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

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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, 2007.                                           
|------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Or                             
|o                               | Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period
from                        to                
        .
|Commission file number: 0-28540

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

|California                                                                                                        |  | 94-3079392                          
|----------------------------------------------------------------------------------------------------------------- |  | ------------------------------------
|(State or other jurisdiction
of incorporation or organization)                                                    |  | (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:None

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

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) for 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) 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.    o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (check one).

Large
Accelerated Filer o            Accelerated
Filer o            Non-Accelerated Filer ý

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which
the common equity was sold, or the average bid and asked prices of such common equity, as of April 30, 2007: $65,484,869

The
number of shares outstanding of each of the issuer's classes of common equity, as of January 15, 2008, was 3,693,235 shares of Common Stock, no par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's definitive proxy statement relating to its 2008 Annual Meeting of Shareholders 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, 2007

TABLE OF CONTENTS

|Item No.       |  | Name of Item                                                                                                     |  | Page
|-------------- |  | ---------------------------------------------------------------------------------------------------------------- |  | ----
|PART I         |  |                                                                                                                  |  |     
|Item 1.        |  | Business                                                                                                         |  | 1   
|Item 1A.       |  | Risk Factors                                                                                                     |  | 10  
|Item 1B.       |  | Unresolved Staff Comments                                                                                        |  | 19  
|Item 2.        |  | Properties                                                                                                       |  | 19  
|Item 3.        |  | Legal Proceedings                                                                                                |  | 19  
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                                              |  | 19  
|PART II        |  |                                                                                                                  |  |     
|Item 5.        |  | Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 20  
|Item 6.        |  | Selected Financial Data                                                                                          |  | 22  
|Item 7         |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                            |  | 23  
|Item 7A.       |  | Quantitative and Qualitative Disclosures About Market Risk                                                       |  | 50  
|Item 8.        |  | Financial Statements and Supplementary Data                                                                      |  | 52  
|Item 9.        |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures                            |  | 90  
|Item 9A        |  | Controls and Procedures                                                                                          |  | 90  
|Item 9B.       |  | Other Information                                                                                                |  | 91  
|PART III       |  |                                                                                                                  |  |     
|Item 10.       |  | Directors, Executive Officers and Corporate Governance                                                           |  | 92  
|Item 11.       |  | Executive Compensation                                                                                           |  | 92  
|Item 12.       |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters                   |  | 92  
|Item 13.       |  | Certain Relationships and Related Transactions and Director Independence                                         |  | 92  
|Item 14.       |  | Principal Accountant Fees and Services                                                                           |  | 92  
|Item 15.       |  | Exhibits and Financial Statement Schedules                                                                       |  | 92  
|SIGNATURES     |  | 93                                                                                                              
|CERTIFICATIONS |  |                                                                                                                 

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Without
limitation, Versant Object Database, VDS, Versant®, FastObjects, Versant JDO, Versant Open Access, Vitness and Vorkout, 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.

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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 are based on Versant's current expectations about our business and industry and reflect our beliefs
and assumptions based upon information that is reasonably available to us at the date of this report. In many cases you may identify these forward-looking statements by words such as "will," "should,"
"may," "might", "believes," "anticipates," "expects," "intends," "estimates" and similar expressions. These forward-looking statements may include, among other things, projections of our future
financial performance and trends anticipated for our business.

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. Our
actual 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.

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.
Companies use Versant solutions to solve complex data management and data integration problems. We design, develop, market and support object-oriented database management system products to address
such problems. We also provide related product support, training, and consulting services to assist users 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, technology and defense industries, as well as to customers in
several vertical markets including 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 both more useful and increasingly dependable. 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

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Technology
Company in July 1996. The name of the company was changed to Versant Corporation on July 15, 1998. In November 2002, we acquired Mokume Software, Inc., a privately held
company that developed technology for use in real-time applications. 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 September 2004, we sold Poet's Catalog solutions business. 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. 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. Other than as expressly set forth in this annual report,
the information contained in, or referred to on, our website is not a part of
this annual report.

We
conduct most of our administrative operations from our U.S headquarters and the offices of our German subsidiary, Versant GmbH, in Hamburg, Germany. Our research and
development activities are primarily conducted by our German subsidiary, Versant GmbH, which is headquartered in Hamburg, Germany and our Indian subsidiary, Versant India, which is
headquartered in Pune, India.

In
fiscal 2007 we liquidated the operations of our former U.K. subsidiary and transferred its operations to our offices in Germany.

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 which 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 and 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 have expanded
the scope of our solutions to address the data management needs of smaller systems as well. The data

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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 requires 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 and FastObjects, 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:



Products and Services

Versant Object Database (VOD)

VOD, a seventh generation object database management system, is designed to support multi-user, commercial applications in distributed computing
environments. VOD enables users to store, manage,

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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, 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
7.0 of VOD includes our core object database management system, C++ and Java 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 making it easier for customers to deploy applications requiring these
components.

As
part of the VOD family of solutions, we also offer Fault Tolerant Server, Vitness, Asynchronous Replication, Warm Standby, Vorkout, Versant SQL, and High Availability Backup Solution
as add-on options that a customer can use in situations requiring advanced capabilities.



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FastObjects

FastObjects is an object database management system designed to provide minimal administration and 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.

Services

We derived approximately 40% of our revenues from services in fiscal 2007. Our services include maintenance and support programs for our data management products,
consulting services and 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) supporting 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 only when
their applications developed on our software are completed.

VARs
and distributors purchase development licenses from us on a per seat basis and on terms similar to those of development licenses sold directly to End-Users. VARs are
authorized to sublicense deployment copies of our data management products, which are either bundled or embedded in the VARs' applications, directly to End-Users. 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 application software 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.

Our Vertical Markets

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

Our
future performance will depend in significant part on the increase in the use and sales of the Versant Object Database and FastObjects in telecommunications, technology, defense,
healthcare, online gaming and financial market applications and the continued acceptance of our products within these 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. Systems integrators may integrate our products with

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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 other vendors, which may in some cases compete with our products.

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 include 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, and participation in conferences and tradeshows. Our products are typically marketed
through (i) development licenses, which entitle the customer to develop applications that use a Versant software product, and (ii) deployment licenses, which entitle the customer to sell
and market product applications developed through use of our software.

Sales Process.The cycle for a complete sale of our products to new and large enterprise customers can often exceed nine
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 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, depending upon the number of their programmers that will develop and build their customers' application.
Development licenses enable the customer to develop applications that use our software. Additionally, a customer may purchase technical support, training courses and consulting services. Our customers
may also purchase deployment licenses enabling them to deploy applications developed under a 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).

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 recorded by our subsidiary in Germany, which sells our
products through distributors and value-added resellers, as well as directly to end-users. For fiscal 2007, our international revenues derived from customers outside North America made up
approximately 54% of our total revenues, compared to 63% for fiscal 2006 and 66% for fiscal 2005.

Competition

Our software products compete with 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. 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

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wide
array of complementary applications which may incentivize customers to purchase such 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

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, capital equipment expenses. Currently our research and development activity is conducted primarily in our Hamburg,
Germany and Pune, India facilities. In fiscal 2007, fiscal 2006 and fiscal 2005, our research and development expenses were $3.4 million, $3.1 million and $3.9 million,
respectively. We anticipate that we will continue to invest significant resources in research and development activities, particularly in Germany and India, in the future to develop new products,
advance the technology of our existing products and develop new business opportunities.

Intellectual Property and Other Proprietary Rights

We regard our products as proprietary. We attempt to protect our product 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.

Employees

As of October 31, 2007, we and our subsidiaries had a total of 80 full time employees, of whom 15 were based in the United States, 32 in Europe, and 33 in
India. Of the total, 49 employees were engaged in engineering and technical services, 11 were engaged in sales and marketing, 2 were engaged in the services organization, and the remaining 18 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.

Past Restructuring

As part of restructuring efforts we undertook in fiscal 2005 and 2006, we completed the following transactions 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, we have reflected the results of operations of our WebSphere consulting

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practice
for fiscal 2007, fiscal 2006 and fiscal 2005 as discontinued operations. Therefore, reported revenues for these periods 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 4 of our "Notes to Consolidated Financial
Statements" in Item 8 of this report for more information regarding this transaction.

In
July 2005, we spun off our former Versant Open Access.NET (or VOA.Net) assets to Vanatec GmbH (Vanatec), a privately held German company. Versant subsequently determined that
the equity at risk in Vanatec was not sufficient to permit Vanatec to finance its activities without additional subordinated financial support from Versant. Therefore, we considered Vanatec a variable
interest entity in accordance with FIN 46(R),Consolidation of Variable Interest Entities(As Amended). As a result, in accordance with
FIN 46(R), Vanatec's operating results were included in Versant's consolidated financial statements from July 2005 through March 27, 2006. On March 27, 2006, Versant sold its
entire equity interest in Vanatec to a third party investor and entered into a joint ownership agreement with Vanatec with respect to technology previously licensed to Vanatec. As a result of this
sale of its interest in Vanatec, we were no longer required to consolidate the operating results of Vanatec as a variable interest entity in its financial statements.

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.

Financial
and other information about Versant can also be accessed at our Investor Relations website. The address of Versant's website is:
(http://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.

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, that could cause our actual results of operations to differ materially from those contemplated in the forward-looking statements.
The matters set forth below should be carefully considered when evaluating our business and prospects.

We are dependent on a limited number of products, especially Versant Object Database.Nearly all of
our license revenues to date have been derived from our Versant Object Database product and its predecessors. Consequently, if our ability to generate revenues from Versant Object Database were
negatively impacted, our business, cash flows and results of operations would be materially 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 market for enterprise software, consumer demand changes in the European market for enterprise software, slowness
in the general economy or in key industries we serve, such as the technology, telecommunications and defense industries, the success of competitive products of other vendors, reduction in the prices
we can obtain

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for
our products due to competitive 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 acquisition of Poet and its FastObjects data management product, we still expect that sales of Versant Object
Database will continue to be very critical to our revenues for the foreseeable future. Accordingly, any significant reduction in revenue levels from our Versant Object Database product can be expected
to have a material negative impact on our business and results of operation.

Our products face significant competition from larger competitors.For Versant Object Database and
FastObjects products, we compete with other companies offering other 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 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 further have more direct access to corporate decision-makers of key customers based on their previous relationships with customers. Our competitors may also be able to respond more quickly to
new or emerging technologies and changes in customer requirements and may be able to obtain sales of products competitive to ours through package sales of a suite of a variety of products that we do
not offer. We may not be able to compete successfully against current or future competitors, and competitive pressures could cause us to lose revenues or lower the prices for our products to increase
sales, or take other responsive actions, any of which could have a material adverse effect on our business, operating results and financial condition.

We depend on successful technology development.We believe that significant research and development
expenditures will continue to be necessary 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, these expenditures will not necessarily result in successful product
introductions. Uncertainties affecting the success of software development project introductions include technical difficulties, delays in introductions of new products, market conditions, competitive
products, and customer acceptance of 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 the 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 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 2007, our quarterly revenues fluctuated from a high of $5.6 million in the fourth quarter of
2007 to a low of $5.2 million in the first, second and third quarters of 2007; and in fiscal 2006, our quarterly revenues

11

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fluctuated
from a high of $4.6 million in both the first and fourth quarters of 2006 to a low of $3.8 million in both the second and third quarters of 2006. These quarterly fluctuations
have resulted from a number of factors, including but not limited to the following:



To expand and diversify our product line may adversely affect our operating results and may not result in the development of successful
new products.To develop new products to expand and diversify our product offerings beyond our core products, Versant Object Database and FastObjects, will likely
require substantial marketing, research and development and sales expenditures, without assurance of receiving incremental additional revenue from such new products. To develop successful new products
typically requires significant marketing expenditures to determine viable products and applications and target customers, substantial research and development expenditures and additional sales expense
associated with selling new products to new 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 such new products will be accepted in the marketplace or generate meaningful amounts of revenue. 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.

12

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Our future revenues are substantially dependent upon our installed customers continuing to license Versant products and renewing
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 maintenance renewal fees. If our existing customers
do not purchase additional products, upgrade existing products or renew their maintenance agreements with us, this could materially 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 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. 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 revenues.

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 orders placed by large organizations. For example, two
customers each accounted for 14% and 8% of our total revenues, respectively, for fiscal 2007 and one customer accounted for 21% of our total revenues for the quarter ended October 31, 2007. Two
customers each accounted for 7% and 8% of our total revenues, respectively, for fiscal 2006 and one customer accounted for 30% of our total revenues for the quarter ended October 31, 2006. The
timing of large orders and of 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.

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 the overall demand for the software products and services we offer.
Reduced demand for our product line may result from competition offered by alternative technologies, negative customer perception of our object-oriented technology or other causes. General economic
conditions can also have a significant adverse effect on our revenues and results of operations. We cannot predict the impact of these events in the future, or their impact on our customers or our
business. In addition, we have experienced continued hesitancy on the part of our existing and potential customers to commit to new products or services
from us, particularly in our North American markets. Recent events, including fallout from problems in the U.S. subprime mortgage market, indicate a potential near-term recession in the
U.S. economy, which could in turn have negative repercussions for the global economy. If U.S. or global economic conditions take a downturn, it could negatively impact our revenues and thus have a
material adverse impact on our business, operating results and financial condition.

Our products have a lengthy sales cycle.The sales cycle for our Versant Object Database and
FastObjects products varies substantially from customer to customer. This sale cycle often exceeds nine months and can sometimes extend to a year or more, especially for sales to defense sector
customers. Due in part to the strategic nature of our products and the expenditures associated with their purchase, potential customers are typically cautious in making decisions to acquire our
products. Influencing our customers' decision to license our products generally requires us to provide a significant level of

13

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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 costs effectively given the unpredictability of our revenues.We expect
to continue to maintain a relatively high percentage of fixed expenses. Inasmuch as we have completed a restructuring in fiscal 2005 and 2006 to significantly reduce our operating expenses and in
fiscal 2007 reduced the rent expense for our U.S. headquarters, we might be unable to further reduce certain fixed expenses to accommodate any revenue reductions. If forecasted revenue does not
materialize, then our business, financial condition and results of operations will be materially harmed.

We rely on revenues from the telecommunications, technology, and defense 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 technology and defense industries for sales of Versant Object Database. Our success in these markets depends, to a large extent, on the general economic
conditions affecting these industries, our ability to compete with alternative and more directly competing technology providers, 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 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. The technology industry has also generally
experienced volatility in recent years that may adversely affect demand for our products and services from that industry, and the defense industry may experience new cycles of lower available
technology budgets due to high levels of U.S. defense spending for operations in Iraq and Afghanistan. In the past, general economic downturns have also adversely affected our ability to generate
revenues from customers in these and other industries. In addition, the types of applications and commercial products for the technology, telecommunications and defense 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 personnel for this practice.

We rely on substantial revenues 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 historically.
Consequently, we must conduct our operations internationally and maintain a significant presence in international markets. For fiscal 2007, international revenues derived from customers outside North
America made up approximately 54% of total revenues, compared to 63% for fiscal 2006 and 66% for fiscal 2005. North American revenues were 46% of total revenues for fiscal 2007, compared to 37% for
fiscal 2006 and 34% for fiscal 2005. Due to the changes in our sales management and organization, which has to some degree shifted more of our sales emphasis to European customers, we expect in the
future to experience a somewhat

14

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stronger
demand for our products in Europe as compared to our other geographic markets, making our international revenues even more 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 global security and terrorism, 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.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. Our future success also depends on our continuing ability to attract,
train and motivate highly qualified technical, sales and managerial personnel. We reduced our workforce in connection with a restructuring of our operations in the fourth quarter of fiscal 2004 and in
the third quarter of fiscal 2005. These factors, 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 retain a significant
number of employees in our offices in Pune, India. There is increasing competition for skilled employees in the Indian market, resulting in a greater risk of employee turnover and loss of key trained
personnel there, which could adversely impact our research and development and quality control activities. In addition, 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

15

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to
retain our German employees may cause us to incur significant severance costs, which could adversely affect our operating results and financial condition.

We have limited working capital and may experience difficulty in obtaining needed funding, which may limit our ability to effectively
pursue our business strategies.At October 31, 2007, we had approximately $19.1 million in cash and cash equivalents and working capital of
approximately $15.3 million. Although our operations were profitable in fiscal 2007 and fiscal 2006, to date, we have not achieved profitability or generated positive cash flows on a sustained
basis. In response to this situation, in the fourth quarter of fiscal 2004 and the third quarter of fiscal 2005, we restructured our business operations to significantly reduce our operating expenses
by streamlining our operating processes. These restructuring efforts continued into the fourth quarter of fiscal 2005 and were completed in the second quarter of fiscal 2006. With such restructuring,
and as a result of our revenue levels in fiscal 2006 and fiscal 2007, we believe that our current cash, cash equivalents, and any net cash provided by operations will be sufficient to meet our
anticipated cash needs for working capital and capital expenditures for the next twelve months or longer. However, it is possible that in the future we may encounter unexpected expenditures due to
unsuccessful sales, marketing and/or development decisions, acquisitions of businesses or technologies, litigations or settlements or other events, such as reduced revenues resulting from adverse
changes broadly affecting the general U.S. or world economies and thus our customers' capital spending decisions, that may cause us to choose to make further cost reductions, and it is possible that
other future events may occur that could render our current working capital reserves insufficient. Because our revenues are unpredictable and a significant portion of our expenses is fixed (and
because it may be more difficult to further reduce our operating expenses beyond the reductions made in our last restructuring), a reduction in our projected revenues or unanticipated requirements for
cash outlays could deplete our limited financial resources and working capital. Impairment of our working capital would require us to make expense reductions and/or to raise funds through borrowing or
debt or equity financing. If we determined that we needed to raise additional funding to pursue our business strategy or otherwise, there can be no assurance that any equity or debt funding will be
available to us on favorable terms, if at all. If we cannot secure adequate financing sources when required, then we would need to further reduce our operating expenses, which we may be unable to do
at a meaningful level and which would restrict our ability to pursue our business objectives.

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 32 employees based in Europe whose activities must be well coordinated with those of our U.S. workforce and other employees. In addition, we also perform a
significant amount of engineering work in India through our wholly owned subsidiary located in Pune, India. We currently employ about 33 employees in India, which represents approximately 41% of our
total workforce. 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 both
our Chief Executive Officer and Executive Vice President of Field Operations reside. 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.We and certain of our present and
former officers and directors were named as defendants in four class action lawsuits filed in 1998 in the United States District Court for the Northern District of California, alleged violations of
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and SEC Rule 10b-5 promulgated under that Act, in connection with public statements about our financial
performance. Although this case was later dismissed, there can be no assurance that we will not be subject to similar securities-related litigation in

16

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the
future. In addition, 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 Mokume Software, Inc. in November 2002, persons associated with Mokume Software 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. We are currently a party
to a pending litigation in which Rockwell Automation, one of our customers, is seeking indemnification from us for similar claims asserted against it by Systems America, Inc. Litigation can be
expensive to defend, can consume significant amounts of management time and can result in an adverse judgment or settlement that could have adverse effects on our results of operations, financial
condition and cash reserves.

We will incur increased costs to comply with certain requirements of the Sarbanes-Oxley Act of 2002 and regulations relating to corporate
governance matters and public disclosure.The provisions of the Sarbanes-Oxley Act of 2002, related rules adopted or proposed by the SEC and by the NASDAQ Stock
Market and recent accounting pronouncements, including accounting rules regarding the expensing of stock options and accounting for uncertainty in income taxes, will increase our costs to evaluate the
implications of these laws, regulations and standards and comply with their requirements. Based on the current market price of our common stock, it is likely that we will become an "accelerated filer"
under the Securities Exchange Act of 1934 during our current fiscal year ending October 31, 2008, which will result in our having to comply with the provisions of Section 404 of the
Sarbanes-Oxley Act regarding certain assessments and auditor attestations regarding internal control structure reporting. Compliance with these assessment and attestation obligations may significantly
increase our general and
administrative expenses, which will negatively impact our results of operations. In addition, to maintain high standards of corporate governance and public disclosure, we intend to invest resources to
comply with existing requirements and standards. We expect that this investment will result in increased general and administrative expenses in fiscal 2008 and 2009, and a diversion of management time
and attention from strategic revenue generation and cost management activities. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on
our board of directors, on our board committees or as executive officers. We are taking steps to comply with applicable laws and regulations in accordance with the deadlines by which compliance is
required, but we cannot accurately predict or estimate the amount or timing of additional costs that we may incur to respond to these requirements.

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 in multi-element or
multi-year transactions. As our transactions increase in complexity with the sale of larger, multi-product, multi-year licenses, negotiation of mutually acceptable terms and
conditions can extend the sales cycle and, in certain situations, may require us to defer recognition of revenue on such licenses. We believe that we are in compliance with Statement of Position
97-2,Software Revenue Recognition,as amended; 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 revenue recognition.

Charges to earnings resulting from the application of the purchase method of accounting for the merger with Poet and FastObjects may
adversely affect the market value of our common stock.In accordance with the U.S. generally accepted accounting principles, we account for our merger with Poet
and our acquisition of FastObjects, Inc. using the purchase method of accounting, which results 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 and

17

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FastObjects
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 depreciation and 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.

Failure to adequately protect our intellectual property could impair our ability to successfully
compete.Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our products, obtain or use information that we
regard as proprietary or use or make copies of our products 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 in certain
foreign countries. Our means of protecting our proprietary rights may not be adequate, and our competitors may independently develop similar technology, 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.We expect that developers of
object-oriented technology will increasingly be subject to infringement claims as the number of products, competitors and patents in our industry sector grows. For example, in 2004 we were served with
a complaint filed by Systems America, Inc. alleging that we received misappropriated intellectual property from Mokume Software, Inc. when we acquired Mokume in November 2002, and that
Mokume had interfered with certain business relationships of Systems America. While this action has since been settled, we are currently the defendant in a pending suit filed by a customer, Rockwell
Automation, who is seeking indemnity from Versant against a similar claim that Systems America has asserted against Rockwell Automation in a separate lawsuit. 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 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 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 re-list our common stock
on The NASDAQ Global Market System, or NGMS.

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:



18

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Such
acquisitions also involve numerous risks, including the following:



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

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 security analysts and 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 revenues shortfall until late in a quarter, which, when announced, could result in an even
more immediate and adverse effect on the trading price of our common stock.

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 located at 255 Shoreline
Drive, Suite 450, Redwood City, California 94065. Our current lease of this facility has a term of thirty-six months, which commenced in June 2007.

Additionally,
we also lease office space for our international subsidiaries, generally under multi-year operating lease agreements, in Hamburg, Germany and Pune, India. 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, India or in U.S if required to do so.

Item 3.    Legal Proceedings.

We may from time to time be subject to various 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.    Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of our security holders during the fourth quarter of fiscal 2007.

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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 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 (formerly the Nasdaq SmallCap 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 it then 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 intra-day prices of our common stock reported on the
Nasdaq Capital Market for the periods indicated during the last two fiscal years.

Fiscal year ended October 31, 2007

High

LowFourth quarter

$
22.87

$
18.40Third quarter

$
25.10

$
18.02Second quarter

$
19.70

$
13.71First quarter

$
15.15

$
10.06Fiscal year ended October 31, 2006Fourth quarter

$
12.88

$
5.92Third quarter

$
7.00

$
6.02Second quarter

$
8.09

$
4.98First quarter

$
6.41

$
3.01


Shareholders

There were approximately 111 holders of record of our common stock as of January 4, 2008. We believe that a significant number of beneficial owners of our
common stock hold their shares in street name. Based on information available to us, we believe that there are approximately 3,654 beneficial owners of our common stock.

Dividend Policy

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

In
connection with our merger with Poet in fiscal 2004, the holders of our then outstanding shares of Series A Preferred Stock had their outstanding shares of Series A
Preferred Stock converted into shares of our common stock at an increased conversion rate of three shares (rather than two shares) of common stock per each share of Series A Preferred Stock. In
addition, the exercise price of certain common stock purchase warrants held by such preferred shareholders was reduced from $21.30 to $16.60 per share and the term of such warrants was extended by one
year. As a result of these actions, a deemed dividend in the amount of approximately $2.4 million was recorded during the three months ended April 30, 2004. Please see
Item 6"Selected Financial Data".

Recent Sales of Unregistered Securities

There were no issuances of unregistered securities by Versant in fiscal 2007.

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Issuer Purchases of Equity Securities

No purchases of Versant equity securities were made by or on behalf of Versant in the fourth quarter of our fiscal year ended October 31, 2007.

Stock Performance Graphs 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, 2007, 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 selected historical financial data presented below are derived from the consolidated financial statements of Versant Corporation. The selected consolidated
financial data set forth below is qualified in its entirely by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations," and the
Consolidated Financial Statements of Versant and notes thereto included elsewhere in this report.

It
should also be noted that in fiscal 2004, we completed a merger with Poet on March 18, 2004, which increased our revenues and operating expenses for part of fiscal 2004 and
substantially increased the number of outstanding shares of our common stock at fiscal year-end for purposes of computing net loss per share in fiscal 2004. We recorded an operating loss
on the liquidation of a foreign subsidiary for approximately $245,000 for fiscal 2007, and incurred restructuring charges of approximately $218,000, $638,000 and $3.3 million for fiscal 2006,
2005 and 2004, respectively, and charges of approximately $12.9 million and $1.0 million related to impairment of goodwill and intangible assets for fiscal 2005 and 2004, respectively,
and a deemed dividend to preferred shareholders of $2.4 million in fiscal 2004. In addition, in fiscal year 2005 and prior fiscal years we determined stock compensation expense according to
then-effective APB Opinion No. 25, whereas in fiscal years 2006 and 2007 we determined stock-based compensation expense in accordance with Statement of Financial Accounting
Standards 123(R). Each of the above items has an impact on the comparability of the selected financial data presented in Item 6 of this report.

|                                            |                                                                                  | Fiscal Year Ended October 31,                |                         
|------------------------------------------- | -------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------
|
|Consolidated statements of operations data: |                                                                                  |                                              |                         
|Revenues:                                   |                                                                                  |                                              |                         
|                                            | License                                                                          |                                              | $                       
|                                            | Maintenance                                                                      |                                              |                         
|                                            | Professional services                                                            |                                              |                         
|                                            |                                                                                  |                                              |                         
|                                            |                                                                                  |                                              | Total revenues          
|                                            |                                                                                  |                                              |                         
|Cost of revenues:                           |                                                                                  |                                              |                         
|                                            | License                                                                          |                                              |                         
|                                            | Amortization of intangible assets                                                |                                              |                         
|                                            | Maintenance                                                                      |                                              |                         
|                                            | Professional services                                                            |                                              |                         
|                                            |                                                                                  |                                              |                         
|                                            |                                                                                  |                                              | Total cost of revenues  
|                                            |                                                                                  |                                              |                         
|                                            |                                                                                  |                                              | Gross profit            
|                                            |                                                                                  |                                              |                         
|Operating expenses:                         |                                                                                  |                                              |                         
|                                            | Sales and marketing                                                              |                                              |                         
|                                            | Research and development                                                         |                                              |                         
|                                            | General and administrative                                                       |                                              |                         
|                                            | Loss on the liquidation of a foreign subsidiary                                  |                                              |                         
|                                            | Impairment of goodwill                                                           |                                              |                         
|                                            | Impairment of intangibles                                                        |                                              |                         
|                                            | Restructuring                                                                    |                                              |                         
|                                            |                                                                                  |                                              |                         
|                                            |                                                                                  |                                              | Total operating expenses
|                                            |                                                                                  |                                              |                         
|                                            | Income (loss) from operations                                                    |                                              |                         
|                                            |                                                                                  | Outside shareholders' income from VIE        |                         
|                                            |                                                                                  | Interest and other income, net               |                         
|                                            |                                                                                  | Gain on disposal of Variable Interest Entity |                         
|                                            |                                                                                  |                                              |                         
|                                            | Income (loss) from continuing operations before taxes                            |                                              |                         
|                                            | Provision for income taxes                                                       |                                              |                         
|                                            |                                                                                  |                                              |                         
|                                            | Net income (loss) from continuing operations                                     |                                              |                         
|                                            | Deemed dividend to preferred shareholders                                        |                                              |                         
|                                            |                                                                                  |                                              |                         
|                                            | Net income (loss) from continuing operations attributable to common shareholders |                                              |                         
|                                            | Net income (loss) from discontinued operations, net of income taxes              |                                              |                         
|                                            | Gain (loss) from sale of discontinued operations, net of income taxes            |                                              |                         
|                                            |                                                                                  |                                              |                         
|                                            | Net income (loss)                                                                |                                              | $                       
|                                            |                                                                                  |                                              |                         

22

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|Basic income (loss) per share:                                    |                                                                                  |  |   |       |  |   |       |  |   |       |   |   |       |   |   |      
|----------------------------------------------------------------- | -------------------------------------------------------------------------------- |  | - | ----- |  | - | ----- |  | - | ----- | - | - | ----- | - | - | -----
|                                                                  | Net income (loss) from continuing operations attributable to common shareholders |  | $ | 2.01  |  | $ | 1.01  |  | $ | (4.23 | ) | $ | (3.33 | ) | $ | (2.17
|                                                                  | Earnings (loss) from discontinued operations, net of income tax                  |  | $ | 0.08  |  | $ | 0.19  |  | $ | 0.12  |   | $ | (0.52 | ) | $ | 0.42 
|                                                                  |                                                                                  |  |   |       |  |   |       |  |   |       |  
|                                                                  | Net income (loss) per share, basic                                               |  | $ | 2.09  |  | $ | 1.20  |  | $ | (4.11 | ) | $ | (3.85 | ) | $ | (1.75
|Diluted income (loss) per share:                                  |                                                                                  |  |   |       |  |   |       |  |   |       |   |   |       |   |   |      
|                                                                  | Net income (loss) from continuing operations attributable to common shareholders |  | $ | 1.98  |  | $ | 1.01  |  | $ | (4.23 | ) | $ | (3.33 | ) | $ | (2.17
|                                                                  | Earnings (loss) from discontinued operations, net of income tax                  |  | $ | 0.08  |  | $ | 0.19  |  | $ | 0.12  |   | $ | (0.52 | ) | $ | 0.42 
|                                                                  |                                                                                  |  |   |       |  |   |       |  |   |       |  
|                                                                  | Net income (loss) per share, diluted                                             |  | $ | 2.06  |  | $ | 1.20  |  | $ | (4.11 | ) | $ | (3.85 | ) | $ | (1.75
|Shares used in per share calculation:                             |                                                                                  |  |   |       |  |   |       |  |   |       |   |   |       |   |   |      
|                                                                  | Basic                                                                            |  |   | 3,649 |  |   | 3,577 |  |   | 3,539 |   |   | 3,117 |   |   | 1,368
|                                                                  | Diluted                                                                          |  |   | 3,708 |  |   | 3,584 |  |   | 3,539 |   |   | 3,117 |   |   | 1,368
|Non-cash stock-based compensation included in the above expenses: |                                                                                  |  |   |       |  |   |       |  |   |       |   |   |       |   |   |      
|                                                                  | Cost of revenues                                                                 |  | $ | 65    |  | $ | 39    |  | $ | 27    |   | $ |      |   | $ |     
|                                                                  | Sales and marketing                                                              |  | $ | 90    |  | $ | 41    |  | $ | 12    |   | $ | 25    |   | $ | 5    
|                                                                  | Research and development                                                         |  | $ | 39    |  | $ | 79    |  | $ | 44    |   | $ | 25    |   | $ |     
|                                                                  | General and administrative                                                       |  | $ | 222   |  | $ | 77    |  | $ | 13    |   | $ | 36    |   | $ | 1,204

|
|

|                                                  |  | As of October 31,
|------------------------------------------------- |  | -----------------
|
|Consolidated balance sheet data:                  |  |                  
|Cash, cash equivalents and short-term investments |  | $                
|Restricted cash                                   |  |                  
|Working capital                                   |  |                  
|Total assets                                      |  |                  
|Total long-term liabilities                       |  |                  
|Total liabilities and stockholder' equity         |  |                  

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

As indicated in the paragraph above in Item 1 of this report, this Form 10-K (including this Item 7)
contains certain forward-looking statements within the meaning of the Securities Exchange Act of 1934 and the Securities Act of 1933. In many cases you may identify these forward-looking statements by
words such as "will," "should," "may," "might," "believes," "anticipates," "expects," "intends," "estimates" and similar expressions. These forward-looking statements include, among other things,
projections of our future financial performance and trends anticipated for our business. We caution investors that forward-looking statements are only predictions 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. Our actual 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 which are 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.

23

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Background and Overview

We design, develop, market and support high performance object-oriented database management systems 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
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 with a significant
competitive edge.

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



Our
Versant Object Database product offerings are used primarily by larger organizations, such as technology providers, telecommunications carriers, government defense agencies and
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 Poet's FastObjects solution into our product line following our March 2004 merger with Poet, we expanded the scope of our solutions to also address the data management needs of smaller business
systems.

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.

In
addition to our product offerings, to assist users in developing and deploying applications based on Versant Object Database and FastObjects, we offer a variety of services, including
consulting, training and technical support services.

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:



24

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Financial Highlights for Fiscal 2007



Fiscal 2007 and Beyond

During fiscal 2007, we focused our sales and marketing efforts on our data management products, Versant Object Database and FastObjects, 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 2007.

We
again expect to derive most of our revenues in fiscal 2008 from Versant Object Database and FastObjects licenses and related services.

Like
many other software companies, we do not operate with a significant backlog of orders. Our license revenues, in particular, are difficult to forecast. For fiscal 2008, we currently
estimate total year revenues of approximately $24.0 million, or an approximate 13% increase from fiscal 2007. We also believe that quarterly revenues during fiscal 2008 may fluctuate as a
result of there being a limited number of revenue transactions in the sales pipeline at any given point in time, and the difficulty in accurately assessing when such transactions may actually close.
We currently estimate net income of approximately $9.5 million for fiscal 2008, resulting in estimated diluted net income per share of approximately $2.50 for fiscal 2008, based on our current
capitalization. Without limitation, the estimates and forecasts in this paragraph are forward-looking statements.

25

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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 uncertainties. We consider "critical" those accounting policies that require our most
difficult, subjective or complex judgments, and that are the 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 the provisions of Statement of Position ("SOP") 97-2,Software Revenue
Recognition,SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions,and SOP 81-1,Accounting for Performance of Construction-Type and Certain Production-Type
Contracts. 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 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 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 value of such undelivered elements. We typically do not offer discounts on future undeveloped products.

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



26

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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 non-cancelable and non-refundable. Also, our customer agreements for prepaid deployment licenses 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 does not impact our revenue recognition in such cases.
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 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. Prior to an End-User customer being able to deploy an application that it has
developed under our development license, it must purchase deployment licenses based on the number of computers connected to the server that will run the application using our product. For certain
applications, we offer deployment licenses priced on a per user basis. 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 sold 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 our 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. 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 VARs, 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,

27

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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.

In
instances where, at a customer's request, we perform engineering work to port our products to an unsupported platform or customization of our software for specific functionality, or
any other non-routine technical assignment, we recognize revenues in accordance with
SOP 81-1 Accounting Research Bulletin ("ARB") No. 45 (As Amended),Long-Term Construction-Type
Contractsand use either time and material percentage of completion or completed contract methods 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 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 SFAS No. 141,Business Combinationsand
account for the related acquired intangible assets in accordance with SFAS No. 142,Goodwill and Other Intangible Assets. In accordance with
SFAS 141, we 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. Certain intangible assets, such as acquired technology, are amortized to expense over time, while in-process research and development costs, or "IPR&D", if any, are charged to
operations expenditures at the time of acquisition.

We
test for any goodwill impairment within our single Data Management operating segment. All our goodwill has been aggregated from, and acquired in connection with, the following
acquisitions:



We
test goodwill for impairment in accordance with SFAS 142, which requires that goodwill be tested for impairment at the reporting unit level, at least annually and more
frequently upon the occurrence of certain events, as provided in SFAS 142. 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

28

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impairment.
The total fair value of our assets is estimated by summing the fair value of our equity (as indicated by Versant publicly traded share price and shares outstanding plus a 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.

As
required by SFAS 142, we ceased amortizing goodwill effective November 1, 2002. Prior to November 1, 2002, we amortized goodwill over five years using the
straight-line method.

Identifiable
intangibles are currently amortized over five years in relation to the JDO Genie (PTY) Ltd acquisition, six years in relation to the FastObjects, Inc.
acquisition, and seven years in relation to our acquisition of Poet, using the straight-line method in each of these cases.

We
performed tests and valuations on our goodwill and intangible assets on July 31, 2005 based on the provisions of SFAS 142 and SFAS 144. As a result, in fiscal
2005, we recorded an impairment charge of $10.3 million related to the write down of goodwill and a charge of $2.6 million related to the write down of intangible assets, of which
$2.4 million was recorded as impairment of Poet intangible assets and $232,000 was recorded as impairment of FastObjects, Inc. intangible assets.

We
performed our annual valuation and analysis of goodwill based on the requirements of SFAS 142 in October 2006 and October 2007. We did not perform impairment tests related to
our intangible assets during fiscal 2006 and fiscal 2007 based on the requirements of SFAS 144, 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 against our goodwill and intangible assets related to
our Poet, JDO Genie (PTY) and FastObjects acquisitions were recorded in fiscal 2006 and fiscal 2007.

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 then assess the likelihood that our deferred tax assets will be recovered from future taxable income and the extent we believe that recovery is not likely. We establish a valuation
allowance against our net deferred tax assets to the extent such assets are not deemed to be realizable. If we establish a valuation allowance or increase it in a given period, then we must increase
the tax provision in our statement of operations.

Significant
management judgment is required in determining any valuation allowance recorded against our net deferred tax assets. Due to uncertainties related to our ability to utilize
our deferred tax assets, we have established full valuation allowances at October 31, 2006 and October 31, 2007 for our deferred tax assets.

29

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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, 2007, 2006 and 2005, expressed
as a percentage of total revenues.

|                    |                                                                | Percentage of Revenues
Fiscal year ended October 31, |                         
|------------------- | -------------------------------------------------------------- | ---------------------------------------------------- | ------------------------
|
|Revenues:           |                                                                |                                                      |                         
|                    | License                                                        |                                                      | 60                      
|                    | Maintenance                                                    |                                                      | 39                      
|                    | Professional services                                          |                                                      | 1                       
|                    |                                                                |                                                      |                         
|                    |                                                                |                                                      | Total revenues          
|                    |                                                                |                                                      |                         
|Cost of revenues:   |                                                                |                                                      |                         
|                    | License                                                        |                                                      | 1                       
|                    | Amortization of intangible assets                              |                                                      | 1                       
|                    | Maintenance                                                    |                                                      | 7                       
|                    | Professional services                                          |                                                      | 1                       
|                    |                                                                |                                                      |                         
|                    |                                                                |                                                      | Total cost of revenues  
|                    |                                                                |                                                      |                         
|                    |                                                                |                                                      | Gross profit            
|                    |                                                                |                                                      |                         
|Operating expenses: |                                                                |                                                      |                         
|                    | Sales and marketing                                            |                                                      | 16                      
|                    | Research and development                                       |                                                      | 16                      
|                    | General and administrative                                     |                                                      | 21                      
|                    | Loss on the liquidation of a foreign subsidiary                |                                                      | 1                       
|                    | Impairment of goodwill                                         |                                                      | 0                       
|                    | Impairment of intangibles                                      |                                                      | 0                       
|                    | Restructuring                                                  |                                                      | 0                       
|                    |                                                                |                                                      |                         
|                    |                                                                |                                                      | Total operating expenses
|                    |                                                                |                                                      |                         
|                    | Income (loss) from operations                                  |                                                      | 36                      
|                    |                                                                | Outside shareholders' income from VIE                |                         
|                    |                                                                | Interest and other income, net                       |                         
|                    |                                                                | Gain on disposal of Variable Interest Entity         |                         
|                    |                                                                |                                                      |                         
|                    | Income (loss) from continuing operations before taxes          |                                                      | 39                      
|                    | Provision for income taxes                                     |                                                      | 4                       
|                    |                                                                |                                                      |                         
|                    | Net income (loss) from continuing operations                   |                                                      | 35                      
|                    | Net income from discontinued operations, net of income taxes   |                                                      | 1                       
|                    | Gain from sale of discontinued operations, net of income taxes |                                                      | 0                       
|                    |                                                                |                                                      |                         
|                    | Net income (loss)                                              |                                                      | 36                      
|                    |                                                                |                                                      |                         

30

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Revenues

Total Revenues:The following table summarizes our total revenues (in thousands, except percentages)
for fiscal 2007, 2006 and 2005:

|               |  | Fiscal Year ended October 31, |        | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) | 
|-------------- |  | ----------------------------- | ------ | --------------------------------------- | - | --------------------------------------- | 
|
|Total revenues |  | $                             | 21,150 |                                         | $ | 16,745                                  | 

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 product and customer mix, general trends in information technology spending, changes in geographic mix, and the corresponding impact of changes in foreign 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 operations 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 (loss) from discontinued operations, net of income taxes". See NOTE 4 of our "NOTES TO CONSOLIDATED FINANCIAL STATEMENTS" in Item 8 of this Report for more information
regarding this transaction.

Our
total revenues increased by $4.4 million (or 26%) in fiscal 2007 compared to fiscal 2006. This increase resulted primarily from a 50% increase in license revenues and a 22%
increase in maintenance revenues in fiscal 2007 compared to fiscal 2006, included favorable foreign currency fluctuations of $1.1 million and was partly offset by a decrease in professional
services revenues. We believe that license revenues increased in fiscal 2007 over fiscal 2006 due to various factors, including increased maturity, stability and focus of our sales organization, the
increased acceptance and success of our VAR customers' applications with end-users, the overall reputation and acceptance of our products in the vertical markets (including
telecommunications, technology and defense) that we serve, the relative strength of the worldwide economy in fiscal 2007, and the strong Euro as compared to the United States Dollar in fiscal 2007,
resulting in higher consolidated revenues. Maintenance revenues increased in fiscal 2007 over fiscal 2006 primarily as a result of the increased license revenues in the same period.

Our
total revenues increased by $999,000 (or 6%) in fiscal 2006 compared to fiscal 2005. This increase resulted primarily from a 153% increase in professional services revenues and a 7%
increase in maintenance revenues in fiscal 2006 compared to fiscal 2005, and included favorable foreign currency fluctuations of $186,000, and was partly offset by a decrease in license revenues.

One
customer accounted for 21% of our total revenues for the quarter ended October 31, 2007, and one customer accounted for 14% of our total revenues for fiscal 2007. One customer
accounted for 30% of our total revenues for the quarter ended October 31, 2006, and no one customer accounted for 10% or more of our total revenues for fiscal 2006.

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, versus the 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 factor in driving the amount of our services revenues, as new license customers typically enter into
support and maintenance agreements with us.

We
are currently forecasting total revenues for fiscal 2008 to increase approximately 13% compared to total revenues for fiscal 2007, and we intend to increase our sales personnel
headcounts during fiscal 2008.

31

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Revenues by Category:The following table summarizes our revenues by category (in thousands, except
percentages) in fiscal 2007, 2006 and 2005:

|                                    |       | Fiscal Year ended October 31, |        | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) |       
|----------------------------------- | ----- | ----------------------------- | ------ | --------------------------------------- | - | --------------------------------------- | ------
|
|Total revenues by category          |       |                               |        |                                         |   |                                         |       
|License revenues                    |       | $                             | 12,681 |                                         | $ | 8,469                                   |       
|Maintenance revenues                |       |                               | 8,225  |                                         |   | 6,726                                   |       
|Professional services revenues      |       |                               | 244    |                                         |   | 1,550                                   |       
|                                    |       |                               |        |                                         |   |                                         |       
|                                    | Total |                               | $      | 21,150                                  |   | $                                       | 16,745
|                                    |       |                               |        |                                         |   |                                         |       
|Percentage of revenues by category: |       |                               |        |                                         |   |                                         |       
|License revenues                    |       |                               | 60     | %                                       |   | 51                                      | %     
|Maintenance revenues                |       |                               | 39     | %                                       |   | 40                                      | %     
|Professional services revenues      |       |                               | 1      | %                                       |   | 9                                       | %     
|                                    |       |                               |        |                                         |   |                                         |       
|                                    | Total |                               |        | 100                                     | % |                                         | 100   
|                                    |       |                               |        |                                         |   |                                         |       

Fiscal 2007 Compared to Fiscal 2006

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

License
revenues were $12.7 million (or 60% of total revenues) in fiscal 2007, an increase of $4.2 million (or 50%) from license revenues of $8.5 million (or 51% of
total revenues) reported in fiscal 2006. The higher license revenues for fiscal 2007 were due in part to two significant license agreements with two U.S. customers for approximately $787,000 and
$479,000, and one significant license transaction with a U.S. customer for approximately $1.0 million sourced through our European operations, as well as three
additional license agreements with three European customers for approximately $1.1 million, $689,000 and $270,000.

The
majority of the growth in our license revenues in fiscal 2007 over fiscal 2006 was driven primarily by license transactions with existing VAR customers in the telecommunications
industry, which was our largest vertical market in fiscal 2007.

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 $8.2 million (or 39% of total revenues) in fiscal 2007, representing an increase of $1.5 million (or 22%) from maintenance revenues of
$6.7 million (or 40% of total revenues) reported in fiscal 2006. The increased maintenance revenues for fiscal 2007 are due primarily to incremental revenues of $1.1 million recognized
during fiscal 2007 from new maintenance agreements attributable to the license revenue growth from both U.S. and European based customers and, to a lesser extent, maintenance revenues of $266,000
related to the sale of premium support and maintenance agreements for software applications using older versions of our software.

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.

32

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Professional
services revenues were $244,000 (or 1% of total revenues) in fiscal 2007, a decline of $1.3 million (or 84%) from $1.6 million (or 9% of total revenues)
reported in fiscal 2006. This decline in fiscal 2007 compared to fiscal 2006 was mainly due to the fact that in fiscal 2006, we recognized $1.3 million in revenues from two significant
percentage-of-completion consulting projects with two European customers but had no such corresponding professional services revenue transactions of this magnitude in fiscal
2007.

Fiscal 2006 Compared to Fiscal 2005

License revenues:License revenues were $8.5 million (or 51% of total revenues) in fiscal
2006, a decline of $359,000 (or 4%) from $8.8 million (or 56% of total revenues) reported in fiscal 2005. In the European region, there was a $700,000 decrease in license revenues in fiscal
2006 compared to fiscal 2005, primarily due to a significant follow-on order from a European telecommunications company during the three months ended January 31, 2005 for which
there was no comparable license transaction in fiscal 2006. This decline was partially offset by a $315,000 increase in license revenues from our North American region, largely as a result of a
significant license transaction closed in the fourth quarter of fiscal 2006.

Maintenance revenues:Maintenance revenues were $6.7 million (or 40% of total revenues)
in fiscal 2006, an increase of $421,000 (or 7%) from $6.3 million (or 40% of total revenues) reported in fiscal 2005. European maintenance revenues increased $310,000 in fiscal 2006, primarily
as a result of three larger maintenance contracts, an increase in extended support agreements (i.e., for customers using older Versant software not supported through standard support
agreements) that have a higher selling price, and to a lesser extent, back maintenance revenues. Additionally, in fiscal 2006 there was an increase of $111,000 in maintenance revenues from our North
American operations, primarily as a result of an increase in extended support agreements.

Professional services revenues:Professional services revenues were $1.6 million (or 9%
of total revenues) in fiscal 2006, an increase of $937,000 (or 153%) from $613,000 (or 4% of total revenues) reported in fiscal 2005. This increase was mainly due to two significant
percentage-of-completion consulting arrangements with two European customers during fiscal 2006.

International revenues:The following table summarizes our total revenues by geographic area (in
thousands, except percentages) in fiscal 2007, 2006 and 2005:

|                                           |       | Fiscal Year ended October 31, |        | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) |       
|------------------------------------------ | ----- | ----------------------------- | ------ | --------------------------------------- | - | --------------------------------------- | ------
|
|Total revenues by geographic area          |       |                               |        |                                         |   |                                         |       
|North America                              |       | $                             | 9,679  |                                         | $ | 6,175                                   |       
|Europe                                     |       |                               | 10,672 |                                         |   | 10,138                                  |       
|Asia                                       |       |                               | 799    |                                         |   | 432                                     |       
|                                           |       |                               |        |                                         |   |                                         |       
|                                           | Total |                               | $      | 21,150                                  |   | $                                       | 16,745
|                                           |       |                               |        |                                         |   |                                         |       
|Percentage of revenues by geographic area: |       |                               |        |                                         |   |                                         |       
|North America                              |       |                               | 46     | %                                       |   | 37                                      | %     
|Europe                                     |       |                               | 50     | %                                       |   | 60                                      | %     
|Asia                                       |       |                               | 4      | %                                       |   | 3                                       | %     
|                                           |       |                               |        |                                         |   |                                         |       
|                                           | Total |                               |        | 100                                     | % |                                         | 100   
|                                           |       |                               |        |                                         |   |                                         |       

33

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Fiscal 2007 Compared to Fiscal 2006

Total
revenues increased $4.4 million (or 26%) in fiscal 2007 compared to fiscal 2006. The increase in revenues was due primarily to a revenue increase of $3.5 million in
our North American operations as a result of closing several significant transactions with U.S. customers during fiscal 2007. Additionally, there was a revenue increase of $901,000 from our European
and Asian regions.

International
(non-North American) revenues represented approximately 54% and 63% of our total revenues in fiscal 2007 and fiscal 2006, respectively.

Revenues from North America:The $3.5 million (or 57%) revenue increase from North
America in fiscal 2007 compared to fiscal 2006 was mainly due to two significant transactions with two North American customers totaling approximately $1.3 million, as well as the closing of
one significant license and maintenance transaction with a U.S. customer for approximately $1.4 million in revenues sourced through our European operations.

Revenues from Europe:The $534,000 (or 5%) revenue increase from Europe in fiscal 2007 compared
to fiscal 2006 was due mainly to the closing of three license agreements with three European customers for approximately $2.0 million during fiscal 2007, offset by a decrease of
$1.3 million in professional services revenues in fiscal 2007 versus fiscal 2006 due to the fact that two significant percentage-of-completion consulting projects in
fiscal 2006 were not replaced with comparable projects in fiscal 2007.

Revenues from Asia:We also experienced an increase of $367,000 (or 85%) in revenues from our
Asia Pacific region during fiscal 2007, primarily due to royalties of $226,000 from an existing Asian customer.

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. However, the closing of a significant license and maintenance transaction with a U.S. customer for approximately $1.4 million in revenues sourced through our European
operations during fiscal 2007 has been included as North American revenues. This one transaction accounted for 40% of the overall North American revenue increase for fiscal 2007 compared to fiscal
2006 and accounted for much of the increase in the percentage of our revenues sourced from North America in fiscal 2007 as compared to fiscal 2006. We expect in the future to experience a somewhat
stronger demand for our products in Europe as compared to our other geographic markets, including North America.

Fiscal 2006 Compared to Fiscal 2005

Total
revenues increased $999,000 (or 6%) in fiscal 2006 compared to fiscal 2005. The increase in revenues was due primarily to a revenue increase of $869,000 in North America as a
result of closing a significant license transaction during the fourth quarter of fiscal 2006 in the U.S. Additionally, there was an increase of $130,000 in revenues from our European and Asian regions
in fiscal 2006 as compared to fiscal 2005.

International
revenues represented approximately 63% and 66% of our total revenues in fiscal 2006 and fiscal 2005, respectively.

The
high percentage of international revenues for both fiscal 2006 and fiscal 2005 is mainly due to the following:



34

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Revenues from North America:The $869,000 (or 16%) increase in North American revenues in fiscal
2006 compared to fiscal 2005 was mainly due to the closing of a significant transaction with a U.S. customer totaling $1.2 million in license revenues during the fourth quarter of fiscal 2006.

Revenues from Europe:Revenues from Europe for fiscal 2006 were at a level consistent with
fiscal 2005 European revenues, with a $51,000 (or 1%) increase in European revenues in fiscal 2006 compared to fiscal 2005.

Cost of Revenues

Cost of Revenues:The following table summarizes the cost of revenues (in thousands, except
percentages) in fiscal 2007, 2006 and 2005:

|                                      |                        | Fiscal Year ended October 31, |        | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) |      
|------------------------------------- | ---------------------- | ----------------------------- | ------ | --------------------------------------- | - | --------------------------------------- | -----
|
|Total revenues                        |                        | $                             | 21,150 |                                         | $ | 16,745                                  |      
|Cost of license revenues              |                        |                               | 142    |                                         |   | 313                                     |      
|Cost of maintenance revenues          |                        |                               | 1,469  |                                         |   | 1,442                                   |      
|Cost of professional service revenues |                        |                               | 112    |                                         |   | 1,021                                   |      
|Amortization of intangibles           |                        |                               | 315    |                                         |   | 315                                     |      
|                                      |                        |                               |        |                                         |   |                                         |      
|                                      | Total cost of revenues |                               | $      | 2,038                                   |   | $                                       | 3,091
|                                      |                        |                               |        |                                         |   |                                         |      
|Gross margin                          |                        | $                             | 19,112 |                                         | $ | 13,654                                  |      
|                                      |                        |                               |        |                                         |   |                                         |      
|Gross margin percentage               |                        |                               | 90     | %                                       |   | 82                                      | %    

Cost
of revenues was $2.0 million (or 10% of total revenues) in fiscal 2007, a decline of $1.1 million (or 34%) from the cost of revenues of $3.1 million (or 18% of
total revenues) reported in fiscal 2006. This decline resulted primarily from a decrease in cost of professional services revenues of $909,000 (or 89%), which was directly related to a substantial
decrease in our lower margin professional services revenues, and included unfavorable foreign currency fluctuations of approximately $314,000.

Cost
of revenues was $3.1 million (or 18% of total revenues) in fiscal 2006, a decline of $180,000 (or 6%) from the cost of revenues of $3.3 million (or 21% of total
revenues) reported in fiscal 2005. This decline resulted primarily from a decrease in amortization of intangibles of $356,000 related to impairment of intangibles in the fourth quarter of fiscal 2005
offset by an increase of $151,000 in cost of professional services revenues, associated with a substantial increase in professional services revenues in fiscal 2006 over fiscal 2005. This decline
included unfavorable foreign currency fluctuations of approximately $79,000.

Gross
margin percentages (gross margin as a percentage of total revenues) improved to 90% in fiscal 2007 over 82% in fiscal 2006 and 79% in fiscal 2005.

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.

35

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The
following table summarizes the cost of license revenues (in thousands, except percentages) in fiscal 2007, 2006 and 2005:

|         |                   | Fiscal Year ended October 31, |        | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) |      
|-------- | ----------------- | ----------------------------- | ------ | --------------------------------------- | - | --------------------------------------- | -----
|
|License  |                   |                               |        |                                         |   |                                         |      
|Revenues |                   | $                             | 12,681 |                                         | $ | 8,469                                   |      
|Cost     |                   |                               | 142    |                                         |   | 313                                     |      
|         |                   |                               |        |                                         |   |                                         |      
|         | Margin            |                               | $      | 12,539                                  |   | $                                       | 8,156
|         |                   |                               |        |                                         |   |                                         |      
|         | Margin percentage |                               |        | 99                                      | % |                                         | 96   

Fiscal 2007 Compared to Fiscal 2006

Cost
of license revenues was $142,000 (or 1% of license revenues) in fiscal 2007, and decreased $171,000 (or 55%) from the cost of license revenues of $313,000 (or 4% of license
revenues) in fiscal 2006. The decrease was primarily due to the reversal of warranty reserves upon expiration of the warranty period in our European operations during fiscal 2007. These warranty
reserves were related to two consulting arrangements completed in fiscal 2006.

License
margin percentage increased by 3% points in fiscal 2007 compared to fiscal 2006 as a result of the decrease in cost of license revenues in fiscal 2007.

Fiscal 2006 Compared to Fiscal 2005

Cost
of license revenues was $313,000 (or 4% of license revenues) in fiscal 2006, and increased $39,000 (or 14%) from the cost of license revenues of $274,000 (or 3% of license revenues)
in fiscal 2005. The increase was primarily due to an increase in product media and packaging costs, as well as warranty reserves, and was offset by a decrease in costs associated with one discontinued
product line in our European operations of approximately $79,000. Additionally, there was a decrease of $44,000 in cost of third party products in our North American operations.

License
margin percentage decreased by 1% point in fiscal 2006 compared to fiscal 2005 as result of the slight increase in cost of license revenues in fiscal 2006.

Cost of maintenance revenues:Cost of maintenance revenues consists primarily of 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 2007, 2006 and 2005:

|            |                   | Fiscal Year ended October 31, |       | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) |      
|----------- | ----------------- | ----------------------------- | ----- | --------------------------------------- | - | --------------------------------------- | -----
|
|Maintenance |                   |                               |       |                                         |   |                                         |      
|Revenues    |                   | $                             | 8,225 |                                         | $ | 6,726                                   |      
|Cost        |                   |                               | 1,469 |                                         |   | 1,442                                   |      
|            |                   |                               |       |                                         |   |                                         |      
|            | Margin            |                               | $     | 6,756                                   |   | $                                       | 5,284
|            |                   |                               |       |                                         |   |                                         |      
|            | Margin percentage |                               |       | 82                                      | % |                                         | 79   

36

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Fiscal 2007 Compared to Fiscal 2006

Cost
of maintenance revenues was $1.5 million (or 18% of maintenance revenues) in fiscal 2007, representing an increase of $27,000 (or 2%) from the cost of cost of maintenance
revenues of $1.4 million (or 21% of maintenance revenues) reported in fiscal 2006. The overall cost of maintenance revenues remained relatively consistent in these two years. The increase in
absolute dollars of $27,000 was mainly due to an increase in commission and bonus expense in both our European and U.S operations.

Maintenance
margin percentage improved by 3% points in fiscal 2007 compared to fiscal 2006 primarily due to our providing increased maintenance and support services with approximately
the same number of personnel as we used to provide such services in fiscal 2006.

Fiscal 2006 Compared to Fiscal 2005

Cost
of maintenance revenues was $1.4 million (or 21% of maintenance revenues) in fiscal 2006, representing a decline of $14,000 (or 1%) from the cost of maintenance revenues of
$1.5 million (or 23% of maintenance revenues) reported in fiscal 2005. The overall cost of maintenance revenues remained relatively consistent in these two years. The $14,000 decline in
absolute dollars was due mainly to a headcount reduction of one employee (resulting in a reduction in salary and related expenses of $34,000 in our U.S. operations) as a result of fiscal 2005
restructuring activities, and was offset by an increase of approximately $20,000 in travel and related expenses in our European operations as a result of increased maintenance revenues in that region.

Maintenance
margin percentage improved by 2% pointsin fiscal 2006 compared to fiscal 2005, because of improved utilization of our
maintenance resources with increased maintenance revenues during fiscal 2006.

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 2007, 2006 and 2005:

|                      |                   | Fiscal Year ended October 31, |     | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) |    
|--------------------- | ----------------- | ----------------------------- | --- | --------------------------------------- | - | --------------------------------------- | ---
|
|Professional services |                   |                               |     |                                         |   |                                         |    
|Revenues              |                   | $                             | 244 |                                         | $ | 1,550                                   |    
|Cost                  |                   |                               | 112 |                                         |   | 1,021                                   |    
|                      |                   |                               |     |                                         |   |                                         |    
|                      | Margin            |                               | $   | 132                                     |   | $                                       | 529
|                      |                   |                               |     |                                         |   |                                         |    
|                      | Margin percentage |                               |     | 54                                      | % |                                         | 34 

Fiscal 2007 Compared to Fiscal 2006

Cost
of professional services revenues was $112,000 (or 46% of professional services revenues) in fiscal 2007, and decreased $909,000 (or 89%) from the cost of professional services
revenues of $1.0 million (or 66% of professional services revenues) in fiscal 2006. This decrease was primarily due to the reallocation of headcounts in our European consulting team from
professional services activities to research and development efforts as a result of the completion of major percentage-of-completion consulting projects with two European
customers in fiscal 2006 that were not replicated in fiscal 2007.

37

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In Europe, there is a typical one-year warranty requirement for all of our products and services. Prior to our merger with Poet in March 2004, Poet Holdings, Inc.
provided for a reserve for such warranties that could be in excess of its regular maintenance programs. As of October 31, 2007, we continued to maintain a warranty reserve of approximately
$10,000 related to the FastObjects products in Europe. Pursuant to our consulting percentage-of-completion engagements with certain European customers, we recorded additional
warranty reserves of $128,000 for fiscal 2006. These reserves were subsequently reversed during the fourth quarter of fiscal 2007 upon expiration of the one-year warranty period.

The
professional services margin percentage improved by 20% points in fiscal 2007 compared to fiscal 2006 due to better utilization of our professional personnel.

Fiscal 2006 Compared to Fiscal 2005

Cost
of professional services revenues was $1.0 million (or 66% of professional services revenues) in fiscal 2006, and increased $151,000 (or 17%) from the cost of professional
services revenues of $870,000 (or 142% of professional services revenues) in fiscal 2005. This increase was primarily due to increases in salary and consultant compensation as a result of transferring
personnel resources from engineering to professional services.

The
professional services margin percentage improved by 76% points in fiscal 2006 compared to fiscal 2005 due to better utilization of our professional personnel. The negative margin in
professional services for fiscal 2005 was due to under-utilization of one full-time employee dedicated to professional services as a result of delays related to a major consulting project
during fiscal 2005.

Amortization of Intangible Assets:The amortization of intangible assets in fiscal 2007 consists
of the amortization of intangible assets acquired in the 2004 acquisitions of Poet Holdings, Inc., FastObjects, Inc. and JDO Genie technology.

The
following table summarizes the amortization of intangible assets (in thousands, except percentages) in fiscal 2007, 2006 and 2005:

|                                            |  | Fiscal Year ended October 31, |     | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) | 
|------------------------------------------- |  | ----------------------------- | --- | --------------------------------------- | - | --------------------------------------- | 
|
|Poet Holdings, Inc.                         |  |                               | 189 |                                         |   | 189                                     | 
|JDO Genie (PTY), LTD.                       |  |                               | 110 |                                         |   | 110                                     | 
|FastObjects, Inc.                           |  |                               | 16  |                                         |   | 16                                      | 
|                                            |  |                               |     |                                         |   |                                         | 
|Total amortization of purchased intangibles |  | $                             | 315 |                                         | $ | 315                                     | 
|                                            |  |                               |     |                                         |   |                                         | 

Fiscal 2007 Compared to Fiscal 2006

Amortization
of intangible assets was $315,000 (or 2% of license revenues) in fiscal 2007, which was consistent with the amount incurred in fiscal 2006. We expect to incur quarterly
amortization charges of approximately $79,000 in fiscal 2008.

Fiscal 2006 Compared to Fiscal 2005

Amortization
of intangible assets was $315,000 (or 4% of license revenues) in fiscal 2006, and decreased $356,000 (or 53%) from amortization of intangible assets of $671,000 (or 8% of
license revenues) in fiscal 2005. This decline was due to several write-offs of our previously amortized intangible assets for $2.6 million in fiscal 2005.

38

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Operating Expenses

Operating Expenses.The following table summarizes our operating expenses (in thousands, except
percentages) for fiscal 2007, 2006 and 2005:

|                                                |  | Fiscal Year ended October 31, |        | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) | 
|----------------------------------------------- |  | ----------------------------- | ------ | --------------------------------------- | - | --------------------------------------- | 
|
|Operating expenses                              |  |                               |        |                                         |   |                                         | 
|Sales and marketing                             |  | $                             | 3,392  |                                         | $ | 3,062                                   | 
|Research and development                        |  |                               | 3,410  |                                         |   | 3,147                                   | 
|General and administrative                      |  |                               | 4,401  |                                         |   | 3,712                                   | 
|Loss on the liquidation of a foreign subsidiary |  |                               | 245    |                                         |   |                                        | 
|Impairment of goodwill and intangibles          |  |                               |       |                                         |   |                                        | 
|Restructuring                                   |  |                               |       |                                         |   | 218                                     | 
|                                                |  |                               |        |                                         |   |                                         | 
|Total                                           |  | $                             | 11,448 |                                         | $ | 10,139                                  | 
|                                                |  |                               |        |                                         |   |                                         | 

Fiscal 2007 Compared to Fiscal 2006

Total
operating expenses were $11.4 million (or 54% of total revenues) in fiscal 2007 and increased $1.3 million (or 13%) from $10.1 million (or 61% of total
revenues) reported in fiscal 2006. The increase of total operating expenses in absolute dollars in fiscal 2007 resulted primarily from an increase in our general and administrative and sales and
marketing expenses and, to a lesser degree, from an increase in our research and development expenses, discussed further below. This increase also included an unfavorable foreign currency exchange
fluctuation of $334,000. However total operating expenses in fiscal 2007 represented a lower percentage of total revenues than did total operating expenses in fiscal 2006.

In
June 2007 we relocated our U.S. corporate headquarters from Fremont, California to Redwood City, California. As a result of this relocation, we anticipate a reduction in our quarterly
operating expenses for financial reporting purposes of approximately $125,000 in building lease and related facility expenses through the end of the current lease term now scheduled for May 2010,
primarily due to the fact that we occupy less square footage in our new Redwood City facility than in our former Fremont offices.

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 $3.4 million (or 16% of total revenues) in fiscal 2007, an increase of $330,000 (or 11%), compared to $3.1 million (or 19% of total
revenues) in fiscal 2006. The increase in absolute dollars for sales and marketing expense for fiscal 2007 was partly due to an approximate $477,000 increase in sales commissions and bonuses payable
as a result of higher revenues for the Company in fiscal 2007 than in fiscal 2006 in both our European and U.S. operations, and an approximate $127,000 increase in marketing expenses related to
advertising campaigns and trade shows in our European operations. The increase was partially offset by one headcount reduction in our U.S. operations (resulting in a reduction of salary, severance and
other payroll related expenses totaling $212,000); together with an approximate $68,000 decrease in marketing programs in our U.S. operations.

39

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We
expect sales and marketing expenses to increase moderately in fiscal 2008 from fiscal 2007 due to both recent and anticipated increases in sales personnel and in marketing programs,
and that sales and marketing expense 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 $3.4 million (or 16% of revenues) for fiscal 2007, an increase of $263,000 (or 8%), compared to $3.1 million (or 19% of revenues) in
fiscal 2006. The increase in absolute dollars for research and development expenses for fiscal 2007 was mainly due to an increase of seven headcounts in our European operations, resulting in an
increase of approximately $1.0 million in research and development expenses from fiscal 2006, an increase of $108,000 in bonus expenses as a result of improved financial results in fiscal 2007
as compared to fiscal 2006, and an increase in building rent expense in our Indian facility for approximately $40,000 from the comparable period for fiscal 2006. These increases were partially offset
by a decrease in research and development expenses as a result of headcount reductions of four personnel in our U.S. operations, resulting in a reduction of salary and payroll related expenses of
approximately $1.0 million.

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. We expect our research and development expenses to increase moderately in fiscal 2008 compared to research and development expenses levels in fiscal 2007.

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

General
and administrative expenses were $4.4 million (or 21% of total revenues) in fiscal 2007, an increase of $689,000 (or 19%), compared to $3.7 million (or 22% of total
revenues) in fiscal 2006. The increase in absolute dollars for fiscal 2007 was primarily due to an approximate $391,000 increase in legal fees and costs associated with a pending litigation, an
approximate $373,000 increase in bonuses as a result of improved financial results in fiscal 2007 as compared to fiscal 2006, an approximate $145,000 increase in stock-based compensation expense due
to stock option grants and increased participation in our Employee Stock Purchase Plan, and an approximate $74,000 net increase in facility expenses as a result of costs related to the relocation of
our U.S. corporate headquarters from Fremont, California to Redwood City, California. These increases were offset by one headcount reduction in our U.S. operations (resulting in a reduction of salary,
severance and other payroll related expenses totaling $287,000) and an approximate $101,000 decrease in accounting and auditing fees in our U.S. operations.

We
expect our general and administrative expenses in fiscal 2008 to be comparable to those in fiscal 2007. We expect increased costs associated with the implementation of
Section 404 of the Sarbanes-Oxley of 2002 to be offset by decreases in other general and administrative expenses including facility costs in fiscal 2008.

Loss on the Liquidation of a Foreign Subsidiary:Loss on the liquidation of a foreign subsidiary
reflects the realization of accumulated foreign currency translation adjustments related to our former U.K. subsidiary, Versant Ltd., upon completion of its liquidation in fiscal 2007.

The
loss on the liquidation of a foreign subsidiary was $245,000 (or 1% of total revenues) in fiscal 2007 with no comparable amount in fiscal 2006. We elected to liquidate
Versant Ltd., our subsidiary in the United Kingdom, to reduce costs and centralize our European operations. The liquidation of Versant Ltd. was completed in the fourth quarter of fiscal
2007, and in accordance with the provisions

40

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of
SFAS 52, we recorded a $245,000 operating loss to reflect the realization of accumulated foreign currency translation adjustments related to Versant Ltd.

Fiscal 2006 Compared to Fiscal 2005

Total
operating expenses were $10.1 million (or 61% of total revenues) in fiscal 2006. Our total operating expenses in fiscal 2006 represented a decline of $4.9 million (or
32%) from $15.0 million of total operating expenses (after excluding $12.9 million of write-offs for impairment of goodwill and intangible assets in fiscal 2005) reported for
fiscal 2005. The most significant portion of this decline in our operating expenses was a reduction in our sales and marketing expenses by approximately $2.7 million as part of our
restructuring efforts, followed by a $935,000 reduction in our general and administrative expenses and a $778,000 reduction in research and development expenses, discussed further below. This decline
also included unfavorable foreign currency exchange fluctuations of $68,000.

Sales and Marketing:Sales and marketing expenses were $3.1 million (or 19% of total
revenues) in fiscal 2006, a decrease of $2.7 million (or 47%), compared to $5.8 million (or 37% of total revenues) in fiscal 2005. The decrease was primarily due to headcount reductions
of six personnel in our U.S. sales operations (resulting in a reduction of salary, commission, employee severance payments and other payroll related expenses totaling $1.1 million) and
headcount reductions of five personnel in European operations (resulting in a reduction of salary, commission, employee severance payments and other payroll related expenses totaling $489,000).
Additionally, the sales activities and marketing programs were reduced in both the U.S. and European operations resulting in a further reduction of sales and marketing expenses of approximately
$939,000. Headcount reductions were the result of our fiscal 2005 restructuring activities to better align our costs with the revenue levels.

Research and Development:Research and development expenses were $3.1 million (or 19% of
revenues) for fiscal 2006, a decrease of $778,000 (or 20%), compared to $3.9 million (or 25% of revenues) in fiscal 2005. The decrease was mainly due to headcount reductions of three personnel
in our U.S. operations (resulting in a reduction of salary and payroll related expenses, as well as severance payments totaling $355,000) and a decline in temporary help and outside consultant
expenses (resulting in a reduction of $402,000). These reductions were primarily due to our fiscal 2005 restructuring activities.

General and Administrative:General and administrative expenses were $3.7 million (or 22%
of total revenues) in fiscal 2006, a decrease of $935,000 (or 20%), compared to $4.6 million (or 30% of total revenues) in fiscal 2005. The decrease was mainly due to headcount reductions of
three personnel in U.S. operations (resulting in a reduction of salary and payroll related expenses totaling $99,000) and a reduction in temporary help and outside consultant expenses (resulting in a
reduction of $97,000) as the result our fiscal 2005 restructuring activities. Legal expenses declined by $677,000 and were primarily a result of an insurance reimbursement for certain legal costs of
$241,000, a reduction of $185,000 in legal expenses related to a legal settlement, and a reduction of $251,000 in overall legal costs due to less complex regulatory issues during fiscal 2006.
Additionally, accounting and SEC filing related expenses declined by $297,000 due to more streamlined operations and procedures. These declines were offset by an increase of approximately $279,000 in
salary and traveling expenses in our European operations attributable to our CEO as a result of reorganization in management.

Outside Shareholders' Income from Variable Interest Entity or "VIE"

|                                      |  | Fiscal Year ended October 31, |   | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) | 
|------------------------------------- |  | ----------------------------- | - | --------------------------------------- | - | --------------------------------------- | 
|
|Outside shareholders' income from VIE |  | $                             |  |                                         | $ | 138                                     | 

41

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During
the three months ended July 31, 2005, as part of our restructuring plan, we spun-off the assets of our VOA.Net product to Vanatec, and we committed to a capital
contribution to Vanatec of an additional 212,500 euros (or $260,000), which we contributed in full on November 3, 2005. We determined that equity at risk in Vanatec was not sufficient to
permit it to finance its activities without additional subordinated financial support; therefore, we considered Vanatec a variable interest entity in accordance with FIN 46(R), Consolidation of Variable Interest
Entities(As Amended).

Vanatec's
results of operations were included in our consolidated financial statements for the three month periods ended July 31, 2005, October 31, 2005 and
January 31, 2006 and through March 27, 2006. During the three months ended January 31, 2006, we absorbed our share of Vanatec's losses up to the point that it exceeded variable
interest liability; and subsequent to that we absorbed 100% of the losses that Vanatec had incurred for an additional amount of $35,000 for the three months ended January 31, 2006. In addition,
we continued to absorb 100% of Vanatec's losses for an additional amount of $70,000 for the period between February 1, 2006 and March 27, 2006, until we determined that we were no longer
required to consolidate Vanatec's operating results, as described below.

On
March 27, 2006, we sold our 19.6% interest in Vanatec to a third party investor for 4,900 euros and entered into a joint ownership agreement with Vanatec with respect to
certain technology we had previously licensed to Vanatec. According to this agreement, Vanatec is obligated to pay Versant a running royalty at a rate of six percent of its net proceeds, but no less
than 30 euros per copy, from licenses it grants of the co-owned technology for a period of five years following the effective date of this agreement. Further, at any time during the
royalty period, Vanatec has the right to exercise a buyout for its royalty obligations by making a one-time payment to Versant of 150,000 euros. As a result of Versant's sale of its
interest in Vanatec and this agreement, Versant determined that it was no longer the primary beneficiary of Vanatec as defined by FIN 46 (R), and thus, was no longer required to consolidate
Vanatec's operating results after March 27, 2006.

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 other income, net (in thousands, except percentages) in fiscal 2007, 2006 and 2005:

|                               |  | Fiscal Year ended October 31, |     | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) |  
|------------------------------ |  | ----------------------------- | --- | --------------------------------------- | - | --------------------------------------- | -
|
|Interest and other income, net |  |                               |     |                                         |   |                                         |  
|Interest income                |  | $                             | 531 |                                         | $ | 154                                     |  
|Interest expense               |  |                               | (5  | )                                       |   | (6                                      | )
|Foreign exchange gain (loss)   |  |                               | (90 | )                                       |   | 6                                       |  
|Other income                   |  |                               | 96  |                                         |   | 54                                      |  
|                               |  |                               |     |                                         |   |                                         |  
|Total                          |  | $                             | 532 |                                         | $ | 208                                     |  
|                               |  |                               |     |                                         |   |                                         |  

Fiscal 2007 Compared to Fiscal 2006

Interest
and other income, net was $532,000 (or 3% of revenues) in fiscal 2007 compared to $208,000 (or 1% of revenues) in fiscal 2006. The increase in absolute dollars of $324,000 (or
156%) was largely due to an increase of $377,000 in interest income from both our European and U.S. operations as a result of higher cash balances as well as higher interest rates, and an increase of
$42,000 in other

42

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income
primarily associated with the sale of excess furniture and equipment related to the relocation of our U.S. headquarters, and was partially offset by $96,000 in unfavorable foreign exchange rate
fluctuations.

Fiscal 2006 Compared to Fiscal 2005

Interest
and other income, net was $208,000 (or 1% of revenues) in fiscal 2006 compared to $197,000 (or 1% of revenues) in fiscal 2005. The increase in absolute dollars of $11,000 was
largely due to an increase in interest income of $91,000 from our European operations due to higher cash balances and higher interest rates, which was offset by approximately $126,000 in unfavorable
foreign exchange rate fluctuations.

Gain on Disposal of VIE

As discussed above, we are no longer required to consolidate the operating results of Vanatec as of March 28, 2006; therefore, we recorded a gain of
$131,000 related to the deconsolidation of Vanatec in our consolidated statement of operations during the three months ended April 30, 2006. This amount is comprised of the reversal of the
excess losses that we had absorbed previously for $105,000, the consideration that we received from a third party investor in lieu of our interest at Vanatec of $6,000, the transfer of property and
equipment for $17,000, other comprehensive income for $6,000, and offset by foreign currency losses of $3,000. Consequently, the results of Vanatec are not included in the Company's consolidated
financial statements as of and for the fiscal year ended October 31, 2007.

Provision for Income Taxes

Provision for income taxes primarily consists of corporate income taxes for our subsidiaries in Germany and India and, to a lesser extent, foreign withholding
taxes and state income and franchise taxes in the U.S.

The
following table summarizes our provision for income taxes (in thousands, except percentages) in fiscal 2007, 2006 and 2005:

|                                   |       | Fiscal Year ended October 31, |     | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) |    
|---------------------------------- | ----- | ----------------------------- | --- | --------------------------------------- | - | --------------------------------------- | ---
|
|Provision for income taxes         |       |                               |     |                                         |   |                                         |    
|Foreign withholding taxes          |       | $                             | 51  |                                         | $ | 7                                       |    
|Provision for income taxes Europe  |       |                               | 751 |                                         |   | 336                                     |    
|Provision for income taxes India   |       |                               | 15  |                                         |   | 15                                      |    
|Federal, state and franchise taxes |       |                               | 50  |                                         |   | 32                                      |    
|                                   |       |                               |     |                                         |   |                                         |    
|                                   | Total |                               | $   | 867                                     |   | $                                       | 390
|                                   |       |                               |     |                                         |   |                                         |    

Although
we have not exhausted our net operating tax loss carry forwards in Germany, the German tax code provides for certain annual statutory limitations related to the use of tax loss
carry forward amounts. The provision for income taxes in Germany of approximately $751,000 and $336,000 for fiscal 2007 and fiscal 2006, respectively, were 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 $101,000, $39,000, and $37,000 in fiscal 2007, 2006 and 2005, respectively, which we have
included in our income tax provision.

43

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At
October 31, 2007, we had federal and state net operating loss carry forwards of approximately $80.0 million and $15.9 million, respectively, and federal and state
tax credit carry forwards of approximately $2.3 million and $1.3 million, respectively. The federal tax credit carry forwards expire on various dates through 2025, if not utilized. The
state tax credit can be carried forward indefinitely. Additionally, at October 31, 2007, we had German net operating tax loss carry forwards of approximately $41.0 million. The German
net operating tax loss carry forwards can be carried forward indefinitely. Due to our history of operating losses, we believe that there is sufficient uncertainty regarding the realizability of these
carry forwards and, therefore, a valuation allowance of
approximately $45.5 million has been recorded against our net deferred tax assets as of October 31, 2007. We will continue to assess the realizability of the tax benefit available based
on actual and forecasted operating results.

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.

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.

Income from Discontinued Operations, Net of Income Taxes

In February 2006, we sold our WebSphere consulting business 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 2007, fiscal 2006, and
fiscal 2005 as income from discontinued operations, net of income taxes. 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 2007, 2006 and 2005:

|                                                         |  | Fiscal Year ended October 31, |     | Fiscal 2007 vs 2006
Increase (Decrease) |   | Fiscal 2006 vs 2005
Increase (Decrease) | 
|-------------------------------------------------------- |  | ----------------------------- | --- | --------------------------------------- | - | --------------------------------------- | 
|
|Income from discontinued operations, net of income taxes |  | $                             | 304 |                                         | $ | 231                                     | 

Fiscal 2007 Compared to Fiscal 2006

Income
from discontinued operations, net of income taxes was $304,000 in fiscal 2007 compared to $231,000 in fiscal 2006. Income from discontinued operations in fiscal 2007 and fiscal
2006 represented primarily royalty payments from WebSphere during these two years.

Fiscal 2006 Compared to Fiscal 2005

Income
from discontinued operations, net of income taxes was $231,000 in fiscal 2006 compared to $417,000 in fiscal 2005. The $231,000 income from discontinued operations in fiscal 2006
represented primarily royalty payments from WebSphere for fiscal 2006. The $417,000 income from discontinued operations in fiscal 2005 primarily represented net income from the WebSphere consulting
practice for fiscal 2005.

44

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Liquidity and Capital Resources

Cash and Cash Equivalents

In fiscal 2007, we financed our operations and met our capital expenditure requirements primarily through cash flows from operations.

As
of October 31, 2007, $12.0 million of our $19.0 million in cash and cash equivalents at that date was held in foreign financial institutions, of which
$10.2 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, 2007Local Currency

U.S. DollarCash in foreign currency:Euro

€6,924

$
9,978British Pound

£48


99India Rupee

Rs.4,445


113Total



$
10,190


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 2007 were comprised of $1.1 million of favorable foreign currency fluctuations on our revenues, $314,000 of unfavorable
foreign currency fluctuations on our cost of revenues, and $334,000 of unfavorable foreign currency fluctuations on our operating expenses, resulting in a net favorable effect of approximately
$456,000 in our statement of operations for fiscal 2007. 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 assess the need to utilize financial instruments to hedge currency exposures on an ongoing basis during fiscal 2008.

Our
exposure to foreign exchange risk is related to the magnitude of foreign net profits and losses denominated in euros and Pound Sterling, as well as our net position of monetary
assets and monetary liabilities in those foreign currencies. These exposures have the potential to produce either gains or losses 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 euros or pounds sterling against the U.S. dollar will result in lower revenues when translated into U.S. dollars, the operating expenditures will be lower as well. Additionally,
we have maintained approximately 47% of our total cash balance 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 if the cash payment or transfer 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; accordingly, our interest rate risk is not considered significant.

45

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We
believe that with our current cost structure and based on our current estimates of revenues and collections in fiscal 2008, we can reasonably expect to operate at a positive cash flow
level in fiscal 2008.

Cash Flow provided by Operating Activities

This table aggregates certain line items from our cash flow statements for the following fiscal years to present the key items affecting our operating activities
(in thousands):

|                                           |                                                             | Fiscal Year ended October 31, |  
|------------------------------------------ | ----------------------------------------------------------- | ----------------------------- | -
|
|Net cash provided by operating activities: |                                                             |                               |  
|                                           | Net income (loss)                                           |                               | $
|                                           | Gain from the disposal of assets                            |                               |  
|                                           | Loss on the liquidation of a foreign subsidiary             |                               |  
|                                           | Net income from discontinued operations                     |                               |  
|                                           | Non-cash adjustments                                        |                               |  
|                                           | Accounts receivable                                         |                               |  
|                                           | Other assets                                                |                               |  
|                                           | Accounts payable, accrued liabilities and other liabilities |                               |  
|                                           | Deferred revenues                                           |                               |  
|                                           | Deferred rents                                              |                               |  
|                                           |                                                             |                               |  
|                                           |                                                             | Total                         |  
|                                           |                                                             |                               |  

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 for
personnel related expenditures and facilities costs.

Fiscal 2007

We
generated $10.0 million of cash flows from operations in fiscal 2007. This was primarily derived from $7.6 million in net income and a $955,000 reduction in accounts
receivables and other assets,

Non-cash
adjustments were $1.1 million, as reflected in our cash flow statement in fiscal 2007, which were primarily depreciation and amortization expense of $637,000
and stock-based compensation expense of $416,000. 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 60 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 the future periods, due to timing and amount of our revenues and the effectiveness of our
collection efforts. Our DSOs were 38 days, 56 days and 45 days for the three months ended October 31, 2007, October 31, 2006 and October 31, 2005,
respectively.

46

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Our
working capital was $15.3 million as of October 31, 2007 compared to $6.2 million as of October 31, 2006.

We
relocated our U.S. corporate headquarters from Fremont, California to Redwood City, California in June 2007. As a result of this relocation, we anticipate a reduction in our quarterly
cash outflows of approximately $250,000 related to reduced building lease and related facility expenses through the end of the current lease term now scheduled for May 2010, primarily due to the fact
that we occupy less square footage in our new Redwood City facility than we did in our former Fremont offices. The difference in the estimated increased quarterly cash outflow savings of $250,000, as
compared to the estimated reduction in our quarterly operating expenses for financial reporting purposes of $125,000, is primarily the result of restructuring charges recorded in our financial
statements for prior periods.

Fiscal 2006

We
generated $3.3 million of cash flows from operations in fiscal 2006. This was primarily derived from $4.3 million in net income and was partially offset by $806,000 cash
used, as a result of reduction in accounts payables, accrued liabilities and other liabilities.

Non-cash
adjustments were $674,000, as reflected in our cash flow statement in fiscal 2006, which were primarily depreciation and amortization expense of $518,000 and
stock-based compensation expense of $236,000.

Our
working capital was $6.2 million as of October 31, 2006 compared to $870,000 as of October 31, 2005.

Fiscal 2005

We
generated $68,000 of cash flows from operations in fiscal 2005. This was primarily due to a $2.7 million reduction in accounts receivables as a result of improved collections
procedures and improved days sales outstanding, or DSO, and was partially offset by $2.1 million cash used, as a result of reduction in accounts payables, accrued liabilities and other
liabilities.

Non-cash
adjustments were $13.7 million, as reflected in our cash flow statement in fiscal 2005, which were primarily due to a $12.9 million impairment of
goodwill and intangible assets, recorded at the end of the third quarter of fiscal 2005.

Cash Flow provided by (used in) 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). In fiscal 2006, we sold our WebSphere consulting practice and our interests in Vanatec, the proceeds from which are reflected in investing activities.

Fiscal 2007

In
fiscal 2007, net cash used in investing activities was approximately $677,000, comprised of the following:



47

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We
anticipate an overall decrease in spending related to property and equipment in fiscal 2008 compared to fiscal 2007.

Fiscal 2006

In
fiscal 2006, net cash provided by investing activities was approximately $385,000, comprised of the following:



Fiscal 2005

In
fiscal 2005, net cash used in investing activities was approximately $47,000, comprised of the following:



Cash Flow provided by Financing Activities

Our main source of cash from financing activities was proceeds from sale of common stock under our employee stock option and stock purchase plans and, in the
periods that we had a receivable line of credit in place, periodic draw-downs on the credit line that were typically repaid within a month.

Fiscal 2007

In
fiscal 2007, $484,000 of cash was provided by financing activities comprised of the following:



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.
Further, as of October 31, 2007 we had approximately 262,000 shares available to issue under our current equity incentive and director plans. The timing of the issuance, the duration of their
vesting provision and the grant price will all impact the timing of any proceeds. Accordingly, we cannot estimate the amount of such proceeds at this time.

Our
$3.0 million credit facility with a financial institution expired by its terms in June 2007, and we currently do not anticipate establishing another credit or loan facility in
fiscal 2008.

Fiscal 2006

In
fiscal 2006, $140,000 cash was provided by financing activities comprised of the following:



48

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Fiscal 2005

In
fiscal 2005, $380,000 cash was provided by financing activities comprised of the following:



Commitments and Contingencies

Our principal commitments as of October 31, 2007 consist of obligations under operating leases for facilities and equipment commitments.

On
March 23, 2007, we entered into an office building lease with CA-Shorebreeze Limited Partnership pursuant to which we are leasing approximately 6,800 square feet in
an office facility located in Redwood City, California. The lease has a term of thirty-six months, which commenced in June 2007. The Redwood City, California office under the lease serves
as our new U.S. headquarters, replacing our former facility in Fremont, California, whose lease expired on June 30, 2007. Monthly rent under the lease for our Redwood City office will initially
be approximately $19,000 and is subject to 4% annual increases thereafter. The total rent payable over the full thirty-six month lease term (net of two months rent abatement) will be
approximately $671,000. We have an option to extend the term of the lease for one additional one-year period at a rent equal to the then fair market lease rate. Pursuant to the lease, the
landlord has agreed to provide a tenant improvement allowance of approximately $101,000. Any tenant improvement costs exceeding this allowance are borne by us. Rental expense under this agreement,
including contractual rent increases, is recognized on a straight-line basis. We also lease field office space in Europe and India, generally under multi-year operating lease
agreements. Consolidated rent expense in fiscal years ended October 31, 2007, October 31, 2006 and October 31, 2005, was approximately $735,000, $877,000, and $1.0 million,
respectively.

Our
annual minimum commitments as of October 31, 2007 under non-cancelable operating leases are listed as follows (in thousands):

Rental Lease

Equipment Leases

TotalFiscal year ending October 31,2008

$
546

$
23

$
5692009


436


15


4512010


180


3


183Thereafter








Total

$
1,162

$
41

$
1,203


We
believe that our existing cash and cash equivalents and cash to be generated from operations will be sufficient to finance our operations during the next twelve months. However, if we
fail to generate adequate cash flows from operations in the future, due to an unexpected decline in our revenues, or due to a sustained increase in cash expenditures in excess of the revenues
generated, then our cash balances may not be sufficient to fund our continuing operations without obtaining additional debt or equity financing. Additional cash may also be needed to acquire or invest
in complementary businesses products or to purchase or license technologies, and we expect that, in the event of such an

49

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acquisition
or investment that is significant and requires that we pay cash consideration, it will be necessary for us to seek additional debt or equity financing.

Our
$3.0 million credit facility with a financial institution expired by its terms in June 2007, and we currently do not anticipate establishing another credit or loan facility in
fiscal 2008.

If
we are required to obtain additional financing for our working capital, there can be no assurance that such financing will be available to us on reasonable financial or other terms,
or at all. The prices at which new investors might be willing to purchase our securities may be lower than the market value or the trading price of our common stock. The sale of additional equity or
convertible debt securities could also result in dilution to our shareholders, which could be substantial and may involve the issuance of preferred securities that would have liquidation preferences
that entitle holders of the preferred securities to receive certain amounts before holders of our common stock in connection with an acquisition or business combination involving Versant or a
liquidation of Versant. New investors may also seek agreements giving them additional voting control or seats on our board of directors. Even if we were able to obtain additional debt or equity
financing, the terms of any such financing might
significantly restrict our business activities and in some circumstances, might require us to obtain the approval of our shareholders, which could delay or prevent consummation of the financing
transaction.

Our
software license agreements generally include certain provisions for indemnifying customers against liabilities if our software products infringe upon a third party's intellectual
property rights. To date, we have not incurred any material costs as a result of any indemnification. However, as a result of current litigation in which Rockwell Automation, one of our customers, is
seeking indemnification from us for alleged infringement of intellectual property rights asserted against it by Systems America, Inc., we have recorded an immaterial loss contingency reserve as
of January 31, 2007 in accordance with FASB Statement No. 5. To date, we have incurred significant legal costs as a result of this litigation. We are continuing to contest the
allegations of infringement of intellectual property rights asserted in this litigation.

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 hedging instruments.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 2007
were comprised of $1.1 million of favorable foreign currency fluctuations on our revenues, $314,000 of unfavorable foreign currency fluctuations on our cost of revenues, and $334,000 of
unfavorable foreign currency fluctuations on our operating expenses, resulting in a net favorable effect of approximately $456,000 in our statement of operations for fiscal 2007. 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 assess the need to
utilize financial instruments to hedge currency exposures on an ongoing basis during fiscal 2008.

Our
exposure to foreign exchange risk is related to the magnitude of foreign net profits and losses denominated in euros and, to a lesser degree, pounds sterling as well as our net
position of monetary assets and monetary liabilities in those foreign currencies. These exposures have the potential to produce either gains or losses within our consolidated results. Our European
operations, however, in some instances act as a natural hedge since both operating expenses as well as revenues are

50

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denominated
in local currencies. In these instances, although an unfavorable change in the exchange rate of euros or pounds sterling against the U.S. dollar will result in lower revenues when
translated into U.S. dollars, the operating expenditures will be lower as well. Additionally, since most of our cash resides outside the United States, we have maintained approximately 47% of our
total cash balance 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.

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

51

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Item 8.    Financial Statements and Supplementary Data.

VERSANT CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
AND OTHER INFORMATION

|Report of Independent Registered Public Accounting Firm                                   |                                                          | 53
|----------------------------------------------------------------------------------------- | -------------------------------------------------------- | --
|Consolidated Balance Sheets as of October 31, 2007 and 2006                               |                                                          | 54
|Consolidated Statements of Operations for the Years Ended October 31, 2007, 2006 and 2005 |                                                          | 55
|Consolidated Statements of Shareholders' Equity and Comprehensive Income                  |                                                          | 56
|Consolidated Statements of Cash Flows for the Years Ended October 31, 2007, 2006 and 2005 |                                                          | 57
|Notes to Consolidated Financial Statements:                                               |                                                          |   
|                                                                                          | Note 1The Company and Basis of Presentation             |   
|                                                                                          | Note 2Summary of Significant Accounting Policies        |   
|                                                                                          | Note 3Stock-Based Compensation                          |   
|                                                                                          | Note 4Discontinued Operations                           |   
|                                                                                          | Note 5Restructuring                                     |   
|                                                                                          | Note 6Liquidation of a Foreign Subsidiary               |   
|                                                                                          | Note 7Consolidation of Variable Interest Entity         |   
|                                                                                          | Note 8Lease Obligations                                 |   
|                                                                                          | Note 9Legal Proceedings                                 |   
|                                                                                          | Note 10Shareholders' Equity and Income (Loss) Per Share |   
|                                                                                          | Note 11Income Taxes                                     |   
|                                                                                          | Note 12Employee and Director Benefit Plans              |   
|                                                                                          | Note 13Forfeiture of Common Stocks                      |   
|                                                                                          | Note 14Valuation and Qualifying Accounts and Reserves   |   
|                                                                                          | Note 15Quarterly Information                            |   

52

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board
of Directors and Shareholders
of Versant Corporation

We
have audited the accompanying consolidated balance sheets of Versant Corporation and subsidiaries (the "Company") as of October 31, 2007 and 2006, and the related consolidated
statements of operations, shareholders' equity and comprehensive income, and cash flows for each of the three years in the period ended October 31, 2007. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated 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 audits 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 consolidated financial position of Versant Corporation and
subsidiaries as of October 31, 2007 and 2006, and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended
October 31, 2007, in conformity with accounting principles generally accepted in the United States of America.

|/s/GRANT THORNTON LLPJanuary 28, 2008
San Francisco, California |  | 
|--------------------------------------------------------------- |  | 

53

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VERSANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands)

|                                     |                                                                                                                                                              | October 31, 2007                           |       | October 31, 2006 |       
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------ | ----- | ---------------- | ------
|ASSETS                               |                                                                                                                                                              |                                            |       |                  |       
|Current assets:                      |                                                                                                                                                              |                                            |       |                  |       
|                                     | Cash and cash equivalents                                                                                                                                    |                                            | $     | 19,086           |       
|                                     | Trade accounts receivable, net of allowance for doubtful accounts of $68 and $62 at October 31, 2007 and October 31, 2006, respectively                      |                                            |       | 2,330            |       
|                                     | Other current assets                                                                                                                                         |                                            |       | 506              |       
|                                     |                                                                                                                                                              |                                            |       |                  |       
|                                     |                                                                                                                                                              | Total current assets                       |       |                  | 21,922
|Property and equipment, net          |                                                                                                                                                              |                                            | 835   |                  |       
|Goodwill                             |                                                                                                                                                              |                                            | 6,720 |                  |       
|Intangible assets, net               |                                                                                                                                                              |                                            | 881   |                  |       
|Other assets                         |                                                                                                                                                              |                                            | 108   |                  |       
|                                     |                                                                                                                                                              |                                            |       |                  |       
|                                     |                                                                                                                                                              | Total assets                               |       | $                | 30,466
|                                     |                                                                                                                                                              |                                            |       |                  |       
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                                                                              |                                            |       |                  |       
|Current liabilities:                 |                                                                                                                                                              |                                            |       |                  |       
|                                     | Accounts payable                                                                                                                                             |                                            | $     | 157              |       
|                                     | Accrued liabilities                                                                                                                                          |                                            |       | 2,756            |       
|                                     | Deferred revenues                                                                                                                                            |                                            |       | 3,707            |       
|                                     | Deferred rent                                                                                                                                                |                                            |       | 7                |       
|                                     |                                                                                                                                                              |                                            |       |                  |       
|                                     |                                                                                                                                                              | Total current liabilities                  |       |                  | 6,627 
|Deferred revenues                    |                                                                                                                                                              |                                            | 641   |                  |       
|Deferred rent                        |                                                                                                                                                              |                                            | 29    |                  |       
|Long-term capital lease obligations  |                                                                                                                                                              |                                            | 4     |                  |       
|                                     |                                                                                                                                                              |                                            |       |                  |       
|                                     |                                                                                                                                                              | Total liabilities                          |       |                  | 7,301 
|                                     |                                                                                                                                                              |                                            |       |                  |       
|Stockholders' equity:                |                                                                                                                                                              |                                            |       |                  |       
|                                     | Common stock, no par value, 7,500,000 shares authorized, 3,671,924 and 3,596,968 shares issued and outstanding as of October 31, 2007 and 2006, respectively |                                            |       | 96,004           |       
|                                     | Accumulated other comprehensive income, net                                                                                                                  |                                            |       | 1,346            |       
|                                     | Accumulated deficit                                                                                                                                          |                                            |       | (74,185          | )     
|                                     |                                                                                                                                                              |                                            |       |                  |       
|                                     |                                                                                                                                                              | Total stockholders' equity                 |       |                  | 23,165
|                                     |                                                                                                                                                              |                                            |       |                  |       
|                                     |                                                                                                                                                              | Total liabilities and stockholders' equity |       | $                | 30,466
|                                     |                                                                                                                                                              |                                            |       |                  |       

See
accompanying notes to consolidated financial statements.

54

---



VERSANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except for per share amounts)

|                                                                  |                                                                | Fiscal Year Ended October 31,                |                         
|----------------------------------------------------------------- | -------------------------------------------------------------- | -------------------------------------------- | ------------------------
|
|Revenues:                                                         |                                                                |                                              |                         
|                                                                  | License                                                        |                                              | $                       
|                                                                  | Maintenance                                                    |                                              |                         
|                                                                  | Professional services                                          |                                              |                         
|                                                                  |                                                                |                                              |                         
|                                                                  |                                                                |                                              | Total revenues          
|                                                                  |                                                                |                                              |                         
|Cost of revenues:                                                 |                                                                |                                              |                         
|                                                                  | License                                                        |                                              |                         
|                                                                  | Amortization of intangible assets                              |                                              |                         
|                                                                  | Maintenance                                                    |                                              |                         
|                                                                  | Professional services                                          |                                              |                         
|                                                                  |                                                                |                                              |                         
|                                                                  |                                                                |                                              | Total cost of revenues  
|                                                                  |                                                                |                                              |                         
|                                                                  |                                                                |                                              | Gross profit            
|                                                                  |                                                                |                                              |                         
|Operating expenses:                                               |                                                                |                                              |                         
|                                                                  | Sales and marketing                                            |                                              |                         
|                                                                  | Research and development                                       |                                              |                         
|                                                                  | General and administrative                                     |                                              |                         
|                                                                  | Loss on the liquidation of a foreign subsidiary                |                                              |                         
|                                                                  | Impairment of goodwill                                         |                                              |                         
|                                                                  | Impairment of intangibles                                      |                                              |                         
|                                                                  | Restructuring                                                  |                                              |                         
|                                                                  |                                                                |                                              |                         
|                                                                  |                                                                |                                              | Total operating expenses
|                                                                  |                                                                |                                              |                         
|                                                                  | Income (loss) from operations                                  |                                              |                         
|                                                                  |                                                                | Outside shareholders' income from VIE        |                         
|                                                                  |                                                                | Interest and other income, net               |                         
|                                                                  |                                                                | Gain on disposal of Variable Interest Entity |                         
|                                                                  |                                                                |                                              |                         
|                                                                  | Income (loss) from continuing operations before taxes          |                                              |                         
|                                                                  | Provision for income taxes                                     |                                              |                         
|                                                                  |                                                                |                                              |                         
|                                                                  | Net income (loss) from continuing operations                   |                                              |                         
|                                                                  | Net income from discontinued operations, net of income taxes   |                                              |                         
|                                                                  | Gain from sale of discontinued operations, net of income taxes |                                              |                         
|                                                                  |                                                                |                                              |                         
|                                                                  | Net income (loss)                                              |                                              | $                       
|                                                                  |                                                                |                                              |                         
|Basic income (loss) per share:                                    |                                                                |                                              |                         
|                                                                  | Net income (loss) from continuing operations                   |                                              | $                       
|                                                                  | Earnings from discontinued operations, net of income tax       |                                              | $                       
|                                                                  |                                                                |                                              |                         
|                                                                  | Net income (loss) per share, basic                             |                                              | $                       
|Diluted income (loss) per share:                                  |                                                                |                                              |                         
|                                                                  | Net income (loss) from continuing operations                   |                                              | $                       
|                                                                  | Earnings from discontinued operations, net of income tax       |                                              | $                       
|                                                                  |                                                                |                                              |                         
|                                                                  | Net income (loss) per share, diluted                           |                                              | $                       
|Shares used in per share calculation:                             |                                                                |                                              |                         
|                                                                  | Basic                                                          |                                              |                         
|                                                                  | Diluted                                                        |                                              |                         
|Non-cash stock-based compensation included in the above expenses: |                                                                |                                              |                         
|                                                                  | Cost of revenues                                               |                                              | $                       
|                                                                  | Sales and marketing                                            |                                              | $                       
|                                                                  | Research and development                                       |                                              | $                       
|                                                                  | General and administrative                                     |                                              | $                       

See accompanying notes to consolidated financial statements.

55

---



VERSANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME

(in thousands, except for share amount)

|                            |                                                                    | Common                     |        |   |        |     |   |      |    |   |         |         |  
|--------------------------- | ------------------------------------------------------------------ | -------------------------- | ------ | - | ------ | --- | - | ---- | -- | - | ------- | ------- | -
|
|
|
|Balance at October 31, 2004 |                                                                    | 3,469,742                  |        | $ | 94,021 |     | $ | (146 | )  | $ | (71,565 | )       | $
|                            | ESPP                                                               |                            | 15,985 |   |        | 73  |   |      |   |   |         |        |  
|                            | Exercise of stock options                                          |                            | 52,137 |   |        | 267 |   |      |   |   |         |        |  
|                            | Reverse split adjustments                                          |                            | (42    | ) |        |    |   |      |   |   |         |        |  
|                            | Issuance of common stock in connection with purchase of JDO assets |                            | 23,015 |   |        | 400 |   |      |   |   |         |        |  
|                            | Amortization of unearned stock based compensation                  |                            |       |   |        |    |   |      | 96 |   |         |        |  
|                            | Cancellation of unvested Poet stock options                        |                            |       |   |        | (6  | ) |      | 6  |   |         |        |  
|                            | Net loss                                                           |                            |       |   |        |    |   |      |   |   |         | (14,554 | )
|                            | Foreign currency translation adjustments                           |                            |       |   |        |    |   |      |   |   |         |        |  
|                            |                                                                    |                            |        |   |        |     |   |      |    |   |         |         |  
|                            |                                                                    | Total comprehensive loss   |        |   |        |     |   |      |    |   |         |         |  
|                            |                                                                    |                            |        |   |        |     |   |      |    |   |         |         |  
|Balance at October 31, 2005 |                                                                    | 3,560,837                  |        | $ | 94,755 |     | $ | (44  | )  | $ | (86,119 | )       | $
|                            | ESPP                                                               |                            | 19,630 |   |        | 64  |   |      |   |   |         |        |  
|                            | Exercise of stock options                                          |                            | 25,499 |   |        | 128 |   |      |   |   |         |        |  
|                            | Forfeiture of common stockMokume Cancellation                     |                            | (8,998 | ) |        | (50 | ) |      |   |   |         |        |  
|                            | Non-cash stock based compensation expense                          |                            |       |   |        | 192 |   |      |   |   |         |        |  
|                            | Adjustment from deferred compensation to APIC                      |                            |       |   |        |    |   |      | 44 |   |         |        |  
|                            | Net income                                                         |                            |       |   |        |    |   |      |   |   |         | 4,301   |  
|                            | Foreign currency translation adjustments                           |                            |       |   |        |    |   |      |   |   |         |        |  
|                            |                                                                    |                            |        |   |        |     |   |      |    |   |         |         |  
|                            |                                                                    | Total comprehensive income |        |   |        |     |   |      |    |   |         |         |  
|                            |                                                                    |                            |        |   |        |     |   |      |    |   |         |         |  
|Balance at October 31, 2006 |                                                                    | 3,596,968                  |        | $ | 95,089 |     | $ |     |    | $ | (81,818 | )       | $
|                            | ESPP                                                               |                            | 29,468 |   |        | 183 |   |      |   |   |         |        |  
|                            | Exercise of stock options                                          |                            | 45,488 |   |        | 316 |   |      |   |   |         |        |  
|                            | Non-cash stock based compensation expense                          |                            |       |   |        | 416 |   |      |   |   |         |        |  
|                            | Net income                                                         |                            |       |   |        |    |   |      |   |   |         | 7,633   |  
|                            | Foreign currency translation adjustments                           |                            |       |   |        |    |   |      |   |   |         |        |  
|                            |                                                                    |                            |        |   |        |     |   |      |    |   |         |         |  
|                            |                                                                    | Total comprehensive income |        |   |        |     |   |      |    |   |         |         |  
|                            |                                                                    |                            |        |   |        |     |   |      |    |   |         |         |  
|Balance at October 31, 2007 |                                                                    | 3,671,924                  |        | $ | 96,004 |     | $ |     |    | $ | (74,185 | )       | $
|                            |                                                                    |                            |        |   |        |     |   |      |    |   |         |         |  

See accompanying notes to consolidated financial statements.

56

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VERSANT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

|                                                                                             |                                                                                          | Fiscal Year Ended October 31,                                       |                                          
|-------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------------- | -----------------------------------------
|
|Cash flows from operating activities:                                                        |                                                                                          |                                                                     |                                          
|                                                                                             | Net income (loss)                                                                        |                                                                     | $                                        
|                                                                                             | Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                                     |                                          
|                                                                                             |                                                                                          | Gain from sale of discontinued operations, net of income taxes      |                                          
|                                                                                             |                                                                                          | Gain on disposal of Variable Interest Entity                        |                                          
|                                                                                             |                                                                                          | Net income from discontinued operations, net of income taxes        |                                          
|                                                                                             |                                                                                          | Loss on the liquidation of a foreign subsidiary                     |                                          
|                                                                                             |                                                                                          | Depreciation and amortization                                       |                                          
|                                                                                             |                                                                                          | Amortization of intangible assets                                   |                                          
|                                                                                             |                                                                                          | Stock-based compensation                                            |                                          
|                                                                                             |                                                                                          | Write off of property and equipment                                 |                                          
|                                                                                             |                                                                                          | Impairment of goodwill and intangibles                              |                                          
|                                                                                             |                                                                                          | Non-cash operating expenses related to cancellation of common stock |                                          
|                                                                                             |                                                                                          | Recovery of bad debt allowance                                      |                                          
|                                                                                             |                                                                                          | Changes in assets and liabilities:                                  |                                          
|                                                                                             |                                                                                          |                                                                     | Restricted cash                          
|                                                                                             |                                                                                          |                                                                     | Accounts receivable                      
|                                                                                             |                                                                                          |                                                                     | Other assets                             
|                                                                                             |                                                                                          |                                                                     | Accounts payable                         
|                                                                                             |                                                                                          |                                                                     | Accrued liabilities and other liabilities
|                                                                                             |                                                                                          |                                                                     | Deferred revenues                        
|                                                                                             |                                                                                          |                                                                     | Deferred rent                            
|                                                                                             |                                                                                          |                                                                     |                                          
|                                                                                             |                                                                                          |                                                                     |                                          
|                                                                                             |                                                                                          |                                                                     |                                          
|Cash flows from investing activities:                                                        |                                                                                          |                                                                     |                                          
|                                                                                             | Proceeds from sale of Websphere                                                          |                                                                     |                                          
|                                                                                             | Proceeds from sale of Vanatec                                                            |                                                                     |                                          
|                                                                                             | Investment in Vanatec                                                                    |                                                                     |                                          
|                                                                                             | Proceeds from sale of property and equipment                                             |                                                                     |                                          
|                                                                                             | Purchases of property and equipment                                                      |                                                                     |                                          
|                                                                                             |                                                                                          |                                                                     |                                          
|                                                                                             |                                                                                          |                                                                     |                                          
|                                                                                             |                                                                                          |                                                                     |                                          
|Cash flows from financing activities:                                                        |                                                                                          |                                                                     |                                          
|                                                                                             | Proceeds from sale of common stock, net                                                  |                                                                     |                                          
|                                                                                             | Principal payments under capital lease obligations                                       |                                                                     |                                          
|                                                                                             | Proceeds (net payments) under short-term note and bank loan                              |                                                                     |                                          
|                                                                                             |                                                                                          |                                                                     |                                          
|                                                                                             |                                                                                          |                                                                     |                                          
|                                                                                             |                                                                                          |                                                                     |                                          
|Effect of foreign exchange rate changes on cash and cash equivalents                         |                                                                                          |                                                                     | 706                                      
|                                                                                             |                                                                                          |                                                                     |                                          
|Net increase in cash and cash equivalents from operating, investing and financing activities |                                                                                          |                                                                     | 10,551                                   
|Net increase in cash and cash equivalents from discontinued operation                        |                                                                                          |                                                                     | 304                                      
|Cash and cash equivalents at beginning of period                                             |                                                                                          |                                                                     | 8,231                                    
|                                                                                             |                                                                                          |                                                                     |                                          
|Cash and cash equivalents at end of period                                                   |                                                                                          | $                                                                   | 19,086                                   
|                                                                                             |                                                                                          |                                                                     |                                          
|Supplemental disclosures of cash flows information:                                          |                                                                                          |                                                                     |                                          
|                                                                                             | Cash paid for:                                                                           |                                                                     |                                          
|                                                                                             | Interest                                                                                 |                                                                     | $                                        
|                                                                                             | Foreign, federal, foreign withholding and state income taxes                             |                                                                     | $                                        
|Supplemental schedule of noncash investing and financing activities:                         |                                                                                          |                                                                     |                                          
|                                                                                             | Common stock issued in conjunction with purchase of JDO Genie (PTY) Ltd.                 |                                                                     | $                                        
|                                                                                             | Mokume common stock cancellation                                                         |                                                                     | $                                        
|                                                                                             | Non cash stock compensation expense                                                      |                                                                     | $                                        

See accompanying notes to consolidated financial statements.

57

---



VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

October 31, 2007

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 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.

Versant
is subject to the risks commonly associated with similar sized companies in the software industry. These risks include, but are not limited to the following: dependence on a key
product, fluctuations of operating results, seasonality, lengthy sales cycles for its products, product concentration, dependence on continued customer acceptance of object database technology,
competition, a limited customer base, dependence on key individuals, dependence on international operations, foreign currency exchange rate fluctuations and the Company's ability to adequately finance
its ongoing operations.

The
Company generated net income of $7.6 million and $4.3 million in fiscal 2007 and fiscal 2006, respectively, and a net loss of $14.6 million in fiscal 2005.
Management anticipates funding future operations from its current cash resources and its future cash flows from operations. However, if the Company's financial results fall short of projections,
additional debt or equity may be required to finance operations, and the Company may need to implement further cost reductions. No assurances can be given that these efforts will be successful, if
required.

In
July 2005, Versant, through its subsidiary Versant GmbH, entered into certain agreements to effect a spin-off of tangible assets, technology rights and contracts
related to its Versant Open Access.NET ("VOA.NET") business to Vanatec GmbH (a then newly formed privately held company based in Germany). In accordance with Financial Accounting Standards
Board ("FASB") Interpretation No. 46 (R) ("FIN 46(R)"), Vanatec's operating results were included in Versant's consolidated financial statements from July 2005 through
March 27, 2006. On March 27, 2006, Versant sold its entire equity interest in Vanatec to a third party investor and entered into a joint ownership agreement with Vanatec
with respect to technology it had previously licensed to Vanatec (see Note 7 for a more detailed description of the Vanatec transaction). As a result of this sale of its interest in Vanatec, as
of March 28, 2006, Versant is no longer required to consolidate the operating results of Vanatec, and as such, the Company's consolidated financial statements for fiscal 2007 do not include the
accounts of Vanatec.

In
February 2006, Versant completed the sale of the assets associated with its WebSphere® consulting practice to Sima Solutions, a newly formed privately held corporation
based in the United States. Versant's WebSphere consulting practice provided consulting and training services to end-users of IBM's WebSphere® application server software. As a
result of this transaction, Versant has ceased providing WebSphere consulting services (see Note 4 for a more detailed description of the WebSphere transaction). Consequently, the Company's
consolidated financial statements included in this report do

58

---



VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 1. THE COMPANY AND BASIS OF PRESENTATION (Continued)

not
include financial results of the WebSphere consulting practice as part of continuing operations. Instead, as required by generally accepted accounting principles, the Company's financial
statements report former WebSphere activities as "net income (loss) from discontinued operations, net of income taxes".

In
October 2007, Versant completed the liquidation of Versant Ltd., its subsidiary in the United Kingdom (See Note 6 for a more detailed description of the
Versant Ltd. transaction). Upon the completion of this liquidation, in accordance with the provisions of FASB Statement of Financial Accounting Standards ("SFAS") No. 52 Foreign Currency Translation,("SFAS 52") Versant recorded a $245,000 operating loss to reflect the realization of foreign currency translation
adjustments related to the liquidated subsidiary.

As
of October 31, 2007, Versant had a total of 80 full time employees.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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) and, from July 2005 through March 27, 2006, the variable interest entity (VIE) required to be consolidated in accordance with accounting principles
generally accepted in the United States of America (GAAP) (see Note 7 for details). 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 at the rates of exchange on the balance sheet date, and local currency revenues and expenses are translated at average rates of exchange during the period. Resulting translation gains or
losses are included in the accompanying consolidated statement of shareholders' equity as a component of accumulated other comprehensive income.

Use of Estimates

The preparation of financial statements, in conformity with 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.

Cash and Cash Equivalents

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
other cash equivalents at October 31, 2007 and October 31, 2006 consisted of deposits in banks and money market funds. As of October 31, 2007 and 2006 cash balances held in
foreign financial institutions were $12.0 million and $7.0 million, respectively.

59

---



VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentration of Credit Risk

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 high quality 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 $68,000 and $62,000 at October 31, 2007 and
October 31, 2006, 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

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, 2007 and October 31, 2006 (in thousands):

As of October 31,2007

2006Computer equipment

$
1,380

$
4,723Furniture and fixtures


551


1,825Software


585


1,479Leasehold improvements


61


155Capital lease and other assets


35


872,612


8,269Less: accumulated depreciation and amortization


(1,777
)

(7,884
)$
835

$
385


Total
depreciation expense for fiscal 2007, fiscal 2006 and fiscal 2005 was $322,000, $203,000, and $305,000, respectively.

Impairment of Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations. In July 2001, the FASB approved the
issuance of SFAS No. 142,Goodwill and Other Intangible Assets("SFAS 142"). SFAS 142 provides guidance on how to account for
goodwill and

60

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

certain
intangible assets after an acquisition is completed. As required by SFAS 142, Versant ceased amortizing its goodwill effective November 1, 2002. Prior to November 1, 2002,
the Company amortized goodwill over five years using the straight-line method.

Goodwill
is subject to an annual impairment test. Versant uses the market approach to assess the fair value of its goodwill and intangible assets, which is then compared to the carrying
value of those assets to test for impairment. The total fair value of Versant's assets is estimated by summing the fair value of Versant's equity (as indicated by Versant publicly traded share price
and shares outstanding plus a control premium), debt and current liabilities. Under this approach, if the estimated fair value of Versant's assets is greater than the carrying value of these assets,
then there is no apparent goodwill impairment. If the estimated fair value of Versant assets is less than the carrying value of these assets, then Versant allocates 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 is less than that reporting unit's goodwill carrying amount and would be recorded in earnings during the period of such impairment.

Due
to a decline in the trading price of Versant's common stock and revised revenue projections in fiscal 2005, most notably for the FastObjects product line, the Company prepared an
updated valuation with regard to its goodwill as of July 31, 2005. The affected goodwill was acquired by Versant as a result of its merger with Poet in March 2004, its acquisition of technology
assets from JDO Genie (PTY) Limited in June 2004, and its acquisition of FastObjects, Inc. in July 2004. Consequently, for the quarter ended July 31, 2005, the Company recorded an
impairment charge of $10.3 million related to the write down of its goodwill.

Versant
also performed its annual evaluations of the Company's goodwill based on the requirements of SFAS 142 in October 2006 and October 2007. As a result of these impairment
tests and valuation analysis, Versant determined that no further impairment charges against the Company's goodwill were required in fiscal 2006 and fiscal 2007.

For
the purpose of testing for goodwill impairment in its single Data Management operating segment, Versant has aggregated the goodwill for the following acquisitions:



61

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



The
goodwill balances as of October 31, 2007 and October 31, 2006, are as follows (in thousands):

|          |                          | As of October 31, 2007 |   | As of October 31, 2006
|--------- | ------------------------ | ---------------------- | - | ----------------------
|
|Goodwill: |                          |                        |   |                       
|          | Versant Europe and India |                        | $ | 3,277                 
|          | Poet Holdings, Inc.      |                        |   | 5,752                 
|          | FastObjects, Inc.        |                        |   | 677                   
|          | JDO Genie (PTY), LTD.    |                        |   | 50                    
|          |                          |                        |   |                       
|          |                          | Total                  |   | $                     
|          |                          |                        |   |                       

Versant
evaluates its long-lived assets, including intangible assets other than goodwill, for impairment in accordance with the provisions of SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived
Assets("SFAS 144"). SFAS 144 requires that long-lived
assets and intangible assets other than goodwill be evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. The
recoverability test compares the carrying amount of the asset or asset group to the expected undiscounted net cash flows to be generated by these assets. If the carrying amount of the asset or asset
group is less than the expected undiscounted net cash flows to be generated by these assets, an impairment loss is recorded in earnings during the period of such impairment and is calculated as the
excess of the carrying amount of the asset or asset group over its estimated fair value.

Identifiable
intangibles are currently amortized over five years in relation to the acquisition of technology of JDO Genie (PTY) Ltd, six years in relation to the
FastObjects, Inc. acquisition and seven years in relation to the merger with Poet, using the straight-line method in each of these cases. Intangible assets consist of acquired
technology and customer relationships.

Versant
tests and evaluates its intangible assets for impairment whenever indicators of potential impairment are identified.

Versant
performed tests and valuations on its intangible assets on July 31, 2005. As a result, the Company recorded a charge of $2.6 million related to the write down of
intangible assets, of which $2.4 million was recorded as impairment of Poet intangible assets and $232,000 was recorded as impairment of FastObjects, Inc. intangible assets.

In
fiscal 2006 and fiscal 2007, as there were no triggering events which might indicate impairment of Versant's intangible assets, the Company did not perform impairment tests and
valuation analysis of its intangible assets. Based on the requirements of SFAS 144, Versant determined that the value of the Company's intangible assets had been fairly recorded in its
financial statements, and therefore, no further impairment charges against the Company's intangible assets related to the Company's Poet and FastObjects acquisitions were recorded in fiscal 2006 and
fiscal 2007.

62

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The
Company's intangible assets' balances as of October 31, 2007 and October 31, 2006 are as follows (in thousands):

|                   |                                              | As of October 31, 2007 |   | As of October 31, 2006
|------------------ | -------------------------------------------- | ---------------------- | - | ----------------------
|
|Intangible assets: |                                              |                        |   |                       
|                   | Poet Holdings, Inc. (Amortized over 7 yrs)   |                        | $ | 1,919                 
|                   | JDO Genie (PTY), LTD. (Amortized over 5 yrs) |                        |   | 550                   
|                   | FastObjects, Inc. (Amortized over 6 yrs)     |                        |   | 148                   
|                   |                                              |                        |   |                       
|                   |                                              | Total                  |   | $                     
|                   |                                              |                        |   |                       

The
projected amortization of intangible assets is as follows (in thousands):

AmortizationFiscal year ending October 31,2008


3152009


2792010


200Thereafter


87Total

$
881


Revenue Recognition

Versant recognizes revenues in accordance with the provisions of Statement of Position ("SOP") 97-2,Software Revenue
Recognition,SOP 98-9, Modification of SOP 97-2, Software Revenue Recognition with Respect to Certain
Transactions,and SOP 81-1,Accounting for Performance of Construction-Type and Certain Production-Type
Contracts. Revenues consist mainly of revenues earned under software license agreements, maintenance support agreements (otherwise known as post-contract customer
support, ("PCS")), and 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 at a future date. If there is an undelivered element under
the license arrangement, Versant defers revenues based on vendor-specific objective evidence, or VSOE, of the fair value of the undelivered elements, 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 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 VSOE

63

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

of
the value of such undelivered elements. Versant typically does not offer discounts on future undeveloped products.

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 satisfaction of the contingency, as
applicable. The Company's license fees are non-cancelable and non-refundable. Also, the Company's customer agreements for prepaid deployment licenses do not make payment of the
Company's license fees contingent upon the actual deployment of its software. Therefore, a customer's delay or acceleration in its deployment schedule does not impact the Company's revenue
recognition. 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 of the PCS, 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 the Company 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 the Company's products
internally and do not redistribute the product outside of their corporate organizations. VAR customers include traditional Value Added Resellers, Systems Integrators, OEMs and other vendors who
redistribute the Company'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

64

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

authorize
a customer to develop and test an application program that uses the Company's software product. Before an End-User customer may deploy an application that it has developed under
our development license, it must purchase deployment licenses based on the number of computers connected to the server that will run the application using the Company's database management system. For
certain applications, the Company offers deployment licenses priced on a per user basis. 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 of a nonrefundable amount for future deployment.

VARs
and distributors purchase development licenses from the Company on a per seat basis on terms similar to those of development licenses sold directly to End-Users. VARs
are authorized to sublicense deployment copies of the Company'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 based either on the number of copies of Versant's 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. 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
VARs,
and (ii) as to other license arrangements, at the time the VAR provides a royalty report to the Company for sales made by the VAR during a given period.

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

In
rare cases that a customer requests engineering work for porting the Company's products to an unsupported platform or customization of its software for specific functionality, or any
other non-routine technical work, Versant recognizes revenues in accordance with SOP 81-1 and uses either time and material percentage of completion or completed
contract methods for recognizing revenues. The Company uses the percentage of completion method if the Company can make reasonable and dependable estimates of labor costs and hours required to
complete the work in question. Versant periodically reviews these estimates in connection with 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:



65

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



The
completed contract method is used when reasonable or dependable estimates cannot be made. As a result, in such situations, the Company defers all revenues until such time that the
work is fully completed.

Foreign Currency Translation

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 during each period. Revenues and expenses are translated using rates that approximate the average of those in
effect during the period. Gains and losses from translation adjustments are included in stockholders' equity in the consolidated balance sheet caption as other comprehensive income.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) consists entirely of cumulative translation adjustments resulting from the Company's application of its foreign currency
translation policy and unrealized gains (losses) on marketable securities.

The
following table summarizes the breakdown of other comprehensive income (loss) for the years ended October 31, 2007, October 31, 2006 and October 31, 2005 (in
thousands):

Fiscal year ended October 31,2007

2006

2005Net income (loss), as reported

$
7,633

$
4,301

$
(14,554
)Foreign currency translation adjustment


825


125


(173
)Other comprehensive income (loss)

$
8,458

$
4,426

$
(14,727
)


Warranties and Indemnification Obligations

The Company recognizes warranty and indemnification obligations under SFAS No. 5 (As Amended),Accounting for
Contingencies("SFAS 5"), FASB Interpretation No. 45,Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Othersand FASB Concepts Statement.("SFAC") No. 7 (As Amended),Using Cash Flow Information and Present
Value in Accounting Measurements.These pronouncements require 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. To date, the Company has not incurred any material costs as a result of any indemnification.

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

66

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Company
also warrants that services the Company performs will be provided in a manner consistent with industry standards. To date, Versant has not incurred any material costs associated with these
warranties, and as such the Company has not provided for any reserves for any such warranty liabilities in its U.S. operating results.

In
Europe, there is typically a one-year warranty period for all of the Company's products and services. In fiscal 2006, pursuant to the consulting engagements with certain
European customers, Versant recorded a $128,000 warranty reserve based on historical experience and expected need at that time in its consolidated financial statements. These warranty reserves were
subsequently reversed during the fourth quarter of fiscal 2007 upon expiration of the one-year warranty period. As a result, Versant has a $10,000 warranty reserve balance as of
October 31, 2007 in its consolidated financial statements compared to a total warranty reserve balance of $136,000 as of October 31, 2006.

The
Company is currently a party to litigation in which Rockwell Automation, one of Versant's customers, is seeking indemnification from the Company for alleged infringement of
intellectual property rights asserted against it by Systems America, Inc. Versant recorded an immaterial loss contingency reserve in the first quarter of fiscal 2007 in accordance with
SFAS 5. The Company is contesting the allegations of infringement of intellectual property rights asserted in this litigation. See Note 9 for more detailed description of this legal
proceeding.

Deferred Revenue

Deferred revenue represents amounts received from 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 the revenue recognition criteria.

As of October 31,2007

2006Maintenance

$
4,305

$
3,769Training and consulting


43


56Total

$
4,348

$
3,825


67

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accrued Liabilities

The breakdown of short-term accrued liabilities for the fiscal years ended October 31, 2007 and October 31, 2006 were as follows:

As of October 31,2007

2006Payroll and related

$
1,334

$
898Customer deposits





131Taxes payable


1,031


357Restructuring accrual





448Other


391


529Total

$
2,756

$
2,363


Software Development Costs

Software development costs are included in product development and are expensed as incurred. After technological feasibility is established, material software
development costs are capitalized in accordance with SFAS No. 86,Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
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, 2007,
October 31, 2006 and October 31, 2005 since the timing of achieving technological feasibility and general availability has not been materially different.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes based on SFAS No. 109,Accounting for Income
Taxes("SFAS 109"). Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences
between financial statement carrying amounts and the tax basis of existing assets and liabilities. The Company records a valuation allowance to reduce tax assets to an amount for which realization is
more likely than not. The Company has recorded a valuation allowance for substantially all of its deferred tax assets, except to the extent of deferred tax liabilities, as it is presently unable to
conclude that it is more likely than not those net deferred tax assets will be realized.

Stock-Based Compensation

On November 1, 2006, Versant adopted the fair value recognition provisions of SFAS No. 123(R),Share-Based
Payment("SFAS 123(R)") and Securities and Exchange Commission ("SEC") Staff Accounting Bulletin No. 107 ("SAB 107"), using the modified-prospective
transition method. (See Note 3 for details).

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Prior
to fiscal 2006, Versant accounted for stock issued to employees in accordance with Accounting Principles Board Opinion No. 25,Accounting for Stock
Issued to Employees("APB 25") as interpreted by FIN 44,Accounting for Certain Transactions Involving Stock
Compensationand complied with the disclosure provisions of SFAS No.123,Accounting for Stock-Based Compensation("SFAS 123"). Under APB 25, compensation expense was based on the difference, if any, on the date of the grant, between the fair value of the Company's stock and the exercise price of
the option. Stock compensation was amortized over the vesting period of the individual awards in a manner consistent with the method described in FASB Interpretation No. 28, Accounting for Stock Appreciation Rights and
Other Variable Stock Option Award Plus. In addition, the Company accounted for stock issued to
non-employees in accordance with the provisions of SFAS 123. Pursuant to SFAS 123, stock-based compensation is accounted for at the fair value of the equity instruments
issued, or at the fair value of the consideration received, whichever is more reliably measurable.

Pursuant
to SFAS No. 148,Accounting for Stock-Based Compensation-Transition and Disclosure, the Company was required to disclose
the pro forma effects of stock-based compensation on net income (loss) and net income (loss) per share as if the company had elected to use the fair value approach to account for its entire employee
stock-based compensation plans. The following table illustrates the pro forma effect on net loss and net loss per share as if the Company had applied the fair value recognition provisions in
accordance with SFAS 123 to account for its stock-based compensation expenses related to its employee plans in fiscal 2005 (in thousands, except per share data):

Fiscal year ended
October 31, 2005Net loss, as reported

$
(14,554
)Stock based compensation under APB 25


96Compensation expense under SFAS 123 related to:Stock option plans


(425
)Employee stock purchase plan


(46
)Pro forma net loss

$
(14,929
)Basic and diluted net loss per share:As reported

$
(4.11
)Pro forma

$
(4.22
)


Segment and Geographic Information

SFAS No. 131,Disclosures about Segments of an Enterprise and Related Informationestablishes 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

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 statements of operations. Therefore, the Company has determined that it operates in a single operating segment, Data
Management.

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 31,2007

2006

2005Revenues by region:North America

$
9,679

$
6,175

$
5,306Europe


10,672


10,138


10,087Asia


799


432


353Total

$
21,150

$
16,745

$
15,746


|
|

Fiscal year ended October 31,2007

2006Total long-lived assets by region:North America

$
282

$
161Europe


460


173Asia


201


113Total

$
943

$
447


Recent Accounting Pronouncements

In July 2006, the FASB issued FIN 48,Accounting for Uncertainty in Income
Taxesan interpretation of FASB Statement No. 109("FIN 48"). FIN 48, which clarifies
SFAS 109, establishes the criteria that an individual tax position has to meet for some or all of the benefits of that position to be recognized in the Company's financial statements. On
initial application, FIN 48 will be applied to all tax positions for which the statute of limitations remains open. Only tax positions that meet the
more-likely-than-not recognition threshold at the adoption date will be recognized or continue to be recognized. The cumulative effect of applying FIN 48
will be reported as an adjustment to retained earnings at the beginning of the period in which it is adopted.

FIN 48
is effective for fiscal years beginning after December 15, 2006, and will be adopted by Versant in the first quarter of fiscal 2008 ending January 31, 2008.
The Company is continuing to evaluate the impact of adopting FIN 48 and currently does not expect it to have any material impact on the Company's results of operation or financial position.

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In
September 2006, the FASB issued SFAS No. 157,Fair Value Measurements,("SFAS 157"). This statement clarifies the
definition of fair value; the method used to measure fair value, and requires expanded financial statement disclosures about fair value measurements for assets and liabilities. SFAS 157 is
effective for financial statements issued for fiscal years beginning after November 15, 2007. This new guidance will become effective for Versant in the fiscal year ending October 31,
2009 and the Company expects that SFAS 157 will not have a material impact on its financial statements.

In
February 2007, the FASB issued SFAS No. 159,The Fair Value Option for Financial Assets and Financial Liabilities("SFAS 159"). SFAS 159 provides a "Fair Value Option" under which a company
may irrevocably elect fair value as the initial and subsequent measurement attribute for certain financial assets and liabilities. This Fair Value Option will be available on a
contract-by-contract basis with changes in fair value recognized in earnings as those changes occur. The effective date for SFAS 159 is the beginning of each reporting
entity's first fiscal year end that begins after November 15, 2007. Therefore, SFAS 159 will become effective for Versant in the fiscal year ending October 31, 2009.
SFAS 159 also allows an entity to early adopt the statement as of the beginning of an entity's fiscal year that begins after the issuance of SFAS 159, provided that the entity also
adopts the requirements of SFAS 157. The Company expects that the adoption of SFAS 159 will not have a material impact on the consolidated financial statements.

NOTE 3. STOCK-BASED COMPENSATION

Since fiscal 2006, Versant accounts for share-based compensation costs in accordance with SFAS No. 123(R),Share-Based
Payment("SFAS 123(R)") and SEC Staff Accounting Bulletin No. 107,Share-Based Payment("SAB 107").
SFAS 123(R) was adopted using the modified-prospective transition method. The Company utilizes the Black-Scholes option pricing model to estimate the fair value of employee stock option
compensation at the date of grant, which requires the input of significant assumptions, including expected volatility and expected life. Historical volatility was used in estimating the fair value of
share-based awards rather than implied volatility, while the expected life was estimated based on a historical model that takes into consideration other factors that could possibly impact the future
expected life of the options. Further, as required under SFAS 123(R), 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 is 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.

Prior
to November 1, 2005, Versant accounted for stock issued to employees in accordance with the recognition and measurement provisions of APB 25 and its related
Interpretations, as permitted by SFAS 123. For fiscal 2005, the Company also did not record any compensation expense in connection with its Employee Stock Purchase Plan since the purchase price
of the stock was 85% of the lower of the fair market value of its common stock at the beginning or the end of each offering period, as APB No. 25 provided a safe harbor not requiring
compensation expense in connection with such an employee stock plan arrangement.

71

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 3. STOCK-BASED COMPENSATION (Continued)

Effective
November 1, 2005, the Company adopted the fair value recognition provisions of SFAS 123(R) and SAB 107 using the modified-prospective transition method.
Under the modified-prospective transition method, the recognized compensation cost includes the following components:

First,
for all share-based payments granted prior to November 1, 2005, but not yet vested as of November 1, 2006, compensation cost is based on the grant date fair value
estimated in accordance with the original provisions of SFAS 123.

Second,
for all share-based payments granted or modified subsequent to November 1, 2005, compensation cost is based on the grant-date fair value estimated in
accordance with the provisions of SFAS 123(R).

SFAS 123(R)
requires companies to estimateforfeiture ratesat the time of grant and to revise these estimates in subsequent
periods if actualforfeiture ratesdiffer from those estimates. Versant applies theforfeiture rateto
the unvested portion of the option valuation and performs a true up for the amount of the valuation to be recorded if the actualforfeiture rateis
different from the one applied on prior periods. The currentforfeiture ratefor the unvested portion of the option valuation recognized as of
October 31, 2007 is 20% for employee plans and 11% for director plans, respectively.

Versant
estimates the fair value of employee stock options and rights to purchase shares under its employee stock purchase plan, or "ESPP" using a Black-Scholes Option Pricing Model.
This is consistent with the provisions of SFAS 123(R), SAB 107 and the Company's prior period pro forma disclosures of net income (loss), including share-based compensation.

The
purchase price of shares which employees may acquire under the Company's employee stock purchase plan, or 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. Since the 85% threshold is no longer a safe harbor under
SFAS 123(R), Versant records compensation expense based on the estimated fair value of the shares granted under the ESPP.

Versant
uses a historical model to arrive at the expected life of its options, but it takes into consideration other factors that could possibly impact the future expected life of the
options. As of October 31, 2007, the Company determined that the estimated expected life of an employee share option granted under the Company's Equity Incentive Plan was 2.2 years.

The
expected life for the options granted to the board members under the Directors Plan, who are not full time employees of Versant, is 5.75 years. Versant used the simplified methodallowed by
SAB 107 to arrive at this calculation. Under thesimplified method,
the expected term is equal to vesting term plus original contractual term divided by two.

Versant
uses the U.S. Treasury Strip rates listed on the last Thursday of every month onThe Wall Street Journalto compute risk-free interest rate.

Versant
uses the historical volatility over the expected term of the options to estimate the expected volatility. The Company, however, takes into account other current information
available to determine the expected volatility. Versant uses the historical volatility as the best estimate of the future volatility of its common stock.

72

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 3. STOCK-BASED COMPENSATION (Continued)

Versant
does not expect to realize any current tax benefits in fiscal 2007 related to stock options or shares issued under its ESPP. Versant currently provides a full valuation allowance
for its deferred tax assets and accordingly, a valuation allowance is also provided for any tax effects of stock-based compensation expense pursuant to SFAS 123(R).

Versant
has not distributed any dividends to its common shareholders and does not expect to do so in the near future.

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    |  | ESPP            
|---------------------------------------- |  | ---------------- |  | ----------------
|
|
|Expected life (in years)                 |  | 2.2 - 5.75 years |  | 2.2 - 5.75 years
|Weighted-average Risk-free interest rate |  | 4.17% - 4.85%    |  | 4.28% - 5.23%   
|Volatility                               |  | 71% - 88%        |  | 87% - 115%      
|Dividend yield                           |  |                 |  |                

Stock-based compensation expenses recognized under SFAS 123(R) in the consolidated statements of operations for fiscal 2007 related to
stock options and ESPP were $320,000 and $96,000, respectively and for fiscal 2006 related to stock options and ESPP were $192,000 and $44,000, respectively.

The
following table summarizes the changes in stock option activities under the Company's equity-based compensation plan during fiscal 2007 and fiscal 2006, respectively:

|                                                                |                       | Fiscal year ended October 31,
|--------------------------------------------------------------- | --------------------- | -----------------------------
|
|
|Outstanding at the beginning of the period                      |                       | 185                          
|                                                                | Granted               |                              
|                                                                | Exercised             |                              
|                                                                | Forfeited and Expired |                              
|                                                                |                       |                              
|Outstanding at the end of the period                            |                       | 235                          
|                                                                |                       |                              
|Options exercised at the end of the fiscal year since inception |                       | 239                          
|Options exercisable at the end of the fiscal year               |                       | 117                          

73

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 3. STOCK-BASED COMPENSATION (Continued)

The
following table summarizes significant ranges of outstanding and exercisable options as of October 31, 2007:

|                          |  | Options Outstanding |  | Options Exercisable
|------------------------- |  | ------------------- |  | -------------------
|
|From $3.00 to $6.00       |  | 37                  |  | 6.55               
|From $6.13 to $9.20       |  | 50                  |  | 7.70               
|From $10.20 to $16.00     |  | 75                  |  | 8.18               
|From $17.19 to $40.00     |  | 63                  |  | 8.17               
|From $42.00 to $122.20    |  | 9                   |  | 2.46               
|From $465.50 to $1,287.00 |  | 1                   |  | 2.28               
|                          |  |                     |  |                    
|                          |  | 235                 |  | 7.58               
|                          |  |                     |  |                    

The
summary of the status of Versant's nonvested shares as of October 31, 2007 and changes during the fiscal year ended October 31, 2007 is as follows:

Nonvested shares

Shares
(in thousands)

Weighted-average
grant-date
fair valueNonvested at October 31, 2006

77

$
3.72Granted

109


8.33Vested

(58
)

4.14Forfeited

(10
)

5.19Nonvested at October 31, 2007

118

$
7.36


The
weighted average grant date fair value of options granted during fiscal 2007, fiscal 2006 and fiscal 2005 were $8.33, $3.40 and $6.04, respectively. The total fair value of shares
granted during fiscal 2007, fiscal 2006 and fiscal 2005 were $908,000, $231,000, and $529,000, respectively. The aggregated intrinsic values of options exercised during fiscal 2007, fiscal 2006 and
fiscal 2005 were $581,000, $120,000 and $158,000, respectively. The total fair value of shares vested during fiscal 2007, fiscal 2006 and fiscal 2005 were $240,000, $167,000, and $316,000,
respectively.

The
total unrecognized compensation costs related to non-vested options were $779,000 and $253,000, respectively, at October 31, 2007 and October 31, 2006 and
will be recognized using the straight-line attribution method ratably for the subsequent three years. However, the Company will adjust total stock-based compensation cost for changes in
estimatedforfeiture ratesand true-ups.

NOTE 4. 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

74

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 4. DISCONTINUED OPERATIONS (Continued)

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 SFAS 144,Impairments of Long-Lived Assets and Discontinued Operations, 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 2007, fiscal 2006 and fiscal 2005 as discontinued operations. Therefore, reported revenues for these periods 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.

The
sale of Versant's WebSphere consulting practice assets was consummated pursuant to an Asset Purchase Agreement dated February 1, 2006 (the "Sale Agreement") between Versant
and Sima. Pursuant to the Sale Agreement, Sima acquired assets, consisting principally of certain contracts with customers, contractors and business partners of Versant's WebSphere consulting
practice, an office lease in the Chicago, Illinois area, certain office equipment, customer lists, marketing information and marketing collateral. In exchange for these assets, Sima assumed certain
liabilities associated with the WebSphere consulting practice, paid Versant $500,000 in cash and agreed to make certain contingent cash "earn-out" payments to Versant based on varying
percentages of the revenues Sima collects from its operation of the WebSphere practice during the 24-month period immediately following closing of this transaction, substantially as
follows:



The
above earn-out payment formula is subject to certain adjustments, including adjustments which reduce the dollar thresholds at which the percentages of
earn-out revenue are to be paid under the above formula if certain former Versant employees do not remain employed by Sima for a certain time period following the closing of the WebSphere
transaction. Versant expects some normal attrition on the number of the former employees of Versant, who are currently working for Sima. Any potential earn-out payments will be recognized
if and when achieved during fiscal 2008.

The
WebSphere sale transaction was reflected in the consolidated financial statements of fiscal 2006. During fiscal 2007 and fiscal 2006, Versant recorded $304,000 and $231,000,
respectively, in royalties from WebSphere as income from discontinued operations. The following table reflects the gain

75

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 4. DISCONTINUED OPERATIONS (Continued)

from
the disposal of the discontinued WebSphere operation in fiscal 2006 and royalty income from discontinued operations, net of income taxes for WebSphere during fiscal 2007 and fiscal 2006:

Fiscal Year Ended October 31,2007

2006WebSphere sales proceeds

$


$
500Lease cancellation





(24
)Legal fees





(8
)Gain from sale of discontinued operations, net of income taxes

$


$
468WebSphere first quarter royalty

$
90

$
WebSphere second quarter royalty


81


41WebSphere third quarter royalty


61


91WebSphere fourth quarter royalty


72


118Other WebSphere revenues, net of expenses





(19
)Net income from discontinued operations, net of income taxes

$
304

$
231Total

$
304

$
699


NOTE 5. RESTRUCTURING

Versant has undergone several restructuring programs since fiscal 2004 with the intent of reducing ongoing operating costs.

Fiscal 2005

In June 2005, Versant committed to and began implementing a restructuring program to realign its resources to focus on its Versant Object Database product.
Versant assessed its product portfolio and associated research and development efforts and expenditures, and then streamlined the rest of its operations to support those reassessments. Versant planned
to spin off and eliminate marginally profitable or non-strategic products lines, consolidate development activities, eliminate four management positions and certain duplicate positions in
marketing functions and programs, and centralize its sales support functions.

In
July 2005, Versant, through its subsidiary Versant GmbH, entered into certain agreements to effect a spin-off of tangible assets, technology rights and contracts
related to its Versant Open Access.NET ("VOA.NET") business to Vanatec GmbH ("Vanatec"), a then newly formed privately held German based company. In connection with that spin-off,
seven former Versant employees departed Versant to join Vanatec, and a partnership formed by those individuals, received an 80.4% equity interest in Vanatec, with Versant retaining the remaining 19.6%
equity interest. In connection with that spin-off, on July 29, 2005, Versant committed to provide funding to Vanatec in a total amount not to exceed 425,000 euros (or
$520,000) in two equal installments of 212,500 euros (or $260,000) each on August 3, 2005 and November 3, 2005, which Versant contributed to Vanatec. In addition, during the three
months ended July 31, 2005, Versant contributed 25,000 euros (or $30,000) to Vanatec;

76

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 5. RESTRUCTURING (Continued)

therefore,
the total cash capital contributed and committed by Versant to Vanatec was 450,000 euros (or $550,000). VOA.NET was one of the aforementioned non-strategic product lines
which Versant decided to spin off as part of its restructuring efforts designed to enable Versant to focus on its core database business and progress towards its long-term profitability
goal.

Versant
determined that equity at risk in Vanatec is not sufficient to permit it to finance its activities without additional subordinated financial support; therefore, Versant
determined that Vanatec was a variable interest entity in accordance with FIN 46(R),Consolidation of Variable Interest Entities(As Amended).
Vanatec results were included in Versant's consolidated financial statements from July 2005 through March 27, 2006 in which the criteria of FIN 46(R) for consolidation are met.
Accordingly, a variable interest entity liability in the amount of $137,000 was recorded in Versant's accompanying condensed consolidated balance sheet as of October 31, 2005 reflecting the
80.4% equity interest in Vanatec held by the former Versant employees. The recording of the aforementioned variable interest entity liability resulted in a corresponding restructuring charge of
$480,000 during fiscal 2005. On March 27, 2006, Versant sold its 19.6% interest in Vanatec to a third party investor for 4,900 euros and entered into a joint ownership agreement with
Vanatec. As a result of the transaction, Versant determined that it is no longer the primary beneficiary of Vanatec, and thus, in accordance with FIN 46(R) is no longer required to consolidate
its operating results effective March 28, 2006.

In
fiscal 2005, Versant recorded total restructuring charges of approximately $638,000, which included approximately $280,000 of severance payments for headcount reductions; $480,000
related to the aforementioned Vanatec spin off of which $24,000 related to legal fees incurred due to the VOA.Net spin-off; offset by a $122,000 adjustment as result of the sublease of the
Company's UK facilities.

Fiscal 2006

The restructuring programs initiated in the third quarter of fiscal 2005 were effectively completed in the second quarter of fiscal 2006. During the quarters
ended July 31 and October 31, 2006, Versant did not record any restructuring expenses. In fiscal 2006, Versant recorded total restructuring expenses of approximately $218,000, which
consist primarily of severance payments due to headcount reductions.

As
of October 31, 2006, there remained $448,000 restructuring accrual and zero variable interest entity liability on Versant's consolidated balance sheet.

Fiscal 2007

The $448,000 restructuring accrual balance as of October 31, 2006 was fully paid during fiscal 2007. As a result, there is no longer a restructuring
accrual on Versant's consolidated balance sheet as of October 31, 2007.

77

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 5. RESTRUCTURING (Continued)

The
following table summarizes the Company's restructuring activities from October 31, 2004 through October 31, 2007 (in thousands):

|                                                                  |  | Facility Leases |       | Employee Terminations |   | Others/
Vanatec |   | Total |     
|----------------------------------------------------------------- |  | --------------- | ----- | --------------------- | - | --------------- | - | ----- | ----
|Opening accrual balance as of October 31, 2004                    |  | $               | 2,107 |                       | $ | 504             |   | $     |    
|Non-cash adjustment during the fiscal year 2005                   |  |                 | (122  | )                     |   | 280             |   |       | 480 
|Net cash payments during the fiscal year 2005                     |  |                 | (804  | )                     |   | (784            | ) |       | (343
|                                                                  |  |                 |       |                       |   |                 |   |       |     
|Accrual and variable interest liability as of October 31, 2005    |  | $               | 1,181 |                       | $ |                |   | $     | 137 
|                                                                  |  |                 |       |                       |   |                 |   |       |     
|Non-cash adjustment during the fiscal year 2006                   |  |                 | 218   |                       |   |                |   |       |    
|Net cash payments during the fiscal year 2006                     |  |                 | (951  | )                     |   |                |   |       |    
|Deconsolidation of Vanatec adjustment during the fiscal year 2006 |  |                 |      |                       |   |                |   |       | (137
|                                                                  |  |                 |       |                       |   |                 |   |       |     
|Accrual and variable interest liability as of October 31, 2006    |  | $               | 448   |                       | $ |                |   | $     |    
|                                                                  |  |                 |       |                       |   |                 |   |       |     
|Non-cash adjustment during the fiscal year 2007                   |  |                 |      |                       |   |                |   |       |    
|Net cash payments during the fiscal year 2007                     |  |                 | (448  | )                     |   |                |   |       |    
|                                                                  |  |                 |       |                       |   |                 |   |       |     
|Accrual and variable interest liability as of October 31, 2007    |  | $               |      |                       | $ |                |   | $     |    
|                                                                  |  |                 |       |                       |   |                 |   |       |     

The
facility lease payments during fiscal 2007, fiscal 2006 and fiscal 2005 were related to Versant's obligations for its California and European facilities, which were accrued for as
part of the restructuring plans.

NOTE 6. LIQUIDATION OF A FOREIGN SUBSIDIARY

Versant elected to liquidate Versant Ltd., its subsidiary in the United Kingdom, to reduce costs and centralize European operations. The liquidation of
Versant Ltd. was completed in the fourth quarter of fiscal 2007.

Upon
the completion of the liquidation of Versant Ltd. in October 2007, in accordance with the provisions of SFAS 52, Versant recorded a $245,000 operating loss to reflect
the realization of accumulated foreign currency translation adjustments related to Versant Ltd. A corresponding amount has been recorded to eliminate accumulated other comprehensive loss, a
component of equity, previously recorded in Versant Ltd.'s balance sheet. This loss represents the net unrealized foreign currency translation losses accumulated from changes in exchange rates
and the related effects from the translation of assets and liabilities of Versant Ltd. in accordance with the provisions of SFAS 52.

NOTE 7. CONSOLIDATION OF VARIABLE INTEREST ENTITY

In July 2005 Versant, through its subsidiary Versant GmbH, entered into certain agreements to effect a spin-off of tangible assets, technology
rights and contracts related to its Versant Open Access.NET ("VOA.NET") business to Vanatec GmbH (a then newly formed privately held German based company). Versant, subsequent to this
agreement, determined that the equity at risk in Vanatec

78

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 7. CONSOLIDATION OF VARIABLE INTEREST ENTITY (Continued)

was
not sufficient to permit the company to finance its activities without additional subordinated financial support from Versant; therefore, it considered Vanatec a variable interest entity in
accordance with FIN 46(R).

As
a result, in accordance with FIN 46(R), Vanatec's operating results were included in Versant's consolidated financial statements for the three-month periods ended
July 31, 2005, October 31, 2005 and January 31, 2006. During the three months ended January 31, 2006, Versant absorbed its share of Vanatec's losses up to the point that it
exceeded the variable interest liability; and subsequent to that it continued to absorb 100% of the losses that Vanatec had incurred for an additional amount of $35,000 for the three months ended
January 31, 2006. During the three months ended April 30, 2006, Versant continued to absorb 100% of Vanatec's losses for an additional amount of $70,000 for the period between
February 1, 2006 and March 27, 2006.

On
March 27, 2006, Versant sold its 19.6% interest in Vanatec to a third party investor for 4,900 euros and entered into a joint ownership agreement with Vanatec. According
to this agreement, Vanatec shall pay Versant a running royalty at a rate of six percent of its net proceeds, but no less than 30 euros per copy of the technology subject to the licenses
granted, for a period of five years following the effective date of the agreement. Further, at any time during the royalty period, Vanatec has the right to exercise a buyout for its royalty
obligations by making a one-time payment to Versant of 150,000 euros. As a result of the aforementioned transaction, Versant determined that it is no longer the primary beneficiary
of Vanatec, and thus, in accordance with FIN 46(R) is no longer required to consolidate its operating results effective March 27, 2006.

As
Versant was no longer required to consolidate the operating results of Vanatec as of March 27, 2006, it recorded a gain of approximately $131,000 on deconsolidation,
representing the reversal of the excess losses that it had absorbed and the consideration that it received from the third party investor in lieu of
its interest in Vanatec. The gain is reported as Gain on Disposal of Variable Interest Entity in the accompanying consolidated statements of operations for fiscal 2006.

NOTE 8. LEASE OBLIGATIONS

Versant's principal commitments as of October 31, 2007 consist of obligations under operating leases for facilities and equipment commitments.

On
March 23, 2007, the Company entered into an office building lease with CA-Shorebreeze Limited Partnership pursuant to which Versant is leasing approximately 6,800
square feet in an office facility located in Redwood City, California. The lease has a term of thirty-six months, which commenced in June 2007. The Redwood City, California office under
the lease serves as the Company's new U.S headquarters, replacing the Company's former facility in Fremont, California, whose lease expired on June 30, 2007. Monthly rent under the lease for
the Company's Redwood City office will initially be approximately $19,000 and is subject to 4% annual increases thereafter. The total rent payable over the full thirty-six month lease term
(net of two months rent abatement) will be approximately $671,000. Versant has an option to extend the term of the lease for one additional one-year period at a rent equal to the then fair
market lease rate. Pursuant to the lease, the landlord has agreed to provide a tenant improvement allowance of approximately $101,000. Any tenant improvement costs exceeding this allowance were borne
by Versant. Rental expense under this

79

---



VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 8. LEASE OBLIGATIONS (Continued)

agreement,
including contractual rent increases, is recognized on a straight-line basis. Versant also leases field office space in Europe and India, generally under multi-year
operating lease agreements. Consolidated rent expense in fiscal years ended October 31, 2007, October 31, 2006 and October 31, 2005, was approximately $735,000, $877,000, and
$1.0 million, respectively.

The
Company's future annual minimum commitments as of October 31, 2007 under non-cancelable operating leases are listed as follows (in thousands):

Rental Lease

Equipment Leases

TotalFiscal year ending October 31,2008

$
546

$
23

$
5692009


436


15


4512010


180


3


183Thereafter








Total

$
1,162

$
41

$
1,203


NOTE 9. LEGAL PROCEEDINGS

In accordance with SFAS 5 the Company records an accrual for a contingency when it is both probable that a liability has been incurred and the amount of
the loss can be reasonably estimated. If a range of liability is probable and estimable and some amount within the range appears to be a better estimate than any other amount within the range, the
Company accrues that amount. If a range of liability is probable and estimable and no amount within the range appears to be a better estimate than any other amount within the range, the Company
accrues the minimum of such probable range. Often these
issues are subject to substantial uncertainties and, therefore, the probability of loss and an estimation of damages are difficult to ascertain. These assessments can involve a series of complex
judgments about future events and can rely heavily on estimates and assumptions that have been deemed reasonable by management.

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. To date, the Company has not incurred any material costs as a result of any indemnification. However, as a result of current litigation in which Rockwell
Automation, one of Versant's customers, is seeking indemnification from the Company for alleged infringement of intellectual property rights asserted against Rockwell by Systems America, Inc.,
Versant has recorded an immaterial loss contingency reserve as of January 31, 2007 in accordance with SFAS 5. The Company is contesting the allegations of infringement of intellectual
property rights asserted in this litigation.

80

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 10. SHAREHOLDERS' EQUITY AND INCOME (LOSS) PER SHARE

Basic and diluted net loss 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 loss per share (in thousands, except per share amounts):

|                                                                                   |                                                                                   | Fiscal year ended October 31, |      
|---------------------------------------------------------------------------------- | --------------------------------------------------------------------------------- | ----------------------------- | -----
|
|Net income (loss) from continuing operations                                       |                                                                                   | $                             | 7,329
|Net income from discontinued operations, net of income taxes                       |                                                                                   |                               | 304  
|Gain from sale of discontinued operations, net of income taxes                     |                                                                                   |                               |     
|                                                                                   |                                                                                   |                               |      
|Net income (loss)                                                                  |                                                                                   | $                             | 7,633
|                                                                                   |                                                                                   |                               |      
|Calculation of basic net income (loss) per share:                                  |                                                                                   |                               |      
|                                                                                   | Weighted average common shares outstanding                                        |                               |      
|                                                                                   | Net income (loss) from continuing operations                                      |                               | $    
|                                                                                   | Earnings from discontinued operations, net of income tax                          |                               | $    
|                                                                                   |                                                                                   |                               |      
|                                                                                   | Net income (loss) per share, basic                                                |                               | $    
|                                                                                   |                                                                                   |                               |      
|Calculation of diluted net income (loss) per share:                                |                                                                                   |                               |      
|                                                                                   | Weighted averagecommon shares outstanding                                        |                               |      
|                                                                                   | Dilutive securitiescommon stock options and shares subject to repurchase         |                               |      
|                                                                                   |                                                                                   |                               |      
|                                                                                   | Weighted averagecommon shares outstanding and potentially dilutive common shares |                               |      
|                                                                                   |                                                                                   |                               |      
|                                                                                   | Net income (loss) from continuing operations                                      |                               | $    
|                                                                                   | Earnings from discontinued operations, net of income tax                          |                               | $    
|                                                                                   |                                                                                   |                               |      
|                                                                                   | Net income (loss) per share, diluted                                              |                               | $    
|                                                                                   |                                                                                   |                               |      
|Anti-dilutive common stock options, not included in net loss per share calculation |                                                                                   |                               | n/a  
|                                                                                   |                                                                                   |                               |      

The
Company excludes potentially dilutive securities from its diluted net loss per share computation when their effects are anti-dilutive to net loss per share amounts. The
following common stock equivalents were excluded from the net loss per share computation (in thousands):

Fiscal year ended
October 31, 2005Anti-dilutive common stock options and non-vested common stock not included in net loss per share calculation

341Total anti-dilutive common shares excluded from basic & diluted net loss per share

341


81

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 11. INCOME TAXES

The Company accounts for income taxes pursuant to the provisions of SFAS 109 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
(Loss) before provision for income taxes consisted of the following (in thousands):

Fiscal year ended October 31,2007

2006

2005United States

$
2,404

$
930

$
(16,653
)International


6,096


3,761


2,123$
8,500

$
4,691

$
(14,530
)


The
provision for income taxes consisted of the following (in thousands):

Fiscal year ended October 31,2007

2006

2005Current:Federal

$


$


$
State


50


32


13Foreign


766


351


Foreign withholding


51


7


24Total current

$
867

$
390

$
37Deferred:Federal








State








Total deferred

$


$


$
Total provision for income taxes

$
867

$
390

$
37


82

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 11. INCOME TAXES (Continued)

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

Fiscal year ended October 31,2007

2006

2005Federal tax (benefit) at statutory rate

$
2,975

$
1,642

$
(5,086
)State tax (benefit) at statutory rate, net of federal benefit


442


188


(64
)Change in valuation allowance


(2,636
)

(420
)

2,212Foreign tax differential


(10
)

(1,053
)

(743
)Impairment of intangible asets








3,605Other


96


33


113Provision for income taxes

$
867

$
390

$
37


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

Fiscal year ended October 31,2007

2006Deferred tax asset:Net operating loss carryforwards

$
42,127

$
44,736Tax credit carryforwards


3,525


3,509Other


(116
)

(73
)$
45,536

$
48,172Valuation allowance


(45,536
)

(48,172
)Net deferred tax asset

$


$



At
October 31, 2007, the Company had federal and state net operating loss carry forwards of $80.0 million and $15.9 million, respectively and federal and state tax
credit carry forwards of $2.3 million and $1.3 million, respectively. The federal tax credit carry forwards expire on various dates through 2025, if not utilized. The state tax credit
can be carried forward indefinitely. Additionally, at October 31, 2007, the Company had German net operating tax loss carry forwards of approximately $41.0 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. Due to the Company's history of operating losses, the Company believes that
there is sufficient uncertainty regarding the realizability of these carry forwards and, therefore, a valuation allowance of approximately $45.5 million has been recorded against the Company's
net deferred tax assets. The Company will continue to assess the realizability of the tax benefit available based on actual and forecasted operating results.

83

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 11. INCOME TAXES (Continued)

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.

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.

NOTE 12. EMPLOYEE AND DIRECTOR BENEFIT PLANS

Versant has, or had during fiscal 2007, the following option plans in place:

    2005
Equity Incentive Plan

At
the Company's Annual Meeting of Shareholders on August 22, 2005, the Company's shareholders approved the adoption of the 2005 Equity Incentive Plan. On that date, the Company
immediately terminated use of the 1996 Equity Incentive Plan and ceased to grant stock options or other stock awards under the 1996 Equity Incentive Plan, instead granting them under the 2005 Equity
Incentive Plan.

Under
Versant's 2005 Equity Incentive Plan, 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 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 ten years after the grant date. Grant holders generally have three months after leaving the Company to exercise their vested options.

The
purpose of adopting the 2005 Equity Incentive Plan was to continue to reserve and make available under that plan the same number of common shares that would have been reserved and
available for future option grants and stock awards under the 1996 Equity Incentive Plan if it were not then expiring. Accordingly, the number of common shares reserved for issuance under the 2005
Equity Incentive Plan is equal to the number of shares that were reserved and available for issuance under the 1996 Equity Incentive Plan on the date the 2005 Equity Incentive Plan was approved by the
Company's shareholders, plus any shares that in the future would have become available for issuance under the 1996 Equity Incentive Plan due to the expiration of unexercised options or other
forfeitures of equity awards granted under that plan. Thus, adoption and approval of the 2005 Equity Incentive Plan in fiscal 2005 did not result in any increase in the number of shares of Common
Stock available for equity awards beyond the number of shares that would otherwise have been available for issuance under the 1996 Equity Incentive Plan if it did not expire.

    1996
Equity Incentive Plan

Under
Versant's 1996 Equity Incentive Plan, 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 grant date and the remaining 75% vests ratably, on a monthly-basis thereafter over the remaining 27 months of the vesting schedule. Versant's Compensation Committee
has from time to time approved

84

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 12. EMPLOYEE AND DIRECTOR BENEFIT PLANS (Continued)

non-standard
stock option vesting schedules for the purposes of employee retention or bonus grants, such as a three-year grant, with 25% vesting in three months and the
remaining vesting ratably on a monthly-basis thereafter or an option grant with 100% of the option grant vesting three months after the grant date. All options granted to employees under the Company's
1996 Equity Incentive Plan expire ten years after the grant date. Grant holders generally have three months after leaving the Company to exercise their vested options. No further options will be
granted under 1996 Equity Incentive Plan.

    2005
Directors Stock Option Plan

On
August 22, 2005, the Company's shareholders approved the 2005 Director Stock Option Plan at the 2005 Annual Meeting of the Company's shareholders. The Company immediately
terminated use of the 1996 Director Stock Option Plan and ceased to grant stock options or other stock awards under the 1996 Director Stock Option Plan, and instead granted them under the 2005
Director Stock Option Plan.

Under
Versant's 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 options to each Outside Director as an annual succeeding grant thereafter. Both grants vest 50% on the first and second
anniversaries of the option grant. The options granted under the 2005 Directors Stock Option Plan expire ten years after the grant date. Directors have seven months after leaving their directorships
to exercise their vested options.

The
purpose of adopting the 2005 Directors Stock Option Plan was to continue to reserve and make available under that plan the same number of common shares that would be reserved and
available for future option grants under the 1996 Directors Stock Option Plan if it were not then expiring. Accordingly, the number of common shares reserved for issuance under the 2005 Directors Plan
will be equal to the number of shares that are reserved and available for issuance under the 1996 Directors Stock Option Plan on the date the 2005 Directors Stock Option Plan was approved by the
Company's shareholders (the "Directors Plan Effective Date"), which was August 22, 2005, plus any shares that in the future would have become available for issuance under the 1996 Directors
Stock Option Plan due to the expiration of unexercised options granted under that plan or the Company's repurchase of shares
issued under that plan at their original issue price. Thus, adoption and approval of the 2005 Directors Stock Option Plan did not result in any increase in the number of shares of Common Stock
available for options beyond the number of shares that would otherwise have been available for issuance under the 1996 Directors Stock Option Plan if it did not expire.

The
purpose of the 2005 Directors Stock Option Plan was also to enhance the Company's ability to attract and retain highly qualified Outside Directors who are not employees of the
Company or of a parent, subsidiary or affiliate of the Company (an "Outside Director") through the use of equity incentives. The Board believed that the 1996 Directors Stock Option Plan played an
important role in the Company's efforts to attract and retain Outside Directors and expected the 2005 Directors Stock Option Plan to play a similar role. The Board believed that adoption of the new
2005 Directors Stock Option Plan was in the best interests of the Company because it believes that the 2005 Directors Stock Option Plan will help enable the Company to provide equity participation to
attract and retain Outside

85

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 12. EMPLOYEE AND DIRECTOR BENEFIT PLANS (Continued)

Directors
of outstanding ability. In this regard the Company noted that recent legislation, stock exchange requirements and case law have increased the importance to the Company of having qualified
independent directors. However, these changes had also increased the obligations, risks and time commitment of directors of public companies such as the Company, making it even more important for the
Company to be able to offer equity incentives to attract and retain qualified Outside Directors.

    1996
Directors Stock Option Plan

Under
Versant's 1996 Directors Stock Option Plan, Versant granted 4,000 options as an initial grant to new directors of the Board and 2,000 as an annual succeeding grant thereafter. Both
grants vest 50% on the first and second anniversaries of the option grant. The options granted under the 1996 Directors Stock Option Plan expire ten years after the grant date. Directors have seven
months after leaving their directorships to exercise their vested options. Versant ceased granting options under its 1996 Directors Stock Option Plan in August 2005 and no further options will be
granted under the 1996 Director Stock Option Plan.

Versant
acquired all of Poet's stock option plans in connection with our March 2004 acquisition of Poet. Prior to the acquisition Poet had the following plans in place:

    1995
Stock Option Plan

Under
Poet's 1995 Stock Option Plan, options were generally granted with a four-year vesting schedule of which 25% are vested twelve months after the date of grant with the
remaining options vesting ratably on a monthly-basis over the remaining 36-month vesting period.
Poet approved non-standard stock option vesting schedules for the purposes of employee retention or bonus grants, including an option grant with 100% of the option grant vested at
6 months.

    2001
Non-statutory Plan

Standard
vesting under this plan was a three-year vesting schedule with 33% of the options vesting one year after the date of grant, and the remaining options vesting ratably
on a monthly-basis over the remaining 24-month vesting period.

    Director
Plan

Under
Poet's 1999 Director's Plan, options were generally granted to its directors with a three-year vesting schedule, with 33% vesting twelve months from the option grant
date with remaining vesting ratably on a monthly-basis over the remaining 24-month vesting period. Poet granted options, as approved by Poet's Board of Directors, with
non-standard option vesting, including an option grant vesting 100% on the fourth anniversary of the grant date; and a four-year grant with 25% vesting on each subsequent
anniversary of the grant date.

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

86

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 12. EMPLOYEE AND DIRECTOR BENEFIT PLANS (Continued)

Shares Reserved for Future Issuance

As of October 31, 2007, the Company had reserved shares of common stock for the following purposes:

Employee stock purchase plan

45,934Stock options available for grant

262,432Unexercised stock options

235,482543,848


Stock Option Activities

The stock option activities in fiscal years 2007, 2006 and 2005 were as follows:

Options available for grant

Number of options outstanding

Weighted average priceBalance at October 31, 2004

214,068

459,893

$
31.20Authorized






Granted

(88,950
)
88,950


7.34Exercised/Expired

(53,199
)
(52,338
)

5.13Canceled

195,018

(195,018
)

37.03Balance at October 31, 2005

266,937

301,487

$
24.90Authorized






Granted

(67,875
)
67,875


5.65Exercised/Expired

(163,776
)
(26,824
)

5.01Canceled

157,948

(157,948
)

29.40Balance at October 31, 2006

193,234

184,590

$
16.89Authorized

200,000




Granted

(108,866
)
108,866


14.57Exercised/Expired

(34,422
)
(45,488
)

6.94Canceled

12,486

(12,486
)

35.80Balance at October 31, 2007

262,432

235,482

$
16.75


87

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 12. EMPLOYEE AND DIRECTOR BENEFIT PLANS (Continued)

The
following table summarizes information concerning outstanding and exercisable options at October 31, 2007:

|                          |  | Options Outstanding |  | Options Exercisable
|------------------------- |  | ------------------- |  | -------------------
|
|From $3.00 to $6.00       |  | 36,850              |  | 6.55               
|From $6.13 to $9.20       |  | 50,545              |  | 7.70               
|From $10.20 to $16.00     |  | 75,109              |  | 8.18               
|From $17.19 to $40.00     |  | 63,271              |  | 8.17               
|From $42.00 to $122.20    |  | 9,007               |  | 2.46               
|From $465.50 to $1,287.00 |  | 700                 |  | 2.28               
|                          |  |                     |  |                    
|                          |  | 235,482             |  | 7.58               
|                          |  |                     |  |                    

Non Cash Stock Expense

The following table summarizes the non-cash stock expenses in fiscal 2007, 2006 and 2005:

Fiscal Year ended October 31,2007

2006

2005Stock options expenses under FAS 123R

$
320

$
192

$
Stock expenses related to ESPP under FAS 123R


96


44


Unvested Poet options expenses under APB 25








96Total non cash stock expenses

$
416

$
236

$
96


For
fiscal 2005, stock-based compensation expense represents the amortization of the deferred compensation related to options assumed in the Poet merger.

NOTE 13. FORFEITURE OF COMMON STOCK

In November 2002 Versant acquired Mokume Software, Inc. ("Mokume"). In October 2004, Systems America Inc. served a complaint against Versant in a
lawsuit alleging that former employees of Systems America, who left that company to form Mokume misappropriated Systems America trade secrets and confidential information, unfairly competed with
Systems America and infringed Systems America's trademarks. The Systems America suit alleged that when Versant acquired Mokume, it acquired the benefit of the allegedly misappropriated trade secrets,
confidential information, customer relationships, trademarks and trade names, and thus Systems America sought damages and injunctive relief from Versant. In connection with this litigation, Versant in
turn sought indemnification from the former stockholders of Mokume under the terms of the merger agreement pursuant to which Versant acquired Mokume in November 2002. Versant's indemnification claims
were made on the grounds that the allegations in and the existence of the Systems America litigation constituted a breach of certain representations and warranties made by the former Mokume
stockholders to Versant in the merger

88

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VERSANT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

October 31, 2007

NOTE 13. FORFEITURE OF COMMON STOCK (Continued)

agreement.
Versant's indemnification rights entitled Versant to obtain indemnification by canceling and recovering certain shares of Versant Common Stock issued to the former Mokume stockholders in
connection with Versant's acquisition of Mokume. In addition to previous forfeitures of shares in prior fiscal years, pursuant to a written agreement with the representative of the former Mokume
stockholders in accordance with the Mokume merger agreement, 8,998 shares of Versant Common Stock held by the former Mokume stockholders were forfeited and cancelled as of January 12, 2006 in
satisfaction of Versant's indemnification rights.

NOTE 14. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

Versant evaluates and revises its bad debt allowance 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. 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 31,2007

2006

2005Allowance for doubtful accountsBeginning balance

$
62

$
114

$
368Provision in allowance for doubtful accounts


6


(52
)

(260
)Recovery in allowance for doubtful accounts








6Ending balance

$
68

$
62

$
114


NOTE 15. QUARTERLY INFORMATION (unaudited)

Summarized quarterly supplemental consolidated financial information for fiscal 2007 and 2006, net of discontinued operations (in thousands):

|                                                             |         | Fiscal 2007 Quarters Ended |       | Fiscal 2006 Quarters Ended |  
|------------------------------------------------------------ | ------- | -------------------------- | ----- | -------------------------- | -
|
|Revenues                                                     |         | $                          | 5,561 |                            | $
|Cost of revenues                                             |         | $                          | 340   |                            | $
|Gross profit                                                 |         | $                          | 5,221 |                            | $
|Operating expenses                                           |         | $                          | 3,097 |                            | $
|Income from operations                                       |         | $                          | 2,124 |                            | $
|Net income from continuing operations                        |         | $                          | 2,015 |                            | $
|Income from discontinued operations, net of income tax       |         | $                          | 72    |                            | $
|Gain from sale of discontinued operations, net of income tax |         | $                          |      |                            | $
|Net income                                                   |         | $                          | 2,087 |                            | $
|Net income per share                                         |         |                            |       |                            |  
|                                                             | Basic   |                            | $     | 0.57                       |  
|                                                             | Diluted |                            | $     | 0.56                       |  

89

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ITEM 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

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, 2007, the
end of the fiscal period covered by this report on Form 10-K. Securities and Exchange Commission, or SEC, rules define the term "disclosure controls and procedures" to mean a
company's controls and other procedures that are designed to ensure that information required to be disclosed in the reports it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time period specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by a company in its reports filed under the Exchange Act 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.

Based
on the evaluation of the effectiveness of our disclosure controls and procedures by our management with the participation of the Chief Executive Officer and the Chief Financial
Officer, our
Chief Executive Officer and our Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that
information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's
rules and forms.

A
control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, because of
the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been or will be detected. These
inherent limitations include the fact that there are resource constraints, and that the benefits of controls must be considered relative to their costs.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The
certification of Versant's Chief Executive Officer and Chief Financial Officer attached as Exhibit 31.01 and Exhibit 31.02 to this Annual Report on
Form 10-K include, in paragraph 4 of such certifications, information concerning Versant's disclosure controls and procedures and internal control over financial reporting.
Such certifications should be read in conjunction with the information contained in this Item 9A for a more complete understanding of the matters covered by such certifications. The certifying
officers have worked to design, or caused to be designed, disclosure controls and procedures, for the purpose of ensuring that material information relating to Versant, including its consolidated
subsidiaries, is made known to them by other personnel of Versant on a timely basis. These disclosure controls and procedures were designed and adopted in good faith for this purpose, but it is
recognized that these procedures must be continually evaluated and can always merit further improvement.

90

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Changes in Internal Control over Financial Reporting.

There was no change in our internal control over financial reporting during the fourth quarter of fiscal 2007 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.

SEC
rules define the term "internal control over financial reporting" as a process designed by, or under the supervision of, the Company's principal executive and principal financial
officers, or persons performing similar functions, and effected by the Company's board of directors, management and other personnel, 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 and includes those policies and procedures that:



Item 9B.    Other Information.

None

91

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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 athttp://www.versant.com. We intend to satisfy
the disclosure requirement under Item 10 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 is incorporated by reference from our Proxy Statement to be filed in connection with our 2008 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 2008 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 2008 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 2008 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 2008 Annual Meeting of
Shareholders.

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.

92

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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 CORPORATION                                                                                                                                            
|----------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|Dated: January 29, 2008 | /s/JERRY WONGJerry Wong Vice President, Finance
Chief Financial Officer
(Duly Authorized Officer, Principal Financial Officer and Principal Accounting Officer)
|                        | /s/JOCHEN WITTEJochen Witte President and Chief Executive Officer
(Duly Authorized Officer and Principal Executive Officer)                                    

93

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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                                               |  | Date            
|------------------------------------------------------------- |  | --------------------------------------------------- |  | ----------------
|                                                              |  |                                                     |  |                 
|PRINCIPAL EXECUTIVE OFFICER:                                  |  |                                                     |  |                 
|/s/JOCHEN WITTEJochen Witte                                   |  | President and Chief Executive Officer               |  | January 29, 2008
|PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL ACCOUNTING OFFICER: |  |                                                     |  |                 
|/s/JERRY WONGJerry Wong                                       |  | Vice President, Finance and Chief Financial Officer |  | January 29, 2008
|ADDITIONAL DIRECTORS:                                         |  |                                                     |  |                 
|/s/UDAY BELLARYUday Bellary                                   |  | Director                                            |  | January 29, 2008
|/s/WILLIAM HENRY DELEVATIWilliam Henry Delevati               |  | Director                                            |  | January 29, 2008
|/s/HERBERT MAYHerbert May                                     |  | Director                                            |  | January 29, 2008
|/s/BERNHARD WOEBKERBernhard Woebker                           |  | Director                                            |  | January 29, 2008

94

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EXHIBIT INDEX

|      |  |                                                                                                                                                                                                                     |  | Incorporated by Reference |  |         
|----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------- |  | --------
|
|
|2.01  |  | 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                       |  | 09/29/03
|2.02  |  | 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                     |  | 2/2/04  
|2.03  |  | 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                       |  | 9/17/03 
|2.04  |  | Vanatec GmbH Asset Purchase Agreement                                                                                                                                                                               |  | 10-KSB                    |  | 1/30/06 
|2.05  |  | Vanatec GmbH Agreement on the Purchase and Assignment of a Share                                                                                                                                                    |  | 10-KSB                    |  | 1/30/06 
|2.06  |  | Asset Purchase Agreement as of February 1, 2006 between Versant Corporation and Sima Solutions                                                                                                                      |  | 8-K                       |  | 02/7/06 
|3.01  |  | Amended and Restated Articles of Incorporation of the Registrant, filed with the California Secretary of State on March 18, 2004                                                                                    |  | S-8                       |  | 03/24/04
|3.02  |  | 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                       |  | 8/26/05 
|3.03  |  | Registrant's Amended and Restated Bylaws                                                                                                                                                                            |  | 8-K                       |  | 3/08/07 
|10.01 |  | Registrant's 2005 Equity Incentive Plan, as amended**                                                                                                                                                               |  | 8-K                       |  | 04/16/07
|10.02 |  | Forms of Stock Option Agreements and Stock Option Exercise Agreements under Registrant's 2005 Equity Incentive Plan**                                                                                               |  | S-8                       |  | 12/22/05
|10.03 |  | Registrant's 2005 Directors Stock Option Plan, as amended**                                                                                                                                                         |  |                           |  |         
|10.04 |  | Forms of Stock Option Grants and Stock Option Exercise Agreements under Registrant's 2005 Directors Stock Option Plan**                                                                                             |  | S-8                       |  | 12/22/05
|10.05 |  | Registrant's 2005 Employee Stock Purchase Plan, as amended **                                                                                                                                                       |  | 8-K                       |  | 04/26/07
|10.06 |  | Forms of Enrollment Form and Subscription Agreement under Registrant's 2005 Employee Stock Purchase Plan**                                                                                                          |  | S-8                       |  | 12/22/05

95

---



|10.07 |  | Registrant's 1996 Directors Stock Option Plan, as amended as of July 30, 2003, and related documents**                                                                                  |  | S-8    |  | 08/14/03 |  | 4.06  |  | 
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------ |  | -------- |  | ----- |  | 
|10.08 |  | Registrant's 1996 Employee Stock Purchase Plan, as amended as of August 17, 2004 and related documents**                                                                                |  | 10-K   |  | 2/15/05  |  | 10.02 |  | 
|10.09 |  | Registrant's 1996 Equity Incentive Plan, as amended as of April 18, 2002, and related documents**                                                                                       |  | S-8    |  | 05/09/02 |  | 4.05  |  | 
|10.10 |  | Poet Holdings, Inc. Amended and Restated 1995 Stock Plan and Forms of Stock Option Agreement and Exercise Notice thereunder**                                                           |  | S-8    |  | 3/24/04  |  | 4.5   |  | 
|10.11 |  | Poet Holdings, Inc. 1999 Director Option Plan and Forms of Director Option Agreement and Director Option Exercise Notice thereunder**                                                   |  | S-8    |  | 3/24/04  |  | 4.6   |  | 
|10.12 |  | Poet Holdings, Inc. 2001 Non Statutory Stock Option Plan and Forms of Stock Option Agreement and Exercise Notice thereunder**                                                           |  | S-8    |  | 3/24/04  |  | 4.7   |  | 
|10.13 |  | Form of Letter from Registrant to option holders of Poet Holdings, Inc., regarding assumption of options by Registrant**                                                                |  | S-8    |  | 3/24/04  |  | 99.01 |  | 
|10.14 |  | Form of Indemnity Agreement entered into by Registrant with each of its directors and executive officers                                                                                |  | 10-K   |  | 2/15/05  |  | 10.9  |  | 
|10.15 |  | Form of Amendment to Versant Corporation Stock Option Agreement**                                                                                                                       |  | SB-2   |  | 7/16/96  |  |       |  | 
|10.16 |  | Separation Agreement dated June 14, 2005 between Versant Corporation and Nick Ordon**                                                                                                   |  | 8-K    |  | 6/16/05  |  | 10.01 |  | 
|10.17 |  | Separation Agreement dated June 14, 2005 between Registrant and Lee McGrath**                                                                                                           |  | 8-K    |  | 6/16/05  |  | 10.02 |  | 
|10.18 |  | Joint Employment Agreement and Managing Director Service Contract dated November 30, 2006 between Registrant, Versant GmbH, a wholly owned subsidiary of Registrant, and Jochen Witte** |  | 8-K    |  | 12/1/06  |  | 5.02  |  | 
|10.19 |  | Registration Rights Agreement dated December 28, 1998 between the Registrant and the parties listed on the Schedule of Investors attached thereto                                       |  | 10-KSB |  | 03/31/99 |  | 10.35 |  | 
|10.20 |  | 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    |  | 07/13/99 |  | 10.02 |  | 
|10.21 |  | Office Building Lease dated March 23, 2007, between Versant Corporation and CA-Shorebreeze Limited Partnership                                                                          |  | 10-Q   |  | 6/13/07  |  | 10.01 |  | 

96

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|21.01 |  | Subsidiaries of the Registrant                              |  |  |  |  |  |  |  | ý
|----- |  | ----------------------------------------------------------- |  |  |  |  |  |  |  | -
|23.01 |  | Consent of Grant Thornton LLP                               |  |  |  |  |  |  |  | ý
|31.01 |  | Rule 13a-14(a) Certification of Principal Executive Officer |  |  |  |  |  |  |  | ý
|31.02 |  | Rule 13a-14(a) Certification of Principal Financial Officer |  |  |  |  |  |  |  | ý
|32.01 |  | Section 1350 Certification of Principal Executive Officer   |  |  |  |  |  |  |  | ý
|32.02 |  | Section 1350 Certification of Principal Financial Officer   |  |  |  |  |  |  |  | ý

---

97

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