**UNITED STATES****SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

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**Form 10-Q**

 

| **ý**                                             | ** ** | **Quarterly  report pursuant to Section 13 or 15(d) of the Securities Exchange Act of  1934**  |
|--------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------|
|                                                   |
| **For the quarterly period ended  July 31, 2004** |
|                                                   |
| **OR**                                                 |
|                                                   |
| **o**                                                  | ** ** | **Transition  report pursuant to Section 13 or 15(d) of the Securities Exchange Act of  1934** |

 

**Commission File Number:  001-11807**

 

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**UNIFY CORPORATION**

(Exact name of registrant asspecified in its charter)

 
| **Delaware**                                                        | ** ** | **94-2710559**                            |
|---------------------------------------------------------------------|------------|-------------------------------------------|
| (State or other jurisdiction  of  incorporation or organization)    |       | (I.R.S. Employer  Identification  Number) |
|                                                                |
| **2101  Arena Blvd, Suite 100  Sacramento, California 95834**  |
| (Address of principal  executive offices)                           |
|                                                                |
| **Telephone:  (916) 928-6400**                                      |
| (Registrant’s telephone  number, including area code)          |

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Section 13 or 15(d) of the Securities Exchange Actof 1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

YES  ý    NO  o

 

Indicate the number of shares outstanding of each of the issuer’sclasses of common stock, as of the latest practicable date.

 

27,630,168 shares of Common Stock, $0.001 parvalue, as of August 31, 2004

 

 

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**UNIFY CORPORATION**

**FORM 10-Q**

 

INDEX

 
| PART I.        | FINANCIAL INFORMATION                                                                                             |   |
|----------------|-------------------------------------------------------------------------------------------------------------------|--------|
|           |                                                                                                              |   |
| Item 1.        | Financial Statements                                                                                              |   |
|           |                                                                                                              |   |
|           | Unaudited Condensed Consolidated Balance  Sheets as of July 31, 2004 and April 30, 2004                 |   |
|           |                                                                                                              |   |
|           | Unaudited Condensed Consolidated Statements  of Operations for the three months ended July 31, 2004 and 2003 |   |
|           |                                                                                                              |   |
|           | Unaudited Condensed Consolidated Statements  of Cash Flows for the three months ended July 31, 2004 and 2003 |   |
|           |                                                                                                              |   |
|           | Notes to Unaudited Condensed Consolidated  Financial Statements                                                   |   |
|           |                                                                                                              |   |
| Item 2.        | Management’s Discussion and Analysis of  Financial Condition and Results of Operations                       |   |
|           |                                                                                                              |   |
| Item 3.        | Disclosures about Market Rate Risk                                                                                |   |
|           |                                                                                                              |   |
| Item 4.        | Controls and Procedures                                                                                           |   |
|           |                                                                                                              |   |
| PART II.       | OTHER INFORMATION                                                                                                 |   |
|           |                                                                                                              |   |
| Item 1.        | Legal Proceedings                                                                                                 |   |
|           |                                                                                                              |   |
| Item 6.        | Exhibits and Reports on Form 8-K                                                                                  |   |
|           |                                                                                                              |   |
| SIGNATURE      |                                                                                                              |
|           |                                                                                                              |
|           |                                                                                                              |
| CERTIFICATIONS |                                                                                                              |

 

2

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**PART I.****                            FINANCIAL INFORMATION**

 

**Item 1.****                                   Financial Statements**

 

**UNIFYCORPORATION**

**UNAUDITED CONDENSED CONSOLIDATEDBALANCE****SHEETS**

**(in thousands)**

 
| ** **                                      | ** ** | **July 31,  2004** | ** ** | **April 30,  2004** | ** ** |
|-------------------------------------------------|------------|-------------------------|------------|--------------------------|------------|
| **Assets**                                      |       |                    |       |                     |       |
| Current assets:                                 |       |                    |       |                     |       |
| Cash and cash equivalents                       |       | $                       | 5,991      |                     | $          | 6,606 |   |
| Accounts receivable, net                        |       | 2,216                   |       | 2,848                    |       |
| Prepaid expense & other current assets      |       | 587                     |       | 543                      |       |
| Total current assets                            |       | 8,794                   |       | 9,997                    |       |
|                                            |       |                    |       |                     |       |
| Property and equipment, net                     |       | 337                     |       | 338                      |       |
| Other investments                               |       | 214                     |       | 214                      |       |
| Other assets                                    |       | 207                     |       | 194                      |       |
| Total assets                                    |       | $                       | 9,552      |                     | $          | 10,743 |   |
|                                            |       |                    |       |                     |       |
| **Liabilities and Stockholders’ Equity**   |       |                    |       |                     |       |
| Current liabilities:                            |       |                    |       |                     |       |
| Line of credit                                  |       | $                       | 800        |                     | $          | — |   |
| Current portion of long term debt               |       | 121                     |       | 146                      |       |
| Account payable                                 |       | 147                     |       | 523                      |       |
| Other accrued liabilities                       |       | 953                     |       | 1,340                    |       |
| Accrued compensation and related expenses       |       | 694                     |       | 812                      |       |
| Deferred revenue                                |       | 2,625                   |       | 3,360                    |       |
| Total current liabilities                       |       | 5,340                   |       | 6,181                    |       |
|                                            |       |                    |       |                     |       |
| Other long term liabilities                     |       | 71                      |       | 70                       |       |
|                                            |       |                    |       |                     |       |
| Commitments and contingencies                   |       |                    |       |                     |       |
|                                            |       |                    |       |                     |       |
| Stockholders’ equity:                      |       |                    |       |                     |       |
| Common stock                                    |       | 28                      |       | 27                       |       |
| Additional paid in capital                      |       | 63,319                  |       | 63,205                   |       |
| Accumulated other comprehensive gain            |       | 26                      |       | 18                       |       |
| Accumulated deficit                             |       | (59,232                 | )          | (58,758                  | )          |
| Total stockholders’ equity                 |       | 4,141                   |       | 4,492                    |       |
| Total liabilities and stockholders’ equity |       | $                       | 9,552      |                     | $          | 10,743 |   |

 

See accompanying notes to condensedconsolidated financial statements.

 

3

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**UNIFY CORPORATION**

**UNAUDITED CONDENSEDCONSOLIDATED STATEME****NTS OF OPERATIONS**

(in thousands, except per share data)

(unaudited)

 
| ** **                                    | ** ** | **Three Months Ended  July 31,** | ** ** |
|-----------------------------------------------|------------|---------------------------------------|------------|
| ** **                                    | ** ** | **2004**                              | ** ** | **2003** | ** ** |
| Revenues:                                     |       |                                  |       |   |   |
| Software licenses                             |       | $                                     | 1,164      |   | $ | 1,836 |   |
| Services                                      |       | 1,569                                 |       | 1,465 |   |
| Total revenues                                |       | 2,733                                 |       | 3,301 |   |
|                                          |       |                                  |       |   |   |
| Cost of Revenues:                             |       |                                  |       |   |   |
| Software licenses                             |       | 83                                    |       | 86 |   |
| Services                                      |       | 364                                   |       | 320 |   |
| Total cost of revenues                        |       | 447                                   |       | 406 |   |
|                                          |       |                                  |       |   |   |
| Gross profit                                  |       | 2,286                                 |       | 2,895 |   |
|                                          |       |                                  |       |   |   |
| Operating Expenses:                           |       |                                  |       |   |   |
| Product development                           |       | 689                                   |       | 1,007 |   |
| Selling, general and administrative           |       | 2,061                                 |       | 1,853 |   |
| Write-down of other investments               |       | —                                |       | 175 |   |
| Total operating expenses                      |       | 2,750                                 |       | 3,035 |   |
|                                          |       |                                  |       |   |   |
| Loss from operations                          |       | (464                                  | )          | (140 | ) |
| Other income (expense), net                   |       | (16                                   | )          | (2 | ) |
| Loss before income taxes                      |       | (480                                  | )          | (142 | ) |
| Provision (recovery) for income taxes         |       | (6                                    | )          | 2 |   |
| Net loss                                      |       | $                                     | (474       | ) | $ | (144 | ) |
|                                          |       |                                  |       |   |   |
| Net loss per share:                           |       |                                  |       |   |   |
| Basic                                         |       | $                                     | (0.02      | ) | $ | (0.01 | ) |
| Dilutive                                      |       | $                                     | (0.02      | ) | $ | (0.01 | ) |
| Shares used in computing net loss per  share: |       |                                  |       |   |   |
| Basic                                         |       | 27,523                                |       | 21,344 |   |
| Dilutive                                      |       | 27,523                                |       | 21,344 |   |

 

See accompanying notes to condensedconsolidated financial statements.

 

4

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**UNIFY CORPORATION**

**UNAUDITEDCONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

*(In thousands)*

 
| ** **                                                            | ** ** | **Three****Months Ended July 31,** | ** ** |
|-----------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                            | ** ** | **2004**                                | ** ** | **2003** | ** ** |
| Cash flows from operating activities:                                 |       |                                    |       |   |   |
| Net loss                                                              |       | $                                       | (474       | ) | $ | (144 | ) |
| Reconciliation of net loss to net cash used  in operating activities: |       |                                    |       |   |   |
| Depreciation                                                          |       | 41                                      |       | 45 |   |
| Write-down of other investments                                       |       | —                                  |       | 175 |   |
| Stock based compensation                                              |       | 40                                      |       | 40 |   |
| Changes in operating assets and  liabilities:                         |       |                                    |       |   |   |
| Accounts receivable                                                   |       | 657                                     |       | 335 |   |
| Prepaid expenses and other current assets                             |       | (53                                     | )          | 51 |   |
| Accounts payable                                                      |       | (377                                    | )          | (207 | ) |
| Other accrued liabilities                                             |       | (383                                    | )          | (201 | ) |
| Accrued compensation and related expenses                             |       | (124                                    | )          | (95 | ) |
| Deferred revenue                                                      |       | (766                                    | )          | (524 | ) |
| Net cash used in operating activities                                 |       | (1,439                                  | )          | (525 | ) |
|                                                                  |       |                                    |       |   |   |
| Cash flows from investing activities:                                 |       |                                    |       |   |   |
| Purchases of property and equipment                                   |       | (35                                     | )          | (20 | ) |
| Net cash used in investing activities                                 |       | (35                                     | )          | (20 | ) |
|                                                                  |       |                                    |       |   |   |
| Cash flows from financing activities:                                 |       |                                    |       |   |   |
| Borrowings under line of credit                                       |       | 800                                     |       | — |   |
| Proceeds from issuance of common stock, net                           |       | 75                                      |       | 34 |   |
| Payments of long term debt                                            |       | (36                                     | )          | (60 | ) |
| Net cash provided by (used in) financing  activities                  |       | 839                                     |       | (26 | ) |
|                                                                  |       |                                    |       |   |   |
| Effect of exchange rate changes on cash                               |       | 20                                      |       | 20 |   |
| Net decrease in cash and cash equivalents                             |       | (615                                    | )          | (551 | ) |
| Cash and cash equivalents, beginning of  period                       |       | 6,606                                   |       | 3,030 |   |
| Cash and cash equivalents, end of period                              |       | $                                       | 5,991      |   | 2,479 |   |
| Supplemental cash flow information:                                   |       |                                    |       |   |   |
| Cash paid during the period for:                                      |       |                                    |       |   |   |
| Interest                                                              |       | $                                       | 3          |   | $ | 1 |   |
| Income taxes                                                          |       | $                                       | 0          |   | $ | 9 |   |

 

See accompanying notes to condensed consolidated financial statements.

 

5

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**UNIFY CORPORATION**

**NOTES TO UNAUDITED CONDENSED CONSOLIDATE****D FINANCIAL STATEMENTS**

 

**1.****                                      Basisof Presentation**

 

The condensed consolidated financial statements have been prepared byUnify Corporation (the “Company”) pursuant to the rules and regulations of theSecurities and Exchange Commission (“SEC”). While the interim financialinformation contained in this filing is unaudited, such financial statements,in the opinion of management, reflect all adjustments (consisting only ofnormal recurring adjustments) which the Company considers necessary for a fairpresentation. The results for interim periods are not necessarily indicative ofthe results to be expected for the entire fiscal year. These financialstatements should be read in conjunction with the Consolidated FinancialStatements and Notes thereto, together with Management’s Discussion andAnalysis of Financial Condition and Results of Operations, which are includedin the Company’s Annual Report on Form 10-K for the fiscal year endedApril 30, 2004 as filed with the SEC.

 

**2**.                                      **Stock CompensationInformation**

 

Unify accounts for its stock-based compensation plans under therecognition and measurement principles of APB Opinion No. 25, “Accounting forStock Issued to Employees,” and related interpretations.  Option valuationmodels were developed for use in estimating the fair value of traded optionsthat have no vesting restrictions and are fully transferable. In addition,option valuation models require the input of highly subjective assumptions,including the expected life of the option. Because the Company’s employee stockoptions have characteristics significantly different from those of tradedoptions and because changes in the subjective input assumptions can materiallyaffect the fair value estimates, in management’s opinion, the existing modelsdo not necessarily provide a reliable single measure of the fair value of itsemployee stock options.

 

The Company’s calculations are made using the Black-Scholes optionpricing model, with the following weighted average assumptions for the threemonths ending July 31, 2004 and 2003, respectively: 5.0 year expectedoption life, 12 months following date of vesting; stock volatility of 234% and109%; risk-free interest rates of 3.1%  and 1.8%; and no dividends. TheCompany’s calculations are based on a multiple option valuation approach andforfeitures are recognized as they occur.

 

The following table illustrates the effect on net loss and net loss pershare if Unify had applied the fair value recognition provisions of FinancialAccounting Standards Board Statement No. 123,  “Accounting for Stock-BasedCompensation,” to stock-based employee compensation (in thousands, except pershare amounts):

 
| ** **                                                                                          | ** ** | **Three Months Ended July 31,** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                                          | ** ** | **2004**                             | ** ** | **2003** | ** ** |
| Net loss as reported                                                                                |       | $                                    | (474       | ) | $ | (144 | ) |
| Add: stock-based employee compensation  included in reported net loss                               |       | 40                                   |       | 40 |   |
| Less: stock-based employee compensation  expense, determined under fair value method for all awards |       | (118                                 | )          | (94 | ) |
| Proforma net loss                                                                                   |       | $                                    | (552       | ) | $ | (198 | ) |
|                                                                                                |       |                                 |       |   |   |
| Net loss per share:                                                                                 |       |                                 |       |   |   |
| Basic and diluted net loss per share, as  reported                                                  |       | $                                    | (0.02      | ) | $ | (0.01 | ) |
| Basic and diluted net loss per share, pro  forma                                                    |       | $                                    | (0.02      | ) | $ | (0.01 | ) |

 

**3.****                                     ****Exercise of Warrants**

 

InJune, 2004, Silicon Valley Bank (the “Bank”) exercised its warrant to purchase115,385 shares of the Company’s common stock. In conjunction with thisexercise, under the terms of the Warrant Agreement, the Company issued 68,016shares of common stock to the Silicon Valley Bank via a cashless exercise.

 

6

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**4.****                                      OtherInvestments**

 

Other investments represent common stock in two closely-held technologycompanies. The Company’s ownership interest in each company is less than15%.  Other investments consisted of thefollowing (in thousands):

 

| ** **                          | ** ** | **July 31,  2004** | ** ** | **April 30,  2004** | ** ** |
|-------------------------------------|------------|-------------------------|------------|--------------------------|------------|
|                                |       |                    |       |                     |       |
| Arango Software International, Inc. |       | $                       | 175        |                     | $          | 175 |   |
| Unify Japan                         |       | 39                      |       | 39                       |       |
|                                |       |                    |       |                     |       |
|                                |       | $                       | 214        |                     | $          | 214 |   |

 

The Company holds a minority interest inArango Software International, Inc. (or “Arango”), a privately-held corporationheadquartered in Panama. We assess the valuation of Arango whenever circumstances indicate thatthere is a decline in the carrying value below cost that is other thantemporary. Several factors can trigger an impairment review, such assignificant underperformance relative to expected historical or projectedfuture operating results and significant negative industry or economic trends.In assessing potential impairment for such investments, we consider thesefactors as well as the forecasted financial performance. When such decline invalue is other than temporary, we recognize an impairment loss in the currentperiod operating results to the extent of the decline.  During the first quarter of fiscal 2004, the Company reduced the carryingvalue of its investment in Arango by $175,000. Future adverse changes in market conditions or poor operating results ofArango could result in losses or an inability to recover the carrying value ofthe investment that is not currently reflected in the investment’s carryingvalue, thereby possibly requiring an impairment charge in the future.

 

**5.****                                      CreditFacility**

 

On June 3, 2004, the Company replaced its previous line of creditand term loan with a new $1.0 million revolving line of credit and a $500,000term loan with the Bank.  The line ofcredit is secured by qualifying domestic accounts receivable and has a one-yearterm. The term loan is secured by purchased assets and has a one-year term. TheCompany will incur interest expense on the line of credit and the term loan atthe prevailing prime rate plus 2.0% and 2.5% per annum, respectively. The primerate used to determine the interest shall not be less than 4.0%. As ofJuly 31, 2004, the Company had $0.8 million outstanding under the line ofcredit and an additional $0.04 million in available credit.

 

**6.****                                      Long-termDebt**

 

The Company’s debt consists of the following at July 31, 2004 andApril 30, 2004 (in thousands):

 

| ** **                                                                                                                                                                                                                                                               | ** ** | **July 31,  2004** | ** ** | **April 30,  2004** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------|------------|--------------------------|------------|
| Note payable to a financial institution,  accruing interest at prime plus 2.5%, not to be less than 4.0% per annum  (actual interest rate at July 31, 2004 was 6.75%), and payable in  monthly installments of $8,333 per month with the balance due in June, 2005. |       | $                       | 121        |                     | $          | 146 |   |
|                                                                                                                                                                                                                                                                     |       |                    |       |                     |       |
| Less current portion                                                                                                                                                                                                                                                     |       | (121                    | )          | (146                     | )          |
|                                                                                                                                                                                                                                                                     |       |                    |       |                     |       |
|                                                                                                                                                                                                                                                                     |       | $                       | —     |                     | $          | — |   |

 

7

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**7.****                                      OtherLong Term Liabilities**

 

In France, the Company is subject to mandatory employee severance costsassociated with a statutory government regulated plan covering all employees.The plan provides for one month of severance for the first five years ofservice with an employer and one fifth of one year of severance for every oneyear of service thereafter. In order to receive their severance payment theemployee may not retire before age 65 and must be employed at the time ofretirement.

 

**8.****                                      ComprehensiveLoss**

 

The Company’s total comprehensive loss for the periods shown was asfollows:

 

| ** **                   | ** ** | **Three Months Ended July 31,** | ** ** |
|------------------------------|------------|--------------------------------------|------------|
| ** **                   | ** ** | **2004**                             | ** ** | **2003** | ** ** |
|                         |       |                                 |       |   |   |
| Net loss                     |       | $                                    | (474       | ) | $ | (144 | ) |
| Foreign currency translation |       | 8                                    |       | 33 |   |
| Total comprehensive loss     |       | $                                    | (466       | ) | $ | (111 | ) |

 

**9.****                                      Earnings(Loss) Per Share**

 

SFAS No. 128, *Earnings per Share,*requires a dual presentation of basic and diluted income per share (“EPS”).Basic EPS excludes dilution and is computed by dividing net income (loss)attributable to common stockholders by the weighted average of common sharesoutstanding for the period. Diluted EPS reflects the potential dilution thatcould occur if securities or other contracts to issue common stock (e.g.convertible preferred stock, warrants, and common stock options) were exercisedor converted into common stock. Potential common shares in the diluted EPS computation are excluded forthe three-month periods ended July 31, 2004 and July 31, 2003 astheir effect would be antidilutive.  Thefollowing is a reconciliation of the numerators and denominators of the basicand diluted income per share computations for the periods indicated (inthousands, except per share amounts):

 

| ** **                                                                         | ** ** | **Three Months Ended July 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------|------------|
| ** **                                                                         | ** ** | **2004**                             | ** ** | **2003** | ** ** |
| **Net loss  (Numerator):**                                                         |       |                                 |       |   |   |
| Net loss                                                                           |       | $                                    | (474       | ) | $ | (144 | ) |
|                                                                               |       |                                 |       |   |   |
| **Shares  (Denominator):**                                                         |       |                                 |       |   |   |
| Weighted average shares of common stock  outstanding, basic                        |       | 27,523                               |       | 21,344 |   |
| Weighted average common equivalent shares outstanding                         |       | —                               |       | — |   |
| Weighted average shares of common stock  outstanding, diluted                      |       | 27,523                               |       | 21,344 |   |
|                                                                               |       |                                 |       |   |   |
| **Per Share Amount:**                                                              |       |                                 |       |   |   |
| Net loss per share, basic                                                          |       | $                                    | (0.02      | ) | $ | (0.01 | ) |
| Adjustment to net loss per share due to  weighted average common equivalent shares |       | —                               |       | — |   |
| Net loss per share, diluted                                                        |       | $                                    | (0.02      | ) | $ | (0.01 | ) |

 

8

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**10.****                               MaintenanceContracts**

 

The Company offers maintenance contracts to its customers at the timethey enter into a product license agreement and renews those contracts, at thecustomers’ option, annually thereafter. These maintenance contracts are pricedas a percentage of the value of the related license agreement. The specificterms and conditions of these initial maintenance contracts and subsequentrenewals vary depending upon the product licensed and the country in which theCompany does business. Generally, maintenance contracts provide the customerwith unspecified product maintenance updates and customer support services. Revenue from maintenance contracts isinitially deferred and then recognized ratably over the term of the agreements.

 

Changes in the Company’s deferred maintenance revenue during theperiods are as follows:

 
| ** **                          | ** ** | **Three Months Ended July 31,** | ** ** |
|-------------------------------------|------------|--------------------------------------|------------|
| ** **                          | ** ** | **2004**                             | ** ** | **2003** | ** ** |
|                                |       |                                 |       |   |   |
| Balances, beginning of period       |       | $                                    | 3,068      |   | $ | 2,846 |   |
|                                |       |                                 |       |   |   |
| Amount recognized during the period |       | (1,373                               | )          | (1,390 | ) |
|                                |       |                                 |       |   |   |
| Amount of new maintenance contracts |       | 747                                  |       | 839 |   |
|                                |       |                                 |       |   |   |
| Balances, end of period             |       | $                                    | 2,442      |   | $ | 2,295 |   |

 

9

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**UNIFY CORPORATION**

 

**Item 2.****                                   Management’s Discussion and Analysisof Financial Condition and Results of Operations**

 

*The discussion in this Quarterly Report on Form 10-Q containsforward-looking statements that have been made pursuant to the provisions ofthe Private Securities Litigation Reform Act of 1995. Such forward-lookingstatements are based on current expectations, estimates and projections aboutthe software industry and certain assumptions made by the Company’s management.Words such as “anticipates”, “expects”, “intends”, “plans”, “believes”,“seeks”, “estimates”, variations of such words and similar expressions areintended to identify such forward-looking statements. These statements are notguarantees of future performance and are subject to certain risks,uncertainties and assumptions that are difficult to predict; therefore, actualresults may differ materially from those expressed or forecasted in any suchforward-looking statements. Such risks and uncertainties include, but are notlimited to, those set forth herein under “Volatility of Stock Price and GeneralRisk Factors Affecting Quarterly Results” and in the Company’s Annual Report onForm 10-K under “Business – Risk Factors.” Unless required by law, the Companyundertakes no obligation to update publicly any forward-looking statements,whether as a result of new information, future events or otherwise. However,readers should carefully review the risk factors set forth in other reports ordocuments the Company files from time to time with the SEC, particularly theCompany’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and anyCurrent Reports on Form 8-K.*

 

The following discussion should be read in conjunction with theunaudited Condensed Consolidated Financial Statements and Notes thereto in PartI, Item 1 of this Quarterly Report on Form 10-Q and with the auditedConsolidated Financial Statements and Notes thereto, together with Management’sDiscussion and Analysis of Financial Condition and Results of Operations, whichare included in the Company’s Annual Report on Form 10-K for the fiscal yearended April 30, 2004 as filed with the SEC.

 

**Overview**

 

Unify is a global provider of enterprise software solutions to mid-sizeand large organizations. For more than 24 years, we have provided our2,000 customers and 300 ISV partners around the world with productive andcost-effective application platform, database and application developmentsolutions for building and deploying applications. Our software products andservices enable businesses to rapidly, efficiently and seamlessly deliverapplications that deliver the right information to the right people at theright time. Our software platform today gives organizations the ability toconnect multiple data sources, quickly build forms-based applications, automatebusiness processes and integrate disparate information to run, manage andoptimize their business. By deploying Unify software, customers can increaserevenue, enrich customer and citizen relationships, increase supply chainefficiencies and enhance operational effectiveness. Our customers are leaders intheir respective industries, including healthcare, financial services,government and manufacturing among others.

 

Our flagship product, Unify NXJ, is an easy-to-use, productive andstandards-based application platform that enables organizations to quickly andeffectively automate processes within and between organizations, consolidatemultiple legacy systems into unified applications, and provide advancedcollaborative information systems for employees, suppliers and partners. UnifyNXJ provides a comprehensive set of application services that include businessprocess management, reporting, portal and portal integration, Web servicesintegration, forms processing, and enterprise application integration, as wellas assembly and orchestration components. Unify NXJ can be delivered as acomplementary offering for delivering applications that deploy across allleading J2EE infrastructure stacks including BEA WebLogic, IBM Websphere andOracle 10g or as a fully integrated application platform with the JBoss applicationserver.

 

Additionally,Unify provides application development and database management productsolutions to organizations worldwide. Unify’s rapid application development product line, ACCELL, graphicalclient/server application development product, VISION, and database managementproduct family, DataServer, enable IT organizations to rapid develop anddeliver business applications critical to the enterprise.

 

For our first quarter operations, total revenues were $2.7 million, a17 percent decrease, compared to $3.3 million in the first quarter of fiscal2004.  Software licenses revenue was $1.2million, a decrease of 37 percent, compared to $1.8 million for the fiscal 2004first quarter.  The net loss for thequarter was $474,000 or $0.02 loss per basic share, compared to a $144,000 or$0.01 loss in the first quarter of the prior year.

 

10

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**Critical Accounting Policies**

 

The following discussion and analysis of the Company’s financialcondition and results of operations are based upon our consolidated financialstatements, which have been prepared in accordance with accounting principlesgenerally accepted in the United States. The preparation of these financialstatements requires us to make estimates and judgments that affect the reportedamounts of assets, liabilities, revenues and expenses, and related disclosureof contingent liabilities. We base our estimates on historical experience andon various other assumptions that are believed to be reasonable under thecircumstances, the results of which form the basis for making judgments aboutthe carrying values of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from these estimates underdifferent assumptions or conditions. The areas that require significantjudgment are as follows.

 

*Revenue Recognition.*The Company generates revenue fromsoftware license sales and related services, including maintenance and support,and consulting services. The Company licenses its products to end-usercustomers, independent software vendors and value-added resellers. While theCompany recognizes revenue for software license sales in accordance withStatement of Position 97-2, “Software Revenue Recognition” as effected by Statementof Position 98-4 “Deferral of the Effective Date of a Provision of SOP 97-2”and Staff Accounting Bulletin No. 101, “Revenue Recognition in FinancialStatements”, we exercise judgment in connection with the determination of theamount of software and services revenue to be recognized in each accountingperiod. The nature of each licensing arrangement determines how revenues andrelated costs are recognized.

 

The Company’s customer contracts include multi-element arrangementsthat include a delivered element, software license, and undelivered elements,maintenance and support and/or consulting. The value allocated to theundelivered elements is unbundled from the delivered element based onvendor-specific objective evidence (VSOE) of the relative fair value of themaintenance and support and/or consulting, regardless of any separate pricesstated within the contract. We recognize revenue for delivered elements onlywhen the fair values of undelivered elements are known, uncertainties regardingcustomer acceptance are resolved, and there are no customer-negotiated refundor return rights affecting the revenue recognized for delivered elements.Changes in the allocation of the sales price between the deliverable elementsmight impact the timing of revenue recognition, but would not change the totalrevenue recognized on the contract. We may modify our pricing practices in thefuture, which could result in changes in our VSOE of fair value for theseundelivered elements. As a result, our future revenue recognition formulti-element arrangements could differ significantly from our historicalresults.

 

We defer revenue for any undelivered elements, and recognize revenuewhen the product is delivered or over the period in which the service isperformed, in accordance with our revenue recognition policy for such element.If we cannot objectively determine the fair value of any undelivered elementincluded in bundled software and service arrangements, we defer revenue untilall elements are delivered and services have been performed, or until fairvalue can objectively be determined for any remaining undelivered elements.When the fair value of a delivered element has not been established, we use theresidual method to record revenue if the fair value of all undelivered elementsis determinable. Under the residual method, the fair value of the undeliveredelements is deferred and the remaining portion of the arrangement fee isallocated to the delivered elements and is recognized as revenue.

 

An assessment of the ability of the Company’s customers to pay isanother consideration that affects revenue recognition. In some cases, theCompany sells to undercapitalized customers. In those circumstances, revenuerecognition is deferred until cash is received, the customer has established ahistory of making timely payments or the customer’s financial condition hasimproved. Furthermore, once revenue has been recognized, the Company evaluatesthe related accounts receivable balance at each period end for amounts that webelieve may no longer be collectible. This evaluation is largely done based ona review of the financial condition via credit agencies and historicalexperience with the customer. Any deterioration in credit worthiness of acustomer may impact the Company’s evaluation of accounts receivable in anygiven period.

 

*Valuation of long-lived assets.* Our long-lived assets are comprised oflong-term investments. At July 31, 2004, we had $214,000 in long-terminvestments, which are accounted for under the cost method. We assess thevaluation of long-lived assets whenever circumstances indicate that there is adecline in carrying value below cost that is other than temporary.  Several factors can trigger an impairmentreview such as significant underperformance relative to expected historical orprojected future operating results and significant negative industry oreconomic trends. In assessing potential impairment for such investments, weconsider these factors as well as the forecasted financial performance. Whensuch decline in value is other than temporary, we recognize an impairment lossin the current period operating results to the extent of the decline. Werecognized no impairment losses related to long-term investments in the quarterended July 31, 2004. Future adverse changes in market conditions or pooroperating results could result in losses or an inability to recover thecarrying value of the long-term investments that is not currently reflected inthe investments carrying value, thereby possibly requiring additionalimpairment charges in the future.

 

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*Deferred tax asset valuation allowance.*  As ofJuly 31, 2004, we have approximately $19.1 million of deferred tax assetsrelated principally to net operating loss carry forwards, reserves and otheraccruals, deferred revenue, and foreign tax credits. A valuation allowance hasbeen recorded to offset these deferred tax assets. The ability of the Companyto ultimately realize its deferred tax assets will be contingent upon theCompany achieving taxable income. There can be no assurance that this willoccur in amounts sufficient to utilize the deferred tax assets. Should wedetermine that we would be able to realize the deferred tax assets in thefuture in excess of the recorded amount, an adjustment to the deferred taxasset would increase income in the period such determination was made.

 

**Results of Operations**

 

Thefollowing table sets forth, for the periods indicated, certain financial dataas a percentage of total revenue:

 

| ** **                           | ** ** | **Three Months ended July 31,** | ** ** |
|--------------------------------------|------------|--------------------------------------|------------|
| ** **                           | ** ** | **2004**                             | ** ** | **2003** | ** ** |
| Revenues:                            |       |                                 |       |   |   |
| Software licenses                    |       | 42.6                                 | %          | 55.6 | % |
| Services                             |       | 57.4                                 |       | 44.4 |   |
| Total revenues                       |       | 100.0                                |       | 100.0 |   |
|                                 |       |                                 |       |   |   |
| Cost of revenues:                    |       |                                 |       |   |   |
| Software licenses                    |       | 3.0                                  |       | 2.6 |   |
| Services                             |       | 13.4                                 |       | 9.7 |   |
| Total cost of revenues               |       | 16.4                                 |       | 12.3 |   |
|                                 |       |                                 |       |   |   |
| Gross profit                         |       | 83.6                                 |       | 87.7 |   |
|                                 |       |                                 |       |   |   |
| Operating expenses:                  |       |                                 |       |   |   |
| Product development                  |       | 25.2                                 |       | 30.5 |   |
| Selling, general and administrative  |       | 75.4                                 |       | 56.1 |   |
| Write-down of other investment       |       | —                               |       | 5.3 |   |
| Total operating expenses             |       | 100.6                                |       | 91.9 |   |
| Loss from operations                 |       | (17.0                                | )          | (4.2 | ) |
| Other income, net                    |       | (0.6                                 | )          | (0.1 | ) |
| Loss before income taxes             |       | (17.6                                | )          | (4.3 | ) |
| Provision (benefit) for income taxes |       | (0.2                                 | )          | 0.1 |   |
| Net Loss                             |       | (17.4                                | )%         | (4.4 | )% |

 

*Revenues*

 

Total revenues for the quarter ended July 31, 2004 decreased $0.6million, or 17%, from the same quarter of the prior year to $2.7 million.  Revenues in North America decreased $0.4million, or 28%, to $0.9 million during the quarter compared to the samequarter of the prior year. International revenues increased as a percentage oftotal revenues from 62% to 67% during the first quarter compared to the samequarter of the prior fiscal year.  Thedecrease in total revenues for the first quarter was primarily the result of softwarelicenses which decreased $0.7 million, or 37%, to $1.2 million as the Companywas unable to duplicate the large application development and database productlicense contracts that had closed during the first quarter of fiscal 2004.

 

Services revenues increased $0.1million compared to the samecomparative period a year ago, including maintenance revenues at $1.4 millionfor both the first quarter of fiscal 2005 and 2004.  The Company generally renews about 79% of itsmaintenance agreements, which is typically augmented by new maintenancerevenues from new product revenues. Consulting and training revenues increased $121,000, or 161%, during thefirst quarter of fiscal 2005 to $196,000 as compared to the same period of theprior year as the Company assisted and trained its customers in the developmentof their applications using Unify NXJ.

 

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*Cost of Revenues*

 

The Company’s cost of revenues includes cost of software licenses andcost of services.  Cost of softwarelicenses consists primarily of product documentation, packaging and productioncosts, and royalties paid for licensed technology. Costs of services consistprimarily of employee, facilities and travel costs incurred in providingcustomer support under software maintenance contracts, and consulting andtraining services.  Total cost ofrevenues was flat at $0.4 million in the first quarter of fiscal 2005 comparedto the first quarter of fiscal 2004.

 

Cost of software licenses decreased by $3,000 in the first quarter offiscal 2005 as compared to the same period of fiscal 2004.  This decrease was attributable to thedecrease in software license revenues during the quarter, compared to the sameperiod of the previous year. While the Company expects its gross margins onsoftware license revenues to remain within typical software industry averages,costs of software license revenues are expected to increase somewhat from theCompany’s historical averages as a percentage of revenue, as a result of royaltiespaid for licensed technology.

 

Total cost of services increased by $44,000 to $0.4 million in thefirst quarter of fiscal 2005 from $0.3 million during the same period in fiscal2004 as a result of the increase in consulting and training revenues.

 

*Product Development*

 

Product development expenses consist primarily of employee andfacilities costs incurred in the development and testing of new products and inthe porting of new and existing products to additional hardware platforms andoperating systems.  For the firstthree-month period of fiscal 2005, product development expenses decreased to$0.7 million compared to $1.0 million during the same three-month period offiscal 2004.  Product development costsas a percentage of total revenues during the first quarter of fiscal 2005 were25% of total revenues as compared to 31% for the first quarter of fiscal 2004.During the first quarter of fiscal 2004, the Company reduced its productdevelopment costs as part of a restructuring, in order to afford increasedinvestments in sales and marketing, particularly for Unify NXJ.  The Company believes that investments inproduct development are critical to maintaining technological leadership andtherefore intends to continue to devote significant resources to productdevelopment.

 

*Selling, General and Administrative*

 

Selling, general and administrative (“SG&A”) expenses for thequarter ended July 31, 2004 increased 11% to $2.1 million, or 75% of totalrevenues, as compared to $1.9 million, or 56% of total revenues, for the samequarter of the prior year as the Company executed its strategy to increase itsinvestments in sales and marketing activities for Unify NXJ.  The major components of SG&A for thefirst three months of fiscal 2005 were sales expenses of $1.3 million,marketing expenses of $0.2 million, general and administrative of $0.6 millionoffset by bad debt recovery of $0.1 million. Sales expenses increased $0.2 million over the same period from theprevious year as a result of increased sales force related investments designedto increase the sales of Unify NXJ. While marketing expenses remained at $0.2 million during the same twocomparative periods, the focus of marketing activities in the first quarter of2005 was on lead generation and specific NXJ marketing activities such as presstours to gain visibility for the product in the market place, as well asexpenditures for investor relations activities, compared to more generalmarketing activities during the first quarter of fiscal 2004. General and administrativeexpenses were flat at during the first quarter of fiscal 2005 as compared tothe same period in fiscal 2004. The Company’s net recovery of prior bad debtexpense was flat. The Company expects that total SG&A expenses mayfluctuate from quarter to quarter primarily because of variability in marketingspending and sales commission expense.

 

*Write-down of Other Investments*

 

During the first quarter of fiscal 2005 and 2004, the Company recordednon-cash charges of $0 and $175,000, respectively to write-down the carryingamount of its investment in Arango Software International to its estimatedrealizable value at July 31, 2004 and 2003.

 

###### *Provision for Income Taxes*

###### * *

The Company recorded no federal or state income tax provisions for thequarter ended July 31, 2004 as the Company had a net operating loss.  For the first quarter ended July 31,2004, the******Company recorded income taxrecoveries related primarily to refunds of previously paid state income taxes.

 

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**Liquidity and Capital Resources**

 

At July 31, 2004, the Company had cash, cash equivalents andshort-term investments of $6.0 million, compared to $6.6 million atApril 30, 2004.  Working capitaldecreased to $3.5 million at July 31, 2004 compared to $3.8 million atApril 30, 2004. Under the Company’s line of credit arrangement withSilicon Valley Bank, which was renewed during the first quarter of fiscal 2005,the Company had $0.8 million outstanding to the Bank as of July 31, 2004.The line of credit has a borrowing limit of $1.0 million; as of July 31,2004, based upon the amount of its eligible assets at that time, the Companyhad available for borrowing up to an additional $0.04 million.

 

The Company’s operations resulted in decreases in cash of $0.6 millionduring the three months ended July 31, 2004 and July 31, 2003.  Cash used by operating activities was $1.4million for the first quarter of fiscal 2005 including a net loss of $0.5million. Operating cash was provided by decreases in accounts receivable of$0.7 million, depreciation and stock based compensation of $0.1 million offsetby increases in prepaid expenses and other current assets of $0.1 million.Operating cash was used as a result of decreases in accounts payable and otheraccrued liabilities of $0.4 million each, a decrease in accrued compensation and related expenses of $0.1 million,and a decrease in deferred revenues of $0.8 million. Investing activitiesduring the period used cash of $35,000 from the purchase of property and equipment.  Cash provided by financing activities duringthe period was $0.8 million primarily from an advance of that amount on theline of credit with the Bank.

 

A summary of certain contractual obligations of the Company as ofJuly 31, 2004 is presented below:

 
| ** **                             | ** ** | **Payments Due by Period** | ** ** |
|----------------------------------------|------------|----------------------------|------------|
| **Contractual  Obligations**           | ** ** | **Total**                  | ** ** | **1 year  or less** | ** ** | **2-3  years** | ** ** | **4 - 5  years** | ** ** | **After  5  years** | ** ** |
| **Long-Term Debt**                     |       | 120,833                    |       | 120,833 |   | 0 |   | 0 |   | 0 |   |
| **Line of Credit**                     |       | 800,000                    |       | 800,000 |   | 0 |   | 0 |   | 0 |   |
| **Other Long-Term Liabilities**        |       | 70,889                     |       | 0 |   | 0 |   | 0 |   | 70,889 |   |
| **Capital Lease Obligations**          |       | 0                          |       | 0 |   | 0 |   | 0 |   | 0 |   |
| **Operating Leases**                   |       | 3,633,990                  |       | 1,026,781 |   | 1,990,710 |   | 616,499 |   | 0 |   |
| **Total Contractual Cash Obligations** |       | 4,625,712                  |       | 1,947,614 |   | 1,990,710 |   | 616,499 |   | 70,889 |   |

 

**Volatility of Stock Price and General Risk Factors Affecting QuarterlyResults**

 

The Company’s common stock price has been and is likely to continue tobe subject to significant volatility.  Avariety of factors could cause the price of the Company’s common stock tofluctuate, perhaps substantially, including: announcements of developmentsrelated to the Company’s business; fluctuations in the Company’s or itscompetitors’ operating results and order levels; general conditions in thecomputer industry or the worldwide economy; announcements of technologicalinnovations; new products or product enhancements by the Company or itscompetitors; changes in financial estimates by securities analysts;developments in patent, copyright or other intellectual property rights;developments in the Company’s relationships with its customers, distributorsand suppliers; legal proceedings brought against the Company or its officers;and significant changes in the Company’s senior management team.  In addition, in recent years the stock marketin general, and the market for shares of equity securities of many hightechnology companies in particular, have experienced extreme price fluctuationswhich have often been unrelated to the operating performance of thosecompanies. Such fluctuations may adversely affect the market price of theCompany’s common stock.

 

The Company’s quarterly operating results have varied significantly inthe past, and the Company expects that its operating results are likely to varysignificantly from time to time in the future. Such variations result from,among other factors, the following: the size and timing of significant ordersand their fulfillment; demand for the Company’s products; ability to sell newproducts; the number, timing and significance of product enhancements and newproduct announcements by the Company and its competitors; ability of theCompany to attract and retain key employees; seasonality; changes in pricingpolicies by the Company or its competitors; realignments of the Company’sorganizational structure; changes in the level of the Company’s operatingexpenses; changes in the Company’s sales incentive plans; budgeting cycles ofthe Company’s customers; customer order deferrals in anticipation ofenhancements or new products offered by the Company or its competitors; productlife cycles; product defects and other product quality problems; currencyfluctuations; and general

 

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domestic and international economic and political conditions.

 

Due to the foregoing factors, quarterly revenues and operating resultsare difficult to forecast. Revenues are also difficult to forecast because themarket for web application development software is rapidly evolving, and theCompany’s sales cycle, from initial evaluation to purchase and the provision ofmaintenance services, is lengthy and varies substantially from customer tocustomer. Because the Company normally ships products within a short time afterit receives an order, it typically does not have any material backlog. As aresult, to achieve its quarterly revenue objectives, the Company is dependentupon obtaining orders in any given quarter for shipment in that quarter.Furthermore, because many customers place orders toward the end of a fiscalquarter, the Company generally recognizes a substantial portion of its revenuesat the end of a quarter. As the Company’s expense levels are based insignificant part on the Company’s expectations as to future revenues and aretherefore relatively fixed in the short term, if revenue levels fall belowexpectations, operating results are likely to be disproportionately adverselyaffected.  The Company also expects thatits operating results will be affected by seasonal trends, and that it mayexperience relatively weaker demand in fiscal quarters ended July 31 andOctober 31 as a result of reduced business activity in Europe during thesummer months.

 

**Item3.  Disclosuresabout Market Risk**

 

*Interest Rate Risk*.  The Company’s exposure to market rate riskfor changes in interest rates relates primarily to its cash equivalents, whichare highly liquid investments with original maturities of three months or lessand are stated at cost. Cash equivalents are generally maintained in moneymarket accounts which have as their objective preservation of principal andwhich hold investments with maturity dates of less than 90 days. The Companydoes not believe its exposure to interest rate risk is material for thesebalances, which totaled $6.0 million at July 31, 2004. Additionally, the Companyhas no interest rate risk on its long-term debt. Unify does not use derivativefinancial instruments and places its cash equivalents with high quality issuersand, by policy, limits the amount of credit exposure to any one issuer. Ifmarket interest rates were to change immediately and uniformly by ten percentfrom levels at July 31, 2004, the fair value of the Company’s cashequivalents would change by an insignificant amount.

 

*Foreign Currency Exchange Rate Risk*.  As a global concern, the Company facesexposure to adverse movements in foreign currency exchange rates. Theseexposures may change over time as business practices evolve and could have amaterial adverse impact on the Company’s business, operating results andfinancial position. Historically, the Company’s primary exposures have relatedto local currency denominated sales and expenses in Europe, Japan andAustralia. Due to the substantial volatility of currency exchange rates, amongother factors, the Company cannot predict the effect of exchange ratefluctuations on its future operating results. Although Unify takes into accountchanges in exchange rates over time in its pricing strategy, it does so only onan annual basis, resulting in substantial pricing exposure as a result offoreign exchange volatility during the period between annual pricing reviews.The Company also has currency exchange rate exposures on intercompany accountsreceivable and payables owed to and by the Company as a result of localcurrency sales of software licenses and payments of intercompany royaltiesthereon, by the Company’s international subsidiaries in the United Kingdom andFrance. At July 31, 2004, the Company had $0.4 million and $0 in suchreceivables denominated in British pounds and Euros, respectively. The Companyencourages prompt payment of these intercompany balances in order to minimizeits exposure to currency fluctuations, but it engages in no hedging activitiesto reduce the risk of such fluctuations. A hypothetical ten percent change inforeign currency rates would have an insignificant impact on the Company’sbusiness, operating results and financial position. The Company has notexperienced material exchange losses on intercompany balances in the past;however, due to the substantial volatility of currency exchange rates, amongother factors, it cannot predict the effect of exchange rate fluctuations onits future business, operating results and financial position.

 

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**Item 4.  Controls andProcedures**

 

(a)                                  Underthe supervision and with the participation of our management, including ourPresident and Chief Executive Officer and our Chief Financial Officer, weevaluated the effectiveness of our disclosure controls and procedures, as suchterm is defined under Rule 13a-15(e) promulgated under the SecuritiesExchange Act of 1934, as amended.  Basedupon that evaluation, our President and Chief Executive Officer****and our Chief Financial Officer****concluded that our disclosure controls andprocedures were effective as of the end of the period covered by this quarterly****report.

 

(b)                                 Therehas been no change in our internal control over financial reporting during thequarter ended July 31, 2004 that has materially affected, or is reasonablylikely to materially affect, our internal control over financial reporting.

 

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**PART II.****                        OTHER INFORMATION**

 

**Item 1. Legal Proceedings**

 

**Litigation**

 

The Company is subject to legal proceedings and claims that arise inthe normal course of business. If such matters arise, the Company cannot assurethat it would prevail in such matters, nor can it assure that any remedy couldbe reached on mutually agreeable terms, if at all. Due to the inherentuncertainties of litigation, were there any such matters, the Company would notbe able to accurately predict their ultimate outcome. As of July 31, 2004,there were no current proceedings or litigation involving the Company thatmanagement believes would have a material adverse impact on its financialposition, results of operations, or cash flows.

 

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**Item 6.****                                   Exhibits and Reports on Form 8-K**

 
| (a)                                                                                                                                              |   | Exhibits                                                                                                                                              |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                             |   |                                                                                                                                                  |
|                                                                                                                                             | 31.1   | Certificate of Chief Executive Officer  under Section 302 of the Sarbanes-Oxley Act of 2002.                                                     |
|                                                                                                                                             |   |                                                                                                                                                  |
|                                                                                                                                             | 31.2   | Certificate of Chief Financial Officer  under Section 302 of the Sarbanes-Oxley Act of 2002.                                                     |
|                                                                                                                                             |   |                                                                                                                                                  |
|                                                                                                                                             | 32.1   | Certification of Chief Executive Officer  under 18 U.S.C Section 1350 as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 |
|                                                                                                                                             |   |                                                                                                                                                  |
|                                                                                                                                             | 32.2   | Certification of Chief Financial Officer  under 18 U.S.C Section 1350 as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002 |
|                                                                                                                                             |   |                                                                                                                                                  |
| (b)                                                                                                                                              |   | Reports on Form 8-K                                                                                                                                   |
|                                                                                                                                             |   |                                                                                                                                                  |
| During the quarter ended July 31, 2004, Unify filed the following  Current Reports on form 8-K with the Securities and Exchange Commission: |
|                                                                                                                                             |   |                                                                                                                                                  |
|                                                                                                                                             |   | Form 8-K filed on June 10, 2004 containing Unify’s fiscal year  ended April 30, 2004 earnings press release.                           |

 

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**UNIFY CORPORATION**

 

**SIGNATURE**

 

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

 

 
| Date: September 10, 2004 | Unify Corporation                            |
|-------------------------------|----------------------------------------------|
| * *                      | *(Registrant)*                               |
|                          |                                         |
|                          | By:                                          |
|                          |                                         |
|                          | /s/ PETER J. DICORTI                         |
|                          | Peter J. DiCorti                             |   |
|                          | Chief Financial Officer                      |   |
|                          | (Principal Financial and Accounting Officer) |
|                               |                                              |  |  |  |

 

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