiscal year 2008 we derived approximately $5.3 million of revenues from several significant license transactions with four telecommunications customers, whereas we did not have
comparable license transactions of this scale during fiscal year 2009.

The
majority of our license revenues in fiscal 2009 resulted from transactions with existing VAR customers in the telecommunications industry, which was our largest vertical market in
fiscal 2009.

Maintenance revenues:Maintenance revenues were $8.8 million (or 49% of total revenues) for fiscal 2009, a
decrease of approximately $208,000 (or 2%) from $9.0 million (or 36% of total revenues) reported for fiscal 2008. The decrease in maintenance revenues for fiscal 2009 included unfavorable
foreign currency fluctuations of approximately $544,000 (or 262% of the $208,000 decrease), back maintenance of approximately $200,000 earned in fiscal 2008 that was not repeated in fiscal 2009, and
the lapse of a project with one European telecom customer for $91,000.These decreases were partially offset by back maintenance of $617,000 derived from two European customers in fiscal 2009.

Professional services revenues:Professional services revenues were $272,000 (or 1% of total revenues) in fiscal 2009, a
decrease of $63,000 (or 19%) from $335,000 (or 1% of total revenues) reported in fiscal 2008. This decrease in the absolute dollar amount of professional services revenues for fiscal 2009 compared to
fiscal 2008 was attributable to decreases in consulting and training revenues in both the US and the European operations and relates to the decrease in license transactions in fiscal 2009.

International revenues:The following table summarizes our total revenues by geographic area (in thousands, except percentages)
in fiscal 2010, 2009
and 2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageTotal revenues by geographic area:North America

$
6,232

$
6,964

$
9,292

$
(732
)

(11
)%
$
(2,328
)

(25
)%Europe


8,764


10,656


13,275


(1,892
)

(18
)

(2,619
)

(20
)Asia


770


530


2,731


240


45


(2,201
)

(81
)Total

$
15,766

$
18,150

$
25,298

$
(2,384
)

(13
)%
$
(7,148
)

(28
)%Percentage of revenues by geographic area:North America


40
%

38
%

37
%Europe


55


59


52Asia


5


3


11Total


100
%

100
%

100
%


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Table of Contents

Fiscal
2010 Compared to Fiscal 2009

Total
revenues decreased $2.4 million (or 13%) in fiscal 2010 compared to fiscal 2009. The decrease in total revenues occurred across geographic regions
as the global economy remained weak. The decrease in absolute dollars from fiscal 2010 compared to fiscal 2009 was primarily due to a revenue decrease of $1.9 million in Europe, and to a lesser
extent a revenue decrease of $732,000 in North America, partially offset by a revenue increase of $240,000 in Asia. As a percentage of total revenues, international (non-North American)
revenues decreased slightly representing approximately 60% and 62% of our total revenues in fiscal 2010 and fiscal 2009, respectively.

Revenues from North America:The $732,000 (or 11%) decrease in revenues from North America in fiscal 2010 compared to
fiscal 2009 was primarily due to a decrease of $432,000 in maintenance revenues and a decrease of $300,000 in license revenues. North American maintenance revenues declined from fiscal 2009 to fiscal
2010 as customers chose less expensive support options or maintained fewer licenses. North American license revenues decreased due to fewer license transactions and the approximate $170,000 decrease
to license revenues resulting from one customer's previous misreporting and overpayment of royalties to Versant. See Note 7 of our "Notes to Consolidated Financial Statements" in Item 8
of this report for more information regarding this transaction.

Revenues from Europe:The $1.9 million (or 18%) decrease in revenues from Europe in fiscal 2010 compared to
fiscal 2009 was primarily due to a decrease of $1.3 million in European maintenance revenues and to a lesser extent, a $594,000 decrease in European license revenues. The decrease in European
maintenance revenues from fiscal 2009 to fiscal 2010 included an approximate $663,000 decrease in back maintenance transactions and an approximate $394,000 decrease as a result of customers choosing
less expensive support options. The decrease in European license revenues from fiscal 2009 to fiscal 2010 reflected fewer license transactions in Europe and the relative absence of larger license
transactions. The decrease in total revenues from Europe also included approximately $42,000 resulting from unfavorable foreign currency exchange rate fluctuations.

Since
the Company's acquisition of Poet Holdings, Inc. in early 2004, we have generally derived a higher percentage of international revenues due to stronger demand for our
products in Europe. We expect in
the future to continue to experience a somewhat stronger demand for our products in Europe as compared to our other geographic markets.

Revenues from Asia:We experienced an increase of $240,000 (or 45%) in revenues from our Asia Pacific region during
fiscal 2010 compared to fiscal 2009, primarily due to increased revenues from our distributor in Japan.

A
variety of factors may impact Versant's future revenues, including the potential strengthening of the U.S. dollar (which would have the effect of reducing portions of our revenue
resulting from favorable currency exchange fluctuations) and the generally difficult economic environment currently being experienced in the global economy, which may negatively impact demand for our
products and services.

Fiscal
2009 Compared to Fiscal 2008

Total
revenues decreased $7.1 million (or 28%) in fiscal 2009 compared to fiscal 2008. The decrease in total revenues occurred across geographic regions
as the global economy slowed. The decrease in absolute dollars of revenue from fiscal 2009 compared to fiscal 2008 was due to revenue decreases of $2.3 million in North America,
$2.6 million in Europe and $2.2 million in Asia. As a percentage of total revenues, international (non-North American) revenues remained stable representing approximately 62%
and 63% of our total revenues in fiscal 2009 and fiscal 2008, respectively.

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Revenues from North America:The $2.3 million (or 25%) decrease in revenue from North America in fiscal 2009
compared to fiscal 2008 was primarily due to fewer license transactions and the relative absence of larger license transactions in fiscal 2009. For example in fiscal 2008 we closed license
transactions with two customers totaling approximately $1.9 million, while there were no such comparable transactions in fiscal 2009.

Revenues from Europe:The $2.6 million (or 20%) decrease in revenue from Europe in fiscal 2009 compared to fiscal
2008 reflected in large part the closing of license transactions with a European based telecommunications customer totaling approximately $1.7 million in fiscal 2008, which were not matched by
comparable transactions in fiscal 2009. The decrease in total revenues from Europe also included approximately $1.0 million resulting from unfavorable foreign currency exchange rate
fluctuations.

Revenues from Asia:We also experienced a decrease of $2.2 million (or 81%) in revenues from our Asia Pacific
region during fiscal 2009, which reflected three significant license transactions totaling approximately $1.9 million with two Asia Pacific telecommunications customers in fiscal 2008, for
which there were no comparable transactions in fiscal 2009.

Cost of Revenues

Cost of Revenues:The following table summarizes the cost of revenues (in thousands, except percentages) in fiscal 2010, 2009 and
2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageTotal revenues

$
15,766

$
18,150

$
25,298

$
(2,384
)

(13
)%
$
(7,148
)

(28
)%Cost of license revenues


279


273


309


6


2


(36
)

(12
)Amortization of intangibles


303


373


315


(70
)

(19
)

58


18Cost of maintenance revenues


1,470


1,452


1,446


18


1


6


0Cost of professional services revenues


61


133


112


(72
)

(54
)

21


19Total cost of revenues

$
2,113

$
2,231

$
2,182

$
(118
)

(5
)%
$
49


2
%Gross margin

$
13,653

$
15,919

$
23,116

$
(2,266
)

(14
)%
$
(7,197
)

(31
)%Gross margin percentage


87
%

88
%

91
%


Cost
of revenues was $2.1 million (or 13% of total revenues) in fiscal 2010, a decrease of $118,000 (or 5%) from the cost of revenues of $2.2 million (or 12% of total
revenues) reported in fiscal 2009. The decrease resulted from a $70,000 reduction in amortization of intangible assets and a $72,000 reduction in the cost of professional services revenue in fiscal
2010 compared to fiscal 2009 and was partially offset by slight increases in the cost of license and maintenance revenues.

Cost
of revenues was $2.2 million (or 12% of total revenues) in fiscal 2009, an increase of $49,000 (or 2%) from the cost of revenues of $2.2 million (or 9% of total
revenues) reported in fiscal 2008. This increase (discussed further below) was primarily due to an increase in the amortization of intangibles related to our acquisition of db4o of $95,000 and an
increase in the cost of maintenance revenues to support db4o of $58,000, partially offset by favorable foreign currency fluctuations of $96,000.

Gross
margin percentages (gross margin as a percentage of total revenues) remained relatively stable at 87% in fiscal 2010, 88% in fiscal 2009 and 91% in fiscal 2008.

39

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Table of Contents

Cost of license revenues:Cost of license revenues consists primarily of royalties and costs of third party products,
which we resell to our customers, as well as product media and shipping and packaging costs.

The
following table summarizes the cost of license revenues (in thousands, except percentages) in fiscal 2010, 2009 and 2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageLicense:Revenues

$
8,342

$
9,045

$
15,922

$
(703
)

(8
)%
$
(6,877
)

(43
)%Cost


279


273


309


6


2


(36
)

(12
)Margin

$
8,063

$
8,772

$
15,613

$
(709
)

(8
)%
$
(6,841
)

(44
)%Margin percentage


97
%

97
%

98
%


Fiscal
2010 Compared to Fiscal 2009

Cost
of license revenues was $279,000 (or 3% of license revenues) in fiscal 2010, remaining stable in both absolute dollars and as a percentage of license
revenues compared to $273,000 (or 3% of license revenues) in fiscal 2009.

Fiscal
2009 Compared to Fiscal 2008

Cost
of license revenues was $273,000 (or 3% of license revenues) in fiscal 2009, remaining relatively stable in both absolute dollars and as a percentage of
license revenues compared to $309,000 (or 2% of license revenues) in fiscal 2008. The decrease of $36,000 in fiscal 2009 was primarily attributable to favorable foreign currency fluctuations of
$18,000.

Cost of maintenance revenues:Cost of maintenance revenues consists primarily of salaries, bonuses and consulting fees
for customer support personnel and related expenses, including payroll, employee benefits and allocated overhead.

The
following table summarizes the cost of maintenance revenues (in thousands, except percentages) in fiscal 2010, 2009 and 2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageMaintenance:Revenues

$
7,331

$
8,833

$
9,041

$
(1,502
)

(17
)%
$
(208
)

(2
)%Cost


1,470


1,452


1,446


18


1


6


0Margin

$
5,861

$
7,381

$
7,595

$
(1,520
)

(21
)%
$
(214
)

(3
)%Margin percentage


80
%

84
%

84
%


Fiscal
2010 Compared to Fiscal 2009

Cost
of maintenance revenues was $1.5 million (or 20% of maintenance revenues) in fiscal 2010, remaining consistent in absolute dollars compared to
$1.5 million (or 16% of maintenance revenues) in fiscal 2009. The Company has elected to maintain our core technical support team and its associated costs, which has resulted in the slight
increase in the cost of maintenance revenues as a percentage of maintenance revenues in fiscal 2010, in which our maintenance revenues were lower than in fiscal 2009.

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Table of Contents

Fiscal
2009 Compared to Fiscal 2008

Cost
of maintenance revenues was $1.5 million (or 16% of maintenance revenues) in fiscal 2009, remaining consistent in both absolute dollars and as a
percentage of maintenance revenues compared to $1.5 million (or 16% of maintenance revenues) in fiscal 2008. The slight increase of $6,000 in fiscal 2009 was primarily attributable to increased
consulting costs of approximately $58,000 related to db4o technical support services and an increase in allocated overhead
in our domestic operations of $25,000, substantially offset by favorable foreign currency fluctuations of $68,000.

Cost of professional services revenues:Cost of professional services consists of salaries, bonuses, third party
consulting fees and other costs associated with supporting our professional services organization.

The
following table summarizes the cost of professional services revenues (in thousands, except percentages) in fiscal 2010, 2009 and 2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageProfessional Services:Revenues

$
93

$
272

$
335

$
(179
)

(66
)%
$
(63
)

(19
)%Cost


61


133


112


(72
)

(54
)

21


19Margin

$
32

$
139

$
223

$
(107
)

(77
)%
$
(84
)

(38
)%Margin percentage


34
%

51
%

67
%


Fiscal
2010 Compared to Fiscal 2009

Cost
of professional services revenues was $61,000 (or 66% of professional services revenues) in fiscal 2010, a decrease of $72,000 (or 54%) compared to
$133,000 (or 49% of professional services revenues) in fiscal 2009.

Cost
of professional services as a percentage of professional services revenues is affected by the mix of services provided (i.e., training vs. consulting) and the travel costs
incurred. Versant provided fewer consulting and training services in fiscal 2010 when compared to fiscal 2009, and incurred higher costs related to fewer students per training class.

Fiscal
2009 Compared to Fiscal 2008

Cost
of professional services revenues was $133,000 (or 49% of professional services revenues) in fiscal 2009, an increase of $21,000 (or 19%) compared to
$112,000 (or 33% of professional services revenues) in fiscal 2008.

Cost
of professional services as a percentage of professional services revenues is affected by the mix of services provided (i.e., training vs. consulting) and the travel costs
incurred. Versant provided more consulting service and fewer training classes in fiscal 2009 compared to fiscal 2008, and therefore incurred higher relative costs.

Amortization of Intangible Assets:The amortization of intangible assets in fiscal 2010 related to our fiscal 2004
acquisitions of Poet Holdings, Inc., FastObjects, Inc. and JDO Genie technology and our fiscal 2009 acquisition of db4o.

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Table of Contents

The
following table summarizes the amortization of intangible assets (in thousands, except percentages) in fiscal 2010, 2009 and 2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageAmortization of intangible assets:Poet Holdings, Inc.

$
189

$
189

$
189

$




%
$




%JDO Genie (PTY), LTD





73


110


(73
)

(100
)

(37
)

(34
)FastObjects, Inc.


11


16


16


(5
)

(31
)




db4o


103


95





8


8


95


100Total amortization of purchased intangibles

$
303

$
373

$
315

$
(70
)

(19
)%
$
58


18
%


Fiscal
2010 Compared to Fiscal 2009

Amortization
of intangible assets was $303,000 (or 4% of license revenues) in fiscal 2010, a $70,000 (or 19%) decrease compared to $373,000 (or 4% of license
revenues) in fiscal 2009. Intangible assets related to JDO Genie technology were fully amortized in the third quarter of fiscal 2009 and intangible assets related to FastObjects customer relationships
were fully amortized in the third quarter of fiscal 2010, resulting in a decrease of $70,000 in amortization of intangible assets in fiscal 2010 as compared to fiscal 2009. Based on current
conditions, we expect to incur quarterly amortization charges of approximately $73,000 for the first quarter of fiscal 2011, $65,000 for the second quarter of fiscal 2011 and $26,000 for the third and
fourth quarters of fiscal 2011.

Fiscal
2009 Compared to Fiscal 2008

Amortization
of intangible assets was $373,000 (or 4% of license revenues) in fiscal 2009, a $58,000 (or 18%) increase compared to $315,000 (or 2% of license
revenues) in fiscal 2008. The increase in fiscal 2009 was primarily due to amortization of the intangible assets acquired with the db4o business of $95,000, partially offset by a decrease of $37,000
as the JDO Genie intangible asset was fully amortized in the third quarter of fiscal 2009.

Operating Expenses

Operating Expenses.The following table summarizes our operating expenses (in thousands, except percentages) for fiscal 2010,
2009 and 2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageOperating expenses:Sales and marketing

$
4,722

$
4,101

$
3,620

$
621


15
%
$
481


13
%Research and development


3,778


3,969


4,066


(191
)

(5
)

(97
)

(2
)General and administrative


3,143


3,665


5,479


(522
)

(14
)

(1,814
)

(33
)Restructuring


39


139





(100
)

(72
)

139


100Total

$
11,682

$
11,874

$
13,165

$
(192
)

(2
)%
$
(1,291
)

(10
)%


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Table of Contents

Fiscal 2010 Compared to Fiscal 2009

Total
operating expenses were $11.7 million (or 74% of total revenues) for fiscal year 2010 and $11.9 million (or 65% of total revenues) for
fiscal year 2009. The decrease of $192,000 (or 2%) in total operating expenses in fiscal 2010 (discussed further below) resulted from a $522,000 decrease in our general and administrative expenses
primarily related to reduced professional services and regulatory compliance costs, a $191,000 decrease in research and development expenses predominantly related to the reduced use of outside
consultants, and a $100,000 decrease in restructuring costs related to the substantial completion of the restructuring plan in our second fiscal quarter, with these decreases being partially offset by
increases in sales and marketing costs of $621,000 primarily related to the expansion of our global sales and marketing efforts. Operating expenses for fiscal year 2010 include favorable foreign
currency exchange fluctuations of approximately $47,000 when compared to fiscal 2009. However, due to the decrease in total revenues from fiscal 2009 to fiscal 2010, total operating expenses
represented a higher percentage of total revenues in fiscal 2010 than in fiscal 2009.

Sales and Marketing:Sales and marketing expenses consist primarily of personnel and related expenses,
commissions earned by sales personnel, trade shows, travel and other marketing communication costs, such as advertising and other marketing programs.

Sales
and marketing expenses were $4.7 million (or 30% of revenues) for fiscal year 2010 and $4.1 million (or 22% of total revenues) for fiscal year 2009. The $621,000 (or
15%) increase in absolute dollars for fiscal 2010 was primarily due to an expansion of our global sales operations, including increases in total compensation expense, recruiting, higher facility costs
attributable to additional personnel, travel and related costs resulting in an approximate increase of $331,000 related to U.S. sales operations, an approximate increase of $103,000 in European sales
operations and an approximate increase of $66,000 in Asian sales operations. The year over year increase also includes an approximate $451,000 increase in global marketing programs including the
addition of a new marketing manager and our VP Marketing and Strategic Product Development, along with lead generation and qualification, emarketing and other new initiatives. These increases in sales
and marketing costs for fiscal 2010 when compared to fiscal 2009 were partially offset by an approximate decrease of $275,000 related to a non-recurring separation payment made to the
former Executive Vice President of Field Operations in the first quarter of fiscal 2009, an approximate reduction of $29,000 in executive bonuses and a decrease of $22,000 in favorable foreign
exchange fluctuations.

We
expect our sales and marketing expenses to increase approximately 21% in fiscal 2011 over fiscal 2010 due to anticipated increases in sales and marketing personnel and programs and we
expect that sales and marketing expenses will continue to represent a considerable percentage of our total operating expenditures in the future.

Research and Development:Research and development expenses consist primarily of personnel and related expenses,
including payroll and employee benefits, expenses for facilities and payments made to outside software development contractors.

Research
and development expenses were $3.8 million (or 24% of revenues) for fiscal 2010 and $4.0 million (or 22% of revenues) in fiscal 2009. The $191,000 (or 5%) decrease
in absolute dollars for research and development expenses in fiscal 2010 was due primarily to an approximate $157,000 decrease related to the reduced use of outside engineering services and an
approximate $16,000 decrease due to favorable foreign currency exchange fluctuations. The closure of our Indian operations resulted in an approximate $472,000 decrease in research and development
costs in fiscal 2010 compared to fiscal 2009, and this decrease was fully offset by an approximate $489,000 increase in salary and related costs for personnel additions in our European operations
consolidating our engineering activities into one location.

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Table of Contents

We
anticipate that we will continue to invest significant resources in research and development activities in the future to develop new products, advance the technology of our existing
products and develop new business opportunities, including research and development activities related to our acquisition of db4o in December 2008. We expect our research and development expenses to
remain relatively stable in fiscal 2011 compared to our research and development expense levels in fiscal 2010.

General and Administrative:General and administrative expenses consist primarily of personnel and related expenses,
professional services and general operating expenses.

General
and administrative expenses were $3.1 million (or 20% of total revenues) in fiscal 2010 and $3.7 million (or 20% of total revenues) in fiscal 2009. The $522,000 (or
14%) decrease in absolute dollars in general and administrative expenses in fiscal 2010 was primarily due to an approximate $231,000 decrease in professional services and regulatory compliance costs,
including audit fees, consulting services and salary related expenses. The year over year decrease also included an approximate $82,000 decrease in share based compensation and travel expenses of the
executives and directors, a decrease of $50,000 in bad debt expense, a decrease of $37,000 in facilities costs and favorable foreign currency exchange fluctuations of approximately $9,000.

We
expect our general and administrative expenses in fiscal 2011 to remain relatively stable compared to fiscal 2010.

Restructuring:On September 22, 2009, the Company committed to the implementation of a restructuring pursuant to
which it closed its research and development facility in Pune, India. The restructuring plan was undertaken to consolidate our research and development efforts into one location in Germany in order to
streamline operations, create management efficiencies and increase productivity. The restructuring was substantially completed during the second fiscal quarter ended April 30, 2010.

The
following table reflects the restructuring charges included in operating expenses for fiscal year 2010 and 2009 (in thousands):

Fiscal Year Ended October 31,2010

2009Restructuring:Severance, retention and related charges

$
38

$
32Impairment of fixed assets (non-cash charges)


2


61Reserve for (recovery of) impairment of other current assets


(29
)

42Contract termination costs


8


Other direct costs of closure


20


4Total restructuring charges

$
39

$
139


There
were no restructuring charges during fiscal 2008.

Fiscal
2009 Compared to Fiscal 2008

Total
operating expenses were $11.9 million (or 65% of total revenues) for fiscal year 2009 and $13.2 million (or 52% of total revenues) for
fiscal year 2008. The decrease of $1.3 million (or 10%) in total operating expenses in fiscal 2009 (discussed further below) resulted primarily from a $1.1 million decrease in our
general and administrative expenses, due to litigation settlement-related expenses incurred in fiscal 2008 not being repeated in fiscal 2009, a decrease of $530,000 in our general and administrative
expenses in fiscal 2009 related to regulatory compliance, and favorable foreign currency exchange fluctuations of $736,000, with these decreases partially offset by increases in sales, marketing

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and
research and development costs of $867,000 primarily related to db4o. However, due to the decrease in total revenues from fiscal 2008 to fiscal 2009, total operating expenses represented a higher
percentage of total revenues in fiscal 2009 than in fiscal 2008.

In
December 2008, we acquired the db4o assets to further expand the scope of our solutions to include the embedded device market. Our results of operations thus include db4o transactions
from the acquisition date of December 1, 2008, or eleven months in fiscal 2009.

Sales and Marketing:Sales and marketing expenses were $4.1 million (or 22% of revenues) for fiscal year 2009 and
$3.6 million (or 14% of total revenues) for fiscal year 2008. The $481,000 (or 13%) increase in absolute dollars for fiscal 2009 was primarily due to an expansion of our U.S. sales operations,
including an approximate $301,000 increase in total compensation expense, recruiting, higher facility costs attributable to additional personnel, travel and related costs associated with hiring two
additional salespeople and a VP of Sales North America, and an increase of $177,000 in marketing consulting fees. The year over year increase also includes db4o-related sales and marketing expenses
for an approximate $107,000 of salary and related costs for one employee, $132,000 in consulting fees and international distributor costs as well as $75,000 in advertising costs. These increases were
partially offset by favorable foreign currency exchange fluctuations of $207,000. The increase in sales and marketing costs related to expansion of our U.S. sales efforts and included an approximate
$275,000 non-recurring separation payment made to the former Executive Vice President of Field Operations in the first quarter of fiscal 2009. This increase was partially offset by reduced
expenses in our European operations of approximately $367,000 in salary and related expenses attributable to the departure of the Executive Vice President of Field Operations and two other sales and
marketing personnel, and reduced trade show and collateral expenses of $88,000.

As
db4o was acquired on December 1, 2008, only eleven months of sales and marketing expenditures associated with db4o as described above are reflected in the Company's statement
of income for fiscal year 2009 and no db4o associated expenses are reflected for fiscal year 2008.

Research and Development:Research and development expenses were $4.0 million (or 22% of revenues) for fiscal
2009 and $4.1 million (or 16% of revenues) in fiscal 2008. The $97,000 (or 2%) decrease in absolute dollars for research and development expenses in fiscal 2009 was due to favorable foreign
currency exchange fluctuations of approximately $438,000, reduced costs of third party contractors of approximately $140,000 and decreased operating costs of $90,000 as our Indian operations begin to
wind down, with these decreases being partially offset by approximately $553,000 of increased consulting and personnel costs related to db4o.

General and Administrative:General and administrative expenses were $3.7 million (or 20% of total revenues) in
fiscal 2009 and $5.5 million (or 22% of total revenues) in fiscal 2008. The $1.8 million (or 33%) decrease in absolute dollars in general and administrative expenses in fiscal 2009 was
primarily due to a decrease of $1.1 million in expenses related to the settlement of litigation occurring in fiscal 2008 and not repeated in fiscal 2009, an approximate $530,000 decrease in
regulatory compliance costs including audit fees, consulting services and salary related expenses, an approximate decrease of $192,000 in employee bonuses due to reduced revenue and net income levels,
and favorable foreign currency exchange fluctuations of approximately $91,000.These decreases were partially offset by an $82,000 increase in share based compensation expense as a result of the higher
average market value of stock option grants.

Restructuring:On September 22, 2009, the Company committed to the implementation of a restructuring pursuant to
which it closed its research and development facility in Pune, India. During the fourth quarter of our fiscal 2009, we incurred $32,000 of severance and retention costs, $61,000 of impairment charges
to our fixed assets, $4,000 of direct costs of closure and a $42,000 impairment charge to other current assets. There were no restructuring charges during fiscal 2008.

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Interest and Other Income, Net

Interest and other income, net consists of interest income earned from our cash and cash equivalents net of interest expense due to our
financing activities, miscellaneous
refunds and foreign exchange rate gains and losses as a result of settling transactions denominated in currencies other than our functional currency.

The
following table summarizes our interest and other income, net (in thousands, except percentages) in fiscal 2010, 2009 and 2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageInterest and other income, net:Interest income

$
59

$
267

$
880

$
(208
)

(78
)%
$
(613
)

(70
)%Interest expense


(1
)




(1
)

(1
)

(100
)

1


100Foreign exchange gain (loss)


91


(35
)

(13
)

126


360


(22
)

(169
)Other income


1





5


1


100


(5
)

(100
)Total

$
150

$
232

$
871

$
(82
)

(35
)%
$
(639
)

(73
)%


Fiscal
2010 Compared to Fiscal 2009

Interest
and other income, net was $150,000 (or 1% of total revenues) in fiscal 2010 compared to $232,000 (or 1% of revenues) in fiscal 2009. The absolute
dollar decrease of $82,000 (or 35%) was primarily due to a decrease of $208,000 in interest income from both our European and U.S. operations as a result of significantly reduced interest rates,
partially offset by a favorable change of approximately $126,000 in foreign exchange gains and losses resulting from settling transactions denominated in currencies other than our functional currency.

Fiscal
2009 Compared to Fiscal 2008

Interest
and other income, net was $232,000 (or 1% of total revenues) in fiscal 2009 compared to $871,000 (or 4% of revenues) in fiscal 2008. The absolute
dollar decrease of $639,000 (or 73%) was primarily due to a decrease of $566,000 in interest income from both our European and U.S. operations as a result of significantly reduced interest rates, and
included unfavorable foreign currency fluctuations of approximately $54,000.

Provision for Income Taxes

Provision for income taxes primarily consists of corporate income taxes for our subsidiaries in Germany and India, foreign withholding
taxes and state income and franchise taxes in the U.S. The provision also reflects the release of the estimated realizable portion of the valuation allowance against the net deferred tax assets.

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The
following table summarizes our provision for (benefit from) income taxes (in thousands, except percentages) in fiscal 2010, 2009 and 2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageProvision for income taxes:Foreign withholding taxes

$
68

$
54

$
253

$
14


26
%
$
(199
)

(79
)%Provision for income taxes Europe


395


(653
)

1,155


1,048


160


(1,808
)

(157
)Provision for income taxes India





14


19


(14
)

(100
)

(5
)

(26
)Federal, state and franchise taxes


4


23


4


(19
)

(83
)

19


475Total

$
467

$
(562
)
$
1,431

$
1,029


183
%
$
(1,993
)

(139
)%


Fiscal
2010 Compared to Fiscal 2009

In
evaluating our ability to utilize our deferred tax assets, we consider all available positive and negative evidence, including our past operating results in
the most recent fiscal years and our assessment of expected future results of operations on a jurisdiction by jurisdiction basis. Based on all the available evidence, we determined that it had become
more likely than not that we would realize a portion of our net deferred tax assets in Germany. As a result, we released approximately $939,000 of our valuation allowance in fiscal year 2009, which
was recorded as an income tax benefit. As of October 31, 2010, we have concluded that it is more likely than not that the Company will realize the benefit of its deferred tax assets related to
its German net operating loss carry forwards only to the extent of its expected taxable income in fiscal 2011. We have a remaining valuation allowance of approximately $33.9 million against net
deferred tax assets in the U.S. and foreign jurisdictions. Significant management judgment is required to determine when, in the future, the realization of our net deferred tax assets will become more
likely than not. The Company will continue to assess the realizability of the tax benefit available based on actual and forecasted operating results.

As
of October 31, 2010, we had U.S. federal and state net operating loss carry forwards of approximately $66.9 million and $11.6 million, respectively, and U.S.
federal and state tax credit carry forwards of approximately $1.4 million and $627,000, respectively. The federal and state net operating loss carry forwards expire on various dates through
2029, including $6.9 million of federal net operating loss carry forward expiring in 2011. The U.S. federal tax credit carry forwards expire on various dates through 2023, if not utilized. The
state tax credit can be carried forward indefinitely. Additionally, at October 31, 2010, we had German net operating tax loss carry forwards of approximately $26.2 million. The German
tax code provides for certain annual statutory limitations related to the use of tax loss carry forward amounts. For each taxable year, we may utilize German tax loss carry forwards fully up to the
first million euros of taxable income, and thereafter, the tax loss carry forwards are limited to 60% of taxable income. The provision for income taxes in Germany included approximately $395,000 and
$285,000 for fiscal 2010 and fiscal 2009, respectively, attributable to taxable income related to our German operations that were in excess of the allowable utilization of the tax loss carry forwards,
and therefore, subject to corporate taxes. During fiscal 2010, the strengthening of the US dollar against the euro created taxable gains from US denominated currencies held by our German operations
which increased our taxable income in Germany.

Due
to "change in ownership" provisions of the Internal Revenue Code of 1986, the availability of net operating loss and tax carry forwards to offset federal taxable income in future
periods is subject to an annual limitation. Future shifts in our stock ownership could subject our net operating loss and tax carry forwards to additional limitations restricting their use in
sheltering future taxable income.

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We
incurred foreign withholding taxes and state income and franchise taxes of approximately $72,000 and $77,000 in fiscal 2010 and fiscal 2009, respectively, which we have included in
our income tax provision.

A
portion of deferred tax assets relating to net operating losses pertains to net operating loss carry forwards resulting from tax deductions upon the exercise of employee stock options
of approximately $1.6 million. When recognized, the tax benefit of these loss carry forwards will be accounted for as a credit to additional paid-in capital rather than a reduction
of income tax expense.

Fiscal
2009 Compared to Fiscal 2008

As
of October 31, 2008, a full valuation allowance was recorded against our net deferred tax assets. Based on all the available evidence, we determined
that it had become more likely than not that we would realize a portion of our net deferred tax assets in Germany. As a
result, we released approximately $939,000 of our valuation allowance in fiscal year 2009 which was recorded as an income tax benefit.

The
provision for income taxes in Germany included approximately $285,000 and $1.2 million for fiscal 2009 and fiscal 2008, respectively, attributable to taxable income related to
our German operations that were in excess of the allowable utilization of the tax loss carry forwards, and therefore, subject to corporate taxes.

We
incurred foreign withholding taxes and state income and franchise taxes of approximately $77,000 and $257,000 in fiscal 2009 and fiscal 2008, respectively, which we have included in
our income tax provision.

Income from Discontinued Operations, Net of Income Taxes

In February 2006, we sold our WebSphere consulting business to Sima Solutions, a privately held company, in exchange for a
one-time cash payment plus certain contingent payments during a 24-month period following the close of the transaction. As a result, we have reflected the results of operations
of the WebSphere consulting practice for fiscal 2008 as income from discontinued operations, net of income taxes. (Our results for fiscal 2009 and 2010 do not include any amounts from discontinued
operations since our rights to receive revenues from our Websphere business terminated in January, 2008.) Therefore, reported revenues for these periods no longer include any revenues from the
WebSphere consulting practice.

The
following table summarizes our income from discontinued operations, net of income taxes (in thousands, except percentages) in fiscal 2010, 2009 and 2008:

Fiscal Year Ended October 31,

Fiscal 2010 vs 2009
Increase (Decrease)

Fiscal 2009 vs 2008
Increase (Decrease)2010

2009

2008

In Dollars

Percentage

In Dollars

PercentageIncome from discontinued operations, net of income taxes

$


$


$
98

$




%
$
(98
)

(100
)%


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Liquidity and Capital Resources

The following table sets forth certain consolidated balance sheets and consolidated statements of cash flows data for the fiscal years
2010 and 2009 (in thousands, except percentages):

October 31,
2010

October 31,
2009

Percentage
Change(unaudited)Working Capital

$
24,889

$
26,791


(7
)%Cash and cash equivalents

$
24,911

$
27,812


(10
)%


Fiscal Year EndedOctober 31,
2010

October 31,
2009

Percentage
Change(unaudited)Net cash provided by operating activities

$
2,285

$
5,771


(60
)%Net cash used in investing activities


(645
)

(2,547
)

75Net cash used in financing activities

$
(4,143
)
$
(2,961
)

(40
)%


Cash and Cash Equivalents

In fiscal 2010, we financed our operations and met our capital expenditure requirements primarily through cash flows from operations
and cash reserves. As of October 31, 2010, we had cash and cash equivalents of approximately $24.9 million, a decrease of $2.9 million over the $27.8 million of cash and
cash equivalents we held at October 31, 2009. The decrease in cash and cash equivalents was primarily attributable to our repurchase of 356,104 share of our common stock for approximately
$4.3 million during fiscal 2010.

As
of October 31, 2010, $6.6 million of our $24.9 million in cash and cash equivalents were held in foreign financial institutions, of which $2.3 million was
held in foreign currencies.

The
following table summarizes our cash balances held in foreign currencies and their equivalent U.S. dollar amounts (in thousands):

As of October 31, 2010Local Currency

U.S. DollarCash in foreign currency:Euros


€1,375

$
1,917British Pound


£32


52Indian Rupee


Rs13,692


302Total




$
2,271


We
transact business in various foreign currencies and, accordingly, we are subject to exposure from adverse movements in foreign currency exchange rates. The effect of changes in
foreign currency exchange rates on our net operating results in fiscal 2010 were comprised of $42,000 of unfavorable foreign currency fluctuations on our revenues, $7,000 of favorable foreign currency
fluctuations on our cost of revenues, and $47,000 of favorable foreign currency fluctuations on our operating expenses, resulting in a net favorable effect of approximately $12,000 on our operating
income for fiscal 2010. Operating expenses incurred by our foreign subsidiaries are denominated primarily in local currencies. We currently do not use financial instruments to hedge these operating
expenses. We intend to continue to assess the need to utilize financial instruments to hedge currency exposures on an ongoing basis during fiscal 2011.

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Our
exposure to foreign exchange risk is primarily related to the magnitude of foreign net profits and losses denominated in euros, as well as our net position of monetary assets and
monetary liabilities in the euro (though in the future the same could be true of other foreign currencies depending on the source of our revenues). This exposure has the potential to produce
fluctuations within our consolidated results. However, in some instances our European operations act as a natural hedge, since both operating expenses as well as revenues are denominated in local
currencies. In these instances, although an unfavorable change in the exchange rate of the euro against the U.S. dollar will result in lower revenues when translated into U.S. dollars, our European
operating expenditures will be lower as well. Additionally, we held approximately 91% of our total cash balances at October 31, 2010 in the form of U.S. dollars to assist in neutralizing the
impact of foreign currency fluctuations.

In
relation to our cash balances held overseas, there were no European Union foreign exchange restrictions on repatriating our overseas-held cash to the United States.
However, we may be subject to income tax withholding in the source countries and to U.S. federal and state income taxes in the future if the payment or transfer of cash from our subsidiaries to the
U.S. parent were to be classified as a dividend. Other payments made by our European overseas subsidiaries in the ordinary course of business (e.g. payment of royalties or interest from the
subsidiaries to the U.S. parent) were generally not subject to income tax withholding due to tax treaties.

Our
cash equivalents primarily consist of money market accounts and short-term time deposits; accordingly, our interest rate risk is not considered significant.

In
December 2008, we committed $2.6 million in cash (including $280,000 of contingent payments subsequently made in fiscal 2009 and 2010) to acquire the assets of the database
software business of privately-held Servo Software, Inc. (formerly db4objects, Inc.).

On
December 1, 2008, Versant's Board of Directors approved a stock repurchase program authorizing Versant to repurchase up to $5.0 million worth of its outstanding common
shares from time to time on the open market, in block trades or otherwise. This stock repurchase program expired by its terms on October 31, 2009. Versant acquired 222,688 common shares on the
open market for approximately $3.2 million at an average purchase price of $14.52 per share under this stock repurchase program.

On
November 30, 2009, Versant's Board of Directors approved a stock repurchase program pursuant to which the Company was authorized to repurchase up to $5.0 million of its
common stock in fiscal year 2010. The stock repurchase program expired by its terms on October 31, 2010. Versant acquired 356,104
common shares on the open market for approximately $4.3 million at an average purchase price of $12.06 per share under the stock repurchase program.

On
November 29, 2010 Versant's Board of Directors approved a new stock repurchase program pursuant to which the Company is authorized to repurchase up to $5.0 million of
its common stock in fiscal year 2011. The stock repurchase program is currently scheduled to expire upon the earlier of October 31, 2011, or such time as Versant has expended
$5.0 million to repurchase outstanding common shares under the program; however this program may be suspended, discontinued, terminated or extended at any time by the Company.

Taking
into consideration the cash outflows related to potential common stock repurchases and with our current and estimated revenues, collections and cost structure, we expect to
operate with a moderate negative cash flow in fiscal 2011.

Cash Flows from Operating Activities

The main source of our operating cash flows is cash collections from customers who have purchased our products and services. Our
primary uses of cash in operating activities are payments for personnel related expenditures and facilities costs.

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Fiscal
2010

We
generated $2.3 million of cash flows from operations in fiscal 2010. This amount resulted from $1.7 million in net income, adjusted for
non-cash charges of $1.6 million and partially offset by a $1.0 million increase in operating assets net of liabilities since the beginning of fiscal 2010. The increase in
operating assets net of liabilities was primarily attributable to an increase of $979,000 in trade accounts receivable.

Non-cash
adjustments were approximately $1.6 million, as reflected in our cash flow statement in fiscal 2010, which were primarily share based compensation expense of
$1.1 million and depreciation and amortization expense of $612,000. Non-cash adjustments may increase
or decrease in the future and, as a result, this might positively or negatively impact our future operating results, but they will not have a direct impact on our cash flows.

The
timing of payments to our vendors for accounts payable and collections from our customers for accounts receivable will impact our cash flows from operating activities. We typically
pay our vendors and service providers in accordance with their invoice terms and conditions. Our standard payment terms for our invoices are usually between 30 and 90 days net.

We
measure the effectiveness of our collection efforts by an analysis of our accounts receivable and our days sales outstanding (DSO). We calculate DSO by taking the ending accounts
receivable balances (net of bad debt allowance) divided by the average daily sales amount. Average daily sales amount is calculated by dividing the total quarterly revenue recognized net of changes in
deferred revenues by 91.25 days. Collection of accounts receivable and related DSO could fluctuate in future periods, due to the timing and amount of our revenues and the effectiveness of our
collection efforts. Our DSOs were 69 days, 55 days and 51 days for the three months ended October 31, 2010, October 31, 2009 and October 31, 2008,
respectively.

Fiscal
2009

We
generated $5.8 million of cash flows from operations in fiscal 2009. This was primarily derived from $4.8 million in net income, adjusted for
non-cash charges of $895,000.

Non-cash
adjustments were approximately $895,000, as reflected in our cash flow statement in fiscal 2009, which were primarily share based compensation expense of $970,000,
depreciation and amortization expense of $710,000 and restructuring charges of $135,000, partially offset by the deferred income tax benefit of $939,000.

Our
working capital was $26.8 million as of October 31, 2009 compared to $25.4 million as of October 31, 2008.

Fiscal
2008

We
generated $8.7 million of cash flows from operations in fiscal 2008. This was primarily derived from $9.5 million in net income offset by a
$936,000 reduction in accounts payables and other liabilities.

Non-cash
adjustments were $1.5 million, as reflected in our cash flow statement in fiscal 2008, which were primarily share based compensation expense of $921,000 and
depreciation and amortization expense of $638,000.

Our
working capital was $25.4 million as of October 31, 2008 compared to $15.3 million as of October 31, 2007.

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Cash Flows from Investing Activities

Our primary uses of cash in investing activities have typically been for the purchases of property and equipment (mostly information
technology related equipment). Purchases of property and equipment were $480,000, $164,000 and $240,000 in fiscal years 2010, 2009 and 2008, respectively. Our cash used in investing activities also
reflects our acquisition of db4o for $180,000 and $2.4 million in fiscal years 2010 and 2009, respectively.

We
anticipate a moderate decrease in our overall spending related to property and equipment in fiscal 2011 compared to fiscal 2010.

Cash Flows from Financing Activities

Our primary use of cash in financing activities has been the repurchase of common stock under our stock repurchase programs, partially
offset by cash proceeds from sales of common stock under our employee stock option and stock purchase plans. Purchases of our common stock were approximately $4.3 million and
$3.2 million in fiscal years 2010 and 2009, respectively. No stock repurchases were made in fiscal 2008. Proceeds from issuance of our common stock were approximately $167,000, $285,000 and
$792,000 in fiscal years 2010, 2009 and 2008, respectively.

Our
future liquidity and capital resources could be impacted by the exercise of outstanding common stock options and the cash proceeds we receive upon exercise of these securities. As of
October 31, 2010 we had approximately 220,000 shares available to issue under our current equity incentive and director plans. The timing of the issuance of options under these plans, the
duration and timing of their vesting schedules and their grant price will all impact the timing of any exercises and proceeds. Accordingly, we cannot estimate the amount of such proceeds at this time.

On
November 29, 2010 Versant's Board of Directors approved a new stock repurchase program pursuant to which the Company is authorized to repurchase up to $5.0 million of
its common stock in fiscal year 2011. The stock repurchase program is currently scheduled to expire upon the earlier of October 31, 2011, or such time as Versant has expended
$5.0 million to repurchase outstanding common shares under the program; however the program may be suspended, discontinued, terminated or extended at any time by the Company.

We
currently do not anticipate establishing a credit or loan facility in fiscal 2011.

Commitments and Contingencies

Our principal commitments as of October 31, 2010 consist of obligations under operating leases for facilities and equipment. In
September 2009, the Company entered into an amended lease agreement to extend the office facilities lease for its U.S. headquarters and in July 2009, the Company entered into a new lease agreement for
its European headquarters.

On
November 29, 2010 Versant's Board of Directors approved a new stock repurchase program pursuant to which the Company is authorized to repurchase up to $5.0 million of
its common stock in fiscal year 2011. The stock repurchase program is currently scheduled to expire upon the earlier of October 31, 2011, or such time as Versant has expended
$5.0 million to repurchase outstanding common shares under the program; however the program may be suspended, discontinued, terminated or extended at any time by the Company. Any repurchases
made under the stock repurchase program are expected to be funded from the Company's working capital.

After
taking into account potential common stock repurchases under our current stock repurchase program, we believe that our existing cash and cash equivalents and cash forecast from
operations will be sufficient to finance our operations during the next twelve months.

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Recent Accounting Pronouncements

For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial
statements, see Note 2 of Notes to Consolidated Financial Statements under item 8 of this report.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

Foreign currency exchange risk.

We transact business in various foreign currencies and, accordingly, we are subject to exposure from adverse movements in foreign
currency exchange rates. The effect of changes in foreign currency exchange rates on our net operating results in fiscal 2010 were comprised of $42,000 of unfavorable foreign currency fluctuations on
our revenues, $7,000 of favorable foreign currency fluctuations on our cost of revenues, and $47,000 of favorable foreign currency fluctuations on our operating expenses, resulting in a net favorable
effect of approximately $12,000 on our operating income for fiscal 2010. Operating expenses incurred by our foreign subsidiaries are denominated primarily in local currencies. We currently do not use
financial instruments to hedge these operating expenses. We intend to continue to assess the need to utilize financial instruments to hedge currency exposures on an ongoing basis during fiscal 2011.

Our
exposure to foreign exchange risk is primarily related to the magnitude of foreign net profits and losses denominated in euros, as well as our net position of monetary assets and
monetary liabilities in the euro (though in the future the same could be true of other foreign currencies depending on the source of our revenues). This exposure has the potential to produce
fluctuations within our
consolidated results. However, in some instances our European operations act as a natural hedge, since both operating expenses as well as revenues are denominated in local currencies. In these
instances, although an unfavorable change in the exchange rate of the euro against the U.S. dollar will result in lower revenues when translated into U.S. dollars, our European operating expenditures
will be lower as well. Additionally, we held approximately 91% of our total cash balances at October 31, 2010 in the form of U.S. dollars to assist in neutralizing the impact of foreign
currency fluctuations.

We
do not own any derivative financial instruments as of October 31, 2010.

Interest rate risk.Our cash equivalents primarily consist of money market accounts and short-term time deposits; therefore, we
do not
believe that our interest rate risk is significant at this time.

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Item 8.    Financial Statements and Supplementary Data.

VERSANT CORPORATION AND SUBSIDIARIES  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS  AND OTHER INFORMATION

Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of October 31, 2010 and 2009Consolidated Statements of Income for the Years Ended October 31, 2010, 2009 and 2008Consolidated Statements of Stockholders' Equity and Comprehensive Income for the Years Ended October 31, 2010, 2009
and 2008Consolidated Statements of Cash Flows for the Years Ended October 31, 2010, 2009 and 2008Notes to Consolidated Financial Statements:Note 1The Company and Basis of PresentationNote 2Summary of Significant Accounting PoliciesNote 3Fair Value MeasurementsNote 4Valuation and Qualifying Accounts and ReservesNote 5Acquisition, Goodwill and Intangible AssetsNote 6Lease ObligationsNote 7ContingenciesNote 8Stockholders' Equity and Income Per ShareNote 9Stock Repurchase ProgramNote 10Employee and Director Benefit PlansNote 11Share Based CompensationNote 12Settlement of LitigationNote 13RestructuringNote 14Income TaxesNote 15Discontinued OperationsNote 16Subsequent EventsNote 17Selected Quarterly Information


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board
of Directors and Stockholders of Versant Corporation and Subsidiaries:

We
have audited the accompanying consolidated balance sheets of Versant Corporation and Subsidiaries as of October 31, 2010 and 2009, and the related consolidated statements of
income, stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended October 31, 2010. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain
reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over
financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Versant Corporation and Subsidiaries at
October 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended October 31, 2010 in conformity with
accounting principles generally accepted in the United States of America.

/s/GRANT THORNTON LLPSan Francisco, California
January 31, 2011

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VERSANT CORPORATION AND SUBSIDIARIES        CONSOLIDATED BALANCE SHEETS(in thousands, except for share amounts)

October 31,
2010

October 31,
2009ASSETSCurrent assets:Cash and cash equivalents

$
24,911

$
27,812Trade accounts receivable, net of allowance for doubtful accounts of $8 and $36 at October 31, 2010 and 2009, respectively


3,186


2,251Deferred income taxes


884


939Other current assets


388


633Total current assets


29,369


31,635Property and equipment, net


634


488Goodwill


8,589


8,410Intangible assets, net


499


802Other assets


38


38Total assets

$
39,129

$
41,373LIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payable

$
164

$
154Accrued liabilities


1,294


1,215Deferred revenues


3,022


3,475Total current liabilities


4,480


4,844Deferred revenues


66


177Deferred rent


49


Other long-term liabilities


90


95Total liabilities


4,685


5,116Commitments and contingencies (Notes 6 & 7)Stockholders' equity:Common stock, no par value, 7,500,000 shares authorized, 3,213,122 shares issued and outstanding at October 31, 2010, and 3,552,946 shares issued and
outstanding at October 31, 2009


92,654


95,730Accumulated other comprehensive income, net


43


434Accumulated deficit


(58,253
)

(59,907
)Total stockholders' equity


34,444


36,257Total liabilities and stockholders' equity

$
39,129

$
41,373


See
accompanying notes to consolidated financial statements.

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VERSANT CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF INCOME(in thousands, except for per share amounts)

Fiscal Year EndedOctober 31,
2010

October 31,
2009

October 31,
2008Revenues:License

$
8,342

$
9,045

$
15,922Maintenance


7,331


8,833


9,041Professional services


93


272


335Total revenues


15,766


18,150


25,298Cost of revenues:License


279


273


309Amortization of intangible assets


303


373


315Maintenance


1,470


1,452


1,446Professional services


61


133


112Total cost of revenues


2,113


2,231


2,182Gross profit


13,653


15,919


23,116Operating expenses:Sales and marketing


4,722


4,101


3,620Research and development


3,778


3,969


4,066General and administrative


3,143


3,665


5,479Restructuring


39


139


Total operating expenses


11,682


11,874


13,165Income from operations


1,971


4,045


9,951Interest and other income, net


150


232


871Income from continuing operations before income taxes


2,121


4,277


10,822Income tax benefit (expense)


(467
)

562


(1,431
)Net income from continuing operations


1,654


4,839


9,391Net income from discontinued operations, net of income taxes








98Net income

$
1,654

$
4,839

$
9,489Basic income per share:Net income from continuing operations

$
0.48

$
1.33

$
2.52Net income from discontinued operations, net of income taxes

$


$


$
0.02Net income per share, basic

$
0.48

$
1.33

$
2.54Diluted income per share:Net income from continuing operations

$
0.48

$
1.32

$
2.48Net income from discontinued operations, net of income taxes

$


$


$
0.03Net income per share, diluted

$
0.48

$
1.32

$
2.51Shares used in per share calculation:Basic


3,411


3,626


3,729Diluted


3,444


3,663


3,783


See accompanying notes to consolidated financial statements.

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VERSANT CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY  AND COMPREHENSIVE INCOME(in thousands,
except for share amounts)

Common



Accumulated
Other
Comprehensive
IncomeAccumulated
Deficit

Total
Stockholders'
Equity

Total
Comprehensive
IncomeShares

AmountBalance at October 31, 2007


3,671,924

$
96,004

$
(74,185
)
$
1,346

$
23,165Adjustment to retained earnings related to ASC §740








(50
)




(50
)ESPP


18,984


290








290Exercise of stock options


55,673


502








502Non-cash share based compensation expense





921








921Net income








9,489





9,489


9,489Foreign currency translation adjustments











(1,163
)

(1,163
)

(1,163
)Total comprehensive income
















$
8,326Balance at October 31, 2008


3,746,581

$
97,717

$
(64,746
)
$
183

$
33,154Repurchases of common stock


(222,688
)

(3,242
)







(3,242
)ESPP


15,691


164








164Exercise of stock options


13,362


121








121Non-cash share based compensation expense





970








970Net income








4,839





4,839


4,839Foreign currency translation adjustments











251


251


251Total comprehensive income
















$
5,090Balance at October 31, 2009


3,552,946

$
95,730

$
(59,907
)
$
434

$
36,257Repurchases of common stock


(356,104
)

(4,310
)







(4,310
)ESPP


13,093


132








132Exercise of stock options


3,187


35








35Non-cash share based compensation expense





1,067








1,067Net income








1,654





1,654


1,654Foreign currency translation adjustments











(391
)

(391
)

(391
)Total comprehensive income
















$
1,263Balance at October 31, 2010


3,213,122

$
92,654

$
(58,253
)
$
43

$
34,444


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Table of Contents

VERSANT CORPORATION AND SUBSIDIARIES        CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)

Fiscal Year Ended October 31,2010

2009

2008Cash flows from operating activities:Net income

$
1,654

$
4,839

$
9,489Adjustments to reconcile net income to net cash provided by operating activities:Net income from discontinued operations, net of income taxes








(98
)Deferred income tax benefit





(939
)

Depreciation and amortization


309


337


323Amortization of intangible assets


303


373


315Share based compensation


1,067


970


921Charges to (reduction of) restructuring costs


(19
)

135


Provision for (recovery of) allowance for doubtful accounts receivable


(26
)

19


(54
)Changes in assets and liabilities:Trade accounts receivable


(979
)

778


(536
)Other assets


235


(75
)

(18
)Accounts payable


(40
)

(233
)

224Accrued liabilities and other long-term liabilities


222


(418
)

(1,160
)Deferred revenues


(441
)

(15
)

(748
)Net cash provided by operating activities


2,285


5,771


8,658Cash flows from investing activities:Acquisition of business


(180
)

(2,383
)

Proceeds from sale of property and equipment


15





Purchases of property and equipment


(480
)

(164
)

(240
)Net cash used in investing activities


(645
)

(2,547
)

(240
)Cash flows from financing activities:Proceeds from issuance of common stock


167


285


792Repurchases of common stock


(4,310
)

(3,242
)

Principal payments under capital lease obligations





(4
)

(10
)Net cash (used in) provided by financing activities


(4,143
)

(2,961
)

782Effect of foreign exchange rate changes on cash and cash equivalents


(398
)

315


(1,150
)Net increase (decrease) in cash and cash equivalents from operating, investing and financing activities


(2,901
)

578


8,050Net increase in cash and cash equivalents from discontinued operationsoperating activities








98Cash and cash equivalents at beginning of period


27,812


27,234


19,086Cash and cash equivalents at end of period

$
24,911

$
27,812

$
27,234Supplemental disclosures of cash flows information:Cash paid for:Interest

$
1

$


$
1Income taxes

$
385

$
713

$
1,806


See accompanying notes to consolidated financial statements.

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VERSANT CORPORATION AND SUBSIDIARIES        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS        October 31, 2010

NOTE 1.    THE COMPANY AND BASIS OF PRESENTATION

Versant Corporation (with its subsidiaries, collectively referred to in this report as "Versant" or "the Company") was incorporated in California in August 1988. Versant is a leading
provider of object-oriented data management software that forms a critical component of the infrastructure of enterprise computing. The Company designs, develops, markets and supports
object-oriented database management system products to solve complex data management and data integration problems of enterprises. Versant also provides related product support, training and
consulting services to assist users in the use of its products and in development and deployment of software applications based on its products. The Company operates its business within a single
operating segment referred to as Data Management. Versant's principal executive offices are located in Redwood City, California. Versant has international operations in Germany and India and markets
its software products and related maintenance services directly through telesales and field sales organizations in North America and Germany and indirectly through distributors and resellers
worldwide.

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



The consolidated financial statements include 100% of the assets, liabilities, revenues, expenses and cash flows of Versant and all
entities in which Versant has a controlling voting interest (subsidiaries) required to be consolidated in accordance with Financial Accounting Standards Board (FASB) guidance pursuant to Accounting
Standards Codification (ASC) 810,Consolidation. All significant intercompany accounts and transactions among consolidated companies have been
eliminated in consolidation.

The
financial position and operating results of foreign operations are consolidated using the local currency as their functional currency. Local currency assets and liabilities are
translated into U.S. dollars at the rates of exchange on the balance sheet date, and local currency revenues and expenses are translated using rates that approximate the average rates of exchange
during the period. Resulting translation gains or losses are included in the accompanying consolidated statement of stockholders' equity as a component of accumulated other comprehensive income.



The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America
("GAAP"), requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates.



Cash and cash equivalents include all highly liquid investments with an original maturity of three months or less at the time of
purchase. The Company's cash and cash equivalents at October 31, 2010 and October 31, 2009 consisted of deposits in banks, short-term time deposits and money market funds. As
of October 31, 2010 and 2009 cash balances held in foreign financial institutions were $6.6 million and $14.7 million, respectively.

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



The Company's financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash
and cash equivalents and trade accounts receivable. The Company maintains its cash and cash equivalents, with balances which may exceed insured limits, with financial institutions and invests in
highly rated short-term securities. The Company maintains an allowance for doubtful accounts as an estimate of the inability of its customers to make required payments. The allowance was
$8,000 and $36,000 at October 31, 2010 and October 31, 2009, respectively. The amount of the Company's allowance is based on historical experience and an analysis of its accounts
receivable balances. Credit losses to date have been within management's expectations. However, actual results could differ from such estimates.



Property and equipment are stated at cost less accumulated depreciation, computed using the straight-line method based on
the estimated useful lives of the assets, generally ranging from three to five years. Depreciation commences upon placing the asset in service. Each capital lease is recorded at the lesser of the fair
value of the leased asset at the inception
of the lease or the present value of the minimum lease payments as of the beginning of the lease term. Leased assets are amortized on a straight-line basis over the estimated useful life
of the asset or the lease term. Leasehold improvements are amortized over the shorter of the useful life or the remaining lease term. The Company reviews its property and equipment for impairment
periodically or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The
following table summarizes the breakdown of the Company's property and equipment as of October 31, 2010 and October 31, 2009 (in thousands):

As of October 31,2010

2009Property and equipment:Computer equipment

$
1,395

$
1,508Furniture and fixtures


222


360Software


694


749Leasehold improvements


393


255Capital lease and other assets


35


352,739


2,907Less: accumulated depreciation and amortization


(2,105
)

(2,419
)Total

$
634

$
488


Total
depreciation expense for fiscal 2010, fiscal 2009 and fiscal 2008 was $309,000, $337,000, and $323,000, respectively.



Goodwill represents the excess of the purchase price of an acquired business over the fair value of the identifiable assets acquired
and liabilities assumed in business combinations. As required by

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ASC 350,IntangiblesGoodwill and Other, the Company evaluates its goodwill for impairment on an annual basis.

In
accordance with ASC 350, Goodwill, we test for any goodwill impairment within our single Data Management operating segment and
reporting unit. FASB guidance requires that goodwill be tested for impairment at the reporting unit level, at least annually and more frequently upon the occurrence of certain events. The Company uses
the market approach to assess the fair value of its assets and this value is compared with the carrying value of those assets to test for impairment. The total fair value of the Company's assets is
estimated by summing the fair value of the Company's equity (as indicated by the publicly traded share price for Versant's shares and the number of shares outstanding plus an estimated control
premium) and its liabilities. Under this approach, if the estimated fair value of the Company's assets is greater than their carrying value, then there is no goodwill impairment. If the estimated fair
value of the Company's assets is less than their carrying value, an allocation would be made of the reporting unit's estimated fair value to its assets and liabilities as though the reporting unit had
just been acquired in a business combination. The impairment loss is the amount, if any, by which the implied fair value of goodwill allocable to the reporting unit is less than that reporting unit's
goodwill carrying amount and would be recorded in operating results during the period of such impairment.

Versant
performed its annual evaluations of the Company's goodwill based on the requirements of ASC 350 in October 2010, October 2009 and October 2008. As a result of these impairment
tests and valuation analyses, Versant determined that no impairment charges against the Company's goodwill were required in fiscal 2010, fiscal 2009 or fiscal 2008.

Purchased
intangible assets other than goodwill are amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets with definite lives
are carried at cost less accumulated amortization. Identifiable intangibles are currently amortized using the straight-line method over useful lives ranging from
5-9 years. Intangible assets consist of acquired technology, customer relationships and trade names. Versant tests and evaluates its intangible assets for impairment whenever
indicators of potential impairment are identified.

In
fiscal 2010, fiscal 2009 and fiscal 2008, there were no triggering events to indicate impairment of Versant's intangible assets, and the Company did not perform impairment tests and
valuation analyses of its intangible assets. Versant determined that the value of the Company's intangible assets had been fairly recorded in its financial statements, and therefore, no impairment
charges against the Company's intangible assets related to the Company's Poet, FastObjects, JDO Genie and db4o acquisitions were recorded in fiscal 2010, fiscal 2009 or fiscal 2008.



We recognize revenues in accordance with GAAP, as set forth in:



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



The
Company's revenues consist mainly of revenues earned under software license agreements, maintenance support agreements (otherwise known as post-contract customer support
or "PCS") and, to a lesser degree, agreements for consulting and training activities.

Versant
uses the residual method to recognize revenues when a license agreement includes one or more elements to be delivered by the Company at a future date. If there is an undelivered
element
under the license arrangement, the Company defers revenues based on vendor-specific objective evidence ("VSOE") of the fair value of the undelivered element, as determined by the price charged when
the element is sold separately. If VSOE of fair value does not exist for all undelivered elements of a transaction, the Company defers all revenues from that transaction until sufficient evidence of
the fair value exists or until all elements have been delivered. Under the residual method, discounts are allocated only to the delivered elements in a multiple element arrangement, with any
undelivered elements being deferred based on the vendor-specific objective evidence of the fair value of such undelivered elements. Versant typically does not offer discounts on future undeveloped
products.

The
Company has established VSOE of fair value of PCS as evidenced by stand alone renewal transactions using the "bell shaped curve approach." PCS of the Versant Object Database is
priced as a percentage of the original software license fees. The Company performs quarterly analysis on a transaction by transaction basis to document the range of pricing in PCS renewals. The
Company has established VSOE of fair value for PCS, if substantial majorities (greater than 80%) of stand-alone renewal transactions are priced within a reasonably narrow range (plus or minus 15% from
the midpoint of the range). For the year ended October 31, 2010, the pricing of over 95% of stand alone PCS renewal transactions fell within the predefined pricing range.

Revenues
from software license arrangements, including prepaid license fees, are recognized when all of the following criteria are met:



If
an acceptance period or other contingency exists, revenues are not recognized until customer acceptance or expiration of the acceptance period, or until satisfaction of the
contingency, as applicable. The Company's license fees are generally non-cancelable and non-refundable. Also, the Company's customer agreements for prepaid deployment licenses
generally do not make payment of our license fees contingent upon the actual deployment of the software. Therefore, a customer's delay or acceleration in its deployment schedule typically does not
impact our revenue recognition in the case of a prepaid deployment license.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenues
from related PCS for all product lines are usually billed in advance of the service being provided and are deferred and recognized on a straight-line basis over the
term in which the PCS is to be performed, which is generally twelve months. In some cases PCS revenues are paid in arrears of the service being provided and are recognized as revenues at the time the
customer provides the Company a report for deployments made during a given time period. Training and consulting revenues are recognized when a purchase order is received, the services have been
performed and collection is deemed probable. Consulting services are billed on an hourly, daily or monthly rate. Training classes are billed based on group or individual attendance.

Versant
categorizes its customers into two broad groups, End-Users and Value Added Resellers (VARs). End-User customers are companies who use Versant's products
internally and do not redistribute the Company's product outside of their corporate organizations. VAR customers include traditional Value Added Resellers, Systems Integrators, Original Equipment
Manufacturers ("OEMs") and other vendors who redistribute Versant's products to their external third party customers, either separately or as part of an integrated product.

Versant
licenses its data management products through two types of perpetual licensesdevelopment licenses and deployment licenses. Development licenses are typically sold on
a per seat basis and authorize a customer to develop and test an application program that uses Versant's software product. Before an End-User customer may deploy an application that it has
developed under the Company's development license, it must purchase deployment licenses based on the number of computers connected to the server that will run the application using Versant's product
or, for certain applications, the number of users. Pricing of Versant Object Database and FastObjects licenses varies according to several factors, including the number of computer servers on which
the application runs and the number of users that are able to access the server at any one time. Customers may elect to simultaneously purchase development and deployment licenses for an entire
project. These development and deployment licenses may also provide for prepayment to Versant of a nonrefundable amount for future deployment.

VARs
and distributors purchase development licenses from Versant on a per seat basis on terms similar to those of development licenses that the Company sells directly to
End-Users. VARs are authorized to sublicense deployment copies of Versant's data management products that are either bundled or embedded in the VAR's applications and sold directly to
End-Users. VARs are required to report their distribution of Versant's software and are charged a royalty that is either based on the number of copies of the application software that are
distributed or computed as a percentage of the selling price charged by the VARs to their end-user customers. These royalties from VARs may be prepaid in full or paid upon deployment. VAR
agreements for prepaid royalty arrangements are non-cancelable, non-refundable and do not make payment of the license fees contingent upon the actual deployment of the
software, and therefore, the future deployments of the VARs have no impact on revenue recognition. Provided that all other conditions for revenue recognition have been met, revenues from arrangements
with VARs are recognized, (i) as to prepaid license arrangements, when the prepaid licenses are sold to the VAR, and (ii) as to other license arrangements, at the time the VAR provides a
royalty report to Versant for sales made by the VAR during a given period.

Revenues
from the Company's resale of third-party products or services are recorded at total contract value with the corresponding cost included in the cost of sales when Versant acts as
a principal

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

in
these transactions by assuming the risks and rewards of ownership (including the risk of loss for collection, delivery or returns). When the Company does not assume the risks and rewards of
ownership, revenues from the resale of third-party products or services are recorded at contract value net of the cost of sales.

On
occasion, at a customer's request, Versant performs engineering work to port the Company's products to an unsupported platform, to customize its software for specific functionality,
or other non-routine technical assignment. In these instances, Versant recognizes revenues in accordance with ASC 605-35, Construction-Type
and Production-Type Contracts, and uses either the time and material percentage of completion method or the completed contract method for recognizing revenues. The
Company uses the percentage of completion method if it can make reasonable and dependable estimates of labor costs and hours required to complete the work in question. The Company periodically reviews
these estimates in connection with the work performed and rates actually charged and recognizes any losses when identified. Progress to completion is determined using the
cost-to-cost method, whereby cost incurred to date as a percentage of total estimated cost determines the percentage completed and revenue recognized. When using the percentage
of completion method, the following conditions must exist:



The
completed contract method is used when reasonable or dependable estimates of labor costs and time to complete the work cannot be made. As a result, in such situations, Versant defers
all revenues until such time as the work is fully completed.

Management
of the Company makes significant judgments and estimates in connection with the determination of the revenue Versant recognizes in each accounting period. If Versant had made
different judgments or utilized different estimates for any period, material differences in the amount and timing of revenue recognized would have resulted.



The functional currencies of the Company's foreign subsidiaries are their respective local currencies. The Company translates the
assets and liabilities of international subsidiaries into the U.S. dollar at the current exchange rates in effect on the balance sheet date and revenues and expenses are translated using rates that
approximate the average rates of exchange during the period. Gains and losses from translation adjustments are included in stockholders' equity on the consolidated balance sheets captioned as
accumulated other comprehensive income, net.

The
Company records net gains and losses resulting from settling transactions denominated in currencies other than our functional currency as a component of interest and other income,
net. Foreign exchange gain (loss) was approximately $91,000, $(35,000) and $(13,000), respectively, for the fiscal years ended October 31, 2010, October 31, 2009 and October 31,
2008, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Accumulated other comprehensive income, net presented in the accompanying consolidated balance sheets consist of cumulative foreign
currency translation adjustments.

The
following table summarizes the breakdown of comprehensive income for the years ended October 31, 2010, October 31, 2009 and October 31, 2008 (in thousands):

Fiscal Year Ended October 31,2010

2009

2008Net income, as reported

$
1,654

$
4,839

$
9,489Foreign currency translation adjustment


(391
)

251


(1,163
)Other comprehensive income

$
1,263

$
5,090

$
8,326




The Company recognizes warranty and indemnification obligations under ASC 460,
Guarantees.This FASB guidance requires a guarantor to recognize and disclose a liability for obligations it has undertaken in relation to the issuance of the guarantee.

The
Company's software license agreements generally include certain provisions for indemnifying customers against liabilities if the Company's software products infringe upon a third
party's intellectual property rights. The Company has not provided for any reserves for such warranty liabilities.

The
Company's software license agreements also generally include a warranty that the Company's software products will substantially operate as described in the applicable program
documentation. The Company also warrants that services the Company performs will be provided in a manner consistent
with industry standards. In Europe, there is typically a one-year warranty period for all of the Company's products and services. To date, Versant has not incurred any material costs
associated with these product and service performance warranties, and as such the Company has provided no warranty reserve balance in its consolidated financial statements.



Deferred revenue represents amounts billed to customers under certain maintenance, software and service contracts for which the revenue
earning process has not been completed and revenue has not been recognized. Deferred revenues are recognized as revenue ratably over the life of the contract or when the service is rendered and the
Company has satisfied all other revenue recognition criteria.

As of October 31,2010

2009(in thousands)Deferred revenue:Short-term deferred maintenance

$
3,022

$
3,475Long-term deferred maintenance


66


177$
3,088

$
3,652


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Table of Contents

VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



The breakdown of short-term accrued liabilities as of October 31, 2010 and October 31, 2009 was as follows
(in thousands):

As of October 31,2010

2009Accrued liabilities:Payroll and related

$
804

$
737Taxes payable


105


1Deferred rent


14


10Other


371


467$
1,294

$
1,215




Software development costs are included in research and development and are expensed as incurred. After technological feasibility is
established, material software development costs are capitalized in accordance with ASC 985-20,Software, Costs of Software to Be Sold, Leased or
Marketed.The time period between achieving technological feasibility, which Versant has defined as the establishment of a working model, which typically occurs when the beta
testing commences, and the general availability of such software has generally been short, and therefore to date, software development costs qualifying for capitalization have been insignificant. No
software development costs have been capitalized for the periods ended October 31, 2010, October 31, 2009 and October 31, 2008.



The Company accounts for income taxes pursuant to the provisions of ASC 740, Income
Taxes, which requires an asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities are determined based on the difference between the
financial statement carrying amounts and the tax basis of assets and liabilities and are measured using the enacted statutory tax rates in effect at the balance sheet date. The Company records a
valuation allowance to reduce its deferred tax assets when uncertainty regarding realizability exists.

The
Company is subject to U.S. federal income taxes and to income taxes in various states in the U.S. as well as in 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. With few exceptions, the Company is no longer subject to U.S. federal, state and local,
or foreign tax examinations by tax authorities for tax years before 2005. However, with respect to prior tax years no longer subject to examination due to expiration of the statute of limitations,
income may nevertheless be recomputed for the purpose of determining the amount of NOL that may be carried over to "open" years.

The
Company recognizes interest and penalties accrued related to unrecognized tax benefits in the provision for income taxes for all periods presented, which were not significant.

The
Company applies the net basis of income statement presentation for taxes collected from customers and remitted to government authorities.

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October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



Beginning in fiscal 2006, Versant has accounted for share-based compensation costs in accordance with ASC 718, Compensation, Stock Compensation. Under the fair value recognition guidance of ASC 718, share based compensation cost is estimated at the grant
date based on the fair value of the award and is recognized as expense over the requisite service period of the award.

The
Company utilizes the Black-Scholes option pricing model to estimate the fair value of employee share based compensation awards at the date of grant. This model requires the use of
assumptions, including expected volatility, expected term, risk-free interest rate and dividend yield, some of which require significant management judgment. Further, the Company estimates
forfeiture rates for those options granted which are not expected to vest. Changes in these inputs and assumptions can materially affect the measure of estimated fair value of our share-based
compensation. The estimated fair value is charged to earnings on a straight-line basis over the vesting period of the underlying awards, which are generally three years under the Company's
Equity Incentive Plans and two years under the Directors Stock Option Plans. While the estimate of fair value and the associated charge to earnings materially impacts the Company's results of
operations, it has no impact on its cash position.

Versant
employs historical volatility over a period equal to the expected term of the options as the basis for estimating expected volatility. The Company, however, takes into account
all available current information to determine the expected volatility. Versant bases the expected term of its options on historical exercise data, while considering other factors that could possibly
impact the future life of the options. Versant uses the Treasury Constant Maturities rates reported by The Federal Reserve to approximate the risk free interest rate. Versant has not distributed any
dividends to its common stockholders and does not expect to do so in the near future.

Versant
uses historical forfeiture data, modified by any available relevant information, to arrive at the estimated forfeiture rate. ASC 718 requires that forfeitures be estimated at the
time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Versant applies the forfeiture rate to the unvested portion of the option valuation
and performs a true up if the actual forfeiture rate is different from the one applied in prior periods.

Versant
estimates the fair value of employee rights to purchase shares under its employee stock purchase plan, or "ESPP", using the Black-Scholes Option Pricing Model. The purchase price
of shares which employees may acquire under the Company's ESPP, at any purchase period, is 85% of the lesser of either of the following: the fair market value of the shares on the offering date or the
fair market
value of the shares on the purchase date. Versant records compensation expense based on the estimated fair value of the shares granted under the ESPP.



The Company's employee savings and retirement plan is qualified under Section 401(k) of the United States Internal Revenue Code.
Employees may make voluntary, tax-deferred contributions to the 401(k) Plan up to the statutorily prescribed annual limit. No matching contributions to employees'

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October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

voluntary
contributions to the 401(k) plan were made by the Company in fiscal years 2010, 2009 and 2008.



Restructuring charges are recognized and measured according to the provisions of ASC 420,Exit or Disposal Cost
Obligations,which requires a liability for a cost associated with an exit or disposal activity to be recognized at its fair value in the period in which the liability is
incurred, except for a liability for one-time termination benefits that is incurred over time. Restructuring charges include employee termination and related costs, contract termination
costs, and other costs directly associated with exit activities, including impairment of property and other assets. Costs for such activities are estimated by management after evaluating detailed
analyses of the cost to be incurred.



ASC 280,Segment Reportingestablishes standards for the manner in which public
companies report information about operating segments in annual and interim financial statements. It also establishes standards for related disclosures about products and services, geographic areas,
and major customers. The method for determining what information to report is based on the way management organizes the operating segments within the Company for making operating decisions and
assessing financial performance. The Company's chief operating decision-maker is considered to be
the Company's chief executive officer (CEO). The CEO reviews financial information presented on an entity level basis accompanied by non-aggregated information about revenues by product
type and certain information about geographic regions for purposes of making operating decisions and assessing financial performance. The entity level financial information is identical to the
information presented in the accompanying consolidated statements of income. Therefore, the Company has determined that it operates in a single operating segment, Data Management.

In
aggregate, the revenues generated by one significant telecommunications customer accounted for approximately 12% of total revenues in the fiscal year ended October 31, 2010.

The
Company operates in North America, Europe and Asia. In general, revenues are attributed to the country in which the contract originates.

The
following tables summarize revenues and long-lived assets by each geographic region (in thousands):

Fiscal Year Ended October 31,2010

2009

2008Total revenues by geographic area:North America

$
6,232

$
6,964

$
9,292Europe


8,764


10,656


13,275Asia


770


530


2,731Total

$
15,766

$
18,150

$
25,298


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October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



As of October 31,2010

2009Total long-lived assets by geographic area:North America

$
127

$
164Germany


506


287Asia


39


75Total

$
672

$
526




In February 2010, the FASB issued amended guidance on subsequent events. Under this amended guidance, Securities and Exchange
Commission (SEC) filers are no longer required to disclose the date through which subsequent events have been evaluated in originally issued
and revised financial statements. This guidance was effective immediately and the Company adopted this new guidance in the quarter ended April 30, 2010. The adoption of this amendment has had
no material impact on the Company's financial position, results of operations or cash flows.



In April 2008, the FASB issued authoritative guidance used to determine the useful life of intangible assets. This guidance amends the
factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. This change is intended to improve the consistency
between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. The requirement for determining useful lives must be applied
prospectively to intangible assets acquired after the effective date and the disclosure requirements must be applied prospectively to all intangible assets recognized as of, and subsequent to, the
effective date. The guidance is effective for fiscal years beginning after December 15, 2008 (November 1, 2009 for the Company) and interim periods within those years, with earlier
adoption prohibited. The adoption of this guidance has had no material impact on the Company's financial position, results of operations, or cash flows.



In December 2007, new guidance was issued providing greater consistency in the accounting and financial reporting of business
combinations. It requires the acquiring entity in a business combination to recognize all assets acquired and liabilities assumed in the transaction, establishes the acquisition-date fair
value as the measurement objective for all assets acquired and liabilities assumed, and requires the acquirer to disclose the nature and financial effect of the business combination. The guidance is
effective for fiscal years beginning after December 15, 2008 (November 1, 2009 for the Company) and interim periods within those years, with earlier adoption prohibited. The adoption of
this new guidance had no material impact on the Company's financial position, results of operations, or cash flows.

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October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In
April 2009, additional guidance was issued which requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair
value, if fair value can be determined during the measurement period. This new rule specifies that an asset or
liability should be recognized at time of acquisition if the amount of the asset or liability can be reasonably estimated and that it is probable that an asset existed or that a liability had been
incurred at the acquisition date. This new rule is effective for all fiscal years beginning after December 15, 2008 (November 1, 2009 for the Company). The adoption of this new guidance
had no material impact on the Company's financial position, results of operations, or cash flows.



In August 2009, the FASB issued additional guidance regarding fair value measurements. This guidance provides clarification for
circumstances in which a quoted price in an active market for the identical liability is not available. In these circumstances, a reporting entity is required to measure fair value using one or more
of the following methods: (1) a valuation technique that uses a) the quoted price of the identical liability when traded as an asset or b) quoted prices for similar liabilities or
similar liabilities when traded as assets and/or (2) a valuation technique that is consistent with U.S. GAAP (e.g. an income approach or market approach). This guidance also
clarifies that when estimating the fair value of a liability, a reporting entity is not required to include inputs relating to the existence of transfer restrictions on that liability. This guidance
is effective for fiscal years and fiscal quarters beginning after August 26, 2009 (November 1, 2009 for the Company). The adoption of this standard had no material effect on the
Company's consolidated financial statements.



In January 2010, the FASB amended the disclosure requirements for the fair value measurements for recurring and nonrecurring
non-financial assets and liabilities. The guidance requires new disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales,
issuances, and settlements relating to Level 3 measurements. It also clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used
to measure fair value. The new disclosures and clarifications of existing disclosures are effective for the Company's second quarter of fiscal year 2010, except for the disclosures about purchases,
sales, issuances, and settlements relating to Level 3 measurements, which are effective for the Company's first quarter of fiscal year 2012. The adoption of this guidance had no material impact
on the Company's consolidated financial statements.



In June 2009, new guidance was issued which requires an enterprise to determine whether its variable interest or interests give it a
controlling financial interest in a variable interest entity. The primary beneficiary of a variable interest entity is the enterprise that has both (1) the power to direct the activities of a
variable interest entity that most significantly impact the entity's economic performance, and (2) the obligation to absorb losses of the entity that could potentially be significant to the
variable interest entity or the right to receive benefits from the entity that could potentially be

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October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

significant
to the variable interest entity. The guidance also requires ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity. The guidance is
effective at the start of a company's first fiscal year beginning after November 15, 2009 (November 1, 2010 for the Company). We do not expect that the adoption of this new guidance will
have an impact on our historical consolidated financial position, cash flows and results of operations.



In October 2009, new guidance was issued by FASB related to the revenue recognition of multiple element arrangements. The new guidance
states that if vendor specific objective evidence, or third party evidence, of fair value for deliverables in an arrangement cannot be determined, companies will be required to develop a best estimate
of the selling price for separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance is effective for Versant for revenue arrangements
entered into or materially modified beginning on November 1, 2010. We are currently evaluating the impact this guidance may have on our results of operations, financial position and cash flows.



In October 2009, new guidance was issued by FASB related to certain revenue arrangements that include software elements. Previously,
companies that sold tangible products with "more than incidental" software were required to apply software revenue recognition guidance.
This guidance often delayed revenue recognition for the delivery of the tangible product. Under the new guidance, tangible products that have software components that are "essential to the
functionality" of the tangible product will be excluded from the software revenue recognition guidance. The new guidance will include factors to help companies determine what is "essential to the
functionality." Software-enabled products will now be subject to other revenue guidance and will likely follow the guidance for multiple deliverable arrangements issued by the FASB in October 2009.
The new guidance is effective for Versant for revenue arrangements entered into or materially modified beginning on November 1, 2010. We are currently evaluating the impact this guidance may
have on our results of operations, financial position and cash flows.



In April 2010, the FASB issued guidance on the criteria that should be met for determining whether the milestone method of revenue
recognition is appropriate for research and development arrangements. A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period
in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The guidance is effective for Versant beginning November 1, 2010. We are currently
evaluating the impact this guidance may have on our results of operations, financial position and cash flows.



In July 2010, the FASB issued guidance which amends ASC 310,Receivables. This
Accounting Standards Update ("ASU") requires disclosures related to financing receivables and the allowance for

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October 31, 2010

NOTE 2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

credit
losses by portfolio segment. The ASU also requires disclosures of information regarding the credit quality, aging, nonaccrual status and impairments by class of receivable. Trade accounts
receivable with maturities of one year or less are excluded from the disclosure requirements. The effective date for disclosures as of the end of the reporting period is the first quarter of fiscal
year 2011. The effective date for disclosures for activity during the reporting period is the second quarter of fiscal year 2011. The adoption will not have a material effect on the Company's
consolidated financial statements.

NOTE 3.    FAIR VALUE MEASUREMENTS

Accounting Standards Codification (ASC) 820,Fair Value Measurements and Disclosures, defines fair value as the price that would be
received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets
and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market for the transaction and considers assumptions that market participants would use
when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance.

The
Financial Accounting Standards Board (FASB) guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value
measurement. The three levels of inputs that may be used to measure fair value are as follows:



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October 31, 2010

NOTE 3.    FAIR VALUE MEASUREMENTS (Continued)

Financial Assets Measured at Fair Value on a Recurring Basis

Our significant financial assets measured at fair value on a recurring basis consisted of the following types of instruments as of
October 31, 2010 (Level 1, 2 and 3 inputs are defined above):

Fair Value Measurements Using Input TypeLevel 1

Level 2

Level 3(in thousands)Assets:Money market funds

$
18,017

$


$
Time deposits


5,600





Total

$
23,617

$


$



The
fair value of money market funds and time deposits reflect quoted market prices in an active market.

NOTE 4.    VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

Versant evaluates and revises its allowance for doubtful accounts receivable as part of its quarter end process at each subsidiary and corporate level. The Company's management assigns a
risk factor and percentage of risk to each account receivable, the collection of which is considered non-routine. Accounts are considered past due in accordance with contractual terms
which usually provide for payment within 30 to 90 days. The Company also assigns a general reserve to all its overdue accounts, excluding the non-routine items.

The
following table summarizes the activities in the Company's allowance for doubtful accounts (in thousands):

Fiscal Year Ended October 31,2010

2009

2008Allowance for doubtful accounts:Beginning balance

$
36

$
16

$
68Adjustments to provision


(28
)

20


(52
)Ending balance

$
8

$
36

$
16


NOTE 5.    ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS



On December 1, 2008, the Company acquired the assets of the database software business of privately-held Servo
Software, Inc. or "Servo" (formerly known as db4objects, Inc.) pursuant to an asset purchase agreement between Versant and Servo dated December 1, 2008 (the "db4o Purchase
Agreement"). The acquisition of the db4o assets allows Versant to provide an open source object

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October 31, 2010

NOTE 5.    ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS (Continued)

database
software solution targeting the embedded device market. Our results of operations include db4o transactions from the acquisition date of December 1, 2008.

The
total purchase price of $2.6 million for the db4o assets consisted of the following:

a)    Initial
cash payment of $2.1 million made in December 2008;

b)    Direct
transaction costs of $183,000; and

c)     Contingent
deferred payments of $280,000.

Under
the terms of the db4o Purchase Agreement, in consideration of its acquisition of the assets of the db4o business, Versant paid Servo the above-mentioned closing payment of
$2.1 million in cash, agreed to pay up to a maximum of an additional $300,000 payable in three contingent deferred payments of up to $100,000 each during the 18-month period
immediately following the December 1, 2008 acquisition date and assumed certain liabilities of Servo under certain contracts included among the db4o assets. The three contingent deferred
payments of up to $100,000 each were payable six months, twelve months and eighteen months, respectively, following the December 1, 2008 acquisition date. The Company made the first contingent
deferred payment of $100,000 to Servo on May 29, 2009, the second payment of $90,000 on November 30, 2009 and the third payment of $90,000 on May 28, 2010.

The
total purchase price for the db4o assets was allocated to db4o's net tangible and identifiable intangible assets based on their estimated fair values as of the acquisition date, with
the excess of the purchase price over these aggregate fair values recorded as goodwill. The fair value assigned to identifiable intangible assets acquired is determined using the income approach,
which values each
intangible asset based upon its estimated impact on the Company's expected future after-tax cash flows and discounts the net changes in the Company's expected future after-tax
cash flows to present value. The discount was based on an analysis of the weighted-average cost of capital for the industry.

The
Company's allocation of the purchase price for the db4o assets and liabilities as of October 31, 2010 is summarized below (in thousands):

Tangible net assets acquired

$
84Customer relationships


210Developed technology


300Trade name


100Goodwill


1,869$
2,563


Purchased
identifiable intangible assets are amortized on a straight-line basis over their useful lives. The estimated useful economic lives of the acquired customer
relationships, developed technology and trade name are nine, five and five years, respectively. The weighted average amortization period of the db4o intangible assets is 6.4 years.

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October 31, 2010

NOTE 5.    ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS (Continued)

db4o's
results of operations for periods prior to this acquisition were not material to the Company's condensed consolidated statements of income and, accordingly, pro forma financial
information has not been presented.



The following table presents goodwill balances and acquisitions of, and adjustments to, goodwill during the fiscal year ended
October 31, 2010 (in thousands):

Net carrying
amount as of
October 31,
2009

Goodwill
acquired

Adjustments
to Goodwill

Net carrying
amount as of
October 31,
2010Goodwill:Versant Europe

$
241

$


$


$
241Poet Holdings, Inc.


5,752








5,752FastObjects, Inc.


677








677JDO Genie (PTY), LTD


50








50db4o


1,690


180


(1
)

1,869Total

$
8,410

$
180

$
(1
)
$
8,589


Goodwill
is subject to at least an annual assessment for impairment, applying a fair-value based test. Versant conducted its annual impairment test in October 2010 and
determined there was no impairment.

The
goodwill acquired in the db4o acquisition will be deductible for tax purposes based upon a 15 year tax life.

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October 31, 2010

NOTE 5.    ACQUISITIONS, GOODWILL AND INTANGIBLE ASSETS (Continued)



The Company's intangible assets' balances as of October 31, 2010 and October 31, 2009 are as follows (in thousands):

As of October 31, 2010

As of October 31, 2009Intangible assets:

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
AmountPoet Holdings, Inc.Developed Technology & Customer Relationships (Amortized over 7 years)

$
1,919

$
1,832

$
87

$
1,919

$
1,643

$
276db4oDeveloped Technology (Amortized over 5 years)


300


115


185


300


55


245db4oCustomer Relationships (Amortized over 9 years)


210


44


166


210


21


189FastObjects, Inc.Customer Relationships (Amortized over 6 years)


148


148





148


137


11db4oTrade Name (Amortized over 5 years)


100


39


61


100


19


81Total

$
2,677

$
2,178

$
499

$
2,677

$
1,875

$
802


Aggregate amortization expense for intangible assets was $303,000, $373,000 and $315,000, respectively, for the fiscal years ended
October 31, 2010, October 31, 2009 and October 31, 2008, respectively.

The
projected amortization of the Company's existing intangible assets as of October 31, 2010 is as follows (in thousands):

AmortizationFiscal year ending October 31,2011

$
1902012


1042013


1032014


302015


23Thereafter


49Total

$
499


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 6.    LEASE OBLIGATIONS

Versant's principal commitments as of October 31, 2010 consist of obligations under operating leases for facilities and equipment commitments.

Versant
leases office space for its U.S. headquarters in Redwood City, California and also leases field office space in Hamburg, Germany under multi-year operating lease
agreements.

On
July 17, 2009, the Company entered into an Office Building Lease, pursuant to which the Company has leased approximately 10,200 square feet in an office facility located in
Hamburg, Germany. The lease has a term of sixty months, which commenced in December 2009. Versant has the option to extend the term of the lease for up to two additional three-year periods at an
inflation adjusted monthly rent. The total rent payable over the lease term remaining as of October 31, 2010, will be approximately $679,000.

On
September 3, 2009, the Company and CA-Shorebreeze Limited Partnership entered into the First Amendment (the "Amendment") of an Office Building Lease executed
between the parties on March 23, 2007. The Amendment extends the term of the Company's lease of approximately 6,800 square feet in an office facility located in Redwood City, California for an
additional term of three years to May 31, 2013, and also provided for a one-year renewal option at fair market rent. The total rent payable over the lease term remaining as of
October 31, 2010 will be approximately $520,000.

Consolidated
rent expense in fiscal years ended October 31, 2010, 2009 and 2008, was approximately $427,000, $507,000, and $550,000, respectively.

The
Company's future annual minimum commitments as of October 31, 2010 under non-cancelable operating leases are listed as follows (in thousands):

Facilities
Leases

Equipment
Leases

TotalFiscal year ending October 31,2011

$
360

$
5

$
3652012


368


5


3732013


287


2


2892014


169





1692015


15





15Thereafter








Total

$
1,199

$
12

$
1,211


NOTE 7.    CONTINGENCIES

The Company may be subject to various legal proceedings and disputes that arise in the ordinary course of business from time to time. The Company has been notified by a customer of a
potential overpayment of license royalties to Versant. The Company estimated the probable liability related to the royalty overpayment to be approximately $170,000, which is included in accrued
liabilities on the consolidated balance sheet as of October 31, 2010. This matter was subsequently resolved for approximately the same amount in December, 2010.

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October 31, 2010

NOTE 8.    STOCKHOLDERS' EQUITY AND INCOME PER SHARE

Basic and diluted net income per common share has been computed using the weighted average number of shares of common stock outstanding during the period, less shares subject to
repurchase. The following table presents the calculation of basic and diluted net income per share (in thousands, except per share amounts):

Fiscal Year Ended October 31,2010

2009

2008Net income from continuing operations

$
1,654

$
4,839

$
9,391Net income from discontinued operations, net of income taxes








98Net income

$
1,654

$
4,839

$
9,489Calculation of basic net income per share:Weighted average common shares outstanding


3,411


3,626


3,729Net income from continuing operations

$
0.48

$
1.33

$
2.52Net income from discontinued operations, net of income taxes

$


$


$
0.02Net income per share, basic

$
0.48

$
1.33

$
2.54Calculation of diluted net income per share:Weighted average common shares outstanding


3,411


3,626


3,729Dilutive effect of employee and director stock options


33


37


54Weighted average common shares outstanding and potentially dilutive common shares


3,444


3,663


3,783Net income from continuing operations

$
0.48

$
1.32

$
2.48Net income from discontinued operations, net of income taxes

$


$


$
0.03Net income per share, diluted

$
0.48

$
1.32

$
2.51


For
the years ended October 31, 2010, 2009 and 2008, 352,000, 182,000 and 22,000 potentially dilutive shares, respectively, were excluded from the computation of diluted net
income per share by the application of the treasury stock method.

NOTE 9.    STOCK REPURCHASE PROGRAM

On December 1, 2008, Versant's Board of Directors approved a stock repurchase program authorizing Versant to repurchase up to $5.0 million worth of its outstanding common
shares from time to time on the open market, in block trades or otherwise. The stock repurchase program expired by its terms on October 31, 2009. Versant acquired 222,688 common shares on the
open market for approximately $3.2 million at an average purchase price of $14.52 per share under this stock repurchase program.

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October 31, 2010

NOTE 9.    STOCK REPURCHASE PROGRAM (Continued)

On
November 30, 2009, Versant's Board of Directors approved a stock repurchase program pursuant to which the Company was authorized to repurchase up to $5.0 million of its
common stock in fiscal year 2010. The stock repurchase program expired by its terms on October 31, 2010. Versant acquired 356,104 common shares on the open market for approximately
$4.3 million at an average purchase price of $12.06 per share under this stock repurchase program.

On
November 29, 2010 Versant's Board of Directors approved a new stock repurchase program pursuant to which the Company is authorized to repurchase up to $5.0 million of
its common stock in fiscal year 2011. This stock repurchase program is currently scheduled to expire upon the earlier of October 31, 2011, or such time as Versant has expended
$5.0 million to repurchase outstanding common shares under the program; however the program may be suspended, discontinued, terminated or extended at any time by the Company.

NOTE 10.    EMPLOYEE AND DIRECTOR BENEFIT PLANS

Versant has, or had during fiscal 2010, the following option plans in place:



The
2005 Equity Incentive Plan was approved by Versant's shareholders in August 2005 to replace the Company's 1996 Equity Incentive Plan. Upon adoption of the 2005 Equity Incentive Plan,
the Company immediately terminated use of the 1996 Equity Incentive Plan. Under the 2005 Equity Incentive Plan, the Company is authorized to grant stock options, restricted stock awards and stock
bonuses. These options are generally granted to its employees with a three-year vesting schedule in which 25% of the option vests and becomes exercisable nine months from the grant date
and the remaining 75% vests ratably, on a monthly-basis thereafter over the remaining 27 months of the vesting schedule. All options granted to employees under the Company's 2005 Equity
Incentive Plan expire no later than ten years after the grant date.



Although
the 1996 Equity Incentive Plan has since expired by its terms, options to purchase a total of 10,415 shares originally granted under this Plan were still outstanding as of
October 31, 2010.



The
2005 Directors' Stock Option Plan was approved by Versant's shareholders in August 2005 to replace the Company's 1996 Directors' Stock Option Plan. Upon adoption of the 2005
Directors' Stock Option Plan, the Company immediately terminated use of the 1996 Directors' Stock Option Plan. Under the 2005 Directors' Stock Option Plan, Versant grants 4,000 options as an initial
grant to new directors on the Board who are not employees of the Company or of a parent, subsidiary or affiliate of the Company ("Outside Directors") and grants 4,000 additional options to each
Outside Director as an annual succeeding grant thereafter. Both initial and succeeding option grants vest 50% on the first and second anniversaries of the option grant. The options granted under the
2005 Directors' Stock Option Plan must expire no more than ten years after the grant date.



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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 10.    EMPLOYEE AND DIRECTOR BENEFIT PLANS (Continued)

As
of October 31, 2010, a total of 17,988 options remain outstanding under Versant's 1996 Directors' Stock Option Plan. Versant ceased granting options under its 1996 Directors'
Stock Option Plan in August 2005 and no further options will be granted under the 1996 Directors' Stock Option Plan.



Versant
acquired all of Poet's stock option plans in connection with our March 2004 acquisition of Poet. As of October 31, 2010, a total of 18,952 options remain outstanding under
these Poet plans.

No
further options will be granted under any of Poet's option plans.



The
2005 Employee Stock Purchase Plan was approved by Versant's shareholders in August 2005 to replace the Company's 1996 Employee Stock Purchase Plan. Upon adoption of the 2005 Employee
Stock Purchase Plan, the Company immediately terminated use of the 1996 Employee Stock Purchase Plan and ceased to issue stock under the 1996 Employee Stock Purchase Plan, and instead thereafter
issued stock under the 2005 Employee Stock Purchase Plan. The number of common shares initially reserved under the 2005 Employee Stock Purchase Plan was equal to the number of shares that were
reserved and available for issuance under the 1996 Employee Stock Purchase Plan on the date of the approval of the new plan.

Under
the Employee Stock Purchase Plan, employees may generally defer up to 10% of their compensation to purchase shares of our common stock at a purchase price equal to 85% of the lower
of the fair market value per share of our common stock on the commencement date of the applicable six month offering period or the applicable purchase date. As of October 31, 2010,
approximately 48,000 shares were available for future issuance under the Employee Stock Purchase Plan.

Shares Reserved for Future Issuance

As of October 31, 2010, the Company had reserved shares of common stock for the following purposes:

Employee stock purchase plan


48,166Stock options available for grant


171,642Unexercised stock options


515,287Balance as of October 31, 2010


735,095


81

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Table of Contents

VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 10.    EMPLOYEE AND DIRECTOR BENEFIT PLANS (Continued)

Stock Option Activities

The stock option activities in fiscal years 2010, 2009 and 2008 were as follows:

Options
available for
grant

Number of
options
outstanding

Weighted
average
exercise priceBalance as of October 31, 2007


262,432


235,482

$
16.75Authorized


50,000





Granted


(127,100
)

127,100


22.40Exercised/expired


(1,201
)

(55,673
)

9.01Canceled


3,585


(3,585
)

29.64Balance as of October 31, 2008


187,716


303,324

$
20.40Authorized


220,000





Granted


(153,050
)

153,050


13.55Exercised/expired


(4,920
)

(13,362
)

9.09Canceled


57,170


(57,170
)

17.88Balance as of October 31, 2009


306,916


385,842

$
18.45Authorized








Granted


(164,600
)

164,600


17.42Exercised/expired


(2,642
)

(3,187
)

10.85Canceled


31,968


(31,968
)

39.89Balance as of October 31, 2010


171,642


515,287

$
16.84


NOTE 11.    SHARE BASED COMPENSATION

Beginning in fiscal 2006, Versant has accounted for share-based compensation costs in accordance with ASC 718,Compensation, Stock
Compensation. The Company utilizes the Black-Scholes option pricing model to estimate the fair value of employee stock option compensation at the date of grant.

Versant
bases the expected term of its options on historical exercise data, while considering other factors that could possibly impact the future life of the options. As of
October 31, 2010, the Company determined that the estimated expected life of an employee share option granted under the Company's Equity Incentive Plan was 3.6 years. The expected life
for the options granted under the Directors' Plans to the board members who are not full time employees of Versant is 5.75 years. Versant used the simplified method allowed by SEC Staff
Accounting Bulletin Nos.107 and 110 to arrive at this calculation. Under the simplified method, the expected term is equal to vesting term plus original contractual term divided by two. As of
October 31, 2010, Versant uses historical volatility as the best estimate of the future volatility of its common stock.

Versant
does not expect to realize any current tax benefits in fiscal 2010 related to stock options or shares issued under its ESPP. Versant currently provides a full valuation allowance
for its domestic deferred tax assets and accordingly, a valuation allowance is also provided for any tax effects of share based compensation expense.

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 11.    SHARE BASED COMPENSATION (Continued)

The
fair values of each option granted and each share issued under the ESPP are estimated on the date of grant, using the Black-Scholes Option Pricing Model, based on the following
weighted average assumptions:

Stock Options

ESPPFiscal Year Ended October 31,

Fiscal Year Ended October 31,2010

2009

2008

2010

2009

2008Assumptions:Volatility

53%65%

56%73%

57%88%

33%42%

59%65%

48%52%Expected life (in years)

3.35.75 years

2.45.75 years

2.35.75 years

612 months

612 months

612 monthsWeighted average risk-free interest rate

1.43%1.87%

0.82%2.58%

2.32%3.22%

0.15%0.35%

0.29%0.45%

2.01%3.31%Dividend yield














Share based compensation expense recognized in the consolidated statements of income related to the stock option plans and the ESPP for fiscal
2010, fiscal 2009 and fiscal 2008 was as follows (in thousands):

Fiscal year ended October 31,2010

2009

2008Stock-based compensation expense:Stock Options

$
1,022

$
933

$
807ESPP


45


37


114Total

$
1,067

$
970

$
921


Share
based compensation recognized in the consolidated statements of income, by income statement caption, was as follows (in thousands):

Fiscal year ended October 31,2010

2009

2008Share based compensation expense:Cost of revenues

$
76

$
59

$
58Sales and marketing


224


137


221Research and development


232


218


178General and administrative


535


556


464Total

$
1,067

$
970

$
921


83

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Table of Contents

VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 11.    SHARE BASED COMPENSATION (Continued)

The
following table summarizes the changes in stock option activities under the Company's equity-based compensation plansduring fiscal
2010 and fiscal 2009:

Fiscal Year Ended October 31,2010

2009Shares in
thousands

Weighted
average
exercise price

Shares in
thousands

Weighted
average
exercise priceStock option activity:Outstanding at the beginning of the period


386

$
18.45


303

$
20.40Granted


164


17.42


153


13.55Exercised


(3
)

10.85


(13
)

9.10Forfeited and expired


(32
)

39.89


(57
)

17.88Outstanding at the end of the period


515

$
16.84


386

$
18.45Options exercisable at the end of the fiscal year


372

$
16.82


264

$
19.69


The
following table summarizes significant ranges of outstanding and exercisable options as of October 31, 2010:

Options Outstanding

Options ExercisableNumber
outstanding at
October 31, 2010
(in thousands)

Weighted
average
remaining
contractual life

Weighted
average
exercise price

Number
outstanding at
October 31, 2010
(in thousands)

Weighted
average
remaining
contractual life

Weighted
average
exercise priceExercise Prices:From $3.00 to $11.81


109


5.80

$
8.40


104


5.64

$
8.24From $11.82 to $16.00


136


8.22


13.79


86


8.08


13.80From $16.01 to $18.80


133


8.82


18.74


47


8.33


18.62From $18.81 to $23.75


108


6.90


20.95


106


6.89


20.95From $23.76 to $122.20


29


5.75


38.48


29


5.73


38.63515


7.44

$
16.84


372


6.91

$
16.82Options expected to vest as of October 31, 2010


510


7.43

$
16.83Aggregate intrinsic value of options (in thousands)

$
301







$
301Aggregate intrinsic value of shares expected to vest (in thousands)

$
301


84

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Table of Contents

VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 11.    SHARE BASED COMPENSATION (Continued)

The aggregate intrinsic value of stock options outstanding and exercisable, and vested or expected to vest, at October 31, 2010 was based
on the closing price of our common stock on October 29, 2010 of $11.13 per share.

The
summary of the status of Versant's nonvested shares as of October 31, 2010 and changes during the fiscal year ended October 31, 2010 is as follows:

Shares
(in thousands)

Weighted average
grant date
fair valueNonvested shares:Nonvested at October 31, 2009


146

$
7.54Granted


164


7.23Vested


(125
)

8.28Forfeited


(18
)

6.72Nonvested at October 31, 2010


167

$
6.81


Additional
information related to the fair value of Versant's stock options as of October 31, 2010, 2009 and 2008 is as follows:

Fiscal Year Ended October 31,2010

2009

2008(in thousands, except for per share amounts)Weighted average grant date fair value of options granted (per share)

$
7.23

$
5.52

$
10.67Total fair value of options granted

$
1,183

$
844

$
1,376Total fair value of shares vested

$
1,030

$
898

$
747Total intrinsic value of options exercised

$
8

$
89

$
1,139


The
total unrecognized compensation costs related to non-vested options were $1.0 million at October 31, 2010 and will be recognized over a weighted average
period of approximately 1.5 years. Future stock option grants and the intrinsic value of ESPP shares will increase the unrecognized compensation, whereas quarterly amortization and the vesting
of the existing stock option grants will reduce it.

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 12.    SETTLEMENT OF LITIGATION

Versant's software license agreements generally include certain provisions for indemnifying customers against liabilities if the Company's software products infringe upon a third party's
intellectual property rights. A former customer of the Company sought indemnification from Versant for alleged infringement of intellectual property rights related to a product that Versant
discontinued in 2004. The customer's indemnification claims included seeking recovery of costs it incurred in defending a now settled suit brought against the customer by a third party who had
asserted that such third party's intellectual property rights had been infringed. The Company and this former customer reached a settlement agreement with respect to this pending litigation on
June 3, 2008 for a cash settlement payment of $800,000 and a full mutual release of claims. The Company had previously recorded a contingency reserve for this litigation of approximately
$63,000 in the fiscal quarter ended January 31, 2007. As a result of this settlement, an additional charge of $800,000 was recorded to general and administrative expenses for the fiscal quarter
ended April 30, 2008. A payment of $62,500 was made to the former customer during the fiscal quarter ended April 30, 2008, and a settlement payment of $800,000 was made to the former
customer during the fiscal quarter ended July 31, 2008.

NOTE 13.    RESTRUCTURING

In the fourth quarter of fiscal year 2009, the Company committed to the implementation of a restructuring plan pursuant to which it has closed its research and development facility in
Pune, India. The restructuring plan was undertaken to consolidate the Company's research and development efforts into one location in Germany in order to streamline operations, create management
efficiencies and increase productivity. Since the plan was undertaken, Versant has incurred restructuring costs of $178,000 as of October 31, 2010. The restructuring was substantially completed
during the fiscal quarter ended April 30, 2010.

The
following table reflects the type and amount of these restructuring charges included in operating expenses for fiscal years 2010 and 2009 (in thousands):

Fiscal year ended October 31,2010

2009Restructuring:Severance, retention and related charges

$
38

$
32Impairment of fixed assets (non-cash charges)


2


61Reserve for (recovery of) impairment of other current assets


(29
)

42Contract termination costs


8


Other direct costs of closure


20


4$
39

$
139


86

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Table of Contents

VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 13.    RESTRUCTURING (Continued)

The
following table reflects the restructuring charges included in accrued liabilities on the consolidated balance sheets (in thousands):

Restructuring accrual balance as of October 31, 2008

$
Provision for employee termination costs


32Restructuring accrual balance as of October 31, 2009


32Payment of employee termination costs


(32
)Restructuring accrual balance as of October 31, 2010

$



NOTE 14.    INCOME TAXES

The Company accounts for income taxes pursuant to the provisions of ASC 740, Income Taxes, which requires an asset and liability approach
to accounting for income taxes. Deferred tax liabilities and assets are determined based on the difference between the financial statement carrying amounts and the tax basis of assets and liabilities
and are measured using the enacted statutory tax rates in effect at the balance sheet date. The Company records a valuation allowance to reduce its deferred tax assets when uncertainty regarding
realizability exists.

Income
before provision for income tax expense (benefit) consisted of the following (in thousands):

Fiscal Year Ended October 31,2010

2009

2008United States

$
(1,261
)
$
(1,015
)
$
2,050International


3,382


5,292


8,870$
2,121

$
4,277

$
10,920


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Table of Contents

VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 14.    INCOME TAXES (Continued)

The
provision for income tax expense (benefit) consisted of the following (in thousands):

Fiscal Year Ended October 31,2010

2009

2008Current:Federal

$


$


$
State


4


24


4Foreign


395


299


1,174Foreign withholding


68


54


253Total current


467


377


1,431Deferred:Federal








State








Foreign





(939
)

Total deferred





(939
)

Total provision for income tax expense (benefit)

$
467

$
(562
)
$
1,431


The
provision for income tax expense (benefit) differs from the amount estimated by applying the statutory federal income tax rate (35%) to income before taxes as follows (in thousands):

Fiscal Year Ended October 31,2010

2009

2008Federal tax at statutory rate

$
742

$
1,497

$
3,822State tax at statutory rate, net of federal benefit


32


(138
)

491Change in valuation allowance


(2,560
)

(711
)

(8,387
)Foreign tax differential


886


(1,299
)

959Foreign tax dividend


1,361





2,650Decrease in tax credits








1,853Other


6


89


43$
467

$
(562
)
$
1,431


88

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Table of Contents

VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 14.    INCOME TAXES (Continued)

The
components of the net deferred tax asset were as follows (in thousands):

As of October 31,2010

2009Deferred tax assets:Net operating loss carryforwards

$
32,543

$
35,307Tax credit carryforwards


1,880


1,815Other


394


25534,817


37,377Valuation allowance


(33,933
)

(36,438
)Net deferred tax asset

$
884

$
939


At
October 31, 2010, the Company had federal and state net operating loss carry forwards of $66.9 million and $11.6 million, respectively, and federal and state tax
credit carry forwards of $1.4 million and $627,000, respectively. The federal and state net operating loss carry forwards expire on various dates through 2029 including $6.9 million of
federal net operating loss carry forward expiring in 2011. The federal tax credit carry forwards expire on various dates through 2023. The state tax credit can be carried forward indefinitely.
Additionally, at October 31, 2010, the Company had German net operating tax loss carry forwards of approximately $26.2 million. The German tax code provides for certain annual statutory
limitations related to the use of tax loss carry forward amounts. For each taxable year, the Company may utilize German tax loss carry forwards fully up to the first million euros of taxable income,
and thereafter, the tax loss carry forwards are limited to 60% of taxable income. Ultimately, the realization of the deferred tax assets is dependent upon the Company's generation of sufficient future
taxable income to enable it to use net operating loss and tax credit carry forwards during those periods in which such carry forwards can be utilized by the Company.

In
evaluating Versant's ability to utilize its deferred tax assets, management of the Company considers all available positive and negative evidence, including past operating results in
the most recent fiscal years and an assessment of expected future results of operations on a jurisdiction by jurisdiction basis. As of October 31, 2010, the Company had a valuation allowance of
approximately $33.9 million recorded against the Company's net deferred tax assets in the U.S. and foreign jurisdictions.

The
Company has experienced substantial past tax losses in its U.S. operations. Due to the lack of forecasted future taxable income and the relative size of the Company's Federal and
California net operating loss carry forwards, considerable uncertainty exists that the Company will realize these deferred tax assets. Based on this objective evidence, a full valuation allowance has
been recorded against the Company's deferred tax assets related to its U.S. operations.

The
Company has also experienced substantial past tax losses in its European operations. In its most recent fiscal years, the Company has generated taxable income and begun to utilize
its deferred tax assets related to its German net operating loss carry forwards. Management of the Company has forecasted taxable income for its European operations for fiscal 2011. The global
economic downturn has negatively impacted the Company's operating results in all regions. The Company has experienced

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 14.    INCOME TAXES (Continued)

declining
revenues as economic conditions have remained difficult. Given the uncertainty of the macroeconomic environment, future revenues and operating results are difficult to forecast. Therefore,
management has concluded it is more likely than not that the Company will realize the benefit of its deferred tax assets related to its German net operating loss carry forwards only to the extent of
its expected taxable income in fiscal 2011.

Significant
management judgment is required to determine when, in the future, it will become more likely than not that additional net deferred tax assets will be realized. Management
will continue to assess the realizability of the tax benefit available based on actual and forecasted operating results. Management does not anticipate significant changes to its uncertain tax
positions through October 31, 2011.

Due
to "change in ownership" provisions of the Internal Revenue Code of 1986, the availability of net operating loss and tax credit carry forwards to offset federal taxable income in
future periods is subject to an annual limitation.

A
portion of deferred tax assets relating to net operating losses pertains to net operating loss carry forwards resulting from tax deductions upon the exercise of employee stock options
of approximately $1.6 million. When recognized, the tax benefit of these loss carry forwards will be accounted for as a credit to additional paid-in capital rather than a reduction
of income tax expense.

The
Company adopted the provisions of ASC 740,Income Taxesrelated to uncertain tax positions on November 1, 2007. During the year
ended October 31, 2009, the amount of unrecognized tax benefits decreased $71,000 due to the completion of a foreign income tax examination covering fiscal years 2006 and 2007.

A
reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance as of October 31, 2009

$
1,629Additions for current year tax positions


Additions for prior years tax positions


Reductions for prior years tax positions


Settlements


Balance as of October 31, 2010

$
1,629


If
recognized, $1.3 million of these unrecognized tax benefits would affect the effective tax rate.

The
Company is subject to U.S. federal income taxes and to income taxes in various states in the U.S. as well as in 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. With few exceptions, the Company is no longer subject to U.S. federal, state and local,
or foreign tax examinations by tax authorities for tax years before 2005. However, with respect to prior tax years no longer subject to examination due to expiration of the statute of limitations,
income may nevertheless be recomputed for the purpose of determining the amount of NOL that may be carried over to "open" years.

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 15.    DISCONTINUED OPERATIONS

On February 1, 2006 Versant completed the sale of the assets associated with its WebSphere consulting practice to Sima Solutions ("Sima"), a privately held U.S. based company.
Versant's WebSphere practice provided consulting and training services to end-users of IBM's WebSphere® application server software. As a result of this transaction, Versant
ceased conducting its WebSphere consulting practice. In connection with Versant's sale of its WebSphere assets, certain employees of Versant, who formerly worked in Versant's WebSphere Practice,
joined Sima.

The
WebSphere transaction, based on ASC 360-10-35,Impairment or Disposal of Long-Lived Assets, met
the criteria of a long-lived asset (disposal group) held for sale at the end of the first quarter ended January 31, 2006. As a result, Versant has reflected the results of
operations of its WebSphere consulting practice for fiscal 2008 as discontinued operations. Therefore, reported revenues for this period no longer include any revenues from the WebSphere consulting
practice. The results from the discontinued WebSphere operations, however, are reported as net income from discontinued operations, net of income taxes.

Under
the sale agreement between Versant and Sima, the Company was entitled to receive contingent payments from Sima related to the WebSphere business for a 24-month period
following the closing of the agreement. This 24-month period expired on January 31, 2008. Consequently no further royalties were payable from Sima to Versant for periods after
Versant's fiscal quarter ended January 31, 2008.

During
fiscal 2008, Versant recorded $98,000 in royalty payments from WebSphere as income from discontinued operations.

Our
results for fiscal 2010 and 2009 do not include any amounts related to the Websphere sale transaction as Versant's rights to receive revenues terminated in January 2008.

NOTE 16.    SUBSEQUENT EVENTS

On November 29, 2010 Versant's Board of Directors approved a new stock repurchase program pursuant to which the Company is authorized to repurchase up to $5.0 million of
its common stock in fiscal year 2011. The stock repurchase program is currently scheduled to expire upon the earlier of October 31, 2011, or such time as Versant has expended
$5.0 million to repurchase outstanding common shares under the program; however the program may be suspended, discontinued, terminated or extended at any time by the Company. Any repurchases
made under the stock repurchase program are expected to be funded from the Company's working capital.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2010

NOTE 17.    SELECTED QUARTERLY INFORMATION (unaudited)

Summarized quarterly supplemental consolidated financial information for fiscal 2010 and 2009 is as follows (in thousands, except per share amounts):

Fiscal 2010 Quarters Ended

Fiscal 2009 Quarters EndedOctober 31,

July 31,

April 30,

January 31,

October 31,

July 31,

April 30,

January 31,Revenues

$
4,372

$
3,424

$
3,515

$
4,455

$
4,139

$
4,433

$
3,959

$
5,619Cost of revenues


521


495


539


558


549


573


532


577Gross profit


3,851


2,929


2,976


3,897


3,590


3,860


3,427


5,042Operating expenses


2,927


2,733


2,826


3,196


3,015


2,884


2,609


3,366Income from operations


924


196


150


701


575


976


818


1,676Net income

$
921

$
130

$
98

$
505

$
1,610

$
891

$
776

$
1,562Net income per shareBasic

$
0.28

$
0.04

$
0.03

$
0.14

$
0.45

$
0.25

$
0.21

$
0.42Diluted

$
0.28

$
0.04

$
0.03

$
0.14

$
0.45

$
0.25

$
0.21

$
0.42


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Table of Contents

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

Our management (with the participation of our Chief Executive Officer and our Chief Financial Officer) evaluated the effectiveness of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of
October 31, 2010, the end of the fiscal period covered by this report on Form 10-K.

Based
on the evaluation of the effectiveness of our disclosure controls and procedures by our management, with the participation of our chief executive officer and chief financial
officer, as of October 31, 2010, the end of the period covered by this report, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures
were effective to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is (i) recorded, processed,
summarized and reported, within the time periods specified in the Commission's rules and forms and (ii) is accumulated and communicated to the Company's management, including its principal
executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Management
assessed the effectiveness of Versant's internal control over financial reporting as of October 31, 2010, the end of the period covered by this report. In making its
evaluation of the effectiveness of Versant's internal control over financial reporting, management used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission ("COSO").

Based
on its assessment of internal control over financial reporting and the above criteria, Versant's management has concluded that, as of October 31, 2010, Versant's internal
control over financial reporting was effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements due to human error, or the improper circumvention or overriding of
internal controls. In addition, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that controls may become
inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may change adversely over time.

This
annual report does not include an attestation report of the Company's independent registered public accounting firm regarding the effectiveness of internal control over financial
reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to rules of the Securities Exchange Commission that permit the
Company to provide only management's report in this annual report.

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Changes in Internal Control over Financial Reporting.

There
was no change in our internal control over financial reporting that occurred during the fourth quarter of the fiscal year ended October 31, 2010
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.    Other Information.

None

PART III

Item 10.    Directors, Executive Officers and Corporate Governance

The Board has adopted a Code of Conduct and Ethics that applies to Versant's principal executive officer, principal financial officer,
principal accounting officer and all other employees of the Company. This Code of Conduct and Ethics is posted on our website at http://www.versant.com. We intend to satisfy the disclosure requirement
under Item 5.05 of Form 8-K regarding any amendment to, or waiver from, a provision of this Code of Conduct and Ethics by posting such information on our website at
http://www.versant.com on the investors' relations page.

The
remainder of the information required for this Item 10 is incorporated by reference from our Proxy Statement to be filed in connection with our 2011 Annual Meeting of
Shareholders.

Item 11.    Executive Compensation

The information required for this Item is incorporated by reference from our Proxy Statement to be filed in connection with our 2011
Annual Meeting of Shareholders.

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required for this Item is incorporated by reference from our Proxy Statement to be filed in connection with our 2011
Annual Meeting of Shareholders.

Item 13.    Certain Relationships and Related Transactions and Director Independence

The information required for this Item is incorporated by reference from our Proxy Statement to be filed in connection with our 2011
Annual Meeting of Shareholders.

Item 14.    Principal Accountant Fees and Services

The information required for this Item is incorporated by reference from our Proxy Statement to be filed in connection with our 2011
Annual Meeting of Shareholders.

PART IV

Item 15.    Exhibits and Financial Statement Schedules

The exhibit list in the "Exhibit Index" is incorporated herein by reference as the list of exhibits required as part of this report.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.

VERSANT CORPORATIONDated:
January 31, 2011

/s/ JERRY WONG Jerry Wong
Vice President, Finance
Chief Financial Officer
(Duly Authorized Officer,
Principal Financial Officer and
Principal Accounting Officer)/s/ JOCHEN WITTE Jochen Witte
President and Chief Executive Officer
(Duly Authorized Officer and Principal
Executive Officer) and Director


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POWER OF ATTORNEY

By signing this Form 10-K below, I hereby appoint each of Jochen Witte and Jerry Wong as my
attorneys-in-fact to sign all amendments to this Form 10-K on my behalf, and to file this report on Form 10-K (including all exhibits and
other documents related to the Form 10-K) with the Securities and Exchange Commission. I authorize each of my attorneys-in-fact to (1) appoint a
substitute attorney-in-fact for himself and (2) perform any actions that he believes are necessary or appropriate to carry out the intention and purpose of this Power of
Attorney. I ratify and confirm all lawful actions taken, directly or indirectly, by my attorneys-in-fact and by any properly appointed substitute
attorneys-in-fact.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

Name

Title

DatePRINCIPAL EXECUTIVE OFFICER:/s/ JOCHEN WITTE Jochen Witte

President and Chief Executive Officer and Director

January 31, 2011PRINCIPAL FINANCIAL OFFICER AND
PRINCIPAL ACCOUNTING OFFICER:/s/ JERRY WONG Jerry Wong

Vice President, Finance and Chief Financial Officer

January 31, 2011ADDITIONAL DIRECTORS:/s/ UDAY BELLARY Uday Bellary

Director

January 31, 2011/s/ WILLIAM HENRY DELEVATI William Henry Delevati

Director

January 31, 2011/s/ HERBERT MAY Herbert May

Director

January 31, 2011/s/ BERNHARD WOEBKER Bernhard Woebker

Director

January 31, 2011


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EXHIBIT INDEX

Incorporated by ReferenceExhibit No.

Exhibit Description

Form

File No.

Filing
Date

Exhibit

Filed
Herewith2.01

Agreement and Plan of Merger with Poet Holdings, Inc. dated September 27, 2003 by and among the Registrant, Puma Acquisition Inc. and Poet Holdings Inc. 

8-K

000-28540

09/29/03

99.12.02

Amendment to Agreement and Plan of Merger, dated as of January 20, 2004, by and among the Registrant, Poet Holdings, Inc. and Puma Acquisition, Inc.

S-4/A

333-110444

2/2/04

2.22.03

Share Purchase and Transfer Agreement dated as of September 13, 2004 between Poet Software GmbH and ems ePublishing AG and attached list of annexes thereto (translated to English from the original German text).


8-K

000-28540

9/17/04

2.012.04

Asset Purchase Agreement as of February 1, 2006 between Versant Corporation and Sima Solutions

8-K

000-28540

02/7/06

2.013.01

Amended and Restated Articles of Incorporation of the Registrant, filed with the California Secretary of State on March 18, 2004

S-8

333-113871

03/24/04

4.013.02

Certificate of Amendment of Amended and Restated Articles of Incorporation of the Registrant, filed with the California Secretary of State on August 22, 2005

8-K

000-28540

8/26/05

3.13.03

Registrant's Amended and Restated Bylaws

8-K

000-28540

3/02/07

3.0110.01

Registrant's 2005 Equity Incentive Plan, as amended **

S-8

333-159931

06/12/09

99.0110.02

Forms of Stock Option Agreements and Stock Option Exercise Agreements under Registrant's 2005 Equity Incentive Plan**

S-8

333-130601

12/22/05

99.0210.03

Registrant's 2005 Directors' Stock Option Plan, as amended**

S-8

333-159931

06/12/09

99.0510.04

Forms of Stock Option Grants and Stock Option Exercise Agreements under Registrant's 2005 Directors Stock Option Plan**

S-8

333-130601

12/22/05

99.0410.05

Registrant's 2005 Employee Stock Purchase Plan, as amended **

S-8

333-159931

06/12/09

99.0310.06

Forms of Enrollment Form and Subscription Agreement under Registrant's 2005 Employee Stock Purchase Plan**

S-8

333-130601

12/22/05

99.0610.07

Registrant's 1996 Directors Stock Option Plan, as amended as of July 30, 2003, and related documents**

S-8

333-107956

08/14/03

4.0610.08

Registrant's 1996 Employee Stock Purchase Plan, as amended as of August 17, 2004 and related documents**

10-K

000-28540

2/15/05

10.0210.09

Registrant's 1996 Equity Incentive Plan, as amended as of April 18, 2002, and related documents**

S-8

333-87922

05/09/02

4.0510.10

Poet Holdings, Inc. Amended and Restated 1995 Stock Plan and Forms of Stock Option Agreement and Exercise Notice thereunder**

S-8

333-113871

3/24/04

4.0510.11

Poet Holdings, Inc. 1999 Director Option Plan and Forms of Director Option Agreement and Director Option Exercise Notice thereunder**

S-8

333-113871

3/24/04

4.0610.12

Poet Holdings, Inc. 2001 Non Statutory Stock Option Plan and Forms of Stock Option Agreement and Exercise Notice thereunder**

S-8

333-113871

3/24/04

4.07


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Table of Contents

Incorporated by ReferenceExhibit No.

Exhibit Description

Form

File No.

Filing
Date

Exhibit

Filed
Herewith10.13

Form of Letter from Registrant to option holders of Poet Holdings, Inc., regarding assumption of options by Registrant**

S-8

333-113871

3/24/04

99.0110.14

Form of Indemnity Agreement entered into by Registrant with each of its directors and executive officers

10-K

000-28540

2/15/05

10.0910.15

Form of Amendment to Versant Corporation Stock Option Agreement**

SB-2



7/16/9610.16

Joint Employment Agreement and Managing Director Service Contract with CEO**

10-Q

000-28540

09/09/09

10.0310.17

Retention Incentive Agreement with Chief Financial Officer**

10-Q

000-28540

09/09/09

10.0410.18

Registration Rights Agreement dated December 28, 1998 between the Registrant and the parties listed on the Schedule of Investors attached thereto

10-KSB

000-28540

03/31/99

10.3510.19

Supplement dated June 28, 1999 to Registration Rights Agreement among the Registrant and the parties listed on the Schedule of Investors attached thereto

8-K

000-28540

07/13/99

10.0410.20

Office Building Lease dated March 23, 2007, between Versant Corporation and CA-Shorebreeze Limited Partnership

10-Q

000-28540

6/13/07

10.0110.21

Separation Agreement between Thomas Huben and Versant Gmbh dated as of December 2, 2008**

10-Q

000-28540

03/13/09

10.0110.22

First Amendment dated September 3, 2009 to Office Building Lease dated March 23, 2007, between Versant Corporation and CA-Shorebreeze Limited Partnership

10-Q

000-28540

09/09/09

10.0110.23

English Summary of Office Building Lease dated July 17, 2009 between Versant Gmbh and DIC DP Hamburg Halanreie Gmbh q

10-Q

000-28540

09/09/09

10.0221.01

Subsidiaries of the Registrant









ý23.01

Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm









ý31.01

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002









ý31.02

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002









ý32.01

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002









ý32.02

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002









ý


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