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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-Q/A

Amendment No. 2

|/x/ | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|--- | ---------------------------------------------------------------------------------------

For the quarterly period ended July 31, 1999

OR

|/ / | 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 as specified in its charter)

Delaware(State or other jurisdiction of incorporation or organization)

94-2710559(I.R.S. Employer Identification Number)


2101 Arena Blvd, Suite 100
Sacramento, California 95834(Address of principal executive offices)

Telephone: (916) 928-6400(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes /x/  No / /

Indicate
the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

17,707,228
shares of Common Stock, $0.0005 par value, as of August 31, 1999

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UNIFY CORPORATION
FORM 10-Q/A

EXPLANATORY STATEMENT

In July 2000, Unify Corporation ("Unify" or the "Company") announced that certain matters had come to the attention of the Company's Board of Directors
that indicated that the Company had engaged in improper accounting practices. Accordingly, the Company delayed the filing of its Form 10-K for the fiscal year ended April 30,
2000, and the Board of Directors authorized its Audit Committee to conduct an investigation of the Company's accounting and financial reporting practices and to recommend remedial action, if any, as a
result of the findings of its investigation. In connection with the ongoing investigation, the Company placed its chief executive officer and its chief financial officer on administrative leave, and
in November 2000, the Company terminated its chief executive officer and its chief financial officer resigned. Based on the results of the Audit Committee's investigation, the Company concluded
that revenue, and in some cases expenses, had been improperly accounted for in certain transactions during fiscal year 2000, and adjustments were made during the fiscal year ended April 30,
2000 for such transactions, including restatements of previously reported quarterly financial statements. The investigation also included a review of transactions in earlier fiscal years. After
evaluating information from the results of the investigation, the Company concluded that its financial statements for the fiscal year ended April 30, 1999 and earlier were not materially
misstated. Also, the Company concluded that the effect on the financial statements for fiscal year 2000 of adjustments relating to transactions of earlier years not being made in those years was not
material.

The
Company filed its Form 10-K for fiscal year ended April 30, 2000 on December 22, 2000. On January 30, 2001, Unify filed amended Quarterly
Reports on Forms 10-Q/A for the fiscal quarters ended July 31, 1999, October 31, 1999 and January 31, 2000. As a result of the Company's conclusion that its financial
statements for the fiscal year ended April 30, 2000 and earlier years were not materially misstated as a result of adjustments relating to transactions in 1999 and earlier years not being made
in those years, such adjustments were not reflected in the Company's financial statements contained in such Form 10-K and Form 10-Q/As. Subsequently, in
connection with comments by the Staff of the Securities and Exchange Commission (the "Staff") relating to the Staff's review of the Company's Form 10-K and
Form 10-Q/As for the year ended April 30, 2000, the Company and the Staff had extensive communications regarding the materiality of the adjustments relating to transactions
in 1999 and earlier years referred to above. Following such communications, management determined that the Company would record the adjustments in the applicable years. Accordingly, the consolidated
financial statements for the fiscal years ended April 30, 2000, 1999 and 1998 have been restated from amounts previously reported to reflect those adjustments. A summary of the effects of the
restatement is presented in Notes 16 and 18 to the consolidated financial statements included in the Company's form 10-K/A for the
year ended April 30, 2000, a summary of the effects of the restatement on the financial statements for the quarterly period ended July 31, 1999 and 1998 is presented in Note 1.

2

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UNIFY CORPORATION
FORM 10-Q/A

INDEX

|          |  |                                                                                                                        |  | PAGE
NUMBER
|--------- |  | ---------------------------------------------------------------------------------------------------------------------- |  | -----------
|PART I.   |  | FINANCIAL INFORMATION                                                                                                  |  |            
|Item 1.   |  | Consolidated Financial Statements                                                                                      |  |            
|          |  | Unaudited Condensed Consolidated Balance Sheets (Restated) as of July 31, 1999 and April 30, 1999                      |  | 4          
|          |  | Unaudited Condensed Consolidated Statements of Income (Restated) for the three months ended July 31, 1999 and 1998     |  | 5          
|          |  | Unaudited Condensed Consolidated Statements of Cash Flows (Restated) for the three months ended July 31, 1999 and 1998 |  | 6          
|          |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                         |  | 7          
|Item 2.   |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                  |  | 11         
|Item 3.   |  | Disclosure about Market Rate Risk                                                                                      |  | 15         
|PART II.  |  | OTHER INFORMATION                                                                                                      |  |            
|Item 5.   |  | Other Information                                                                                                      |  | 17         
|Item 6.   |  | Exhibits and Reports on Form 8-K                                                                                       |  | 17         
|SIGNATURE |  | 18                                                                                                                    

3

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Item 1. Financial Statements

UNIFY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)

|                                     |                                                 | July 31,
1999              |       | April 30,
1999 |       
|------------------------------------ | ----------------------------------------------- | -------------------------- | ----- | -------------- | ------
|
|Assets                               |                                                 |                            |       |                |       
|Current assets:                      |                                                 |                            |       |                |       
|                                     | Cash and cash equivalents                       |                            | $     | 8,993          |       
|                                     | Investments                                     |                            |       | 3,663          |       
|                                     | Accounts receivable, net                        |                            |       | 6,585          |       
|                                     | Prepaid expenses and other current assets       |                            |       | 662            |       
|                                     |                                                 |                            |       |                |       
|                                     |                                                 | Total current assets       |       |                | 19,903
|Property and equipment, net          |                                                 |                            | 1,290 |                |       
|Other assets                         |                                                 |                            | 209   |                |       
|                                     |                                                 |                            |       |                |       
|                                     |                                                 | Total assets               |       | $              | 21,402
|                                     |                                                 |                            |       |                |       
|Liabilities and Stockholders' Equity |                                                 |                            |       |                |       
|Current liabilities:                 |                                                 |                            |       |                |       
|                                     | Accounts payable                                |                            | $     | 1,059          |       
|                                     | Notes payable to minority interest stockholders |                            |       | 517            |       
|                                     | Accrued compensation and related expenses       |                            |       | 1,346          |       
|                                     | Other accrued liabilities                       |                            |       | 2,076          |       
|                                     | Deferred revenue                                |                            |       | 4,570          |       
|                                     |                                                 |                            |       |                |       
|                                     |                                                 | Total current liabilities  |       |                | 9,568 
|Stockholders' equity:                |                                                 |                            |       |                |       
|                                     | Common stock                                    |                            |       | 9              |       
|                                     | Additional paid-in capital                      |                            |       | 54,439         |       
|                                     | Note receivable from stockholder                |                            |       | (101           | )     
|                                     | Accumulated other comprehensive loss            |                            |       | (683           | )     
|                                     | Accumulated deficit                             |                            |       | (41,830        | )     
|                                     |                                                 |                            |       |                |       
|                                     |                                                 | Total stockholders' equity |       |                | 11,834
|                                     |                                                 |                            |       |                |       
|                                     | Total liabilities and stockholders' equity      |                            | $     | 21,402         |       
|                                     |                                                 |                            |       |                |       

See
accompanying notes to unaudited condensed consolidated financial statements.

4

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

|                                             |                                     | Three Months Ended July 31, |      
|-------------------------------------------- | ----------------------------------- | --------------------------- | -----
|
|
|Revenues:                                    |                                     |                             |      
|                                             | Software licenses                   |                             | $    
|                                             | Services                            |                             |      
|                                             |                                     |                             |      
|                                             |                                     | Total revenues              |      
|                                             |                                     |                             |      
|Cost of revenues:                            |                                     |                             |      
|                                             | Software licenses                   |                             |      
|                                             | Services                            |                             |      
|                                             |                                     |                             |      
|                                             |                                     | Total cost of revenues      |      
|                                             |                                     |                             |      
|Gross margin                                 |                                     |                             | 4,035
|                                             |                                     |                             |      
|Operating expenses:                          |                                     |                             |      
|                                             | Product development                 |                             |      
|                                             | Selling, general and administrative |                             |      
|                                             |                                     |                             |      
|                                             |                                     | Total operating expenses    |      
|                                             |                                     |                             |      
|                                             |                                     | Loss from operations        |      
|Other income (expense), net                  |                                     |                             | 128  
|                                             |                                     |                             |      
|                                             |                                     | Loss before income taxes    |      
|Provision for income taxes                   |                                     |                             | 101  
|                                             |                                     |                             |      
|                                             |                                     | Net loss                    |      
|                                             |                                     |                             |      
|Net loss per share                           |                                     |                             |      
|                                             | Basic                               |                             | $    
|                                             |                                     |                             |      
|                                             | Diluted                             |                             | $    
|                                             |                                     |                             |      
|Shares used in computing net loss per share: |                                     |                             |      
|                                             | Basic                               |                             |      
|                                             |                                     |                             |      
|                                             | Diluted                             |                             |      
|                                             |                                     |                             |      

See
accompanying notes to unaudited condensed consolidated financial statements.

5

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UNIFY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands)
(Unaudited)

|                                               |                                                                                      | Three Months Ended July 31,                  |                                                
|---------------------------------------------- | ------------------------------------------------------------------------------------ | -------------------------------------------- | -----------------------------------------------
|
|
|Cash flows from operating activities:          |                                                                                      |                                              |                                                
|                                               | Net (loss)                                                                           |                                              | $                                              
|                                               | Reconciliation of net (loss) to net cash provided by (used in) operating activities: |                                              |                                                
|                                               |                                                                                      | Depreciation                                 |                                                
|                                               |                                                                                      | Changes in operating assets and liabilities: |                                                
|                                               |                                                                                      |                                              | Accounts receivable                            
|                                               |                                                                                      |                                              | Prepaid expenses and other current assets      
|                                               |                                                                                      |                                              | Accounts payable                               
|                                               |                                                                                      |                                              | Notes payable to minority interest stockholders
|                                               |                                                                                      |                                              | Accrued compensation and related expenses      
|                                               |                                                                                      |                                              | Other accrued liabilities                      
|                                               |                                                                                      |                                              | Deferred revenue                               
|                                               |                                                                                      |                                              |                                                
|                                               |                                                                                      |                                              |                                                
|                                               |                                                                                      |                                              |                                                
|Cash flows from investing activities:          |                                                                                      |                                              |                                                
|                                               | Purchases of available-for-sale securities                                           |                                              |                                                
|                                               | Sales of available-for-sale securities                                               |                                              |                                                
|                                               | Purchases of property and equipment                                                  |                                              |                                                
|                                               | Other assets                                                                         |                                              |                                                
|                                               |                                                                                      |                                              |                                                
|                                               |                                                                                      |                                              |                                                
|                                               |                                                                                      |                                              |                                                
|Cash flows from financing activities:          |                                                                                      |                                              |                                                
|                                               | Principal payments under debt obligations                                            |                                              |                                                
|                                               | Proceeds from issuance of common stock, net                                          |                                              |                                                
|                                               | Collection of note receivable from stockholder, net of interest accrual              |                                              |                                                
|                                               |                                                                                      |                                              |                                                
|                                               |                                                                                      |                                              |                                                
|                                               |                                                                                      |                                              |                                                
|Effect of exchange rate changes on cash        |                                                                                      |                                              | (22                                            
|                                               |                                                                                      |                                              |                                                
|Net increase in cash and cash equivalents      |                                                                                      |                                              | 3,678                                          
|Cash and cash equivalents, beginning of period |                                                                                      |                                              | 5,315                                          
|                                               |                                                                                      |                                              |                                                
|Cash and cash equivalents, end of period       |                                                                                      | $                                            | 8,993                                          
|                                               |                                                                                      |                                              |                                                
|Supplemental cash flow information:            |                                                                                      |                                              |                                                
|Cash paid during the period for:               |                                                                                      |                                              |                                                
|                                               | Interest                                                                             |                                              | $                                              
|                                               |                                                                                      |                                              |                                                
|                                               | Income taxes                                                                         |                                              | $                                              
|                                               |                                                                                      |                                              |                                                

See
accompanying notes to unaudited condensed consolidated financial statements.

6

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UNIFY CORPORATION
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation and Restatement of Financial Statements

Investigation and Restatement

In June 2000, certain matters came to the attention of the Board of Directors of Unify Corporation (the "Company") that indicated that the Company had
engaged in improper accounting practices. The Company's Board of Directors authorized its Audit Committee to conduct an investigation of the Company's accounting and financial reporting practices and
to recommend remedial action, if any, as a result of the findings of their investigation. In July 2000, in connection with the ongoing investigation, the Company placed its chief executive
officer and its chief financial officer on administrative leaves, and in November 2000, the Company terminated its chief executive officer and its chief financial officer resigned. Based on the
results of the Audit Committee's investigation, the Company concluded that revenue, and in some cases expenses, had been improperly accounted for in certain transactions during the fiscal year ended
April 30, 2000, and adjustments were made for such transactions, including restatements of previously reported quarterly financial statements. The investigation also identified commissions,
bonuses and other payments made to the Company's former chief executive officer during the fiscal year ended April 30, 2000, which the Company believes were not appropriate. Such payments in
the amount of approximately $500,000 have been charged to expense in that fiscal year; however, the Company is seeking to have the amounts repaid by the former chief executive officer. The
investigation also included a review of transactions in earlier fiscal years. After evaluating information from the results of the investigation, the Company concluded that its financial statements
for the fiscal year ended April 30, 1999 and earlier were not materially misstated. Also, the Company concluded that the effect on the financial statements for fiscal 2000 of adjustments
relating to transactions of earlier years not being made in those years was not material.

Subsequent
to the issuance of the Company's financial statements for the fiscal year ended April 30, 2000, and in connection with comments by the Staff of the Securities and
Exchange Commission (the "Staff") relating to the Staff's review of the Company's Form 10-K for the year ended April 30, 2000, the Company and the Staff had extensive
communications regarding the materiality of the adjustments relating to transactions in 1999 and earlier years referred to above. Following such communications, management determined that the Company
would record the adjustments in the applicable years. Accordingly, the condensed consolidated financial statements for the fiscal years ended April 30, 2000, 1999 and 1998 have been restated
from amounts previously reported to reflect those adjustments. As a result, the accompanying unaudited condensed consolidated financial statements for the three months ended July 31, 1999, 1998
have been restated to give effect to those adjustments applicable to those interim periods.

7

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The following summarizes the significant effects of the restatement on the unaudited condensed consolidated financial statements as of July 31, 1999 and April 30, 1998
and for the three months ended July 31, 1999 and 1998:

|                                                         |                   | Three Months Ended July 31, |       
|-------------------------------------------------------- | ----------------- | --------------------------- | ------
|
|
|
|Unaudited Condensed
Consolidated Statements of Operation |                   |                             |       
|Revenues:                                                |                   |                             |       
|                                                         | Software licenses |                             | $     
|                                                         | Services          |                             | $     
|                                                         |                   |                             |       
|                                                         |                   | Total revenues              |       
|                                                         |                   |                             |       
|Cost of services                                         |                   | $                           | 1,143 
|Gross margin                                             |                   | $                           | 3,910 
|Selling, general and administrative expense              |                   | $                           | 4,006 
|Other income, net                                        |                   | $                           | 450   
|Net income (loss)                                        |                   | $                           | (1,311
|Basic Earnings (Loss) per share                          |                   | $                           | (0.07 
|Diluted Earnings (loss) per share                        |                   | $                           | (0.07 

|                                                |  |   |        
|----------------------------------------------- |  | - | -------
|
|
|Unaudited Condensed
Consolidated Balance Sheets |  |   |        
|Assets                                          |  |   |        
|Accounts receivable, net                        |  |   |        
|Prepaid expenses and other current assets       |  |   |        
|Other assets                                    |  | $ | 206    
|Total assets                                    |  | $ | 21,399 
|Liabilities                                     |  |   |        
|Accounts payable                                |  |   |        
|Other accrued liabilities                       |  | $ | 2,077  
|Deferred revenue                                |  | $ | 4,075  
|Minority interest                               |  |   |        
|Stockholders' Equity                            |  |   |        
|Accumulated other comprehensive loss            |  |   |        
|Accumulated Deficit                             |  | $ | (41,339
|Total stockholders' equity                      |  | $ | 12,325 
|Total liabilities and stockholders' equity      |  | $ | 21,399 

8

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Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC"). While the interim financial information contained in this filing is unaudited, such financial statements reflect all adjustments (consisting only of normal recurring
adjustments) which the Company considers necessary for a fair presentation. The results for interim periods are not necessarily indicative of the results to be expected for the entire fiscal year.
These financial statements should be read in conjunction with the Consolidated Financial Statements and Notes thereto, which are included in the Company's Annual Report on
Form 10-K/A for the fiscal year ended April 30, 2000 as filed with the SEC on April 27, 2001.

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,Accounting for Derivative Instruments and
Hedging Activities. This statement establishes accounting and reporting standards for derivative instruments and hedging activities and is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The statement requires balance sheet recognition of derivatives as assets or liabilities measured at fair value. Accounting for gains and losses
resulting from changes in the values of derivatives is dependent on the use of the derivative and whether it qualifies for hedge accounting. The Company believes that the adoption of SFAS
No. 133 will not have a material impact on its financial position or results of operations.

2. Notes Due to Minority Interest Stockholders

In September 1995, Unify Japan entered into a 100 million yen loan agreement with a bank affiliated with Sumitomo Metals Industries, Ltd.
("SMI"). The loan bears interest at the Tokyo International Bank Offered Rate ("TIBOR") plus 50 basis points (approximately 1% at October 31, 1999), and is secured by the assets of Unify Japan.

3. Earnings Per Share

SFAS No. 128,Earnings Per Share,requires a dual presentation of basic and diluted income (loss) per
share ("EPS"). Basic EPS excludes dilution and is computed by dividing net income attributable to common stockholders by the weighted average of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other contracts to issue common stock (e.g. convertible preferred stock, warrants, and common stock options) were exercised or
converted into common stock. The effect of dilutive securities (stock options) is excluded in the diluted EPS computation for the three months ended July, 31,1999 as their effect would be
antidilutive. The

9

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following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for the periods indicated (in thousands, except per share amounts):

Three Months Ended July 31,1999

1998Net Loss (Numerator):Net loss, basic and diluted

$
(2,411
)
$
(94
)Shares (Denominator):Weighted average shares of common stock outstanding, basic


17,501


16,776Effect of dilutive securities (stock options)





272Weighted average shares of common stock outstanding, diluted


17,501


17,048Per Share Amount:Net loss per share, basic

$
(0.14
)
$
(0.01
)Effect of dilutive securities (stock options)





(0.01
)Net loss per share, diluted

$
(0.14
)
$
(0.00
)Antidilutive Shares:


1,637


866


4. Comprehensive Loss

The Company's total comprehensive loss for the periods shown was as follows:

Three Months Ended July 31,1999

1998Net loss

$
(2,411
)
$
(94
)Foreign currency translation


(40
)

34Total comprehensive loss

$
(2,451
)
$
(60
)


10

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

The discussion in this Quarterly Report on Form 10-Q/A contains forward-looking statements that have been made
pursuant to the provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current expectations, estimates and projections about the software
industry and certain assumptions made by the Company's management. Words such as "anticipates", "expects", "intends", "plans", "believes", "seeks", "estimates", variations of such words and similar
expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are
difficult to predict; therefore, actual results may differ materially from those expressed or forecasted in any such forward-looking statements. Such risks and uncertainties include, but are not
limited to, those set forth herein under "Volatility of Stock Price and General Risk Factors Affecting Quarterly Results" and in the Company's Annual Report on Form 10-K/A under
"BusinessRisk Factors." Unless required by law, the Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future
events or otherwise. However, readers should carefully review the risk factors set forth in other reports or documents the Company files from time to time with the SEC, particularly the Company's
Annual Reports on Form 10-K/A, Quarterly Reports on Form 10-Q/A and any Current Reports on Form 8-K.

The
following discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and Notes thereto in Part I, Item 1 of this Quarterly
Report on Form 10-Q/A and with the audited Consolidated Financial Statements and Notes thereto, together with Management's Discussion and Analysis of Financial Condition and Results
of Operations, which are included in the Company's Annual Report on Form 10-K/A for the fiscal year ended April 30, 2000 as filed with the SEC on April 27, 2001.

Results of Operations

Overview

Unify develops, markets and supports Internet software that extends business applications to the Web. The Company provides features-rich products
and services for organizations growing their business on the Web, based on open, Java technologies. Unify's products provide enterprise, scalable and affordable software for building and managing
online applications. The Company's flagship product line, Unify eWave, includes a Web application server, enterprise application server and commerce framework built
on the Java 2 Enterprise Edition ("J2EE") platform technology. These products are designed to enable developers to rapidly build production-ready, scalable Internet and e-commerce
applications that are easy to manage and run with minimal down-time.

In
June 2000, certain matters came to the attention of the Company's Board of Directors that indicated that the Company had engaged in improper accounting practices. The
Company's Board of Directors authorized its Audit Committee to conduct an investigation of the Company's accounting and financial reporting practices and to recommend remedial action, if any, as a
result of the findings of its investigation. In July 2000, in connection with the ongoing investigation, the Company placed its chief executive officer and its chief financial officer on
administrative leave, and in November 2000, the Company terminated its chief executive officer and its chief financial officer resigned. Based on the results of the Audit Committee's
investigation, the Company concluded that revenue, and in some cases expenses, had been improperly accounted for in certain transactions during the fiscal year ended April 30, 2000, primarily
related to the following:



11

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Based
on the results of the Audit Committee's investigation, adjustments were made during the fiscal year ended April 30, 2000 for such transactions, including restatements of
previously reported quarterly financial statements. The investigation also identified commissions, bonuses and other payments made
to the Company's former chief executive officer during the fiscal year ended April 30, 2000, which the Company believes were not appropriate. Such payments in the amount of approximately
$500,000 have been charged to expense in that fiscal year; however, the Company is seeking to have these amounts repaid by the former chief executive officer. The investigation also included a review
of transactions in earlier fiscal years. After evaluating information from the results of the investigation, the Company concluded that its financial statements for the fiscal year ended
April 30, 1999 and earlier were not materially misstated. Also, the Company concluded that the effect on the financial statements for fiscal 2000 of adjustments relating to transactions of
earlier years not being made in those years was not material.

Subsequent
to the issuance of the Company's financial statements for the fiscal year ended April 30, 2000, and in connection with comments by the Staff of the Securities and
Exchange Commission (the "Staff") relating to the Staff's review of the Company's Form 10-K for the year ended April 30, 2000, the Company and the Staff had extensive
communications regarding the materiality of the adjustments relating to transactions in 1999 and earlier years referred to above. Following such communications, management determined that the Company
would record the adjustments in the applicable years. Accordingly, the financial statements for the fiscal years ended April 30, 2000, 1999 and 1998 have been restated from amounts previously
reported to reflect those adjustments. The significant effects of the restatement on the unaudited condensed consolidated financial statements as of July 31, 1999 and April 30, 1999 and
for the three months ended July 31, 1999 and 1998 are summarized in Note 1. The information in Management's Discussion and Analysis of Financial Condition and Results of Operations as
presented herein has been revised to reflect the effects of the restatement.

Revenues

The Company's strategy is to aggressively market and enhance its e-commerce and Internet products. The Company also generates significant revenues
from services, including customer maintenance, consulting and training.

Total
revenues for the quarter ended July 31, 1999 decreased 15% over the same quarter of the prior year to $5.4 million. The decrease during the first three months of
fiscal 2000 was primarily due to the Company's shift in focus from its client/server product line to the Unify eWave product line, which was not fully implemented during the first quarter. The
decrease in total revenues was largely the result of license revenues which decreased by $1.0 million to $3.2 million in the first quarter of fiscal 2000 which was 24% lower as compared
with the same quarter of the prior year. Service remained unchanged during the first quarter of fiscal 2000 as compared to the first quarter of fiscal 1999, at $2.2 million.

12

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International revenues include all software license and service revenues from customers located outside the United States. International revenues from the Company's direct sales
organizations in Europe and
Japan and from value added resellers, distributors, and other partners in all international locations accounted for 59% and 60% of total revenues in the quarters ended July 31, 1999 and 1998
respectively.

Cost of Revenues

Total cost of revenues as a percentage of total revenues increased from 20% in the first quarter of fiscal 1999 to 25% for the first quarter of fiscal 2000.

In
absolute dollars, cost of software licenses increased by only 1% in the first quarter of 2000 as compared to the same period of fiscal 1999. Software license revenue had decreased
by 24% as compared to the same period of 1999. This mismatch in revenues and expenses is the result of differences between revenue recognition, which is variable, and the recording of expenses, which
for the most part are fixed as period costs. Cost of services consists primarily of employee, facilities and travel costs incurred in providing customer support under software maintenance contracts
and consulting and training services. Total cost of services increased 7% over the same period in fiscal 1999 to $1.1 million. The cost of service has a high component of fixed costs, and
therefore does not fluctuate as readily with the changes in revenues.

Product Development

Product development expenses increased 8% to $1.6 million in the first quarter of fiscal 2000 compared with an expense of $1.4 million for the
same quarter of the prior year. The increase in product development expenses in fiscal year 2000 is primarily the result of the design and development of the Unify eWave family of products and the
resources required to maintain and support this product line. The Company believes that a substantial investment in product development is critical to maintaining technological leadership and
therefore continues to devote resources to product development.

Selling, General and Administrative

Selling, general and administrative ("SG&A") expenses for the quarter ended July 31, 1999 increased 34% to $4.9 million, or 91% of total
revenues, as compared to $3.7 million, or 58% of total revenues, for the same quarter of the prior year. The major components of SG&A for the first three months of fiscal 2000 were sales
expenses of $1.9 million, marketing expenses of $0.7 million, general and administrative of $1.4 million and bad debt expenses of $0.9 million. Sales expenses, salaries and
commissions, decreased $0.4 million from the first quarter of fiscal 1999, as the result of the shift in focus to the Unify eWave product line which had not been fully implemented in the first
quarter. This expense decrease was partially offset by an increase in marketing expense of $0.3 million as a result of this new promotion.

General
and administrative expenses decreased by $0.4 million for fiscal year 2000 as compared to the same quarter for fiscal 1999. As a result of management's evaluation of
the performance and quality of its outstanding receivables bad debt expenses increased by $0.8 million during the three months ended July 31, 1999 as compared to the comparable period
for the prior fiscal year. The Company expects that total SG&A expenses may fluctuate from quarter to quarter primarily because of variability in marketing program spending and sales commission
expense.

Provision for Income Taxes

The Company recorded tax provisions for the quarters ended July 31, 1999 and 1998 which related primarily to foreign income taxes and withholding taxes
on software license royalties paid to the

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Company by certain foreign licensees. For the same periods, the Company recorded no significant federal or state income tax provisions as the Company had substantial net operating loss carryforwards.

Liquidity and Capital Resources

At July 31, 1999, the Company had cash, cash equivalents and short-term investments of $12.7 million, compared to
$11.4 million at April 30, 1999. Working capital decreased to $10.3 million at July 31, 1999 from $12.3 million at April 30, 1999.

The
Company's operating activities generated cash of $1.1 million during the three months ended July 31, 1999, as compared to using $0.2 million for the same
period in the prior year. The increase in cash provided by operating activities for the first quarter of fiscal year 2000 was primarily from decreases in accounts receivable and increases in deferred
revenues and other accrued liabilities, partially offset by operating losses compensation expenses. Accounts receivable decreased by $2.6 million of which $0.7 million was achieved
through the sale of receivables without recourse. Investing activities during the period generated cash of $2.3 million, consisting principally of net sales of
available-for-sale securities. Cash provided by financing activities during the period was $0.3 million, which represented proceeds from the issuance of common stock
under the Company's stock option and stock purchase plans.

Recently Issued Accounting Standards

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,Accounting for Derivative Instruments and
Hedging Activities. This statement establishes accounting and reporting standards for derivative instruments and hedging activities and is effective for all fiscal quarters of
fiscal years beginning after June 15, 2000. The statement requires balance sheet recognition of derivatives as assets or liabilities measured at fair value. Accounting for gains and losses
resulting from changes in the values of derivatives is dependent on the use of the derivative and whether it qualifies for hedge accounting. The Company believes that the adoption of SFAS
No. 133 will not have a material impact on its financial position or results of operations.

Volatility of Stock Price and General Risk Factors Affecting Quarterly Results

The Company's common stock price has been and is likely to continue to be subject to significant volatility. A variety of factors could cause the price of the
Company's common stock to fluctuate, perhaps substantially, including: announcements of developments related to the Company's business; fluctuations in the Company's or its competitors' operating
results and order levels; general conditions in the computer industry or the worldwide economy; announcements of technological innovations; new products or product enhancements by the Company or its
competitors; changes in financial estimates by securities analysts; developments in patent, copyright or other intellectual property rights; and developments in the Company's relationships with its
customers, distributors and suppliers; legal proceedings brought against the Company or its officers; significant changes in the Company' senior management team. In addition, in recent years the stock
market in general, and the market for shares of equity securities of many high technology companies in particular, has experienced extreme price fluctuations which have often been unrelated to the
operating performance of those companies. Such fluctuations may adversely affect the market price of the Company's common stock.

The
Company's quarterly operating results have varied significantly in the past, and the Company expects that its operating results are likely to vary significantly from time to time
in the future. Such variations result from, among other factors, the following: the size and timing of significant orders and their fulfillment; demand for the Company's products; the number, timing
and significance of product enhancements and new product announcements by the Company and its competitors; ability of the Company to attract and retain key employees; seasonality; changes in pricing
policies by the Company

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or its competitors; realignments of the Company's organizational structure; changes in the level of the Company's operating expenses; changes in the Company's sales incentive plans; budgeting cycles
of the Company's customers; customer order deferrals in anticipation of enhancements or new products offered by the Company or its competitors; product life cycles; product defects and other product
quality problems; currency fluctuations; and general domestic and international economic and political conditions. Due to the foregoing factors, quarterly revenues and operating results are difficult
to forecast. Revenues are also difficult to forecast because the market for Internet and e-commerce
application development software is rapidly evolving, and the Company's sales cycle, from initial evaluation to purchase and the provision of maintenance services, is lengthy and varies substantially
from customer to customer. Because the Company normally ships products within a short time after it receives an order, it typically does not have any material backlog. As a result, to achieve its
quarterly revenue objectives, the Company is dependent upon obtaining orders in any given quarter for shipment in that quarter. Furthermore, because many customers place orders toward the end of a
fiscal quarter, the Company generally recognizes a substantial portion of its revenues at the end of a quarter. As the Company's expense levels are based in significant part on the Company's
expectations as to future revenues and are therefore relatively fixed in the short term, if revenue levels fall below expectations operating results are likely to be disproportionately adversely
affected. The Company also expects that its operating results will be affected by seasonal trends, and that it may experience relatively weaker demand in fiscal quarters ending July 31 and
October 31 as a result of reduced business activity in Europe during the summer months.

Item 3. Disclosures about Market Rate Risk

Interest Rate Risk.The Company's exposure to market rate risk for changes in interest rates relates primarily to its
investment portfolio, which consists of cash equivalents and short-term investments. Cash equivalents are highly liquid investments with original maturities of three months or less and are
stated at cost. Cash equivalents are generally maintained in money market accounts which have as their objective preservation of principal and which hold investments with maturity dates of less than
90 days. The Company does not believe its exposure to interest rate risk is material for these balances, which totaled $9.0 million at July 31, 1999. The securities in the
Company's short-term investment portfolio are generally classified as available-for-sale and, consequently, are recorded on the consolidated balance sheet at fair
value with unrealized gains or losses reported as a separate component of stockholders' equity. Short-term investments totaled $3.7 million at July 31, 1999 and there were no
material realized or unrealized gains or losses on short-term investments during the first quarter of fiscal 2000. The Company does not use derivative financial instruments in its
investment portfolio, places its investments with high quality issuers and, by policy, limits the amount of credit exposure to any one issuer. The Company is adverse to principal loss and attempts to
ensure the safety of its invested funds by limiting default. The Company's short-term investments at July 31, 1999 consisted of $3.7 million in high quality corporate bonds
maturing within one year, which the Company does not believe carry any material interest rate exposure. If market interest rates were to change immediately and uniformly by ten percent from levels at
July 31, 1999, the fair value of the Company's cash equivalents and short-term investments would change by an insignificant amount.

Foreign Currency Exchange Rate Risk.As a global concern, the Company faces exposure to adverse movements in foreign
currency exchange rates. These exposures may change over time as business practices evolve and could have a material adverse impact on the Company's business, operating results and financial position.
Historically, the Company's primary exposures have related to local currency denominated sales and expenses in Europe, Japan and Australia. Due to the substantial volatility of currency exchange
rates, among other factors, the Company cannot predict the effect of exchange rate fluctuations on its future operating results. Although The Company takes into account changes in exchange rates over
time in its pricing strategy, it does so only on an annual basis, resulting in substantial pricing exposure as a result of foreign exchange volatility during the period between

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annual pricing reviews. The Company also has currency exchange rate exposures on intercompany accounts receivable owed to the Company as a result of local currency sales of software licenses by the
Company's international subsidiaries in the United Kingdom, France and Japan. At July 31, 1999, the Company had $1.1 million, $0.3 million and $0.6 million in such
receivables denominated in British Pounds, French Francs and Japanese Yen, respectively. The Company encourages prompt payment of these intercompany balances in order to minimize its exposure to
currency fluctuations, but it engages in no hedging activities to reduce the risk of such fluctuations. A hypothetical ten percent change in foreign currency rates would have an insignificant impact
on the Company's business, operating results and financial position. The Company has not experienced material exchange losses on intercompany balances in the past; however, due to the substantial
volatility of currency exchange rates, among other factors, it cannot predict the effect of exchange rate fluctuations on its future business, operating results and financial position.

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PART II. OTHER INFORMATION

Item 5. Other Information

Kurt M. Garbe, Chief Operating Officer, Asera, Inc., joined the Company's Board of Directors effective August 12, 1999.

Item 6. Exhibits and Reports on Form 8-K





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SIGNATURE

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

|Date: |  | May 11, 2001 |  | Unify Corporation (Registrant)
|----- |  | ------------ |  | ------------------------------
|      |  |              |  | By:                           

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