UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

Form 10-K

|(MarkOne)                                                                                                            |  |                                                                                                   
|-------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------
|x                                                                                                                    |  | ANNUAL REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934    
|For the fiscal year ended April
      30, 2008                                                                      
|OR                                                                                                                  
|o                                                                                                                    |  | TRANSITION REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
    1934
|For the transition period from
                                            toCommission
      File Number: 001-11807

UNIFY CORPORATION(Exact name of registrant as specified in its
charter)

|Delaware(State or other jurisdiction
      ofincorporation
      or organization) | 94-2710559(I.R.S. EmployerIdentification
      Number)
|--------------------------------------------------------------------------------- | ------------------------------------------------------

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

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

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

Securities registered pursuant to
Section 12(g) of the Act:Common Stock, $0.001
par value

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.YESoNOx

Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15 of the Act.YESoNOx

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. YESxNOo

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

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of large accelerated filer, accelerated filer
and smaller reporting company in Rule 12b-2 of the Exchange Act.

|Large
      accelerated filer o | Accelerated
      filer o | Non-accelerated filer o                            | Smaller
      reporting company x
|------------------------------- | ------------------------- | -------------------------------------------------- | ---------------------------------
|                                |                           | (Do not check
      if a smallerreporting company) |                                  

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act.) YESoNOx

The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant was $17,963,219 based on the number of shares
held by non-affiliates of the registrant as of April 30, 2008, and computed by
reference to the reported last sale price of common stock on October 31, 2007,
which is the last business day of the registrants most recently completed
second fiscal quarter. Shares of common stock held by each officer and director
and by each person who owns 5% or more of the outstanding common stock have been
excluded in that such persons may be deemed to be affiliates. This determination
of affiliate status is not necessarily a conclusive determination for other
purposes. As of May 31, 2008, the registrant had 6,980,749 shares of common
stock outstanding.

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PART I

A Caution about Forward-Looking
Statements:

The
discussion in this Annual Report on Form 10-K 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,
projects, and 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 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 Securities and Exchange
Commission (the SEC), particularly the Companys Quarterly Reports on Form
10-Q and any Current Reports on Form 8-K.

ITEM 1.BUSINESS

The Company

Unify (the
Company, we, us or our) is a global provider of application
modernization, data management and application development solutions. Our
migration solutions, development software and embedded databases allow customers
to modernize and maximize their application environment. Our award-winning
technologies help organizations drive business optimization, improve
collaboration, increase customer service and reduce costs. Unifys strategy is
to help businesses modernize mission-critical legacy applications and data.
Based on market requirements for application modernization, our solutions help
companies increase speed and agility, improve asset reuse, lower IT costs,
reduce business risks and exposures, and free information previously locked
within proprietary systems. The Company sells and markets its application
development and database software and services and modernization solutions
through two segments. The segments are the Americas, which include the Companys
international distributors, and Europe, which includes the UK, France, Germany
and other direct European customers.

Unify
expanded its technology heritage and innovation with the November 2006
acquisition of GUPTA Technologies LLC (Gupta), a complementary application
development and data management software company. Unify now serves more than
5,000 end user corporate information technology (IT) department customers, 35
distributors and 250 software value-added resellers (VARs), solutions
integrators (SIs) and independent software vendors (ISVs) partners across
the globe. Our clients represent diverse industries including energy, financial
services, government, health care, insurance, manufacturing, retail,
telecommunications and more. We market and sell products directly in the United
States, Australia, UK, France and Germany, and indirectly to more than 50
countries through worldwide distributors in Europe, Middle East and Africa
(EMEA), Asia Pacific and Latin America.

Over the
past five years, we have expanded our product offering to adapt to evolving
market requirements. Our application modernization solutions include Composer
for Lotus Notes and Sabertooth; our application development product families
include NXJ Developer, Team Developer, ACCELL and VISION; and our data
management software includes SQLBase and DataServer.

Unify was
initially incorporated in California in 1980 and later reincorporated in
Delaware on April 10, 1996. We are headquartered in Sacramento, California, and
have offices in Australia, France, Germany and the United Kingdom (UK). Our
headquarters office is located at 2101 Arena Blvd., Suite 100, Sacramento,
California 95834. Our telephone number is (916) 928-6400 and our website address
is http://www.unify.com.

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Products

Application Modernization
Solutions

Composer
for Lotus Notesis specifically designed for
customers that need to modernize and migrate proprietary applications to a new
technology platform. Composer for Lotus Notes is a software plus services
solution for migrating IBM Lotus Notes® applications to the Microsoft platform.
Composer delivers like-for-like, production-to-production migration of Lotus
Notes applications to the Microsoft stack while preserving the business
logic/workflow in order to avoid end-user disruption. With Composer, Lotus Notes
applications are decomposed and re-assembled: Data from the Lotus Notes
application is migrated into a normalized SQL Server database; Business logic is
restructured as C# Web Services in Visual Studio; User Interface is transformed
into SharePoint Lists and Web Parts; and ACL security is mapped into the
Microsoft Active Directory Services.

**Sabertooth**is designed for organizations that are standardizing on
Microsoft and are forced to transition Team Developer applications to C# or
VB.NET. The vast majority of Unifys worldwide Team Developer customers continue
to benefit from the ability to rapidly build and deploy business applications
fast and cost-effectively. From the latest Web Services Consumption in Team
Developer 5.1 to the planned .NET support in future releases, Sabertooth
delivers complimentary solution for organizations requiring standardization and
consolidation of their IT systems and applications to the Microsoft .NET
platform, either now or in the near future.

Rapid Application Development
Products

NXJ
Developer and NXJ Enterprise®is a visual
environment for the rapid development of innovative Web 2.0 Rich Internet
Applications (RIA). NXJ Developer is distinguished by its combination of
intuitive visual design, flexible service-oriented architecture (SOA)
programming, and ease of integration with both Java code and .NET business logic
via Web services. The combination of AJAX-rich client technology and Web
services make NXJ Developer a powerful and competitive solution for delivering
SOA-based Rich Internet Applications. NXJ Enterprise ® includes all of the
powerful technology of NXJ Developer but adds workflow and reporting for
delivering enterprise class RIA and web-based applications.

Team
Developer®is a visual object-oriented rapid
application development product that shortens the development cycle by providing
developers the tools needed to quickly design, develop and deploy Windows
solutions. Team Developer provides a completely integrated visual development
environment that includes a database explorer, integrated reporting tool,
team-oriented source code management facility, and a powerful component
developer facility that enables programmers to automate and customize the
development environment.

ACCELL®is a highly productive 4GL
application development suite and database software for developing and deploying
data-rich, database-driven applications. 4GL is a fourth generation programming
language designed to allow users to develop applications, particularly for the
purpose of querying databases and producing reports. The ACCELL products support
interfaces to leading database products including Unify DataServer, IBM DB2,
Informix, Microsoft SQL Server, Oracle and Sybase. The ACCELL product suite
includes ACCELL/Web, ACCELL/SQL and ACCELL/IDS.

- ACCELL/Web 
  enables our customers with existing ACCELL/SQL applications to convert them
  into fully featured graphical web-based applications without rewriting the
  application or modifying the source code.
- ACCELL/SQL  is our 4GL-based rapid
  application development software for developing client/server applications.
  ACCELL/SQL connects to Unify, Oracle, Sybase and Informix databases creating a
  fast application performance environment.
- ACCELL/IDS  is our 4GL-based rapid
  application development software for applications that connect to Unifys
  DataServer ELS database.

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**VISION®**is a graphical, client/server application development system
that allows for rapid creation and easy modification of complex business
applications based on 4GL technology. Unify VISION consists of an
object-oriented, repository-based component framework designed to enable
developers to rapidly create and easily modify application components. VISION
also contains an application server to allow organizations to integrate
custom-built and packaged applications with the Internet.

Database Management
Products

- SQLBase®is a fully relational, high
  performance, embedded database that allows organizations to manage data closer
  to the customer, where capturing and organizing information is becoming
  increasingly critical. SQLBase provides what other database companies cannot
  deliver: a self-recovering, maintenance-free embedded database architecture
  that enables IT, ISVs and VARs to focus on their solution, rather than the
  underlying database technology.
- SQLBase® Treasuryis an encrypted, secure version of the SQLBase
  database.
- DataServer® A high performance enterprise relational database
  management system with minimal maintenance and memory requirements. It can
  quickly accommodate the growth of user requirements over time, making it an
  attractive choice for mission critical applications. DataServer makes it easy
  for developers to create graphical applications and migrate existing database
  applications to enterprise network and Internet environments.
- DataServer® ELS A high performance, easily embeddable database. Its small
  footprint and proven reliability make it an industry favorite for embedded
  applications that require relational databases.\
- Report Builderprovides individuals a quick and easy way to create
  attractive reports and ad-hoc queries for databases. Report Builder offers
  full Cross Platform capabilities and is available for Windows and Linux
  desktop computers.

Customers

Unifys
customers include corporate information technology departments (IT), software
value-added resellers (VARs), solutions integrators (SIs) and independent
software vendors (ISVs) from a variety of industries, including insurance,
financial services, healthcare, government, manufacturing, retail, education,
and more. We had one customer in the years ended April 30, 2008 and 2006 that
accounted for 12% of consolidated revenues. No single customer accounted for 10%
or more of consolidated revenue in the year ended April 30, 2007.

Sales, Marketing and
Distribution

Unifys
products and professional services are marketed and distributed to customers
globally using a combination of a direct corporate sales force and indirect
distribution channels, including ISVs, VARs, SIs and worldwide distributors. The
indirect sales channels leverage Unifys sales, support and consulting resources
to provide complete solutions to our customers.

Unifys
direct sales organization consists of sales representatives and pre-sales
consultants. Our North America sales representatives are located primarily in
our headquarters in Sacramento, California. Unify markets its products
internationally through offices in the UK, France, Germany and Australia. Unify
has distributors in Asia Pacific, Europe, Japan, Latin and South America, and
Russia. International revenues accounted for 78%, 73% and 70% of total revenues
in fiscal 2008, 2007 and 2006, respectively.

Unifys
marketing is focused on generating demand and marketing awareness for Unify
products including efforts to support the direct and indirect sales channels.
Marketing activities include e-business initiatives, strategic demand
generation, public relations, customer communications and events, trade shows
and our Web site.

As of April
30, 2008, Unify had 24 employees engaged in sales and marketing activities, 15
in North America and 9 in Europe.

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Customer Support and Professional
Services

Unifys
customer support and professional services organizations play an important role
in maintaining customer satisfaction, facilitating license sales and enabling
customers to successfully architect, design, develop, deploy, manage or migrate
applications.

Customer Support and
Maintenance

Unify
provides customer support via telephone, Web, e-mail and fax from its support
centers located in California, Australia, France and Holland. Distribution
partners provide telephone support to international customers with technical
assistance from the U.S.-based support personnel who also respond to e-mail
inquiries. Customers are offered tailored support service levels including
response time, information reporting, and other features, such as 24-hour a day,
seven-day a week support. During each of the past three fiscal years, over 75%
of our support and maintenance customers have renewed their annual
contracts.

Consulting

Unify offers
a full range of consulting services ranging from application implementation
services including delivering a proof of concept to completed applications using
our technology infrastructure. Our products allow companies to maximize return
on investment, get to market quickly or be more efficient. Consulting services
include: application migration, project implementations and application updates,
business process-centric application development, Web-enablement,
technology/knowledge transfer, application architecture audits and database
tuning. The level of consulting services is tailored to customer-defined needs
and includes development plans, hands-on development tasks and project
management.

Education

Unify offers
education courses at our training centers located in Sacramento, California and
Paris, France. We also offer on-site training at customer and partner
facilities.

As of April
30, 2008, we had a total of 13 employees engaged in providing professional
services, 8 in support and 5 in consulting and training. Of those employees, 9
were located in the United States and 4 were located in Europe.

Product Development

We focused
our development efforts primarily on the Composer for Lotus Notes, Team
Developer, SQLBase and NXJ products. During fiscal 2008, we developed and
released major new versions of SQLBase, Team Developer, SQLBase Treasury,
Sabertooth and NXJ Developer, and significantly expanded and enhanced our
Composer for Lotus Notes application migration solution. Unifys product
development expenses for fiscal 2008, 2007, and 2006, were $3.5 million, $2.4
million and $1.6 million, respectively.

Most of
Unifys current software products have been developed internally; however, we
have licensed certain software components from third parties and we may do so
again in the future. We are committed to delivering products that meet customer
and market needs today and into the future.

Unifys
product development activities are conducted at the Sacramento, California
headquarters facility. As of April 30, 2008, we had a total of 19 employees in
product development, including 12 software development engineers.

Intellectual Property

Unify relies
on a combination of copyright, trademark and trade-secret laws, non-disclosure
agreements and other methods to protect our proprietary technology. Despite
efforts to protect our proprietary rights, unauthorized parties may attempt to
copy aspects of our products or to obtain and use information that we regard as
proprietary. Policing unauthorized use of our products is difficult, and while
we are unable to determine the extent to which piracy of our software products
exists, software piracy can be expected to be a persistent problem. In addition,
the laws of some foreign countries in which we sell products do not protect our
proprietary rights as fully as do the laws of the United States. There can be no
assurance that our means of protecting our proprietary rights in the United
States or abroad will be adequate or that competition will not independently
develop similar technology.

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Although
there are no pending lawsuits against Unify regarding infringement of any
existing patents or other intellectual property rights and we have not received
any notices that we are infringing or allegedly infringing the intellectual
property rights of others, there can be no assurance that infringement claims
will not be asserted by third parties in the future. If any such claims are
asserted, there can be no assurance that we will be able to defend such claim or
obtain licenses on reasonable terms. Our involvement in any patent dispute or
any other intellectual property dispute or action to protect trade secrets and
know-how may have an adverse effect on our business, operating results, and
financial condition. Adverse determinations in any litigation may subject us to
significant liabilities to third parties, require us to seek licenses from third
parties, and prevent us from developing and selling its products. Any of these
situations could have an adverse effect on our business, operating results and
financial condition.

Unify is
dependent on third-party suppliers for certain software which is embedded in
some of our products. Although we believe that the functionality provided by
software which is licensed from third parties is obtainable from multiple
sources, or could be developed by us if any such third-party licenses were
terminated, or not renewed, or if these third parties fail to develop new
products in a timely manner, we could be required to develop an alternative
approach to developing products which could require payment of additional fees
to third parties or internal development costs and delays that might not be
successful in providing the same level of functionality. Such delays, increased
costs, or reduced functionality could adversely affect our business, operating
results, and financial condition.

Competition

The market
for Unifys software is intensely competitive, subject to rapid change and
significantly affected by new product introductions and other activities of
market participants. Our products and software solutions compete in the market
with dozens of other companies that provide application modernization solutions,
application development products, and databases. These competitors include IBM,
Microsoft, Oracle and Sun. All of these competitors are large, well capitalized
companies with significantly greater financial, technical and marketing
resources as well as greater name recognition and larger customer bases. The
Unify solutions are competitive from a technical capability, rich interface and
ease of use, service and pricing perspectives, but our competitors have greater
brand recognition and perceived financial strength.

The Company
generally derives sales from new project initiatives, additional deployment of
existing applications and product upgrades. As a result, the key competitive
factor is generally the decision by a customer as to whether or not to begin a
new project initiative or upgrade or keep things status quo. Organizations
choose Unify software for a variety of factors including the ability to migrate
applications, build and deploy applications quickly, the knowledge of Unifys
software among its IT developers, the high level of customer service and support
Unify provides and our price point, which gives customers a cost-effective
solution to their business problem. Organizations will typically choose a
competitor because of their perceived financial strength.

As new
products and technologies are introduced, increased competition could result in
fewer customer orders, reduced prices and reduced gross margins, any one of
which could adversely affect our business, operating results, and financial
condition. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties, thereby increasing the ability of their products to address the
needs of our prospective customers. Accordingly, it is possible that new
competitors or alliances among current and new competitors may emerge and gain
significant market share. Such competition could adversely affect our ability to
sell additional licenses and maintenance and support renewals on favorable
terms.

Employees

As of April
30, 2008, we had a total of 71 employees, including 19 in product development,
24 in sales and marketing, 13 in customer support, consulting, and training, and
15 in finance, operations and general administration. Of these employees, 56
were located in the United States and 15 were located in Europe.

Unifys
success depends in large part on its ability to attract and retain qualified
employees, particularly senior management, engineering, direct sales and support
personnel. The competition for such employees is intense. There can be no
assurance that we will be successful in attracting or retaining key employees.
Any failure we have in attracting and retaining qualified senior management,
engineering, direct sales, and support personnel could adversely affect our
business, operating results, and financial condition. None of our employees are
represented by a collective bargaining agreement, nor have we experienced any
work stoppage. We consider our relations with our employees to be good.

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WHERE YOU CAN FIND MORE
INFORMATION

You are
advised to read this Form 10-K in conjunction with other reports and documents
that we file from time to time with the SEC. In particular, please read our
Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K that we may
file from time to time. You may obtain copies of these reports directly from us
or from the SEC and the SECs Public Reference Room at 100 F Street, N.E.
Washington, D.C. 20549. In addition, the SEC maintains information for
electronic filers (including Unify) at its website at www.sec.gov. We make
available free of charge on or through our Internet website located at
www.unify.com our SEC filings on Forms 10-K, 10-Q and 8-K and any amendments to
those filings as soon as reasonably practicable after electronic filing with the
SEC.

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RISK FACTORS

In evaluating the Companys business, readers
should carefully consider the business risks discussed in this section in
addition to the other information presented in this Annual Report on Form 10-K
and in ourother filings with the SEC.

The conversion ratio of the convertible
notes and the exercise price of the warrants may be substantially below the
market price of our stock at the time of exercise which could potentially have a
negative impact on our stock price.

In
conjunction with the acquisition of Gupta, we obtained debt financing that
included convertible notes in the principal amount of $5,350,000 and we also
issued 670,000 warrants. As of April 30, 2008, the remaining principal amount of
convertible notes resulting from our debt financing was $1,400,000 which are
convertible into our common stock at a fixed ratio of $5.00 per share. The
warrants are exercisable at fixed exercise prices ranging from $1.35 per share
to $1.90 per share. Subject to certain exceptions, these conversion ratios and
exercise prices are subject to downward adjustment in the event we issue
additional shares of common stock at prices below the then-current conversion
ratio or exercise price. Conversion of the notes or exercise of the warrants is
only likely to occur at such time as the conversion ratio or exercise price, as
the case may be, is lower than the current market price for our stock. Issuance
of common stock at a price below our current market price would have a dilutive
effect on current stockholders and could potentially have a negative impact on
our stock price.

If we default on any secured loan, all
or a portion of our assets could be subject to forfeiture.

To finance
the cash portion of the acquisition of Gupta and provide working capital, we
entered into a Revolving Credit and Term Loan Agreement (the Loan Agreement)
with ComVest on November 20, 2006. Under the Loan Agreement, we granted to
ComVest a first priority security interest in substantially all of our assets.
If we default on the Loan Agreement and are unable to cure the default pursuant
to the terms of the agreement, our lender could take possession of any or all
assets in which it holds a security interest, including intellectual property,
and dispose of those assets to the extent necessary to pay off the debts, which
could seriously harm our business. Furthermore, we may enter into other secured
credit or loan agreements in the future. As of April 30, 2008, the outstanding
loan balance of convertible debt was $1.4 million.

We are subject to intense
competition.

We have
experienced and expect to continue to experience intense competition from
current and future competitors including IBM, Microsoft Corporation, and Oracle
Corporation. Often, these competitors have significantly greater financial,
technical, marketing and other resources than Unify, in addition to having
greater name recognition and more extensive customer bases. As a result, our
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements or devote greater resources to the
development, promotion and sale of their products than we can.

In addition,
current and potential competitors may make strategic acquisitions or establish
cooperative relationships among themselves or with third parties, thereby
increasing the ability of their products to address the needs of our prospective
customers. Accordingly, it is possible that new competitors or alliances among
current and new competitors may emerge and rapidly gain significant market
share. Such competition could adversely affect our ability to sell additional
licenses and maintenance and support renewals on terms favorable to us. Further,
competitive pressures could require us to reduce the price of our products and
related services, which could adversely affect our business, operating results,
and financial condition. There can be no assurance that we will be able to
compete successfully against current and future competition, and the failure to
do so would have an adverse effect upon our business, operating results and
financial condition.

The markets in which we compete are
subject to rapid technological change.

The markets
in which we compete are characterized by rapid technological change, frequent
introductions of new and enhanced products, changes in customer demands and
evolving industry standards. The introduction of products embodying new
technologies and the emergence of new industry standards can render existing
products obsolete and unmarketable.

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Our future
success will depend in part upon our ability to address the increasingly
sophisticated needs of customers by developing new product functionality and
enhancements that keep pace with technological developments, emerging industry
standards and customer requirements.

There can be
no assurance that our products will continue to be perceived by our customers as
technologically advantageous or that we will not experience difficulties that
delay or prevent the sale of enhancements to existing products that meet with a
significant degree of market acceptance. If the release dates of any future
product enhancements, or new products are delayed, or if when released, they
fail to achieve market acceptance, our business, operating results, and
financial condition would be adversely affected.

We are dependent on indirect sales
channels.

A
significant portion of our revenues are derived from indirect sales channels,
including ISVs, VARs and distributors. ISVs, VARs and distributors accounted for
approximately 64%, 61% and 51% of our software license revenues for fiscal 2008,
2007 and 2006, respectively. Our success therefore depends in part upon the
performance of our indirect sales channels, over which we have limited
influence. Our ability to achieve significant revenue growth in the future
depends in part on maintaining and expanding our indirect sales channels
worldwide. The loss of any major partners, either to competitive products
offered by other companies or to products developed internally by those
partners, or the failure to attract effective new partners, could have an
adverse effect on our business, operating results, and financial
condition.

There are numerous risks associated
with our international operations and sales.

Revenues
derived from our international customers accounted for 78%, 73% and 70% of our
total revenues, with the remainder from North America, in fiscal 2008, 2007 and
2006, respectively. If the revenues generated by our international operations
are not adequate to offset the expense of maintaining such operations, our
overall business, operating results and financial condition will be adversely
affected. There can be no assurance that we will continue to be able to
successfully market, sell and deliver our products in these markets. Although we
have had international operations for a number of years, there are certain
unique business challenges and risks inherent in doing business outside of North
America, and such challenges and risks can vary from region to region. These
include unexpected changes in regulatory requirements; export restrictions,
tariffs and other trade barriers; difficulties in staffing and managing foreign
operations; longer payment cycles; problems in collecting accounts receivable;
political instability; fluctuations in currency exchange rates; seasonal
reductions in business activity during the summer months in Europe and other
parts of the world; unfamiliar or unusual business practices; and potentially
adverse tax consequences, any of which could adversely impact the success of our
international operations. There can be no assurance that one or more of these
factors will not have an adverse effect on our future international operations
and, consequently, on our business, operating results and financial condition.
In addition, the Companys subsidiaries and distributors in Europe and Japan
operate in local currencies. If the value of the U.S. dollar increases relative
to foreign currencies, our business, operating results and financial condition
could be adversely affected.

Our stock price may be subject to
volatility.

Unify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 common
stock to fluctuate, perhaps substantially, including: announcements of
developments related to our business; fluctuations in the operating results and
order levels of Unify or its competitors; general conditions in the computer
industry or the worldwide economy; announcements of technological innovations;
new products or product enhancements from us or our competitors; changes in
financial estimates by securities analysts; developments in patent, copyright or
other intellectual property rights; and developments in our relationships with
our customers, distributors and suppliers; legal proceedings brought against the
Company or its officers; and significant changes in our 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,
have 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 our common stock.

Unifys
stock trades over-the-counter on the bulletin board. Companies whose shares
trade over-the-counter generally receive less analyst coverage and their shares
are more thinly traded than stock that is traded on the NASDAQ National Market
System or a major stock exchange. Our stock is therefore subject to greater
price volatility than stock trading on national market systems or major
exchanges.

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Our quarterly operating results may be
subject to fluctuations and seasonal variability.

Unifys quarterly
operating results have varied significantly in the past and we expect that they
could vary significantly in the future. Such variations could result from the
following factors: the size and timing of significant orders and their
fulfillment; demand for our products; the quantity, timing and significance of
our product enhancements and new product announcements or those of our
competitors; our ability to attract and retain key employees; seasonality;
changes in our pricing or our competitors; realignments of our organizational
structure; changes in the level of our operating expenses; incurrence of
extraordinary operating expenses, changes in our sales incentive plans;
budgeting cycles of our customers; customer order deferrals in anticipation of
enhancements or new products offered by us or our 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 may vary on a quarterly basis.
Revenues and quarterly results may vary because software technology is rapidly
evolving, and our sales cycle, from initial evaluation to purchase and the
providing of maintenance services, can be lengthy and varies substantially from
customer to customer. Because we normally deliver products within a short time
of receiving an order, we typically do not have a backlog of orders. As a
result, to achieve our quarterly revenue objectives, we are 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, we
generally recognize a substantial portion of our software license revenues at
the end of a quarter. Our expense levels largely reflect our expectations for
future revenue and are therefore somewhat fixed in the short term.

We expect that our
operating results will continue to be affected by the continually challenging IT
economic environment as well as by seasonal trends. In particular, we anticipate
relatively weak demand in the fiscal quarters ending July 31 and October 31 as a
result of reduced business activity in Europe during the summer
months.

Our products are subject to lengthy sales
cycles.

Our application
modernization solutions are used to implement comprehensive solutions including
complete technology platform transitions and new applications. As a result, the
delivery of our application modernization solutions generally involve a four to
ten week implementation time and a significant commitment of management
attention and resources by prospective customers. Accordingly, our sales cycle
is subject to delays associated with the long approval process that typically
accompanies significant initiatives or capital expenditures. Our business,
operating results, and financial condition could be adversely affected if
customers reduce or delay orders. There can be no assurance that we will not
continue to experience these and additional delays in the future. Such delays
may contribute to significant fluctuations of quarterly operating results in the
future and may adversely affect those results.

Our software products could contain defects and
could be subject to potential release delays.

Software products
frequently contain errors or defects, especially when first introduced or when
new versions or enhancements are released. Although we have not experienced
adverse effects resulting from any such defects or errors to date, there can be
no assurance that, despite testing by us and current and potential customers,
defects and errors will not be found in current versions, new versions or
enhancements after commencement of commercial shipments, resulting in loss of
revenues, delay in market acceptance, or unexpected re-programming costs, which
could have an adverse effect upon our business, operating results and financial
condition. Additionally, if the release dates of any future Unify product line
additions or enhancements are delayed or if, when released, they fail to achieve
market acceptance, our business, operating results, financial condition and cash
flows would be adversely affected.

Our license agreements may not protect us from
product liability claims.

The license agreements
we have with our customers typically contain provisions designed to limit our
exposure to potential product liability claims. It is possible, however, that
the limitation of liability provisions contained in these license agreements may
not be effective as a result of existing or future federal, state or local laws
or ordinances or unfavorable judicial decisions. The sale and support of current
and future products may involve the risk of such claims, any of which are likely
to be substantial in light of the use of these products in the development of
core business applications. A successful product liability claim brought against
the Company could have an adverse effect upon our business, operating results,
and financial condition.

10

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**We rely upon technology from certain
third-party suppliers.**

Unify is dependent on
third-party suppliers for software which is embedded in some of its products. We
believe that the functionality provided by software which is licensed from third
parties is obtainable from multiple sources or could be developed by the
Company. However, if any such third-party licenses were terminated, or not
renewed, or if these third parties fail to develop new products in a timely
manner, we could be required to develop an alternative approach to developing
such products, which could require payment of additional fees to third parties
or internal development costs and delays that might not be successful in
providing the same level of functionality. Such delays, increased costs or
reduced functionality could adversely affect our business, operating results and
financial condition.

We may be subject to violations of our
intellectual property rights.

Unify relies on a
combination of copyright, trademark and trade secret laws, non-disclosure
agreements and other intellectual property protection methods to protect its
proprietary technology. Despite our efforts to protect proprietary rights,
unauthorized parties may attempt to copy aspects of our products or obtain and
use information that we regard as proprietary. Policing unauthorized use of our
products is difficult, and while we are unable to determine the extent to which
piracy of our technology exists, piracy can be expected to be a persistent
problem. In addition, the laws of some foreign countries do not protect our
proprietary rights as fully as do the laws of the United States. There can be no
assurance that our means of protecting our proprietary rights will be adequate
and, to the extent such rights are not adequate, other companies could
independently develop similar products using similar technology.

Although there are no
pending lawsuits against us regarding infringement of any existing patents or
other intellectual property rights, and we have received no notices that we are
infringing or allegedly infringing the intellectual property rights of others,
there can be no assurance that such infringement claims will not be asserted by
third parties in the future. If any such claims are asserted, there can be no
assurance that we will be able to defend such claim or if necessary obtain
licenses on reasonable terms. Our involvement in any patent dispute or other
intellectual property dispute or action to protect trade secrets and know-how
may have an adverse effect on our business, operating results, and financial
condition. Adverse determinations in any litigation may subject us to
significant liabilities to third parties, require that we seek licenses from
third parties and prevent us from developing and selling our products. Any of
these situations could have an adverse effect on our business, operating
results, and financial condition.

Our success is dependent upon the retention of key
personnel and we may be unable to retain key employees.

Our future performance
depends on the continued service of key technical, sales and senior management
personnel. With the exception of Unifys president and chief executive officer,
there are no other Unify technical, sales, executive or senior management
personnel bound by an employment agreement. The loss of the services of one or
more of our officers or other key employees could seriously harm our business,
operating results and financial condition. Future success also depends on our
continuing ability to attract and retain highly qualified technical, sales and
managerial personnel. Competition for such personnel is intense, and we may fail
to retain our key technical, sales and managerial employees, or attract,
assimilate or retain other highly qualified technical, sales and managerial
personnel in the future.

Rapid growth may significantly strain our
resources.

If we are able to
achieve rapid and successful market acceptance of our current and future
products, we may undergo a period of rapid growth. This expansion may
significantly strain management, financial resources, customer support,
operational and other resources. To accommodate this anticipated growth, we are
continuing to implement a variety of new and upgraded operating and financial
systems, procedures and controls, including the improvement of our internal
management systems. There can be no assurance that such efforts can be
accomplished successfully. Any failure to expand these areas in an efficient
manner could have an adverse effect on our business, operating results, and
financial condition. Moreover, there can be no assurance that our systems,
procedures and controls will be adequate to support our future
operations.

Our disclosure controls and procedures and our
internal control over financial reporting may not be effective to detect all
errors or to detect and deter wrongdoing, fraud or improper activities in all
instances.

While we believe we
currently have adequate internal control over financial reporting, our
management does not expect that our disclosure controls and procedures or our
internal control over financial reporting will prevent all errors and fraud. In
designing our control systems, management recognizes that any control system, no
matter how well designed and operated, can provide only reasonable, not
absolute, assurance of achieving the desired control objectives. Further the
design of a control system must reflect the necessity of considering the
cost-benefit relationship of possible controls and procedures. Because of
inherent limitations in any control system, no evaluation of controls can
provide absolute assurance that all control issues and instances of wrongdoing,
if any, that may affect our operations, have been detected. These inherent
limitations include the realities that judgments in decision-making can be
faulty, that breakdowns can occur because of simple error or mistake and that
controls may be circumvented by individual acts by some person, by collusion of
two or more people or by managements override of the control. The design of any
control system also is based in part upon certain assumptions about the
likelihood of a potential future event, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions. Because of the inherent limitations in cost-effective control
systems, misstatements due to error or wrongdoing may occur and not be detected.
Over time, it is also possible that controls may become inadequate because of
changes in conditions that could not be, or were not, anticipated at inception
or review of the control systems. Any breakdown in our control systems, whether
or not foreseeable by management, could cause investors to lose confidence in
the accuracy of our financial reporting and may have an adverse impact on our
business and on the market price for Unifys common stock.

11

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ITEM 2.PROPERTIES

The Companys principal
administrative offices and headquarters are in Sacramento, California where we
lease a 15,200 square foot facility. This lease is on a month-to-month basis and
in July 2008 we will relocate our principal administrative offices and
headquarters to a 17,700 square foot facility in Roseville, California. We also
lease offices in the United Kingdom, Germany and France. We believe that our
existing facilities are adequate for our needs and that suitable additional or
alternative space will be available on commercially reasonable terms as
needed.

ITEM 3.LEGAL PROCEEDINGS

The Company is subject
to legal proceedings and claims that arise in the normal course of business. If
such matters arise, the Company cannot assure that it would prevail in such
matters, nor can it assure that any remedy could be reached on mutually
agreeable terms, if at all. Due to the inherent uncertainties of litigation,
were there any such matters, the Company would not be able to accurately predict
their ultimate outcome. As of April 30, 2008, there were no current proceedings
or litigation involving the Company that management believes would have a
material adverse impact on its financial position, results of operations, or
cash flows.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company held its
Annual Meeting of Stockholders on February 22, 2008. As part of the meeting, the
election of Board members was voted on by the Companys stockholders. Elected to
serve on the board were Steven D. Whiteman, Robert Bozeman,Richard M. Brooks, Robert J. Majteles, Tery R.
Larrew and Todd E. Wille. All board members elected to serve were previously
board members for the Company. The elected board members will serve until the
next Annual Meeting of Stockholders and until their respective successors are
duly elected and qualified.

As part of the Annual
Meeting, stockholders voted on the nominees for director, an amendment to
increase the number of options reserved for issuance under the 2001 stock option
plan and ratified the appointment of Grant Thornton LLP as the Companys
auditors for the fiscal year ending April 30, 2008.

1.       The election
of each of the nominees for director were approved with the following votes:

| |                          | In
      Favor |  | **Withheld**
| | ------------------------ | -------------- |  | ------------
| | Steven D.
      Whiteman | 4,744,336      |  | 37,183      
| | Robert Bozeman           | 4,744,319      |  | 37,200      
| | Richard M.
      Brooks  | 4,744,626      |  | 36,893      
| | Tery R. Larrew           | 4,744,336      |  | 37,183      
| | Robert J.
      Majteles | 4,744,606      |  | 36,913      
| | Todd E. Wille            | 4,719,876      |  | 61,643      

|2. |  | The proposal to amend the 2001
      Stock Option Plan to increase the number of shares of common stock
      reserved for issuance from 595,000 to 1,200,000, was approved as 2,029,334
      shares voted in favor of the amendment, representing 84% of the shares
      voted at the meeting. This was sufficient to pass the
  amendment.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|3. |  | The proposal to ratify the
      selection of Grant Thornton LLP as the Companys independent auditors for
      the fiscal year ending April 30, 2008 was approved as 4,757,092 shares
      voted in favor of the amendment, representing 71% of the shares voted at
      the meeting. This was sufficient to pass this
  proposal.        

12

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PART II

|ITEM
      5. |  | MARKET FOR
      REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
      PURCHASES OF EQUITY SECURITIES
|------------- |  | ------------------------------------------------------------------------------------------------------------------------

Market Information for Common Stock

During fiscal 2008,
Unifys common stock was traded on the Over-The-Counter Bulletin Board (OTC BB)
under the symbol UFYC.OB. The following table sets forth the average high and
low bid quotations as reported on the over-the-counter market for shares of our
common stock for the periods indicated. Such quotations reflect prices between
dealers, do not include retail mark-ups, mark-downs or commissions and may not
represent actual transactions.

**High**
    
    **Low**Fiscal
      2008Fourth Quarter
    $
    7.00
    
    $
    5.65Third
      Quarter
    
    6.60
    
    
    4.81Second Quarter
    
    5.25
    
    
    2.05First
      Quarter
    
    2.75
    
    
    2.25Fiscal
      2007Fourth Quarter
    $
    2.85
    
    $
    1.45Third
      Quarter
    
    1.55
    
    
    1.10Second Quarter
    
    1.90
    
    
    1.00First
      Quarter
    
    2.30
    
    
    1.60


Common Stockholders of Record

At May 31, 2008, there
were approximately 275 stockholders of record of the Companys common stock, as
shown in the records of our transfer agent, excluding stockholders whose stock
was held in nominee or street name by brokers.

Dividends

We have never paid
dividends on our common stock and our present policy is to retain anticipated
future earnings for use in our business.

13

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Equity Compensation Plan Information

Unify maintains a
compensation plan that provides for the issuance of its Common Stock to
officers, directors, other employees or consultants. This plan is known as the
2001 Stock Option Plan (the Option Plan) and it was approved by the
stockholders. The 1991 Stock Option Plan, which had a ten-year life, has expired
and has therefore ceased to be available for new grants. In fiscal 2003, the
Board adopted, without a need for shareholder approval, the 2002 Director
Restricted Stock Plan (the Director Restricted Stock Plan) as part of a
program to provide compensation we felt was necessary to attract, retain and
reward members of our Board of Directors who were willing to provide the time
and energy that we believe is required to meet our business goals. The following
table sets forth information regarding outstanding options and shares reserved
for future issuance under the foregoing plans as of April 30, 2008:

|                                                              |  |                    |  |                         |      |                    | Number of 
|------------------------------------------------------------- |  | ------------------ |  | ----------------------- | ---- | ------------------ | ----------
|                                                              |  |                    |  |                         |      |                    | shares    
|                                                              |  |                    |  |                         |      |                    | remaining 
|                                                              |  |                    |  |                         |      |                    | available 
|                                                              |  |                    |  |                         |      |                    | for future
|                                                              |  | Number of          |  |                         |      |                    | issuance  
|                                                              |  | shares to
      be |  | Weighted-               |      | under
      equity
|                                                              |  | issued upon        |  | average                 |      | compensation      
|                                                              |  | exercise of        |  | exercise
      price of |      | plans             
|                                                              |  | outstanding        |  | outstanding             |      | [excluding        
|                                                              |  | options,           |  | options,                |      | shares            
|                                                              |  | warrants
      and |  | warrants
      and      |      | reflected
      in
|                                                              |  | rights             |  | rights                  |      | column (a)]       
|Plan Category                                                 |  | (a)                |  | (b)                     |      | (c)               
|Equity
      compensation plans approved by stockholders (1)  |  | 412,910            |  | $                       | 2.64 |                    | 669,314   
|Equity compensation plans
      not approved by stockholders: |  |                    |  |                         |      |                    |           
|Director Restricted Stock Plan (2)                            |  | 96,137             |  | $                       | 2.45 |                    | 3,862     
|Non-Plan Options (3)                                          |  | 330,400            |  | $                       | 2.95 |                    | 0         

|(1) |  | Comprised entirely of shares
      reserved for future issuance under the Option Plan.                                                                                                                                                               
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | There are 100,000 shares
      authorized under the Director Restricted Stock Plan, of which 96,137
      shares were awarded and were outstanding on April 30, 2008. As of April
      30, 2008 there were 3,862 shares available for future awards.
|   
|(3) |  | In fiscal 2003, the Board
      authorized the issuance of non-plan stock options for individual senior
      level executive recruitment.                                                                                                           

Material Features of Director Restricted Stock
Plan

On May 1, 2002 the
Board approved the Director Restricted Stock Plan as part of a compensation
program designed to attract and retain independent members for our board of
directors. The maximum aggregate number of shares of common stock that may be
issued under the Director Restricted Stock Plan is 100,000. In fiscal 2008,
there were no shares awarded under this plan. As of April 30, 2008 there is a
balance of 3,862 shares reserved for future awards under this plan.

ITEM 6.SELECTED FINANCIAL DATA

The following selected
consolidated financial data should be read in conjunction with the Companys
Consolidated Financial Statements and Notes thereto in Item 8 and Managements
Discussion and Analysis of Financial Condition and Results of Operations in
Item 7.

14

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|                                                            | Years Ended
      April 30,                
|----------------------------------------------------------- | -------------------------------------------
|                                                            | 2008**(1)**                                
|                                                            | (In
      thousands, except per share data)
|Consolidated Statement of Operations Data:                  |                                            
|Revenues:                                                   |                                            
|Software licenses                                           | $                                          
|Services                                                    |                                            
|Total revenues                                              |                                            
|Cost of Revenues:                                           |                                            
|Software licenses                                           |                                            
|Services                                                    |                                            
|Total cost of revenues                                      |                                            
|Gross profit                                                |                                            
|Operating
      Expenses:                                   |                                            
|Product development                                         |                                            
|Selling, general and administrative                         |                                            
|Write-down of other investments                             |                                            
|Total operating expenses                                    |                                            
|Income (loss) from operations                               |                                            
|Interest
      expense                                      |                                            
|Other income (expense), net                                 |                                            
|Income (loss) before income taxes                           |                                            
|Provision (benefit) for income taxes                        |                                            
|Income (loss) from continuing operations                    | $                                          
|Loss from discontinued operations                           |                                            
|Net income (loss)                                           | $                                          
|                                                           
|Net income (loss) per
      share:                          |                                            
|Basic earnings per share:                                   |                                            
|Continuing operations                                       | $                                          
|Discontinued operations                                     | $                                          
|Net income (loss) per share                                 | $                                          
|                                                           
|Dilutive earnings per share:                                |                                            
|Continuing operations                                       | $                                          
|Discontinued operations                                     | $                                          
|Net income (loss) per share                                 | $                                          
|Shares used in computing net
      income (loss) per share: |                                            
|Basic                                                       |                                            
|Diluted                                                     |                                            
|Consolidated Balance
      Sheet Data (As Restated)         |                                            
|Cash and cash
      equivalents                             | $                                          
|Working capital (deficit)                                   |                                            
|Total assets                                                |                                            
|Long term debt, net                                         |                                            
|Total stockholders'
      equity                            |                                            

|(1) |  | The Company acquired Gupta on
      November 20, 2006 so the fiscal 2007 results include only the activity
      through the end of the fiscal year. There was no Gupta activity for fiscal
      years 2006, 2005 and 2004 and twelve months in fiscal
  2008.
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15

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|ITEM
      7. |  | MANAGEMENTS
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
|------------- |  | -------------------------------------------------------------------------------------------------

The following
discussion of the financial condition and results of operations of the Company
contains forward-looking statements that involve risks and uncertainties and
should be read in conjunction with the cautionary language applicable to such
forward-looking statements described above in A Caution About Forward-Looking
Statements found before Item 1 of this Form 10-K. You should not place undue
reliance on these forward-looking statements which speak only as of the date of
this Annual Report on Form 10-K. The following discussion should also be read in
conjunction with the Consolidated Financial Statements and Notes thereto in Item
8. The Companys actual results could differ materially from those discussed
herein. Factors that could cause or contribute to such differences include, but
are not limited to, the Risk Factors discussed in this Annual Report and in the
Companys other filings with the SEC.

Overview

Unify (the Company,
we, us or our) is a global provider of application modernization, data
management and application development solutions. Our migration solutions,
development software and embedded databases allow customers to modernize and
maximize their application environment. Our award-winning technologies help
organizations drive business optimization, improve collaboration, increase
customer service and reduce costs. Unifys strategy is to help businesses
modernize mission-critical legacy applications and data. Based on market
requirements for application modernization, our solutions help companies
increase speed and agility, improve asset reuse, lower IT costs, reduce business
risks and exposures, and free information previously locked within proprietary
systems. The Company sells and markets its application development and database
software and services and modernization solutions through two segments. The
segments are the Americas, which include the Companys international
distributors, and Europe, which includes the UK, France, Germany and other
direct European customers.

On September 13, 2006,
the Company entered into a Purchase and Exchange Agreement (Purchase
Agreement) with Halo Technology Holdings, Inc. (Halo) whereby Unify agreed to
purchase Gupta from Halo in exchange for: (i) the Companys Insurance Risk
Management (IRM) division, (ii) the Companys ViaMode software, (iii)
$6,100,000 in cash, and (iv) the amount, if any, by which Guptas net working
capital exceeds IRMs net working capital at the close of the transaction (the
Purchase and Exchange). The Companys acquisition of Gupta was consummated on
November 20, 2006. As a result of the Gupta acquisition the Companys fiscal
2007 financial results include approximately five months of Gupta operations and
fiscal 2008 includes twelve months of Guptas operations.

On November 20, 2006,
the Company entered into various agreements with ComVest Capital LLC (ComVest)
whereby ComVest, along with participation from Special Situations Funds,
provided debt financing for the Gupta acquisition and for working capital,
consisting of convertible term loans totaling $5.35 million and a revolving
credit facility of up to $2.5 million. The term loans had an initial interest
rate of 11.25% and have terms of 48 to 60 months. The agreement was modified in
April 2008 such that the interest rate on the term loans was reduced to 5% and
principal payments were deferred until June 2009. The revolver has an interest
rate of prime plus 2.25% and has a maturity date of November 30, 2010. As part
of the financing, ComVest received 402,000 warrants and Special Situations Funds
received 268,000 warrants. The warrants are for the purchase of common stock at
prices from $1.35 to $1.90 per share. The agreements provide for ComVest to have
a security interest in substantially all of the Companys assets.

In February 2005, Unify
acquired privately-held Acuitrek Inc. (Acuitrek), a provider of policy
administration and underwriting solutions for the alternative risk market. The
acquisition was the result of a strategy to penetrate underserved specialty
markets with our solutions and led to the formation of the Unify IRM division.
However, with the September 2006 sale of the Companys IRM division and ViaMode
software asset to Halo, Acuitrek, Inc. was sold to Halo. In connection with this
sale, the Company amended certain terms of the agreement under which it had
purchased Acuitrek, Inc. in February 2005.

Today, Unifys
customers include corporate information technology departments (IT), software
value-added resellers (VARs), solutions integrators (SIs) and independent
software vendors (ISVs) from a variety of industries, including insurance,
financial services, healthcare, government, manufacturing, retail, education,
and more. We are headquartered in Sacramento, California, with offices in
Australia, France, Germany, and the United Kingdom (UK). We market and sell
products directly in the United States, Europe, and Australia and indirectly
through global distributors representing more than 50 countries.

16

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Our mission is to
enable customers to modernize mission critical applications. Our software and
solutions give customers a rich user experience, quality information and a high
degree of customer satisfaction.

Our technology products
include Composer for Lotus Notes, Sabertooth, NXJ Developer and NXJ Enterprise,
Team Developer, ACCELL, VISION, DataServer, SQLBase and SQLBase Treasury. The
Company is committed to providing exceptional technology to this customer base
and to continue to meet their current and future technology needs. Services to
our extensive customer installed base include sales and marketing, support, and
professional services.

Critical Accounting Policies

The following
discussion and analysis of the Companys financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent liabilities. We base
our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. The areas that
require significant judgment are as follows.

Revenue Recognition

The Company generates
revenue from software license sales and related services, including maintenance
and support, and consulting services. The Company licenses its products to
end-user customers, independent software vendors (ISVs), international
distributors and value-added resellers (VARs). The Companys products are
generally sold with a perpetual license. The Companys contracts with ISVs, VARs
and international distributors do not include special considerations such as
rights of return, stock rotation, price protection, special acceptance or
warranty provisions. With the exception of its Composer for Lotus Notes Solution
and its discontinued product, NavRisk, the Company recognizes revenue for
software license sales in accordance with Statement of Position (SOP) 97-2,Software Revenue Recognition. For
Composer for Lotus Notes and the discontinued product, NavRisk, the Company
recognized revenue for software licenses sales in accordance with Statement of
Position 81-1,Accounting for Performance of
Construction-Type and Certain Production-Type Contractsand Accounting Research Bulletin (ARB) 45,Long-Term
Construction Type Contracts. The Company exercises
judgment in connection with the determination of the amount of software and
services revenue to be recognized in each accounting period. The nature of each
licensing arrangement determines how revenues and related costs are
recognized.

For software license
arrangements that do not require significant modification or customization of
the underlying software, revenue is recognized when the software product or
service has been shipped or electronically delivered, the license fees are fixed
and determinable, uncertainties regarding customer acceptance are resolved,
collectibility is probable and persuasive evidence of an arrangement
exists.

The Company considers a
signed noncancelable license agreement, a customer purchase order, a customer
purchase requisition, or a sales quotation signed by an authorized purchaser of
the customer to be persuasive evidence that an arrangement exists such that
revenue can be recognized.

The Companys customer
contracts include multi-element arrangements that include a delivered element (a
software license) and undelivered elements (such as maintenance and support
and/or consulting). The value allocated to the undelivered elements is unbundled
from the delivered element based on vendor-specific objective evidence (VSOE) of
the fair value of the maintenance and support and/or consulting, regardless of
any separate prices stated within the contract. VSOE of fair value is defined
as: (i) the price charged when the same element is sold separately, or (ii) if
the element has not yet been sold separately, the price for the element
established by management having the relevant authority when it is probable that
the price will not change before the introduction of the element into the
marketplace. The Company then allocates the remaining balance to the delivered
element (a software license) regardless of any separate prices stated within the
contract using the residual method as the fair value of all undelivered elements
is determinable.

We defer revenue for
any undelivered elements, and recognize revenue for delivered elements only when
the fair values of undelivered elements are known, uncertainties regarding
customer acceptance are resolved, and there are no customer-negotiated refund or
return rights affecting the revenue recognized for delivered elements. If we
cannot objectively determine the fair value of any undelivered element included
in bundled software and service arrangements, we defer revenue until all
elements are delivered and services have been performed, or until fair value can
objectively be determined for any remaining undelivered elements.

17

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An assessment of the
ability of the Companys customers to pay is another consideration that affects
revenue recognition. In some cases, the Company sells to undercapitalized
customers. In those circumstances, revenue recognition is deferred until cash is
received, the customer has established a history of making timely payments or
the customers financial condition has improved. Furthermore, once revenue has
been recognized, the Company evaluates the related accounts receivable balance
at each period end for amounts that we believe may no longer be collectible.
This evaluation is largely done based on a review of the financial condition via
credit agencies and historical experience with the customer. Any deterioration
in credit worthiness of a customer may impact the Companys evaluation of
accounts receivable in any given period.

Revenue from support
and maintenance activities, which consist of fees for ongoing support and
unspecified product updates, are recognized ratably over the term of the
maintenance contract, typically one year, and the associated costs are expensed
as incurred. Consulting service arrangements are performed on a best efforts
basis and are generally billed under time-and-materials arrangements. Revenues
and expenses relating to providing consulting services are recognized as the
services are performed.

Valuation of Long-Lived Assets

Our long-lived assets
are comprised of long-term investments. At April 30, 2008, we had no long-term
investments. In September 2007, the Company sold all of its stock in Arango
Software International (Arango) as part of a stock repurchase plan offered by
Arango. At the time of the sale, the Company had a carrying value of $175,000
for the Arango stock. Proceeds from the sale of the Arango stock were $264,000.
The gain on the sale of the Arango stock is included in other income.
Additionally, in April 2008, we wrote off our investment in Unify Japan of
$39,000 based on our assessment that there was a permanent decline in value for
this investment. We assess the valuation of long-lived assets whenever
circumstances indicate that there is a decline in carrying value below cost that
is other-than-temporary. Several factors can trigger an impairment review such
as significant underperformance relative to expected historical or projected
future operating results and significant negative industry or economic trends.
In assessing potential impairment for such investments, we consider these
factors as well as the forecasted financial performance. When such decline in
value is deemed to be other-than-temporary, we recognize an impairment loss in
the current period operating results to the extent of the decline. Future
adverse changes in market conditions or poor operating results could result in
losses or an inability to recover the carrying value of the long-term
investments that is not currently reflected in the investments carrying value,
thereby, possibly requiring impairment charges in the future.

Deferred Tax Asset Valuation
Allowance

As of April 30, 2008,
we had approximately $18.3 million of deferred tax assets related principally to
net operating loss carryforwards, reserves and other accruals, and foreign tax
credits. The Companys ability to utilize net operating loss carryforwards may
be subject to certain limitations in the event of a change in ownership. A
valuation allowance has been recorded to offset these deferred tax assets. The
ability of the Company to ultimately realize its deferred tax assets will be
contingent upon the Company achieving taxable income. There is no assurance that
this will occur in amounts sufficient to utilize the deferred tax assets. Should
we determine that we would be able to realize the deferred tax assets in the
future in excess of the recorded amount, an adjustment to the deferred tax asset
would increase income in the period such determination was made.

18

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Results of Operations

The following table
sets forth our consolidated statement of operations expressed as a percentage of
total revenues for the periods indicated:

|                                                                   | Years Ended April 30,
|------------------------------------------------------------------ | ---------------------
|                                                                   | 2008                 
|Revenues:                                                          |                      
|Software licenses                                                  | 43.1                 
|Services                                                           | 56.9                 
|Total
      revenues                                               | 100.0                
|Cost of
      revenues:                                            |                      
|Software licenses                                                  | 1.1                  
|Services                                                           | 6.9                  
|Total cost of revenues                                             | 8.0                  
|Gross profit                                                       | 92.0                 
|Operating expenses:                                                |                      
|Product
      development                                          | 17.6                 
|Selling, general and administrative                                | 60.5                 
|Total operating expenses                                           | 78.1                 
|Income (loss) from operations                                      | 13.7                 
|Interest
      expense                                             | (4.5                 
|Other income (expense),
      net                                  | 0.7                  
|Income (loss) from continuing
      operations before income taxes | 9.9                  
|Provision for income
      taxes                                   | 1.6                  
|Income (loss) from continuing
      operations                     | 8.2                  
|Loss from discontinued operations, net of taxes                    | 0.0                  
|Net income
      (loss)                                            | 8.2                  

Total Revenues

The Company generates
revenue from software license sales and related services, including maintenance,
support and consulting services. We license our software through our direct
sales force in the United States and Europe, and through indirect channels
comprised of distributors, ISVs, VARs, and other partners worldwide. Revenues
from our distributor, ISV and VAR indirect channels accounted for approximately
64%, 61%, and 51% of our software license revenues for fiscal 2008, 2007 and
2006, respectively. International revenues include all our software license and
service revenues from customers located outside North America. International
revenues accounted for 78%, 73%, and 70% of total revenues in fiscal years 2008,
2007 and 2006, respectively.

Total revenues in
fiscal 2008 were $19.8 million, an increase of $8.6 million or 77% from fiscal
2007 revenues of $11.2 million. Total software license revenues in fiscal 2008
were $8.5 million, an increase of $4.1 million or 93% from fiscal 2007. Total
services revenues were $11.3 million in fiscal 2008, an increase of $4.5 million
or 67% from fiscal 2007. The increase in total revenues, software license
revenues, and services revenues was primarily the result of the November 20,
2006 acquisition of Gupta Technologies LLC. Total revenues in fiscal 2007 were
$11.2 million, an increase of $1.1 million or 11% from fiscal 2006 revenues of
$10.1 million. Total software license revenues in fiscal 2007 were $4.4 million
for a decrease of $0.3 million or 7% from fiscal 2006, while total service
revenues of $6.8 in fiscal 2007 increased by $1.4 million or 25% from fiscal
2006. The increase in total revenue and service revenues was primarily the
result of the acquisition of Gupta Technologies LLC.

For fiscal 2008 and
2007, total revenues from the Americas were 22% and 27% of total revenues,
respectively. Total revenue from the Americas in absolute dollars was $4.4
million for fiscal 2008 and $3.0 million for fiscal 2007. Total revenue from our
European territory was $10.9 million for fiscal 2008 and $6.3 million for fiscal
2007. On a percentage basis, revenue from our European territory was 55% for
fiscal 2008 and 54% for fiscal 2007. For fiscal 2008 and 2007, total revenues
from international distributors were 23% and 16% of total revenues,
respectively. Total revenue from the international distributors in absolute
dollars was $4.5 million for fiscal 2008 and $1.9 million for fiscal
2007.

19

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Cost of Revenues

Cost of
Software Licenses.Cost of software licenses
consists primarily of product packaging and production costs as well as the
amortization of royalties and license fees paid for licensed technology. Costs
associated with royalties and other direct production costs are expensed as
incurred at the time of the sale and purchased technology from third parties are
amortized ratably over their expected useful lives. Cost of software licenses
was $0.2 million for fiscal 2008 and $0.4 million for both fiscal 2007 and
fiscal 2006. The decrease from fiscal 2007 primarily relates to a decrease in
third party license fees paid in the current year.

Cost of
Services.Cost of services consists primarily
of employee, facilities and travel costs incurred in providing customer support
under software maintenance contracts and consulting and implementation services.
Total cost of services was $1.4 million for fiscal 2008, $1.0 million for fiscal
2007 and $1.1 million for fiscal 2006. Our cost of services as a percent of
services revenues was 12% in fiscal 2008, 15% in fiscal 2007 and 21% in 2006.
The favorable decrease in the percentage of cost of service expenses to services
revenue in fiscal 2008 was the result of economies of scale relative to our cost
structure and an increase in services revenue, both of which were direct results
of our acquisition of Gupta.

Operating Expenses

Product
Development.Product development expenses
consist primarily of employee and facilities costs incurred in the development
and testing of new products and in the porting of new and existing products to
additional hardware platforms and operating systems. Product development costs
in fiscal 2008 were $3.5 million compared to $2.4 million in fiscal 2007 and
$1.6 million in fiscal 2006. The increase in product development costs was the
addition of the Gupta product development team plus additional outsourced
development costs associated with efforts to deliver the first major new version
of the Gupta Team Developer product in several years.

Selling,
General and Administrative.Selling, general
and administrative (SG&A) expenses consist primarily of salaries and
benefits, marketing programs, travel expenses, professional services, facilities
expenses and bad debt expense. SG&A expenses were $12.0 million in fiscal
2008, $8.3 million for 2007 and $5.8 million for 2006. The increase in SG&A
costs in fiscal 2007 is from adding five months of the Gupta Technologies
selling, marketing and administrative personnel from the November 2006
acquisition plus $0.5 million in legal and accounting costs resulting from the
Gupta acquisition and the aborted merger with Halo Technology Holdings. The
increase in SG&A in fiscal 2008 is from having 12 months of the Gupta
personnel, plus approximately $0.3 million in closing costs for our German
subsidiary, plus the launch of the Composer business in terms of both personnel
and sales and marketing activities. As a percentage of total revenue, SG&A
expenses were 61% in fiscal 2008, 74% in fiscal 2007 and 57% in fiscal 2006. We
expect SG&A costs as a percentage of total revenues to decrease in the
future as we continue to benefit from the additional economies of scale as a
result of the acquisition and the Composer business begins to generate revenue.
The major components of SG&A for fiscal 2008 were sales expenses of $5.8
million, marketing expenses of $1.4 million and general and administrative
expenses of $4.8 million. For fiscal 2007, the major components were sales
expenses of $4.1 million, marketing expenses of $0.6 million and general and
administrative expenses of $3.6 million. For fiscal 2006, the major components
of SG&A were sales expenses of $3.0 million, marketing expenses of $0.7
million, and general and administrative expenses of $2.1 million.

Write-down of Other Investments.We
continue to periodically review the recorded value of our investments. We record
an investment impairment charge if and when we believe an investment has
experienced a decline in market value that is other than temporary. Future
adverse changes in market conditions or poor operating results of an investment
could result in losses or an inability to recover the carrying value of the
investment, thereby possibly requiring impairment charges in the future. In
September 2007, the Company sold all of its stock in Arango as part of a stock
repurchase plan offered by Arango. At the time of the sale, the Company had a
carrying value of $175,000 for the Arango stock. Proceeds from the sale of the
Arango stock were $264,000. The gain on the sale of the Arango stock is included
in other income. Additionally, in April 2008, we wrote off our investment in
Unify Japan of $39,000 based on our assessment that there was a permanent
decline in value for this investment. The write off of Unify Japan was recorded
in other expense.

Interest Expense.Interest expense is primarily the result of interest from
outstanding debt and was $900,000, $527,000 and $11,000 in fiscal 2008, 2007 and
2006, respectively. Fiscal 2008 interest expense consists primarily of interest
incurred on notes payable resulting from a debt financing in conjunction with
the acquisition of Gupta plus the amortization of related debt issuance costs
and the note discount representing the value of the issued warrants.

20

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Other
Income (Expense).Other income (expense), net
consists primarily of the gain on the sale of the Other Investments, the foreign
exchange gains and losses and interest earned by the Company on our cash and
cash equivalents. Other income (expense) was $130,000, $136,000 and $61,000 in
fiscal 2008, 2007 and 2006, respectively.

Provision
for Income Taxes.For fiscal 2008, the
Company recorded $89,000 in foreign tax expense and $235,000 for state and
federal taxes. For fiscal 2007, the Company recorded $82,000 in foreign tax
expense and no expense for state or federal taxes. For fiscal 2006, the Company
recorded no state, federal or foreign tax expense. At April 30, 2008, the
Company had approximately $44.4 million in federal net operating loss
carryforwards that begin to expire in fiscal year 2008 through 2027,
approximately $11.0 million in state net operating loss carryforwards that
expire in fiscal years 2013 to 2017, approximately $0.7 million in foreign net
operating loss carryforwards that do not expire and approximately $4.3 million
in capital loss carryforwards that expire in 2010. The Companys ability to
utilize these net operating loss carryforwards may be subject to certain
limitations in the event of a change in ownership.

Liquidity and Capital
Resources

At April 30,
2008, the Company had cash and cash equivalents of $2.7 million, compared to
$2.1 million at April 30, 2007. The Company had net accounts receivable of $5.1
million as of April 30, 2008 and $4.2 million as of April 30, 2007.

On November
20, 2006, the Company entered into various agreements with ComVest whereby
ComVest, along with participation from Special Situations Funds, provided debt
financing for the Gupta acquisition and for working capital, consisting of
convertible term loans totaling $5.35 million and a revolving credit facility of
up to $2.5 million. The term loans had an initial interest rate of 11.25% and
have repayment terms of 48 to 60 months. The agreement was modified in April
2008 whereby the interest rate on the term loans has been decreased to 5% and
all principal payments have been deferred until June 2009. The revolver has an
interest rate of prime plus 2.25% and has a maturity date of November 30, 2010.
As part of the financing, ComVest received 402,000 warrants and Special
Situations Funds received 268,000 warrants. The warrants are for the purchase of
common stock at prices from $1.35 to $1.90 per share. The agreements provide for
ComVest to have a security interest in substantially all of the Companys
assets.

We believe
that existing cash of $2.7 million as of April 30, 2008, along with forecasted
operating cash flows for fiscal year 2009 and the ComVest credit facility will
provide us with sufficient working capital for us to meet our operating plan for
fiscal year 2009. The fiscal 2009 operating plan assumes normal operations for
the Company, capital expenditures of approximately $100,000 and only required
interest payments on debt.

In fiscal
2009, we plan to aggressively market our Composer product and we also anticipate
releasing new versions of Team Developer, SQLBase, NXJ and DataServer which will
have enhanced functionality. The fiscal 2009 plan requires few additional
strategic investments in sales, marketing or implementation services. We believe
our fiscal 2009 plan will generate positive cash flow as a result of increased
revenues for Composer, new license sales from the release of new versions of our
Team Developer, SQLBase and NXJ products.

*Operating Cash
Flows.*In fiscal 2008, we had cash flows
from continuing operations of $3.4 million. This compares to fiscal 2007 and
2006 where cash flows from continuing operations were $0.6 million and a
negative $39,000, respectively. Cash flows provided by operations for fiscal
2008 principally resulted from $1.6 million of income from operations, a $0.9
million increase in deferred revenue, a $0.8 million increase in accrued
compensation and related expenses, $0.8 million in amortization of intangible
assets, $0.2 million for amortization of discount on notes payable, $0.2 million
in depreciation and $0.2 million in stock based expenses. Offsetting these
amounts was an increase of $0.6 million in accounts receivable, an increase of
$0.1 million in other long term assets, a $0.3 million decrease in accounts
payable, a decrease of $0.3 million in accrued acquisition costs, and
fulfillment of support obligations of $0.3 million.

In fiscal
2007, we had cash flows provided by operations of $0.6 million principally
resulting from a $2.6 million increase in deferred revenue, a $0.4 million
decrease in accounts receivable, a $0.2 million increase in prepaid expenses and
other current assets, a $0.5 million increase in accrued acquisition costs, $0.3
million in amortization, $0.2 million in depreciation and $0.1 million in stock
based expenses. Offsetting these amounts was a loss from continuing operations
for fiscal year 2007 of $1.4 million, a decrease of $0.7 million in accrued
compensation and related expenses, a $0.5 million decrease in accounts payable,
a decrease of $0.8 million in other accrued liabilities, an increase of $0.2
million in other long term assets and fulfillment of support obligations of $0.2
million.

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In fiscal
2006, negative operating cash flow of $39,000 from continuing operations
principally resulted from a $0.9 million increase in accounts receivable, a $0.3
million decrease in accounts payable, a $0.3 million decrease in other accrued
liabilities and a $0.1 million decrease in deferred revenue. Offsetting these
amounts was an increase of $0.1 million prepaid expense and other current
assets, a $0.1 million increase in accrued compensation and related expenses,
$0.1 million in stock based expenses, $0.2 million in depreciation and income
from continuing operations of $1.2 million.

Investing
Cash Flows.Cash used in investing activities
for continuing operations was a negative $0.6 million for fiscal 2008. The use
of cash consisted of $0.2 million related to the acquisition of Active Data,
$0.3 million related to the purchase of property and equipment and $0.3 million
related to payments on acquisitions offset by proceeds from the sale of
investments of $0.3 million. Cash used in investing activities for continuing
operations was $5.9 million in fiscal 2007 and $41,000 in fiscal 2006. The use
of cash in investing activities for continuing operations for fiscal 2007 was
related to the acquisition of Gupta and in fiscal 2006 was entirely related to
the purchase of property and equipment.

Financing
Cash Flows.Net cash used in financing
activities for continuing operations in fiscal 2008 was $2.3 million. Cash used
for principal payments under debt obligations was $3.3 million. This amount was
offset by $1.0 million in borrowing under debt obligations and $20,000 of
proceeds from issuance of common stock. Net cash provided by financing
activities for continuing operations in fiscal 2007 was $7.0 million. Sources of
cash from financing activities included $7.7 million from borrowings and $0.2
million from the proceeds of the issuance of common stock. In fiscal 2007 $1.0
million in cash was used to make principal payments on debt obligations. In
fiscal 2006 cash used in financing activities was $42,000 and was the result of
cash payments of $1.6 million for principal payments on debt offset by proceeds
from borrowings of $1.4 million and proceeds of $0.1 million from the issuance
of common stock.

A summary of certain contractual
obligations as April 30, 2008 is as follows (in thousands):

|                                         |  | Payments Due by
      Period
|---------------------------------------- |  | ----------------------------
|                                         |  |                             
|Contractual
      Obligations            |  | Total                       
|Debt financing                           |  | $                           
|Revolver
      note                      |  |                             
|Other long-term liabilities              |  |                             
|Capital lease
      obligations          |  |                             
|Operating leases                         |  |                             
|Total
      contractual cash obligations |  | $                           

In January
2008, the Company entered into a lease agreement for office furniture. The lease
is expected to commence in July 2008 and will be recorded as a capital lease in
the amount of $115,000.

Recently Issued Accounting Standards

In February
2006, the FASB issued SFAS No. 155,Accounting
for Certain Hybrid Financial Instruments  An Amendment of FAS Statements No.
133 and 150. SFAS No. 155: (a) permits fair
value re-measurement for any hybrid financial instrument that contains an
embedded derivative that otherwise would require bifurcation, (b) clarifies that
certain instruments are not subject to the requirements of SFAS 133, (c)
establishes a requirement to evaluate interests in securitized financial assets
to identify interests that may contain an embedded derivative requiring
bifurcation, (d) clarifies what may be an embedded derivative for certain
concentrations of credit risk, and (e) amends SFAS 140 to eliminate certain
prohibitions related to derivatives on a qualifying special-purpose entity. SFAS
No. 155 became effective for the Company in the first quarter of fiscal year
2008 and did not have a material impact on our financial position, cash flows or
results of operations.

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In June
2006, the FASB issued Interpretation (FIN) No. 48,Accounting for Uncertainty in Income Taxes - An Interpretation of FASB
Statement No. 109. This Interpretation
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return, and provides guidance on derecognition classification,
interest and penalties, accounting in interim periods, disclosure, and
transition. FIN No. 48 is effective for fiscal years beginning after December
15, 2006 and was applicable for Unify in the first quarter of fiscal year 2008.
The adoption of FIN No. 48 did not have a material impact on our financial
position, cash flows or results of operations.

In September 2006, the FASB issued
Statement No. 157,Fair Value Measurements
(SFAS 157). SFAS 157 defines fair value,
establishes a framework and gives guidance regarding the methods used for
measuring fair value, and expands disclosures about fair value measurements.
SFAS 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2008, and interim periods within those fiscal years. We are
currently assessing the impact, if any, of SFAS 157 on our consolidated
financial statements.

In February 2007, the FASB issued
SFAS No. 159,The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 provides companies with an option to report selected financial
assets and liabilities at fair value at specified election dates. SFAS 159 is
effective for fiscal years beginning after November 15, 2007. We are currently
assessing the impact, if any, of SFAS 159 on our consolidated financial
statements.

In December 2007, the FASB issued
Statement No. 160,Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51. The standard changes the accounting for noncontrolling
(minority) interests in consolidated financial statements including the
requirements to classify noncontrolling interests as a component of consolidated
stockholders equity, and the elimination of minority interest accounting in
results of operations with earnings attributable to noncontrolling interests
reported as part of consolidated earnings. Additionally, Statement 160 revises
the accounting for both increases and decreases in a parents controlling
ownership interest. Statement 160 is effective for fiscal years beginning after
December 15, 2008, with early adoption prohibited. We are currently assessing
the impact, if any, of SFAS 160 on our consolidated financial statements.

In December 2007, the FASB issued
SFAS No. 141 (revised),Business
Combinations. The standard changes the
accounting for business combinations including the measurement of acquirer
shares issued in consideration for a business combination, the recognition of
contingent consideration, the accounting for pre-acquisition gain and loss
contingencies, the recognition of capitalized in-process research and
development, the accounting for acquisition-related restructuring cost accruals,
the treatment of acquisition related transaction costs and the recognition of
changes in the acquirers income tax valuation allowance. Statement 141(R) is
effective for fiscal years beginning after December 15, 2008, with early
adoption prohibited. We are currently assessing the impact, if any, of SFAS
141(R) on our consolidated financial statements.

In March 2008, the FASB issued
Statement No. 161,Disclosures about
Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. (SFAS No. 161). SFAS No. 161
requires enhanced disclosures about an entitys derivative instruments and
hedging activities with a view toward improving the transparency of financial
reporting, and is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. SFAS No. 161 encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. We are currently evaluating
the impact of adopting SFAS No. 161 on our consolidated financial statements.

On May 9, 2008, the FASB issued FASB
Staff Position No. APB 14-1(FSP APB 14-1),Accounting for Convertible Debt Instruments That May Be Settled in Cash
Upon Conversion (Including Partial Cash Settlement. FSP APB 14-1 requires issuers of convertible debt that may be settled
wholly or partly in cash when converted to account for the debt and equity
components separately. FSP APB 14-1 is effective for fiscal years beginning
after December 15, 2008 and must be applied retrospectively to all periods
presented. We are currently assessing the impact, if any, of FSP APB 14-1 on our
consolidated financial statements.

ITEM 7A.QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET 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. 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. The Company
does not believe its exposure to interest rate risk is material for cash and
cash equivalents, which totaled $2.7 million at April 30, 2008. Unify had no
short-term investments at April 30, 2008.

23

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In November
2006, the Company entered into a revolving credit facility agreement with
ComVest whereby ComVest would provide up to $2.5 million through a revolving
credit facility. The revolver has an interest rate of prime plus 2.25% and has a
maturity date of November 30, 2010. Should the prime interest rate increase
during the life of the revolver, the Company would have exposure to interest
rate risk if it has a large balance outstanding on the revolver. At April 30,
2008 the Company had no amount outstanding under the revolver.

Unify does
not use derivative financial instruments in its short-term investment portfolio,
and places its investments with high quality issuers only and, by policy, limits
the amount of credit exposure to any one issuer. The Company is averse to
principal loss and attempts to ensure the safety of its invested funds by
limiting default, market and reinvestment risk.

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 an 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. For example, when the U.S. dollar strengthens against the major
European currencies, it results in lower revenues and expenses recorded for
those regions when translated into U.S. dollars.

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 Unify 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 annual pricing reviews. The Company also has currency
exchange rate exposures on intercompany accounts receivable and intercompany
accounts payable related to activities with the Companys operations in France,
Germany and the UK. At April 30, 2008, the Company had $2.6 million in such
payables denominated in euros and a total $0.5 million in receivables
denominated in euros and pounds sterling. The Company encourages prompt payment
of 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 could
have a significant 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.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA

See Part IV,
Item 15 (a) for an index to the financial statements and supplementary financial
information, which are filed, as part of this report.

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A.CONTROLS AND
PROCEDURES

(a)Evaluation of Disclosure Controls and
Procedures. Under the supervision and with
the participation of our management, including our chief executive officer and
chief financial officer, we evaluated the effectiveness of our disclosure
controls and procedures, as such term is defined under Rule 13a-15(e)
promulgated under the Securities Exchange Act of 1934, as amended. Based upon
that evaluation, our chief executive officer and chief financial officer
concluded that our disclosure controls were effective as of the end of the
period covered by this annual report.

24

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In December
2007, the Company determined that due to an accounting error it would restate
its consolidated financial statements for the fiscal year ended April 30, 2007
included in its 2007 Annual Report on Form 10-K and its condensed consolidated
financial statements for the quarters ended January 31, 2007 and July 31, 2007.
The decision to restate the consolidated financial statements was made by the
Audit Committee of the Companys Board of Directors. The restatement reflects
the identification of an error related to the accounting for the acquisition of
Gupta Technologies LLC (Gupta) in November 2006. The acquisition of Gutpa was
part of a purchase and exchange agreement whereby, in addition to acquiring
Gupta, the Company also sold its Insurance Risk Management Division. In
accounting for the purchase and exchange transaction, the Company incorrectly
capitalized $384,000 in future payments as direct costs of the sale and
acquisition. The future payments of $384,000 were determined to be indirect
costs of the sale and should have been expensed. The restatement increased the
Companys loss from discontinued operations for the fiscal year ended April 30,
2007 and the quarter ended January 31, 2007 by $384,000 and increased the
Companys net loss by the same amount. The restatement also decreases the amount
reported as goodwill by $384,000 as of April 30, 2007 and the quarters ended
January 31, 2007 and July 31, 2007.

As a result
of the error noted above, the Company identified a significant deficiency in
internal control related to the accounting for non-routine complex transactions.
The Company will engage outside accounting experts to advise it regarding any
complex nonroutine transactions to ensure accounting entries are properly
recorded. The Company believes this change to our system of disclosure and
procedure controls will be adequate to provide reasonable assurance that the
information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported correctly.

(b)Changes in Internal Controls. There have been no changes in our internal controls over
financial reporting, other than what was adopted above, during the fiscal year
April 30, 2008, that have materially affected, or are reasonably likely to
materially affect, our internal controls over financial reporting.

(c)Managements Report on Internal Control Over
Financial Reporting.Management is
responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rule 13a-15(f) under the Exchange Act, as
amended. The Companys internal control over financial reporting is designed to
provide reasonable assurance as to the reliability of the Companys financial
reporting and the preparation of financial statements in accordance with GAAP.
Our internal control over financial reporting includes those policies and
procedures that:

- Pertain to the maintenance of records that in reasonable
  detail accurately and fairly reflect the transactions and dispositions of the
  assets of the Company;
- Provide reasonable assurance that transactions are recorded
  as necessary to permit preparation of financial statements in accordance with
  GAAP, and that receipts and expenditures of the Company are being made only in
  accordance with authorizations of management and directors of the Company,
  and
- Provide reasonable assurance regarding prevention or timely
  detection of unauthorized acquisition, use or disposition of the Companys
  assets that could have a material effect on the Companys consolidated
  financial statements.

Internal
control over financial reporting, no matter how well designed, has inherent
limitations. Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Therefore, internal
control over financial reporting determined to be effective can provide only
reasonable assurance with respect to financial statement preparation and may not
prevent or detect all misstatements. Moreover, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

Management
has assessed the effectiveness of the Companys internal control over financial
reporting as of April 30, 2008. In making this assessment, management used the
criteria established by the Committee of Sponsoring Organizations of the
TreadwayCommission (COSO) inInternal Control  Integrated Framework.

Based on the
Companys processes and assessment, as described above, management has concluded
that, as of April 30, 2008, the Companys internal control over financial
reporting was effective.

This Annual
Report on Form 10-K does not include an attestation report of the Companys
registered public accounting firm regarding internal control over financial
reporting. Managements report was not subject to attestation requirements by
the Companys registered public accounting firm pursuant to temporary rules of
the SEC that permit the Company to provide only managements report in this
Annual Report on Form 10-K for the year ended April 30, 2008.

25

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PART III

ITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT

The following table sets forth
certain information concerning our executive officers as of the date May 31,
2008.

Executive Officers

|                       |  |                                                              |  |     |  | **Executive**
|---------------------- |  | ------------------------------------------------------------ |  | --- |  | -------------
|                       |  |                                                              |  |     |  | **Officer**  
|Name                   |  | Current Position with
      Company                          |  | Age |  | Since        
|Todd E. Wille          |  | President and Chief Executive Officer                        |  | 45  |  | 2000         
|Steven D.
      Bonham |  | Vice President,
      Finance and Administration and CFO     |  | 51  |  | 2005         
|Kevin R. Kane          |  | Vice President, Composer Solutions                           |  | 40  |  | 2007         
|Mark
      Bygraves    |  | Vice President,
      Sales  Europe, Middle East and Africa |  | 51  |  | 2007         
|Frank Verardi          |  | Vice President, Sales - Americas and Asia Pacific            |  | 59  |  | 2001         
|Duane
      George     |  | Vice President,
      Product Development and CTO            |  | 50  |  | 2007         

Unify has a
board of directors consisting of six (6) members. Set forth below is information
with respect to their ages as of May 31, 2007, as well as their positions and
offices held with the Company. Each director holds office until the next Annual
Meeting of Stockholders and until his successor is duly elected and
qualified.

|                     |  |                                                             |  |     |  | **Director**
|-------------------- |  | ----------------------------------------------------------- |  | --- |  | ------------
|Name                 |  | Current Position with
      Company                         |  | Age |  | Since       
|Steven D. Whiteman   |  | Chairman of Board                                           |  | 57  |  | 1997        
|Robert
      Bozeman |  | Director and
      Mergers and Acquisitions Committee Chair |  | 59  |  | 2008        
|Richard M. Brooks    |  | Director and Audit Committee Chair                          |  | 54  |  | 2005        
|Tery R.
      Larrew |  | Director and
      Compensation Committee Chair             |  | 54  |  | 2002        
|Robert J. Majteles   |  | Director                                                    |  | 43  |  | 2004        
|Todd E.
      Wille  |  | President and
      Chief Executive Officer                 |  | 45  |  | 2000        

Executive Officers

Todd E.
Willehas served as president and chief
executive officer since November 2000. He rejoined the Company in October 2000
as the chief operating officer and acting chief financial officer. Mr. Wille
originally joined Unify in August 1995 as the corporate controller. In September
1997, Mr. Wille was promoted to vice president, finance and chief financial
officer. In March 1998, Mr. Wille left the Company and joined FRx Software
Corporation as the vice president of finance and chief financial officer.
Subsequently, Mr. Wille was promoted to senior vice president of operations. Mr.
Wille received a B.A. degree in business administration with concentrations in
accounting and finance and management information systems from Wartburg
College.

Steven D.
Bonhamjoined the Company in June 2005, as
vice president of finance and administration and chief financial officer. Before
joining Unify, Mr. Bonham served eight years as chief financial officer for
LexisNexis/Examen, a subsidiary of LexisNexis. Prior to LexisNexis/Examen, Mr.
Bonham spent nine years with Foundation Health Corporation, a former Fortune 500
publicly traded managed care insurance company, most recently serving as the
vice president of finance for Foundations California Heath Plan. Mr. Bonham, a
licensed certified public accountant, has a B.S. degree in accounting from
California State University, Sacramento.

Kevin R.
Kanejoined Unify in January 2007 and is
responsible for driving market adoption for the Company's service-oriented
architecture (SOA) modernization product portfolio. Mr. Kane brings demonstrated
sales success in growing top-line revenue for several enterprise software
companies. Most recently he served as the global sales director for Sacramento,
California based Meridian Systems from 2005 to 2007. Trimble Navigation acquired
Meridian Systems in late 2006. Prior to Meridian Systems, Mr. Kane assisted in
launching VIEO, now Censure, as a senior sales executive from 2004 to 2005.
Prior to VIEO, Mr. Kane was with Dazel Corporation which was acquired by HP
Printing and Imaging Division from 1999 to 2004. Prior to HP, Mr. Kane held
various sales management positions with Tivoli Systems, An IBM Software Company,
Beyond Software, acquired by NEON Systems and Sterling Software, acquired by
Computer Associates. Mr. Kane received his B.A. degree in business management
from Saint Marys College of California.

26

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Mark
Bygravesjoined the Company in November 2006
as part of the acquisition of Gupta Technologies, where he had served since
February 2002 and was appointed as an officer on May 1, 2007. Mr. Bygraves is
responsible for driving the Unify channel sales programs together with day to
day operational responsibilities for Northern Europe, Middle East and Africa
(EMEA). Mr. Bygraves has worked in the IT industry for 20 years, holding a
number of senior positions, most recently, between January 1999 to January 2002
as Director of Channels at Hitachi Data Systems. Prior to Hitachi Data Systems,
Mr. Bygraves was the Sales Director of Transformation Software.

Frank
Verardihas served in an executive officer
position since 2000. Mr. Verardi is currently responsible for driving the Unify
channel sales programs together with day to day operational responsibilities for
the Americas and Asia Pacific regions. Mr. Verardi served as vice president and
general manager of Unify Business Solutions from May 2005 to April 2007, where
he oversaw the sales and marketing for the Companys technology products. From
June 2003 to April 2005, he served as vice president of technical services, and
from May 2001 to May 2003, he served as vice president of worldwide sales and
marketing. Prior to these positions, Mr. Verardi served in various management
positions, including vice president of worldwide professional services, vice
president of worldwide product delivery and customer support, and director of
client services. Mr. Verardi joined the Company in August 1988. Before joining
Unify, Mr. Verardi held various positions with Computer Sciences Corporation,
including director of commercial professional services. Mr. Verardi received a
B.S. degree in computer science from California State University,
Chico.

Duane
Georgehas served as vice president of
development and technology since July 2006 and was appointed as an officer on
May 1, 2007. Mr. George is responsible for Unifys Technical Services Group
which includes product development, customer support, consulting, training,
documentation, quality control and assurance. Mr. George joined Unify in 1995
and has been a core member of the support, consulting and product development
teams. Mr. George has been in the information technology and engineering
industries for over 25 years. He began his career as an engineer with the
Department of Defense managing the acquisition and implementation of Computer
Aided Design and Manufacturing (CAD/CAM) systems. He eventually moved into
software development, customer support and project management with an emphasis
on customer satisfaction. He earned his B.S. in engineering from Brigham Young
University in Provo, Utah.

Board of Directors

Steven D.
Whitemanhas served as a director of the
Company since May 1997. In August 2004, he was appointed chairman of the board.
Mr. Whiteman previously served as the president and chief executive officer of
Intesource, an Internet based procurement service specifically for the food
industry. From June 2000 to May 2002, he worked as an independent consultant.
From May 1993 until June 2000, Mr. Whiteman served as president of Viasoft, Inc.
(Viasoft), a publicly traded software products and services company. From
February 1994 to June 2000, Mr. Whiteman also served as chief executive officer
and director of Viasoft, and from April 1997 to June 2000, he served as chairman
of the board of directors. Mr. Whiteman is also a director of Intesource,
Actuate Corporation, and Netpro. Mr. Whiteman holds a B.A. degree in business
administration from Taylor University and a M.B.A. from the University of
Cincinnati.

Robert
Bozemanwas appointed director in January of
2008. Mr. Bozeman currently serves as an advisor to companies in the technology
industry. He is experienced in business operations, venture capital investment,
and mergers and acquisitions having previously served in the capacities of CEO
and Board Member for a variety of software, information services and computer
supplier companies. Mr. Bozeman's last operating role was as CEO for Bricsnet
from July, 2003 through November, 2004; prior to that - from November, 1997
through December, 2003, Bob was General Partner of Angel Investors LP for both
its Fund I and Fund II. Investments by the firm included Ask Jeeves, Brightmail,
Google, Opsware, and PayPal. In addition, many of Angel Investors LP investments
became successful acquisitions, including AOLs acquisition of Spinner,
Microsofts acquisitions of eQuil, MongoMusic and Vacation Spot and Sybases
acquisition of AvantGo!. Mr. Bozeman is currently on the Board and/or is an
advisor to AkiiRa, Become.com, Pacific Art Group, Restoration Partners and
Vortex.

27

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*Richard M.
Brooks*has served as a director of the
company since August 2005. Since September 2006, Mr. Brooks has been a partner
with Tatum LLC, a national Executive consulting services Company. With Tatum
LLC, Mr. Brooks has acted as the project lead on a variety of IT and finance
assignments, including acting as the interim CFO for some private companies. Mr.
Brooks previously served as chief executive officer for VantageMed, a public
company, from April 2002 to December 2004. In addition, Mr. Brooks served as a
director of VantageMed Corporation from March 2001 to January 2005 and was
appointed chairman of that board in May of 2002. Mr. Brooks received a B.S. in
business administration from Oregon State University.

Tery R.
Larrewhas served as a director of the
Company since May 2002. Mr. Larrew is the founding and managing partner of
Caddis LLC, a boutique private equity firm that specializes in income oriented
with strong equity appreciation investments in international gaming, energy
mobile home communities and unimproved real estate and secured debt/hard asset
financing. Until 2005, Mr. Larrew served as the President and CEO of Vericept
Corporation, a provider of network-based early warning and misuse prevention
solutions, headquartered in Denver, Colorado. Prior to joining Vericept in 2002,
Mr. Larrew co-founded IQ3G, a mobile services company, in 2000. From 1999 to
2000, Mr. Larrew was the chairman and chief executive officer of a start-up
e-communication company, UPDATE Systems, Inc. Mr. Larrew also serves as the
chief executive officer of Pinnacle Management, which he reformed in 1998. From
1996 to 1998, Mr. Larrew served on the executive management team of
Metromail/CIC. He is a graduate of Colorado State University with a B.S. degree
in business administration and a minor in finance and marketing.

Robert J.
Majteleshas served as a director of the
Company since April 2004. Mr. Majteles founded Treehouse Capital, LLC, a firm
focused on blending value and growth investment disciplines to make active
investments in later-stage technology companies in 2001. In addition to Unify,
Mr. Majteles is on the Board of Directors of Adept Technology, Inc., Macrovision
Corporation, Vertical Communications, Inc., and WorldHeart Corporation. Mr.
Majteles received a law degree from Stanford University and an undergraduate
degree from Columbia University. Additionally, Mr. Majteles is a lecturer at the
Lester Center for Entrepreneurship, Haas School of Business, University of
California, Berkeley and is a Member of the Board of Trustees of the Head-Royce
School, Oakland, California.

Audit Committee

We have
established an audit committee, the primary responsibilities of which are to
oversee the accounting and financial reporting processes of our company as well
as our affiliated and subsidiary companies, and to oversee the internal and
external audit processes. The audit committee also assists the board of
directors in fulfilling its oversight responsibilities by reviewing the
financial information which is provided to stockholders and others, and the
system of internal controls which management and the board of directors have
established. The audit committee oversees the independent auditors, including
their independence and objectivity. However, the committee members are not
acting as professional accountants or auditors, and their functions are not
intended to duplicate or substitute for the activities of management and the
independent auditors. The audit committee is empowered to retain independent
legal counsel and other advisors as it deems necessary or appropriate to assist
the audit committee in fulfilling its responsibilities, and to approve the fees
and other retention terms of the advisors.

The audit
committee is comprised of three members, each of whom was elected by the board
of directors. Richard Brooks, Tery Larrew, and Steven Whiteman currently serve
as our audit committee members. Our board of directors has determined that each
of the members of our audit committee is independent, as defined under and
required by the federal securities laws and the rules of the NASDAQ. Our board
of directors has determined that Mr. Brooks qualifies as an audit committee
financial expert under the federal securities laws and that each member of the
audit committee has the financial sophistication required under the rules of
the NASDAQ. Mr. Brooks is the chairperson of the audit committee.

28

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Compensation Committee

We have
established a compensation committee, the primary responsibilities of which are
to periodically review and approve the compensation and other benefits for our
employees, officers and independent directors, including reviewing and approving
corporate goals and objectives relevant to the compensation of our executive
officers in light of those goals and objectives, and setting compensation for
these officers based on those evaluations. Our compensation committee also
administers and has discretionary authority over the issuance of stock awards
under our stock compensation plans.

The
compensation committee has in the past, and may in the future, delegate
authority to review and approve the compensation of our employees to certain of
our executive officers, including with respect to stock option grants issued
under our Stock Option Plan. Even where the compensation committee has not
delegated authority, our executive officers typically make recommendations to
the compensation committee regarding compensation to be paid to our employees
and the size of stock options and stock grants.

The
compensation committee is comprised of three members, Messrs. Larrew, Majteles
and Whiteman. Mr. Larrew is the chairperson of the compensation committee. The
board has determined that Mr. Larrew meets the independence requirements of the
NASDAQ Marketplace Rules.

Code of Conduct and
Ethics

Our board of
directors has adopted a code of conduct and ethics that establishes the
standards of ethical conduct applicable to all directors, officers and employees
of our company. The code addresses, among other things, conflicts of interest,
compliance with disclosure controls and procedures and internal control over
financial reporting, corporate opportunities and confidentiality requirements.
The audit committee is responsible for applying and interpreting our code of
conduct and ethics in situations where questions are presented to it. The board
has adopted a Code of Business Conduct that applies to all our employees,
officers and directors.

ITEM 11.EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND
ANALYSIS

We provide
what we believe is a competitive total compensation package to our executive
management team through a combination of base salary, an annual cash incentive
plan, a long-term equity incentive compensation plan and broad-based benefits
programs. We place significant emphasis on pay for performance-based incentive
compensation programs, which make payments when certain company or revenue goals
are achieved. This Compensation Discussion and Analysis explains our
compensation philosophy, policies and practices with respect to our chief
executive officer, chief financial officer, and the other three most
highly-compensated executive officers, which are collectively referred to as the
named executive officers.

The Objectives of Our Executive
Compensation Program

Our
compensation committee is responsible for establishing and administering our
policies governing the compensation for our executive officers. Our executive
officers are elected by our board of directors. Our compensation committee is
composed entirely of non-employee independent directors. The primary goals of
the compensation committee with respect to executive compensation are to attract
and retain the most talented and dedicated executives possible, to tie annual
and long-term cash and equity incentives to achievement of specified performance
objectives, and to align executives incentives with stockholder value creation.
To achieve these goals, the compensation committee intends to implement and
maintain compensation plans that tie a substantial portion of executives
overall compensation to our financial and operational performance, as measured
by metrics such as revenue, revenue growth and profitability. The compensation
committee evaluates individual executive performance with a goal of setting
compensation at levels the committee believes are comparable with executives in
other companies of similar size and stage of development operating in the
software industry while taking into account our relative performance and our own
strategic goals. In April 2007, we retained a compensation consultant to review
our policies and procedures with respect to executive and board compensation.
The compensation committee used the results of the consultants analysis to
evaluate the appropriateness of compensation levels for our executives compared
to other companies of similar size.

Our
compensation committee meets outside the presence of all of our executive
officers, including the named executive officers, to consider appropriate
compensation for our chief executive officer, or CEO. For all other named
executive officers, the committee meets outside the presence of all executive
officers except our CEO, Mr. Wille, who reviews each other named executive
officers performance with the committee and makes recommendations to the
compensation committee with respect to the appropriate base salary, cash bonus
incentives and equity incentives. The compensation committee considers the
annual performance of the executive officer, the importance of the executive
position to the Company, the past salary history of the executive officer and
the contributions to be made by the executive officer to us. The compensation
committee also reviews the analyses and recommendations of the executive
compensation consultant retained by the committee. After considering the
relevant information, the compensation committee establishes the annual
compensation package for our executive officers.

29

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We use the following principles to
guide our decisions regarding executive compensation:

Allocation between long-term and
currently paid out
compensation.     The compensation we currently pay consists of base pay and annual cash
incentive compensation. The long-term compensation consists entirely of stock
awards or stock options pursuant to our 2001 Stock Option Plan. The allocation
between long-term and currently paid out compensation is based on an analysis of
how the enterprise software industry and companies of similar size in the
general technology market use long-term and currently paid compensation to pay
their executive officers.

Allocation between cash and non-cash
compensation.     It
is our intent to allocate all currently paid compensation and annual incentive
pay in the form of cash and all long-term compensation in the form of stock
awards and/or stock options to purchase our common stock. We consider
competitive market analyses when determining the allocation between cash and
non-cash compensation.

Provide compensation opportunities
targeted at market median levels.     To
attract and retain executives with the ability and the experience necessary to
lead us and deliver strong performance to our stockholders, we strive to provide
a total compensation package that is competitive with total compensation
provided by our industry peer group. We benchmark our salary and target
incentive levels and practices as well as our performance results in relation to
other comparable general technology and enterprise software companies of similar
size in terms of revenue and market capitalization. In fiscal 2007, we engaged a
compensation consultant to provide us with a comprehensive evaluation of our
executive compensation program. The consultant used multiple data sources,
including confidential market compensation surveys and public survey data to
enable them to compare our company to others with similar attributes.

We target
base salaries and target total compensation to result in annual salaries equal
to the market median (50th percentile) pay level. We believe our executive
compensation packages are reasonable when considering our business strategy, our
compensation philosophy and the competitive market pay data.

Require performance goals to be
substantially achieved in order for the majority of the target pay levels to be
earned.Our executive compensation program
emphasizes pay for performance. Performance is measured based on the achievement
of company and divisional performance goals established by our board of
directors relative to our board of director approved annual business plan. The
goals for our company and divisional measures are established so that target
attainment is not assured. The attainment of these company and divisional goals
will require significant effort on the part of our executives.

Offer the same comprehensive
benefits package to all full-time employees.     We
provide a competitive benefits package to all full-time employees which includes
health and welfare benefits, such as medical, dental, vision care, disability
insurance, life insurance benefits, and a 401(k) savings plan. We have no
structured executive perquisite benefits (e.g., club memberships or company
vehicles) for any executive officer, including the named executive officers, and
we currently do not provide any deferred compensation programs or supplemental
pensions to any executive officer, including the named executive
officers.

Provide fair and equitable
compensation.     We
provide a total compensation program that we believe will be perceived by both
our executive officers and our stockholders as fair and equitable. In addition
to conducting analyses of market pay levels and considering individual
circumstances related to each executive officer, we also consider the pay of
each executive officer relative to each other executive officer and relative to
other members of the management team. We have designed the total compensation
programs to be consistent for our executive management team.

30

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Our Executive Compensation Program
Elements

Overall, our
executive compensation programs are designed to be consistent with the
objectives and principles set forth above. For each fiscal year, the
compensation committee will select, in its discretion, the executive officers of
the Company or its subsidiaries who are to participate in the Companys
incentive plans. The compensation committee will establish the terms and
conditions applicable to any award granted under the plan and a participant will
be eligible to receive an award under the plan in accordance with such terms and
conditions. Awards will be paid in whole or in part in cash, common stock or
other property and will generally be paid in the first quarter following
completion of a given fiscal year. The actual amount of any discretionary bonus
payment will be determined following a review of each executives individual
performance and contribution to our strategic goals. The plan does not fix a
maximum payout for any officers annual discretionary incentive payment. With
the exception of the Companys chief executive officer, no other executive
officers have an employment agreement. The basic elements of our executive
compensation programs are summarized below:

Base
Salary.Base salaries for our executives are
established based on the scope of their responsibilities, taking into account
competitive market compensation paid by other companies for similar positions.
Generally, we believe that executive base salaries should be targeted near the
median of the range of salaries for executives in similar positions with similar
responsibilities at comparable companies, in line with our compensation
philosophy. Base salaries are reviewed annually, and adjusted from time to time
to realign salaries with market levels after taking into account individual
responsibilities, performance and experience. For 2008, this review occurred at
the beginning of the first quarter.

Management Incentive Plan.The
Company, through the compensation committee, maintains an annual Management
Incentive Plan (MIP) such that executives of the Company can receive an
incentive payment based on the achievement of pre-defined objectives. The
incentive plan awards are intended to compensate officers for achieving
financial and operational goals and for achieving individual annual performance
objectives. These objectives vary depending on the individual executive, but
relate generally to the Companys financial results. The Companys financial
performance met the MIP predefined objective for fiscal 2008, therefore, MIP
cash incentive bonuses were accrued for fiscal 2008.

Long-Term
Equity Incentive Program.We believe that
long-term performance is achieved through an ownership culture that encourages
such performance by our executive officers through the use of stock and
stock-based awards. Our stock compensation guidelines have been established to
provide certain of our employees, including our executive officers, with
incentives to help align those employees interests with the interests of
stockholders. The compensation committee believes that the use of stock and
stock-based awards is a significant component in enabling the company to achieve
its compensation goals. We do maintain stock award guidelines and all stock
awards are made at the direction of the compensation committee. We believe that
the aggregate equity ownership levels for our executive officers should be set
near competitive median levels for comparable companies. For fiscal 2008, this
review occurred at the beginning of the first quarter.

Options
and Stock Awards.Our 2001 Stock Option Plan
authorizes us to grant options to purchase shares of common stock to our
employees, directors and consultants. Our compensation committee is the
administrator of the stock option plan. Stock option grants are made at the
commencement of employment and, occasionally, following a significant change in
job responsibilities or to meet other special retention or performance
objectives. The compensation committee reviews and approves stock option awards
to executive officers based upon a review of competitive compensation data, its
assessment of individual performance, a review of each executives existing
long-term incentives, and retention considerations. Periodic stock option grants
are made at the discretion of the compensation committee to eligible employees
and, in appropriate circumstances, the compensation committee considers the
recommendations of members of management, such as Mr. Wille, our Chief Executive
Officer. In 2008, certain named executive officers were awarded stock options in
the amounts indicated in the section entitled Grants of Plan Based Awards.
These grants included stock options grants made in May and November 2007.
Performance based stock option grants were also made in May 2007. These grants
were recognized upon the attainment of pre-defined objectives for fiscal
2008.

Other
Compensation.In accordance with our
compensation philosophy, the compensation committee may, in its discretion,
revise, amend or authorize any changes to the executive officers compensation
or benefits as deemed necessary. There were no non-discretionary payments to
executive officers during fiscal 2008.

Tax Deductibility of Executive
Compensation

Limitations
on deductibility of compensation may occur under Section 162(m) of the Internal
Revenue Code which generally limits the tax deductibility of compensation paid
by a public company to its chief executive officer and certain other highly
compensated executive officers to $1 million in the year the compensation
becomes taxable to the executive officer. There is an exception to the limit on
deductibility for performance-based compensation that meets certain
requirements.

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Compensation Committee
Report

The
Compensation Committee is comprised entirely of independent directors. The
Committee has reviewed the Compensation Discussion and Analysis required by Item
402(b) of Regulation S-K with management and, based on such review and
discussions, the Committee recommended to our board of directors that the
Compensation Discussion and Analysis be included in this annual
report.

Submitted by the Compensation
Committee:Tery R. Larrew, Robert J. Majteles, Steven D. Whiteman.

SUMMARY COMPENSATION
TABLE

The
following table sets forth information concerning the compensation earned during
the fiscal years ended April 30, 2008, 2007 and 2006 by our President and Chief
Executive Officer, our Chief Financial Officer and our three other most
highly-compensated executive officers for the last three (3) fiscal
years:

|Name and
      Principal   |  |      |  | Salary  |  | Bonus   |  | Awards |      | Awards  |      | Compensation |  | Compensation |      | Total  
|-------------------------- |  | ---- |  | ------- |  | ------- |  | ------ | ---- | ------- | ---- | ------------ |  | ------------ | ---- | -------
|Position                   |  | Year |  | $ (1)   |  | $ (2)   |  | $ (3)  |      | $ (4)   |      | $ (5)        |  | $            |      | $      
|Todd E. Wille (6)          |  | 2008 |  | 250,000 |  | 180,000 |  |        |      | 320,231 | (7)  |              |  |              |      | 750,231
|President and Chief        |  | 2007 |  | 220,000 |  |         |  | 34,540 | (8)  |         |      |              |  | 25,000       | (9)  | 279,540
|Executive Officer          |  | 2006 |  | 220,000 |  |         |  |        |      |         |      |              |  |              |      | 220,000
|                          
|Steven D. Bonham (10)      |  | 2008 |  | 185,000 |  | 138,000 |  |        |      | 38,641  | (11) |              |  |              |      | 361,641
|Chief Financial Officer    |  | 2007 |  | 175,000 |  |         |  | 8,800  | (12) |         |      |              |  | 15,000       | (13) | 198,800
|                           |  | 2006 |  | 142,900 |  |         |  |        |      | 69,240  | (14) |              |  |              |      | 212,140
|                          
|Frank Verardi (15)         |  | 2008 |  | 125,000 |  | 15,000  |  |        |      |         |      | 157,352      |  |              |      | 297,352
|Vice President of Sales -  |  | 2007 |  | 125,000 |  |         |  |        |      |         |      | 64,663       |  |              |      | 189,663
|Americas and Asia Pacific  |  | 2006 |  | 143,750 |  |         |  |        |      |         |      | 31,768       |  |              |      | 175,518
|                          
|Mark Bygraves (16)         |  | 2008 |  | 170,985 |  | 12,000  |  |        |      | 96,220  | (17) | 163,130      |  | 19,311       | (19) | 461,646
|Vice President and General |  | 2007 |  | 70,833  |  |         |  |        |      | 18,000  | (18) | 60,890       |  | 8,000        |      | 157,723
|Manager - Software Group   |  |      |  |         |  |         |  |        |      |         |      |              |  |              |      |        
|                          
|Duane George (20)          |  | 2008 |  | 166,000 |  | 42,000  |  |        |      | 60,577  | (21) | 31,867       |  |              |      | 300,444
|Chief Technical Officer    |  | 2007 |  | 139,583 |  |         |  |        |      | 16,500  | (22) | 32,995       |  |              |      | 189,078

|(1) |  | Includes amounts, if
      any, deferred at the named executive officers option under Unify
      Corporations 401(k) plan.                                                                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes amounts, if
      any, paid under the Companys Management Incentive Plan
  (MIP).                                                                                                                                                                                                                                                                                                                     
|   
|(3) |  | The value of stock
      awards granted to our executive officers equals the number of shares
      granted multiplied by the share price on the date of the
  grant.                                                                                                                                                                                                                                             
|   
|(4) |  | The value of option
      awards granted to our executive officers have been estimated pursuant to
      SFAS No. 123(R) for fiscal years 2006, 2007 and 2008. In fiscal 2006, the
      Company adopted SFAS No. 123(R) and began to record stock option expenses.
      Our executive officers will not realize the estimated value of these
      awards in cash until these awards are vested and
  exercised.

32

---

|(5)  |  | Represents commissions
      earned and paid pursuant to the Companys sales commission
  plans.                                                                                                                                                             
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(6)  |  | Mr. Wille was
      appointed president and chief executive officer in November
  2000.                                                                                                                                                                      
|    
|(7)  |  | Relates to stock
      option grants of 54,000 and 60,000 shares of common stock to Mr. Wille on
      May 1, 2007 and November 27, 2007 respectively.                                                                                                       
|    
|(8)  |  | Relates to a stock
      grant of 31,400 shares of common stock to Mr. Wille on November 16,
      2006.                                                                                                                                                     
|    
|(9)  |  | Represents a
      discretionary bonus awarded by the Compensation Committee.                                                                                                                                                                                
|    
|(10) |  | Mr. Bonham joined the
      Company in June 2005 as chief financial officer.                                                                                                                                                                                 
|    
|(11) |  | Relates to stock
      option grants of 14,400 and 6,000 shares of common stock to Mr. Bonham on
      May 1, 2007 and Novemeber 27 ,2007 respectively.                                                                                                      
|    
|(12) |  | Relates to a stock
      grant of 8,000 shares of common stock to Mr. Bonham on November 16,
      2006.                                                                                                                                                     
|    
|(13) |  | Represents a
      discretionary bonus awarded by the Compensation Committee.                                                                                                                                                                                
|    
|(14) |  | Represents the
      aggregate fair market value of options to purchase 40,000 shares of common
      stock granted to Mr. Bonham upon hiring on June 27, 2005 with an exercise
      price of $1.85 per share.                                              
|    
|(15) |  | Mr. Verardi was
      appointed to the position of Vice President, Sales for the Americas and
      Asia Pacific in May 2007. Prior to that, he held the position of vice
      president and general manager of the Unify Business Solutions
      division.
|    
|(16) |  | Mr. Bygraves was
      appointed to the position of Vice President and General Manager, Software
      Group in May 2007. He joined the company in November 2006 upon the
      acquisition of Gupta Technologies.                                           
|    
|(17) |  | Relates to stock
      option grants of 20,000 and 20,000 shares of common stock to Mr. Bygraves
      on May 1, 2007 and Novemeber 27 ,2007 respectively.                                                                                                   
|    
|(18) |  | Relates to a stock
      option grant of 15,000 shares of common stock to Mr. Bygraves on November
      20, 2006.                                                                                                                                           
|    
|(19) |  | Represents the amount
      received by Mr. Bygraves under the car allowance program.                                                                                                                                                                        
|    
|(20) |  | Mr. George was
      appointed to the position of Vice President of Product Development and
      Chief Technology Officer in May 2007. Prior to that, he held the position
      of Senior Director of Product Development.                                 
|    
|(21) |  | Relates to stock
      option grants of 17,400 and 10,000 shares of common stock to Mr. George on
      May 1, 2007 and Novemeber 27 ,2007 respectively.                                                                                                     
|    
|(22) |  | Relates to a stock
      option grant of 15,000 shares of common stock to Mr. George on November
      16, 2006.                                                                                                                                             

33

---

Grants of Plan-Based Awards

The
compensation committee approved option awards under our 2001 Stock Option Plan
to certain of our named executives in fiscal 2006, 2007 and 2008 and awarded
stock to Mr. Wille and Mr. Bonham in 2007. Set forth below is information
regarding awards granted during fiscal 2006, 2007 and 2008.

|                 |  |            |  |                       |  | All
      Other      |  |                  |      |                 |   |        
|---------------- |  | ---------- |  | --------------------- |  | -------------------- |  | ---------------- | ---- | --------------- | - | -------
|                 |  |            |  | All Other
      Stock |  | Option
      Awards: |  | Exercise or      |      |                 |  
|                 |  |            |  | Awards:               |  | Number
      of      |  | Base             |      | Grant Date Fair
|                 |  |            |  | Number
      of       |  | Securities           |  | Price of Options |      | Value of Stock 
|                 |  |            |  | Shares
      of       |  | Underlying           |  | or
      Awards  |      | and Option     
|Name             |  | Grant Date |  | Stock (#)             |  | Options (#)          |  | ($/share) (1)    |      | Awards ($)     
|Todd E. Wille    |  | 11/16/2006 |  | 31,400                |  |                      |  | $                | 1.10 |                 | $ | 34,540 
|                 |  | 5/1/2007   |  |                       |  | 54,000               |  | $                | 2.55 |                 | $ | 137,700
|                 |  | 11/27/2007 |  |                       |  | 60,000               |  | $                | 5.20 |                 | $ | 312,000
|                
|Steven D. Bonham |  | 6/27/2005  |  |                       |  | 40,000               |  | $                | 1.85 |                 | $ | 74,000 
|                 |  | 11/16/2006 |  | 8,000                 |  |                      |  | $                | 1.10 |                 | $ | 8,800  
|                 |  | 5/1/2007   |  |                       |  | 14,400               |  | $                | 2.55 |                 | $ | 36,720 
|                 |  | 11/27/2007 |  |                       |  | 6,000                |  | $                | 5.20 |                 | $ | 31,200 
|                
|Kevin R. Kane    |  | 1/8/2007   |  |                       |  | 40,000               |  | $                | 1.44 |                 | $ | 57,600 
|                 |  | 5/1/2007   |  |                       |  | 20,000               |  | $                | 2.55 |                 | $ | 51,000 
|                
|Mark Bygraves    |  | 11/20/2006 |  |                       |  | 15,000               |  | $                | 1.20 |                 | $ | 18,000 
|                 |  | 5/1/2007   |  |                       |  | 20,000               |  | $                | 2.55 |                 | $ | 51,000 
|                 |  | 11/27/2007 |  |                       |  | 20,000               |  | $                | 5.20 |                 | $ | 104,000
|                
|Frank Verardi    |  | 2/2/2005   |  |                       |  | 4,000                |  | $                | 2.30 |                 | $ | 9,200  
|                
|Duane George     |  | 11/16/2006 |  |                       |  | 15,000               |  | $                | 1.10 |                 | $ | 16,500 
|                 |  | 5/1/2007   |  |                       |  | 17,400               |  | $                | 2.55 |                 | $ | 44,370 
|                 |  | 11/27/2007 |  |                       |  | 10,000               |  | $                | 5.20 |                 | $ | 52,000 

|(1) |  | All options were
      granted with an exercise price equal to the fair market value per share of
      the common stock on the date of grant, as determined by the fair market
      value of the Companys common stock on that
day.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Stock Option Plans

Our 2001
Stock Option Plan (the 2001 Option Plan) is administered by our compensation
committee. The objectives of the plan include attracting, motivating and
retaining key personnel and promoting our success by linking the interests of
our employees, directors and consultants with our success.

Prior to the
2001 Option Plan, the Company had a 1991 Stock Options Plan (the 1991 Option
Plan) which expired as of March 2001. Under the 1991 Option Plan, the Company
was able to grant options to eligible employees, directors and consultants at
prices not less than the fair market value at the date of grant for incentive
stock options and not less than 85% of the fair market value at the date of
grant for non-statutory stock options. Options granted under the 1991 Option
Plan generally vest over four years, are exercisable to the extent vested, and
expire 10 years from the date of grant.

Options Available for
Issuance

Under the
2001 Stock Option Plan, the Company may grant options to purchase up to
1,200,000 shares of common stock to eligible employees, directors, and
consultants at prices not less than the fair market value at the date of grant
for incentive stock options and not less than 85% of the fair market value at
the date of grant for non-statutory stock options. As of April 30, 2008 there
were 669,314 options available under the 2001 Option Plan.

34

---

Term of Options

The term of
each option is ten years from the date of the grant of the option, unless a
shorter period is established for incentive stock options or the administrator
of the 2001 Stock Option Plan establishes a shorter period.

Vesting Schedule

Options
granted under our 2001 Stock Option Plan, unless waived or modified in a
particular option agreement or by action of the compensation committee, vest
over a four year period. The options generally have no vesting until the end of
one year at which time they become 25% vested. Following the first year, the
options generally vest monthly on a ratable basis over the next three years. At
the end of four years the options are fully vested.

Administration

The
compensation committee has full discretionary authority to determine all matters
relating to options granted under the plan. The compensation committee has the
authority to determine the persons eligible to receive options, the number of
shares subject to each option, the exercise price of each option, any vesting
schedule, any acceleration of the vesting schedule and any extension of the
exercise period.

Amendment and
Termination

Our board of
directors has authority to suspend, amend or terminate the plan, except as would
adversely affect participants rights to outstanding awards without their
consent. As the plan administrator, our compensation committee has the authority
to interpret the plan and options granted under the plan and to make all other
determinations necessary or advisable for plan administration.

Other Stock Options

In fiscal
2003, the Board authorized the issuance of non-registered non-plan stock options
(Non-Plan Options) for individual senior level executive recruitment. These
Non-Plan Options are granted pursuant to written agreements that are not subject
to the terms of the 2001 Option Plan, but have similar terms and conditions. The
options and shares issuable under the Non-Plan Options are restricted securities
under the Securities Act and may not be issued or sold except under an effective
registration statement or an applicable exemption there from. The Non-Plan
Option agreements contain substantially similar terms as options issued under
our 2001 Option Plan, including vesting schedule and option term. During fiscal
2008, the Board granted options to purchase 237,000 shares of common stock using
Non-Plan Option agreements.

Other Benefits

Retirement Savings
Opportunity

The Company
maintains a 401(k) employee retirement savings plan. Eligible employees may
contribute up to 100% of their pre-tax salary, but not more than statutory
limits. We match a portion of employee contributions, currently 50% of the first
6% of compensation deferred. We do not provide an option for our employees to
invest in our common stock in the 401(k) plan.

Health and Welfare
Benefits

All
full-time employees, including our named executive officers, may participate in
our health and welfare benefit programs, including medical, dental and vision
care coverage, disability insurance and life insurance.

Employment Agreements and Termination
and Change of Control Agreements

We have an
employment agreement with Mr. Wille, our president and chief executive officer
which became effective October 1, 2000. Under the agreement, he originally
received an annual salary, of $220,000, subject to Board adjustment, and is
eligible to receive bonuses upon Unify achieving certain benchmarks in its
business plan. Following a merger of the Company or sale of substantially all of
its assets, the unvested portion of all options held by Mr. Wille as of the date
of the transaction will automatically vest. Should Mr. Wille be terminated
without cause or resign for good reason, all options held by Mr. Wille will have
the benefit of twelve (12) additional months of vesting and he will receive an
amount equal to twelve (12) months salary and the continuation of health
benefits for 12 months following termination.

35

---

Change in Control

Under our
1991 and 2001 Stock Option Plans, should we merge with or be otherwise acquired
by another company in a transaction where our stockholders do not retain a
majority of the voting stock, a Change of Control occurs. If there is a Change
of Control and the successor company fails to either assume the outstanding
options or substitute substantially equivalent options for its own stock, the
vesting of all outstanding Unify options shall accelerate to become fully vested
and immediately exercisable. Any outstanding options will terminate if they are
not exercised upon consummation of the merger or assumed or replaced by the
successor corporation.

Outstanding Equity Awards at April 30,
2008

The following table summarizes the
outstanding equity award holdings by our named executive officers.

|                 |  | Number
      of |  | Number
      of |  |                 |       |                         |           
|---------------- |  | --------------- |  | --------------- |  | --------------- | ----- | ----------------------- | ----------
|                 |  | Securities      |  | Securities      |  |                 |       |                         |           
|                 |  | Underlying      |  | Underlying      |  |                 |       |                         |           
|                 |  | Unexercised     |  | Unexercised     |  |                 |       |                         |           
|                 |  | Options         |  | Options         |  | Option Exercise |       |                        
|                 |  | Exercisable     |  | Unexercisable   |  | Price           |       | Option
      Expiration
|Name             |  | (#)             |  | (#)             |  | ($)             |       | Date                   
|Todd E. Wille    |  | 30,000          |  |                 |  | $               | 1.25  |                         | 9/26/2011 
|                 |  | 30,000          |  |                 |  |                 | 1.30  |                         | 11/16/2011
|                 |  | 30,000          |  |                 |  |                 | 2.75  |                         | 5/9/2012  
|                 |  | 30,875          |  | 23,125          |  |                 | 2.55  |                         | 5/1/2017  
|                 |  | 6,250           |  | 53,750          |  |                 | 5.20  |                         | 11/27/2017
|                
|Steven D. Bonham |  | 18,333          |  | 21,667          |  |                 | 1.85  |                         | 6/27/2015 
|                 |  | 14,400          |  |                 |  |                 | 2.55  |                         | 5/1/2017  
|                 |  | 625             |  | 5,375           |  |                 | 5.2   |                         | 11/27/2017
|                
|Kevin Kane       |  | 12,500          |  | 27,500          |  |                 | 1.44  |                         | 1/8/2017  
|                 |  | 15,000          |  | 5,000           |  |                 | 2.55  |                         | 5/1/2017  
|                
|Mark Bygraves    |  | 5,312           |  | 9,688           |  |                 | 1.20  |                         | 11/20/2016
|                 |  | 20,000          |  |                 |  |                 | 2.55  |                         | 5/1/2017  
|                 |  | 2,083           |  | 17,917          |  |                 | 5.20  |                         | 11/27/2017
|                
|Frank Verardi    |  | 2,000           |  |                 |  |                 | 25.78 |                         | 8/3/2009  
|                 |  | 8,000           |  |                 |  |                 | 1.25  |                         | 9/26/2011 
|                 |  | 10,000          |  |                 |  |                 | 1.30  |                         | 11/16/2011
|                 |  | 15,000          |  |                 |  |                 | 2.75  |                         | 5/9/2012  
|                 |  | 3,166           |  | 1,833           |  |                 | 2.30  |                         | 2/2/2015  
|                
|Duane George     |  | 1,200           |  |                 |  |                 | 29.38 |                         | 8/25/2009 
|                 |  | 5,000           |  |                 |  |                 | 1.30  |                         | 11/16/2011
|                 |  | 2,000           |  |                 |  |                 | 2.75  |                         | 5/9/2012  
|                 |  | 2,000           |  |                 |  |                 | 3.35  |                         | 11/3/2013 
|                 |  | 2,937           |  | 63              |  |                 | 4.70  |                         | 5/3/2014  
|                 |  | 1,166           |  | 234             |  |                 | 2.05  |                         | 12/10/2014

Option Exercises and Stock
Vested

There have been
no exercises of stock options by our named executive officers during the last
fiscal year.

36

---

Compensation of
Directors

In May 2002,
the Companys Board of Directors adopted the following compensation program for
its non-employee (independent) members. This program has several components
described in the table below. The compensation for each individual Director is
assessed by the other members of the Board and is generally based upon the
degree and quality of his/her participation in Board activities. The director
compensation program provides for the issuance of an annual stock option as were
awarded to Directors for the year ended April 30, 2008.

|                              |  | Summary
      of                   |  |                             |  |                                     |  |                      
|----------------------------- |  | ---------------------------------- |  | --------------------------- |  | ----------------------------------- |  | ---------------------
|                              |  | Compensation Program               |  |                             |  |                                     |  |                      
|                              |  | for
      Non-Employee             |  |                             |  |                                     |  |                      
|                              |  | Directors                          |  |                             |  |                                     |  |                      
|                              |  | Based Upon                         |  | Annual Maximum              |  | How Paid                            |  | When Paid            
|Annual Cash Retainer (1)      |  | Active
      Board participation   |  | $25,000 in
      cash       |  | $6,250 per
      quarter            |  | Paid in the middle   
|                              |  |                                    |  |                             |  |                                     |  | of the fiscal quarter
|                             
|Annual Stock Option Grant (2) |  | Board
      determination of award |  | Up to 2,000
      shares of |  | An option to purchase Unify         |  | In
      May         
|                              |  | to be made
      pursuant to the   |  | common
      stock          |  | common
      stock at FMV at the    |  |                      
|                              |  | 2001 Stock
      Option Plan       |  |                             |  | date of
      grant with a one year |  |                      
|                              |  |                                    |  |                             |  | vesting
      period                |  |                      

|(1) |  | Unify will pay
      non-employee directors an annual cash retainer fee of $25,000 which will
      be paid in four quarterly payments of $6,250 each. Payments are to be made
      in the middle of each fiscal quarter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Directors are eligible
      for an annual stock option grant of up to 2,000 shares of Unify common
      stock under the Companys then current stock option program. Eligibility
      will be determined by the Board and will be based on several factors from
      the prior fiscal year, including the financial performance of the Company,
      the Directors personal contribution to the Company and any other relevant
      factors or events. The stock option grant, if any, will be made in May of
      each year and the exercise price shall be equivalent to the fair market
      value of the stock at the time of the option grant. Any such option grant
      will vest monthly over a period of twelve (12)
months.

37

---

The following table details the
Companys committee structure and committee membership information.

|                         |  |             |  |              |  |               |  |             |  | Mergers
      &
|------------------------ |  | ----------- |  | ------------ |  | ------------- |  | ----------- |  | ---------------
|                         |  | Audit       |  | Compensation |  | Disclosure    |  | Nominating  |  | Acquisitions   
|Name of Director (1)     |  | Committee   |  | Committee    |  | Committee (2) |  | Committee   |  | Committee      
|Todd E. Wille            |  |             |  |              |  | Member        |  |             |  | Member         
|Robert
      Bozeman     |  |             |  |              |  | Member        |  |             |  | Chairperson    
|Richard M. Brooks        |  | Chairperson |  |              |  | Member        |  | Member      |  |                
|Tery R.
      Larrew     |  | Member      |  | Chairperson  |  | Member        |  | Member      |  |                
|Robert J. Majteles       |  |             |  | Member       |  | Member        |  | Member      |  |                
|Steven D.
      Whiteman |  | Member      |  | Member       |  | Member        |  | Chairperson |  |                

|(1) |  | With the exception of
      Mr. Wille, the companys CEO, all other board members are
      non-employees. 
|--- |  | -----------------------------------------------------------------------------------------------------------
|   
|(2) |  | The Disclosure
      Committee is chaired by the Companys Chief Financial Officer, Steven D.
      Bonham.

The
following table sets forth certain information with respect to our non-employee
director compensation during the fiscal year ended April 30, 2008.

Director Compensation
Table

|                         |  | Fees Earned
      or |  | Stock  |  | Option |     |          
|------------------------ |  | -------------------- |  | ------ |  | ------ | --- | ---------
|                         |  | Paid in
      Cash   |  | Awards |  | Awards |     | **Total**
|Name                     |  | ($)                  |  | ($)    |  | ($)    |     | **($)**  
|Robert Bozeman           |  | 8,750                |  |        |  | 17,165 | (1) | 25,915   
|Richard M.
      Brooks  |  | 35,000               |  |        |  | 2,327  | (2) | 37,327   
|Tery R. Larrew           |  | 33,000               |  |        |  | 2,327  | (2) | 35,327   
|Robert J.
      Majteles |  | 27,000               |  |        |  | 2,327  | (2) | 29,327   
|Steven D. Whiteman       |  | 40,000               |  |        |  | 2,327  | (2) | 42,327   

|(1) |  | Represents the
      aggregate fair market value of options to purchase 4,000 shares of common
      stock granted to Mr. Bozeman upon his election to the Board on January 14,
      2008 with an exercise price of $6.25 per share.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Represents the
      aggregate fair market value of options to purchase 2,000 shares of common
      stock on May 1, 2007 with an exercise price of $2.55 per
  share.                                                               

Director Restricted Stock
Plan

In fiscal
2003, the Board adopted, without a need for shareholder approval, the 2002
Director Restricted Stock Plan (the Director Restricted Stock Plan) as part of
a program to provide compensation we felt was necessary to attract, retain and
reward members of our Board of Directors who were willing to provide the time
and energy that we believe is required to meet our business goals. At the end of
fiscal 2007, the Board changed the Director Compensation such that were is no
longer a stock award component. Since the sole purpose of this Restricted Stock
Plan was to provide stock awards to the Directors, this plan will no longer be
used. Consequently, there were no shares awarded in the fiscal 2008 under this
Director Plan and there is a balance of 3,862 shares available at April 30,
2008.

38

---

Indemnification of Officer and
Directors

Unifys
Restated Certificate of Incorporation (the Certificate) limits the liability
of our directors to the maximum extent permitted by Delaware law. Delaware law
provides that a corporations certificate of incorporation may contain a
provision eliminating or limiting the personal liability of a director for
monetary damages for breach of their fiduciary duties as directors, except for
liability for (i) any breach of their duty of loyalty to the corporation or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) unlawful payments of
dividends or unlawful stock repurchases or redemptions as provided in Section
174 of the Delaware General Corporation Law, or (iv) any transactions from which
the director derived an improper personal benefit. Our bylaws call for us to
indemnify our directors, executive officers, and trustees to the fullest extent
permitted by law. We believe that such indemnification covers negligence and
gross negligence. Our bylaws also permit us to secure insurance on behalf of any
executive officer, director, employee or other agent for any liability arising
out of his or her actions in such capacity (subject to certain exclusions),
regardless of whether the bylaws permit indemnification.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT

Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our executive
officers, directors and persons who beneficially own more than ten percent (10%)
of Unifys common stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange Commission (SEC). Such
persons are required by SEC regulations to furnish us with copies of all Section
16(a) reports filed by them.

Based solely
upon our review of such reports furnished to us and written representations from
certain reporting persons, we believe that all filing requirements applicable to
our executive officers, directors and more than ten percent (10%) stockholders
for the fiscal year ended April 30, 2008, were met.

39

---

STOCK OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

The following table sets forth
certain information as of May 31, 2008 with respect to the beneficial ownership
of our common stock by: (i) each member of our board of directors; (ii) each of
our named executives; (iii) all of our directors and executive officers as a
group; and (iv) each stockholder who is known to us to own beneficially more
than 5% of our outstanding common stock. The following beneficial ownership
table assumes full conversion of the convertible term notes resulting from the
debt financing in conjunction with the acquisition of Gupta.

|                                                                        |  | Shares Owned (1)
|----------------------------------------------------------------------- |  | ----------------
|                                                                        |  | Number
      of 
|Name of Beneficial Owner                                                |  | Shares          
|Directors                                                               |  |                 
|Steven D. Whiteman (2)                                                  |  | 48,925          
|Tery R. Larrew (3)                                                      |  | 47,331          
|Robert J. Majteles (4)                                                  |  | 8,844           
|Richard M. Brooks (5)                                                   |  | 11,394          
|Robert Bozeman (6)                                                      |  | 1,499           
|                                                                       
|Executive Officers                                                      |  |                 
|Todd E. Wille (7)                                                       |  | 233,854         
|Steven D. Bonham (8)                                                    |  | 54,858          
|Kevin R. Kane (9)                                                       |  | 32,083          
|Mark Bygraves (10)                                                      |  | 30,624          
|Frank Verardi (11)                                                      |  | 69,805          
|Duane George (12)                                                       |  | 40,704          
|All Directors
      and Executive Officers as a group (11 persons) (13) |  | 579,921         
|                                                                       
|5% Stockholders                                                         |  |                 
|AWM Investment Company, Inc. (14)                                       |  | 2,574,408       
|c/o Special Situations Funds                                            |  |                 
|153 East 53rd St., 55th Floor                                           |  |                 
|New York, NY 10022-4611                                                 |  |                 
|                                                                       
|Diker Management LLC (15)                                               |  | 692,700         
|745 Fifth Avenue, Suite 1409                                            |  |                 
|New York, NY 10151                                                      |  |                 
|                                                                       
|Sophrosyne Technology Fund Ltd (16)                                     |  | 380,000         
|Queensgate House, South Church Street, P.O.
      Box 12349T            |  |                 
|Grand Cayman                                                            |  |                 

*     Less than 1%

40

---

|(1)  |  | Number of shares
      beneficially owned and the percentage of shares beneficially owned are
      based on 6,980,749 shares of the Companys common stock outstanding as of
      May 31, 2008. Beneficial ownership is determined in accordance with the
      rules of the Securities and Exchange Commission. In computing the number
      of shares beneficially owned by a person and the percentage ownership of
      that person, shares of common stock subject to options or warrants held by
      that person that are currently exercisable, or will become exercisable
      within 60 days of April 30, 2008, are deemed outstanding. Such shares,
      however, are not deemed outstanding for purposes of computing the
      percentage ownership of any other person. Except as indicated in the
      footnotes to this table, the persons named in the table have sole voting
      and investment power with respect to all shares of common stock shown as
      beneficially owned by them, subject to community property laws where
      applicable. Unless otherwise indicated, the individuals in the table may
      be contacted in care of Unify Corporation, 2101 Arena Blvd, Suite 100,
      Sacramento, California 95834.
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(2)  |  | Includes 24,277 shares
      subject to options held by Mr. Whiteman exercisable within 60 days of May
      31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|(3)  |  | Includes 14,833 shares
      subject to options held by Mr. Larrew exercisable within 60 days of May
      31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|(4)  |  | Includes 2,833 shares
      subject to options held by Mr. Majteles exercisable within 60 days of May
      31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    
|(5)  |  | Includes 7,694 shares
      subject to options held by Mr. Brooks exercisable within 60 days of May
      31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    
|(6)  |  | Includes 1,499 shares
      subject to options held by Mr. Bozeman exercisable within 60 days of May
      31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|(7)  |  | Includes 135,875
      shares subject to options held by Mr. Wille exercisable within 60 days of
      May 31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|(8)  |  | Includes 46,858 shares
      subject to options held by Mr. Bonham exercisable within 60 days of May
      31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|(9)  |  | Includes 32,083 shares
      subject to options held by Mr. Kane exercisable within 60 days of May 31,
      2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    
|(10) |  | Includes 30,624 shares
      subject to options held by Mr. Bygraves exercisable within 60 days of May
      31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|(11) |  | Includes 38,416 shares
      subject to options held by Mr. Verardi exercisable within 60 days of May
      31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    
|(12) |  | Includes 38,270 shares
      subject to options held by Mr. George exercisable within 60 days of May
      31, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|    
|(13) |  | Includes 373,262
      shares subject to options and exercisable within 60 days of May 31,
      2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|(14) |  | AWM Investment
      Company, Inc. is a hedge fund management firm based in New York. The firm
      is owned by David Greenhouse and Austin Marxe. They manage the Special
      Situations Fund III, L.P., Special Situations Cayman Fund L.P., Special
      Situations Private Equity Fund, L.P., and Special Situations Tech. Fund,
      L.P.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    
|(15) |  | Diker Management, LLC
      is a Registered Investment Advisor of certain managed accounts and
      investment funds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    
|(16) |  | Sophrosyne Technology
      Fund Ltd. is a Cayman Island corporation and is engaged primarily in
      investments in securities of companies that are beneficiaries of
      technological change.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Amounts
Due from Officers, Directors and Principal Stockholders.Except for advances of reimbursable expenses we have made no
other loans to executive officers, directors, stockholders or other affiliates.
Any such loan must be approved by a majority of those board members who are
independent of and have no interest in the transaction.

Upon
consummation of Unifys 2004 equity financing, the investors affiliated with
Special Situations Funds (SSF) exercised their right to designate a director
nominee and designated Robert J. Majteles to serve as a member of our Board of
Directors. Mr. Majteles joined the Board of Directors in 2004. Mr. Majteles is
the founder of Treehouse Capital, LLC, an investment firm. SSF has entered into
an agreement with Mr. Majteles and Treehouse Capital pursuant to which Treehouse
Capital, through Mr. Majteles, provides certain management and financial
advisory services for the funds on request. If Mr. Majteles services are
requested by the funds with respect to a particular portfolio investment,
Treehouse Capital is entitled to ten percent of the funds net gain (as defined)
or net loss (as defined) on the investment during the term of the agreement,
offset by certain fees that may be paid by the portfolio company to Treehouse
Capital or Mr. Majteles directly. Under the agreement, Mr. Majteles is required
to act independently of the funds in discharging his fiduciary duties to
stockholders of any company for which he serves as a member of the Board of
Directors and also is obligated not to disclose to the funds or use for his own
benefit any confidential information he obtains in connection with his service
for a particular portfolio company. Mr. Majteles does not have or share voting
or dispositive power over any securities held by the funds. Mr. Majteles has
agreed to serve as a member of Unifys Board of Directors pursuant to this
agreement.

Director
Independence.Five of our six directors are
independent under the rules of the NASDAQ Marketplace. Only our CEO, Mr. Wille,
is not considered independent under such rules.

41

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND
SERVICES

Audit Fees

Fees billed
by our principal accountant, Grant Thornton LLP, for fiscal 2008 and fiscal 2007
audit services totaled approximately $249,000 and $265,000, respectively. This
includes fees associated with the annual audit, review of the Companys
quarterly reports on Form 10-Q and the statutory audit required for our French
subsidiary.

Audit-Related Fees

Audit-related service fees billed by Grant Thornton for fiscal 2008 and
fiscal 2007 were approximately $34,000 and $55,000, respectively. The fiscal
2008 fees primarily related to registration statements required to be filed with
the SEC. The fiscal 2007 fees primarily related to activities associated with
the acquisition of Gupta Technologies, LLC.

Tax Fees

Fees billed
by our principal tax accountant, Macias Gini & OConnell LLP, for tax
services in fiscal 2008 and 2007 were $52,000 and $21,000, respectively. Tax
fees consisted of amounts incurred for tax compliance, tax advice and tax
planning.

Other Fees

Our principal accountant, Grant
Thornton LLP, had no other fees for fiscal year 2008 and fiscal year
2007.

Pre-Approval Policies and
Procedures

The Audit
Committee has adopted a policy that requires advance approval of all audit,
audit-related, tax services, and other services performed by the independent
auditor. The policy provides for pre-approval by the Audit Committee of
specifically defined audit and non-audit services. Unless the specific service
has been pre-approved with respect to that year, the Audit Committee must
approve the permitted service before the independent auditor is engaged to
perform it.

42

---

PART IV

ITEM 15. EXHIBITS AND FINANCIAL
STATEMENT SCHEDULES

(a)The following documents are filed as part of
this Annual Report on Form 10-K:

1.
Consolidated Financial Statements

|                                                                                                           | Page  
|---------------------------------------------------------------------------------------------------------- | ------
|                                                                                                           | Number
|Report of Grant Thornton LLP, Independent Registered Public
      Accounting Firm                          | 47    
|Consolidated Balance
      Sheets as of April 30, 2008 and 2007                                            | 48    
|Consolidated Statements of Operations for the years ended April 30,
      2008, 2007, 2006                 | 49    
|Consolidated
      Statements of Stockholders Equity for the years ended April 30, 2008,
      2007, 2006 | 50    
|Consolidated Statements of Cash Flows for the years ended April 30,
      2008, 2007, 2006                 | 51    
|Notes to
      Consolidated Financial Statements                                                           | 52    

Schedules are
omitted because they are not applicable, or the required information is shown in
the Consolidated Financial Statements or Notes thereto.

*2. Exhibits*See Item 15(b)
below.

(b)Exhibits

|Exhibit |  |                                                                                                                                                                                      
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     |  | Description                                                                                                                                                                          
|2.1     |  | Purchase and Exchange Agreement between Halo Technology Holdings,
      Inc and Unify, dated September 13, 2006 as amended by Amendment No. 1
      dated November 20, 2006 (10) (11)
|        |  |                                                                                                                                                                                      
|3.1     |  | Restated Certificate of Incorporation of the Company
  (1)                                                                                                                           
|        |  |                                                                                                                                                                                      
|3.2     |  | Amendment to Restated Certificate of Incorporation of the
      Company                                                                                                              
|        |  |                                                                                                                                                                                      
|3.3     |  | Bylaws of the Registrant (1)                                                                                                                                                         
|        |  |                                                                                                                                                                                      
|4.1     |  | Form of Stock Certificate (1)                                                                                                                                                        
|        |  |                                                                                                                                                                                      
|4.2     |  | Revolving Credit and Term Note Agreement by and between ComVest and
      Unify, dated November 20, 2006 (11)                                                                        
|        |  |                                                                                                                                                                                      
|4.3     |  | Convertible Term Note  Tranche 1                                                                                                                                                    
|        |  |                                                                                                                                                                                      
|4.4     |  | Convertible Term Note  Tranche 2                                                                                                                                                    
|        |  |                                                                                                                                                                                      
|4.5     |  | Convertible Term Note  Tranche 3                                                                                                                                                    
|        |  |                                                                                                                                                                                      
|4.6     |  | Registration Rights Agreement dated November 20, 2006
  (11)                                                                                                                         
|        |  |                                                                                                                                                                                      
|4.7     |  | Form of 2006 Warrants                                                                                                                                                                
|        |  |                                                                                                                                                                                      
|4.8     |  | Acuitrek Inc. Stock Purchase Agreement dated February 2, 2005 as
      amended by Amendment No. 1 dated November 20, 2006 (7) (11)                                                   
|        |  |                                                                                                                                                                                      
|4.9     |  | Acuitrek Inc. Registration Rights Agreement dated February 2, 2005
      (7)                                                                                                         

43

---

|Exhibit |  |                                                                                                                                                                                                                                                                                                                      
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|No.     |  | Description                                                                                                                                                                                                                                                                                                          
|4.10    |  | Special
      Situations Stock Purchase Agreement dated April 23, 2004 (6)                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                      
|4.11    |  | Special Situations Registration Rights Agreement dated April 23,
      2004 (6)                                                                                                                                                                                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                      
|4.12    |  | Form of 2004 Warrant                                                                                                                                                                                                                                                                                                 
|        |  |                                                                                                                                                                                                                                                                                                                      
|10.1*   |  | 1991 Stock Option Plan, as amended (1)                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                      
|10.2*   |  | 2001 Stock Option Plan (4)                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                      
|10.3*   |  | Employment Agreement by and between Todd Wille and the Registrant
      dated December 29, 2000 (3)                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                      
|10.4    |  | Form of Indemnification Agreement (1)                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                      
|10.5    |  | Office Building Lease for Sacramento Facility, Dated December 17,
      1999, as Amended (2)                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                      
|10.6    |  | Fourth Amendment Effective January 1, 2002 to Office Building Lease
      Dated December 17, 1999 (6)                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                      
|10.7    |  | Fifth Amendment to Lease and Termination of Stock Pledge Agreement
      dated September 18, 2003 (6)                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                      
|10.8    |  | Silicon Valley Bank Loan and Security Agreement dated June 6,
      2003(5), as amended by Silicon Valley Bank Amendment to Loan Documents
      dated June 3, 2004, June 5, 2005 (8) and May 24, 2006 (9) and Amended
      Schedule to Loan and Security Agreement dated June 3, 2004(6) and June 5,
      2005 (8)
|        |  |                                                                                                                                                                                                                                                                                                                      
|14      |  | Code of Ethics for Senior Officers(6)                                                                                                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                                                                                                                                      
|21.1    |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                       
|        |  |                                                                                                                                                                                                                                                                                                                      
|23.1    |  | Consent of Grant Thornton LLP, Independent Registered Public
      Accounting Firm                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                      
|31.1    |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
      or 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                      
|31.2    |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
      or 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                                      
|32.1    |  | Certification of Todd E. Wille, Chief Executive Officer of Unify
      Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                      
|32.2    |  | Certification of Steven D. Bonham, Chief Financial Officer of Unify
      Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                

|(1) | Incorporated by reference to the
      exhibit filed with Registrants Form S-1 Registration Statement (No.
      333-3834) declared effective by the Securities and Exchange Commission on
      June 14, 1996.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) | Incorporated by reference to the
      exhibit filed with Registrants Form 10-K on December 22,
  2000.                                                                                                        
|   
|(3) | Incorporated by reference to the
      exhibit filed with Registrants Form 10-K on July 30, 2001.                                                                                                              
|   
|(4) | Incorporated by reference to the
      exhibit filed with Registrants Form 10-Q on March 14,
  2002.                                                                                                           

44

---

|(5)  | Incorporated by
      reference to the exhibit filed with Registrants Form 10-K on July 17,
      2003.    
|---- | ------------------------------------------------------------------------------------------------------------
|     |                                                                                                             
|(6)  | Incorporated by
      reference to the exhibit filed with Registrants Form 10-K on July 21,
      2004.    
|     |                                                                                                             
|(7)  | Incorporated by
      reference to the exhibit filed with Registrants Form 8-K on February 2,
      2005.  
|     |                                                                                                             
|(8)  | Incorporated by
      reference to the exhibit filed with Registrants Form 10-K on July 28,
      2005.    
|     |                                                                                                             
|(9)  | Incorporated by
      reference to the exhibit filed with Registrants Form 10-K on July 31,
      2006.    
|     |                                                                                                             
|(10) | Incorporated by
      reference to the exhibit filed with Registrants Form 8-K on September 20,
      2006.
|     |                                                                                                             
|(11) | Incorporated by
      reference to the exhibit filed with Registrants Form 8-K on November 29,
      2006. 
|     |                                                                                                             
|*    | Exhibit pertains
      to a management contract or compensatory plan or
  arrangement.                      

45



---

SIGNATURES

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

UNIFYCORPORATIONBy:
    /s/
      TODDE.
      WILLETodd E. WillePresident and Chief Executive Officer


Dated: June 30, 2008

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

|/s/ TODDE. WILLE         |  | President and
      Chief Executive Officer        |  | June 30,
      2008
|------------------------ |  | -------------------------------------------------- |  | -------------------
|Todd E.
      Wille      |  | (Principal
      Executive Officer)                |  |                    
|                        
|/s/ STEVEND. BONHAM      |  | Vice President
      and Chief Financial Officer   |  | June 30,
      2008
|Steven D.
      Bonham   |  | (Principal
      Financial and Accounting Officer) |  |                    
|                        
|/s/ STEVEND. WHITEMAN    |  | Director and
      Chairman of the Board           |  | June 30,
      2008
|Steven D.
      Whiteman |  |                                                    |  |                    
|                        
|/S/ ROBERTBOZEMAN        |  | Director                                           |  | June 30,
      2008
|Robert
      Bozeman     |  |                                                    |  |                    
|                        
|/s/ RICHARDM. BROOKS     |  | Director                                           |  | June 30,
      2008
|Richard M.
      Brooks  |  |                                                    |  |                    
|                        
|/s/ TERYR. LARREW        |  | Director                                           |  | June 30,
      2008
|Tery R.
      Larrew     |  |                                                    |  |                    
|                        
|/s/ ROBERTJ. MAJTELES    |  | Director                                           |  | June 30,
      2008
|Robert J.
      Majteles |  |                                                    |  |                    

46

---

Report of Grant Thornton LLP,
Independent Registered Public Accounting Firm

Board of Directors and Stockholders of
Unify Corporation

We have
audited the accompanying balance sheets of Unify Corporation and subsidiaries as
of April 30, 2008 and 2007, and the related consolidated statements of
operations, stockholders equity and cash flows for each of the three years in
the period ended April 30, 2008.  These financial statements are the
responsibility of the Companys management.  Our responsibility is to
express an opinion on theses financial statements based on our
audits.

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

In our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of Unify Corporation and subsidiaries as of April 30, 2008
and 2007, and the results of its operations and its cash flows for each of the
three years in the period ended April 30, 2008 in conformity with accounting
principles generally accepted in the United States of America.

/s/ GRANT THORNTON LLPReno,
NevadaJune 30, 2008

47

---

UNIFY CORPORATIONCONSOLIDATED
BALANCE SHEETS(In thousands, except
per share data)

|                                                                                | April 30, |         | April 30,
|------------------------------------------------------------------------------- | --------- | ------- | ---------
|                                                                                | 2008      |         | 2007     
|ASSETS                                                                          |           |         |          
|Current assets:                                                                 |           |         |          
|Cash and cash equivalents                                                       | $         | 2,692   |          
|Accounts receivable, net of
      allowances of $169 in 2008, and $193 in 2007  |           | 5,079   |          
|Accounts receivable-related
      party                                         |           | 13      |          
|Prepaid expenses and other current
      assets                                 |           | 529     |          
|Total current assets                                                            |           | 8,313   |          
|                                                                               
|Property and
      equipment, net                                               |           | 346     |          
|Other investments                                                               |           |        |          
|Goodwill                                                                        |           | 5,643   |          
|Intangibles, net                                                                |           | 2,197   |          
|Other assets, net
      of allowances of $96 in 2008, and $213 in 2007          |           | 179     |          
|Total assets                                                                    | $         | 16,678  |          
|                                                                               
|LIABILITIES
      AND STOCKHOLDERS' EQUITY                                      |           |         |          
|Current
      liabilities:                                                      |           |         |          
|Accounts payable                                                                | $         | 326     |          
|Current portion of long term
      debt                                         |           | 8       |          
|Accrued compensation and related
      expenses                                 |           | 1,661   |          
|Accrued acquisition costs                                                       |           |        |          
|Other accrued liabilities                                                       |           | 895     |          
|Deferred revenue                                                                |           | 6,580   |          
|Total current liabilities                                                       |           | 9,470   |          
|                                                                               
|Long term debt,
      net of current portion                                    |           | 1,334   |          
|Other long term
      liabilities                                               |           | 455     |          
|                                                                               
|Commitments and
      contingencies                                             |           |        |          
|                                                                               
|Stockholders
      equity:                                                     |           |         |          
|Preferred stock, $0.001 par value;
      7,931,370 shares authorized; no shares |           |         |          
|issued or outstanding                                                           |           |        |          
|Common stock, $0.001 par value;
      40,000,000 shares authorized, 6,980,749   |           |         |          
|and 6,029,201 shares outstanding in
      2008 and 2007                         |           | 7       |          
|Additional paid-in capital                                                      |           | 68,215  |          
|Accumulated other comprehensive
      income                                    |           | 119     |          
|Accumulated deficit                                                             |           | (62,922 | )        
|Total stockholders equity                                                      |           | 5,419   |          
|Total liabilities and stockholders
      equity                                | $         | 16,678  |          

See accompanying notes

48

---

Unify CorporationConsolidated
Statement of Operations(In thousands,
except per share data)

|                                                             | Years Ended April 30,
|------------------------------------------------------------ | ---------------------
|                                                             | 2008                 
|Revenues:                                                    |                      
|Software licenses                                            | $                    
|Services                                                     |                      
|Total
      revenues                                         |                      
|                                                            
|Cost of Revenues:                                            |                      
|Software licenses                                            |                      
|Services                                                     |                      
|Total
      cost of revenues                                 |                      
|Gross profit                                                 |                      
|                                                            
|Operating Expenses:                                          |                      
|Product development                                          |                      
|Selling, general and
      administrative                    |                      
|Total operating expenses                                     |                      
|Income (loss) from
      operations                          |                      
|Interest
      expense                                       |                      
|Other income (expense), net                                  |                      
|Income (loss) from continuing
      operations before income |                      
|taxes                                                        |                      
|Provision for income taxes                                   |                      
|Income (loss) from continuing
      operations               |                      
|Loss from discontinued
      operations                      |                      
|Net income
      (loss)                                      | $                    
|                                                            
|Net income (loss) per share:                                 |                      
|Basic earnings per share:                                    |                      
|Continuing operations                                        | $                    
|Discontinued operations                                      | $                    
|Net income (loss) per
      share                            | $                    
|                                                            
|Dilutive earnings per
      share:                           |                      
|Continuing operations                                        | $                    
|Discontinued operations                                      | $                    
|Net
      income (loss) per share                            | $                    
|Shares used in computing net income (loss) per share:        |                      
|Basic                                                        |                      
|Diluted                                                      |                      

See accompanying notes

49

---

UNIFY CORPORATIONCONSOLIDATED
STATEMENTS OF STOCKHOLDERS EQUITY(In
thousands, except per share data)

|                                               |              |  |         |   |               |            |               | Accumulated |               |     |        |       |        |              
|---------------------------------------------- | ------------ |  | ------- | - | ------------- | ---------- | ------------- | ----------- | ------------- | --- | ------ | ----- | ------ | -------------
|                                               |              |  |         |   |               | Additional |               | Other       |               |     |        | Total |        | Comprehensive
|                                               | Common Stock |  | Paid-In |   | Comprehensive |            | Accumulated   |             | Stockholders |     | Income
|                                               | Shares       |  | Amount  |   | Capital       |            | Income (loss) |             | Deficit       |     | Equity |       | (Loss)
|Balances at April 30, 2005                     | 5,688,530    |  | $       | 6 |               | $          | 63,612        |             | $             | 73  |        |       | $      | (61,122      
|Comprehensive
      loss                       |              |  |         |   |               |            |               |             |               |     |        |       |        |              
|                                              
|Net income from continued operations           |             |  |         |  |               |            |              |             |               |    |        |       |        | 1,195        
|                                              
|Net loss from discontinued operations          |             |  |         |  |               |            |              |             |               |    |        |       |        | (1,823       
|Translation
      adjustments                  |             |  |         |  |               |            |              |             |               | (54 | )      |       |        |             
|Total comprehensive loss                       |              |  |         |   |               |            |               |             |               |     |        |       |        |              
|Issuance of
      common stock                 | 88,527       |  |         |  |               |            | 172           |             |               |    |        |       |        |             
|Exercise of stock options                      | 62,523       |  |         |  |               |            | 58            |             |               |    |        |       |        |             
|Issuance of
      common stock under           |              |  |         |   |               |            |               |             |               |     |        |       |        |              
|employee stock
      purchase plan             | 42,060       |  |         |  |               |            | 62            |             |               |    |        |       |        |             
|Stock-based compensation                       | 23,081       |  |         |  |               |            | 57            |             |               |    |        |       |        |             
|Balances at
      April 30, 2006               | 5,904,721    |  | $       | 6 |               | $          | 63,961        |             | $             | 19  |        |       | $      | (61,750      
|Comprehensive loss                             |              |  |         |   |               |            |               |             |               |     |        |       |        |              
|Net loss from
      continuing operations      |             |  |         |  |               |            |              |             |               |    |        |       |        | (1,361       
|Net loss from discontinued operations (as      |              |  |         |   |               |            |               |             |               |     |        |       |        |              
|restated)                                      |             |  |         |  |               |            |              |             |               |    |        |       |        | (1,445       
|Translation
      adjustments                  |             |  |         |  |               |            |              |             |               | 26  |        |       |        | 1            
|Total comprehensive loss                       |              |  |         |   |               |            |               |             |               |     |        |       |        |              
|Issuance of
      common stock                 |             |  |         |  |               |            | 43            |             |               |    |        |       |        |             
|Exercise of stock options                      | 85,080       |  |         |  |               |            | 152           |             |               |    |        |       |        |             
|Fair value of
      warrants issued            |             |  |         |  |               |            | 743           |             |               |    |        |       |        |             
|Stock-based compensation                       | 39,400       |  |         |  |               |            | 74            |             |               |    |        |       |        |             
|                                              
|Balances at April 30, 2007 (as restated)       | 6,029,201    |  | $       | 6 |               | $          | 64,973        |             | $             | 45  |        |       | $      | (64,555      
|Comprehensive
      loss                       |              |  |         |   |               |            |               |             |               |     |        |       |        |              
|Net income continuing operations               |             |  |         |  |               |            |              |             |               |    |        |       |        | 1,631        
|Translation
      adjustments                  |             |  |         |  |               |            |              |             |               | 74  |        |       |        | 2            
|Total comprehensive income                     |              |  |         |   |               |            |               |             |               |     |        |       |        |              
|Issuance of
      common stock                 | 41,108       |  |         |  |               |            | 183           |             |               |    |        |       |        |             
|Exercise of stock options                      | 13,390       |  |         |  |               |            | 23            |             |               |    |        |       |        |             
|Conversion of
      warrants and debt to stock | 897,050      |  |         | 1 |               |            | 2,826         |             |               |    |        |       |        |             
|Stock-based compensation                       |             |  |         |  |               |            | 210           |             |               |    |        |       |        |             
|Balances at
      April 30, 2008               | 6,980,749    |  | $       | 7 |               | $          | 68,215        |             | $             | 119 |        |       | $      | (62,922      

See accompanying notes

50

---

UNIFY
CORPORATIONCONSOLIDATED STATEMENTS OF
CASH FLOWS(In thousands)

|                                                                                   | Twelve Months Ended April
      30,
|---------------------------------------------------------------------------------- | -----------------------------------
|                                                                                   | 2008                               
|Cash flows from operating activities:                                              |                                    
|Net income (loss)                                                                  | $                                  
|Loss from discontinued
      operations                                            |                                    
|Income (loss) from continuing
      operations                                     |                                    
|Reconciliation of
      income (loss) to net cash provided by (used in) continuing |                                    
|operating
      activities:                                                        |                                    
|Depreciation                                                                       |                                    
|Gain on disposal of other investments                                              |                                    
|Amortization of intangible assets                                                  |                                    
|Fulfillment of support obligations                                                 |                                    
|Amortization of discount on notes payable                                          |                                    
|Stock based expense                                                                |                                    
|Changes in operating assets and liabilities:                                       |                                    
|Accounts receivable                                                                |                                    
|Prepaid expenses and other current assets                                          |                                    
|Other long term assets                                                             |                                    
|Accounts payable                                                                   |                                    
|Accrued compensation and related expenses                                          |                                    
|Accrued acquisition costs                                                          |                                    
|Other accrued liabilities                                                          |                                    
|Deferred revenue                                                                   |                                    
|Net cash provided by (used in) continuing operating
      activities               |                                    
|Cash flows from
      investing activities:                                        |                                    
|Acquisition, net of cash acquired                                                  |                                    
|Purchases of property and
      equipment                                          |                                    
|Proceeds from sale of
      property and equipment                                 |                                    
|Payments on acquisitions                                                           |                                    
|Proceeds from sale of
      other investments                                      |                                    
|Net cash used in
      investing activities of continuing operations               |                                    
|Cash flows from financing activities:                                              |                                    
|Proceeds from issuance of common
      stock                                       |                                    
|Borrowings under debt
      obligations                                            |                                    
|Principal payments under debt
      obligations                                    |                                    
|Net cash provided by (used in) financing activities of continuing
      operations |                                    
|Effect of
      exchange rate changes on cash                                      |                                    
|Cash flows of discontinued operations:                                             |                                    
|Net cash used in operating
      activities                                        |                                    
|Net cash used in
      investing activities                                        |                                    
|Net cash used in financing
      activities                                        |                                    
|Net cash used in discontinued operations                                           |                                    
|Net increase
      (decrease) in cash and cash equivalents                         |                                    
|Cash and cash equivalents, beginning of year                                       |                                    
|Cash and cash
      equivalents, end of year                                       | $                                  
|Supplemental cash flow information for continuing
      operations:                |                                    
|Cash paid during the year for
      interest, net:                                 | $                                  
|Cash paid during the
      year for income taxes                                   | $                                  
|Supplemental
      non-cash financing activities:                                  |                                    
|Warrants issued in
      conjunction with the issuance of long term debt           | $                                  
|Warrants converted into common
      stock                                         | $                                  
|Debt converted into
      common stock                                             | $                                  

See accompanying notes

51

---

UNIFY
CORPORATION     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 30,
2008

Note 1. The Company and Summary of Significant
Accounting Policies

The Company

Unify (the Company,
we, us or our) is a global provider of application modernization, data
management and application development solutions that enable Service-Oriented
Architecture (SOA). Our suite of migration solutions, easy to use development
software and maintenance-free embedded databases allows customers to modernize
and maximize their application environment. For organizations needing to
modernize their systems, we help businesses service-enable legacy applications
to support SOA initiatives. Based on market requirements, our solutions help
companies increase speed and agility, improve asset reuse, lower IT costs and
reduce risks and exposures.

Basis of Presentation

The accompanying
consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries including Unify Corporation France S.A., Gupta
Technologies, LLC, Gupta Technologies Ltd., Gupta Technologies GmbH, and Active
Data Corporation. All significant intercompany balances and transactions have
been eliminated.

The functional currency
of the Companys foreign subsidiaries is their local currency. Assets and
liabilities denominated in foreign currencies are translated into U.S. dollars
at period-end exchange rates. Income and expense accounts are translated at
average rates of exchange in effect during the reporting period. Foreign
currency transaction gains or losses are included in other income, net. Foreign
currency adjustments resulting from the translation process are excluded from
net income and recorded in other comprehensive income. At April 30, 2008, the
Company had $1,663,000 in foreign bank accounts.

The accompanying
consolidated financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America.

Use of Estimates

The preparation of
financial statements in conformity with accounting principles generally accepted
in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Significant estimates include the assessment of the
valuation of goodwill and other intangible assets, valuation allowance for
deferred taxes and the allowance for doubtful accounts for accounts receivable,
long-term receivables and notes receivable. Actual results could differ from
these estimates.

Cash Equivalents

Cash equivalents are
highly liquid investments with original maturities of three months or less when
purchased and are stated at cost. Cash equivalents consist primarily of demand
deposits with banks and money market funds.

Fair Value of Financial Instruments

The carrying amounts of
cash and cash equivalents, accounts receivable and accounts payable approximate
fair value because of the short-term maturity of these instruments. The carrying
amounts of long term accounts receivable approximate fair value based on the
collection analysis performed and recording of necessary reserves. The fair
values of the Company's long term borrowings are estimated based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements and such values approximate the fair value of the borrowings as of
fiscal year end.

52

---

Concentrations of Credit Risk and Credit
Evaluations

Financial instruments
potentially subjecting the Company to concentrations of credit risk consist
primarily of cash, cash equivalents and accounts receivable. The Company places
its cash and cash equivalents primarily with four financial institutions. The
Company licenses its products principally to companies in the United States,
Europe, and Japan. One single customer accounted for 12% of consolidated
revenues in the years ended April 30, 2008 and 2006. No single customer
accounted for 10% or more of consolidated revenue in the year ended April 30,
2007. The Company performs periodic credit evaluations of its customers and
generally does not require collateral. Allowances are maintained for potential
credit losses. International revenues include all our software license and
service revenues from customers located outside North America. International
revenues accounted for 78%, 73% and 70% of total revenues in fiscal years 2008,
2007 and 2006, respectively.

Allowance for Doubtful Accounts

An allowance for
doubtful accounts is established to ensure trade receivables are not overstated
due to uncollectibility. Bad-debt reserves are maintained for all customers
based on a variety of factors, including the length of time receivables are past
due, significant one-time events and historical experience. Additional reserves
for individual accounts are recorded when the Company becomes aware of a
customers inability to meet its financial obligations, such as in the case of
bankruptcy filings or deterioration in the customers operating results or
financial position. If circumstances related to customers change, estimates of
the recoverability of receivables would be further adjusted. Following is a
schedule that details activity for the allowance for doubtful accounts and the
allowance for long-term accounts and notes receivable.

|                                                  |                      |     |                    | Charges |             |   |              |   |                  |   | 
|------------------------------------------------- | -------------------- | --- | ------------------ | ------- | ----------- | - | ------------ | - | ---------------- | - | 
|                                                  | Balance
      at     |     | (Credits)
      to |         |             |   |              |   | Balance
      at
|                                                  | Beginning            |     | Operating          |         | Write-offs  |   | End
      of
|                                                  | of Year              |     | Expenses           |         | of Accounts |   | Year        
|                                                  | (In
      thousands)
|Allowance
      for doubtful accounts receivable: |                      |     |                    |         |             |   |              |   |                  |   | 
|Year ended April 30,
      2006                   | $                    | 195 |                    | $       | (109        | ) |              | $ | (38              | ) | 
|Year ended
      April 30, 2007                   |                      | 48  |                    |         | 204         |   |              |   | (59              | ) | 
|Year ended April 30,
      2008                   |                      | 193 |                    |         | 15          |   |              |   | (39              | ) | 
|                                                 
|Allowance
      for long-term accounts and notes  |                      |     |                    |         |             |   |              |   |                  |   | 
|receivable  reflected in
      other assets:     |                      |     |                    |         |             |   |              |   |                  |   | 
|Year ended
      April 30, 2006                   | $                    | 178 |                    | $       | 71          |   |              | $ | (3               | ) | 
|Year ended April 30,
      2007                   |                      | 246 |                    |         | (33         | ) |              |   |                 |   | 
|Year ended
      April 30, 2008                   |                      | 213 |                    |         | 23          |   |              |   | (140             | ) | 

Other Investments

The
Company carries other investments at the lower of cost or estimated fair value
(Note 4).

Property and Equipment

Property and equipment
are stated at cost. Depreciation is recorded on a straight-line basis over the
estimated useful lives of the related assets, generally three to five years.
Leasehold improvements are amortized over the shorter of their estimated useful
lives or the lease term.

Capitalized Software

Under the criteria set
forth in Statement of Financial Accounting Standard (SFAS) No. 86Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed, capitalization of software
development costs begins upon the establishment of technological feasibility of
the product. With respect to the Companys software development process,
technological feasibility is established upon completion of a working model. To
date, the Companys products have been released shortly after reaching
technological feasibility. Therefore, development costs incurred after
completion of a working model and prior to general release have not been
significant. Accordingly, no software development costs have been capitalized by
the Company to date.

53

---

Long-Lived Assets

The Company evaluates
its long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying amount of such assets or intangibles may be in excess
of fair value or not recoverable. If such assets are considered to be impaired,
the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets.

The Company
periodically reevaluates the original assumptions and rationale utilized in the
establishment of the carrying value and estimated useful lives of the long-lived
assets. The criteria used for these evaluations include managements estimate of
the assets continuing ability to generate income from operations and positive
cash flows in future periods.

Goodwill

Goodwill is the excess
of cost of an acquired entity over the amounts assigned to assets acquired and
liabilities assumed in a business combination. Goodwill is not amortized.
Goodwill is tested for impairment on an annual basis as of April 30, and between
annual tests if indicators of potential impairment exist, using a
fair-value-based approach. No impairment of goodwill has been identified during
any of the periods presented (Note 5).

Intangible Assets

Intangible assets are
amortized using the straight-line method over their estimated period of benefit.
We evaluate the recoverability of intangible assets periodically and take into
account events or circumstances that warrant revised estimates of useful lives
or that indicate that impairment exists. All of our intangible assets are
subject to amortization. No impairments of intangible assets have been
identified during any of the periods (Note 5).

Revenue Recognition

The
Company generates revenue from software license sales and related services,
including maintenance and support, and consulting services. The Company licenses
its products to end-user customers, independent software vendors (ISVs),
international distributors and value-added resellers (VARs). The Companys
products are generally sold with a perpetual license. The Companys contracts
with ISVs, VARs and international distributors do not include special
considerations such as rights of return, stock rotation, price protection,
special acceptance or warranty provisions. With the exception of its Composer
for Lotus Notes solution and its discontinued product, NavRisk, the Company
recognizes revenue for software license sales in accordance with Statement of
Position (SOP) 97-2,Software Revenue
Recognition. For the Composer for Lotus Notes and its
discontinued product, NavRisk, the Company recognized revenue for software
licenses sales in accordance with Statement of Position 81-1,Accounting for Performance of Construction-Type and Certain
Production-Type Contractsand Accounting Research
Bulletin (ARB) 45,Long-Term Construction Type
Contracts. The Company exercises judgment in connection
with the determination of the amount of software and services revenue to be
recognized in each accounting period. The nature of each licensing arrangement
determines how revenues and related costs are recognized.

For software license
arrangements that do not require significant modification or customization of
the underlying software, revenue is recognized when the software product or
service has been shipped or electronically delivered, the license fees are fixed
and determinable, uncertainties regarding customer acceptance are resolved,
collectibility is probable and persuasive evidence of an arrangement
exists.

The Company considers a
signed noncancelable license agreement, a customer purchase order, a customer
purchase requisition, or a sales quotation signed by an authorized purchaser of
the customer to be persuasive evidence that an arrangement exits such that
revenue can be recognized.

The Companys customer
contracts include multi-element arrangements that include a delivered element (a
software license) and undelivered elements (such as maintenance and support
and/or consulting). The value allocated to the undelivered elements is unbundled
from the delivered element based on vendor-specific objective evidence (VSOE) of
the fair value of the maintenance and support and/or consulting, regardless of
any separate prices stated within the contract. VSOE of fair value is defined
as: (i) the price charged when the same element is sold separately, or (ii) if
the element has not yet been sold separately, the price for the element
established by management having the relevant authority when it is probable that
the price will not change before the introduction of the element into the
marketplace. The Company then allocates the remaining balance to the delivered
element (a software license) regardless of any separate prices stated within the
contract using the residual method as the fair value of all undelivered elements
is determinable.

54

---

We defer revenue for
any undelivered elements, and recognize revenue for delivered elements only when
the fair values of undelivered elements are known, uncertainties regarding
customer acceptance are resolved, and there are no customer-negotiated refund or
return rights affecting the revenue recognized for delivered elements. If we
cannot objectively determine the fair value of any undelivered element included
in bundled software and service arrangements, we defer revenue until all
elements are delivered and services have been performed, or until fair value can
objectively be determined for any remaining undelivered elements.

An assessment of the
ability of the Companys customers to pay is another consideration that affects
revenue recognition. In some cases, the Company sells to undercapitalized
customers. In those circumstances, revenue recognition is deferred until cash is
received, the customer has established a history of making timely payments or
the customers financial condition has improved. Furthermore, once revenue has
been recognized, the Company evaluates the related accounts receivable balance
at each period end for amounts that we believe may no longer be collectible.
This evaluation is largely done based on a review of the financial condition via
credit agencies and historical experience with the customer. Any deterioration
in credit worthiness of a customer may impact the Companys evaluation of
accounts receivable in any given period.

Revenue from support
and maintenance activities, which consist of fees for ongoing support and
unspecified product updates, are recognized ratably over the term of the
maintenance contract, typically one year, and the associated costs are expensed
as incurred. Consulting service arrangements are performed on a best efforts
basis and are generally billed under time-and-materials arrangements. Revenues
and expenses relating to providing consulting services are recognized as the
services are performed.

Warranties and Indemnification

The Company offers a
limited warranty for product and service sales that generally provide the
customer a sixty-day warranty period against defects. To date, the Company has
not incurred any material costs as a result of such warranties and has not
accrued any liabilities related to such obligations in the accompanying
consolidated financial statements.

The Companys license
agreements generally include certain provisions for indemnifying customers
against liabilities if its product or services infringe upon a third-partys
intellectual property rights. To date, the Company has not incurred any material
costs as a result of such indemnifications and has not accrued any liabilities
related to such obligations in the accompanying consolidated financial
statements.

Stock-Based Compensation

Effective May 1, 2006,
the Company adopted the provisions of SFAS No. 123(R),Share-Based Payment, using the modified version
of prospective application. Under this method, compensation expense includes the
estimated fair value of equity awards vested during the reported period. Expense
for equity awards vested is determined based on grant date fair value previously
calculated for pro forma disclosures under SFAS No. 148,Accounting for Stock-Based CompensationTransition and DisclosureAn
Amendment of FASB Statement No. 123. For the fiscal
years ended April 30, 2008 and 2007, stock-based compensation expense was
comprised of the following (in thousands):

|                                                             | April 30, 2008 |     | April 30, 2007
|------------------------------------------------------------ | -------------- | --- | --------------
|Cost of
      Sales                                          | $              | 4   |               
|Product Development                                          |                | 30  |               
|Selling,
      General and Administrative                    |                | 176 |               
|Total Equity-Based
      Compensation, Continuing Operations |                | 210 |               
|Equity-Based Compensation, Discontinued Operations           |                | -   |               
|Total
      Equity-Based Compensation                        | $              | 210 |               

55

---

The following table
shows remaining unrecognized compensation expense from continuing operations on
a pre-tax basis related to all types of nonvested equity awards outstanding as
of April 30, 2008. This table does not include an estimate for future grants
that may be issued (amounts in thousands).

|Fiscal Year Ended April 30, |  | **Amount**
|--------------------------- |  | ----------
|2009                        |  | $         
|2010                        |  |           
|2011                        |  |           
|2012                        |  |           
|Total                       |  | $         

The
cost above is expected to be recognized over a weighted-average period of 1.50
years.

As permitted by SFAS
No. 148, prior to the adoption of SFAS No. 123(R), the Company accounted for
equity award expense under the recognition and measurement principles of
Accounting Principles Board Opinion No. 25,Accounting
for Stock Issued to Employees, under which no
compensation was recognized in the Companys financial statements for the twelve
months ended April 30, 2006. In connection with the modified prospective method,
disclosures made for periods prior to the adoption of SFAS No. 123(R) do not
reflect restated amounts.

The following table
illustrates the effect on net loss and net loss per share if Unify had applied
the fair value recognition provisions of SFAS 123, to stock-based employee
compensation (in thousands, except per share amounts):

|                                                                   | Year
      Ended
|------------------------------------------------------------------ | ----------------
|                                                                   | April
      30, 
|                                                                   | 2006            
|Income
      (loss) from continuing operations                     | $               
|Loss from discontinued
      operations                            |                 
|Net income
      (loss) as reported                                |                 
|Add: stock-based employee
      compensation included in reported  |                 
|net income
      (loss)                                            |                 
|Less: stock-based employee
      compensation expense, determined  |                 
|under fair
      value method for all awards                       |                 
|Pro forma net income
      (loss)                                  |                 
|Net income
      (loss) per share (basic and diluted), as reported |                 
|Net income (loss) per share
      (basic and diluted), pro forma   |                 

The Company
continues to use the Black-Scholes option pricing model to estimate fair value
of equity awards, which requires the input of highly subjective assumptions,
including the expected stock price volatility. The Companys calculations are
made using the Black-Scholes option pricing model, with the following weighted
average assumptions: expected option life, 12 months following vesting; stock
volatility, 104% in fiscal 2008, 193% in fiscal 2007, and 207% in fiscal 2006;
risk-free interest rates, 4.2% in fiscal 2008, 4.7% in fiscal 2007, and 4.3% in
fiscal 2006; and no dividends during the expected term. Not all stock options
that have been granted will be exercised. Accordingly, the Companys calculation
of equity-based compensation expense includes an adjustment for the estimated
number of options that will be forfeited.

56

---

A
summary of the Companys stock option activity for the fiscal year ended April
30, 2008 is as follows:

|                                    |         |   |       | Weighted |                 | Weighted                |                      |           |          
|----------------------------------- | ------- | - | ----- | -------- | --------------- | ----------------------- | -------------------- | --------- | ---------
|                                    |         |   |       | Average  |                 | average
      remaining |                      | Aggregate
|                                    |         |   |       | Exercise |                 | contractual             |                      | intrinsic
|                                    | Shares  |   | Price |          | term (in years) |                         | **value****(1****)**
|Outstanding
      at April 30, 2007 | 453,242 |   |       | 2.90     |                 | 6.46                    |                      | $         | 277,608  
|Granted                             | 393,300 |   |       | 3.58     |                 |                         |                      |           |          
|Exercised                           | (13,390 | ) |       | 1.67     |                 |                         |                      |           |          
|Cancelled/expired                   | (73,135 | ) |       | 3.41     |                 |                         |                      |           |          
|Outstanding
      at April 30, 2008 | 760,017 |   |       | 3.23     |                 | 7.35                    |                      | $         | 2,699,038

|(1) |  | Aggregate intrinsic value is
      defined as the difference between the current market value and the
      exercise price and is estimated using the closing price of the Companys
      common stock on the last trading day of the periods ended as of the dates
      indicated.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
total intrinsic value of awards exercised during the year ended April 30, 2008
and 2007 was $26,566 and $75,215, respectively. The total fair value of awards
vested during the year ended April 30, 2008 and 2007 was $258,297 and $131,748,
respectively.

A
summary of the Companys nonvested stock option activity for the fiscal year
ended April 30, 2008 is as follows:

|                                  |          |   |       | Weighted
|--------------------------------- | -------- | - | ----- | --------
|                                  |          |   |       | Average 
|                                  |          |   |       | Fair    
|                                  | Shares   |   | Value
|Nonvested
      at April 30, 2007 | 118,370  |   |       | $       
|Granted                           | 393,300  |   |       | $       
|Exercised                         | (165,940 | ) |       | $       
|Cancelled/expired                 | (7,240   | ) |       | $       
|Nonvested
      at April 30, 2008 | 338,490  |   |       | $       

Income Taxes

Deferred taxes are
recorded for the difference between the financial statement and tax basis of the
Companys assets and liabilities and net operating loss carryforwards. A
valuation allowance is recorded to reduce deferred tax assets to an amount whose
realization is more likely than not. U.S. income taxes are not provided on the
undistributed earnings of foreign subsidiaries as they are considered to be
permanently invested.

Income (loss) Per Share

Statement of Financial
Accounting Standards 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. Potential common shares in the diluted
EPS computation are excluded for fiscal year 2007 as their effect would be
antidilutive.

57

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*Comprehensive Income (loss)*

Comprehensive income
(loss) includes net income (loss) and comprehensive income (loss). The Companys
components of other comprehensive income (loss) are gains and losses on foreign
currency translation.

Segment Reporting

The Company maintains
two segments that sell and market application development software and related
services. The segments are the Americas, which include the Companys
international distributors, and Europe, which includes the UK, France, Germany
and other direct European customers.

Recently Issued Accounting Standards

In February 2006, the
FASB issued SFAS No. 155,Accounting for Certain Hybrid
Financial Instruments  An Amendment of FAS Statements No. 133 and
150. SFAS No. 155: (a) permits fair value re-measurement
for any hybrid financial instrument that contains an embedded derivative that
otherwise would require bifurcation, (b) clarifies that certain instruments are
not subject to the requirements of SFAS 133, (c) establishes a requirement to
evaluate interests in securitized financial assets to identify interests that
may contain an embedded derivative requiring bifurcation, (d) clarifies what may
be an embedded derivative for certain concentrations of credit risk, and (e)
amends SFAS 140 to eliminate certain prohibitions related to derivatives on a
qualifying special-purpose entity. SFAS No. 155 became effective for the Company
in the first quarter of fiscal year 2008 and did not have a material impact on
our financial position, cash flows or results of operations.

In
June 2006, the FASB issued Interpretation (FIN) No. 48,Accounting for Uncertainty in Income Taxes - AnInterpretation of FASB Statement No. 109. This
Interpretation prescribes a recognition threshold and measurement attribute for
the financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return, and provides guidance on derecognition
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. FIN No. 48 is effective for fiscal years beginning
after December 15, 2006 and was applicable for Unify in the first quarter of
fiscal year 2008. The adoption of FIN No. 48 did not have a material impact on
our financial position, cash flows or results of operations.

In
September 2006, the FASB issued Statement No. 157,Fair
Value Measurements (SFAS 157). SFAS 157 defines fair
value, establishes a framework and gives guidance regarding the methods used for
measuring fair value, and expands disclosures about fair value measurements.
SFAS 157 is effective for financial statements issued for fiscal years beginning
after November 15, 2008, and interim periods within those fiscal years. We are
currently assessing the impact, if any, of SFAS 157 on our consolidated
financial statements.

In
February 2007, the FASB issued SFAS No. 159,The Fair
Value Option for Financial Assets and Financial Liabilities (SFAS
159). SFAS 159 provides companies with an option to
report selected financial assets and liabilities at fair value at specified
election dates. SFAS 159 is effective for fiscal years beginning after November
15, 2007. We are currently assessing the

In
December 2007, the FASB issued Statement No. 160,Noncontrolling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51. The standard changes the
accounting for noncontrolling (minority) interests in consolidated financial
statements including the requirements to classify noncontrolling interests as a
component of consolidated stockholders equity, and the elimination of minority
interest accounting in results of operations with earnings attributable to
noncontrolling interests reported as part of consolidated earnings.
Additionally, Statement 160 revises the accounting for both increases and
decreases in a parents controlling ownership interest. Statement 160 is
effective for fiscal years beginning after December 15, 2008, with early
adoption prohibited. We are currently assessing the impact, if any, of SFAS 160
on our consolidated financial statements.

In
December 2007, the FASB issued SFAS No. 141 (revised),Business Combinations. The standard changes the
accounting for business combinations including the measurement of acquirer
shares issued in consideration for a business combination, the recognition of
contingent consideration, the accounting for pre-acquisition gain and loss
contingencies, the recognition of capitalized in-process research and
development, the accounting for acquisition-related restructuring cost accruals,
the treatment of acquisition related transaction costs and the recognition of
changes in the acquirers income tax valuation allowance. Statement 141(R) is
effective for fiscal years beginning after December 15, 2008, with early
adoption prohibited. We are currently assessing the impact, if any, of SFAS
141(R) on our consolidated financial statements.

58

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In
March 2008, the FASB issued Statement No. 161,Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133.
(SFAS No. 161). SFAS No. 161 requires enhanced disclosures about an entitys
derivative instruments and hedging activities with a view toward improving the
transparency of financial reporting, and is effective for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008,
with early application encouraged. SFAS No. 161 encourages, but does not
require, comparative disclosures for earlier periods at initial adoption. We are
currently evaluating the impact of adopting SFAS No. 161 on our consolidated
financial statements.

On
May 9, 2008, the FASB issued FASB Staff Position No. APB 14-1(FSP APB 14-1),Accounting for Convertible Debt Instruments That May Be
Settled in Cash Upon Conversion (Including Partial Cash
Settlement. FSP APB 14-1 requires issuers of convertible
debt that may be settled wholly or partly in cash when converted to account for
the debt and equity components separately. FSP APB 14-1 is effective for fiscal
years beginning after December 15, 2008 and must be applied retrospectively to
all periods presented. We are currently assessing the impact, if any, of FSP APB
14-1 on our consolidated financial statements.

Reclassifications

Certain items in the
fiscal 2007 and 2006 consolidated financial statements have been reclassified to
conform to the fiscal 2008 presentation. These reclassifications had no effect
on operating results or stockholders equity.

Note 2. Acquisitions and Discontinued
Operations

On March 14, 2006, the
Company entered into an Agreement and Plan of Merger with Halo Technology
Holdings Inc. (Halo). Under the terms of the merger agreement Halo would
acquire all of the outstanding stock of Unify. On September 13, 2006, Halo and
Unify entered into a Termination Agreement terminating the merger
agreement.

On September 13, 2006,
the Company entered into a Purchase and Exchange Agreement with Halo whereby
Unify agreed to purchase all of the outstanding stock of Gupta Technologies LLC
(Gupta) from Halo in exchange for: (i) the Companys Insurance Risk Management
(IRM) division, (ii) the Companys ViaMode software, (iii) $6,100,000 in cash,
and (iv) the amount, if any, by which Guptas net working capital exceeds IRMs
net working capital at the close of the transaction. The Companys acquisition
of Gupta was consummated on November 20, 2006. The total purchase price for
Gupta was $7.7 million. Gupta was founded in 1984 and is a leading producer of
secure, small-footprint, embeddable databases and enterprise application
development tools. The acquisition resulted in additional revenue and market
share in the Companys core markets and significantly enhanced the distribution
channels through which the Companys products can be sold. Guptas headquarters
was in Redwood Shores, California with offices in Germany and the UK and has
distributors and partners in more than 40 countries around the world. Guptas
results of operations are included in the Companys results from the date of
acquisition, November 20, 2006, to April 30, 2008.

On November 20, 2006,
the Company entered into various agreements with ComVest Capital LLC (ComVest)
whereby ComVest, along with participation from Special Situations Funds,
provided debt financing for the Gupta acquisition. The debt financing consisted
of $5.35 million in convertible term notes and a revolver of up to $2.5 million.
There are three tranches that comprise the convertible term notes, Tranche 1 is
for $1,000,000, Tranche 2 is for $3,250,000 and Tranche 3 is for $1,100,000. The
term loans had an initial interest rate of 11.25% and have repayment terms of 48
to 60 months. The agreement was modified in April 2008 whereby the interest rate
on the term loans has been decreased to 5% and all principal payments have been
deferred until June 2009. As part of the debt financing the Company provided the
lenders with 670,000 warrants to purchase common stock. There are 200,000
warrants to purchase common stock at a price of $1.35 per share, 270,000
warrants at a price of $1.60 per share and 200,000 warrants at a price of $1.90
per share. The warrants have an expiration date of October 31, 2012.
Additionally, the holder of the term notes may, at their option, upon written
notice to Unify given at any time and from time to time from the date Unify has
sufficient authorized, unissued and unreserved shares of common stock convert
the outstanding principal and any accrued interest into shares of Unify common
stock. Tranche 1 is convertible at $2.50 per common share and Tranches 2 and 3
are convertible at $5.00 per common share. Unify may require conversion of the
convertible term notes if its common stock price closes at or above 160% of the
applicable conversion price for 20 or more consecutive market days. In October
2007, the outstanding balance for Tranche 1 of $0.9 million was converted into
352,380 shares of common stock. Additionally, in fiscal 2008, $1.6 million of
the outstanding balance of Tranche 2 and $0.5 million of the outstanding balance
of Tranche 3 was converted into 424,670 shares of common stock. The agreement
provides for ComVest to have a security interest in substantially all of the
Companys assets. We capitalized $238,000 of debt issuance costs associated with
the debt financing and also recorded a discount on the notes payable of
approximately $743,000 that is attributed to the warrants that were issued in
conjunction with the financing. The debt issuance costs and the discount on
notes payable are being amortized using the effective interest method over the
stated life of the related notes. The amortization of both the debt issuance
costs and the discount on the notes payable was approximately $345,000 in fiscal
2008 and is included in interest expense. The unamortized amount of the discount
on the notes payable was $76,000 as of April 30, 2008 and is included in
long-term debt, net. As of April 30, 2008 the unamortized portion of debt
issuance costs was $60,000 which is included in other assets, net.

59

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The Gupta purchase
price was allocated to tangible and intangible assets acquired and liabilities
assumed based on their estimated fair values at the acquisition date, November
20, 2006. The determination of goodwill and intangibles is based on the results
of an independent valuation experts report. The excess of the purchase price
over the fair value of net assets acquired was allocated to goodwill. The
Company believes the fair values assigned to the assets acquired and liabilities
assumed were based on reasonable assumptions. The following table summarizes the
fair values of net assets acquired and represents the opening balance sheet for
Gupta Technologies LLC as of the acquisition date, November 20, 2006 (in
thousands):

|Current
      assets                       | $ | 1,281 
|------------------------------------------ | - | ------
|Property and equipment,
      net          |   | 99    
|Long term
      assets                     |   | 71    
|Goodwill                                   |   | 6,161 
|Intangibles                                |   | 2,950 
|Total assets                               | $ | 10,562
|                                          
|Current
      liabilities                  |   | 2,844 
|Long term
      liabilities                |   | 18    
|Shareholders' equity                       |   | 7,700 
|Total liabilities and shareholders' equity | $ | 10,562

Unaudited Pro Forma Financial
Information

The unaudited
financial information in the table below summarizes the combined results of the
operations of Unify and Gupta, on a pro forma basis, as though the companies had
been combined as of May 1, 2006. The pro forma information gives effect to the
acquisition of Gupta and the sale of both the Companys IRM division and its
ViaMode Product. The pro forma information also assumes the financing raised in
connection with the acquisition took place on May 1, 2006.

The unaudited pro forma
financial information combines the historical results of Unify for the twelve
months ended April 30, 2007 and 2006 and due to differences in our reporting
periods, the historical results of Gupta for the twelve months ended June 30,
2006 and the six months September 30, 2006.

|                                      |  | Year ended April 30,
|------------------------------------- |  | --------------------
|(in thousands, except per share data) |  | 2007                
|Total
      revenues                  |  | $                   
|Net income                            |  | $                   
|Basic net
      income per share      |  | $                   
|Diluted net income per
      share    |  | $                   

The unaudited pro
forma information is not necessarily indicative of the operational results, or
of the financial position that would have occurred if the acquisition had been
consummated on the dates indicated, nor is it necessarily indicative of future
operating results or financial position of the consolidated
enterprise.

60

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***Active Data
Corporation***

On May 22, 2007, the
Company purchased privately held Active Data Corporation (ADC) for
approximately $420,000 plus potential earn-out payments over a two year period
following the acquisition. ADC provided application migration software that
added Microsofts .NET functionality to Unifys Team Developer product and
provided an additional application migration solution for the Company. Pursuant
to the terms of the purchase agreement, Unify acquired all the outstanding stock
of ADC. ADC did not represent the addition of a significant subsidiary as the
investment in ADC was less than 10% of the Companys assets, ADCs total assets
at date of acquisition were less than 10% of Unifys assets and ADCs net loss
represented less than 10% of Unifys net loss. The acquisition of Active Data
did not have a material impact on the financials of Unify and the results of
operations for Active Data Corporation are included in the Companys results
from the date of acquisition. The ADC purchase price was allocated to tangible
and intangible assets acquired and liabilities assumed based on their estimated
fair values. The determination of goodwill and intangibles is based on the
results of a report prepared by an independent valuation expert. The excess of
the purchase price over the fair value of net assets acquired was allocated to
goodwill. The Company believes the fair values assigned to the assets acquired
and liabilities assumed were based on reasonable assumptions.

61

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Discontinued Operations

In accordance with
SFAS No. 144,Accounting for the Impairment or Disposal
of Long-Lived Assets,the results of the Companys IRM
division and ViaMode software product have been reported as discontinued
operations for the years ended April 30, 2007 and 2006, respectively.

In addition, the assets
and liabilities of the IRM division and the ViaMode software product have been
reclassified as held for sale in the Balance Sheet at April 30, 2006. The
divestitures of these businesses were made pursuant to the Companys strategy to
refocus on its core software development and embedded database
products.

The IRM division sold
and marketed the NavRisk application. The NavRisk application is a policy
administration and underwriting software application used by underwriters,
administrators and risk managers of risk pools, risk retention groups, captives
and self-insured entities. ViaMode is a software and services solution that is
used for driver performance management within the transportation industry. Both
IRM and ViaModes historic revenues were the result of sales solely in North
America. The IRM division was previously reported as a separate segment and
ViaMode was included in the Americas segment. Operating results for the IRM
division and ViaMode software product are summarized as follows (in
thousands):

|                                        | Year ended April 30,
|--------------------------------------- | --------------------
|                                        | **2008**            
|Revenue                                 | $                   
|Loss from discontinued
      operations | $                   

Assets and
liabilities of the IRM division and the ViaMode product as of April 30, 2006
were as follows (in thousands):

|                                                | **April
      30,**
|----------------------------------------------- | -------------------
|                                                | **2006**           
|Accounts
      receivable                       | $                  
|Other assets                                    |                    
|Property
      and equipment, net               |                    
|Intangibles, net                                |                    
|Goodwill                                        |                    
|Total assets                                    | $                  
|                                               
|Accounts
      payable                          | $                  
|Other accrued
      liabilities                 |                    
|Accrued
      compensation and related expenses |                    
|Deferred revenue                                |                    
|Total
      liabilities                         | $                  

Intangibles, net of
amortization and goodwill disposed of in the divestiture of the IRM division
amounted to $212,000 and $1,405,000, respectively. No amortization expense was
recorded once the related assets were held for sale, prior to their divestiture
on November 20, 2006. The ViaMode software asset had no intangibles or goodwill
associated with it.

62

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Note 3.Property and Equipment

Property and equipment at April 30,
2008 and 2007 consisted of the following (in thousands):

|                                                     | 2008 |        | 2007
|---------------------------------------------------- | ---- | ------ | ----
|Equipment                                            | $    | 1,962  |     
|Furniture and
      leasehold improvements           |      | 863    |     
|                                                     |      | 2,825  |     
|Less accumulated
      depreciation and amortization |      | (2,479 | )   
|Property and equipment, net                          | $    | 346    |     

Note 4.Other Investments

Other
investments represent stock in closely held companies, which are accounted for
under the cost method. The Companys ownership interest in both Arango Software
International, Inc. (Arango) and Unify Japan KK, is less than 15%.

At April 30, 2008 and 2007 other
investments consisted of the following (in thousands):

|                                    | 2008 |   | **2007**
|----------------------------------- | ---- | - | --------
|Arango Software International, Inc. | $    |  |         
|Unify Japan
      KK                |      |  |         
|                                    | $    |  |         

Unify Japan
KK is a Japanese corporation that is a master distributor for the Company in
Japan. Sales to Unify Japan KK in fiscal 2008 and 2007 were $0.2 million for
both periods, respectively. Accounts receivable from Unify Japan KK as of April
30, 2008 and 2007 were $12,600 and $7,900, respectively.

At April 30,
2008, we had no long-term investments. The Company held a minority interest in
Arango, a privately held corporation located in Panama. In September 2007, the
Company sold all of its stock in Arango as part of a stock repurchase plan
offered by Arango. At the time of the sale, the Company had a carrying value of
$175,000 for the Arango stock. Proceeds from the sale of the Arango stock were
$264,000. The gain on the sale of the Arango stock is included in other income.
The Company records an investment impairment charge if and when the Company
believes an investment has experienced a decline in market value that is other
than temporary. Several factors can trigger an impairment review such as
significant underperformance relative to expected historical or projected future
operating results and significant negative industry or economic trends. In
assessing potential impairment for such investments, we consider these factors
as well as the forecasted financial performance. In April 2008, we wrote off our
investment in Unify Japan of $39,000 based on our assessment that there was a
permanent decline in value for this investment.

63

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Note 5. Goodwill and Intangible
Assets

The
following tables present details of the Companys goodwill and intangible assets
as of April 30, 2008 and April 30, 2007 (in thousands). The April 30, 2007
amounts relate entirely to the purchase of Gupta Technologies LLC and the sale
of the Companys IRM division on November 20, 2006. See Note 2. The April 30,
2008 amounts relates to the purchase of Gupta Technologies LLC and Active
Data.

|                   |  | **Gross**    |       |              |   |          |   | Net             |   |      
|------------------ |  | ------------ | ----- | ------------ | - | -------- | - | --------------- | - | -----
|                   |  | **carrying** |       | Accumulated  |   | carrying |   | **Estimated**  
|**April 30, 2008** |  | **amount**   |       | amortization |   | amount   |   | **useful life**
|Infinite Lives:    |  |              |       |              |   |          |   |                 |   |      
|Goodwill           |  | $            | 5,643 |              | $ |         |   |                 | $ | 5,643
|Finite Lives:      |  |              |       |              |   |          |   |                 |   |      
|Customer - related |  |              | 1,500 |              |   | (425     | ) |                 |   | 1,075
|Technology-based   |  |              | 1,050 |              |   | (372     | ) |                 |   | 678  
|Trademarks         |  |              | 300   |              |   | (106     | ) |                 |   | 194  
|Trade name         |  |              | 100   |              |   | (100     | ) |                 |   |     
|Technologies       |  |              | 288   |              |   | (66      | ) |                 |   | 222  
|Customer lists     |  |              | 36    |              |   | (8       | ) |                 |   | 28   
|Total              |  | $            | 8,917 |              | $ | (1,077   | ) |                 | $ | 7,840

|                     |  | **Gross**    |       |              |   |          |   | Net             |   |      
|-------------------- |  | ------------ | ----- | ------------ | - | -------- | - | --------------- | - | -----
|                     |  | **carrying** |       | Accumulated  |   | carrying |   | **Estimated**  
|April 30,
      2007 |  | **amount**   |       | amortization |   | amount   |   | **useful life**
|Infinite Lives:      |  |              |       |              |   |          |   |                 |   |      
|Goodwill             |  | $            | 5,283 |              | $ |         |   |                 | $ | 5,283
|Finite Lives:        |  |              |       |              |   |          |   |                 |   |      
|Customer - related   |  |              | 1,500 |              |   | (125     | ) |                 |   | 1,375
|Technology-based     |  |              | 1,050 |              |   | (109     | ) |                 |   | 941  
|Trademarks           |  |              | 300   |              |   | (31      | ) |                 |   | 269  
|Trade name           |  |              | 100   |              |   | (42      | ) |                 |   | 58   
|Total                |  | $            | 8,233 |              | $ | (307     | ) |                 | $ | 7,926

Acquired
finite-lived intangibles are generally amortized on a straight line basis over
their estimated useful life. The useful life of finite-lived intangibles is the
period over which the asset is expected to contribute directly or indirectly to
future cash flows of the Company. Intangible assets amortization expense for
continuing operations for fiscal 2008 was $770,000 and was related to the Gupta
and Active Data acquisitions. Amortization expense for the fiscal year ended
April 30, 2007, was $307,000 and was related entirely to the Gupta acquisition.
The estimated future amortization expense related to intangible assets as of
April 30, 2008, is as follows (in thousands):

|Fiscal Year Ending April
      30, |  | Amount
|---------------------------------- |  | ------
|2009                               |  |       
|2010                               |  |       
|2011                               |  |       
|2012                               |  |       
|2013                               |  |       
|Total                              |  | $     

64

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Goodwill is included in the
Companys Americas segment as part of corporate assets. Goodwill at April 30,
2008, represents the excess of the Gupta and Active Data Corporation purchase
prices over the sum of the amounts assigned to assets acquired less liabilities
assumed. The initial determination of goodwill and intangibles was based on the
results of an independent valuation experts report. The Company believes the
acquisition of Gupta and Active Data Corporation will produce the following
results:

- *Increased Market Presence and Opportunities:*The combination of the Company, Gupta and Active Data should
  increase the combined companys market presence and opportunities for growth
  in sales and earnings.
- *Enhanced Product Mix:*The
  complementary nature of the Companys products with those of Gupta and Active
  Data should benefit current customers of both companies and provide the
  combined company with the ability to access new customers.
- *Operating Efficiencies:*The
  combination of the Company, Gupta and Active Data provides the opportunity for
  potential economies of scale and cost savings.

The Company
believes these primary factors support the amount of goodwill recognized as a
result of the purchase price for Gupta and Active Data. Goodwill is tested for
impairment on an annual basis as of April 30, and between annual tests if
indicators of potential impairment exist, using a fair-value-based approach in
accordance with FASB 142,Goodwill and Other
Intangible Assets. Based on our testing as of
April 30, 2008, we do not believe goodwill is impaired and accordingly have made
no adjustments to its carrying value.

Note 6. Credit Facility

On November
3, 2006, the Companys revolving line of credit with Silicon Valley Bank expired
and was not renewed. At the expiration the Company had no amounts outstanding on
the line of credit.

On November
20, 2006, the Company entered into a revolving credit note agreement with
ComVest Capital LLC. Under the terms of the agreement the Company can borrow up
to $2.5 million. As of April 30, 2008, there was no amount outstanding on the
revolver. The amount that can be borrowed under the revolver is based on the
amount of eligible foreign and domestic accounts receivable outstanding. The
revolver has an expiration date of November 30, 2010, and the Company incurs
interest expense on funds borrowed at the prevailing prime rate plus 2.25% per
annum (7.25% as of April 30, 2008).

65

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Note 7. Long-Term Debt

The Companys debt consists of the
following at April 30, 2008 and April 30, 2007 (in thousands):

|                                                                                    | April 30, |       | **April 30,**
|----------------------------------------------------------------------------------- | --------- | ----- | -------------
|                                                                                    | **2008**  |       | **2007**     
|Convertible notes payable to ComVest Capital LLC, interest rate of
      5%,        |           |       |              
|payable in installments through October 31, 2011. These notes
      include certain |           |       |              
|negative covenants and the Company is in compliance with such
      covenants.      | $         | 1,400 |              
|                                                                                   
|Revolving note payable to ComVest Capital LLC, interest rate of
      prime plus    |           |       |              
|2.25% and a maturity date of November 30, 2010                                      |           |      |              
|                                                                                   
|Capital leases payable, payable in monthly installments through
      June 2010     |           | 18    |              
|                                                                                    |           | 1,418 |              
|Less discount on notes payable, net                                                 |           | (76   | )            
|Less current
      portion                                                          |           | (8    | )            
|Total long term debt, net                                                           | $         | 1,334 |              

A summary of long term debt
obligations as April 30, 2008 is as follows (in thousands):

|Fiscal Year Ending April
      30,          |  | Amount
|------------------------------------------- |  | ------
|2009                                        |  | $     
|2010                                        |  |       
|2011                                        |  |       
|Thereafter                                  |  |       
|                                            |  |       
|Unamortized
      discount on notes payable |  |       
|Current portion of long term debt           |  |       
|Total long term
      debt, net             |  | $     

In January
2008, the Company entered into a lease agreement for office furniture. The lease
is expected to commence in July 2008 and will be recorded as a capital lease in
the amount of $115,000.

Note 8. Other Long Term
Liabilities

In France,
the Company is subject to mandatory employee severance costs associated with a
statutory government regulated plan covering all employees. The plan provides
for one month of severance for the first five years of service with an employer
and one fifth of one year of severance for every one year of service thereafter.
In order to receive their severance payment the employee may not retire before
age 65 and must be employed at the time of retirement. The balance as of April
30, 2008 and 2007 is $121,000 and $108,000, respectively and is reflected as
other long-term liabilities. Also, included in other long term liabilities as of
April 30, 2008 is $115,000 related to the onetime charge associated with
abandoning the German office and $219,000 of deferred tax
liabilities.

66

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Note 9. Maintenance
Contracts

The Company
offers maintenance contracts to its customers at the time they enter into a
product license agreement and renew those contracts, at the customers option,
annually thereafter. These maintenance contracts are priced as a percentage of
the value of the related license agreement. The specific terms and conditions of
these initial maintenance contracts andsubsequent renewals vary depending upon the product licensed and the
country in which the Company does business. Generally, maintenance contracts
provide the customer with unspecified product maintenance updates and customer
support services. Revenue from maintenance contracts is initially deferred and
then recognized ratably over the term of the agreements.

Changes in
the Companys deferred maintenance revenue from continuing operations during the
periods are as follows (in thousands):

|                                                            | **Year Ended** |         | Year Ended |  | Year Ended
|----------------------------------------------------------- | -------------- | ------- | ---------- |  | ----------
|                                                            | **April 30,**  |         | April 30,  |  | April 30, 
|                                                            | **2008**       |         | 2007       |  | 2006      
|Deferred maintenance revenue beginning balance              | $              | 5,500   |            |  | $         
|Deferred
      maintenance revenue recognized during period |                | (10,551 | )          |  |           
|Deferred maintenance revenue of new maintenance             |                |         |            |  |           
|Contracts                                                   |                | 11,181  |            |  |           
|Deferred maintenance revenue ending balance                 | $              | 6,130   |            |  | $         

Note 10. Stockholders
Equity

Preferred Stock

The Company
may issue up to 7,931,370 shares of preferred stock in one or more series upon
authorization by its board of directors. The board of directors, without further
approval of the stockholders, is authorized to fix the dividend rights and
terms, conversion rights, voting rights, redemption rights and terms,
liquidation preferences, and any other rights, preferences, privileges and
restrictions applicable to each series of preferred stock.

Stock Option Plan

Under the
2001 Stock Option Plan (the 2001 Option Plan), the Company may grant options
to purchase up to 1,200,000 shares of common stock to eligible employees,
directors, and consultants at prices not less than the fair market value at the
date of grant for incentive stock options and not less than 85% of the fair
market value at the date of grant for non-statutory stock options. Options
granted under the 2001 Stock Option Plan generally vest over four years, are
exercisable to the extent vested, and expire 10 years from the date of grant. In
fiscal year 2008, we granted 237,000 option shares to the management team
outside of the 2001 Stock Option Plan. Under the 1991 Stock Option Plan (the
1991 Option Plan) which expired as of March 2001, the Company was able to
grant options to eligible employees, directors and consultants at prices not
less than the fair market value at the date of grant for incentive stock options
and not less than 85% of the fair market value at the date of grant for
non-statutory stock options. Options granted under the 1991 Option Plan
generally vest over four years, are exercisable to the extent vested, and expire
10 years from the date of grant.

67

---

A summary of stock option activity
is as follows:

|                                                     |               |   |              | **Weighted**
|---------------------------------------------------- | ------------- | - | ------------ | ------------
|                                                     |               |   |              | **Average** 
|                                                     | **Number of** |   | **Exercise**
|                                                     | Shares        |   | **Price**   
|Outstanding at April 30, 2005                        | 568,476       |   |              | 4.60        
|Granted
      (weighted average fair value of $1.55) | 95,000        |   |              | 1.90        
|Exercised                                            | (62,523       | ) |              | 1.75        
|Cancelled/expired                                    | (71,971       | ) |              | 8.10        
|Outstanding at April 30, 2006                        | 528,982       |   |              | 4.10        
|Granted
      (weighted average fair value of $1.35) | 79,000        |   |              | 1.35        
|Exercised                                            | (85,080       | ) |              | 1.80        
|Cancelled/expired                                    | (69,660       | ) |              | 11.45       
|Outstanding at April 30, 2007                        | 453,242       |   |              | 2.90        
|Granted
      (weighted average fair value of $3.58) | 393,300       |   |              | 3.58        
|Exercised                                            | (13,390       | ) |              | 1.67        
|Cancelled/expired                                    | (73,135       | ) |              | 3.41        
|Outstanding at April 30, 2008                        | 760,017       |   |              | 3.23        

Additional information regarding
options outstanding at April 30, 2008 is as follows:

|  |                                |  |                 | Options
    Outstanding |                        | Options
    Exercisable
|- | ------------------------------ |  | --------------- | ----------------------- | ---------------------- | -----------------------
|  |                                |  |                 |                         |                        | **Average**            
|  |                                |  |                 |                         |                        | **Remaining**          
|  |                                |  |                 | **Number**              |                        | **Contractual**        
|  | Range of Exercise
      Prices |  | **Outstanding** |                         | **Life
      (Years)** |                        
|$ | 1.10 - 1.30                    |  | 130,500         |                         | 4.66                   |                        
|  | 1.40 - 1.85                    |  | 98,635          |                         | 7.58                   |                        
|  | 1.95 - 2.40                    |  | 79,475          |                         | 8.08                   |                        
|  | 2.45 - 2.50                    |  | 7,200           |                         | 7.61                   |                        
|  | 2.55 - 2.55                    |  | 183,800         |                         | 9.00                   |                        
|  | 2.70 - 3.35                    |  | 82,600          |                         | 4.17                   |                        
|  | 3.65 - 5.00                    |  | 13,700          |                         | 7.56                   |                        
|  | 5.20 - 5.20                    |  | 135,000         |                         | 9.58                   |                        
|  | 5.70 - 32.50                   |  | 29,558          |                         | 4.72                   |                        
|  | 44.06 - 44.06                  |  | 300             |                         | 1.96                   |                        

Options to purchase 422,278 and
379,573 shares at weighted average prices of $3.06 and $4.80 were exercisable at
April 30, 2008 and 2007. At April 30, 2008, there were 669,314 shares reserved
for future grants under the Stock Option Plan.

Restricted Stock

On May 1,
2002, the Company established the 2002 Director Restricted Stock Plan (Director
Restricted Stock Plan) as part of a compensation program designed to attract
and retain independent members for our board of directors. The maximum aggregate
number of shares of common stock that may be issued under the Director
Restricted Stock Plan is 100,000. There were no shares awarded under the plan in
fiscal 2008 or fiscal 2007 leaving a balance of 3,862 shares reserved for future
awards at April 30, 2008.

68

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Private Placement

On April 23,
2004, the Company issued through a private placement 1,126,780 shares of common
stock to a group of institutional investors at a price of $3.55 per share and
5-year warrants to purchase an aggregate of 450,712 shares of common stock at an
exercise price of $4.50 per share. Net proceeds from the private placement were
$3,696,000, net of estimated accrued costs of $304,000. The Companys actual
costs for the private placement were $397,000 which resulted in a further
reduction of additional paid-in-capital of $93,000 during fiscal
2005.

Due to the
initial issuance of shares in the acquisition of Acuitrek in February 2005,
which caused the application of the anti-dilution provision of the warrants, the
warrant exercise price has been adjusted to $4.45 per share and the total number
of warrant shares purchasable on exercise of the warrants has increased to
454,543 shares. The debt financing on November 20, 2006 in conjunction with the
acquisition of Gupta Technologies LLC (see Note 2) also caused the application
of the anti-dilution provision and the warrant exercise price was adjusted to
$4.15 per share and the number of warrant shares purchasable on exercise of the
warrants has increased to 487,387 shares. Under certain circumstances, where the
closing bid price of a share of common stock equals or exceeds $9.00,
appropriately adjusted for any stock split, reverse stock split, stock dividend
or other reclassification or combination of common stock, for 20 consecutive
trading days commencing after the registration statement covering the warrants
shares has been declared effective, the Company, upon 20 days prior written
notice to the warrant holders within one business day immediately following the
end of such 20 day trading period, may call the warrants for 25% of the shares
of the common stock initially purchasable pursuant to the warrants at a
redemption price equal to $0.05 per share of common stock then purchasable
pursuant to the warrants. If the call conditions are met again during the 30 day
period immediately after consummation of a previous call, the Company may once
again call the warrants for an additional increment of 25% of the shares of
common stock initially purchasable pursuant to the warrants or such less amount
as shall then remain purchasable and in the same manner and subject to the same
notice requirements as the initial call, until all of the shares have been
called.

Reverse Stock Split

On June 24,
2007, the Company implemented a 1 for 5 reverse stock split. The reverse stock
split had been previously approved by the Companys stockholders as part of the
Companys March 29, 2007 Annual Meeting.

Note 11. Income Taxes

For fiscal
2008, the Company recorded $89,000 for foreign tax expense and $235,000 for
state or federal taxes. For fiscal 2007, the Company recorded $82,000 for
foreign tax expense and no expense for state or federal taxes. For fiscal 2006,
the Company recorded no state, federal or foreign tax expense.

Income
(loss) from continuing operations before income taxes and provision for income
taxes, which consisted solely of current tax expense, for the years ended April
30 were as follows (in thousands):

|                                        | **2008** |       | **2007** |  | **2006**
|--------------------------------------- | -------- | ----- | -------- |  | --------
|Domestic                                | $        | 1,997 |          |  |         
|Foreign                                 |          | (42   | )        |  |         
|Total income (loss) before income taxes | $        | 1,955 |          |  |         
|                                       
|Foreign taxes                           | $        | 89    |          |  | $       
|Federal and
      state income taxes    |          | 235   |          |  |         
|Provision (benefit) for income taxes    | $        | 324   |          |  | $       

|69
|--

---

The
provision for income taxes for the years ended April 30, 2008, 2007 and 2006
differs from the amounts computed by applying the statutory U.S. federal income
tax rate to pretax loss as a result of the following (in thousands):

|                                                            | 2008 |      | 2007 |  | 2006
|----------------------------------------------------------- | ---- | ---- | ---- |  | ----
|Computed tax benefit                                        | $    | 665  |      |  | $   
|Increases
      (reductions) in tax expense resulting from: |      |      |      |  |     
|Change in valuation allowance for deferred tax
      assets |      | (298 | )    |  |     
|Expiration of net operating loss carryforwards              |      |     |      |  |     
|Change in deferred revenue                                  |      |     |      |  |     
|Other                                                       |      | (43  | )    |  |     
|Provision for income taxes                                  | $    | 324  |      |  | $   

The Company
provides deferred income taxes which reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and for income tax purposes. Significant components of the
Companys deferred tax assets and liabilities at April 30 were as follows (in
thousands):

|                                            | 2008 |         | 2007
|------------------------------------------- | ---- | ------- | ----
|Deferred tax assets (liabilities):          |      |         |     
|Non-current
      assets                    |      |         |     
|Net operating loss carryforwards            | $    | 16,008  |     
|Capital loss carryforward                   |      | 1,695   |     
|Foreign tax credits                         |      | 81      |     
|Fixed assets and other intangibles          |      | 172     |     
|Others                                      |      | 185     |     
|Current
      assets                        |      |         |     
|Deferred revenue                            |      |        |     
|Allowance for losses on accounts receivable |      | 66      |     
|Reserves and other accruals                 |      | 107     |     
|Total deferred tax assets                   | $    | 18,314  |     
|Valuation allowance                         |      | (18,314 | )   
|Non-current
      liabilities               |      |         |     
|Goodwill                                    |      | (219    | )   
|Net deferred tax
      assets (liabilities) | $    | (219    | )   

Realization
of deferred tax assets is dependent upon future earnings, the timing and amount
of which are uncertain. Accordingly, the net deferred tax assets have been fully
offset by a valuation allowance. The valuation allowance increased by $298,000
in fiscal 2008, increased by $14.3 in fiscal 2007 and decreased by $15.6 million
in fiscal 2006. At April 30, 2008, the Company had approximately $44.4 million
in federal net operating loss carryforwards that begin to expire in fiscal year
2008 through 2027, approximately $11.0 million in state net operating loss
carryforwards that expire in fiscal years 2013 to 2017, approximately $0.7
million in foreign net operating loss carryforwards that do not expire and
approximately $4.3 million in capital loss carryforwards that expire in 2010.
The Companys ability to utilize these net operating loss carryforwards may be
subject to certain limitations in the event of a change in ownership.

FIN 48 Disclosure

The Company adopted the provisions
of FASB Interpretation (FIN) No. 48,Accounting for Uncertainty in Income Taxes, on May 1, 2007. As required by Interpretation 48, which clarifies
Statement 109,Accounting for Income
Taxes, the Company recognizes the financial
statement benefit of a tax position only after determining that the relevant tax
authority would more likely than not sustain the position following an audit.
For tax positions meeting the more-likely-than-not threshold, the amount
recognized in the financial statements is the largest benefit that has a greater
than 50 percent likelihood of being realized upon ultimate settlement with the
relevant tax authority. At the adoption date, the Company applied Interpretation
48 to all tax positions for which the statute of limitations remained open.

70

---

As the result of implementation of
FIN 48, the company recognized no change in the liability for unrecognized tax
benefits related to tax positions taken in prior periods. All positions taken on
the US and foreign tax returns with respect to any book-tax adjustments were
deemed highly certain.

The Company is subject to income
taxes in the U.S. federal jurisdiction, and various states and foreign
jurisdictions. Tax regulations within each jurisdiction are subject to the
interpretation of the related tax laws and regulations and require significant
judgment to apply. In general, the Company is no longer subject to U.S. federal,
state and local, or non-U.S. income tax examinations by tax authorities for the
fiscal years before 2004. The Company does not believe there will be any
material changes in its unrecognized tax positions over the next 12 months.
Therefore, no reserves for uncertain income tax positions have been recorded
pursuant to FIN No. 48. The adoption of FIN No. 48 did not have a material
effect on the Companys consolidated financial position or results of
operations.

The Companys policy is to
recognized interest and penalties accrued on any unrecognized tax benefits as a
component of income tax expense. As of April 30, 2008, the Company did not have
any accrued interest or penalties associated with any unrecognized tax benefits,
nor did the Company record any interest expense in the three months ended April
30, 2008.

Note 12. Other Income
(Expenses)

Other income (expenses), net for the
years ended April 30, consisted of the following (in thousands):

|                                            | 2008 |     | 2007 |  | 2006
|------------------------------------------- | ---- | --- | ---- |  | ----
|Interest income                             | $    | 12  |      |  | $   
|Foreign currency
      exchange gain (loss) |      | 146 |      |  |     
|Other                                       |      | (28 | )    |  |     
|Other income (expenses), net                | $    | 130 |      |  | $   

Note 13. Earnings (loss) per
Share

Basic earnings per share is computed
by dividing net income (loss) by the weighted average number of common shares
outstanding during the reporting period. Diluted earnings (loss) per share is
computed similar to basic earnings per share except that it reflects the
potential dilution that could occur if dilutive securities or other obligations
to issue common stock were exercised or converted into common stock. For fiscal
2007, because of our reported net loss, potentially dilutive securities were
excluded from the per share computations due to their antidilutive
effect.

|(in
      thousands, except per share amounts)                   | Years Ended April
      30,
|---------------------------------------------------------------- | ---------------------------
|                                                                 | **2008**                   
|Income (loss) from continuing operations                         | $                          
|Loss from
      discontinued operations                          |                            
|Net loss                                                         | $                          
|                                                                
|Weighted average shares of common stock
      outstanding, basic |                            
|Effect of dilutive securities                                    |                            
|Weighted average shares of common stock outstanding, diluted     |                            
|                                                                
|Earnings (loss) per share of common stock:                       |                            
|Basic:                                                           |                            
|Continuing operations                                            | $                          
|Discontinued operations                                          |                            
|Total                                                            | $                          
|                                                                
|Assuming dilution:                                               |                            
|Continuing operations                                            | $                          
|Discontinued operations                                          |                            
|Total                                                            | $                          

71

---

The dilutive
securities above represent only those stock options, warrants and convertible
debt whose exercise prices were less than the average market price of the stock
during the respective periods and therefore were dilutive. The number of shares
of stock options excluded from the above amounts because their exercise prices
exceeded the average market price of the stock during the respective periods was
85,319 in fiscal 2008, 453,200 in fiscal 2007 and 529,000 in fiscal 2006. The
number of shares of common stock warrants excluded from the above amounts
because their exercise prices exceeded the average market price of the stock
during the respective periods was none in fiscal 2008, 1,124,600 in fiscal 2007
and 454,600 in fiscal 2006.

Note 14. Related Party
Transactions

Prior to its
write off in fiscal 2008, Unify had an investment of less than 15% in Unify
Japan KK who is the Companys master distributor in Japan (See Note 4). Sales to
Unify Japan KK in fiscal 2008, 2007 and 2006 were $0.2 million, $0.2 million and
$0.3 million, respectively. Accounts receivable from Unify Japan KK as of April
30, 2008 and 2007 were $12,600 and $7,900, respectively.

Note 15. Employee Retirement
Plan

The Company
maintains a 401(k) profit sharing plan (the 401(k) Plan). Eligible employees
may contribute up to 100% of their pre-tax annual compensation to the 401(k)
Plan, subject to certain statutory limitations. The Company can, at its
discretion, voluntarily match the participating employees contributions not to
exceed 6% of each employees annual compensation. In fiscal years 2008, 2007 and
2006, the Company contributed $114,000, $72,000 and $59,000, respectively, to
the 401(k) Plan.

Note 16. Commitments and
Contingencies

Operating Leases

The Company
leases office space and equipment under non-cancelable operating lease
arrangements expiring at various dates through fiscal 2012. Future minimum
rental payments under these leases as of April 30, 2008 are as follows (in
thousands):

|Years Ending
      April 30, |   |      
|---------------------------- | - | -----
|2009                         | $ | 354  
|2010                         |   | 695  
|2011                         |   | 554  
|2012                         |   | 562  
|2013                         |   | 569  
|Thereafter                   |   | 486  
|                             | $ | 3,220

Rent expense
under operating leases was $1,240,000, $1,095,500 and $1,038,400 for the years
ended April 30, 2008, 2007 and 2006, respectively.

72

---

Litigation

The Company
is subject to legal proceedings and claims that arise in the normal course of
business. If such matters arise, the Company cannot assure that it would prevail
in such matters, nor can it assure that any remedy could be reached on mutually
agreeable terms, if at all. Due to the inherent uncertainties of litigation,
were there any such matters, the Company would not be able to accurately predict
their ultimate outcome. As of April 30, 2008, there were no current proceedings
or litigation involving the Company that management believes would have a
material adverse impact on its financial position, results of operations, or
cash flows.

In January
2008, the Company entered into a lease agreement for office furniture. The lease
is expected to commence in July 2008 and will be recorded as a capital lease in
the amount of $115,000.

Note 17. Segment
Information

FASB
Statement No. 131,Disclosures about Segments
of an Enterprise and Related Information,
establishes standards for reporting information about operating segments.
Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the
chief operating decision maker, or decision making group, in deciding how to
allocate resources and in assessing performance. Our chief operating decision
maker is our Chief Executive Officer. We are organized geographically. While our
Chief Executive Officer evaluates results in a number of different ways, our
geographic structure is the primary basis for which the allocation of resources
and financial results are assessed. The Company maintains two segments that sell
and market application development software and related services.

The segments
are the Americas, which includes the Companys international distributors, and
Europe, including the UK, France, Germany and other direct European customers.
Previously, the Company also maintained a reportable segment for its Insurance
Risk Management (IRM) division. The IRM division sold and marketed the NavRisk
application. In November 2006, the IRM division and the Companys ViaMode
software product were sold. In the tables below, the IRM division and the
Companys ViaMode software product comprise the amounts presented as
discontinued operations.

73

---

Financial
information for the Companys reportable segments is summarized below (in
thousands):

|                                                               | For
      the Twelve Months Ended April 30,
|-------------------------------------------------------------- | -------------------------------------------
|                                                               | 2008                                       
|Total revenues:                                                |                                            
|Americas (1)                                                   | $                                          
|Europe
      (1)                                               |                                            
|Total
      revenues from continuing operations                |                                            
|Total
      revenues from discontinued operations              |                                            
|Total revenues                                                 | $                                          
|                                                              
|Operating income (loss):                                       |                                            
|Americas (2)                                                   | $                                          
|Europe                                                         |                                            
|Total
      operating income (loss) from continuing operations |                                            
|Total
      operating loss from discontinued operations        |                                            
|Total operating loss                                           | $                                          
|                                                              
|Interest income (3)                                            | $                                          
|Interest expense (3)                                           | $                                          
|                                                              
|Total assets by segment were as follows (in
      thousands):  |                                            
|                                                              
|Assets:                                                        |                                            
|Americas                                                       | $                                          
|Europe                                                         |                                            
|Total
      assets of continuing operations                    |                                            
|Assets
      held for sale                                     |                                            
|Total assets                                                   | $                                          

Total intersegment revenues were as follows (in thousands):

|                                                            | For
      the Twelve Months Ended April 30,
|----------------------------------------------------------- | -------------------------------------------
|                                                            | 2008                                       
|Total intersegment revenues were as follows (in thousands): |                                            
|                                                           
|Intersegment revenues:                                      |                                            
|Americas                                                    | $                                          
|Europe                                                      |                                            
|Total intercompany revenues                                 | $                                          
|                                                           
|Depreciation (5)                                            | $                                          
|Capital
      expenditures (5)                              | $                                          

74

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Revenues and
long-lived assets by geographic area were as follows (in thousands):

|                                         | 2008 |        | 2007 |   | 2006  
|---------------------------------------- | ---- | ------ | ---- | - | ------
|Total net revenues:                      |      |        |      |   |       
|Americas                                 | $    | 4,390  |      | $ | 2,986 
|International Distributors               |      | 4,558  |      |   | 1,865 
|Subtotal
      Americas                  |      | 8,948  |      |   | 4,851 
|United Kingdom                           |      | 1,495  |      |   | 984   
|Central Europe - Germany, Benelux, Other |      | 7,473  |      |   | 3,039 
|France                                   |      | 1,909  |      |   | 2,313 
|Subtotal
      Europe                    |      | 10,877 |      |   | 6,336 
|Discontinued operations                  |      |       |      |   | 541   
|Total net revenues                       | $    | 19,825 |      | $ | 11,728
|                                        
|Long-lived assets:                       |      |        |      |   |       
|Americas                                 | $    | 117    |      | $ | 241   
|Europe                                   |      | 98     |      |   | 237   
|Corporate assets                         |      | 8,150  |      |   | 8,365 
|Total long-lived assets                  | $    | 8,365  |      | $ | 8,843 

|(1) |  | The Company allocates
      revenues to operating segments based on the location of the country where
      the license is installed or service is delivered. The accounting policies
      of the segments are the same as those described in Note 1.                                                                        
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Americas operating
      income (loss) is net of corporate product development and general and
      administrative expenses.                                                                                                                                                                                                 
|   
|(3) |  | Interest income and
      interest expense were primarily attributable to corporate assets located
      in the Americas for the periods presented. Interest income and interest
      expense in the Americas and Europe were not significant in those
      periods.                                                        
|   
|(4) |  | Corporate assets are
      located in the Americas and consist primarily of cash equivalents,
      investments, purchased technology and related maintenance contracts,
      property and equipment, intangibles, goodwill and intercompany receivables
      from Europe.                                                  
|   
|(5) |  | The majority of the
      Companys capital expenditures are incurred for product development (which
      occurs exclusively in the Americas) and for corporate infrastructure.
      Consequently, capital expenditures and depreciation expense were primarily
      attributable to the Americas in the periods
presented.

75

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Note 18. Quarterly Results of
Operations (Unaudited)

The following
interim financial information presents the fiscal 2008 and 2007 results on a
quarterly basis:

|                                                      | Quarter Ended                        
|----------------------------------------------------- | -------------------------------------
|                                                      | July 31,                             
|                                                      | (In thousands, except per share data)
|Year ended 2008:                                      |                                      
|Total revenues                                        | $                                    
|Gross profit                                          | $                                    
|Net income (loss) from continuing operations          | $                                    
|Net
      loss from discontinued operations           | $                                    
|Net income (loss)                                     | $                                    
|                                                     
|Net
      income (loss) per share:                    |                                      
|Basic earnings per share:                             |                                      
|Net income (loss) per share                           | $                                    
|                                                     
|Dilutive earnings per share:                          |                                      
|Net income (loss) per share                           | $                                    
|                                                     
|Shares used in computing net income (loss) per share: |                                      
|Basic                                                 |                                      
|Diluted                                               |                                      
|                                                     
|Year ended 2007:                                      |                                      
|Total revenues                                        | $                                    
|Gross profit                                          | $                                    
|Net income (loss) from continuing operations          | $                                    
|Net
      income (loss) from discontinued operations  | $                                    
|Net loss                                              | $                                    
|                                                     
|Net
      income (loss) per share:                    |                                      
|Basic earnings per share:                             |                                      
|Continuing operations                                 | $                                    
|Discontinued operations                               |                                      
|Net loss per share                                    | $                                    
|                                                     
|Dilutive earnings per share:                          |                                      
|Continuing operations                                 | $                                    
|Discontinued operations                               |                                      
|Net loss per share                                    | $                                    
|                                                     
|Shares used in computing net income (loss) per share: |                                      
|Basic                                                 |                                      
|Diluted                                               |                                      

76

---

INDEX OF EXHIBITS

|Exhibit |    |            
|------- | -- | -----------
|No.     |    | Description
|2.      | 1  |            
|        |    |            
|3.      | 1  |            
|        |    |            
|3.      | 2  |            
|        |    |            
|3.      | 3  |            
|        |    |            
|4.      | 1  |            
|        |    |            
|4.      | 2  |            
|        |    |            
|4.      | 3  |            
|        |    |            
|4.      | 4  |            
|        |    |            
|4.      | 5  |            
|        |    |            
|4.      | 6  |            
|        |    |            
|4.      | 7  |            
|        |    |            
|4.      | 8  |            
|        |    |            
|4.      | 9  |            
|        |    |            
|4.      | 10 |            
|        |    |            
|4.      | 11 |            
|        |    |            
|4.      | 12 |            
|        |    |            
|10.     | 1* |            
|        |    |            
|10.     | 2* |            
|        |    |            
|10.     | 3* |            
|        |    |            
|10.     | 4  |            
|        |    |            
|10.     | 5  |            
|        |    |            
|10.     | 6  |            
|        |    |            
|10.     | 7  |            

77

---

|    |    |  |                                                                                                                                                                                                                                                                                                                      
|--- | -- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10. | 8  |  | Silicon
      Valley Bank Loan and Security Agreement dated June 6, 2003(5), as amended
      by Silicon Valley Bank Amendment to Loan Documents dated June 3, 2004,
      June 5, 2005 (8) and May 24, 2006 (9) and Amended Schedule to Loan and
      Security Agreement dated June 3, 2004(6) and June 5, 2005 (8)
|    |    |  |                                                                                                                                                                                                                                                                                                                      
|14  |    |  | Code of Ethics for Senior Officers(6)                                                                                                                                                                                                                                                                                
|    |    |  |                                                                                                                                                                                                                                                                                                                      
|21  | .1 |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                       
|    |    |  |                                                                                                                                                                                                                                                                                                                      
|23  | .1 |  | Consent of Grant Thornton LLP, Independent Registered Public
      Accounting Firm                                                                                                                                                                                                                                   
|    |    |  |                                                                                                                                                                                                                                                                                                                      
|31  | .1 |  | Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
      or 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                            
|    |    |  |                                                                                                                                                                                                                                                                                                                      
|31  | .2 |  | Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
      or 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to
      Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                            
|    |    |  |                                                                                                                                                                                                                                                                                                                      
|32  | .1 |  | Certification of Todd E. Wille, Chief Executive Officer of Unify
      Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                   
|    |    |  |                                                                                                                                                                                                                                                                                                                      
|32  | .2 |  | Certification of Steven D. Bonham, Chief Financial Officer of Unify
      Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
      Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                

|(1)  |  | Incorporated by
      reference to the exhibit filed with Registrants Form S-1 Registration
      Statement (No. 333- 3834) declared effective by the Securities and
      Exchange Commission on June 14, 1996.
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(2)  |  | Incorporated by
      reference to the exhibit filed with Registrants Form 10-K on December 22,
      2000.                                                                                                     
|    
|(3)  |  | Incorporated by
      reference to the exhibit filed with Registrants Form 10-K on July 30,
      2001.                                                                                                         
|    
|(4)  |  | Incorporated by
      reference to the exhibit filed with Registrants Form 10-Q on March 14,
      2002.                                                                                                        
|    
|(5)  |  | Incorporated by
      reference to the exhibit filed with Registrants Form 10-K on July 17,
      2003.                                                                                                         
|    
|(6)  |  | Incorporated by
      reference to the exhibit filed with Registrants Form 10-K on July 21,
      2004.                                                                                                         
|    
|(7)  |  | Incorporated by
      reference to the exhibit filed with Registrants Form 8-K on February 2,
      2005.                                                                                                       
|    
|(8)  |  | Incorporated by
      reference to the exhibit filed with Registrants Form 10-K on July 28,
      2005.                                                                                                         
|    
|(9)  |  | Incorporated by
      reference to the exhibit filed with Registrants Form 10-K on July 31,
      2006.                                                                                                         
|    
|(10) |  | Incorporated by
      reference to the exhibit filed with Registrants Form 8-K on September 20,
      2006.                                                                                                     
|    
|(11) |  | Incorporated by
      reference to the exhibit filed with Registrants Form 8-K on November 29,
      2006.                                                                                                      
|     |  |                                                                                                                                                                                                                  
|*    |  | Exhibit pertains to a management
      contract or compensatory plan or arrangement.                                                                                                                             

78

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