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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10 - Q10-Q
(Mark One)
/X/[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNESEPTEMBER 30, 1996
or
/ /OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 0-28252
BROADVISION, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 94-3184303
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
333 DISTEL CIRCLE, LOS ALTOS, CALIFORNIA 94022-1404
CALIFORNIA (Zip code)
(Address of principal executive
offices)
(Zip code)
(415) 943-3600
(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 / /
NO /x/
As of JulyOctober 31, 1996 there were 19,985,30419,995,941 shares of the Registrant's
Common Stock outstanding.
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This is page 1 of 13 pages.
Index to exhibits is on page 14
BROADVISION, INC.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED JUNESEPTEMBER 30, 1996
TABLE OF CONTENTS
Page No.
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations -
Three and six months ended June 30, 1996 and 1995 3
Condensed Consolidated Balance Sheets -
June 30, 1996 and December 31, 1995 4
Condensed Consolidated Statements of Cash Flows -
Six months ended June 30, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
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PART II OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
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SIGNATURES
PAGE NO.
-------------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations--Three and nine months ended September 30,
1996 and 1995............................................................................ 3
Condensed Consolidated Balance Sheets--September 30, 1996 and December 31, 1995............ 4
Condensed Consolidated Statements of Cash Flows--Nine months ended September 30, 1996 and
1995..................................................................................... 5
Notes to Condensed Consolidated Financial Statements....................................... 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations...... 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings.......................................................................... 12
Item 2. Changes in Securities...................................................................... 12
Item 3. Defaults upon Senior Securities............................................................ 12
Item 4. Submission of Matters to a Vote of Security Holders........................................ 12
Item 5. Other Information.......................................................................... 12
Item 6. Exhibits and Reports on Form 8-K........................................................... 12
SIGNATURES............................................................................................. 13
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2
BROADVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ----------------
1996 1995 1996 1995
------- ------- ------- -------
Revenues:
Software licenses $ 1,564 $ - $ 2,663 $ -
Services 738 - 1,037 -
------- ------- ------- -------
Total revenues 2,302 - 3,700 -
Cost of revenues
Cost of software licenses 93 - 189 -
Cost of services 331 - 497 -
------- ------- ------- -------
Total cost of revenues 424 - 686 -
------- ------- ------- -------
Gross profit 1,878 - 3,014 -
Operating expenses
Research and development 1,277 575 2,193 946
Sales and marketing 2,486 215 4,093 490
General and administrative 320 201 638 426
------- ------- ------- -------
Total operating expenses 4,083 991 6,924 1,862
------- ------- ------- -------
Operating loss (2,205) (991) (3,910) (1,862)
Interest income 51 28 94 53
Interest and other expense (26) (6) (62) (6)
------- ------- ------- -------
Net loss $(2,180) $( 969) $(3,878) $(1,815)
======= ======= ======= =======
Net loss per share $ (0.13) $( 0.05) $ (0.22) $ (0.10)
======= ======= ======= =======
Shares used in per share calculation 16,822 18,888 17,699 18,888
======= ======= ======= =======(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
1996 1995 1996 1995
--------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
Revenues:
Software licenses................................................. $ 2,074 $ -- $ 4,737 $ --
Services.......................................................... 1,026 250 2,063 250
--------- --------- --------- ---------
Total revenues................................................ 3,100 250 6,800 250
Cost of revenues
Cost of software licenses......................................... 72 -- 261 --
Cost of services.................................................. 520 110 1,017 110
--------- --------- --------- ---------
Total cost of revenues........................................ 592 110 1,278 110
--------- --------- --------- ---------
Gross profit........................................................ 2,508 140 5,522 140
Operating expenses
Research and development.......................................... 1,320 785 3,513 1,731
Sales and marketing............................................... 3,574 200 7,667 690
General and administrative........................................ 592 222 1,230 648
--------- --------- --------- ---------
Total operating expenses...................................... 5,486 1,207 12,410 3,069
--------- --------- --------- ---------
Operating loss...................................................... (2,978) (1,067) (6,888) (2,929)
Interest income................................................... 331 70 425 123
Interest and other expense........................................ (27) (10) (89) (16)
--------- --------- --------- ---------
Net loss............................................................ $ (2,674) $ (1,007) $ (6,552) $ (2,822)
--------- --------- --------- ---------
--------- --------- --------- ---------
Net loss per share.................................................. $ (0.13) $ (0.05) $ (0.35) $ (0.15)
--------- --------- --------- ---------
--------- --------- --------- ---------
Shares used in per share calculation................................ 19,889 18,888 18,720 18,888
--------- --------- --------- ---------
--------- --------- --------- ---------
The accompanying notes are an integral part of these financial statements.
3
BROADVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
June 30, December 31,
1996 1995
---------(IN THOUSANDS)
(UNAUDITED)
ASSETS
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
Current assets:
Cash, cash equivalents and short term investments................................. $ 23,566 $ 4,507
Accounts receivable, net.......................................................... 4,299 395
Other current assets.............................................................. 618 24
------------- ------------
Total current assets.......................................................... 28,483 4,926
Property and equipment, net....................................................... 2,545 868
Other assets...................................................................... 98 63
------------- ------------
Total assets.................................................................. $ 31,126 $ 5,857
------------- ------------
------------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses............................................. $ 2,732 $ 488
Unearned revenues................................................................. 2,580 355
Deferred maintenance.............................................................. 796 0
Current portion of long-term liabilities.......................................... 301 167
------------- ------------
Total current liabilities..................................................... 6,409 1,010
Long-term liabilities............................................................. 634 593
Stockholders' equity
Equity............................................................................ 38,926 11,414
Deferred compensation............................................................. (2,167) (1,036)
Accumulated deficit............................................................... (12,676) (6,124)
------------- ------------
Total stockholders' equity.................................................... 24,083 4,254
------------- ------------
Total liabilities and stockholders' equity.................................... $ 31,126 5,857
------------- ------------
------------- ------------
ASSETS
Current assets:
Cash, cash equivalents, and short
term investments $24,593 $ 4,507
Accounts receivable, net 4,868 395
Other current assets 286 24
---------- ---------
Total current assets 29,747 4,926
Property and equipment, net 1,765 868
Other assets 89 63
---------- ---------
Total assets $31,601 $ 5,857
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 2,309 $ 488
Unearned revenues 3,151 355
Deferred maintenance 679 0
Current portion of long-term
liabilities 167 167
---------- ---------
Total current liabilities 6,306 1,010
Long-term liabilities 533 593
Stockholders' equity
Equity 37,065 11,414
Deferred compensation (2,301) (1,036)
Accumulated deficit (10,002) (6,124)
---------- ---------
Total stockholders' equity 24,762 4,254
---------- ---------
Total liabilities and
stockholders' equity $31,601 $ 5,857
========== =========
The accompanying notes are an integral part of these financial statements.
4
BROADVISION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Six months ended
------------------------
June 30, June 30,
1996 1995
---------- ---------
Cash flows from operating activities:
Net loss $(3,878) $(1,815)
Adjustments to reconcile net loss
to net cash used for operating
activities:
Depreciation and amortization 252 (69)
Deferred compensation 245 -
Changes in operating assets
and liabilities:
Accounts receivable (4,473) -
Prepaid expenses, other
current assets, and other
assets (288) (77)
Accounts payable and accrued
expenses 1,821 172
Deferred revenue 3,475 -
Other liabilities 19 -
---------- ---------
Net cash provided by
(used in) operating
activities (2,827) (1,789)
---------- ---------
Cash flows from investing activities:
Acquisition of property and
equipment (1,149) (58)
Purchase of short-term investments (19,929) -
Maturity of short-term investments 196 1,489
---------- ---------
Net cash provided by (used in)
investing activities (20,882) 1,431
---------- ---------
Cash flows from financing activities:
Proceeds from issuance of common
stock 19,086 -
Proceeds from issuance of preferred
stock, net of issuance costs 5,055 4,135
Proceeds from capital lease - 342
Payments on capital lease (79) -
---------- ---------
Net cash provided by financing
activities 24,062 4,477
---------- ---------
Net increase in cash and cash
equivalents 353 4,119
Cash and cash equivalents,
beginning of period/year 4,311 808
---------- ---------
Cash and cash equivalents,
end of period/year 4,664 4,927
Short-term investments, end of
period/year 19,929 -
---------- ---------
Cash, cash equivalents, and short-
term investments end of period/year $24,593 $4,927
========== =========(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED
----------------------------
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
------------- -------------
Cash flows from operating activities:
Net loss.......................................................................... $ (6,552) $ (2,822)
Adjustments to reconcile net loss to net cash used for operating activities:
Depreciation and amortization................................................... 476 (40)
Amortization of deferred compensation........................................... 379 --
Changes in operating assets and liabilities:
Accounts receivable............................................................. (3,904) (341)
Prepaid expenses, other current assets, and other assets........................ (629) (64)
Accounts payable and accrued expenses........................................... 2,244 638
Deferred revenue................................................................ 3,021 --
Other liabilities............................................................... 18 63
------------- -------------
Net cash provided by (used in) operating activities........................... (4,947) (2,566)
------------- -------------
Cash flows from investing activities:
Acquisition of property and equipment............................................. (1,817) (328)
Purchase of short-term investments................................................ (22,913) --
Maturity of short-term investments................................................ 196 1,489
------------- -------------
Net cash provided by (used in) investing activities........................... (24,534) 1,161
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock............................................ 20,945 --
Proceeds from issuance of preferred stock, net of issuance costs.................. 5,055 5,925
Proceeds from capital lease....................................................... -- 454
Payments on capital lease......................................................... (177) --
------------- -------------
Net cash provided by financing activities..................................... 25,823 6,379
------------- -------------
Net increase in cash and cash equivalents........................................... (3,658) 4,974
Cash and cash equivalents, beginning of period/year................................. 4,311 808
------------- -------------
Cash and cash equivalents, end of period/year....................................... 653 5,782
Short-term investments, end of period/year.......................................... 22,913 --
------------- -------------
Cash, cash equivalents and short-term investments end of period/year................ $ 23,566 $ 5,782
------------- -------------
------------- -------------
Non-cash investing and financing activities
Acquisition of equipment under capital leases................................... $ 336 $ --
------------- -------------
------------- -------------
The accompanying notes are an integral part of these financial statements.
5
BROADVISION, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
BroadVision, Inc. (the "Company") was incorporated in Delaware in May 1993.
The Company provides an integrated software application system, BroadVision
One-To-One-TM-, that enables businesses to create applications for interactive
marketing and selling services on the Internet's World Wide Web.
INTERIM FINANCIAL INFORMATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. In the Company's opinion, the financial statements include all
adjustments, consisting only of normal recurring adjustments, which the Company
considers necessary to fairly state the Company's financial position and the
results of operations and cash flows. The balance sheet at December 31, 1995 has
been derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. The accompanying
financial statements should be read in conjunction with the financial statements
and notes thereto included in the Company's Prospectus, dated June 21, 1996,
filed with the Securities and Exchange Commission in connection with the
Company's initial public offering. The results of the Company's operations for
any interim period are not necessarily indicative of the results of the
Company's operations for any other interim period or for a full fiscal year.
Through the quarter ended March 31, 1996, the Company was a development
stage enterprise for financial reporting purposes. During the quarter ended June
30, 1996, the Company exited the development stage.
SHORT-TERM INVESTMENTS
As of June 30, 1996, short-term investments consisted of high-grade
commercial paper with maturities of less than one month and are carried at
cost, which approximates fair value.
NET LOSS PER SHARE
The net loss per share is computed using net loss and, for periods prior to
the Company's initial public offering ("IPO"), is based on the weighted average
number of shares of common stock outstanding, convertible preferred stock, on an
"as-if-converted" basis, using the exchange rate in effect at the initial public
offering date and dilutive common equivalent shares from stock options and
warrants outstanding using the treasury stock method. In accordance with certain
Securities and Exchange Commission ("SEC") Staff Accounting Bulletins, such
computations include all common and common equivalent shares issued within 12
months of the offeringinitial filing date as if they were outstanding for all periods
presented using the treasury stock method and the anticipated initial public
offering price. For periods subsequent to the IPO, loss per share is based on
weighted average shares outstanding, excluding the effects of dilutive
securities.
6
3)BROADVISION, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2) BALANCE SHEET DETAIL
SHORT-TERM INVESTMENTS
Short-term investments consisted of the following (in thousands):
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ---------------
(UNAUDITED)
Money market funds........................................... $ 111 $ --
Commercial paper............................................. 22,802 196
------------- -----
$ 22,913 $ 196
------------- -----
------------- -----
PROPERTY AND EQUIPMENT
As of the dates shown, propertyProperty and equipment consisted of the following (in thousands):
June 30, December 31,
1996 1995
---------- ------------
Furniture and fixtures $ 227 $ 92
Computer and Software 1,858 844
Leasehold improvements 42 42
---------- ------------
2,127 978
Less accumulated depreciation
and amortization 362 110
---------- ------------
$ 1,765 $ 868
========== ============
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ---------------
(UNAUDITED)
Furniture and fixtures....................................... $ 424 $ 92
Computers and software....................................... 2,665 844
Leasehold improvements....................................... 42 42
------------- -----
3,131 978
------------- -----
Less accumulated depreciation and amortization............... 586 110
------------- -----
$ 2,545 $ 868
------------- -----
------------- -----
ACCRUED EXPENSES
As of the dates shown, accruedAccrued expenses consisted of the following (in thousands):
June 30, December 31,
1996 1995
---------- ------------
Accrued employee benefits $ 667 $ 130
Deferred compensation 187 107
Accrued amounts payable to
contractors 115 45
Other accrued liabilities 178 45
---------- ------------
$ 1,147 $ 327
========== ============
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ---------------
(UNAUDITED)
Accrued employee benefits.................................... $ 602 $ 130
Deferred compensation........................................ -- 107
Accrued amounts payable to contractors....................... 174 45
Taxes payable................................................ 67 --
Employee stock purchase plan................................. 216 --
Accrued directors and officers insurance premiums............ 339 --
Other accrued liabilities.................................... 419 45
------------- -----
$ 1,817 $ 327
------------- -----
------------- -----
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Report contains, in additionEXCEPT FOR HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM THOSE DISCUSSED HERE.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED IN THIS FORM 10-Q AND IN THE COMPANY'S FORM 10-Q FOR
THE QUARTER ENDED JUNE 30, 1996 AND THOSE DISCUSSED UNDER THE CAPTION "RISK
FACTORS" IN THE COMPANY'S REGISTRATION STATEMENT ON FORM S-1 FILED APRIL 19,
1996, AS AMENDED. ANY SUCH FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE
SUCH STATEMENTS ARE MADE.
OVERVIEW
BroadVision, Inc. is a leading supplier of software products that enable
companies to historical information,
forward-looking statements that involve risksconduct one-to-one personalized business on Web sites with
consumers, business partners and uncertainties.employees. The Company's actual results could differ significantly from the results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those
discussed under the caption, "Risk Factors," in the Prospectus, dated June 21,
1996, issued in connection with the Company's registration statement on Form
S-1, filed with the Securities and Exchange Commission (the "Prospectus"), as
well as elsewhere in this Quarterly Report on Form 10-Q.
OVERVIEW
Through March 31, 1996, the Company was a development stage company. The
Company provides an integrated software application system, BroadVision
One-To-One, that enables businesses to create applications for interactive
marketing and selling services on the Internet's World Wide Web. These
applicationsproducts are designed
to allow non-technical business managers to tailor Web site content to the needs
and interests of individual Web site visitors personalizing each visit on a real-timereal
time basis. The Company's flagship product, BroadVision One-to-One, is an
integrated software application system for interactive marketing and selling
services on Web sites. In September 1996, the Company launched a personalized
Web service called "The Angle-TM-" which helps consumers more effectively
utilize the Web. Using a combination of editors and BroadVision One-to-One
technology, "The Angle-TM-" matches daily information with individuals including
website reviews and recommendations, up-to-the-minute news and special features.
Since its inception, Thethe Company has incurred substantial costs to research,
develop, and enhance its technology and products, to recruit and train a
marketing and sales group, and to establish an administrative organization. As a
result, the Company has incurred net losses in each fiscal quarter since
inception and, as of JuneSeptember 30, 1996, had an accumulated deficit of $10.0$12.7
million. The Company anticipates that its operating expenses will increase
substantially in the foreseeable future as it continues the development of its
technology, increases its sales and marketing activities, and creates and
expands its distribution channels. Accordingly, the Company expects to incur
additional losses for the foreseeable future. In addition, the Company's limited
operating history makes the prediction of future results of operations difficult
and accordingly, there can be no assurance that the Company will achieve or
sustain revenue growth or profitability.
To date, only a limited number of companies have licensed the BroadVision
One-To-One application system. Accordingly, the Company has only a limited
operating history, and its prospects must be evaluated in light of the risks and
uncertainties frequently encountered by a company in its early stagestate of
development. Some of these risks and uncertainties relate to the new and rapidly
evolving nature of the markets in which the Company operates. Such market risks
include, among other things, the early stage of market development for online
commerce, the dependence of online commerce upon the development of the
Internet, the uncertainty of widespread adoption of online commerce and the risk
of government regulation of the Internet. Other risks and uncertainties facing
the Company relate to the Company's ability to, among other things, successfully
implement its marketing strategy, respond to competitive developments, continue
to develop and upgrade its products and technologies more rapidly than its
competitors, and commercialize its products and services incorporating these
enhanced technologies. There can be no assurance that the Company will succeed
in addressing any or all of these risks. A more complete description of these
and other risks relating to the Company's business is set forth under the
caption "Risk Factors" in the Prospectus.
In April 1996, the Company raised proceeds of approximately $5,055,000,
net of offering costs, in a private placement of its Series E Preferred Stock
to certain investors.8
In June 1996, the Company completed an initial public offering of its Common
Stock, the proceeds of which, after expenses and upon the exercise of the
over-allotment option by the underwriters of the public offering in July 1996,
were approximately $18,780,000.
8
$20,700,000.
RESULTS OF OPERATIONS
REVENUES
Total revenues increased to $3,100,000 in the three-month period ended
September 30, 1996 from $250,000 for the same quarter of fiscal 1995. The
Company earned its first operatingservices revenues in the third quarter of fiscal 1995 and1995.
For the nine-month period ended September 30, 1996, total revenues increased to
$6,800,000 from $250,000 for the same period in fiscal 1995. The Company
recognized its first license revenues in the first quarter of fiscal 1996.
Total revenues for the quarter ended June 30, 1996 were
$2,302,000. For the six-month period ended June 30, 1996, total revenues were
$3,700,000.
Software product license revenues were $1,564,000$2,074,000 for the three-month period
ended JuneSeptember 30, 1996. The software product license revenues consisted of
North American software product license revenues of $777,000,$1,121,000, or 54% of the
total software product license revenues, and International software product
license revenues of $787,000, representing in each case, 50%$953,000, or 46% of the total software product license
revenues for the period.revenues. Software product license revenues were $2,663,000$4,737,000 for the six-monthnine-month
period ended JuneSeptember 30, 1996. The software product license revenues consisted
of North American software product license revenues of $1,342,000,$2,463,000, or 52% of the
total software product license revenues, and International software product
license revenues of $1,321,000, representing$2,274,000, or 48% of the total software product license
revenues. The increases in each case, 50% of total software product license revenues for the period.three-month
and nine-month periods ended September 30, 1996 reflect the sale of development
licenses of the Company's product, and the recognition of revenues relating to
deployment licenses. During the three-month and nine-month periods ended
September 30, 1996, the Company recognized $1,221,100 and $1,618,000,
respectively, in deployment revenues. As of September 30, 1996, the Company
deployed three customer sites.
Services revenues were $738,000increased to $1,026,000 for the three-month period ended
JuneSeptember 30, 1996. The1996 from $250,000 for the same quarter of fiscal 1995. For the
quarter, services revenues consisted of North American services revenues of
$131,000,$480,000, or 18%47% of total services revenues, and International services revenues
of $607,000,$546,000, or 82%53% of total services revenues. For the nine-month period ended
September 30, 1996, services revenues increased to $2,063,000 from $250,000 for
the period. Services
revenues were $1,037,000 forsame period in fiscal 1995. For the six-monthnine-month period ended JuneSeptember 30,
1996. The1996, services revenues consisted of North American services revenues of
$311,000,$791,000, or 30%38% of total services revenues, and International services revenues
of $726,000,$1,272,000, or 70%62% of total services revenues. Services revenues forincreased
during these periods from the period.respective prior year periods due to service and
maintenance components of the increasing number of Company's licenses of
BroadVision One-to-One application systems.
OPERATING EXPENSES
The Company's operating expenses have increased substantially since
inception. The Company believes that continued expansion of its operations is
essential to achieving its objectives and, therefore, intends to increase
expenditures in all operating areas.
COST OF SOFTWARE LICENSES. Cost of software licenses includes the costs of
royalties payable to third parties for software that is embedded in, or bundled
together orand sold with, the Company's products, product media and duplication,
and manuals. The amount of such royalties payable is generally related to the
volume of sales made by the Company to its customers. Cost of software licenses
was $93,000$72,000 in the three monthsthree-month period ended JuneSeptember 30, 1996, or 6%3% of the
related license revenues. Cost of software licenses was $189,000$261,000 in the
six monthsnine-month period ended June 30,1996,September 30, 1996, or 7%6% of the related license
revenues. The Company earned its first license revenues in the first quarter of
fiscal 1996; therefore, there was no cost of software licenses for either the
six monthsthree-month period or the nine-month period ended JuneSeptember 30, 1995.
COST9
COSTS OF SERVICES. Cost of services consists primarily of employee-related
costs and fees for third-party consultants incurred in providing consulting,
post-contract support, and training services. Cost of services was $331,000 inincreased to
$520,000 for the three monthsthree-month period ended JuneSeptember 30, 1996 or 45%from $110,000 for
the same quarter of fiscal 1995. For the related service revenues. Costnine-month period ended September 30,
1996, cost of services increased to $1,017,000 from $110,000 for the same period
in fiscal 1995. This increase in cost of services was $497,000 indue to the six months
ended June 30, 1996,increasing
number of licenses of BroadVision One-to-One with a support or 48%maintenance
component and the increasing fixed costs resulting from the Company's expansion
of the related service revenues.its services organization. The Company earnedexpects that services costs will
continue to increase in absolute dollar amounts as the Company continues to
expand its first services revenues in the third quarter of fiscal 1995;
therefore, there was no cost of services for the six months ended June 30,
1995.
9
organization.
RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of salaries, other employee-related costs, and consulting fees related
to the development of the Company's products. Research and development expenses
increased by 122%68%, to $1,277,000,$1,320,000, for the three-month period ended JuneSeptember 30,
1996 from $575,000 in$785,000 for the same quarter of the prior year.fiscal 1995. For the six-monthnine-month
period ended JuneSeptember 30, 1996, research and development expenses increased by
132%103%, to $2,193,000,$3,513,000, from $946,000 in$1,731,000 for the same period in fiscal 1995. These
amounts reflect significant headcount increases in eachthe dollar amount of research and development expenses are
primarily attributable to costs of additional personnel in the periods.Company's
research and development operations. The Company anticipates that research and
development expenses will continue to increase in absolute dollars for the
remainder of 1996 and for 1997. All expenditures related to research and
development have been expensed as incurred and, therefore, no amortization of
capitalized software development costs is included.
SALES AND MARKETING. Sales and marketing expenses consist primarily of
salaries and other employee-related costs, commissions and other incentive
compensation, travel and entertainment, and expenditures for marketing programs
such as collateral materials, trade shows, public relations and creative
services. Sales and marketing expenses increased to $2,486,000$3,574,000 for the
three-month period ended JuneSeptember 30, 1996, as compared to $215,000 infrom $200,000 for the same quarter
of fiscal 1995. For the six-monthnine-month period ended JuneSeptember 30, 1996, Salessales and
marketing expenses increased to $4,093,000 as compared to $490,000$7,667,000 from $690,000 for the same period in
fiscal 1995. These amounts reflect significant
headcount increases in eachdollar amount of sales and marketing expenses
reflect primarily the periods.hiring of additional sales and marketing personnel,
development and deployment of "The Angle-TM-", and costs associated with
expanded promotional activities. The Company expects to continue to expand its
direct sales and marketing efforts and expects sales and marketing expenses to
continue to increase significantly in absolute dollars.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist
primarily of salaries, other employee-related costs, and fees for professional
services. General and administrative expenses increased by 59%167%, to $320,000,$592,000,
for the three-month period ended JuneSeptember 30, 1996 from $201,000 in$222,000 for the same
quarter of fiscal 1995. For the six-monthnine-month period ended JuneSeptember 30, 1996,
general and administrative expenses increased by 50%90%, to $638,000,$1,230,000, from
$426,000
in$648,000 for the same period in fiscal 1995. These amounts reflect headcount increases
in eachThe substantial increase for these
periods was primarily attributable to increased professional fees, to hiring of
additional administrative and management personnel and to other expenses
associated with the expansion of the periods.Company's operations. The Company expects
to continue to add administrative staff to support expanded operations, relocate
to new facilities, and incur additional costs related to being a public company
and, therefore expects administrative expenses to increase significantly in
absolute dollars.
ThePrior to its IPO, the Company has recorded deferred compensation and compensation expense for the
difference between the exercise price and the deemed fair value of the Company's
Common Stock with respect to 1,794,000 shares issuable upon exercise of options
granted. These amounts were initially recorded as deferred compensation and will
be amortized to cost of software licenses,
cost of services, research and development, selling and
marketing, and general and administrative expense over the vesting periods of
the options, generally 60 months. Deferred compensation amortized to
compensation expense was $100,000 for the year ended December 31, 1995, $110,000$134,000
for the quarterthree-month period ended March
31,September 30, 1996 and $135,000$379,000 for the
quarternine-month period
10
ended JuneSeptember 30, 1996. The amortization of deferred compensation will have an
adverse effect on the Company's reported results of operations through the year
2003, but such effect will be significantly reduced beginning the third quarter
of the year 2001.
10
FACTORS AFFECTING QUARTERLY OPERATING RESULTS
The Company expects to experience significant fluctuations in quarterly
operating results that may be caused by many factors including, but not limited
to, those discussed under the caption "Risk Factors" in the Prospectus and, in
particular, those discussed under the caption "Fluctuations in Quarterly
Operating Results" in the Prospectus. The Company also expects that a
significant portion of its revenues will be derived from a limited number of
orders, and the timing of receipt and, fulfillment and deployment of such orders is
likely to cause material fluctuations in the Company's operating results
particularly on a quarterly basis, as with many software companies. In addition,
the Company is taking steps to accelerate the pace of deployment which could
result in acceleration of revenue recognition and, consequently, the potential
for greater fluctuation in quarterly operating results. The Company anticipates
that it will make the major portion of each quarter's deliveries near the end of
each quarter and, as a result, short delays in delivery of products at the end
of a quarter could adversely affect operating results for that quarter. Due to
these factors, quarterly revenues and operating results are difficult to
forecast, and the Company believes that period-to-period comparisons of its
operating results will not necessarily be meaningful and should not be relied
upon as any indication of future performance. It is also likely that the
Company's future quarterly operating results from time to time will not meet the
expectations of market analysts or investors, which may have an adverse effect
on the price of the Company's Common Stock.
LIQUIDITY AND CAPITAL RESOURCES
Prior to its initial public offering, the Company financed its operations
primarily through private placements of Common and Preferred Stock, which
have provided net proceeds totaling $15.5 million through May 1996. The Company's
initial public offering in June 1996 and the exercise of the over-allotment
option yielded net proceeds of approximately $18,780,000.$20.7 million. At JuneSeptember 30,
1996 the Company had approximately $24,600,000$23.6 million in cash, cash equivalents and
short-term investments. The Company has no credit facilities. Subsequent to June 30, 1996,facilities, and does not
believe that it will require credit facilities for at least the Company issued and sold 360,000
shares of Common Stock with net proceeds of approximately of $2,244,000 upon
exercise by the underwriters of the public offering of the over-allotment
option.next 12 months.
The Company anticipates that its available cash resources will be sufficient
to meet its presently anticipated working capital and capital expenditure
requirements for at least the next 12 months. This estimate is a forward-looking
statement that involves risks and uncertainties, and actual results may vary as
a result of a number of factors, including those discussed under "Risk Factors"
in the Prospectus and those discussed elsewhere herein. The Company may need to
raise additional funds in order to support more rapid expansion, develop new or
enhanced services, respond to competitive pressures, acquire complementary
businesses or technologies, or respond to unanticipated requirements. The
Company may seek to raise additional funds through private or public sales of
securities, strategic relationships, bank or lease financings, or otherwise. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the stockholders of the Company will be reduced,
stockholders may experience additional dilution, or such equity securities may
have rights, preferences, or privileges senior to those of the holders of the
Company's Common Stock. There can be no assurance that additional financing will
be available on acceptableacceptance terms, if at all. If adequate funds are not available
or are not available at acceptable terms, the Company may be unable to develop
or enhance its products, take advantage of future opportunities, or respond to
competitive pressures or unanticipated requirements, which could have a material
adverse effect on the Company's business, financial condition, and operating
results.
11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
Immediately following the completion of the Company's initial public
offering, the Company filed an Amended and Restated Certificate of
Incorporation, which authorizes the Board of Directors to issue up to
5,000,000 shares of Preferred Stock in one or more series and to fix the
rights, preferences and privileges thereof, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation
preferences, sinking fund terms and the number of shares constituting any
series or the designation of such series, without any further vote or action
by the Company's stockholders.None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
In June 1996, prior to completion of the Company's initial public
offering, the stockholders of the Company approved the following items: (i)
the amendment and restatement of the Company's Restated Certificate of
Incorporation, (ii) the amendment and restatement of the Company's Bylaws,
(iii) the selection of KPMG Peat Marwick, L.L.P. as the Company's auditors
for the fiscal year ending December 31, 1996, (iv) the amendment and
restatement of the Company's Stock Option Plan, which was renamed the Equity
Incentive Plan, (v) the adoption of the Company's Employee Stock Purchase
Plan, (vi) the adoption of a form of Indemnity Agreement to be entered into
by the Company with each of its directors, and (vii) the waiver of certain
registration rights and consent to certain stock transfers. The action was
effected by stockholder consent in June 1996. All or substantially all of
the stockholders voted in favor of each proposal. The amended documents are
more fully described in the Company's Prospectus.None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits
ITEM DESCRIPTION
---- -----------
1.1 Underwriting Agreement by and among the Company and Robertson,
Stephens & Co. LLC, Hambrecht & Quist LLC, and Wessels, Arnold &
Henderson, LLC dated June 21, 1996.(a) EXHIBITS
ITEM DESCRIPTION
- --------- ----------------------------------------------------------------------------------------
11.1 Statement re: Computation of Net Loss Per Share
27.1 Financial Data Schedule
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BROADVISION, INC
/s/ PEHONG CHEN
--------------------------------------
Pehong Chen
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
Date: August 14,November 13, 1996
/s/ Pehong Chen
----------------------------- ------------------------------
Pehong Chen
President and Chief Executive
Officer
(Principal Executive Officer)
Date: August 14, 1996 /s/RANDALL C. BOLTEN
--------------------------------------
Randall C. Bolten
----------------------------- ------------------------------
Randall C. Bolten
Vice President, Operations and
Chief Financial Officer
(Principal Financial and
Accounting Officer)VICE PRESIDENT, OPERATIONS AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
Date: November 13, 1996
13
BROADVISION, INC.
INDEX TO EXHIBITS
Exhibit
No. Description
- ------- --------------------------------------------
1.1 Underwriting Agreement by and among the
Company and Robertson, Stephens & Co. LLC,
Hambrecht & Quist LLC, and Wessels, Arnold
& Henderson, LLC dated June 21, 1996.
11.1 Statement regarding Computation of Per Share
Earnings
27.1 Financial Data Schedule
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
- ----------- ------------------------------------------------------------------------------------------- ---------------
11.1 Statement regarding Computation of Per Share Earnings...................................... 14
27.1 Financial Data Schedule.................................................................... --
14
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