<PAGE>
- -----------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1997
OR
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION 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. EMPLOYER IDENTIFICATION
INCORPORATION OR ORGANIZATION) NUMBER)
181 METRO DRIVE, THIRD FLOOR
SAN JOSE, CALIFORNIA 95110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
TELEPHONE: (408) 467-4500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
-------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
8,340,905 shares of Common Stock, $0.001 par value, as of November 30, 1997
- -----------------------------------------------------------------------------
<PAGE>
UNIFY CORPORATION
FORM 10-Q
INDEX
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
October 31, 1997 and April 30, 1997....................... 3
Condensed Consolidated Statements of Operations for
the three and six months ended October 31, 1997
and 1996.................................................. 4
Condensed Consolidated Statements of Cash Flows
for the six months ended October 31, 1997 and 1996........ 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 7
PART II. OTHER INFORMATION
Item 5. Other Information........................................... 12
Item 6. Exhibits and Reports on Form 8-K............................ 12
SIGNATURE............................................................ 13
Exhibit 11.1 Statement of Computation of Net Loss Per Share......... 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNIFY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
October 31, April 30,
1997 1997
----------- ---------
ASSETS (unaudited) (1)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,619 $ 9,513
Short-term investments 5,444 7,133
Accounts receivable, net 4,168 4,557
Prepaid expenses and other current assets 414 526
-------- --------
Total current assets 15,645 21,729
Property and equipment, net 2,321 2,415
Other assets 141 294
-------- --------
Total assets $18,107 $24,438
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 103 $ 2,378
Accounts payable 1,156 1,586
Amounts due to minority interest stockholders 828 830
Accrued compensation and related expenses 1,949 1,972
Other accrued liabilities 3,024 3,797
Deferred revenue 3,282 3,531
-------- --------
Total current liabilities 10,342 14,094
Long-term debt, net of current portion 35 58
Minority interest 287 324
Stockholders' equity:
Common stock 8 8
Additional paid-in capital 53,296 52,965
Notes receivable from stockholders (212) (207)
Cumulative translation adjustments (704) (767)
Accumulated deficit (44,945) (42,037)
-------- --------
Total stockholders' equity 7,443 9,962
-------- --------
Total liabilities and stockholders' equity $18,107 $24,438
-------- --------
-------- --------
</TABLE>
(1) Derived from audited financial statements.
See accompanying notes to condensed consolidated financial statements.
3
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UNIFY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Oct. 31, Six Months Ended Oct.31,
--------------------------- ------------------------
1997 1996 1997 1996
----------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Revenues:
Software licenses $ 3,994 $ 4,847 $ 6,863 $ 8,826
Services 2,270 2,498 4,535 4,747
Amnesty license arrangement - - - 2,812
------- ------- ------- -------
Total revenues 6,264 7,345 11,398 16,385
------- ------- ------- -------
Cost of revenues:
Software licenses 130 287 363 643
Services 1,143 1,164 2,224 2,292
------- ------- ------- -------
Total cost of revenues 1,273 1,451 2,587 2,935
------- ------- ------- -------
Gross margin 4,991 5,894 8,811 13,450
------- ------- ------- -------
Operating expenses:
Product development 1,526 1,683 2,974 3,374
Selling, general and administrative 4,296 5,800 8,856 11,467
------- ------- ------- -------
Total operating expenses 5,822 7,483 11,830 14,841
------- ------- ------- -------
Loss from operations (831) (1,589) (3,019) (1,391)
Other income, net 141 67 201 114
------- ------- ------- -------
Loss before income taxes (690) (1,522) (2,818) (1,277)
Provision for income taxes (43) (54) (90) (112)
------- ------- ------- -------
Net loss $ (733) $(1,576) $(2,908) $(1,389)
------- ------- ------- -------
------- ------- ------- -------
Net loss per share $ (0.09) $ (0.20) $ (0.35) $ (0.19)
------- ------- ------- -------
------- ------- ------- -------
Shares used in computing net
loss per share 8,252 7,917 8,201 7,292
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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UNIFY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended October 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,908) $ (1,389)
Reconciliation of net loss to net cash used in
operating activities:
Depreciation 530 668
Provision for losses on accounts receivable 80 -
Minority interest (37) (2)
Liquidation of Benelux subsidiary 136 -
Imputed interest on stockholder line of credit - 145
Changes in operating assets and liabilities:
Accounts receivable 388 (4,929)
Prepaid expenses and other current assets 117 200
Accounts payable (457) (497)
Amounts due to minority interest stockholders (19) (120)
Accrued compensation and related expenses (34) 926
Other accrued liabilities (790) 843
Deferred revenue (293) (651)
--------- --------
Net cash used in operating activities (3,287) (4,806)
--------- --------
Cash flows from investing activities:
Purchases of available-for-sale securities (5,309) (10,141)
Sales of available-for-sale securities 6,998 1,971
Purchases of property and equipment (430) (701)
Other assets 168 74
--------- --------
Net cash provided by (used in) investing activities 1,427 (8,797)
--------- --------
Cash flows from financing activities:
Principal payments under debt obligations (2,298) (162)
Proceeds from issuance of common stock, net 331 23,281
Collection of notes receivable from stockholders, net of
interest accrual (5) 63
--------- --------
Net cash (used in) provided by financing activities (1,972) 23,182
--------- --------
Effect of exchange rate changes on cash (62) 47
--------- --------
Net (decrease) increase in cash and cash equivalents (3,894) 9,626
Cash and cash equivalents, beginning of period 9,513 3,028
--------- --------
Cash and cash equivalents, end of period $ 5,619 $ 12,654
--------- --------
--------- --------
Supplemental schedule of noncash investing and financing
activities:
Conversion of redeemable preferred stock and accrued
dividends to common stock $ - $ 26,726
--------- --------
--------- --------
Cash paid during the period for:
Interest $274 $45
--------- --------
--------- --------
Income taxes $80 $93
--------- --------
--------- --------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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UNIFY CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The condensed consolidated financial statements have been prepared by
Unify Corporation (the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). While the interim financial
information contained in this filing is unaudited, the financial statements
presented reflect all adjustments (consisting only of normal recurring
adjustments) which the Company considers necessary for a fair presentation of
the financial position as of October 31, 1997 and April 30, 1997,the results
of operations for the three and six months ended October 31, 1997 and 1996,
and the cash flows for the six months ended October 31, 1997 and 1996. The
results for interim periods are not necessarily indicative of the results to
be expected for the entire fiscal year. These financial statements should be
read in conjunction with the Consolidated Financial Statements and Notes
thereto, together with Management's Discussion and Analysis of Financial
Condition and Results of Operations, which are included in the Company's
Annual Report on Form 10-K for the year ended April 30, 1997 as filed with
the SEC.
2. LONG-TERM DEBT
At April 30, 1997, the Company had a line of credit provided by certain
stockholders. The Company retired the full $2.2 million balance due under
this credit facility upon its expiration in July 1997.
3. NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, EARNINGS PER
SHARE. The Company is required to adopt SFAS No. 128 in the third quarter of
fiscal 1998 and at that time will restate earnings per share data for prior
periods to conform with the provisions of SFAS No. 128. Earlier application
is not permitted. If SFAS No. 128 had been in effect for the three and six
months ended October 31, 1997 and 1996, basic and diluted net loss per share
would not have been significantly different than net loss per share currently
reported for those periods.
In June 1997, the Financial Accounting Standards Board issued two new
SFASs. SFAS No. 130, REPORTING COMPREHENSIVE INCOME, requires that an
enterprise report, by major components and as a single total, the change in
its net assets from nonowner sources during the period. SFAS No. 131,
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION,
establishes annual and interim reporting standards for an enterprise's
business segments and related disclosures about its products, services,
geographic areas and major customers. Adoption of these statements will not
impact the Company's consolidated financial position, results of operations
or cash flows. Both statements are effective for fiscal years beginning
after December 15, 1997, with earlier application permitted.
6
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UNIFY CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE DISCUSSION IN THIS QUARTERLY REPORT ON FORM 10-Q CONTAINS
FORWARD-LOOKING STATEMENTS THAT HAVE BEEN MADE PURSUANT TO THE PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH FORWARD-LOOKING
STATEMENTS ARE BASED ON CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS ABOUT
THE SOFTWARE INDUSTRY AND CERTAIN ASSUMPTIONS MADE BY THE COMPANY'S
MANAGEMENT. WORDS SUCH AS "ANTICIPATES", "EXPECTS", "INTENDS", "PLANS",
"BELIEVES", "SEEKS", "ESTIMATES", VARIATIONS OF SUCH WORDS AND SIMILAR
EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE
STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE SUBJECT TO
CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT;
THEREFORE, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR
FORECASTED IN ANY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS AND
UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO, THOSE SET FORTH HEREIN UNDER
"VOLATILITY OF STOCK PRICE AND GENERAL RISK FACTORS AFFECTING QUARTERLY
RESULTS." UNLESS REQUIRED BY LAW, THE COMPANY UNDERTAKES NO OBLIGATION TO
UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW
INFORMATION, FUTURE EVENTS OR OTHERWISE. HOWEVER, READERS SHOULD CAREFULLY
REVIEW THE RISK FACTORS SET FORTH IN OTHER REPORTS OR DOCUMENTS THE COMPANY
FILES FROM TIME TO TIME WITH THE SEC, PARTICULARLY THE COMPANY'S ANNUAL
REPORTS ON FORM 10-K, QUARTERLY REPORTS ON FORM 10-Q AND ANY CURRENT REPORTS
ON FORM 8-K.
The following discussion should be read in conjunction with the unaudited
Condensed Consolidated Financial Statements and Notes thereto in Part I, Item
1 of this Quarterly Report on Form 10-Q and with the audited Consolidated
Financial Statements and Notes thereto, together with Management's Discussion
and Analysis of Financial Condition and Results of Operations, which are
included in the Company's Annual Report on Form 10-K for the year ended April
30, 1997 as filed with the SEC.
RESULTS OF OPERATIONS
REVENUES
The Company recognizes software license revenue when a noncancelable
license agreement has been executed, the product has been shipped, all
significant contractual obligations have been satisfied and collection of the
resulting receivable is deemed probable by management. Software licenses
include both development and deployment licenses, with pricing for graphical
products generally based upon the number of developers or end users, as
applicable. Customer maintenance revenues are recognized ratably over the
maintenance period. Payments for maintenance fees are generally received in
advance and are nonrefundable. Revenues from consulting and training
services are recognized as the services are performed.
The Company's strategy is to aggressively market and enhance its
graphical products, Unify VISION and VISION/Web. The Company continues to
support its extensive installed base of Unify ACCELL and DataServer character
products, which the Company believes represents a significant source of
potential customers for Unify VISION and VISION/Web. The Company also
generates significant revenues from services, including customer maintenance,
consulting and training. The following table sets forth revenues from
licenses of its graphical and character products and from services for the
periods indicated:
7
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UNIFY CORPORATION
<TABLE>
<CAPTION>
Three Months Ended Oct. 31, Six Months Ended Oct.31,
--------------------------- ------------------------
1997 1996 1997 1996
----------- ----------- --------- ----------
<S> <C> <C> <C> <C>
License revenues:
Graphical $ 2,008 $ 1,749 $ 3,265 $ 3,943
Character 1,986 3,098 3,598 4,883
------- ------- ------- -------
Total license revenues 3,994 4,847 6,863 8,826
Services revenues 2,270 2,498 4,535 4,747
Amnesty license arrangement - - - 2,812
------- ------- ------- -------
Total revenues $ 6,264 $ 7,345 $11,398 $16,385
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Total revenues for the three and six months ended October 31, 1997
decreased 15% and 30%, respectively, over the same periods of the prior year.
Graphical license revenues for those periods were 15% higher than the same
quarter of the prior year but 17% lower than the same six-month period of the
prior year . The increase in graphical license revenues for the quarter
ended October 31, 1997 was primarily because of a single Unify VISION sale
totaling $1 million in that quarter. The Company does not anticipate that it
will record any single license of similar size during the quarter ending
January 31, 1998. Accordingly, in order to maintain the same level of
graphical license revenue as recorded for the quarter ended October 31, 1997,
the Company will need to obtain a substantial number of additional smaller
licenses. There is no assurance that such licenses can be obtained during the
quarter. The decrease in graphical license revenues for the six months ended
October 31, 1997 was primarily attributable to the rebuilding of the North
American sales team and continuing longer sales cycles associated with the
Company's solicitation of larger, enterprise-level sales transactions.
Character license revenues for the three and six months ended October 31,
1997 decreased 36% and 26%, respectively, over the same periods of the prior
year, principally because of the general decline in demand for character
products and the Company's continued focus on its graphical products.
Service revenues for the three and six months ended October 31, 1997
decreased 9% and 4%, respectively, over the same periods of the prior year
primarily because of a 10% decline in the total value of maintenance
contracts obtained during the third and fourth quarters of fiscal 1997 which
was associated with lower total license revenues in those quarters as
compared to the same quarters of the prior year.
International revenues decreased to 47% of total revenues in the quarter
ended October 31, 1997 from 59% of total revenues in the same quarter of the
prior year due to weaker Pacific Rim sales coupled with slightly stronger
U.S. sales in the fiscal 1998 quarter. International revenues decreased to
49% of total revenues in the six months ended October 31, 1997 from 60% of
total revenues in the same period of the prior year primarily because of two
international sales totaling $3.9 million which occurred in the first quarter
of fiscal 1997. The $2.8 million international amnesty license arrangement
for the use of unauthorized copies of the Company's character products was
subsequently reversed in the third quarter of fiscal 1997 when the Company
determined that it would be unable to collect payments due pursuant to this
arrangement.
The Company made significant changes in the management and structure of
its sales and marketing organizations and released Unify VISION 3.0 and
VISION/Web during the second half of fiscal 1997. As a result, the Company
began to experience new opportunities to compete for larger, enterprise-level
sales transactions which were accompanied by significantly longer sales
cycles. The Company expects that it will continue to experience extended
customer evaluation and decision-making processes for large, complex Unify
VISION and VISION/Web sales transactions over the next several quarters. The
Company also expects that in the near
8
<PAGE>
UNIFY CORPORATION
term it is likely that a significant portion of Unify VISION and VISION/Web
sales to new customers may be for pilot programs and therefore modest in size.
COST OF REVENUES
Cost of software licenses for the quarter and six months ended October
31, 1997 decreased to 3% and 5% of license revenues, respectively, as
compared to 6% and 7% of license revenues for the same periods of the prior
year. The decreases in cost of software licenses in absolute dollars and as
a percentage of license revenues in both of the fiscal 1998 periods were due
to continuing efficiencies achieved in the U.S. and Japan.
Cost of services for the three and six months ended October 31, 1997 were
comparable in absolute dollars but slightly higher as a percentage of service
revenues compared to the same periods of the prior year, principally because
of somewhat lower maintenance revenues in the second quarter of fiscal 1998.
As the Company increases its emphasis on providing comprehensive application
development solutions in fiscal 1998 it expects that consulting service costs
will increase, possibly significantly and at a faster rate than consulting
revenues increase.
PRODUCT DEVELOPMENT
Product development expenses for the quarter ended October 31, 1997
decreased to $1.5 million, or 24% of total revenues, as compared to $1.7
million, or 23% of total revenues, for the same quarter of the prior year.
Product development expenses for the six months ended October 31, 1997
decreased to $3.0 million, or 26% of total revenues, as compared to $3.4
million, or 21% of total revenues, for the same period of the prior year.
The declines in product development expenses in absolute dollars were
attributable to a decrease in contract staffing in the first half of fiscal
1998 from the level of staffing required in the first half of fiscal 1997 to
complete Unify VISION 3.0 and VISION/Web in a timely manner. The increases
in product development expenses as a percentage of total revenues were
because of the decline in fiscal 1998 revenues as compared to the same period
of the prior year. The Company believes that substantial investment in
product development is critical to maintaining technological leadership and
therefore intends to continue to devote significant resources to product
development.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative ("SG&A") expenses for the quarter
ended October 31, 1997 decreased to $4.3 million, or 69% of total revenues,
as compared to $5.8 million, or 79% of total revenues, for the same quarter
of the prior year. SG&A expenses for the six months ended October 31, 1997
decreased to $8.9 million, or 78% of total revenues, as compared to $11.5
million, or 70% of total revenues, for the same period of the prior year.
Fiscal 1998 SG&A expenses decreased in absolute dollars compared to the same
periods of the prior year as the Company continued to manage expenses and
rebuild the North American sales team. As expected, the cost savings
experienced in SG&A during the first quarter of fiscal 1998 did abate during
the second quarter as additional sales staff were hired or redeployed into
the new sales organization; however, these additional expenses were more than
offset by cost savings associated with staff realignments completed in the
second quarter of fiscal 1998. The increases
9
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UNIFY CORPORATION
in fiscal 1998 SG&A expenses as a percentage of total revenues were
attributable to the decline in fiscal 1998 revenues as compared to the same
periods of the prior year. The Company expects that total SG&A expenses will
fluctuate from quarter to quarter primarily because of variability in
marketing program spending and sales commission expense.
PROVISION FOR INCOME TAXES
The Company recorded tax provisions for the three and six months ended
October 31, 1997 and 1996 which related primarily to foreign income tax
withholding on software license royalties paid to the Company by certain
foreign licensees. For the same periods, the Company recorded no federal or
state income tax provisions as the Company had substantial net operating loss
carryforwards.
VOLATILITY OF STOCK PRICE AND GENERAL RISK FACTORS AFFECTING QUARTERLY RESULTS
The Company's common stock price has been and is likely to continue to be
subject to significant volatility. A variety of factors could cause the
price of the Company's common stock to fluctuate, perhaps substantially,
including: announcements of developments related to the Company's business;
fluctuations in the Company's quarterly operating results and order levels;
general conditions in the computer industry or the worldwide economy;
announcements of technological innovations; new products or product
enhancements by the Company or its competitors; changes in financial
estimates by securities analysts; developments in patent, copyright or other
intellectual property rights; and developments in the Company's relationships
with its customers, distributors and suppliers. In addition, in recent years
the stock market in general, and the market for shares of equity securities
of many high technology companies in particular, has experienced extreme
price fluctuations which have often been unrelated to the operating
performance of those companies. Such fluctuations may adversely affect the
market price of the Company's common stock.
The Company's quarterly operating results have varied significantly in
the past, and the Company expects that its operating results are likely to
vary significantly from time to time in the future. Such variations result
from, among other factors, the following: the size and timing of significant
orders and their fulfillment; demand for the Company's products; the number,
timing and significance of product enhancements and new product announcements
by the Company and its competitors; ability of the Company to attract and
retain key employees, especially in the sales organization; seasonality;
changes in pricing policies by the Company or its competitors; realignments
of the Company's organizational structure; changes in the level of the
Company's operating expenses; changes in the Company's sales incentive plans;
budgeting cycles of the Company's customers; customer order deferrals in
anticipation of enhancements or new products offered by the Company or its
competitors; product life cycles; product defects and other product quality
problems; the results of international expansion; currency fluctuations; and
general domestic and international economic and political conditions.
Because a significant portion of the Company's revenues have been, and the
Company believes will continue to be, derived from orders ranging in size
from several hundred thousand dollars to approximately $1 million, the timing
of such orders and their fulfillment has caused and is expected to continue
to
10
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UNIFY CORPORATION
cause material fluctuations in the Company's operating results, particularly
on a quarterly basis. In addition, the Company has recently expanded its
North American direct sales force and the rate at which new sales people
become productive could also cause material fluctuations in the Company's
quarterly operating results.
Because of the foregoing factors, quarterly revenues and operating
results are difficult to forecast. Revenues are also difficult to forecast
because the market for client/server application development software is
rapidly evolving, and the Company's sales cycle, from initial evaluation to
purchase and the provision of maintenance services, is lengthy and varies
substantially from customer to customer. In particular, with the fiscal 1997
release of Unify VISION 3.0 and VISION/Web the Company has experienced new
opportunities to compete for larger, enterprise-level sales transactions.
These transactions have even longer sales cycles than the Company has
experienced in the past. Because the Company normally ships products within a
short time after it receives an order, it typically does not have any
material backlog. As a result, to achieve its quarterly revenue objectives,
the Company is dependent upon obtaining orders in any given quarter for
shipment in that quarter. Furthermore, because many customers place orders
toward the end of a fiscal quarter, the Company generally recognizes a
substantial portion of its revenues at the end of a quarter. As the
Company's expense levels are based in significant part on the Company's
expectations as to future revenues and are therefore relatively fixed in the
short term, if revenue levels fall below expectations operating results are
likely to be disproportionately adversely affected.
The Company also expects that its operating results will be affected by
seasonal trends. The Company believes that it is likely it will experience
relatively higher revenues in fiscal quarters ending April 30 and relatively
lower revenues in fiscal quarters ending July 31 as a result of efforts by
its direct sales force to meet fiscal year-end sales quotas. The Company
also anticipates that it may experience relatively weaker demand in fiscal
quarters ending July 31 and October 31 as a result of reduced business
activity in Europe during the summer months.
In particular, because of the foregoing factors and because of longer
sales cycles associated with Unify VISION 3.0 and VISION/Web, the Company
expects that it will incur an operating loss for the quarter ending January
31, 1998. The Company has incurred net losses in five of the last eight
fiscal quarters and in each of the last five fiscal years. There can be no
assurance regarding when or if the Company will return to profitability.
LIQUIDITY AND CAPITAL RESOURCES
At October 31, 1997, the Company had cash, cash equivalents and
short-term investments of $11.1 million, compared to $16.6 million at April
30, 1997. Working capital decreased to $5.3 million at October 31, 1997 from
$7.6 million at April 30, 1997.
The Company's operating activities used cash of $3.3 million during the
six months ended October 31, 1997, primarily for operating losses. Investing
activities during the period generated cash of $1.4 million, consisting
principally of net sales of short term investments of $1.7 million offset by
equipment purchases of $0.4 million. Cash used in financing activities
during the
11
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UNIFY CORPORATION
period was $2.0 million, representing primarily the retirement of the $2.2
million stockholder line of credit which expired in July 1997.
The Company believes that current cash, cash equivalents and short-term
investments will be sufficient to meet its cash requirements during the next
12 months. Thereafter, depending on its operating results, the Company may
require additional equity or debt financing to meet its working capital or
capital equipment requirements. There can be no assurance that additional
financing will be available when required or, if available, that it will be
on terms satisfactory to the Company.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Susan Salvesen, Vice President, Finance and Administration and Chief
Financial Officer, resigned her position effective September 19,
1997.
D. Kirkwood Bowman, Director, resigned his position effective
November 25, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 11.1 Statement of Computation of Net Loss Per Share
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K during the quarter
ended October 31, 1997.
12
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UNIFY CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Date: December 5, 1997 Unify Corporation
(REGISTRANT)
By:
Todd Wille
------------------------------------------
Todd Wille
Vice President, Finance and Administration
and Chief Financial Officer (Principal
Financial and Accounting Officer)
13
<PAGE>
EXHIBIT 11.1
UNIFY CORPORATION
STATEMENT OF COMPUTATION OF NET LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Oct. 31, Six Months Ended Oct.31,
--------------------------- ------------------------
1997 1996 1997 1996
------ ------- ------- -------
<S> <C> <C> <C> <C>
Net loss $ (733) $(1,576) $(2,908) $(1,389)
------ ------- ------- -------
------ ------- ------- -------
Weighted average shares of common
stock outstanding 8,252 7,917 8,201 3,726
Weighted average shares of redeemable
preferred stock outstanding (1) - - - 3,566
------ ------- ------- -------
8,252 7,917 8,201 7,292
------ ------- ------- -------
------ ------- ------- -------
Net loss per share $(0.09) $ (0.20) $ (0.35) $(0.19)
------ ------- ------- -------
------ ------- ------- -------
</TABLE>
- --------------------------
(1) Computed using the as-if-converted method.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEET AS OF OCTOBER 31, 1997 AND THE CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED OCTOBER 31, 1997
FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 5,619
<SECURITIES> 5,444
<RECEIVABLES> 4,606
<ALLOWANCES> 438
<INVENTORY> 0
<CURRENT-ASSETS> 15,645
<PP&E> 8,697
<DEPRECIATION> 6,376
<TOTAL-ASSETS> 2,321
<CURRENT-LIABILITIES> 10,342
<BONDS> 0
0
0
<COMMON> 53,304
<OTHER-SE> (45,861)
<TOTAL-LIABILITY-AND-EQUITY> 7,443
<SALES> 11,398
<TOTAL-REVENUES> 11,398
<CGS> 2,587
<TOTAL-COSTS> 14,417
<OTHER-EXPENSES> (258)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> (2,818)
<INCOME-TAX> 90
<INCOME-CONTINUING> (2,908)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,908)
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
