Deferred taxes are recorded for the difference between the financial statement and tax basis of the Company’s assets and liabilities and net operating loss carryforwards. A valuation allowance is recorded to reduce deferred tax assets to an amount whose realization is more likely than not. U.S. income taxes are not provided on the undistributed earnings of foreign subsidiaries as they are considered to be permanently invested.
Comprehensive Income (loss)
Comprehensive income (loss) includes net income (loss) and comprehensive income (loss). The Company’s components of other comprehensive income (loss) are gains and losses on foreign currency translation.
Segment Reporting
The Company maintains two segments that sell and market application development software and related services. The segments are the Americas, which include the Company’s international distributors, and Europe, which includes the UK, France, Germany and other direct European customers.
Recently Issued Accounting Standards
In February 2006, the FASB issued SFAS No. 155,Accounting for Certain Hybrid Financial Instruments – An Amendment of FAS Statements No. 133 and 150. SFAS No. 155: (a) permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, (b) clarifies that certain instruments are not subject to the requirements of SFAS 133, (c) establishes a requirement to evaluate interests in securitized financial assets to identify interests that may contain an embedded derivative requiring bifurcation, (d) clarifies what may be an embedded derivative for certain concentrations of credit risk, and (e) amends SFAS 140 to eliminate certain prohibitions related to derivatives on a qualifying special-purpose entity. SFAS No. 155 became effective for the Company in the first quarter of fiscal year 2008 and did not have a material impact on our financial position, cash flows or results of operations.
In June 2006, the FASB issued Interpretation (“FIN”) No. 48,Accounting for Uncertainty in Income Taxes - AnInterpretation of FASB Statement No. 109. This Interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 is effective for fiscal years beginning after December 15, 2006 and was applicable for Unify in the first quarter of fiscal year 2008. The adoption of FIN No. 48 did not have a material impact on our financial position, cash flows or results of operations.
In September 2006, the FASB issued Statement No. 157,Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. We are currently assessing the impact, if any, of SFAS 157 on our consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS 159). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value at specified election dates. SFAS 159 is effective for fiscal years beginning after November 15, 2007. We are currently assessing the
In December 2007, the FASB issued Statement No. 160,Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51. The standard changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, Statement 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. Statement 160 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. We are currently assessing the impact, if any, of SFAS 160 on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (revised), Business Combinations. The standard changes the accounting for business combinations including the measurement of acquirer shares issued in consideration for a business combination, the recognition of contingent consideration, the accounting for pre-acquisition gain and loss contingencies, the recognition of capitalized in-process research and development, the accounting for acquisition-related restructuring cost accruals, the treatment of acquisition related transaction costs and the recognition of changes in the acquirer’s income tax valuation allowance. Statement 141(R) is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. We are currently assessing the impact, if any, of SFAS 141(R) on our consolidated financial statements.
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In March 2008, the FASB issued Statement No. 161,Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133. (SFAS No. 161). SFAS No. 161 requires enhanced disclosures about an entity’s derivative instruments and hedging activities with a view toward improving the transparency of financial reporting, and is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. SFAS No. 161 encourages, but does not require, comparative disclosures for earlier periods at initial adoption. We are currently evaluating the impact of adopting SFAS No. 161 on our consolidated financial statements.
On May 9, 2008, the FASB issued FASB Staff Position No. APB 14-1(FSP APB 14-1),Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement. FSP APB 14-1 requires issuers of convertible debt that may be settled wholly or partly in cash when converted to account for the debt and equity components separately. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 and must be applied retrospectively to all periods presented. We are currently assessing the impact, if any, of FSP APB 14-1 on our consolidated financial statements.
Reclassifications
Certain items in the fiscal 2007 and 2006 consolidated financial statements have been reclassified to conform to the fiscal 2008 presentation. These reclassifications had no effect on operating results or stockholders’ equity.
Note 2. Acquisitions and Discontinued Operations
On March 14, 2006, the Company entered into an Agreement and Plan of Merger with Halo Technology Holdings Inc. (“Halo”). Under the terms of the merger agreement Halo would acquire all of the outstanding stock of Unify. On September 13, 2006, Halo and Unify entered into a Termination Agreement terminating the merger agreement.
On September 13, 2006, the Company entered into a Purchase and Exchange Agreement with Halo whereby Unify agreed to purchase all of the outstanding stock of Gupta Technologies LLC (“Gupta”) from Halo in exchange for: (i) the Company’s Insurance Risk Management (“IRM”) division, (ii) the Company’s ViaMode software, (iii) $6,100,000 in cash, and (iv) the amount, if any, by which Gupta’s net working capital exceeds IRM’s net working capital at the close of the transaction. The Company’s acquisition of Gupta was consummated on November 20, 2006. The total purchase price for Gupta was $7.7 million. Gupta was founded in 1984 and is a leading producer of secure, small-footprint, embeddable databases and enterprise application development tools. The acquisition resulted in additional revenue and market share in the Company’s core markets and significantly enhanced the distribution channels through which the Company’s products can be sold. Gupta’s headquarters was in Redwood Shores, California with offices in Germany and the UK and has distributors and partners in more than 40 countries around the world. Gupta’s results of operations are included in the Company’s results from the date of acquisition, November 20, 2006, to April 30, 2008.
On November 20, 2006, the Company entered into various agreements with ComVest Capital LLC (“ComVest”) whereby ComVest, along with participation from Special Situations Funds, provided debt financing for the Gupta acquisition. The debt financing consisted of $5.35 million in convertible term notes and a revolver of up to $2.5 million. There are three tranches that comprise the convertible term notes, Tranche 1 is for $1,000,000, Tranche 2 is for $3,250,000 and Tranche 3 is for $1,100,000. The term loans had an initial interest rate of 11.25% and have repayment terms of 48 to 60 months. The agreement was modified in April 2008 whereby the interest rate on the term loans has been decreased to 5% and all principal payments have been deferred until June 2009. As part of the debt financing the Company provided the lenders with 670,000 warrants to purchase common stock. There are 200,000 warrants to purchase common stock at a price of $1.35 per share, 270,000 warrants at a price of $1.60 per share and 200,000 warrants at a price of $1.90 per share. The warrants have an expiration date of October 31, 2012. Additionally, the holder of the term notes may, at their option, upon written notice to Unify given at any time and from time to time from the date Unify has sufficient authorized, unissued and unreserved shares of common stock convert the outstanding principal and any accrued interest into shares of Unify common stock. Tranche 1 is convertible at $2.50 per common share and Tranches 2 and 3 are convertible at $5.00 per common share. Unify may require conversion of the convertible term notes if its common stock price closes at or above 160% of the applicable conversion price for 20 or more consecutive market days. In October 2007, the outstanding balance for Tranche 1 of $0.9 million was converted into 352,380 shares of common stock. Additionally, in fiscal 2008, $1.6 million of the outstanding balance of Tranche 2 and $0.5 million of the outstanding balance of Tranche 3 was converted into 424,670 shares of common stock. The agreement provides for ComVest to have a security interest in substantially all of the Company’s assets. We capitalized $238,000 of debt issuance costs associated with the debt financing and also recorded a discount on the notes payable of approximately $743,000 that is attributed to the warrants that were issued in conjunction with the financing. The debt issuance costs and the discount on notes payable are being amortized using the effective interest method over the stated life of the related notes. The amortization of both the debt issuance costs and the discount on the notes payable was approximately $345,000 in fiscal 2008 and is included in interest expense. The unamortized amount of the discount on the notes payable was $76,000 as of April 30, 2008 and is included in long-term debt, net. As of April 30, 2008 the unamortized portion of debt issuance costs was $60,000 which is included in other assets, net.
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The Gupta purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date, November 20, 2006. The determination of goodwill and intangibles is based on the results of an independent valuation expert’s report. The excess of the purchase price over the fair value of net assets acquired was allocated to goodwill. The Company believes the fair values assigned to the assets acquired and liabilities assumed were based on reasonable assumptions. The following table summarizes the fair values of net assets acquired and represents the opening balance sheet for Gupta Technologies LLC as of the acquisition date, November 20, 2006 (in thousands):
| Current assets | $ | 1,281 |
| Property and equipment, net | | 99 |
| Long term assets | | 71 |
| Goodwill | | 6,161 |
| Intangibles | | 2,950 |
| Total assets | $ | 10,562 |
| |
| Current liabilities | | 2,844 |
| Long term liabilities | | 18 |
| Shareholders' equity | | 7,700 |
| Total liabilities and shareholders' equity | $ | 10,562 |
Unaudited Pro Forma Financial Information
The unaudited financial information in the table below summarizes the combined results of the operations of Unify and Gupta, on a pro forma basis, as though the companies had been combined as of May 1, 2006. The pro forma information gives effect to the acquisition of Gupta and the sale of both the Company’s IRM division and its ViaMode Product. The pro forma information also assumes the financing raised in connection with the acquisition took place on May 1, 2006.
The unaudited pro forma financial information combines the historical results of Unify for the twelve months ended April 30, 2007 and 2006 and due to differences in our reporting periods, the historical results of Gupta for the twelve months ended June 30, 2006 and the six months September 30, 2006.
| | | Year ended April 30, |
| (in thousands, except per share data) | | 2007 | | 2006 |
| Total revenues | | $ | 19,363 | | $ | 21,600 | |
| Net income | | $ | 957 | | $ | (728 | ) |
| Basic net income per share | | $ | 0.16 | | $ | (0.13 | ) |
| Diluted net income per share | | $ | 0.16 | | $ | (0.13 | ) |
The unaudited pro forma information is not necessarily indicative of the operational results, or of the financial position that would have occurred if the acquisition had been consummated on the dates indicated, nor is it necessarily indicative of future operating results or financial position of the consolidated enterprise.
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Active Data Corporation
On May 22, 2007, the Company purchased privately held Active Data Corporation (“ADC”) for approximately $420,000 plus potential earn-out payments over a two year period following the acquisition. ADC provided application migration software that added Microsoft’s .NET functionality to Unify’s Team Developer product and provided an additional application migration solution for the Company. Pursuant to the terms of the purchase agreement, Unify acquired all the outstanding stock of ADC. ADC did not represent the addition of a significant subsidiary as the investment in ADC was less than 10% of the Company’s assets, ADC’s total assets at date of acquisition were less than 10% of Unify’s assets and ADC’s net loss represented less than 10% of Unify’s net loss. The acquisition of Active Data did not have a material impact on the financials of Unify and the results of operations for Active Data Corporation are included in the Company’s results from the date of acquisition. The ADC purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The determination of goodwill and intangibles is based on the results of a report prepared by an independent valuation expert. The excess of the purchase price over the fair value of net assets acquired was allocated to goodwill. The Company believes the fair values assigned to the assets acquired and liabilities assumed were based on reasonable assumptions.
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Discontinued Operations
In accordance with SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets, the results of the Company’s IRM division and ViaMode software product have been reported as discontinued operations for the years ended April 30, 2007 and 2006, respectively.
In addition, the assets and liabilities of the IRM division and the ViaMode software product have been reclassified as held for sale in the Balance Sheet at April 30, 2006. The divestitures of these businesses were made pursuant to the Company’s strategy to refocus on its core software development and embedded database products.
The IRM division sold and marketed the NavRisk application. The NavRisk application is a policy administration and underwriting software application used by underwriters, administrators and risk managers of risk pools, risk retention groups, captives and self-insured entities. ViaMode is a software and services solution that is used for driver performance management within the transportation industry. Both IRM and ViaMode’s historic revenues were the result of sales solely in North America. The IRM division was previously reported as a separate segment and ViaMode was included in the Americas segment. Operating results for the IRM division and ViaMode software product are summarized as follows (in thousands):
| | Year ended April 30, |
| | 2008 | | 2007 | | 2006 |
| Revenue | $ | - | | $ | 541 | | | $ | 1,106 | |
| Loss from discontinued operations | $ | - | | $ | (1,445 | ) | | $ | (1,823 | ) |
Assets and liabilities of the IRM division and the ViaMode product as of April 30, 2006 were as follows (in thousands):
| | April 30, |
| | 2006 |
| Accounts receivable | $ | 114 |
| Other assets | | 200 |
| Property and equipment, net | | 23 |
| Intangibles, net | | 212 |
| Goodwill | | 1,405 |
| Total assets | $ | 1,954 |
| |
| Accounts payable | $ | 26 |
| Other accrued liabilities | | 737 |
| Accrued compensation and related expenses | | 105 |
| Deferred revenue | | 416 |
| Total liabilities | $ | 1,284 |
Intangibles, net of amortization and goodwill disposed of in the divestiture of the IRM division amounted to $212,000 and $1,405,000, respectively. No amortization expense was recorded once the related assets were held for sale, prior to their divestiture on November 20, 2006. The ViaMode software asset had no intangibles or goodwill associated with it.
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Note 3.Property and Equipment
Property and equipment at April 30, 2008 and 2007 consisted of the following (in thousands):
| | 2008 | | 2007 |
| Equipment | $ | 1,962 | | | $ | 2,046 | |
| Furniture and leasehold improvements | | 863 | | | | 942 | |
| | | 2,825 | | | | 2,988 | |
| Less accumulated depreciation and amortization | | (2,479 | ) | | | (2,759 | ) |
| Property and equipment, net | $ | 346 | | | $ | 229 | |
Note 4.Other Investments
Other investments represent stock in closely held companies, which are accounted for under the cost method. The Company’s ownership interest in both Arango Software International, Inc. (“Arango”) and Unify Japan KK, is less than 15%.
At April 30, 2008 and 2007 other investments consisted of the following (in thousands):
| | 2008 | | 2007 |
| Arango Software International, Inc. | $ | — | | $ | 175 |
| Unify Japan KK | | — | | | 39 |
| | $ | — | | $ | 214 |
Unify Japan KK is a Japanese corporation that is a master distributor for the Company in Japan. Sales to Unify Japan KK in fiscal 2008 and 2007 were $0.2 million for both periods, respectively. Accounts receivable from Unify Japan KK as of April 30, 2008 and 2007 were $12,600 and $7,900, respectively.
At April 30, 2008, we had no long-term investments. The Company held a minority interest in Arango, a privately held corporation located in Panama. In September 2007, the Company sold all of its stock in Arango as part of a stock repurchase plan offered by Arango. At the time of the sale, the Company had a carrying value of $175,000 for the Arango stock. Proceeds from the sale of the Arango stock were $264,000. The gain on the sale of the Arango stock is included in other income. The Company records an investment impairment charge if and when the Company believes an investment has experienced a decline in market value that is other than temporary. Several factors can trigger an impairment review such as significant underperformance relative to expected historical or projected future operating results and significant negative industry or economic trends. In assessing potential impairment for such investments, we consider these factors as well as the forecasted financial performance. In April 2008, we wrote off our investment in Unify Japan of $39,000 based on our assessment that there was a permanent decline in value for this investment.
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Note 5. Goodwill and Intangible Assets
The following tables present details of the Company’s goodwill and intangible assets as of April 30, 2008 and April 30, 2007 (in thousands). The April 30, 2007 amounts relate entirely to the purchase of Gupta Technologies LLC and the sale of the Company’s IRM division on November 20, 2006. See Note 2. The April 30, 2008 amounts relates to the purchase of Gupta Technologies LLC and Active Data.
| | | Gross | | | | | | Net | | |
| | | carrying | | Accumulated | | carrying | | Estimated |
| April 30, 2008 | | amount | | amortization | | amount | | useful life |
| Infinite Lives: | | | | | | | | | | | | |
| Goodwill | | $ | 5,643 | | $ | — | | | $ | 5,643 | | — |
| Finite Lives: | | | | | | | | | | | | |
| Customer - related | | | 1,500 | | | (425 | ) | | | 1,075 | | 5 years |
| Technology-based | | | 1,050 | | | (372 | ) | | | 678 | | 4 years |
| Trademarks | | | 300 | | | (106 | ) | | | 194 | | 4 years |
| Trade name | | | 100 | | | (100 | ) | | | — | | 1 years |
| Technologies | | | 288 | | | (66 | ) | | | 222 | | 4 years |
| Customer lists | | | 36 | | | (8 | ) | | | 28 | | 4 years |
| Total | | $ | 8,917 | | $ | (1,077 | ) | | $ | 7,840 | | |
| | | Gross | | | | | | Net | | |
| | | carrying | | Accumulated | | carrying | | Estimated |
| April 30, 2007 | | amount | | amortization | | amount | | useful life |
| Infinite Lives: | | | | | | | | | | | | |
| Goodwill | | $ | 5,283 | | $ | — | | | $ | 5,283 | | — |
| Finite Lives: | | | | | | | | | | | | |
| Customer - related | | | 1,500 | | | (125 | ) | | | 1,375 | | 5 years |
| Technology-based | | | 1,050 | | | (109 | ) | | | 941 | | 4 years |
| Trademarks | | | 300 | | | (31 | ) | | | 269 | | 4 years |
| Trade name | | | 100 | | | (42 | ) | | | 58 | | 1 years |
| Total | | $ | 8,233 | | $ | (307 | ) | | $ | 7,926 | | |
Acquired finite-lived intangibles are generally amortized on a straight line basis over their estimated useful life. The useful life of finite-lived intangibles is the period over which the asset is expected to contribute directly or indirectly to future cash flows of the Company. Intangible assets amortization expense for continuing operations for fiscal 2008 was $770,000 and was related to the Gupta and Active Data acquisitions. Amortization expense for the fiscal year ended April 30, 2007, was $307,000 and was related entirely to the Gupta acquisition. The estimated future amortization expense related to intangible assets as of April 30, 2008, is as follows (in thousands):
| Fiscal Year Ending April 30, | | Amount |
| 2009 | | | 719 |
| 2010 | | | 719 |
| 2011 | | | 578 |
| 2012 | | | 181 |
| 2013 | | | — |
| Total | | $ | 2,197 |
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Goodwill is included in the Company’s Americas segment as part of corporate assets. Goodwill at April 30, 2008, represents the excess of the Gupta and Active Data Corporation purchase prices over the sum of the amounts assigned to assets acquired less liabilities assumed. The initial determination of goodwill and intangibles was based on the results of an independent valuation expert’s report. The Company believes the acquisition of Gupta and Active Data Corporation will produce the following results:
- Increased Market Presence and Opportunities:The combination of the Company, Gupta and Active Data should increase the combined company’s market presence and opportunities for growth in sales and earnings.
- Enhanced Product Mix:The complementary nature of the Company’s products with those of Gupta and Active Data should benefit current customers of both companies and provide the combined company with the ability to access new customers.
- Operating Efficiencies:The combination of the Company, Gupta and Active Data provides the opportunity for potential economies of scale and cost savings.
The Company believes these primary factors support the amount of goodwill recognized as a result of the purchase price for Gupta and Active Data. Goodwill is tested for impairment on an annual basis as of April 30, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach in accordance with FASB 142,Goodwill and Other Intangible Assets. Based on our testing as of April 30, 2008, we do not believe goodwill is impaired and accordingly have made no adjustments to its carrying value.
Note 6. Credit Facility
On November 3, 2006, the Company’s revolving line of credit with Silicon Valley Bank expired and was not renewed. At the expiration the Company had no amounts outstanding on the line of credit.
On November 20, 2006, the Company entered into a revolving credit note agreement with ComVest Capital LLC. Under the terms of the agreement the Company can borrow up to $2.5 million. As of April 30, 2008, there was no amount outstanding on the revolver. The amount that can be borrowed under the revolver is based on the amount of eligible foreign and domestic accounts receivable outstanding. The revolver has an expiration date of November 30, 2010, and the Company incurs interest expense on funds borrowed at the prevailing prime rate plus 2.25% per annum (7.25% as of April 30, 2008).
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Note 7. Long-Term Debt
The Company’s debt consists of the following at April 30, 2008 and April 30, 2007 (in thousands):
| | April 30, | | April 30, |
| | 2008 | | 2007 |
| Convertible notes payable to ComVest Capital LLC, interest rate of 5%, | | | | | | | |
| payable in installments through October 31, 2011. These notes include certain | | | | | | | |
| negative covenants and the Company is in compliance with such covenants. | $ | 1,400 | | | $ | 5,350 | |
| |
| Revolving note payable to ComVest Capital LLC, interest rate of prime plus | | | | | | | |
| 2.25% and a maturity date of November 30, 2010 | | — | | | | 1,500 | |
| |
| Capital leases payable, payable in monthly installments through June 2010 | | 18 | | | | 25 | |
| | | 1,418 | | | | 6,875 | |
| Less discount on notes payable, net | | (76 | ) | | | (604 | ) |
| Less current portion | | (8 | ) | | | (1,361 | ) |
| Total long term debt, net | $ | 1,334 | | | $ | 4,910 | |
A summary of long term debt obligations as April 30, 2008 is as follows (in thousands):
| Fiscal Year Ending April 30, | | Amount |
| 2009 | | $ | 8 | |
| 2010 | | | 1213 | |
| 2011 | | | 197 | |
| Thereafter | | | — | |
| | | | 1,418 | |
| Unamortized discount on notes payable | | | (76 | ) |
| Current portion of long term debt | | | (8 | ) |
| Total long term debt, net | | $ | 1,334 | |
In January 2008, the Company entered into a lease agreement for office furniture. The lease is expected to commence in July 2008 and will be recorded as a capital lease in the amount of $115,000.
Note 8. Other Long Term Liabilities
In France, the Company is subject to mandatory employee severance costs associated with a statutory government regulated plan covering all employees. The plan provides for one month of severance for the first five years of service with an employer and one fifth of one year of severance for every one year of service thereafter. In order to receive their severance payment the employee may not retire before age 65 and must be employed at the time of retirement. The balance as of April 30, 2008 and 2007 is $121,000 and $108,000, respectively and is reflected as other long-term liabilities. Also, included in other long term liabilities as of April 30, 2008 is $115,000 related to the onetime charge associated with abandoning the German office and $219,000 of deferred tax liabilities.
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Note 9. Maintenance Contracts
The Company offers maintenance contracts to its customers at the time they enter into a product license agreement and renew those contracts, at the customers’ option, annually thereafter. These maintenance contracts are priced as a percentage of the value of the related license agreement. The specific terms and conditions of these initial maintenance contracts andsubsequent renewals vary depending upon the product licensed and the country in which the Company does business. Generally, maintenance contracts provide the customer with unspecified product maintenance updates and customer support services. Revenue from maintenance contracts is initially deferred and then recognized ratably over the term of the agreements.
Changes in the Company’s deferred maintenance revenue from continuing operations during the periods are as follows (in thousands):
| | Year Ended | | Year Ended | | Year Ended |
| | April 30, | | April 30, | | April 30, |
| | 2008 | | 2007 | | 2006 |
| Deferred maintenance revenue beginning balance | $ | 5,500 | | | $ | 2,810 | | | $ | 2,837 | |
| Deferred maintenance revenue recognized during period | | (10,551 | ) | | | (6,155 | ) | | | (4,976 | ) |
| Deferred maintenance revenue of new maintenance | | | | | | | | | | | |
| Contracts | | 11,181 | | | | 8,845 | | | | 4,949 | |
| Deferred maintenance revenue ending balance | $ | 6,130 | | | $ | 5,500 | | | $ | 2,810 | |
Note 10. Stockholders’ Equity
Preferred Stock
The Company may issue up to 7,931,370 shares of preferred stock in one or more series upon authorization by its board of directors. The board of directors, without further approval of the stockholders, is authorized to fix the dividend rights and terms, conversion rights, voting rights, redemption rights and terms, liquidation preferences, and any other rights, preferences, privileges and restrictions applicable to each series of preferred stock.
Stock Option Plan
Under the 2001 Stock Option Plan (the “2001 Option Plan”), the Company may grant options to purchase up to 1,200,000 shares of common stock to eligible employees, directors, and consultants at prices not less than the fair market value at the date of grant for incentive stock options and not less than 85% of the fair market value at the date of grant for non-statutory stock options. Options granted under the 2001 Stock Option Plan generally vest over four years, are exercisable to the extent vested, and expire 10 years from the date of grant. In fiscal year 2008, we granted 237,000 option shares to the management team outside of the 2001 Stock Option Plan. Under the 1991 Stock Option Plan (the “1991 Option Plan”) which expired as of March 2001, the Company was able to grant options to eligible employees, directors and consultants at prices not less than the fair market value at the date of grant for incentive stock options and not less than 85% of the fair market value at the date of grant for non-statutory stock options. Options granted under the 1991 Option Plan generally vest over four years, are exercisable to the extent vested, and expire 10 years from the date of grant.
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A summary of stock option activity is as follows:
| | | | | Weighted |
| | | | | Average |
| | Number of | | Exercise |
| | Shares | | Price |
| Outstanding at April 30, 2005 | 568,476 | | | 4.60 |
| Granted (weighted average fair value of $1.55) | 95,000 | | | 1.90 |
| Exercised | (62,523 | ) | | 1.75 |
| Cancelled/expired | (71,971 | ) | | 8.10 |
| Outstanding at April 30, 2006 | 528,982 | | | 4.10 |
| Granted (weighted average fair value of $1.35) | 79,000 | | | 1.35 |
| Exercised | (85,080 | ) | | 1.80 |
| Cancelled/expired | (69,660 | ) | | 11.45 |
| Outstanding at April 30, 2007 | 453,242 | | | 2.90 |
| Granted (weighted average fair value of $3.58) | 393,300 | | | 3.58 |
| Exercised | (13,390 | ) | | 1.67 |
| Cancelled/expired | (73,135 | ) | | 3.41 |
| Outstanding at April 30, 2008 | 760,017 | | | 3.23 |
Additional information regarding options outstanding at April 30, 2008 is as follows:
| | | | Options Outstanding | | Options Exercisable |
| | | | | | Average | | Weighted | | | | Weighted |
| | | | | | Remaining | | Average | | | | Average |
| | | | Number | | Contractual | | Exercise | | Number | | Exercise |
| | Range of Exercise Prices | | Outstanding | | Life (Years) | | Price | | Outstanding | | Price |
| $ | 1.10 -1.30 | | 130,500 | | 4.66 | | $ | 1.25 | | 111,124 | | $ | 1.27 |
| 1.40 -1.85 | | 98,635 | | 7.58 | | | 1.63 | | 54,733 | | | 1.69 |
| | 1.95 -2.40 | | 79,475 | | 8.08 | | | 2.27 | | 32,341 | | | 2.15 |
| 2.45 -2.50 | | 7,200 | | 7.61 | | | 2.50 | | 4,216 | | | 2.50 |
| | 2.55 -2.55 | | 183,800 | | 9.00 | | | 2.55 | | 102,675 | | | 2.55 |
| 2.70 -3.35 | | 82,600 | | 4.17 | | | 2.80 | | 82,225 | | | 2.80 |
| | 3.65 -5.00 | | 13,700 | | 7.56 | | | 4.14 | | 7,174 | | | 4.10 |
| 5.20 - 5.20 | | 135,000 | | 9.58 | | | 5.20 | | 9,999 | | | 5.20 |
| | 5.70 - 32.50 | | 29,558 | | 4.72 | | | 15.77 | | 17,491 | | | 22.31 |
| 44.06 - 44.06 | | 300 | | 1.96 | | | 44.06 | | 300 | | | 44.06 |
Options to purchase 422,278 and 379,573 shares at weighted average prices of $3.06 and $4.80 were exercisable at April 30, 2008 and 2007. At April 30, 2008, there were 669,314 shares reserved for future grants under the Stock Option Plan.
Restricted Stock
On May 1, 2002, the Company established the 2002 Director Restricted Stock Plan (“Director Restricted Stock Plan”) as part of a compensation program designed to attract and retain independent members for our board of directors. The maximum aggregate number of shares of common stock that may be issued under the Director Restricted Stock Plan is 100,000. There were no shares awarded under the plan in fiscal 2008 or fiscal 2007 leaving a balance of 3,862 shares reserved for future awards at April 30, 2008.
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Private Placement
On April 23, 2004, the Company issued through a private placement 1,126,780 shares of common stock to a group of institutional investors at a price of $3.55 per share and 5-year warrants to purchase an aggregate of 450,712 shares of common stock at an exercise price of $4.50 per share. Net proceeds from the private placement were $3,696,000, net of estimated accrued costs of $304,000. The Company’s actual costs for the private placement were $397,000 which resulted in a further reduction of additional paid-in-capital of $93,000 during fiscal 2005.
Due to the initial issuance of shares in the acquisition of Acuitrek in February 2005, which caused the application of the anti-dilution provision of the warrants, the warrant exercise price has been adjusted to $4.45 per share and the total number of warrant shares purchasable on exercise of the warrants has increased to 454,543 shares. The debt financing on November 20, 2006 in conjunction with the acquisition of Gupta Technologies LLC (see Note 2) also caused the application of the anti-dilution provision and the warrant exercise price was adjusted to $4.15 per share and the number of warrant shares purchasable on exercise of the warrants has increased to 487,387 shares. Under certain circumstances, where the closing bid price of a share of common stock equals or exceeds $9.00, appropriately adjusted for any stock split, reverse stock split, stock dividend or other reclassification or combination of common stock, for 20 consecutive trading days commencing after the registration statement covering the warrants shares has been declared effective, the Company, upon 20 days’ prior written notice to the warrant holders within one business day immediately following the end of such 20 day trading period, may call the warrants for 25% of the shares of the common stock initially purchasable pursuant to the warrants at a redemption price equal to $0.05 per share of common stock then purchasable pursuant to the warrants. If the call conditions are met again during the 30 day period immediately after consummation of a previous call, the Company may once again call the warrants for an additional increment of 25% of the shares of common stock initially purchasable pursuant to the warrants or such less amount as shall then remain purchasable and in the same manner and subject to the same notice requirements as the initial call, until all of the shares have been called.
Reverse Stock Split
On June 24, 2007, the Company implemented a 1 for 5 reverse stock split. The reverse stock split had been previously approved by the Company’s stockholders as part of the Company’s March 29, 2007 Annual Meeting.
Note 11. Income Taxes
For fiscal 2008, the Company recorded $89,000 for foreign tax expense and $235,000 for state or federal taxes. For fiscal 2007, the Company recorded $82,000 for foreign tax expense and no expense for state or federal taxes. For fiscal 2006, the Company recorded no state, federal or foreign tax expense.
Income (loss) from continuing operations before income taxes and provision for income taxes, which consisted solely of current tax expense, for the years ended April 30 were as follows (in thousands):
| | 2008 | | 2007 | | 2006 |
| Domestic | $ | 1,997 | | | | ($1,546 | ) | | $ | 1,165 |
| Foreign | | (42 | ) | | | 267 | | | | 30 |
| Total income (loss) before income taxes | $ | 1,955 | | | | ($1,279 | ) | | $ | 1,195 |
| |
| Foreign taxes | $ | 89 | | | $ | 82 | | | $ | — |
| Federal and state income taxes | | 235 | | | | — | | | | — |
| Provision (benefit) for income taxes | $ | 324 | | | $ | 82 | | | $ | — |
The provision for income taxes for the years ended April 30, 2008, 2007 and 2006 differs from the amounts computed by applying the statutory U.S. federal income tax rate to pretax loss as a result of the following (in thousands):
| | 2008 | | 2007 | | 2006 |
| Computed tax benefit | $ | 665 | | | $ | (824 | ) | | $ | (214 | ) |
| Increases (reductions) in tax expense resulting from: | | | | | | | | | | | |
| Change in valuation allowance for deferred tax assets | | (298 | ) | | | 14,321 | | | | (15,560 | ) |
| Expiration of net operating loss carryforwards | | — | | | | (13,024 | ) | | | 15,460 | |
| Change in deferred revenue | | — | | | | (1,088 | ) | | | — | |
| Other | | (43 | ) | | | 697 | | | | 314 | |
| Provision for income taxes | $ | 324 | | | $ | 82 | | | $ | — | |
The Company provides deferred income taxes which reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at April 30 were as follows (in thousands):
| | 2008 | | 2007 |
| Deferred tax assets (liabilities): | | | | | | | |
| Non-current assets | | | | | | | |
| Net operating loss carryforwards | $ | 16,008 | | | $ | 14,649 | |
| Capital loss carryforward | | 1,695 | | | | 1,515 | |
| Foreign tax credits | | 81 | | | | — | |
| Fixed assets and other intangibles | | 172 | | | | — | |
| Others | | 185 | | | | — | |
| Current assets | | | | | | | |
| Deferred revenue | | — | | | | 2,151 | |
| Allowance for losses on accounts receivable | | 66 | | | | 97 | |
| Reserves and other accruals | | 107 | | | | 200 | |
| Total deferred tax assets | $ | 18,314 | | | $ | 18,612 | |
| Valuation allowance | | (18,314 | ) | | | (18,612 | ) |
| Non-current liabilities | | | | | | | |
| Goodwill | | (219 | ) | | | — | |
| Net deferred tax assets (liabilities) | $ | (219 | ) | | $ | — | |
Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $298,000 in fiscal 2008, increased by $14.3 in fiscal 2007 and decreased by $15.6 million in fiscal 2006. At April 30, 2008, the Company had approximately $44.4 million in federal net operating loss carryforwards that begin to expire in fiscal year 2008 through 2027, approximately $11.0 million in state net operating loss carryforwards that expire in fiscal years 2013 to 2017, approximately $0.7 million in foreign net operating loss carryforwards that do not expire and approximately $4.3 million in capital loss carryforwards that expire in 2010. The Company’s ability to utilize these net operating loss carryforwards may be subject to certain limitations in the event of a change in ownership.
FIN 48 Disclosure
The Company adopted the provisions of FASB Interpretation (“FIN”) No. 48,Accounting for Uncertainty in Income Taxes, on May 1, 2007. As required by Interpretation 48, which clarifies Statement 109,Accounting for Income Taxes, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, the Company applied Interpretation 48 to all tax positions for which the statute of limitations remained open.
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As the result of implementation of FIN 48, the company recognized no change in the liability for unrecognized tax benefits related to tax positions taken in prior periods. All positions taken on the US and foreign tax returns with respect to any book-tax adjustments were deemed highly certain.
The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In general, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the fiscal years before 2004. The Company does not believe there will be any material changes in its unrecognized tax positions over the next 12 months. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to FIN No. 48. The adoption of FIN No. 48 did not have a material effect on the Company’s consolidated financial position or results of operations.
The Company’s policy is to recognized interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of April 30, 2008, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor did the Company record any interest expense in the three months ended April 30, 2008.
Note 12. Other Income (Expenses)
Other income (expenses), net for the years ended April 30, consisted of the following (in thousands):
| | 2008 | | 2007 | | 2006 |
| Interest income | $ | 12 | | | $ | 45 | | $ | 109 | |
| Foreign currency exchange gain (loss) | | 146 | | | | 15 | | | (48 | ) |
| Other | | (28 | ) | | | 76 | | | — | |
| Other income (expenses), net | $ | 130 | | | $ | 136 | | $ | 61 | |
Note 13. Earnings (loss) per Share
Basic earnings per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings per share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock. For fiscal 2007, because of our reported net loss, potentially dilutive securities were excluded from the per share computations due to their antidilutive effect.
| (in thousands, except per share amounts) | Years Ended April 30, |
| | 2008 | | 2007 | | 2006 |
| Income (loss) from continuing operations | $ | 1,631 | | $ | (1,361 | ) | | $ | 1,195 | |
| Loss from discontinued operations | | — | | | (1,445 | ) | | | (1,823 | ) |
| Net loss | $ | 1,631 | | $ | (2,806 | ) | | $ | (628 | ) |
| |
| Weighted average shares of common stock outstanding, basic | | 6,423 | | | 5,927 | | | | 5,803 | |
| Effect of dilutive securities | | 682 | | | — | | | | 72 | |
| Weighted average shares of common stock outstanding, diluted | | 7,105 | | | 5,927 | | | | 5,875 | |
| |
| Earnings (loss) per share of common stock: | | | | | | | | | | |
| Basic: | | | | | | | | | | |
| Continuing operations | $ | 0.25 | | $ | (0.23 | ) | | $ | 0.21 | |
| Discontinued operations | | — | | | (0.24 | ) | | | (0.32 | ) |
| Total | $ | 0.25 | | $ | (0.47 | ) | | $ | (0.11 | ) |
| |
| Assuming dilution: | | | | | | | | | | |
| Continuing operations | $ | 0.23 | | $ | (0.23 | ) | | $ | 0.20 | |
| Discontinued operations | | — | | | (0.24 | ) | | | (0.32 | ) |
| Total | $ | 0.23 | | $ | (0.47 | ) | | $ | (0.12 | ) |
71
The dilutive securities above represent only those stock options, warrants and convertible debt whose exercise prices were less than the average market price of the stock during the respective periods and therefore were dilutive. The number of shares of stock options excluded from the above amounts because their exercise prices exceeded the average market price of the stock during the respective periods was 85,319 in fiscal 2008, 453,200 in fiscal 2007 and 529,000 in fiscal 2006. The number of shares of common stock warrants excluded from the above amounts because their exercise prices exceeded the average market price of the stock during the respective periods was none in fiscal 2008, 1,124,600 in fiscal 2007 and 454,600 in fiscal 2006.
Note 14. Related Party Transactions
Prior to its write off in fiscal 2008, Unify had an investment of less than 15% in Unify Japan KK who is the Company’s master distributor in Japan (See Note 4). Sales to Unify Japan KK in fiscal 2008, 2007 and 2006 were $0.2 million, $0.2 million and $0.3 million, respectively. Accounts receivable from Unify Japan KK as of April 30, 2008 and 2007 were $12,600 and $7,900, respectively.
Note 15. Employee Retirement Plan
The Company maintains a 401(k) profit sharing plan (the “401(k) Plan”). Eligible employees may contribute up to 100% of their pre-tax annual compensation to the 401(k) Plan, subject to certain statutory limitations. The Company can, at its discretion, voluntarily match the participating employees’ contributions not to exceed 6% of each employee’s annual compensation. In fiscal years 2008, 2007 and 2006, the Company contributed $114,000, $72,000 and $59,000, respectively, to the 401(k) Plan.
Note 16. Commitments and Contingencies
Operating Leases
The Company leases office space and equipment under non-cancelable operating lease arrangements expiring at various dates through fiscal 2012. Future minimum rental payments under these leases as of April 30, 2008 are as follows (in thousands):
| Years Ending April 30, | | |
| 2009 | $ | 354 |
| 2010 | | 695 |
| 2011 | | 554 |
| 2012 | | 562 |
| 2013 | | 569 |
| Thereafter | | 486 |
| | $ | 3,220 |
Rent expense under operating leases was $1,240,000, $1,095,500 and $1,038,400 for the years ended April 30, 2008, 2007 and 2006, respectively.
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Litigation
The Company is subject to legal proceedings and claims that arise in the normal course of business. If such matters arise, the Company cannot assure that it would prevail in such matters, nor can it assure that any remedy could be reached on mutually agreeable terms, if at all. Due to the inherent uncertainties of litigation, were there any such matters, the Company would not be able to accurately predict their ultimate outcome. As of April 30, 2008, there were no current proceedings or litigation involving the Company that management believes would have a material adverse impact on its financial position, results of operations, or cash flows.
In January 2008, the Company entered into a lease agreement for office furniture. The lease is expected to commence in July 2008 and will be recorded as a capital lease in the amount of $115,000.
Note 17. Segment Information
FASB Statement No. 131,Disclosures about Segments of an Enterprise and Related Information , establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision maker is our Chief Executive Officer. We are organized geographically. While our Chief Executive Officer evaluates results in a number of different ways, our geographic structure is the primary basis for which the allocation of resources and financial results are assessed. The Company maintains two segments that sell and market application development software and related services.
The segments are the Americas, which includes the Company’s international distributors, and Europe, including the UK, France, Germany and other direct European customers. Previously, the Company also maintained a reportable segment for its Insurance Risk Management (“IRM”) division. The IRM division sold and marketed the NavRisk application. In November 2006, the IRM division and the Company’s ViaMode software product were sold. In the tables below, the IRM division and the Company’s ViaMode software product comprise the amounts presented as discontinued operations.
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Financial information for the Company’s reportable segments is summarized below (in thousands):
| For the Twelve Months Ended April 30, |
| 2008 | | 2007 | | 2006 |
| Total revenues: | | | | | | | | | | | |
| Americas (1) | $ | 8,948 | | | $ | 4,851 | | | $ | 4,889 | |
| Europe (1) | | 10,877 | | | | 6,336 | | | | 5,254 | |
| Total revenues from continuing operations | | 19,825 | | | | 11,187 | | | | 10,143 | |
| Total revenues from discontinued operations | | — | | | | 541 | | | | 1,106 | |
| Total revenues | $ | 19,825 | | | $ | 11,728 | | | $ | 11,249 | |
| |
| Operating income (loss): | | | | | | | | | | | |
| Americas (2) | $ | (4,856 | ) | | $ | (4,081 | ) | | $ | (1,238 | ) |
| Europe | | 7,581 | | | | 3,193 | | | | 2,383 | |
| Total operating income (loss) from continuing operations | | 2,725 | | | | (888 | ) | | | 1,145 | |
| Total operating loss from discontinued operations | | — | | | | (1,445 | ) | | | (1,823 | ) |
| Total operating loss | $ | 2,725 | | | $ | (2,333 | ) | | $ | (678 | ) |
| |
| Interest income (3) | $ | 12 | | | $ | 45 | | | $ | 109 | |
| Interest expense (3) | $ | 900 | | | $ | 527 | | | $ | 11 | |
| |
| Total assets by segment were as follows (in thousands): | | | | | | | | | | | |
| |
| Assets: | | | | | | | | | | | |
| Americas | $ | 14,567 | | | $ | 11,990 | | | $ | 4,218 | |
| Europe | | 2,111 | | | | 3,664 | | | | 2,179 | |
| Total assets of continuing operations | | 16,678 | | | | 15,654 | | | | 6,397 | |
| Assets held for sale | | — | | | | — | | | | 1,954 | |
| Total assets | $ | 16,678 | | | $ | 15,654 | | | $ | 8,351 | |
Total intersegment revenues were as follows (in thousands):
| For the Twelve Months Ended April 30, |
| 2008 | | 2007 | | 2006 |
| Total intersegment revenues were as follows (in thousands): | | | | | | | | |
| |
| Intersegment revenues: | | | | | | | | |
| Americas | $ | 1,148 | | $ | 490 | | $ | 982 |
| Europe | | 1,903 | | | 611 | | | — |
| Total intercompany revenues | $ | 3,051 | | $ | 1,101 | | $ | 982 |
| |
| Depreciation (5) | $ | 172 | | $ | 185 | | $ | 169 |
| Capital expenditures (5) | $ | 284 | | $ | 63 | | $ | 41 |
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Revenues and long-lived assets by geographic area were as follows (in thousands):
| 2008 | | 2007 | | 2006 |
| Total net revenues: | | | | | | | | |
| Americas | $ | 4,390 | | $ | 2,986 | | $ | 3,048 |
| International Distributors | | 4,558 | | | 1,865 | | | 1,841 |
| Subtotal Americas | | 8,948 | | | 4,851 | | | 4,889 |
| United Kingdom | | 1,495 | | | 984 | | | 1,128 |
| Central Europe - Germany, Benelux, Other | | 7,473 | | | 3,039 | | | 2,349 |
| France | | 1,909 | | | 2,313 | | | 1,777 |
| Subtotal Europe | | 10,877 | | | 6,336 | | | 5,254 |
| Discontinued operations | | — | | | 541 | | | 1,106 |
| Total net revenues | $ | 19,825 | | $ | 11,728 | | $ | 11,249 |
| |
| Long-lived assets: | | | | | | | | |
| Americas | $ | 117 | | $ | 241 | | $ | 47 |
| Europe | | 98 | | | 237 | | | 132 |
| Corporate assets | | 8,150 | | | 8,365 | | | 479 |
| Total long-lived assets | $ | 8,365 | | $ | 8,843 | | $ | 658 |
____________________
| (1) | | The Company allocates revenues to operating segments based on the location of the country where the license is installed or service is delivered. The accounting policies of the segments are the same as those described in Note 1. |
| |
| (2) | | Americas operating income (loss) is net of corporate product development and general and administrative expenses. |
| |
| (3) | | Interest income and interest expense were primarily attributable to corporate assets located in the Americas for the periods presented. Interest income and interest expense in the Americas and Europe were not significant in those periods. |
| |
| (4) | | Corporate assets are located in the Americas and consist primarily of cash equivalents, investments, purchased technology and related maintenance contracts, property and equipment, intangibles, goodwill and intercompany receivables from Europe. |
| |
| (5) | | The majority of the Company’s capital expenditures are incurred for product development (which occurs exclusively in the Americas) and for corporate infrastructure. Consequently, capital expenditures and depreciation expense were primarily attributable to the Americas in the periods presented. |
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Note 18. Quarterly Results of Operations (Unaudited)
The following interim financial information presents the fiscal 2008 and 2007 results on a quarterly basis:
| Quarter Ended |
| July 31, | | October 31, | | January 31, | | April 30, |
| (In thousands, except per share data) |
| Year ended 2008: | | | | | | | | | | | | | | | |
| Total revenues | $ | 3,961 | | | $ | 4,949 | | | $ | 5,842 | | | $ | 5,073 | |
| Gross profit | $ | 3,719 | | | $ | 4,607 | | | $ | 5,399 | | | $ | 4,500 | |
| Net income (loss) from continuing operations | $ | (218 | ) | | $ | 692 | | | $ | 1,080 | | | $ | 77 | |
| Net loss from discontinued operations | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Net income (loss) | $ | (218 | ) | | $ | 692 | | | $ | 1,080 | | | $ | 77 | |
| |
| Net income (loss) per share: | | | | | | | | | | | | | | | |
| Basic earnings per share: | | | | | | | | | | | | | | | |
| Net income (loss) per share | $ | (0.04 | ) | | $ | 0.11 | | | $ | 0.16 | | | $ | 0.01 | |
| |
| Dilutive earnings per share: | | | | | | | | | | | | | | | |
| Net income (loss) per share | $ | (0.04 | ) | | $ | 0.10 | | | $ | 0.14 | | | $ | 0.01 | |
| |
| Shares used in computing net income (loss) per share: | | | | | | | | | | | | | | | |
| Basic | | 6,037 | | | | 6,100 | | | | 6,626 | | | | 6,934 | |
| Diluted | | 6,037 | | | | 6,627 | | | | 7,581 | | | | 8,000 | |
| |
| Year ended 2007: | | | | | | | | | | | | | | | |
| Total revenues | $ | 1,733 | | | $ | 2,190 | | | $ | 3,310 | | | $ | 3,954 | |
| Gross profit | $ | 1,420 | | | $ | 1,903 | | | $ | 2,869 | | | $ | 3,594 | |
| Net income (loss) from continuing operations | $ | (292 | ) | | $ | 291 | | | $ | (777 | ) | | $ | (583 | ) |
| Net income (loss) from discontinued operations | $ | (462 | ) | | $ | (478 | ) | | $ | (505 | ) | | $ | — | |
| Net loss | $ | (754 | ) | | $ | (187 | ) | | $ | (1,282 | ) | | $ | (583 | ) |
| |
| Net income (loss) per share: | | | | | | | | | | | | | | | |
| Basic earnings per share: | | | | | | | | | | | | | | | |
| Continuing operations | $ | (0.05 | ) | | $ | 0.05 | | | $ | (0.13 | ) | | $ | (0.10 | ) |
| Discontinued operations | | (0.08 | ) | | | (0.08 | ) | | | (0.08 | ) | | | 0.00 | |
| Net loss per share | $ | (0.13 | ) | | $ | (0.03 | ) | | $ | (0.21 | ) | | $ | (0.10 | ) |
| |
| Dilutive earnings per share: | | | | | | | | | | | | | | | |
| Continuing operations | $ | (0.05 | ) | | $ | 0.05 | | | $ | (0.13 | ) | | $ | (0.10 | ) |
| Discontinued operations | | (0.08 | ) | | | (0.08 | ) | | | (0.08 | ) | | | 0.00 | |
| Net loss per share | $ | (0.13 | ) | | $ | (0.03 | ) | | $ | (0.21 | ) | | $ | (0.10 | ) |
| |
| Shares used in computing net income (loss) per share: | | | | | | | | | | | | | | | |
| Basic | | 5,905 | | | | 5,905 | | | | 5,935 | | | | 5,966 | |
| Diluted | | 5,905 | | | | 5,905 | | | | 5,935 | | | | 5,966 | |
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INDEX OF EXHIBITS
| Exhibit | | |
| No. | | Description |
| 2. | 1 | | Purchase and Exchange Agreement between Halo Technology Holdings, Inc and Unify, dated September 13, 2006 as amended by Amendment No. 1 dated November 20, 2006 (10) (11) |
| | | | |
| 3. | 1 | | Restated Certificate of Incorporation of the Company (1) |
| | | |
| 3. | 2 | | Amendment to Restated Certificate of Incorporation of the Company |
| | | |
| 3. | 3 | | Bylaws of the Registrant (1) |
| | | |
| 4. | 1 | | Form of Stock Certificate (1) |
| | | |
| 4. | 2 | | Revolving Credit and Term Note Agreement by and between ComVest and Unify, dated November 20, 2006 (11) |
| | | | |
| 4. | 3 | | Convertible Term Note – Tranche 1 |
| | | |
| 4. | 4 | | Convertible Term Note – Tranche 2 |
| | | |
| 4. | 5 | | Convertible Term Note – Tranche 3 |
| | | |
| 4. | 6 | | Registration Rights Agreement dated November 20, 2006 (11) |
| | | |
| 4. | 7 | | Form of 2006 Warrants |
| | | |
| 4. | 8 | | Acuitrek Inc. Stock Purchase Agreement dated February 2, 2005 as amended by Amendment No. 1 dated November 20, 2006 (7) (11) |
| | | | |
| 4. | 9 | | Acuitrek Inc. Registration Rights Agreement dated February 2, 2005 (7) |
| | | |
| 4. | 10 | | Special Situations Stock Purchase Agreement dated April 23, 2004 (6) |
| | | |
| 4. | 11 | | Special Situations Registration Rights Agreement dated April 23, 2004 (6) |
| | | |
| 4. | 12 | | Form of 2004 Warrant |
| | | |
| 10. | 1* | | 1991 Stock Option Plan, as amended (1) |
| | | |
| 10. | 2* | | 2001 Stock Option Plan (4) |
| | | |
| 10. | 3* | | Employment Agreement by and between Todd Wille and the Registrant dated December 29, 2000 (3) |
| | | |
| 10. | 4 | | Form of Indemnification Agreement (1) |
| | | |
| 10. | 5 | | Office Building Lease for Sacramento Facility, Dated December 17, 1999, as Amended (2) |
| | | |
| 10. | 6 | | Fourth Amendment Effective January 1, 2002 to Office Building Lease Dated December 17, 1999 (6) |
| | | |
| 10. | 7 | | Fifth Amendment to Lease and Termination of Stock Pledge Agreement dated September 18, 2003 (6) |
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| | | | |
| 10. | 8 | | Silicon Valley Bank Loan and Security Agreement dated June 6, 2003(5), as amended by Silicon Valley Bank Amendment to Loan Documents dated June 3, 2004, June 5, 2005 (8) and May 24, 2006 (9) and Amended Schedule to Loan and Security Agreement dated June 3, 2004(6) and June 5, 2005 (8) |
| | | | |
| 14 | | | Code of Ethics for Senior Officers(6) |
| | | |
| 21 | .1 | | Subsidiaries of the Registrant |
| | | |
| 23 | .1 | | Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm |
| | | |
| 31 | .1 | | Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | | |
| 31 | .2 | | Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | | | |
| 32 | .1 | | Certification of Todd E. Wille, Chief Executive Officer of Unify Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| | | | |
| 32 | .2 | | Certification of Steven D. Bonham, Chief Financial Officer of Unify Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
____________________
| (1) | | Incorporated by reference to the exhibit filed with Registrant’s Form S-1 Registration Statement (No. 333- 3834) declared effective by the Securities and Exchange Commission on June 14, 1996. |
| |
| (2) | | Incorporated by reference to the exhibit filed with Registrant’s Form 10-K on December 22, 2000. |
| |
| (3) | | Incorporated by reference to the exhibit filed with Registrant’s Form 10-K on July 30, 2001. |
| |
| (4) | | Incorporated by reference to the exhibit filed with Registrant’s Form 10-Q on March 14, 2002. |
| |
| (5) | | Incorporated by reference to the exhibit filed with Registrant’s Form 10-K on July 17, 2003. |
| |
| (6) | | Incorporated by reference to the exhibit filed with Registrant’s Form 10-K on July 21, 2004. |
| |
| (7) | | Incorporated by reference to the exhibit filed with Registrant’s Form 8-K on February 2, 2005. |
| |
| (8) | | Incorporated by reference to the exhibit filed with Registrant’s Form 10-K on July 28, 2005. |
| |
| (9) | | Incorporated by reference to the exhibit filed with Registrant’s Form 10-K on July 31, 2006. |
| |
| (10) | | Incorporated by reference to the exhibit filed with Registrant’s Form 8-K on September 20, 2006. |
| |
| (11) | | Incorporated by reference to the exhibit filed with Registrant’s Form 8-K on November 29, 2006. |
| | |
| * | | Exhibit pertains to a management contract or compensatory plan or arrangement. |
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