** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

 

**FORM 10-K/A**

**Amendment No. 2**

 

ý  **Annual report pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934 for the fiscal year ended October 31, 2004**

 

**Or**

 

o  **Transition report pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934 for the transition periodfrom           to           .**

 

**Commission filenumber: 0-28540**

 

**VERSANT CORPORATION**

**(Exact name of registrant as specified in itscharter)**

 

| **California**                                                   | ** ** | **94-3079392**                         |
|------------------------------------------------------------------|------------|----------------------------------------|
| (State or  other jurisdiction  of incorporation or organization) | ** ** | (I.R.S.  Employer  Identification No.) |

 

**6539 Dumbarton Circle, Fremont, California94555**(Address of principal executive offices) (Zip code)

 

**(510) 789-1500**(Registrant’s telephone number, including area code)

 

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

 

Securities registered pursuant to Section 12(g) of the Act: CommonStock, no par value

 

Indicate bycheck mark whether the Registrant: (1) has filed all reports required to befiled by Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the Registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.  Yes ýNo o

 

Indicate by check mark if disclosure ofdelinquent filers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of Registrant’s knowledge, indefinitive proxy or information statements incorporated by reference in PartIII of this Form 10-K/A or an amendment to Form 10-K.  ý

 

Indicate by check mark whether the Registrantis an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes oNo o

 

The aggregate market value of the outstandingcommon stock held by non-affiliates of the Registrant as of April 30, 2004, thelast business day of the registrant’s most recently completed second fiscalquarter, based on the closing price of $2.08 per share on the NASDAQ SmallCapMarket on April 30, 2004, was approximately $62,138,003.20.  This amountexcludes 631,764 shares of common stock held by directors, officers and certainshareholders of the Registrant as of April 30, 2004.  Exclusion of sharesheld by any person should not be construed to indicate that that personpossesses power, direct or indirect, to direct or cause the direction of themanagement or policies of the Registrant, or that such person is controlled byor is under common control with the Registrant.

 

As of February 22, 2005, there wereoutstanding 34,823,361 shares of the Registrant’s common stock, no par value

 

**DOCUMENTSINCORPORATED BY REFERENCE**

 

None.

 

 

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**VERSANT CORPORATIONAMENDMENT NO. 2 TO ANNUAL REPORT ON FORM 10-KFor the Fiscal Year Ended October 31, 2004**

 

**TABLE OF CONTENTS**

 

 
| **Item No.**   | ** ** | **Name of  Item**        | ** ** |   |
|----------------|------------|--------------------------|------------|--------|
| 9A             |       | Controls and  Procedures |       |   |
|           |       |                     |       |   |
| Signatures     |       |                     |       |   |
|           |       |                     |       |   |
| Certifications |       |                     |       |   |

 

**EXPLANATORY NOTE**

 

This Amendment No. 2 to Versant Corporation’s Annual Report on Form10-K for its fiscal year ended October 31, 2004 is being filed in order toamend disclosure required by Item 9A.

 

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**PART II**

 

**Item 9A.  Controls and Procedures*.***

 

(a)           Evaluation ofDisclosure Controls and Procedures. Securities and Exchange Commission, or SEC, rules define the term “disclosurecontrols and procedures” to mean a company’s controls and other procedures thatare designed to ensure that information required to be disclosed in the reportsthat it files or submits under the Securities Exchange Act of 1934 is recorded,processed, summarized and reported, within the time periods specified in theSEC’s rules and forms.  Disclosurecontrols and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed by a company inits reports filed under the Securities Exchange Act of 1934 is accumulated andcommunicated to the company’s management, including its principal executive andprincipal financial officers, or persons performing similar functions, asappropriate to allow timely decisions regarding required disclosure.  Based on the evaluation of the effectivenessof our disclosure controls and procedures by our management and the advice ofour independent auditors, with the participation of our Chief Executive Officerand our Chief Financial Officer, our Chief Executive Officer and our ChiefFinancial Officer have, for the reasons noted below, concluded that, as of theend of the period covered by this report, our disclosure controls andprocedures were ineffective to ensure that information required to be disclosedin the reports that the Company files or submits under the Securities ExchangeAct of 1934 is recorded, processed, summarized and reported, within the timeperiods specified in the Commission’s rules and forms.

 

In the course of conducting its audit of our financial statements forour fiscal year ended October 31, 2004, in late November 2004 ourregistered independent public accounting firm, Grant Thornton LLP, determinedthat there were certain material weaknesses and significant deficiencies in ourinternal controls.  Promptly followingthis determination, Grant Thornton advised our management and, on December 13,2004, the audit committee of our board of directors, of the following mattersthat Grant Thornton considered to be****materialweaknesses****in our internalcontrols:

 

(i)            Grant Thornton concluded that thenumber of year end audit adjustments and a prior amendment to the Company’sreported financial statements relating to an acquisition matter were indicativeof a material weakness in controls over closing procedures and the accountingfor non-routine transactions.  Ourauditors determined that the Company lacked certain procedures, staffing, andrequired expertise needed to properly account for non-routine transactions(such as acquisitions of other businesses) and prepare certain of its requiredfinancial statement disclosures (primarily with respect to non-routinetransactions).  Additionally, inconnection with its fiscal 2004 year-end audit, Grant Thornton discoveredseveral cut-off errors in our financial statements (primarily with respect toperiod-end accruals) that should have been identified by the Company prior tothe audit (in aggregate these adjustments represented approximately 1% of ournet loss for fiscal 2004).

 

(ii)           Our auditors also identified amaterial weakness in our consolidation controls.  During Grant Thornton’s audit, errors werenoted in the Company’s consolidation, specifically with respect to eliminatingentries.  Such errors are due to thecomplexity of

 

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theconsolidation, in addition to a lack of certain formal procedures and expertisenecessary to ensure an accurate consolidation. Primarily due to the Company’s acquisition of Poet Holdings, Inc., whichsignificantly increased the number of our corporate subsidiaries and thequantity of inter-company transactions, the Company’s consolidation ofaccounting information has become a complex and time-consuming process (especiallyas it relates to inter-company eliminations). The current consolidation process is both error-prone and inefficient.

 

At the time it advised our audit committee of its above conclusions,Grant Thornton also advised the audit committee of the following significantdeficiencies in our internal controls:

 

•                  Monitoring controls over the recording andanalysis of revenue transactions (particularly multiple element transactions)are in need of improvement. There are currently no established or documented policiesand procedures that require review of revenue entries and related analysisperformed by accounting personnel.  Theneed for additional training of personnel dealing with the recording and reviewof revenue transactions was also identified as an area for improvement.

 

•                  Inadequate segregation of duties was notedwith respect to the revenue, expenditure and payroll processes as numerousincompatible tasks are performed by the same accounting personnel.  The Company needs to review current policiesand procedures to ensure that incompatible duties are not performed by oneindividual or that there are specific compensating controls if incompatibleduties cannot be avoided.

 

The material weaknesses and significant deficiencies in internalcontrols described above still exist; however in the quarter ended October 31,2004 we took certain actions to improve our disclosure controls and proceduresand our internal control over financial reporting that are described below insubparagraph (i) of part (b) of this Item 9A (see “Changes in Internal ControlOver Financial Reporting”).  In addition, following the close of ourfiscal year on October 31, 2004, we have taken several other affirmative stepsto begin the process of remediating these weaknesses in controls as describedmore fully in subparagraph (ii) of part (b) of this Item 9A.

 

In part (b) of this Item 9A we have also explained in greaterdetail those aspects of the material weaknesses in our controls that continueto require remediation, certain steps we have taken thus far to address theseweaknesses and our current estimate of when we hope to substantially cure oreliminate these weaknesses.

 

When in certain of the Company’s prior filings under the SecuritiesExchange Act, including the filing of the Company’s Form 10-Q/A for thequarter ended April 30, 2004 that was filed on September 14, 2004(the “Q2 10-Q/A”), officers of Versant provided conclusions regarding theeffectiveness of the Company’s disclosure controls and procedures, theybelieved that their conclusions were then accurate. The officers did notconclude that amendments made to address certain accounting matters in theCompany’s Exchange Act filings during the fiscal year ended October 31,2004 (including the Q2 10-Q/A) were indicative of material weakness in theCompany’s disclosure controls and procedures. The officers concluded thatthe circumstances that led to the filing of these amendments resulted primarilyfrom the complexity, under relevant accounting rules, of certain non-ordinarycourse transactions related to the Company’s

 

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acquisition of Poet Holdings, Inc. and from certain pastaccounting actions that were implemented several years before the Company’scurrent disclosure controls were designed and implemented.  However, after working closely with theCompany’s independent auditors on the audit of the Company’s financialstatements for the fiscal year ended October 31, 2004 and receiving andassessing the formal advice regarding the Company’s controls that the Company’sindependent auditors provided in the course of that audit process, the Company’sChief Executive Officer and Chief Financial Officer have reached theconclusions regarding the Company’s disclosure controls set forth above in thefirst paragraph of part (a) of this Item 9A.

 

The certifications of Versant’s chief executive officer and chieffinancial officer attached as Exhibits 31.01 and 31.02 to this Report onForm 10-K and its amendments include, in paragraph 4 of suchcertifications, information concerning Versant’s disclosure controls andprocedures and internal control over financial reporting.  Suchcertifications should be read in conjunction with the information contained inthis Item 9A for a more complete understanding of the matters covered by suchcertifications.  The certifying officers worked to design, or caused to bedesigned, disclosure controls and procedures, for the purpose of ensuring thatmaterial information relating to the Company, including its consolidatedsubsidiaries, is made known to them by other personnel of the Company on atimely basis.  These disclosure controls and procedures were designed andadopted in good faith for this purpose, but it is recognized that theseprocedures must be continually evaluated and can always merit furtherimprovement. Versant believes that the material weaknesses and significantdeficiencies in the Company’s internal controls identified by the Company’sindependent auditors and described above do not materially affect the fairnessor accuracy of the presentation of the Company’s financial condition andresults of operation in the Company’s historical financial statements as setforth in the Company’s reports previously filed with the SEC under theSecurities Exchange Act of 1934.  This belief is based on the fact that,despite the material weaknesses subsequently noted by our auditor, the Companybelieves that it applied an appropriate amount of reviews and analysis bymanagement to reasonably determine the accuracy and fairness of the Company’sfinancial reports.  Although it has subsequently appeared that the Company’scontrols and procedures have certain material weaknesses, these certifyingofficers and the Company have been and continue to be engaged in efforts topromptly change and improve the Company’s disclosure controls and procedures asdescribed in part (b) of this Item 9A. The Company expects that these effortswill, over time, positively address the weaknesses noted by the Company’sindependent auditors.

 

(b)           Changes inInternal Control Over Financial Reporting. SEC rules define the term “internal control over financial reporting” asa process designed by, or under the supervision of, the Company’s principalexecutive and principal financial officers, or persons performing similarfunctions, and effected by the Company’s board of directors, management andother personnel, to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles andincludes those policies and procedures that:

 

•                  Pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions anddispositions of the assets of the Company;

 

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•                  Provide reasonable assurance thattransactions are recorded as necessary to permit preparation of financialstatements in accordance with generally accepted accounting principles, andthat receipts and expenditures of the Company are being made only in accordancewith authorizations of management and directors of the Company; and

 

•                  Provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use or dispositionof the Company’s assets that could have a material effect on the financialstatements.

 

(i)            During the fiscalquarter ended October 31, 2004, we made the following changes in the Company’sinternal control over financial reporting that have materially affected, or arereasonably likely to materially affect, the Company’s internal control overfinancial reporting:

 

•                  We simplified our subsidiary structure inEurope and reduced the number of subsidiaries we will need to consolidate in fiscal2005.

 

•                  We made changes in our accounting personneland launched a search for a new Director of Finance / Corporate Controller.

 

•                  We re-organized responsibilities within ouraccounting organization to provide a stronger focus on our SEC reporting and toincrease the total internal person-hours dedicated to the SEC reportingprocess.

 

•                  We increased employee training on SECreporting requirements and subscribed to an accounting research service in aneffort to keep more current with accounting pronouncements and financialreporting matters.

 

*Subsequent Events*

 

(ii)           During the fiscalquarter ended January 31, 2005, the Company took the following actionsthat have materially affected, or are reasonably likely to materially affect,the Company’s internal control over financial reporting:

 

•                  The Company recently hired a new Director ofFinance and Corporate Controller to expand its internal finance and accountingstaff and increase its internal accounting expertise.

 

•                  The Company has established a formal disclosurecommittee comprised of one audit committee member and senior management toassist the Company on resolving issues regarding proper disclosure overfinancial reporting.

 

•                  The Company revised its quarter-end closingprocess to strengthen its close cycle and to improve its quarter-end cut off aswell as its accrual process. The Company will implement these new procedures inits fiscal quarter ended April 30, 2005.

 

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•                  The Company revised its consolidation processfor the three months ended January 31,2005 and will implement a standard closing and reporting package for allof its subsidiaries during the quarter ending April 30, 2005.

 

•                  The Company plans to review both its domesticand international revenue recognition process during the quarter endingApril 30, 2005.

 

•                  The Company has also added an SEC analyst toits staff and plans to add an additional staff with strong technical accountingskills by the end of the current fiscal year to be able to support the Company’sSarbanes-Oxley Section 404 implementation.

 

•                  The Company has subscribed to an accountingresearch service and currently conducts reviews and research on all new andrelevant existing accounting and SEC pronouncements.

 

•                  The Company is in the process of reorganizingits accounting and finance operation and has put more emphasis on properdisclosures and improving its internal controls.

 

The certifications of Versant’s chief executive officer and chieffinancial officer attached as Exhibits 31.1 and 31.2 to this Annual Report onForm 10-K as amended include, in paragraph 4 of such certifications,information concerning Versant’s disclosure controls and procedures andinternal control over financial reporting. Such certifications should be readin conjunction with the information contained in this Item 9A for a morecomplete understanding of the matters covered by such certifications.

 

**SIGNATURES**

 

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

 

| VERSANT CORPORATION                            |            |
|------------------------------------------------|-----------------|
|                                           |            |
|                                           |            |
|                                           |            |
| By:                                       | /s/ Lee McGrath |   |
| Lee McGrath                                    |            |
| Vice President, Finance and Administration and |            |
| Chief Financial Officer                        |            |
|                                           |            |
| Date: May 12, 2005                             |            |
|                                                |                 |  |

 

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Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below by thefollowing persons on behalf of the Registrant and in the capacities and on thedates indicated.
| **Name**                        | ** **     | **Title**                           | ** **                                 | **Date** | ** **   |
|---------------------------------|----------------|-------------------------------------|--------------------------------------------|----------|--------------|
|                            |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
| PRINCIPAL EXECUTIVE OFFICER:    |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
| /s/ Nick Ordon                  |           |                                | President, Chief Executive Officer and     |     | May 12, 2005 |   |
| Nick Ordon                      |           | Director                            |                                       |     |         |
|                            |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
| PRINCIPAL FINANCIAL OFFICER AND |           |                                |                                       |     |         |
| PRINCIPAL ACCOUNTING OFFICER    |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
| /s/ Lee McGrath                 |           |                                | Vice President-Finance and                 |     | May 12, 2005 |   |
| Lee McGrath                     |           | Administration, and Chief Financial |                                       |     |         |
|                            |           | Officer                             |                                       |     |         |
|                            |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
| ADDITIONAL DIRECTORS:           |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
| /s/ Jochen Witte                | **** **** | **** ****                      | ****President, European Operations**** and |     | May 12, 2005 |   |
| Jochen Witte                    |           | Director                            |                                       |     |         |
|                            |           |                                |                                       |     |         |
| /s/ Uday Bellary                |           |                                | Director                                   |     | May 12, 2005 |   |
| Uday Bellary                    |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
| /s/ William Henry Delevati      |           |                                | Director                                   |     | May 12, 2005 |   |
| William Henry Delevati          |           |                                |                                       |     |         |
|                            |           |                                |                                       |     |         |
| /s/ Herbert May                 |           |                                | Director                                   |     | May 12, 2005 |   |
| Herbert May                     |           |                                |                                       |     |         |
|                                 |                |                                     |                                            |          |              |  |  |

 

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**EXHIBIT INDEX**

 
| **Exhibit   Number** | ** ** | **Exhibit Description**                                                                             | ** ** | **Incorporated by Reference** | ** ** | **Filed  Herewith** | ** ** |
|----------------------|------------|-----------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|---------------------|------------|
| ** **           | **Form**   | ** **                                                                                          | **Date**   | ** **                    | **Number** | ** **          |
|                 |       |                                                                                                |       |                          |       |                |       |   |   |   |   |
| 31.01                |       | Certification of Chief Executive Officer pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002 |       |                          |       |                |       |   |   | ý |   |
|                 |       |                                                                                                |       |                          |       |                |       |   |   |   |   |
| 31.02                |       | Certification of Chief Financial Officer pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002 |       |                          |       |                |       |   |   | ý |   |
|                 |       |                                                                                                |       |                          |       |                |       |   |   |   |   |

 

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