UNITED STATES  SECURITIES AND EXCHANGE COMMISSION  Washington, D.C. 20549




Form 10-K




(Mark One)x
            
            ANNUAL REPORT PURSUANT TO SECTION 13 OR
      15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended April 30,
      2010ORo
            
            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
            94-2710559(State or other jurisdiction
of
            (I.R.S. Employerincorporation or organization)
            Identification
  Number)




Address of principal
executive offices: 1420 Rocky Ridge Drive, Suite 380, Roseville,
California 95661
  Registrant’s telephone
number, including area code: (916) 218-4700
  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. YES o NOx




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




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. YESx NOo




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
      (Do not check if a smallerreporting company)
            Smaller reporting companyx


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




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The aggregate market
value of the voting and non-voting common equity held by non-affiliates of the
registrant was $16,629,703 based on the number of shares held by non-affiliates
of the registrant and computed by reference to the reported last sale price of
common stock on October 31, 2009, 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, 2010, the
registrant had 10,476,633 shares of common stock outstanding.




DOCUMENTS INCORPORATED BY REFERENCE




Certain information is
incorporated by reference to the Proxy Statement for the registrant’s 2010
Annual Meeting of Stockholders to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A not later than 120 days after the end of
the fiscal year covered by this Form 10-K.




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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 development, data
management, migration and archiving software solutions. Our software helps
companies to maximize value and reduce cost in the development, deployment,
management and retention of business applications, data and electronically
stored information. Our archiving solutions meet an organization’s requirement
to archive, discover and preserve electronically stored information for
eDiscovery, regulatory compliance, global email access and storage
savings.




The Company sells and
markets application development and database software and services, integrated
content archiving solutions and modernization solutions through three segments.
The segments are the Database and Development Products (“DDP”), Integrated
Content Archiving Solutions and our Modernization and Migration Solutions.
Following its merger with Daegis in June 2010, the Company also delivers
eDiscovery solutions for corporate legal departments and law firms.




Unify’s customers
include corporate information technology (“IT”) and legal organizations,
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 market and sell products directly in the United States,
Europe, Canada, Japan, Singapore and Australia and indirectly through global
distributors and resellers representing more than 50 countries.




Over the past five
years, we have expanded our product offering to adapt to evolving market
requirements. Our integrated content archiving and eDiscovery software solution,
the Central Archive, enables organizations to securely capture, index, archive,
retrieve, review, share, search, supervise and manage the retention,
disposition, preservation and destruction of electronic records. With Daegis, we
provide eDiscovery offerings that span the litigation lifecycle. Our application
modernization solutions help organizations migrate and maximize investments in
their existing applications and data. Our Modernization and Migration Solutions,
and Software products are built to increase productivity, eliminate risk and
substantially reduce time and costs. Our application development and data
management software products include Team Developer, SQLBase, SQLBase Treasury,
NXJ, DataServer, VISION and ACCELL. Our Modernization and Migration Solutions
include ComposerTM Notes which delivers a like-for-like migration of Lotus Notes
applications to the Microsoft .NET platform, Composer SabertoothTM which speeds
the conversion of Team Developer or SQLWindows applications to Microsoft .NET,
Composer CipherSoft which automatically converts Oracle Forms and PL/SQL code to
Java and Composer Mainframe which delivers automation migration of legacy COBOL,
Ideal and Natural code to modern code and relational databases through best of
breed partnerships with Ateras Inc. and Information Analysis Inc.
(“IAI”).




On June 29, 2010, we
acquired Strategic Office Solutions, Inc. (d/b/a “Daegis”), a provider of
eDiscovery solutions for corporate legal departments and law firms. The Company
believes that the eDiscovery solutions compliment the integrated content archiving segment. The financial and
other information in this Report presented as of our fiscal year end does not
include the effect of this acquisition.




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Unify was initially
incorporated in California in 1980 and later reincorporated in Delaware on April
10, 1996. We are headquartered in Roseville, California, with offices in New
Jersey, Canada, Australia, France, Germany, and the United Kingdom (“UK”). Our
headquarters office is located at 1420 Rocky Ridge Drive, Suite 380, Roseville,
California 95661. Our telephone number is (916) 218-4700 and our website address
is http://www.unify.com.




Products




Archive and eDiscovery
Solutions




The Central Archive enables corporations to preserve, manage, and utilize their
electronically stored information (ESI) as an asset, while better managing
storage resources, complying with industry regulations, enabling legal discovery
and reducing the risks associated with electronic content. The Central Archive,
a policy driven, highly scalable archive solution for all forms of
electronically stored information, processes all forms of disparate data types
into a single unified archive where companies can manage its long-term
preservation requirements, apply records management, support regulated industry
requirements and manage legal discovery.




Daegis DocHunter is
a dynamic online review platform
that hosts electronically stored information (ESI) and provides an array of
tools for early case assessment and culling, processing, hosted review and
document production for legal matters. Daegis also provides professional
services that include data collection, eDiscovery analytics project management,
cost burden analysis and litigation readiness.




Application Modernization and Migration
Solutions




ComposerTM CipherSoft is a software solution that automates the
conversion of Oracle Forms and PL/SQL code to Java and we believe is the only
one of its kind to be validated by Oracle for migrating Forms to Java (J2EE).
Utilizing J2EE simplifies the application development process by using
standardized and reusable object-oriented components and by automating
multi-tier functionality. As a result, the amount of time needed for programming
and training is decreased, saving time and money. Composer CipherSoft provides a
like-for-like conversion by preserving the business logic/work flow in order to
avoid end-user disruption. Composer CipherSoft can convert all releases of
Oracle Forms, including character-based versions such as Release 2.3, 3.0 and
4.5. By automating the migration process, Composer CipherSoft removes the risk
of human error and produces standardized business applications that are fully
maintainable, helping companies stay competitive.




ComposerTM Notes is a software solution for converting IBM
Lotus Notes® applications to the Microsoft platform. Composer Notes delivers
like-for-like 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. Composer Notes
removes the risk of human error and produces standardized business applications
that are fully maintainable, helping companies stay competitive.




Composer Mainframe delivers automation migration of legacy COBOL,
Ideal and Natural code to modern code and relational databases through
partnerships with Ateras Inc. and Information Analysis Inc. (“IAI”). Through the
Ateras partnership, Composer Mainframe offers a complete solution for companies
needing to modernize their legacy mainframe applications, including migrating
mainframe code and non-relational databases from IDMS, IMS, VSAM or from Natural
/ Adabas to COBOL, C# or JAVA code, with either a DB2, SQL Server or Oracle
database. The partnership with IAI enables Composer Mainframe to migrate Ideal /
Datacom applications to COBOL code with either a DB2 or Oracle database.
Composer Mainframe delivers an automated code conversion and data migration for
a functionally equivalent application. Unify’s methodology is designed to
eliminate risk and substantially reduce time and costs of IT
departments.




Composer SabertoothTM 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 5.2 to the planned .NET support in future
releases, Composer Sabertooth delivers a 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.




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Rapid Application Development
Products




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.




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.




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/SQL and ACCELL/IDS.


- ACCELL/SQLTM — 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/IDSTM — is our 4GL-based
  rapid application development software for applications that connect to
  Unify’s DataServer ELS database.

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 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® Treasury is an encrypted, secure version of the
SQLBase database.




DataServer® is 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 is 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 BuilderTM provides individuals with 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.




Q is an end user query and reporting tool for
Personal Query Management, Personal Report Management and Information
Sharing.




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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. For the year ended April 30, 2010, we had one customer that accounted
for 14% of consolidated revenues and one customer that accounted for 11% of
consolidated revenues. No single customer accounted for 10% or more of
consolidated revenue in the year ended April 30, 2009. We had one customer in
the year ended April 30, 2008 that accounted for 12% of consolidated
revenues.




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
Roseville, California. Unify markets its products internationally through
offices in the UK, France, Germany, Canada and Australia. Unify has distributors
in Asia Pacific, Europe, Japan, Latin and South America, and Russia.
International revenues accounted for 50%, 68% and 78% of total revenues in
fiscal 2010, 2009 and 2008, 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 strategic demand generation, public relations, customer
communications and events, trade shows and our Web sites.




As of April 30, 2010, we
had a total of 25 employees engaged in sales and marketing activities. Of those
employees, 16 were located in the United States and 9 were located in other
countries.




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, New Jersey, Australia, France, UK, Malaysia, South Africa, 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 installation and
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.




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Education




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




As of April 30, 2010, we
had a total of 40 employees engaged in providing customer support and
professional services. Of those employees, 16 were located in the United States
and 24 were located in other countries.




Product Development




In fiscal 2010, we
focused our development efforts on the archive portfolio, the initial release of
Q, a new version of Team Developer, the Composer products, and SQLBase products.
During fiscal 2010, we developed and released a new product, Q, as well as minor
versions of the Central Archive, SQLBase, Team Developer, VISION and ACCELL/SQL.
Significant enhancements and improvements were made to Composer CipherSoft and
Composer Lotus Notes. Unify’s product development expenses for fiscal 2010, 2009
and 2008, were $6.5 million, $2.9 million and $3.5 million, respectively. The
significant increase in expenses was the result of the AXS-One acquisition in
June 2009.




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.




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.




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.




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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 applications and software products compete in the market with
dozens of other companies that provide application modernization solutions,
application development products, and databases. These competitors include EMC,
IBM, Microsoft, Oracle and Symantec. 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 eDiscovery & archiving projects, application
modernization initiatives, and additional deployment of existing applications
and version 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 deliver market leading
archiving/eDiscovery applications, migrate applications, build and deploy
applications quickly, 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, 2010, we
had a total of 127 employees, including 38 in product development, 25 in sales
and marketing, 40 in customer support, consulting, and training, and 24 in
finance, operations and general administration. Of these employees, 94 were
located in the United States and 33 were located in other
countries.




Unify’s success depends,
in large part, on its ability to attract and retain qualified employees,
particularly senior management, engineering and direct sales. 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.




Directors and Executive Officers of the
Registrant




The following table sets
forth certain information concerning our executive officers as of the date April
30, 2010.




ExecutiveOfficerName
            
            Current Position with
      Company
            
            Age
            
            SinceTodd E. Wille
            
            President and Chief Executive
      Officer
            
            47
            
            2000Steven D. Bonham
            
            Vice President, Finance and Administration and CFO
            
            53
            
            2005Mark T. Bygraves
            
            Vice President, Sales – Europe, Middle
      East and Africa
            
            53
            
            2007Duane V. George
            
            Vice President, Product Development and CTO
            
            52
            
            2007Glenn D. Rhodes
            
            Vice President, Marketing and
    CMO
            
            43
            
            2010Frank Verardi
            
            Vice President, Sales - Americas and Asia Pacific
            
            61
            
            2001


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Unify has a board of
directors consisting of seven (7) members. Set forth below is information with
respect to their ages as of April 30, 2010, 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.




DirectorName
            
            Current Position with
      Company
            
            Age
            
            SinceSteven D. Whiteman
            
            Chairman of Board
            
            59
            
            1997Timothy P. Bacci
            
            Director
            
            51
            
            2009Robert M. Bozeman
            
            Director and Mergers and Acquisitions
      Committee Chair
            
            61
            
            2008Richard M. Brooks
            
            Director and Audit Committee Chair
            
            56
            
            2005Tery R. Larrew
            
            Director and Compensation Committee
      Chair
            
            56
            
            2002Robert J. Majteles
            
            Director
            
            45
            
            2004Todd E. Wille
            
            President and Chief Executive
      Officer
            
            47
            
            2000


Executive Officers




Todd E. Wille has 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. Bonham joined the Company in June 2005, as vice
president of finance and administration and chief financial officer. Before
joining Unify, Mr. Bonham was the chief financial officer for LexisNexis/Examen,
a subsidiary of LexisNexis, from 1997-2005. 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.




Mark T. Bygraves joined 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 from 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.




Duane V. George has served as vice president of product
development and CTO since July 2006. Mr. George is responsible for Unify’s
Technical Services Group which includes product development, customer support,
training, documentation, quality control and assurance. Mr. George provides
technical vision, leads all aspects of the Company’s technology development and
plays an integral role in shaping the Company’s strategic direction, development
and future growth. He is responsible for refining the technology strategy for
Company products and services and implementing projects aligned to that strategy
and delivering all technology applications, systems and solutions that are core
to the Company’s offerings. 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. Subsequently, Mr.
George joined the US Space Command to manage strategic space defense initiatives
and satellite Command Control and Communication (C3) programs. He eventually
moved into software development, customer support and project management with an
emphasis on customer satisfaction. Mr. George joined Unify in 1995 and has been
a core member of the support, consulting and product development teams. He
earned his B.S. in engineering from Brigham Young University in Provo,
Utah.




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Glenn Rhodes joined Unify in February 2010, as vice
president of marketing and chief marketing officer. He is responsible for
leading all aspects of Unify’s marketing organization as the Company accelerates
its growth and leadership in the content archiving and eDiscovery markets. Glenn
has more than 20 years of experience in the IT industry, having held key
management roles in marketing, sales, strategy and consulting for leading
technology firms. Prior to joining Unify, Mr. Rhodes served as vice president of
marketing at CA, Inc. where he was involved in the company’s storage and
information management software line. Prior to CA, at Symantec, he was involved
in the development of a new solution sales and marketing programs. Preceding
Symantec, Mr. Rhodes served on the leadership team at Arkivio, Inc., where he
spearheaded marketing for the company’s information lifecycle management (ILM)
storage software solution later acquired by Rocket Software. Previously, at HP,
Mr. Rhodes orchestrated the market development of HP’s Surestore network storage
solutions. He began his career in sales at NCR. Mr. Rhodes holds a master’s
degree in business administration and a bachelor’s degree in marketing from
Northern Illinois University, College of Business.




Frank Verardi has 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.




Board of Directors




Steven D. Whiteman has 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 Flypaper Inc. Mr. Whiteman holds a B.A. degree in business administration
from Taylor University and a M.B.A. from the University of
Cincinnati.




Timothy P. Bacci joined our board of directors on August 20,
2009 following Unify’s acquisition of AXS-One Inc. on June 30, 2009. Prior to
joining Unify’s board of directors, Mr. Bacci had been a board member of
AXS-One. Mr. Bacci is the co-founder of BlueLine Partners, a Calif.-based
strategic opportunities fund with more than $100 million in assets invested in
small, publicly-traded, and undervalued healthcare and IT companies. Prior to
BlueLine, he spent 15 years in executive positions for software companies,
including serving as chairman and interim CEO of Instant802 Networks and CEO of
siteROCK Corp. He was a co-founder of Vicinity Corporation, which was acquired
by Microsoft in 2002. Additionally, he has served as a consultant to several
early stage technology companies addressing areas relating to corporate strategy
and executive recruiting. Mr. Bacci holds a B.S. in engineering from the United
States Naval Academy and served as an officer on active duty in the U.S. Navy as
a fighter pilot.




Robert M. Bozeman was appointed director in January of 2008.
Mr. Bozeman currently serves as an investor and/or advisor to companies in
Silicon Valley. His experience includes business operations, venture capital
investment, and mergers and acquisitions. He 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, Mr. Bozemen 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 Become.com, Rare Light, Restoration Partners, Shakers Vodka,
and Vortex Intellectual Property Management.




10




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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, a
national Executive Services consulting company, which is a wholly owned
subsidiary of SFN Group. With Tatum, Mr. Brooks has acted as the project lead on
a variety of consulting assignments, including acting as the interim CFO for
Pixelworks, a publicly traded semi-conductor company. 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. Larrew has served as a director of the Company since
May 2002. Mr. Larrew is the founding and managing partner of Caddis Capital LLC,
a private equity firm that specializes in income oriented investments with
strong equity appreciation including International Gaming and Entertainment;
Energy – Oil & Gas Exploration and Production; Real Estate - Mobile Home
Communities, Apartment Complexes, Self Storage Units and Unimproved Land;
Natural Resources – Water 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. From 1989 to 1998, Mr. Larrew served as President of the
Database Marketing Services Division of Metromail/CIC. He is a graduate of
Colorado State University with a B.S. degree in business administration and
serves on the Global Leadership Council for the Colorado State University School
of Business.




Robert J. Majteles is the managing partner of Treehouse Capital
LLC, an investment firm he founded in order to make investments of time and
money in interesting people doing worthy things. Treehouse’s portfolio consists
of private and public technology companies in a wide array of markets and
circumstances. Mr. Majteles often serves as an active and involved board member
for the companies in Treehouse's portfolio and also serves as an advisory
partner to a variety of investment funds. In addition, Mr. Majteles is the
Director of the Entrepreneurship Program at the Berkeley Center for Law,
Business and the Economy. Prior to launching Treehouse, Mr. Majteles was the
chief executive officer of three different technology companies. In addition,
Mr. Majteles has also been an investment banker and a mergers and acquisitions
attorney. Mr. Majteles is a frequent lecturer, speaker, and panelist on a wide
range of topics including board governance and value added, investment process
and methodology, and entrepreneurial strategic planning and metrics-driven
business model execution. Mr. Majteles received a law degree from Stanford
University in 1989 and a Bachelor of Arts degree from Columbia University in
1986.




11




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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, any Current Reports on Form 8-K that we may file from time to time
and our proxy statements. 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.




12




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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 our  other filings with the SEC.




Deterioration in general economic conditions
has caused and could cause additional decreases or delays in spending by
customers and could harm our ability to generate license and maintenance
revenues and our results of operations.




The state of the global
economy and availability of capital has and could further impact the spending
patterns of existing and potential future customers. Any reduction in spending
by, or loss of, existing or potential future customers would cause revenues to
decline. Further, it may be difficult to adjust expenses and capital
expenditures quickly enough to compensate for any unexpected revenue
shortfall.




Software license and
maintenance purchases tend to be cyclical, reflecting overall economic
conditions and budgeting and buying patterns. Since most revenues are derived
from sales of software licenses, the current deterioration in economic
conditions has caused and could cause additional decreases in or delays in
software spending and is likely to reduce software license revenues and
negatively impact our short-term ability to grow revenues. Further, any
decreased collectability of accounts receivable or early termination of
agreements due to the current deterioration in economic conditions could
negatively impact our results of operations.




The conversion ratio of certain convertible
notes and the exercise price of certain 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 Technologies LLC in November 2006, 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, 2010, the remaining
principal amount of convertible notes resulting from our debt financing was
approximately $377,000 which is convertible into our common stock at a fixed
ratio of $5.00 per share. As of April 30, 2010, there were 435,994 warrants
issued as part of our debt financing that were outstanding which 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.




In conjunction with the
acquisition of Daegis in June 2010, we obtained debt financing and issued
718,860 warrants which are exercisable at $3.30 per share. Subject to certain
exceptions, these exercise prices are subject to downward adjustment in the
event we issue additional shares of common stock at prices below the
then-current exercise price. Exercise of the warrants is only likely to occur at
such time as the exercise price 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.




13




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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 in 2006 and provide working capital, we
entered into a Revolving Credit and Term Loan Agreement (the “ComVest 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. To finance the cash portion of the merger with Daegis and provide
working capital, the Company entered into a new Revolving Credit & Term Loan
Agreement with Hercules Technology on June 29, 2010 (the “Hercules Loan
Agreement”). Under the Hercules Loan Agreement, we granted to Hercules a first
priority security interest in substantially all of our assets. If we default on
the Hercules 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. The proceeds from the loan provided under the
Hercules Loan Agreement were used to pay off the loans provided under the
ComVest Loan Agreement and upon such pay-off ComVest’s security interest was
released.




We are subject to intense
competition.




We have experienced and
expect to continue to experience intense competition from current and future
competitors including EMC, IBM, Microsoft, Oracle, and Symantec. 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.




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 45%, 61%
and 64% of our software license revenues for fiscal 2010, 2009 and 2008,
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.




14




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




Revenues derived from
our international customers accounted for 50%, 68% and 78% of our total
revenues, with the remainder from North America, in fiscal 2010, 2009 and 2008,
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 Asia
Pacific 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.




Beginning on August 25,
2008, the Company’s stock started trading on the NASDAQ. Prior to being traded
on the NASDAQ, the Company’s stock was traded over-the-counter on the “bulletin
board”. Even though our stock is now traded on the NASDAQ, we do not receive any
analyst coverage, our stock is thinly traded and our stock is considered to be
micro-cap stock. Our stock is therefore subject to greater price volatility than
larger companies whose stock trades more actively.




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 vary 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.




15




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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 weaker 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 archiving/eDiscovery
solutions are used to implement governance and matter driven requirements and
involve legal, IT and risk management departments. Our application modernization
solutions are used to implement comprehensive solutions including complete
technology platform transitions and new applications. The delivery of our
application modernization solutions generally involves 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. 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.




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.




16




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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
and Executive Vice President and Chief Operating 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.




17




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Acquisitions may have an adverse effect on our
business.




We expect to continue
making acquisitions as part of our long-term business strategy. These
transactions involve significant challenges and risks including that the
transaction does not advance our business strategy, that we don’t realize a
satisfactory return on our investment, or that we experience difficulty in the
integration of new employees, business systems, and technology, or diversion of
management’s attention from our other businesses. These events could harm our
operating results or financial condition.




ITEM 2. PROPERTIES




The Company’s principal
administrative offices and headquarters are in Roseville, California where we
lease a 17,660 square foot facility. This lease is for a period of 68 months and
ends in April 2014. We also lease offices in the United Kingdom, France, Canada
and New Jersey. 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, 2010, there were no 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. Reserved




18




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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




For all of fiscal 2008
and through August 24, 2008 of fiscal 2009, Unify’s common stock was traded on
the Over-The-Counter Bulletin Board (OTC BB) under the symbol UFYC.OB. Beginning
on August 25, 2008, Unify began trading on the NASDAQ under the symbol UNFY. The
following table sets forth the lowest and highest sale price of our common
stock, as reported on the over-the-counter market or the NASDAQ for the periods
presented. For common stock traded on the OTC BB, quotations reflect prices
between dealers, do not include retail mark-ups, mark-downs or commissions and
may not represent actual transactions.




High
            
            LowFiscal 2010Fourth Quarter
            $
            3.72
            
            $
            2.95Third Quarter
            
            3.38
            
            
            2.64Second Quarter
            
            3.60
            
            
            2.50First Quarter
            
            3.90
            
            
            2.40Fiscal 2009Fourth Quarter
            $
            2.93
            
            $
            1.24Third Quarter
            
            3.26
            
            
            2.00Second Quarter
            
            5.50
            
            
            2.59First Quarter
            
            6.40
            
            
            3.70


Common Stockholders of Record




As of June 24, 2010,
there were approximately 343 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.




19




---



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, 2010:




Number ofsharesremainingavailablefor futureNumber of
            
            
            
            
            issuanceshares to be
            
            Weighted-
            
            under equityissued upon
            
            average
            
            compensationexercise of
            
            exercise price of
            
            plansoutstanding
            
            outstanding
            
            [excludingoptions,
            
            options,
            
            shareswarrants and
            
            warrants and
            
            reflected inrights
            
            rights
            
            column (a)]Plan Category
            
            (a)
            
            (b)
            
            (c)Equity compensation plans approved by
      stockholders (1)
            
            1,636,848
            
            $
            3.42
            
            509,965Equity compensation plans not approved by stockholders:Director Restricted Stock Plan (2)
            
            96,138
            
            $
            2.45
            
            3,862Non-Plan Options (3)
            
            330,400
            
            $
            2.94
            
            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 96,138 shares were awarded and were outstanding on April 30, 2010.
      As of April 30, 2010 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 2010, there were no
shares awarded under this plan. As of April 30, 2010 there is a balance of 3,862
shares reserved for future awards under this plan. The Company does not intend
to issue any of the remaining shares and intends to terminate 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.




20




---



Years Ended April
30,2010 (2)
            
            2009
            
            2008
            
            2007 (1)
            
            2006(In thousands, except per share
      data)Consolidated Statement of Operations
      Data:Revenues:Software licenses
            $
            7,379
            
            
            $
            6,436
            
            
            $
            8,489
            
            
            $
            4,432
            
            
            $
            4,759Services
            
            15,816
            
            
            
            11,688
            
            
            
            11,027
            
            
            
            6,755
            
            
            
            5,384Migration Solutions
            
            5,397
            
            
            
            2,468
            
            
            
            309
            
            
            
            -
            
            
            
            -Total revenues
            
            28,592
            
            
            
            20,592
            
            
            
            19,825
            
            
            
            11,187
            
            
            
            10,143Cost of
      Revenues:Software licenses
            
            346
            
            
            
            244
            
            
            
            226
            
            
            
            377
            
            
            
            448Services
            
            3,202
            
            
            
            1,019
            
            
            
            1,245
            
            
            
            1,024
            
            
            
            1,106Migration Solutions
            
            2,537
            
            
            
            1,041
            
            
            
            129
            
            
            
            -
            
            
            
            -Total cost of revenues
            
            6,085
            
            
            
            2,304
            
            
            
            1,600
            
            
            
            1,401
            
            
            
            1,554Gross
      profit
            
            22,507
            
            
            
            18,288
            
            
            
            18,225
            
            
            
            9,786
            
            
            
            8,589Operating Expenses:Product development
            
            6,470
            
            
            
            2,907
            
            
            
            3,498
            
            
            
            2,360
            
            
            
            1,643Selling, general and
      administrative
            
            17,664
            
            
            
            12,494
            
            
            
            12,002
            
            
            
            8,314
            
            
            
            5,801Total operating expenses
            
            24,134
            
            
            
            15,401
            
            
            
            15,500
            
            
            
            10,674
            
            
            
            7,444Income (loss) from
      operations
            
            (1,627
            )
            
            
            2,887
            
            
            
            2,725
            
            
            
            (888
            )
            
            
            1,145Interest expense
            
            (267
            )
            
            
            (194
            )
            
            
            (900
            )
            
            
            (527
            )
            
            
            (11
            )Other
      income (expense), net
            
            (14
            )
            
            
            (124
            )
            
            
            130
            
            
            
            136
            
            
            
            61Income (loss) before income
      taxes
            
            (1,908
            )
            
            
            2,569
            
            
            
            1,955
            
            
            
            (1,279
            )
            
            
            1,195Provision (Benefit) for income
      taxes
            
            (131
            )
            
            
            179
            
            
            
            324
            
            
            
            82
            
            
            
            -Income (loss) from continuing
      operations
            $
            (1,777
            )
            
            $
            2,390
            
            
            $
            1,631
            
            
            $
            (1,361
            )
            
            $
            1,195Loss from discontinued
      operations
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,445
            )
            
            
            (1,823
            )Net income (loss)
            $
            (1,777
            )
            
            $
            2,390
            
            
            $
            1,631
            
            
            $
            (2,806
            )
            
            $
            (628
            )Net
      income (loss) per share:Basic earnings per
share:Continuing operations
            $
            (0.18
            )
            
            $
            0.34
            
            
            $
            0.25
            
            
            $
            (0.23
            )
            
            $
            0.21Discontinued operations
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (0.24
            )
            
            $
            (0.32
            )Net income (loss) per
    share
            $
            (0.18
            )
            
            $
            0.34
            
            
            $
            0.25
            
            
            $
            (0.47
            )
            
            $
            (0.11
            )Dilutive earnings per
    share:Continuing operations
            $
            (0.18
            )
            
            $
            0.32
            
            
            $
            0.23
            
            
            $
            (0.23
            )
            
            $
            0.20Discontinued operations
            $
            -
            
            
            $
            -
            
            
            $
            -
            
            
            $
            (0.24
            )
            
            $
            (0.32
            )Net income (loss) per
    share
            $
            (0.18
            )
            
            $
            0.32
            
            
            $
            0.23
            
            
            $
            (0.47
            )
            
            $
            (0.12
            )Shares used in
      computing net income (loss) per share:Basic
            
            9,691
            
            
            
            6,991
            
            
            
            6,423
            
            
            
            5,927
            
            
            
            5,803Diluted
            
            9,691
            
            
            
            7,582
            
            
            
            7,105
            
            
            
            5,927
            
            
            
            5,875Consolidated Balance Sheet
      DataCash
      and cash equivalents
            $
            3,055
            
            
            $
            6,147
            
            
            $
            2,692
            
            
            $
            2,064
            
            
            $
            1,881Working capital
      (deficit)
            
            (5,425
            )
            
            
            1,317
            
            
            
            (1,157
            )
            
            
            (3,343
            )
            
            
            1,657Total
      assets
            
            34,768
            
            
            
            21,081
            
            
            
            16,678
            
            
            
            15,654
            
            
            
            8,351Long
      term debt, net
            
            12
            
            
            
            837
            
            
            
            1,334
            
            
            
            4,910
            
            
            
            3Total
      stockholders' equity
            
            18,396
            
            
            
            9,303
            
            
            
            5,419
            
            
            
            469
            
            
            
            2,235


(1)
            
            The
      Company acquired Gupta Technologies LLC 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 year
2006.(2)
            
            The
      Company acquired AXS-One, Inc. on June 30, 2009, so the fiscal 2010
      results include ten months of operations from AXS-One,
  Inc.





21




---



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 archiving/eDiscovery, application
development, data management, and migration software solutions. Our archiving
solutions meet an organization’s requirement to archive, discover and preserve
electronically stored information for eDiscovery, regulatory compliance, global
email access and storage savings. Our software helps companies to maximize value
and reduce cost in the development, deployment, management and retention of
business applications, data and electronically stored information.




The Company sells and
markets application development and database software and services, integrated
content archiving solutions and modernization solutions through three segments.
The segments are the Database and Development Products (“DDP”), Integrated
Content Archiving Solutions and our Modernization and Migration
Solutions.




On June 29, 2010, the
Company purchased Strategic Office Solutions, Inc. dba Daegis for approximately
$37.5 million. Payment was made in the form of $24.0 million in cash, $7.3
million in equity, and $6.2 million in convertible notes.




On June 30, 2009, the
Company purchased AXS-One Inc. for approximately 3.1 million shares of common
stock.




On January 30, 2009, the
Company purchased CipherSoft Inc. (“CipherSoft”), headquartered in Calgary,
Canada, for approximately $628,000 in cash plus the assumption of debt of
$1,032,000 and future potential royalty payments to be paid over a four year
period following the acquisition.




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.




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. Additionally, the Company generates
revenue from its migration solutions products. 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 or special acceptance. The
Company exercises judgment in connection with the determination of the amount of
revenue to be recognized in each accounting period. The nature of each
contractual arrangement determines how revenues and related costs are
recognized.




22




---



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,
collectability is probable and persuasive evidence of an arrangement
exists.




For fixed price
arrangements that require significant modification or customization of software,
the Company uses the percentage-of-completion method for revenue recognition.
Under the percentage-of-completion method, progress towards completion is
measured by labor hours.




The Company considers a
signed non-cancelable 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.




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 may be billed under time-and-materials or fixed price arrangements.
Revenues and expenses relating to providing consulting services are generally
recognized as the services are performed.




Goodwill and Intangible Assets




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. 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 presented.




23




---



Deferred Tax Asset Valuation Allowance




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 reinvested.




As of April 30, 2010, we
had approximately $22.4 million of deferred tax assets related principally to
net operating loss and capital loss carryforwards, reserves and other accruals,
and various 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. In addition, 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. Accordingly, a valuation allowance has been
recorded to offset these 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.




Account Receivable and Allowance for Doubtful
Accounts




We record trade accounts
receivable at the invoiced amount and they do not bear interest. We maintain an
allowance for doubtful accounts for estimated losses resulting from the
inability of our customers to make required payments. We make these estimates
based on an analysis of accounts receivable using available information on our
customers’ financial status and payment histories as well as the age of the
account receivable. Historically, bad debt losses have not differed materially
from our estimates.




Accounting for Stock-based
Compensation




For our share-based
payment awards, we make estimates and assumptions to determine the underlying
value of stock options, including volatility, expected life and forfeiture
rates. Additionally, for awards which are performance-based, we make estimates
as to the probability of the underlying performance being achieved. Changes to
these estimates and assumptions may have a significant impact on the value and
timing of stock-based compensation expense recognized, which could have a
material impact on our financial statements.




24




---



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
30,2010
            
            
            2009
            
            
            2008Revenues:Software licenses
            25.8
            
            %
            
            31.3
            
            %
            
            42.8
            
            %Services
            55.3
            
            
            
            56.7
            
            
            
            55.6Migration Solutions
            18.9
            
            
            
            12.0
            
            
            
            1.6Total revenues
            100.0
            
            
            
            100.0
            
            
            
            100.0Cost of revenues:Software licenses
            1.2
            
            
            
            1.2
            
            
            
            1.1Services
            11.2
            
            
            
            4.9
            
            
            
            6.3Migration Solutions
            8.9
            
            
            
            5.1
            
            
            
            0.7Total cost of revenues
            21.3
            
            
            
            11.2
            
            
            
            8.1Gross profit
            78.7
            
            
            
            88.8
            
            
            
            91.9Operating expenses:Product development
            22.6
            
            
            
            14.1
            
            
            
            17.6Selling, general and
      administrative
            61.8
            
            
            
            60.7
            
            
            
            60.5Total operating expenses
            84.4
            
            
            
            74.8
            
            
            
            78.1Income (loss) from operations
            (5.7
            )
            
            
            14.0
            
            
            
            13.7Interest expense
            (0.9
            )
            
            
            (0.9
            )
            
            
            (4.5
            )Other income (expense), net
            0.0
            
            
            
            (0.6
            )
            
            
            0.7Income (loss) from operations before income
      taxes
            (6.6
            )
            
            
            12.5
            
            
            
            9.9Provision (Benefit) for income taxes
            (0.5
            )
            
            
            0.9
            
            
            
            1.6Net Income (loss)
            (6.1
            )
            %
            
            11.6
            
            %
            
            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
45%, 61%, and 64% of our software license revenues for fiscal 2010, 2009 and
2008, respectively. International revenues include all our software license and
service revenues from customers located outside North America. International
revenues accounted for 50%, 68%, and 78% of total revenues in fiscal years 2010,
2009 and 2008, respectively.




Total revenues in fiscal
2010 were $28.6 million, an increase of $8.0 million or 39% from fiscal 2009
revenues of $20.6 million. Total software license revenues in fiscal 2010 were
$7.4 million, an increase of $1.0 million or 15% from fiscal 2009 software
license revenues of $6.4 million. Total services revenues were $15.8 million in
fiscal 2010, an increase of $4.1 million or 35% from fiscal 2009 service
revenues of $11.7 million. The increase in software license revenues and
services revenues was primarily due to the acquisition of AXS-One, Inc. in 2010.
Total migration solutions revenue in fiscal 2010 was $5.4 million compared to
$2.5 million in fiscal 2009. The increase in migration solutions revenue was
primarily related to a multi-million dollar database migration project for a
governmental entity. This increase offset the decline in total revenues from the
tools and database business that was impacted by the deterioration in the
worldwide economic conditions during fiscal 2010. Total revenues in fiscal 2009
were $20.6 million, an increase of $0.8 million or 4% from fiscal 2008 revenues
of $19.8 million. Total software license revenues in fiscal 2009 were $6.4
million, a decrease of $2.1 million or 24% from fiscal 2008 software revenue of
$8.5 million due to the deterioration of in the worldwide economic conditions in
fiscal 2009, the decline of the Euro and an order of approximately $1 million
received during fiscal 2008 from our Russian distributor that did not reoccur in
fiscal 2009. Total service revenues of $11.7 million in fiscal 2009 increased by
$0.7 million or 6% from fiscal 2008. Total migration solutions revenue in fiscal
2009 was $2.5 million compared to $0.3 million in fiscal 2008. The increase in
migration solutions revenue was due to increases in sales from our Composer
Notes, Composer Sabertooth, and Composer CipherSoft.




25




---



For fiscal 2010 and
2009, total revenues from the United States were 50% and 32% of total revenues,
respectively. Total revenue from the United States in absolute dollars was $14.3
million for fiscal 2010 and $6.7 million for fiscal 2009. The increase is
primarily due to the recognition of revenue on two large US based projects.
Additionally, AXS-One has historically had a high percentage of total revenue
from the United States. Total revenue from all other countries was $14.3 million
for fiscal 2010 and $13.9 million for fiscal 2009. On a percentage basis,
revenue from other countries was 50% for fiscal 2010 and 68% for fiscal 2009.




Cost of Revenues




Cost of Software Licenses. Cost of software licenses consists primarily
of royalty payments and the amortization of purchased technology from third
parties that is amortized ratably over the technology’s expected useful life.
Cost of software licenses was $0.3 million for fiscal 2010, $0.2 million for
fiscal 2009 and $0.2 for fiscal 2008.




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 $3.2 million for fiscal 2010, $1.0 million for fiscal
2009 and $1.2 million for fiscal 2008. Our cost of services as a percent of
services revenues was 20% in fiscal 2010, 9% in fiscal 2009 and 11% in 2008. The
increase in the percentage of cost of service expenses to services revenue in
fiscal 2010 versus fiscal 2009 was due primarily to the acquisition of AXS-One
which has a higher proportion of costs of services than most of the Company’s
other products.




Cost of Migration Solutions. Cost of migration
solutions consists primarily of both expenses associated with employees involved
in migration projects and also expenses related to third party assistance. Cost
of migration solutions was $2.5 million in fiscal 2010, $1.0 million in fiscal
2009, and $0.1 million in fiscal 2008. The increase in cost of migration
solutions in fiscal 2010 over fiscal 2009 is primarily related to a
multi-million dollar database migration project for a governmental entity.




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 2010 were $6.5 million compared to $2.9 million in fiscal 2009 and
$3.5 million in fiscal 2008. The increase in product development costs in fiscal
2010 compared to fiscal 2009 was primarily the result of expenses related to
additional headcount resulting from our acquisition of CipherSoft in January
2009 and our acquisition of AXS-One in June 2009.




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 $17.7 million
in fiscal 2010, $12.5 million for 2009 and $12.0 million for 2008. The increase
in SG&A costs in fiscal 2010 was primarily the result of expenses related to
our acquisition of CipherSoft in January 2009 and our acquisition of AXS-One in
June 2009. During fiscal 2010, the Company incurred approximately $1.4 million
related to the transaction costs for the AXS-One acquisition and salary
continuation and severance costs for AXS-One staff that were eliminated post
acquisition. As a percentage of total revenue, SG&A expenses were 62% in
fiscal 2010, 61% in fiscal 2009 and 61% in fiscal 2008. The major components of
SG&A for fiscal 2010 were sales expenses of $8.2 million, marketing expenses
of $1.5 million and general and administrative expenses of $7.9 million. The
major components of SG&A for fiscal 2009 were sales expenses of $6.5
million, marketing expenses of $0.9 million and general and administrative
expenses of $5.1 million. For fiscal 2008, the major components were sales
expenses of $5.8 million, marketing expenses of $1.4 million and general and
administrative expenses of $4.8 million.




Interest Expense. Interest expense is primarily the result of
interest from outstanding debt and was $267,000, $194,000 and $900,000 in fiscal
2010, 2009 and 2008, respectively. Fiscal 2010 interest expense consists
primarily of interest incurred on notes payable resulting from a debt financing
in conjunction with the November 2006 acquisition of Gupta Technologies LLC and
the acquisition of CipherSoft Inc., plus the amortization of related debt
issuance costs and the amortization of the discount on notes
payable.




26




---



Other Income (Expense). Other income (expense), net consists
primarily of the gain on the sale of the other investments in fiscal 2008, the
foreign exchange gains and losses and interest earned by the Company on our cash
and cash equivalents. Other income (expense), net was ($14,000), ($124,000) and
$130,000 in fiscal 2010, 2009 and 2008, respectively. 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 which generated a gain that was included in other income. Additionally,
during fiscal 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.




Provision (Benefit) for Income
Taxes. For fiscal 2010,
the Company recorded $65,000 in foreign tax benefit and $66,000 for state and
federal tax benefit. For fiscal 2009, the Company recorded $27,000 in foreign
tax benefit and $206,000 for state or federal tax expense. For fiscal 2008, the
Company recorded $89,000 in foreign tax expense and $235,000 for state and
federal taxes.




Liquidity and Capital Resources




At April 30, 2010, the
Company had cash and cash equivalents of $3.1 million, compared to $6.1 million
at April 30, 2009. The Company had net accounts receivable of $6.2 million as of
April 30, 2010 and $4.5 million as of April 30, 2009. The increase in accounts
receivable and decrease in cash from April 30, 2009 to April 30, 2010 was
primarily the result of accounts receivable acquired and payments on obligations
related to the June 30, 2009 acquisition of AXS-One.




As of April 30, 2010 the
Company has various notes payable outstanding in the amount of $1.0 million of
which $1.0 million is current. The notes payable all have an interest rate of
5%. The Company also has a $2.5 million revolving line of credit with an
interest rate of prime plus 2.25% which has a maturity date of November 30,
2010. As of April 30, 2010 there is $350,000 outstanding on the revolving line
of credit. All outstanding amounts under these notes and the line of credit were
repaid in June 2010 from the proceeds of the loan provided under the Hercules
Loan Agreement.




To finance the merger
with Daegis, the Company entered into the Hercules Loan Agreement. The Hercules
Loan Agreement consists of a term note and a revolving credit note agreement.
The term note is for $24.0 million payable over 5 years with escalating
principal payments of 5%, 10%, 15%, 20% and 50% annually. The Company incurs
interest at the prevailing LIBOR rate plus 8.25% per annum with a minimum rate
of 10.25% (10.25% at the date of closing) plus 2% interest to be paid in kind.
Under the terms of the revolver the Company can borrow up to $6.0 million. The
amount that can be borrowed under the revolver is based on the amount of
eligible accounts receivable outstanding. The Company incurs interest expense on
funds borrowed at the prevailing LIBOR rate plus 7.25% per annum with a minimum
rate of 9.25% (9.25% at the date of closing).




We believe that existing
cash of $3.1 million as of April 30, 2010, along with forecasted operating cash
flows and the credit facilities under the Hercules Loan Agreement, will provide
us with sufficient working capital for us to meet our operating plan for fiscal
year 2011. Our operating plan assumes normal operations for the Company and the
required debt service payments.




Operating Cash Flows. In fiscal 2010, we had cash flows used in
operations of $1.4 million. This compares to fiscal 2009 and 2008 where cash
flows from operations were $3.8 million and $3.4 million, respectively. Cash
flows used in operations for fiscal 2010 principally resulted from $1.8 million
of net losses, a $1.2 million increase in accounts receivable, a decrease in the
valuation allowance from acquisition of $0.2 million, a decrease in accounts
payable of $1.8 million, a decrease in accrued compensation of $0.2 million, a
decrease in accrued acquisition costs of $0.1 million, a decrease in other
accrued liabilities of $2.4 million, and a decrease in other long term
liabilities of $0.5 million. Offsetting these amounts was a $2.7 million
increase in deferred revenue, a decrease of $0.6 million in prepaid expenses and
other current assets, $2.4 million in amortization of intangible assets, $0.2
million in depreciation and $0.6 million in stock based expenses.




In fiscal 2009, we had
cash flows from operations of $3.8 million. Cash flows provided by operations
for fiscal 2009 principally resulted from $2.3 million of income from
operations, a $0.7 million decrease in accounts receivable, a decrease in other
long term assets of $0.1 million, an increase in other accrued liabilities of
$0.4 million, an increase in accounts payable of $0.1 million, $0.8 million in
amortization of intangible assets, $0.2 million in depreciation and $0.5 million
in stock based expenses. Offsetting these amounts was a $0.8 million decrease in
deferred revenue, a decrease of $0.4 million in accrued compensation and related
expenses and an increase of $0.1 million in prepaid expenses and other current
assets.




27




---



In fiscal 2008, we had
cash flows from operations of $3.4 million. 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.




Investing Cash Flows. Cash used in investing activities was $17,000
for fiscal 2010. Cash used in investing activities was $842,000 in fiscal 2009.
The use of cash consisted of $542,000 related to the acquisition of CipherSoft
Inc., $190,000 related to the purchase of property and equipment and $110,000
related to payments on acquisitions. Cash used in investing activities was
$576,000 in fiscal 2008.




Financing Cash Flows. Net cash used in financing activities in
fiscal 2010 was $1.6 million. In fiscal 2010 uses of cash included $1.9 million
of principal payments under debt obligations. This amount was offset by proceeds
of $0.4 million from borrowings on revolving line of credit. Net cash provided
by financing activities in fiscal 2009 was $1.1 million. In fiscal 2009 sources
of cash included $1.2 million in proceeds from the exercise of warrants and $1.0
million from borrowings under debt obligations. This amount was offset by a
payment of $1.1 million for principal payments under debt obligations. Net cash
used in financing activities in fiscal 2008 was $2.3 million. In fiscal 2008
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.




A summary of certain
contractual obligations as April 30, 2010 is as follows (in
thousands):




Payments Due by
  Period1 year
            
            
            
            
            
            
            
            AfterContractual Obligations
            
            Total
            
            or less
            
            2-3 years
            
            4-5 years
            
            5 yearsDebt financing
            
            $
            1,358
            
            $
            1,356
            
            $
            2
            
            $
            -
            
            $
            -Estimated interest expense
            
            
            20
            
            
            20
            
            
            -
            
            
            -
            
            
            -Other liabilities
            
            
            197
            
            
            100
            
            
            -
            
            
            -
            
            
            97Capital lease obligations
            
            
            52
            
            
            41
            
            
            11
            
            
            -
            
            
            -Operating leases
            
            
            3,446
            
            
            1,295
            
            
            1,600
            
            
            551
            
            
            -Total contractual cash obligations
            
            $
            5,073
            
            $
            2,812
            
            $
            1,613
            
            $
            551
            
            $
            97


Recently Issued Accounting Standards




In June 2009, the
Financial Accounting Standards Board (“FASB”) issued authoritative guidance that
establishes the Accounting Standards Codification (“Codification” or "ASC") as
the single source of authoritative U.S. generally accepted accounting principles
(“GAAP”) recognized by the FASB to be applied by non-governmental entities.
Rules and interpretive releases of the Securities and Exchange Commission
(“SEC”) under authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. The Codification supercedes all existing
non-SEC accounting literature not included in the Codification. The FASB will
not issue new standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead, it will issue Accounting
Standards Updates, which will serve to update the Codification, provide
background information about the guidance and provide the basis for conclusions
on the changes to the Codification. GAAP was not intended to be changed as a
result of the FASB’s Codification project, but it did change the way guidance is
organized and presented. As a result, these changes impacted how companies
reference GAAP in their financial statements and in their accounting policies
for financial statements issued for interim and annual periods ending after
September 15, 2009. The Company has implemented the Codification in this Report
by providing a plain English approach when describing any new or updated
authoritative guidance.




28




---



In October 2009, the
FASB issued authoritative guidance on revenue arrangements with multiple
deliverables that are outside the scope of the software revenue recognition
guidance. Under the new guidance, when vendor specific objective evidence or
third party evidence for deliverables in an arrangement cannot be determined, a
best estimate of the selling price is required to separate deliverables and
allocate arrangement consideration using the relative selling price method. The
new guidance includes new disclosure requirements on how the application of the
relative selling price method affects the timing and amount of revenue
recognition. The new guidance will become effective for Unify beginning May 1,
2011, with earlier adoption permitted. The Company is currently assessing the
impact of the adoption of this guidance.




In May 2009, the FASB
issued authoritative guidance for the accounting and reporting of subsequent
events that occur between the balance sheet date and issuance of financial
statements. Issuers are required to recognize the effects, if material, of
subsequent events in the financial statements if the subsequent event provides
additional evidence about conditions that existed as of the balance sheet date.
The issuer must also disclose the date through which subsequent events have been
evaluated and the nature of any nonrecognized subsequent events. This guidance
became effective for financial reporting periods ending after June 15, 2009. We
adopted this guidance in fiscal 2010. We evaluated subsequent events through the
date this Report was filed with the U.S. Securities and Exchange Commission.




In September 2006, the
FASB issued authoritative guidance on fair value measurements. This guidance
defines fair value, establishes a framework and gives guidance regarding the
methods used for measuring fair value, and expands disclosures about fair value
measurements. This guidance is effective for financial statements issued for
fiscal years beginning after November 15, 2008, and interim periods within those
fiscal years. We adopted this guidance in the first quarter of fiscal 2010 and
it did not have a material effect on our consolidated financial statements.




In December 2007, the
FASB issued authoritative guidance on 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. This guidance is
effective for fiscal years beginning after December 15, 2008, with early
adoption prohibited. We have accounted for the acquisition of AXS-One Inc. in
June 2009 under this guidance. See Note 2.




In December 2007, the
FASB issued authoritative guidance on noncontrolling interests in consolidated
financial Statements. The guidance changes the accounting and reporting for
minority interests. Minority interests will be recharacterized as noncontrolling
interests and will be reported as a component of equity separate from the
parent’s equity, and purchases or sales of equity interests that do not result
in a change in control will be accounted for as equity transactions. In
addition, net income attributable to the noncontrolling interest will be
included in net income and, upon a loss of control, the interest sold, as well
as any interest retained, will be recorded at fair value with any gain or loss
recognized in net income. The guidance was effective for us beginning May 1,
2009. We adopted the guidance in the first quarter of fiscal 2010 and it did not
have a material effect on our consolidated financial statements.




In March 2008, the FASB
issued authoritative guidance on disclosures about derivative instruments and
hedging activities. This guidance 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. The guidance encourages,
but does not require, comparative disclosures for earlier periods at initial
adoption. We have adopted the guidance and it did not have a material impact on
our consolidated financial statements.




In May 2008, the FASB
issued authoritative guidance on accounting for convertible debt instruments
that may be settled in cash upon conversion (including partial cash settlement).
This guidance 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. The guidance is effective for fiscal years beginning after December
15, 2008 and must be applied retrospectively to all periods presented. We
adopted the guidance in the first quarter of fiscal 2010 and it did not have a
material effect on our consolidated financial statements.




29




---



In April 2008, the FASB
issued authoritative guidance on the determining the useful life of intangible
assets. This guidance amends the factors that should be considered in developing
the renewal or extension assumptions used to determine the useful life of a
recognized intangible asset. It also requires expanded disclosure related to the
determination of intangible asset useful lives. The guidance is effective for
fiscal years beginning after December 15, 2008. We adopted the guidance in the
first quarter of fiscal 2010 and it did not have a material effect 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 $3.1 million as of April 30, 2010. Unify had no short-term
investments at April 30, 2010.




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. As of April 30, 2010, there was
$350,000 outstanding on 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 cash and accounts receivable balances related to
activities with the Company’s operations in France, Germany, UK, Australia and
Canada. At April 30, 2010 the Company had cash held in foreign currencies of
$1,029,000 in Euros, $174,000 in Canadian dollars, $987,000 in pounds sterling,
and $60,000 in Australian dollars. At April 30, 2010 the Company had accounts
receivable in foreign currencies of $1,927,000 in Euros, $25,000 in Canadian
dollars, $316,000 in pounds sterling, $369,000 in Australian dollars, $35,000 in
Japanese yen, $34,000 in Polish zloty, $5,000 in Singapore dollars, and $95,000
in Malaysian ringgit. The Company 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 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.




30




---



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.




(b) Changes in Internal Controls . There have been no changes in our internal
controls over financial reporting during the fiscal year April 30, 2010 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, 2010. In making this assessment, management used the criteria
established by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) in Internal Control — Integrated Framework.




Based on the Company’s
processes and assessment, as described above, management has concluded that, as
of April 30, 2010, 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, 2010.




31




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PART III




ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF
THE REGISTRANT




Pursuant to General
Instruction G(3) of Form 10-K, the information required by this item relating to
our executive officers is included under the caption “Directors and Executive
Officers of the Registrant” in Part I of this report.




The other information
required by this Item 10 is incorporated by reference from the information
contained in our Proxy Statement to be filed with the U.S. Securities and
Exchange Commission in connection with the solicitation of proxies for our 2010
Annual Meeting of Stockholders (the “2010 Proxy Statement”) under the sections
entitled “Directors and Executive”.




ITEM 11. EXECUTIVE COMPENSATION




The information required
by this Item 11 is incorporated by reference from the information to be
contained in our 2010 Proxy Statement under sections entitled “Executive
Compensation”.




ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT




The information required
by this Item 12 is incorporated by reference from the information to be
contained in our 2010 Proxy Statement under sections entitled “Security
Ownership of Certain Beneficial Owners and Management”.




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




The information required
by this Item 13 is incorporated by reference from the information to be
contained in our 2010 Proxy Statement under sections entitled “Certain
Relationships and Related Transactions, and Director Independence”.




ITEM 14. PRINCIPAL ACCOUNTING FEES AND
SERVICES




The information required
by this Item 14 is incorporated by reference from the information to be
contained in our 2010 Proxy Statement under sections entitled “Principal
Accounting Fees and Services”.




32




---



PART IV




ITEM 15. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES




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




1. Consolidated Financial Statements




PageNumberReport of Grant
      Thornton LLP, Independent Registered Public Accounting
    Firm
            37Consolidated Balance
      Sheets as of April 30, 2010 and 2009
            38Consolidated
      Statements of Operations for the years ended April 30, 2010, 2009,
      2008
            39Consolidated
      Statements of Stockholders’ Equity for the years ended April 30, 2010,
      2009, 2008
            40Consolidated
      Statements of Cash Flows for the years ended April 30, 2010, 2009,
      2008
            41Notes to
      Consolidated Financial Statements
            42


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




Incorporated by ReferenceExhibit
            
            
            
            
            
            
            
            
            
            
            
            FiledNumber
            
            Exhibit
      Description
            
            Form
            
            File
      No.
            
            Exhibit
            
            Filing
      Date
            
            Herewith2.1
            
            
            Agreement and Plan of Merger, dated
      April 16,2009, by and among Unify, UCAC, Inc., aDelaware
      corporation and wholly ownedsubsidiary of Unify, and AXS-One Inc.,
      aDelaware corporation
            
            8-K
            
            001-11807
            
            2.1
            
            April 20,
      20092.2
            
            
            Agreement and Plan of Merger, dated June
      29,2010, by and among Unify Corporation, UnifyAcquisition Corp.,
      and Strategic OfficeSolutions, Inc. (dba Daegis)
            
            8-K
            
            001-11807
            
            10.1
            
            July 1,
    20103.1
            
            
            Restated Certificate of Incorporation of
      the Company
            
            S-1
            
            333-03834
            
            3.1
            
            April 19,
      19963.2
            
            
            Amendment to Restated Certificate
      of
            
            10-K/A
            
            001-11807
            
            3.2
            
            December
    18,Incorporation of the Company
            
            
            
            
            
            
            
            20073.3
            
            
            Amended Bylaws of the
    Registrant
            
            10-K
            
            
            
            
            
            
            
            X4.1
            
            
            Form of Stock Certificate
            
            S-1/A
            
            333-03834
            
            4.1
            
            May 22, 19964.2
            
            
            Revolving Credit and Term Note Agreement
      byand between ComVest and Unify, datedNovember 20, 2006
            
            8-K
            
            001-11807
            
            10.18
            
            November
      29,20064.3
            
            
            Convertible Term Note – Tranche
    1
            
            10-K/A
            
            001-11807
            
            4.3
            
            December
      18,2007




33


---



Incorporated by ReferenceExhibit
            
            
            
            
            
            
            
            
            
            
            
            FiledNumber
            
            Exhibit
      Description
            
            Form
            
            File
      No.
            
            Exhibit
            
            Filing
      Date
            
            Herewith4.4
            
            
            Convertible Term Note – Tranche
    2
            
            10-K/A
            
            001-11807
            
            4.4
            
            December 18,20074.5
            
            
            Convertible Term Note – Tranche
    3
            
            10-K/A
            
            001-11807
            
            4.5
            
            December 18,20074.6
            
            
            Registration Rights Agreement
      dated
            
            8-K
            
            001-11807
            
            10.19
            
            November 29,November 20, 2006
            
            
            
            
            
            
            
            20064.7
            
            
            Form of 2006 Warrants
            
            10-K/A
            
            001-11807
            
            4.7
            
            December 18,20074.8
            
            
            Special Situations Stock Purchase
      Agreement
            
            10-K
            
            001-11807
            
            10.11
            
            July 21, 2004dated April 23, 20044.9
            
            
            Special Situations Registration
      Rights
            
            10-K
            
            001-11807
            
            10.12
            
            July 21, 2004Agreement dated April 23, 20044.10
            
            
            Form of 2004 Warrants
            
            10-K/A
            
            001-11807
            
            4.12
            
            December 18,20074.11
            
            
            Form of 2009 Warrants
            
            10-K
            
            001-11807
            
            4.11
            
            July 22, 20094.12
            
            
            Loan and Security Agreement, dated June
      29,
            
            8-K
            
            001-11807
            
            10.2
            
            July 1, 20102010, by and among Unify Corporation
      andHercules Technology II, L.P.4.13
            
            
            Registration Rights Agreement dated June
      29,
            
            8-K
            
            001-11807
            
            10.3
            
            July 1, 201020104.14
            
            
            Form of 2010 Warrant
            
            8-K
            
            001-11807
            
            10.4
            
            July 1, 20104.15
            
            
            Form of Subordinated Indemnity
      Note
            
            8-K
            
            001-11807
            
            10.5
            
            July 1, 20104.16
            
            
            Form of Subordinated Purchase
    Note
            
            8-K
            
            001-11807
            
            10.6
            
            July 1, 201010.1*
            
            
            1991 Stock Option Plan, as
    amended
            
            S-1
            
            001-11807
            
            10.2
            
            April 19, 199610.2*
            
            
            2001 Stock Option Plan
            
            10-Q
            
            001-11807
            
            10.9
            
            March 14, 200210.3*
            
            
            Employment Agreement by and between
      Todd
            
            10-K
            
            001-11807
            
            10.8
            
            July 30, 2001Wille and the Registrant dated December
      29,200010.4
            
            
            Note Exchange Agreement, dated April
      16,
            
            8-K
            
            001-11807
            
            10.1
            
            April 20, 20092009, between and among Unify and
      holders ofcertain convertible notes of AXS-One
      Inc., aDelaware corporation10.5*
            
            
            Employment Agreement by and between
      Kurt
            
            8-K
            
            001-11807
            
            10.7
            
            July 1, 2010Jensen and the Registrant dated June 30,
      2010




34


---



Incorporated by ReferenceExhibit
            
            
            
            
            
            
            
            
            
            
            
            FiledNumber
            
            Exhibit
      Description
            
            Form
            
            File
      No.
            
            Exhibit
            
            Filing
      Date
            
            Herewith10.6
            
            
            Form of Indemnification
    Agreement
            
            10-K
            
            001-11807
            
            10.5
            
            July 22, 200910.7
            
            
            Office Building Lease for Roseville,
      California
            
            10-K
            
            001-11807
            
            10.6
            
            July 22, 2009facility, dated November 1, 2007, and
      amendedNovember 21, 200714
            
            
            Code of Ethics for Senior
    Officers
            
            10-K
            
            001-11807
            
            14
            
            July 21, 200421.1
            
            
            Subsidiaries of the Registrant
            
            
            
            
            
            
            
            
            
            X23.1
            
            
            Consent of Grant Thornton LLP,
      Independent
            
            
            
            
            
            
            
            
            
            XRegistered Public Accounting
    Firm31.1
            
            
            Certification of Chief Executive
      Officer
            
            
            
            
            
            
            
            
            
            Xpursuant to Rule 13a-14(a) or 15d-14(a)
      of theSecurities Exchange Act of 1934 as
      adoptedpursuant to Section 302 of the
      Sarbanes-OxleyAct of 200231.2
            
            
            Certification of Chief Financial
      Officer
            
            
            
            
            
            
            
            
            
            Xpursuant to Rule 13a-14(a) or 15d-14(a)
      of theSecurities Exchange Act of 1934 as
      adoptedpursuant to Section 302 of the
      Sarbanes-OxleyAct of 200232.1
            
            
            Certification of Todd E. Wille, Chief
      Executive
            
            
            
            
            
            
            
            
            
            XOfficer of Unify Corporation pursuant to
      18U.S.C. Section 1350, as adopted pursuant
      toSection 906 of the Sarbanes-Oxley Act of
      200232.2
            
            
            Certification of Steven D. Bonham,
      Chief
            
            
            
            
            
            
            
            
            
            XFinancial Officer of Unify
      Corporationpursuant to 18 U.S.C. Section 1350, as
      adoptedpursuant to Section 906 of the
      Sarbanes-OxleyAct of 2002


*
            
            Exhibit pertains to a management
      contract or compensatory plan or
arrangement.




35


---



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.




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


Dated: July 12,
2010




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
            July 12,
      2010Todd E. Wille
            
            (Principal Executive Officer)/s/ STEVEND. BONHAM
            
            Vice President and Chief Financial Officer
            July 12, 2010Steven D. Bonham
            
            (Principal Financial and Accounting Officer)/s/ STEVEND. WHITEMAN
            
            Director and Chairman of the Board
            July 12, 2010Steven D. Whiteman/s/ TIMOTHYP. BACCI
            
            Director
            July 12, 2010Timothy P. Bacci/S/ ROBERTM. BOZEMAN
            
            Director
            July 12, 2010Robert M. Bozeman/s/ RICHARDM. BROOKS
            
            Director
            July 12,
      2010Richard M. Brooks/s/ TERYR. LARREW
            
            Director
            July 12,
      2010Tery R. Larrew/s/ ROBERTJ. MAJTELES
            
            Director
            July 12,
      2010Robert J. Majteles


36




---



Report of Independent Registered Public
Accountants




Board of Directors and
ShareholdersUnify Corporation




We have audited the
accompanying consolidated balance sheets of Unify Corporation (a Delaware
corporation) and subsidiaries (collectively, the “Company”) as of April 30, 2010
and 2009, and the related consolidated statements of operations, stockholders’
equity, and cash flows for each of the three years in the period ended April 30,
2010. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these 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
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Unify Corporation and subsidiaries
as of April 30, 2010 and 2009, and the results of their operations and their
cash flows for each of the three years in the period ended April 30, 2010 in
conformity with accounting principles generally accepted in the United States of
America.




/s/ GRANT THORNTON LLP




Reno, NevadaJuly 12,
2010




37




---



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




April 30,
            
            April 30,2010
            
            2009ASSETSCurrent assets:Cash and cash equivalents
            
            $
            3,055
            
            
            $
            6,147Accounts receivable, net of allowances
      of $262 in 2010, and $183 in 2009
            
            
            6,194
            
            
            
            4,501Prepaid expenses and
      other current assets
            
            
            493
            
            
            
            717Total current
      assets
            
            
            9,742
            
            
            
            11,365Property and equipment, net
            
            
            350
            
            
            
            472Goodwill
            
            
            15,835
            
            
            
            6,425Intangibles, net
            
            
            8,613
            
            
            
            2,720Other assets, net of allowances of $82
      in 2010, and $80 in 2009
            
            
            228
            
            
            
            99Total assets
            
            $
            34,768
            
            
            $
            21,081LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent liabilities:Accounts
payable
            
            $
            380
            
            
            $
            685Current portion of long
      term debt
            
            
            1,397
            
            
            
            1,663Accrued compensation and
      related expenses
            
            
            1,308
            
            
            
            1,178Other accrued
      liabilities
            
            
            2,349
            
            
            
            905Deferred
revenue
            
            
            9,733
            
            
            
            5,617Total current
      liabilities
            
            
            15,167
            
            
            
            10,048Long term debt, net of current
      portion
            
            
            12
            
            
            
            837Deferred tax liabilities, net
            
            
            557
            
            
            
            541Other long term liabilities
            
            
            636
            
            
            
            352Commitments and contingencies
            
            
            —
            
            
            
            —Stockholders’ equity:Preferred stock, $0.001
      par value; 7,931,370 shares authorized; no shares
            
            
            —
            
            
            
            —issued or
      outstandingCommon stock, $0.001 par
      value; 40,000,000 shares authorized, 10,476,633
            
            
            10
            
            
            
            7and 7,476,705 shares
      outstanding in 2010 and 2009Additional paid-in
      capital
            
            
            80,312
            
            
            
            69,941Accumulated other
      comprehensive income (loss)
            
            
            383
            
            
            
            (113
            )Accumulated
    deficit
            
            
            (62,309
            )
            
            
            (60,532
            )Total stockholders’
      equity
            
            
            18,396
            
            
            
            9,303Total liabilities and
      stockholders’ equity
            
            $
            34,768
            
            
            $
            21,081


See accompanying notes.




38




---



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




Years Ended April
30,2010
            
            2009
            
            2008Revenues:Software licenses
            
            $
            7,379
            
            
            $
            6,436
            
            
            $
            8,489Services
            
            
            15,816
            
            
            
            11,688
            
            
            
            11,027Migration
    solutions
            
            
            5,397
            
            
            
            2,468
            
            
            
            309Total
      revenues
            
            
            28,592
            
            
            
            20,592
            
            
            
            19,825Cost of Revenues:Software
    licenses
            
            
            346
            
            
            
            244
            
            
            
            226Services
            
            
            3,202
            
            
            
            1,019
            
            
            
            1,245Migration
    solutions
            
            
            2,537
            
            
            
            1,041
            
            
            
            129Total
      cost of revenues
            
            
            6,085
            
            
            
            2,304
            
            
            
            1,600Gross profit
            
            
            22,507
            
            
            
            18,288
            
            
            
            18,225Operating Expenses:Product
    development
            
            
            6,470
            
            
            
            2,907
            
            
            
            3,498Selling, general and
      administrative
            
            
            17,664
            
            
            
            12,494
            
            
            
            12,002Total operating
      expenses
            
            
            24,134
            
            
            
            15,401
            
            
            
            15,500Income (loss) from
      operations
            
            
            (1,627
            )
            
            
            2,887
            
            
            
            2,725Interest expense
            
            
            (267
            )
            
            
            (194
            )
            
            
            (900
            )Other income (expense), net
            
            
            (14
            )
            
            
            (124
            )
            
            
            130Income (loss) before
      income taxes
            
            
            (1,908
            )
            
            
            2,569
            
            
            
            1,955Provision (benefit) for income
      taxes
            
            
            (131
            )
            
            
            179
            
            
            
            324Net income
    (loss)
            
            $
            (1,777
            )
            
            $
            2,390
            
            
            $
            1,631Net income (loss) per share:Basic
            
            $
            (0.18
            )
            
            $
            0.34
            
            
            $
            0.25Diluted
            
            $
            (0.18
            )
            
            $
            0.32
            
            
            $
            0.23Shares used in computing net income
      (loss) per share:Basic
            
            
            9,691
            
            
            
            6,991
            
            
            
            6,423Diluted
            
            
            9,691
            
            
            
            7,582
            
            
            
            7,105


See accompanying notes.




39




---



UNIFY CORPORATIONCONSOLIDATED STATEMENTS
OF STOCKHOLDERS’ EQUITY(In thousands, except share data)




Common Stock
            
            AdditionalPaid-In
            
            AccumulatedOtherComprehensive
            
            Accumulated
            
            TotalStockholders’Shares
            
            Amount
            
            Capital
            
            Income (loss)
            
            Deficit
            
            EquityBalances at April 30, 2007
            
            6,029,201
            
            $
            6
            
            $
            64,973
            
            $
            45
            
            
            $
            (64,555
            )
            
            $
            469Components of comprehensive
      income:Net
      income
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            
            1,631
            
            
            
            1,631Translation
      adjustments
            
            —
            
            
            —
            
            
            —
            
            
            74
            
            
            
            2
            
            
            
            76Total
      comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,707Issuance of common
      stock
            
            41,108
            
            
            —
            
            
            183
            
            
            —
            
            
            
            —
            
            
            
            183Exercise of stock
      options
            
            13,390
            
            
            —
            
            
            23
            
            
            —
            
            
            
            —
            
            
            
            23Conversion of
      warrants and debt to stock
            
            897,050
            
            
            1
            
            
            2,826
            
            
            —
            
            
            
            —
            
            
            
            2,827Stock-based
      compensation
            
            —
            
            
            —
            
            
            210
            
            
            —
            
            
            
            —
            
            
            
            210Balances at April 30, 2008
            
            6,980,749
            
            
            7
            
            
            68,215
            
            
            119
            
            
            
            (62,922
            )
            
            
            5,419Components of
      comprehensive income:Net
      income
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            
            2,390
            
            
            
            2,390Translation
      adjustments
            
            —
            
            
            —
            
            
            —
            
            
            (232
            )
            
            
            —
            
            
            
            (232
            )Total
      comprehensive income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,158Issuance of common
      stock
            
            20,000
            
            
            —
            
            
            52
            
            
            —
            
            
            
            —
            
            
            
            52Exercise of stock
      options
            
            500
            
            
            —
            
            
            2
            
            
            —
            
            
            
            —
            
            
            
            2Conversion of
      warrants to stock
            
            475,456
            
            
            —
            
            
            1,188
            
            
            —
            
            
            
            —
            
            
            
            1,188Stock-based
      compensation
            
            —
            
            
            —
            
            
            484
            
            
            —
            
            
            
            —
            
            
            
            484Balances at April 30, 2009
            
            7,476,705
            
            
            7
            
            
            69,941
            
            
            (113
            )
            
            
            (60,532
            )
            
            
            9,303Components of
      comprehensive loss:Net
      loss
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            
            (1,777
            )
            
            
            (1,777
            )Translation
      adjustments
            
            —
            
            
            —
            
            
            —
            
            
            496
            
            
            
            —
            
            
            
            496Total
      comprehensive loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,281
            )Issuance of common
      stock
            
            2,836,063
            
            
            3
            
            
            9,439
            
            
            —
            
            
            
            —
            
            
            
            9,442Exercise of stock
      options
            
            7,911
            
            
            —
            
            
            13
            
            
            —
            
            
            
            —
            
            
            
            13Conversion of
      warrants and debt to stock
            
            155,954
            
            
            —
            
            
            290
            
            
            —
            
            
            
            —
            
            
            
            290Stock-based
      compensation
            
            —
            
            
            —
            
            
            629
            
            
            —
            
            
            
            —
            
            
            
            629Balances at April 30, 2010
            
            10,476,633
            
            $
            10
            
            $
            80,312
            
            $
            383
            
            
            $
            (62,309
            )
            
            $
            18,396


See accompanying notes.




40




---



UNIFY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS(In
thousands)




Years Ended April
30,2010
            
            2009
            
            2008Cash flows from operating activities:Net income (loss)
            
            $
            (1,777
            )
            
            $
            2,390
            
            
            $
            1,631Reconciliation of net income (loss) to
      net cash provided by (used in) operating activities:Depreciation
            
            
            235
            
            
            
            189
            
            
            
            172Gain on disposal of other
      investments
            
            
            -
            
            
            
            -
            
            
            
            (49
            )Amortization of intangible
    assets
            
            
            2,398
            
            
            
            809
            
            
            
            770Fulfillment of support
    obligations
            
            
            -
            
            
            
            -
            
            
            
            (313
            )Amortization of discount on notes
      payable
            
            
            28
            
            
            
            47
            
            
            
            199Stock based compensation
    expense
            
            
            629
            
            
            
            484
            
            
            
            210Changes in operating assets and
      liabilities:Accounts receivable
            
            
            (1,164
            )
            
            
            654
            
            
            
            (596
            )Prepaid expenses and other current assets
            
            
            647
            
            
            
            (209
            )
            
            
            119Other long term assets
            
            
            52
            
            
            
            74
            
            
            
            142Valuation allowance from acquisition
            
            
            (220
            )
            
            
            -
            
            
            
            -Accounts payable
            
            
            (1,804
            )
            
            
            130
            
            
            
            (312
            )Accrued compensation and related expenses
            
            
            (187
            )
            
            
            (425
            )
            
            
            784Accrued acquisition costs
            
            
            (76
            )
            
            
            7
            
            
            
            (324
            )Other accrued liabilities
            
            
            (2,420
            )
            
            
            381
            
            
            
            50Deferred revenue
            
            
            2,739
            
            
            
            (754
            )
            
            
            899Other long term liabilities
            
            
            (470
            )
            
            
            -
            
            
            
            -Net cash provided by (used in) operating
      activities
            
            
            (1,390
            )
            
            
            3,777
            
            
            
            3,382Cash flows from investing
      activities:Acquisition, net of cash
    acquired
            
            $
            19
            
            
            $
            (542
            )
            
            $
            (249
            )Purchases of property and
      equipment
            
            
            (36
            )
            
            
            (190
            )
            
            
            (284
            )Proceeds from sale of property and
      equipment
            
            
            -
            
            
            
            -
            
            
            
            9Payments on acquisitions
            
            
            -
            
            
            
            (110
            )
            
            
            (317
            )Proceeds from sale of other
      investments
            
            
            -
            
            
            
            -
            
            
            
            265Net cash used in investing
      activities
            
            
            (17
            )
            
            
            (842
            )
            
            
            (576
            )Cash flows from financing
      activities:Short term borrowings, net
            
            
            -
            
            
            
            -
            
            
            
            20Proceeds from issuance of common
      stock
            
            
            13
            
            
            
            2
            
            
            
            -Proceeds from exercise of
    warrants
            
            
            -
            
            
            
            1,188
            
            
            
            -Borrowings on revolving line of
      credit
            
            
            350
            
            
            
            1,000
            
            
            
            1,000Payments on revolving line of
      credit
            
            
            -
            
            
            
            (1,000
            )
            
            
            (1,000
            )Principal payments under debt
      obligations
            
            
            (1,940
            )
            
            
            (133
            )
            
            
            (2,302
            )Net cash provided by (used in) financing
      activities
            
            
            (1,577
            )
            
            
            1,057
            
            
            
            (2,282
            )Effect of exchange rate changes on
      cash
            
            
            (108
            )
            
            
            (537
            )
            
            
            104Net increase (decrease) in cash and cash
      equivalents
            
            
            (3,092
            )
            
            
            3,455
            
            
            
            628Cash and cash equivalents, beginning of
      year
            
            
            6,147
            
            
            
            2,692
            
            
            
            2,064Cash and cash equivalents, end of
      year
            
            $
            3,055
            
            
            $
            6,147
            
            
            $
            2,692Supplemental cash flow
      information:Cash paid during the year for
      interest
            
            $
            112
            
            
            $
            81
            
            
            $
            610Cash paid during the year for income
      taxes
            
            $
            79
            
            
            $
            146
            
            
            $
            21Supplemental non-cash financing
      activities:Warrants converted into common
      stock
            
            $
            20
            
            
            $
            -
            
            
            $
            162Debt converted into common
    stock
            
            $
            270
            
            
            $
            -
            
            
            $
            3,004


See accompanying notes.




41




---



UNIFY CORPORATIONNOTES TO CONSOLIDATED
FINANCIAL STATEMENTSApril 30, 2010


(Tables in thousands of dollars, except share
and per share data, unless otherwise indicated)




Note 1. The Company and Summary of Significant
Accounting Policies




The Company




Unify (the “Company”,
“we”, “us” or “our”) is a global provider of archiving, application development,
data management, and migration software solutions. Our archiving solutions meet
an organization’s requirement to archive, discover and preserve electronically
stored information for eDiscovery, regulatory compliance, global email access
and storage savings. Our software helps companies to maximize value and reduce
cost in the development, deployment, management and retention of business
applications, data and electronically stored information.




Basis of Presentation




The accompanying
consolidated financial statements have been prepared by Unify Corporation
pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”). Such financial statements include our accounts and those of our
subsidiaries that we control due to ownership of a controlling interest.
Intercompany transactions and balances 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 (expense),
net. Foreign currency adjustments resulting from the translation process are
excluded from net income and recorded in other comprehensive income
(loss).




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 revenue recognition and the
assessment of the valuation of goodwill and other intangible assets, valuation
allowance for deferred taxes and the allowance for doubtful accounts 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. Such values approximate the carrying value of the borrowings as of
fiscal year end.




42




---



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 five financial institutions which
at times may exceed federal insured levels. The Company licenses its products
principally to companies in the United States, Europe, Canada, Latin America,
Russia, Japan, Singapore and Australia. For the year ended April 30, 2010, one
customer accounted for 14% of consolidated revenues and another accounted for
11% of consolidated revenues. No single customer accounted for 10% or more of
consolidated revenue in the year ended April 30, 2009. We had one customer in
the year ended April 30, 2008 that accounted for 12% of consolidated revenues.
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 the United States. International
revenues accounted for 50%, 68% and 78% of total revenues in fiscal years 2010,
2009 and 2008, respectively.




Allowance for Doubtful
Accounts




An allowance for
doubtful accounts is established to ensure trade receivables are not overstated
due to uncollectability. 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.




ChargesBalance at
            
            Beginning
            
            (Credits) to
            
            
            
            
            
            Balance atBeginning
            
            Balance From
            
            Operating
            
            Write-offs
            
            End ofof Year
            
            Acquisition
            
            Expenses
            
            of Accounts
            
            Year(In thousands)Allowance for doubtful accounts
      receivable:Year ended April 30, 2008
            
            $
            193
            
            $
            -
            
            $
            15
            
            
            $
            (39
            )
            
            $
            169Year ended April 30, 2009
            
            
            169
            
            
            -
            
            
            73
            
            
            
            (59
            )
            
            
            183Year ended April 30, 2010
            
            
            183
            
            
            50
            
            
            74
            
            
            
            (45
            )
            
            
            262Allowance for long-term
    accountsreceivable – reflected in other
      assets:Year ended April 30, 2008
            
            $
            213
            
            $
            -
            
            $
            23
            
            
            $
            (140
            )
            
            $
            96Year ended April 30, 2009
            
            
            96
            
            
            -
            
            
            (14
            )
            
            
            (2
            )
            
            
            80Year ended April 30, 2010
            
            
            80
            
            
            -
            
            
            2
            
            
            
            -
            
            
            
            82


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 Financial Accounting Standards Board (“FASB”) guidance on accounting
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.




43




---



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. No impairment has
been identified during any of the periods presented.




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 4).




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 presented (Note 4).




Revenue Recognition




The Company generates
revenue from software license sales and related services, including maintenance
and support, and consulting services. Additionally, the Company generates
revenue from its migration solutions products. 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 or special acceptance. The
Company exercises judgment in connection with the determination of the amount of
revenue to be recognized in each accounting period. The nature of each
contractual 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,
collectability is probable and persuasive evidence of an arrangement
exists.




For fixed price
arrangements that require significant modification or customization of software,
the Company uses the percentage-of-completion method for revenue recognition.
Under the percentage-of-completion method, progress towards completion is
measured by labor hours.




The Company considers a
signed non-cancelable 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.




44




---



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.




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 may be billed under time-and-materials or fixed price arrangements.
Revenues and expenses relating to providing consulting services are generally
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




Compensation expense
includes the estimated fair value of equity awards vested during the reported
period. Expense for equity awards vested is determined based on the grant date
fair value previously calculated for pro forma disclosures. For the fiscal years
ended April 30, 2010, 2009, and 2008 equity-based compensation expense was
comprised of the following (in thousands):




April 30, 2010
            
            April 30, 2009
            
            April 30, 2008Cost of Sales
            
            $
            17
            
            $
            14
            
            $
            4Product Development
            
            
            122
            
            
            75
            
            
            30Selling, General and
      Administrative
            
            
            490
            
            
            395
            
            
            176Total Equity-Based Compensation
            
            $
            629
            
            $
            484
            
            $
            210


45




---



The following table
shows remaining unrecognized compensation expense on a pre-tax basis related to
all types of nonvested equity awards outstanding as of April 30, 2010. This
table does not include an estimate for future grants that may be issued (in
thousands).




Fiscal Year Ending April
      30,
            
            Amount2011
            
            $
            6212012
            
            
            5192013
            
            
            2182014
            
            
            24Total
            
            $
            1,382


The cost above is
expected to be recognized over a weighted-average period of 1.25
years.




The Company uses 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
following weighted average assumptions: expected option life, 12 months
following vesting; stock volatility, 92% in fiscal 2010, 90% in fiscal 2009,
104% in fiscal 2008; risk-free interest rates, 1.9% in fiscal 2010, 2.9% in
fiscal 2009, 4.2% in fiscal 2008; 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. The
Company uses a forfeiture rate of 20%, which is based on historical
trends.




Under the 2001 Stock
Option Plan (the “2001 Option Plan”), the Company may grant options to purchase
up to 2,000,000 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. 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.




A summary of the
Company’s stock option activity for the fiscal year ended April 30, 2010 is as
follows:




Weighted
            
            WeightedAverage
            
            average remaining
            
            AggregateExercise
            
            contractual
            
            intrinsicShares
            
            Price
            
            term (in years)
            
            value (1)Outstanding at April 30, 2009
            
            1,075,804
            
            
            $
            3.93
            
            7.22
            
            $
            496,992Granted
            
            705,300
            
            
            $
            2.84Exercised
            
            (7,911
            )
            
            $
            1.59Cancelled/expired
            
            (109,696
            )
            
            $
            6.07Outstanding at April 30, 2010
            
            1,663,497
            
            
            $
            3.34
            
            7.12
            
            $
            1,271,375


(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, 2010 and 2009 was
$11,996 and $1,975, respectively. The total fair value of awards vested during
the year ended April 30, 2010 and 2009 was $722,896 and $561,190,
respectively.




46




---



A summary of the
Company’s nonvested stock option activity for the fiscal year ended April 30,
2010 is as follows:




WeightedAverageFairShares
            
            ValueNonvested at April 30, 2009
            
            460,464
            
            
            $
            3.50Granted
            
            705,300
            
            
            $
            1.54Vested
            
            (282,561
            )
            
            $
            2.56Cancelled/expired
            
            (68,860
            )
            
            $
            2.44Nonvested at April 30, 2010
            
            814,343
            
            
            $
            2.18


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 reinvested.




Income (loss) Per Share




Earnings per share
guidance 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 2010 as their effect would be
antidilutive.




Comprehensive Income
(Loss)




Comprehensive income
(loss) includes net income (loss) and gains and losses on foreign currency
translation.




Segment Reporting




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 have evaluated our approach for making operating decisions
and assessing the performance of our business and, beginning in the first
quarter of fiscal year 2010 as a result of our acquisition on AXS-One, we
determined that we have three reportable segments: Database and Development
Products (“DDP”), Integrated Content Archiving Solutions and Modernization and
Migration Solutions.




Recently Issued Accounting
Standards




In June 2009, the
Financial Accounting Standards Board (“FASB”) issued authoritative guidance that
establishes the Accounting Standards Codification (“Codification” or "ASC") as
the single source of authoritative U.S. generally accepted accounting principles
(“GAAP”) recognized by the FASB to be applied by non-governmental entities.
Rules and interpretive releases of the Securities and Exchange Commission
(“SEC”) under authority of federal securities laws are also sources of
authoritative GAAP for SEC registrants. The Codification supercedes all existing
non-SEC accounting literature not included in the Codification. The FASB will
not issue new standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead, it will issue Accounting
Standards Updates, which will serve to update the Codification, provide
background information about the guidance and provide the basis for conclusions
on the changes to the Codification. GAAP was not intended to be changed as a
result of the FASB’s Codification project, but it did change the way guidance is
organized and presented. As a result, these changes impacted how companies
reference GAAP in their financial statements and in their accounting policies
for financial statements issued for interim and annual periods ending after
September 15, 2009. The Company has implemented the Codification in this Report
by providing a plain English approach when describing any new or updated
authoritative guidance.




47




---



In October 2009, the
FASB issued authoritative guidance on revenue arrangements with multiple
deliverables that are outside the scope of the software revenue recognition
guidance. Under the new guidance, when vendor specific objective evidence or
third party evidence for deliverables in an arrangement cannot be determined, a
best estimate of the selling price is required to separate deliverables and
allocate arrangement consideration using the relative selling price method. The
new guidance includes new disclosure requirements on how the application of the
relative selling price method affects the timing and amount of revenue
recognition. The new guidance will become effective for Unify beginning May 1,
2011, with earlier adoption permitted. The Company is currently assessing the
impact of the adoption of this guidance.




In May 2009, the FASB
issued authoritative guidance for the accounting and reporting of subsequent
events that occur between the balance sheet date and issuance of financial
statements. Issuers are required to recognize the effects, if material, of
subsequent events in the financial statements if the subsequent event provides
additional evidence about conditions that existed as of the balance sheet date.
The issuer must also disclose the date through which subsequent events have been
evaluated and the nature of any nonrecognized subsequent events. This guidance
became effective for financial reporting periods ending after June 15, 2009. We
adopted this guidance in fiscal 2010. We evaluated subsequent events through the
date this Report was filed with the U.S. Securities and Exchange
Commission.




In September 2006, the
FASB issued authoritative guidance on fair value measurements. This guidance
defines fair value, establishes a framework and gives guidance regarding the
methods used for measuring fair value, and expands disclosures about fair value
measurements. This guidance is effective for financial statements issued for
fiscal years beginning after November 15, 2008, and interim periods within those
fiscal years. We adopted this guidance in the first quarter of fiscal 2010 and
it did not have a material effect on our consolidated financial
statements.




In December 2007, the
FASB issued authoritative guidance on 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. This guidance is
effective for fiscal years beginning after December 15, 2008, with early
adoption prohibited. We have accounted for the acquisition of AXS-One Inc. in
June 2009 under this guidance. See Note 2.




In December 2007, the
FASB issued authoritative guidance on noncontrolling interests in consolidated
financial Statements. The guidance changes the accounting and reporting for
minority interests. Minority interests will be recharacterized as noncontrolling
interests and will be reported as a component of equity separate from the
parent’s equity, and purchases or sales of equity interests that do not result
in a change in control will be accounted for as equity transactions. In
addition, net income attributable to the noncontrolling interest will be
included in net income and, upon a loss of control, the interest sold, as well
as any interest retained, will be recorded at fair value with any gain or loss
recognized in net income. The guidance was effective for us beginning May 1,
2009. We adopted the guidance in the first quarter of fiscal 2010 and it did not
have a material effect on our consolidated financial statements.




In March 2008, the FASB
issued authoritative guidance on disclosures about derivative instruments and
hedging activities. This guidance 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. The guidance encourages,
but does not require, comparative disclosures for earlier periods at initial
adoption. We have adopted the guidance and it did not have a material impact on
our consolidated financial statements.




In May 2008, the FASB
issued authoritative guidance on accounting for convertible debt instruments
that may be settled in cash upon conversion (including partial cash settlement).
This guidance 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. The guidance is effective for fiscal years beginning after December
15, 2008 and must be applied retrospectively to all periods presented. We
adopted the guidance in the first quarter of fiscal 2010 and it did not have a
material effect on our consolidated financial statements.




48




---



In April 2008, the FASB
issued authoritative guidance on the determining the useful life of intangible
assets. This guidance amends the factors that should be considered in developing
the renewal or extension assumptions used to determine the useful life of a
recognized intangible asset. It also requires expanded disclosure related to the
determination of intangible asset useful lives. The guidance is effective for
fiscal years beginning after December 15, 2008. We adopted the guidance in the
first quarter of fiscal 2010 and it did not have a material effect on our
consolidated financial statements.




Note 2. Acquisitions




Active Data Corporation




On May 22, 2007, the
Company purchased privately held Active Data Corporation (“ADC”) for
approximately $420,000 plus earn-out payments of $97,000. 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. The acquisition of ADC did not have a material impact
on the financials of Unify and the results of operations for ADC 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 management’s determination of their estimated fair values. 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.




CipherSoft Inc.




On January 30, 2009, the
Company purchased privately held CipherSoft Inc. (“CipherSoft”), headquartered
in Calgary, Canada, for approximately $628,000 plus the assumption of debt of
$1,032,000 and future potential royalty payments to be paid over a four year
period following the acquisition. The royalty payments are based on a percentage
of revenue and will increase goodwill upon being earned. As of April 30, 2010,
royalty payments earned totaled $135,000. CipherSoft is a leading Oracle partner
for modernization and migration of Oracle applications and provides an
additional application migration solution for the Company. Pursuant to the terms
of the purchase agreement, Unify acquired all the outstanding stock of
CipherSoft. CipherSoft did not represent the addition of a significant
subsidiary.




The CipherSoft purchase
price was allocated to tangible and intangible assets acquired and liabilities
assumed based on management’s determination of their estimated fair values at
the acquisition date, January 30, 2009. Intangible assets include technologies
of $1,060,000, non-competition agreements of $85,000, consulting agreements of
$110,000 and trade names of $80,000. 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
CipherSoft as of the acquisition date, January 30, 2009 (in
thousands):




Current assets
            
            $
            236Long term assets
            
            
            22Goodwill
            
            
            780Intangibles
            
            
            1,335Total assets
            
            $
            2,373Current Liabilities
            
            $
            1,099Long term liabilities
            
            
            646Total liabilities assumed
            
            $
            1,745Total consideration
            
            $
            628


49




---



AXS-One Inc.




On June 30, 2009, the
Company acquired all of the issued and outstanding shares of common stock and
warrants of AXS-One. The common stock and warrants were converted into, in the
aggregate, 1,000,000 shares of Unify common stock. The outstanding convertible
notes of AXS-One with an aggregate outstanding principal and interest balance of
approximately $13 million were exchanged for 1,642,600 shares of Unify common
stock. The note holders may also be issued additional shares of Unify common
stock based on revenue generated from AXS-One’s products over 13 months after
the effective date of the merger.




AXS-One is a leading
provider of integrated content archiving software solutions which enables
organizations to implement secure, scalable and enforceable policies that
address records management for corporate governance, legal discovery and
industry regulations. The acquisition of AXS-One advances the Company’s growth
strategy to acquire superior technology companies that can leverage its
technology strengths, extensive customer base and worldwide distribution channel
while enabling the combined company to meet a broader set of customers’ needs,
accelerate direct and channel sales, and achieve cost synergies.




The goodwill of $9.1
million arising from the acquisition consists of increased market presence and
opportunities, enhanced product mix and operating efficiencies expected from
combining the operations of Unify and AXS-One. All of the goodwill was assigned
to Unify’s Integrated Content Archiving Solutions segment. None of the goodwill
recognized is expected to be deductible for income tax purposes.




The following table
summarizes the consideration paid for AXS-One and the amounts of the assets
acquired and liabilities assumed recognized at the acquisition date, June 30,
2009 (in thousands):




ConsiderationEquity instruments (2,642,600 common shares of Unify)
            
            $
            8,853Contingent consideration
      arrangement
            
            
            1,499Fair value of total
      consideration
            
            $
            10,352Recognized amounts of identifiable
      assets acquired and liabilies assumedFinancial assets
            
            $
            117Accounts receivable
            
            
            561Other assets
            
            
            640Property, plant and equipment
            
            
            132Identifiable intangible assets
            
            
            8,065Financial liablities
            
            
            (5,772
            )Deferred revenue
            
            
            (2,493
            )Total identifiable net assets
            
            $
            1,250Goodwill
            
            
            9,102$
            10,352Acquisition related costs(included in
      selling, general and administrative expense in Unify'sstatement of operations for the year
      ended April 30, 2010)
            
            $
            611


The fair value of the
2,642,600 common shares issued as part of the consideration paid for AXS-One
($8,853,000) was determined on the basis of the closing market price of Unify’s
common shares on the acquisition date.




50




---



The contingent
consideration arrangement requires Unify to issue to the former holders of
AXS-One convertible notes 0.35 shares of Unify common stock for every $1 of
AXS-One net license revenue over the first $2,000,000 for the 13 month period
following the acquisition date. After the holders of AXS-One convertible notes
have received in the aggregate 2,580,000 Unify shares (as adjusted to reflect
stock splits, stock dividends and reverse stock splits of Unify) under the
earn-out, the shares issued as the earn-out shall be distributed one-half to the
holders of AXS-One convertible notes and one-half to the former management
members until the management members have received 171,250 Unify shares under
the earn-out. Thereafter, any additional Unify shares issued as earn-out shall
be distributed solely to the holders of AXS-One convertible notes. There is no
limit to the total number of shares that can be earned. The estimated number of
shares that Unify will issue under the contingent consideration arrangement is
451,000. The fair value of the contingent consideration of $1.5 million is based
on management’s estimate of both expected net license revenue and share
price.




Based on the receipt of
a final valuation, acquisition date provisional values were adjusted to decrease
contingent consideration by $3.3 million, decrease identifiable intangible
assets by $2.0 million, increase deferred revenue by $0.4 million, increase
financial liabilities $0.2 million, and decrease goodwill by $0.7 million.
Intangible assets include technologies of $4.2 million, trademarks of $1.2
million, backlog of $0.1 million, and customer relationships of $2.6
million.




The amounts of AXS-One’s
revenue and earnings included in the Company’s consolidated statement of
operations for the year ended April 30, 2010, and the supplemental pro forma
revenue and earnings of the combined entity had the acquisition date been May 1,
2009, or May 1, 2008, are:




(in thousands, except per share
      amounts)
            
            Revenue
            
            Net loss
            
            Net loss per
    shareActual from July 1, 2009 to April 30,
      2010
            
            $
            8,555
            
            $
            (393
            )
            
            $
            (0.04
            )Supplemental pro forma from May 1, 2009 to April 30, 2010
            
            $
            30,101
            
            $
            (2,693
            )
            
            $
            (0.28
            )Supplemental pro forma from May 1, 2008
      to April 30, 2009
            
            $
            32,827
            
            $
            (5,920
            )
            
            $
            (0.85
            )


Note 3. Property and
Equipment




Property and equipment
at April 30, 2010 and 2009 consisted of the following (in
thousands):




2010
            
            2009Equipment
            
            $
            1,700
            
            
            $
            1,661Furniture and leasehold improvements
            
            
            602
            
            
            
            626$
            2,302
            
            
            $
            2,287Less accumulated depreciation and amortization
            
            
            (1,952
            )
            
            
            (1,815
            )Property and equipment, net
            
            $
            350
            
            
            $
            472


51




---



Note 4. Goodwill and Intangible
Assets




The following tables
present details of the Company’s goodwill and intangible assets as of April 30,
2010 and April 30, 2009 (in thousands).




Gross
            
            
            
            Netcarrying
            
            Accumulated
            
            carrying
            
            EstimatedApril 30, 2010
            
            amount
            
            amortization
            
            amount
            
            useful lifeInfinite Lives:Goodwill
            
            $
            15,835
            
            $
            -
            
            
            $
            15,835
            
            -Finite Lives:Customer - related
            
            
            4,136
            
            
            (1,268
            )
            
            
            2,868
            
            5 to 10 yearsTechnology-based
            
            
            6,787
            
            
            (2,220
            )
            
            
            4,567
            
            0.5 to 6 yearsTrademarks
            
            
            1,500
            
            
            (456
            )
            
            
            1,044
            
            0.5 to 5 yearsTrade name
            
            
            197
            
            
            (140
            )
            
            
            57
            
            2 yearsBacklog
            
            
            100
            
            
            (100
            )
            
            
            -
            
            0.5 yearsNon-compete
            
            
            103
            
            
            (32
            )
            
            
            71
            
            3 to 3.3 yearsConsulting
Agreements
            
            
            133
            
            
            (127
            )
            
            
            6
            
            1 yearTotal
            
            $
            28,791
            
            $
            (4,343
            )
            
            $
            24,448Gross
            
            
            
            Netcarrying
            
            Accumulated
            
            carrying
            
            EstimatedApril 30, 2009
            
            amount
            
            amortization
            
            amount
            
            useful lifeInfinite Lives:Goodwill
            
            $
            6,425
            
            $
            -
            
            
            $
            6,425
            
            -Finite Lives:Customer - related
            
            
            1,536
            
            
            (742
            )
            
            
            794
            
            4 to 5 yearsTechnology-based
            
            
            2,395
            
            
            (827
            )
            
            
            1,568
            
            3 to 5 yearsTrademarks
            
            
            300
            
            
            (181
            )
            
            
            119
            
            4 yearsTrade name
            
            
            180
            
            
            (107
            )
            
            
            73
            
            1 to 3 yearsNon-compete
            
            
            85
            
            
            (7
            )
            
            
            78
            
            3 to 3.3 yearsConsulting Agreements
            
            
            110
            
            
            (22
            )
            
            
            88
            
            1 to 1.3 yearsTotal
            
            $
            11,031
            
            $
            (1,886
            )
            
            $
            9,145


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 fiscal
2010 was $2,398,000. Amortization expense for the fiscal year ended April 30,
2009, was $809,000. The estimated future amortization expense related to
intangible assets as of April 30, 2010, is as follows (in
thousands):




Fiscal Year Ending April
    30
            
            Amount2011
            
            $
            2,2652012
            
            
            1,7472013
            
            
            1,2062014
            
            
            1,2022015
            
            
            994Thereafter
            
            
            1,199Total
            
            $
            8,613


52




---



Goodwill at April 30,
2010, represents the excess of purchase prices of acquired companies over the
sum of the amounts assigned to assets acquired less liabilities assumed. The
Company believes these acquisitions will produce the following
results:


- Increased Market Presence and
  Opportunities:The addition of
  the acquired companies 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 the acquired companies should benefit current customers
  and provide the combined company with the ability to access new
  customers.
- Operating Efficiencies:The combination of the Company
  and the acquired companies 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 companies it has acquired. 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.
Based on our testing as of April 30, 2010, we do not believe goodwill is
impaired and accordingly have made no adjustments to its carrying
value.




Note 5. Credit Facility




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, 2010, there was $350,000 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 (5.5% as of
April 30, 2010). The credit facility was repaid on June 29, 2010. See Note
19.




53




---



Note 6. Long-Term Debt




The Company’s long-term
debt consists of the following at April 30, 2010 and April 30, 2009 (in
thousands):




April 30,
            
            April 30,2010
            
            2009Convertible notes payable to ComVest
      Capital LLC, interest rate of 5%, payable ininstallments through September 30, 2010.
      These notes include certain negativecovenants and the Company is in
      compliance with such covenants at April 30,2010. The Comvest notes were repaid on
      June 29, 2010. See Note 19.
            
            $
            377
            
            
            $
            1,400Note Payable, interest rate of 5%,
      payable in installments through April 2011
            
            
            627
            
            
            
            1,032ComVest Capital LLC credit facility,
      repaid on June 29, 2010. See Notes 5 and 19.
            
            
            350
            
            
            
            -Other note payable
            
            
            4
            
            
            
            -Capital leases, payable in monthly
      installments through September 2011
            
            
            52
            
            
            
            971,410
            
            
            
            2,529Less discount on notes payable,
      net
            
            
            (1
            )
            
            
            (29
            )Less current portion
            
            
            (1,397
            )
            
            
            (1,663
            )Long term debt, net
            
            $
            12
            
            
            $
            837


A summary of future
payments on long-term debt obligations as of April 30, 2010 is as follows (in
thousands):




Fiscal Year Ending April
      30,
            
            Amount2011
            
            $
            1,3972012
            
            
            131,410Unamortized discount on notes payable
            
            
            (1
            )Current portion of long term
    debt
            
            
            (1,397
            )Long term debt, net
            
            $
            12


Note 7. 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. As of April 30, 2010 and
April 30, 2009 the amount of severance is $97,000 and $81,000, respectively.
Also included in other long term liabilities as of April 30, 2010 and April 30,
2009 is $219,000 and $271,000 respectively, of deferred rent related to the
Roseville, California office. Additionally, included in other long term
liabilities as of April 30, 2010, is $320,000 related to the unfavorable lease
terms associated with the Rutherford, New Jersey office lease assumed in the
acquisition of AXS-One, Inc. (see Note 2).




54




---



Note 8. 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 and subsequent 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 during the periods are as follows (in
thousands):




Year Ended
            
            Year Ended
            
            Year EndedApril 30,
            
            April 30,
            
            April 30,2010
            
            2009
            
            2008Deferred maintenance revenue beginning
      balance
            
            $
            5,473
            
            
            $
            6,130
            
            
            $
            5,500Deferred maintenance revenue recognized during period
            
            
            (14,217
            )
            
            
            (11,239
            )
            
            
            (10,551
            )Deferred maintenance revenue of new
      maintenance contracts
            
            
            18,386
            
            
            
            10,582
            
            
            
            11,181Deferred maintenance revenue ending balance
            
            $
            9,642
            
            
            $
            5,473
            
            
            $
            6,130


Note 9. 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 2,000,000 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. 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.




55




---



A summary of stock
option activity is as follows:




WeightedAverageNumber of
            
            ExerciseShares
            
            PriceOutstanding at April 30, 2007
            
            453,242
            
            
            $
            2.90Granted (weighted average fair value of $3.58)
            
            393,300
            
            
            $
            3.58Exercised
            
            (13,390
            )
            
            $
            1.67Cancelled/expired
            
            (73,135
            )
            
            $
            3.41Outstanding at April 30, 2008
            
            760,017
            
            
            $
            3.23Granted (weighted average fair value of $5.85)
            
            455,900
            
            
            $
            5.85Exercised
            
            (500
            )
            
            $
            2.55Cancelled/expired
            
            (139,613
            )
            
            $
            6.39Outstanding at April 30, 2009
            
            1,075,804
            
            
            $
            3.93Granted (weighted average fair value of $2.84)
            
            705,300
            
            
            $
            2.84Exercised
            
            (7,911
            )
            
            $
            1.59Cancelled/expired
            
            (109,696
            )
            
            $
            6.07Outstanding at April 30, 2010
            
            1,663,497
            
            
            $
            3.34


Additional information
regarding options outstanding at April 30, 2010 is as follows:




Options Outstanding
            
            Options ExercisableAverage
            
            Weighted
            
            
            
            WeightedRemaining
            
            Average
            
            
            
            AverageNumber
            
            Contractual
            
            Exercise
            
            Number
            
            ExerciseRange of Exercise
Prices
            
            Outstanding
            
            Life (Years)
            
            Price
            
            Outstanding
            
            Price$     1.10 -
      1.44
            
            173,994
            
            3.59
            
            $
            1.30
            
            161,836
            
            $
            1.301.65 - 2.50
            
            118,603
            
            5.99
            
            $
            2.12
            
            98,830
            
            $
            2.062.55 - 2.55
            
            179,000
            
            7.01
            
            $
            2.55
            
            158,576
            
            $
            2.552.60 - 2.60
            
            519,000
            
            8.09
            
            $
            2.60
            
            100,828
            
            $
            2.602.65 - 3.80
            
            238,100
            
            6.87
            
            $
            3.24
            
            89,697
            
            $
            2.883.90 - 5.20
            
            184,500
            
            7.67
            
            $
            4.87
            
            105,151
            
            $
            4.936.15 - 6.25
            
            9,000
            
            7.94
            
            $
            6.19
            
            5,291
            
            $
            6.216.40 - 6.40
            
            235,900
            
            8.01
            
            $
            6.40
            
            126,037
            
            $
            6.406.48 - 6.48
            
            400
            
            7.99
            
            $
            6.48
            
            200
            
            $
            6.486.70 - 6.70
            
            5,000
            
            7.79
            
            $
            6.70
            
            2,708
            
            $
            6.70


Options to purchase
849,154 and 616,091 shares at weighted average prices of $3.20 and $3.33 were
exercisable at April 30, 2010 and 2009. At April 30, 2010, there were 509,965
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 2010 or fiscal 2009 leaving a balance of 3,862 shares reserved for future
awards at April 30, 2010.




56




---



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. The
warrants were subject to an anti-dilution provision such that future stock
issuances would cause an adjustment to the number of warrants.




As a result of issuances
of additional common stock the number of warrant shares purchasable as of April
30, 2009 was increased to 491,792. On April 24, 2009, the warrant agreement was
amended and the exercise price was reduced to $2.50 per share as an inducement
to have the warrant holder exercise the warrants. On April 24, 2009, 475,456 of
the warrants were exercised at $2.50 per share and the remaining 16,336 warrants
expired. Further, in consideration of the exercise of the warrants, the Company
granted an additional 190,182 warrants at an exercise price of $2.75 per share.
Under certain circumstances, where the closing bid price of a share of common
stock equals or exceeds $5.50, 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 $0.01 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.




Note 10. Income Taxes




Income (loss) before
income taxes and provision (benefit) for income taxes for the years ended April
30 were as follows (in thousands):




2010
            
            2009
            
            2008Domestic
            
            $
            (1,728
            )
            
            $
            3,004
            
            
            $
            1,997Foreign
            
            
            (180
            )
            
            
            (435
            )
            
            
            (42
            )Total income (loss) before income taxes
            
            $
            (1,908
            )
            
            $
            2,569
            
            
            $
            1,955CurrentForeign taxes
            
            $
            55
            
            
            $
            -
            
            
            $
            89Federal and state income taxes
            
            
            18
            
            
            
            95
            
            
            
            16Total Current
            
            
            73
            
            
            
            95
            
            
            
            105DeferredForeign taxes
            
            
            (120
            )
            
            
            (27
            )
            
            
            -Federal and state income taxes
            
            
            (84
            )
            
            
            111
            
            
            
            219Total Deferred
            
            
            (204
            )
            
            
            84
            
            
            
            219Provision (benefit) for income
      taxes
            
            $
            (131
            )
            
            $
            179
            
            
            $
            324


57




---



The provision (benefit)
for income taxes for the years ended April 30, 2010, 2009 and 2008 differs from
the amounts computed by applying the statutory U.S. federal income tax rate to
pretax income (loss) as a result of the following (in thousands):




2010
            
            2009
            
            2008Computed tax expense (benefit) at
      statutory rate
            
            $
            (837
            )
            
            $
            1,144
            
            
            $
            665Increases (reductions) in tax expense resulting from:Change in valuation
      allowance for deferred tax assets
            
            
            339
            
            
            
            (1,226
            )
            
            
            (298
            )Stock-based
      compensation
            
            
            180
            
            
            
            117
            
            
            
            -Acquisition
      cost
            
            
            224
            
            
            
            -
            
            
            
            -Change in tax
      contingency reserve
            
            
            7
            
            
            
            67
            
            
            
            -Other
            
            
            (44
            )
            
            
            77
            
            
            
            (43
            )Provision (benefit) for income taxes
            
            $
            (131
            )
            
            $
            179
            
            
            $
            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):




2010
            
            2009Deferred tax assets
    (liabilities):Non-current assetsNet operating loss
      carryforwards
            
            $
            18,694
            
            
            $
            14,501Capital loss
      carryforward
            
            
            2,288
            
            
            
            1,702Foreign tax
      credits
            
            
            163
            
            
            
            108Domestic fixed assets and other
      intangibles
            
            
            -
            
            
            
            296Others
            
            
            462
            
            
            
            206Current assetsDeferred
      revenue
            
            
            109
            
            
            
            64Allowance for losses on accounts
      receivable
            
            
            107
            
            
            
            83Reserves and other
      accruals
            
            
            578
            
            
            
            151Total deferred tax
assets
            
            
            22,401
            
            
            
            17,111Valuation allowance
            
            
            (20,120
            )
            
            
            (17,111
            )Non-current liabilitiesDomestic fixed assets and other
      intangibles
            
            
            (2,095
            )
            
            
            -Foreign fixed assets and other
      intangibles
            
            
            (278
            )
            
            
            (211
            )Goodwill
            
            
            (465
            )
            
            
            (330
            )Net deferred tax assets (liabilities)
            
            $
            (557
            )
            
            $
            (541
            )


Realization of deferred
tax assets is dependent upon future earnings, the timing and amount of which are
uncertain. Accordingly, the Company has maintained a full valuation allowance
against its net deferred tax assets in all the tax jurisdictions except Canada.
The valuation allowance increased by $3.0 million in fiscal 2010, decreased by
$1.2 million in fiscal 2009 and increased by $298,000 in fiscal
2008.




58




---



At April 30, 2010, the
Company had approximately $37.4 million in federal net operating loss (“NOL”)
carryforwards that begin to expire in fiscal year 2011 through 2029,
approximately $5.2 million in state net operating loss carryforwards that expire
in fiscal years 2014 to 2031, and approximately $1.2 million in foreign net
operating loss carryforwards that do not expire. 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. In addition, the Company had
approximately $9.2 million acquired federal NOLs through a business combination
during fiscal year 2010 that begin to expire in fiscal year 2027 though 2029,
approximately $13.7 million acquired state NOL that expire in fiscal years 2015
to 2031 and approximately $5.2 million acquired foreign NOL that do not expire.
At April 30, 2010, the Company also had approximately $5.1 million federal
capital loss carryforward and $9.1 million California capital loss carryforward,
respectively, which expires beginning in fiscal year 2013 for federal tax
purpose and will not expire for State of California.




Tax Positions




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.




A reconciliation of the
beginning and ending amount of unrecognized tax benefits is as follows (in
thousands):




Year ended
            
            Year endedApril 30,
      2010
            
            April 30,
      2009Beginning balance
            $
            67
            
            $
            -Gross increases - tax positions in current period
            
            -
            
            
            67Gross decreases - tax positions in prior
      period
            
            -
            
            
            -Gross increases - tax positions in prior period
            
            7
            
            
            -Decreases relating to
    settlements
            
            -
            
            
            -Reductions as a result of a lapse of statute of
    limitations
            
            -
            
            
            -Ending balance
            $
            74
            
            $
            67


If recognized, $74,000
of the total unrecognized tax benefits would be recorded as a reduction in
income tax expense. The Company’s policy is to recognize interest and penalties
accrued on any unrecognized tax benefits as a component of income tax expense.
As of April 30, 2010, the Company did not have material interest or penalties
associated with any unrecognized tax benefits. We do not expect the total amount
of unrecognized tax benefits to significantly increase or decrease within the
next twelve months.




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 2005.




Note 11. Other Income
(Expenses)




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




2010
            
            2009
            
            2008Interest income
            
            $
            5
            
            
            $
            20
            
            
            $
            12Foreign currency exchange gain (loss)
            
            
            (78
            )
            
            
            (205
            )
            
            
            146Other
            
            
            59
            
            
            
            61
            
            
            
            (28
            )Other income (expenses),
      net
            
            $
            (14
            )
            
            $
            (124
            )
            
            $
            130


Note 12. Comprehensive Income
(Loss)




Comprehensive income
(loss) includes net income (loss) and net foreign currency translation
adjustments. A comprehensive gain (loss) on foreign currency translations for
years ended April 30, 2010, 2009, and 2008 was $496,000 and ($232,000), and
$76,000 respectively.




59




---



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 2010, because of our reported net loss, potentially dilutive
securities of 491,000 were excluded from the per share computations due to their
antidilutive effect.




(in thousands, except per share
      amounts)
            
            Year Ended April 30,2010
            
            2009
            
            2008Net income (loss)
            
            $
            (1,777
            )
            
            $
            2,390
            
            $
            1,631Weighted average shares of common stock
      outstanding, basic
            
            
            9,691
            
            
            
            6,991
            
            
            6,423Effect of dilutive securities (stock options)
            
            
            -
            
            
            
            591
            
            
            682Weighted average shares of common stock
      outstanding, diluted
            
            $
            9,691
            
            
            $
            7,582
            
            $
            7,105Earnings (loss) per share of common
      stock:Basic
            
            $
            (0.18
            )
            
            $
            0.34
            
            $
            0.25Diluted
            
            $
            (0.18
            )
            
            $
            0.32
            
            $
            0.23


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 548,006
in fiscal 2010, 584,688 in fiscal 2009, and 85,319 in fiscal 2008. 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 2010, fiscal 2009, and fiscal 2008.




Note 14. Related Party
Transactions




The Company had an
ownership interest in Unify Japan KK which was less than 15%. 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. Unify Japan KK is a
Japanese corporation that is a master distributor for the Company in Japan.
Sales to Unify Japan KK in fiscal 2010, 2009, and 2008 were $0.3 million, $0.2
million, and $0.2 million, respectively. Accounts receivable from Unify Japan KK
as of April 30, 2010 and 2009 were $35,000 and $13,000, respectively. 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.




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 2010, 2009 and 2008, the
Company contributed $196,000, $140,000 and $114,000, respectively, to the 401(k)
Plan.




60




---



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 2014. Future minimum rental payments
under these leases as of April 30, 2010 are as follows (in
thousands):




Years Ending April 30,2011
            $
            1,2952012
            
            1,0542013
            
            5462014
            
            551Thereafter
            
            -$
            3,446


Rent expense under
operating leases was $927,800, $667,200 and $1,095,500 for the years ended April
30, 2010, 2009 and 2008, respectively.




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, 2010, 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.




Note 17. Segment
Information




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 have evaluated our approach for making operating decisions
and assessing the performance of our business and, beginning in the first
quarter of fiscal year 2010, we have determined that we have three reportable
segments: Database and Development Products (“DDP”), Integrated Content
Archiving Solutions and Modernization and Migration Solutions. Prior to the
first quarter of fiscal year 2010, the Company maintained two reportable
segments, Database and Development Products and Modernization and Migration
Solutions. The accounting policies of the segments are the same as those
described in Note 1. We evaluate performance based on gross margins (total
revenues less costs of licenses, services and migration solutions) before
operating costs. We do not manage our operating costs on a segment basis as many
of our sales, marketing and support personnel regularly work with products from
all segments. Additionally, we do not track assets by segment and therefore
asset disclosures by segment are not relevant and are not
presented.




For the fourth quarter
of fiscal 2010 and 2009, total revenue from the United States was $5.0 million
and $1.6 million, respectively. Total revenue from all other countries was $3.4
million in the fourth quarter of fiscal 2010 and $3.1 million for the fourth
quarter of fiscal 2009. Total long-lived assets as of April 30, 2010 and 2009,
for the United States, were $26.4 million and $9.6 million, respectively. Total
long-lived assets in all other countries were $2.0 million as of April 30, 2010
and $68,000 as of April 30, 2009.




61




---



Financial information
for the Company’s reportable segments is summarized below (in
thousands).




For the Years Ended April
      30,2010
            
            2009
            
            2008Total revenues:Database and Development
      Products
            
            $
            14,640
            
            $
            18,124
            
            $
            19,516Integrated Content Archiving
      Solutions
            
            
            8,555
            
            
            -
            
            
            -Modernization and Migration
      Solutions
            
            
            5,397
            
            
            2,468
            
            
            309Total revenues
            
            $
            28,592
            
            $
            20,592
            
            $
            19,825Cost of revenue:Database and Development
      Products
            
            $
            1,357
            
            $
            1,263
            
            $
            1,471Integrated Content Archiving
      Solutions
            
            
            2,191
            
            
            -
            
            
            -Modernization and Migration
      Solutions
            
            
            2,537
            
            
            1,041
            
            
            129Total Cost of Revenues
            
            $
            6,085
            
            $
            2,304
            
            $
            1,600Gross profit:Database and Development
      Products
            
            $
            13,283
            
            $
            16,861
            
            $
            18,045Integrated Content Archiving
      Solutions
            
            
            6,364
            
            
            -
            
            
            -Modernization and Migration
      Solutions
            
            
            2,860
            
            
            1,427
            
            
            180Total Gross Profit
            
            $
            22,507
            
            $
            18,288
            
            $
            18,225


62




---



Note 18. Quarterly Results of Operations
(Unaudited)




The following interim
financial information presents the fiscal 2010 and 2009 results on a quarterly
basis:




Quarter EndedJuly 31,
            
            October 31,
            
            January 31,
            
            April 30,(In thousands, except per share
      data)Year ended 2010:Total revenues
            
            $
            4,511
            
            
            $
            7,087
            
            
            $
            8,622
            
            $
            8,372Gross profit
            
            $
            3,917
            
            
            $
            5,610
            
            
            $
            6,837
            
            $
            6,143Net income (loss)
            
            $
            (2,229
            )
            
            $
            (1,400
            )
            
            $
            1,062
            
            $
            790Net
      income (loss) per share:Basic earnings per share:Net income (loss) per share
            
            $
            (0.27
            )
            
            $
            (0.14
            )
            
            $
            0.10
            
            $
            0.08Dilutive earnings per share:Net income (loss) per share
            
            $
            (0.27
            )
            
            $
            (0.14
            )
            
            $
            0.10
            
            $
            0.07Shares used in computing net income per share:Basic
            
            
            8,367
            
            
            
            10,119
            
            
            
            10,123
            
            
            10,169Diluted
            
            
            8,367
            
            
            
            10,119
            
            
            
            10,601
            
            
            10,743Year ended 2009:Total revenues
            
            $
            5,027
            
            
            $
            5,801
            
            
            $
            5,208
            
            $
            4,556Gross profit
            
            $
            4,566
            
            
            $
            5,056
            
            
            $
            4,621
            
            $
            4,045Net income
            
            $
            391
            
            
            $
            725
            
            
            $
            1,085
            
            $
            189Net
      income per share:Basic earnings per share:Net income per share
            
            $
            0.06
            
            
            $
            0.10
            
            
            $
            0.16
            
            $
            0.03Dilutive earnings per share:Net income per share
            
            $
            0.05
            
            
            $
            0.10
            
            
            $
            0.15
            
            $
            0.03Shares used in computing net income per share:Basic
            
            
            6,981
            
            
            
            6,981
            
            
            
            6,981
            
            
            7,022Diluted
            
            
            7,821
            
            
            
            7,605
            
            
            
            7,334
            
            
            7,210


Note 19. Subsequent Event




On June 29, 2010, the
Company purchased Strategic Office Solutions, Inc., dba Daegis, for
approximately $37.5 million. Payment was made in the form of $24.0 million in
cash, $7.3 million in equity, and $6.2 million in convertible notes. The Company
issued 2,085,714 shares of Unify common stock to the former owners of Daegis at
$3.50 per share for a total of $7.3 million. The notes consisted of a $5.0
million convertible note and a $1.2 million escrow note. Under the terms of the
convertible note the Company will incur interest at 8% per annum. Upon
shareholder approval to issue additional shares in conjunction with this
acquisition, the note will automatically convert to 1,428,571 shares of Unify
common stock. Under the terms of the escrow note the Company will incur interest
at 3% per annum for the first eighteen months and 8% per annum thereafter. Upon
shareholder approval the escrow note will convert into 342,857 shares of Unify
common stock 18 months after the date of closing.




63




---



To finance the cash
portion of the acquisition of Daegis and provide working capital, the Company
entered into a new Revolving Credit and Term Loan Agreement with Hercules
Technology (the “Hercules Loan Agreement”) on June 29, 2010. The Hercules Loan
Agreement consists of a term note and a revolving credit note agreement. The
term note is for $24.0 million payable over five years with escalating principal
payments of 5%, 10%, 15%, 20% and 50% annually. The Company incurs interest at
the prevailing LIBOR rate plus 8.25% per annum with a minimum rate of 10.25%
(10.25% at the date of closing) plus 2% interest to be paid in kind. Under the
terms of the revolver the Company can borrow up to $6.0 million. The amount that
can be borrowed under the revolver is based on the amount of eligible accounts
receivable outstanding. The Company incurs interest expense on funds borrowed at
the prevailing LIBOR rate plus 7.25% per annum with a minimum rate of 9.25%
(9.25% at the date of closing). The additional proceeds from the Hercules Loan
Agreement were used to pay the remaining balance of the ComVest Term Loan and
Revolver in full (see Note 6). In conjunction with the Hercules Loan Agreement,
we issued 718,860 warrants which are exercisable at $3.30 per share.




Disclosure of the
acquisition-date fair value of the consideration given, fair-value of assets
acquired and liabilities assumed, intangible asset classifications, and
pro-forma information is not included in this note. Due to the timing of the
acquisition, the initial accounting for the business combination was incomplete
at the time the financial statements were issued and the above mentioned
information was unavailable.




64






---



INDEX OF EXHIBITS




Incorporated byReferenceExhibit
            
            
            
            
            
            
            
            
            
            
            
            FiledNumber
            
            Exhibit
      Description
            
            Form
            
            File
      No.
            
            Exhibit
            
            Filing
      Date
            
            Herewith2.1
            
            
            Agreement and Plan of Merger, dated
      April 16,
            
            8-K
            
            001-11807
            
            2.1
            
            April 20, 20092009, by and among Unify, UCAC, Inc.,
      aDelaware corporation and wholly
      ownedsubsidiary of Unify, and AXS-One Inc.,
      aDelaware corporation2.2
            
            
            Agreement and Plan of Merger, dated June
      29,
            
            8-K
            
            001-11807
            
            10.1
            
            July 1, 20102010, by and among Unify Corporation,
      UnifyAcquisition Corp., and Strategic
      OfficeSolutions, Inc. (dba Daegis)3.1
            
            
            Restated Certificate of Incorporation of
      the
            
            S-1
            
            333-03834
            
            3.1
            
            April 19, 1996Company3.2
            
            
            Amendment to Restated Certificate
      of
            
            10-K/A
            
            001-11807
            
            3.2
            
            December 18,Incorporation of the Company
            
            
            
            
            
            
            
            20073.3
            
            
            Amended Bylaws of the
    Registrant
            
            10-K
            
            
            
            
            
            
            
            X4.1
            
            
            Form of Stock Certificate
            
            S-1/A
            
            333-03834
            
            4.1
            
            May 22, 19964.2
            
            
            Revolving Credit and Term Note Agreement
      by
            
            8-K
            
            001-11807
            
            10.18
            
            November 29,and between ComVest and Unify,
      dated
            
            
            
            
            
            
            
            2006November 20, 20064.3
            
            
            Convertible Term Note – Tranche
    1
            
            10-K/A
            
            001-11807
            
            4.3
            
            December 18,20074.4
            
            
            Convertible Term Note – Tranche
    2
            
            10-K/A
            
            001-11807
            
            4.4
            
            December 18,20074.5
            
            
            Convertible Term Note – Tranche
    3
            
            10-K/A
            
            001-11807
            
            4.5
            
            December 18,20074.6
            
            
            Registration Rights Agreement
      dated
            
            8-K
            
            001-11807
            
            10.19
            
            November 29,November 20, 2006
            
            
            
            
            
            
            
            20064.7
            
            
            Form of 2006 Warrants
            
            10-K/A
            
            001-11807
            
            4.7
            
            December 18,20074.8
            
            
            Special Situations Stock Purchase
      Agreement
            
            10-K
            
            001-11807
            
            10.11
            
            July 21, 2004dated April 23, 20044.9
            
            
            Special Situations Registration
      Rights
            
            10-K
            
            001-11807
            
            10.12
            
            July 21, 2004Agreement dated April 23, 20044.10
            
            
            Form of 2004 Warrants
            
            10-K/A
            
            001-11807
            
            4.12
            
            December 18,20074.11
            
            
            Form of 2009 Warrants
            
            10-K
            
            001-11807
            
            4.11
            
            July 22, 2009




65


---



Incorporatedby
      ReferenceExhibit
            
            
            
            
            
            
            
            
            
            
            
            FiledNumber
            
            Exhibit
      Description
            
            Form
            
            File
      No.
            
            Exhibit
            
            Filing
      Date
            
            Herewith4.12
            
            
            Loan and Security Agreement, dated June
      29,
            
            8-K
            
            001-11807
            
            10.2
            
            July 1, 20102010, by and among Unify Corporation
      andHercules Technology II, L.P.4.13
            
            
            Registration Rights Agreement dated June
      29,
            
            8-K
            
            001-11807
            
            10.3
            
            July 1, 201020104.14
            
            
            Form of 2010 Warrant
            
            8-K
            
            001-11807
            
            10.4
            
            July 1, 20104.15
            
            
            Form of Subordinated Indemnity
      Note
            
            8-K
            
            001-11807
            
            10.5
            
            July 1, 20104.16
            
            
            Form of Subordinated Purchase
    Note
            
            8-K
            
            001-11807
            
            10.6
            
            July 1, 201010.1*
            
            
            1991 Stock Option Plan, as
    amended
            
            S-1
            
            001-11807
            
            10.2
            
            April 19, 199610.2*
            
            
            2001 Stock Option Plan
            
            10-Q
            
            001-11807
            
            10.9
            
            March 14, 200210.3*
            
            
            Employment Agreement by and between
      Todd
            
            10-K
            
            001-11807
            
            10.8
            
            July 30, 2001Wille and the Registrant dated December
      29,200010.4
            
            
            Note Exchange Agreement, dated April
      16,
            
            8-K
            
            001-11807
            
            10.1
            
            April 20, 20092009, between and among Unify and
      holders ofcertain convertible notes of AXS-One
      Inc., aDelaware corporation10.5*
            
            
            Employment Agreement by and between
      Kurt
            
            8-K
            
            001-11807
            
            10.7
            
            July 1, 2010Jensen and the Registrant dated June 30,
      201010.6
            
            
            Form of Indemnification
    Agreement
            
            10-K
            
            001-11807
            
            10.5
            
            July 22, 200910.7
            
            
            Office Building Lease for Roseville,
      California
            
            10-K
            
            001-11807
            
            10.6
            
            July 22, 2009facility, dated November 1, 2007, and
      amendedNovember 21, 200714
            
            
            Code of Ethics for Senior
    Officers
            
            10-K
            
            001-11807
            
            14
            
            July 21, 200421.1
            
            
            Subsidiaries of the Registrant
            
            
            
            
            
            
            
            
            
            X23.1
            
            
            Consent of Grant Thornton LLP,
      Independent
            
            
            
            
            
            
            
            
            
            XRegistered Public Accounting
    Firm31.1
            
            
            Certification of Chief Executive
      Officer
            
            
            
            
            
            
            
            
            
            Xpursuant to Rule 13a-14(a) or 15d-14(a)
      of theSecurities Exchange Act of 1934 as
      adoptedpursuant to Section 302 of the
      Sarbanes-OxleyAct of 200231.2
            
            
            Certification of Chief Financial
      Officer
            
            
            
            
            
            
            
            
            
            Xpursuant to Rule 13a-14(a) or 15d-14(a)
      of theSecurities Exchange Act of 1934 as
      adoptedpursuant to Section 302 of the
      Sarbanes-OxleyAct of 2002




66


---



Incorporated by ReferenceExhibit
            
            
            
            
            
            
            
            
            
            
            
            FiledNumber
            
            Exhibit
      Description
            
            Form
            
            File
      No.
            
            Exhibit
            
            Filing
      Date
            
            Herewith32.1
            
            
            Certification of Todd E. Wille, Chief
      Executive
            
            
            
            
            
            
            
            
            
            XOfficer of Unify Corporation pursuant to
      18U.S.C. Section 1350, as adopted pursuant
      toSection 906 of the Sarbanes-Oxley Act of
      200232.2
            
            
            Certification of Steven D. Bonham,
      Chief
            
            
            
            
            
            
            
            
            
            XFinancial Officer of Unify
      Corporationpursuant to 18 U.S.C. Section 1350, as
      adoptedpursuant to Section 906 of the
      Sarbanes-OxleyAct of 2002


*
            
            Exhibit pertains to a management
      contract or compensatory plan or
arrangement.




67




---