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

                                   FORM 10 - Q

(Mark One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)15 (d) OF THE SECURITIES 
         EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31,June 30, 1997

                                       or

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)15 (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
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(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 _

         As of April 30,July 31, 1997 there were  20,234,14420,279,363  shares of the  Registrant's
Common Stock outstanding.

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                           This is page 1 of 14 pages.
                         Index to exhibits is on page 15






                                BROADVISION, INC.

                          QUARTERLY REPORT ON FORM 10-Q
                           QUARTER ENDED MARCH 31,JUNE 30, 1997

                                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 March 31,June 30, 1997 and 1996      3

                  Condensed Consolidated Balance Sheets -
                      March 31,June 30, 1997 and December 31, 1996                    4

                  Condensed Consolidated Statements of Cash Flows -
                      ThreeSix months ended March 31,June 30, 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              8

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PART II       OTHER INFORMATION

Item 1.       Legal Proceedings                                             13

Item 2.       Changes in Securities                                         13

Item 3.       Defaults upon Senior Securities                               13

Item 4.       Submission of Matters to a Vote of Security Holders           13

Item 5.       Other Information                                             13

Item 6.       Exhibits and Reports on Form 8-K                              13

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SIGNATURES                                                                  14

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2
                       BROADVISION, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)

Three Months Ended Six Months Ended June 30, June 30, 1997 1996 1997 1996 (unaudited) (unaudited) Revenues: Software licenses $ 4,098 $ 1,564 $ 7,246 $ 2,663 Services 1,929 738 4,072 1,037 -------- -------- -------- -------- Total revenues 6,027 2,302 11,318 3,700 Cost of revenues: Cost of license revenues 425 93 639 189 Cost of service revenues 1,001 331 2,144 497 -------- -------- -------- -------- Total cost of revenues 1,426 424 2,783 686 -------- -------- -------- -------- Gross profit 4,601 1,878 8,535 3,014 Operating expenses: Research and development 1,802 1,277 3,482 2,193 Sales and marketing 4,257 2,486 8,461 4,093 General and administrative 700 320 1,446 638 -------- -------- -------- -------- Total operating expenses 6,759 4,083 13,389 6,924 -------- -------- -------- -------- Operating loss (2,158) (2,205) (4,854) (3,910) Interest and other income 187 51 408 94 Interest and other expense (138) (26) (150) (62) -------- -------- -------- -------- Net loss $ (2,109) $ (2,180) $ (4,596) $ (3,878) ======== ======== ======== ======== Net loss per share $ (0.10) $ (0.13) $ (0.23) $ (0.22) ======== ======== ======== ======== Shares used in computing net loss per share 20,219 16,822 20,111 17,699 The accompanying notes are an integral part of these financial statements.
3 BROADVISION, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Three Months Ended March 31, 1997 1996 (unaudited) (unaudited) Revenues: Software licenses $ 3,148 $ 1,099 Services 2,143 299 -------- -------- Total revenues 5,291 1,398 Cost of revenues Cost of license revenues 214 96 Cost of service revenues 1,143 165 -------- -------- Total cost of revenues 1,357 261 -------- -------- Gross profit 3,934 1,137 Operating expenses Research and development 1,680 917 Sales and marketing 4,204 1,585 General and administrative 746 340 -------- -------- Total operating expenses 6,630 2,842 -------- -------- Operating loss (2,696) (1,705) Interest and other income 221 43 Interest and other expense (12) (36) -------- -------- Net loss $ (2,487) $ (1,698) ======== ======== Net loss per share $ (0.12) $ (0.09) ======== ======== Shares used in computing net loss per share 20,002 18,576 3 BROADVISION, INC.AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) March 31,June 30, December 31, 1997 1996 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 13,90011,595 $ 17,608 Short-term investments 1,532794 2,112 Accounts receivable, net 7,8267,129 5,548 Other current assets 505645 317 -------- -------- Total current assets 23,76320,163 25,585 Property and equipment, net 3,3503,563 3,024 Other assets 402388 321 -------- -------- Total assets $ 27,51524,114 $ 28,930 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilitiesliabilities: Accounts payable and accrued expenses $ 3,8843,075 $ 3,484 Unearned revenues 2,616revenue 1,610 2,625 Deferred maintenance 1,1821,439 924 Current portion of long-term liabilities 365 294 -------- -------- Total current liabilities 8,0476,489 7,327 Long-term liabilities 582490 587 Stockholders' equity Common stock and paid-in capital 39,565Stock 39,806 39,318 Deferred compensation (1,923)(1,806) (2,033) Accumulated deficit (18,756)(20,865) (16,269) -------- -------- Total stockholders' equity 18,88617,135 21,016 -------- -------- Total liabilities and stockholders' equity $ 27,51524,114 $ 28,930 ======== ======== The accompanying notes are an integral part of these financial statements. 4 BROADVISION, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended March 31, March 31,Six months ended June 30, June 30, 1997 1996 (unaudited) (unaudited) ----------- ------------------- -------- Cash flows from operating activities: Net loss $ (2,487)(4,596) $ (1,698)(3,878) Adjustments to reconcile net loss to net cash used for operating activities: Depreciation and amortization 326 95 Amortization of deferred712 252 Deferred compensation 110 110 Allowance for doubtful accounts and returns 185 --227 245 Changes in operating assets and liabilities: Accounts receivable (2,463) (1,558) Prepaid expenses, other current(1,581) (4,473) Other assets and other assets (269) (131)(395) (288) Accounts payable and accrued expenses 400 799(409) 1,821 Unearned revenue and deferred maintenance 249 896(500) 3,475 Other liabilities (2) 15(4) 19 -------- -------- Net cash used in operating activities (3,951) (1,472)(6,546) (2,827) -------- -------- Cash flows from investing activities: Acquisition of property and equipment (474) (499)(1,073) (1,149) Purchase of short-term investments (1,532) --(19,929) Maturity of short-term investments 2,1122,850 196 -------- -------- Net cash provided by (used in) investing activities 106 (303)245 20,882) -------- -------- Cash flows from financing activities: Proceeds from issuance of common stock 247 160488 19,086 Proceeds from issuance of preferred stock, net of issuance costs -- 65,055 Payments on capital lease (110) (39)(200) (79) -------- -------- Net cash provided by financing activities 137 127288 24,062 -------- -------- Net decreaseincrease (decrease) in cash and cash equivalents (3,708) (1,648)(6,013) 353 Cash and cash equivalents, beginning of periodperiod/year 17,608 4,311 -------- -------- Cash and cash equivalents, end of periodperiod/year $ 13,90011,595 $ 2,6634,664 ======== ======== Non-cash investing and financing activities:activities Acquisition of equipment under capital leaseleases $ 178 $ --- ======== ======== The accompanying notes are an integral part of these financial statements. 5 BROADVISION, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1) Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements include the accounts of BroadVision, Inc. (the "Company") and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Business of the Company The Company provides an integrated software application system, BroadVision One-To-One(TM),One-To-One TM, that enables the creation of applications allowing non-technical business managers to tailor Internet marketing and selling services to the needs and interests of individual World Wide Web site visitors, personalizing each visit on a real-time basis. Interim Financial Information The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and 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, 1996 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, Forms 10-K and 10-Q, and other documents filed with the Securities and Exchange Commission ("SEC"). 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. 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 SEC Staff Accounting Bulletins, such computations include all common and common equivalent shares issued within 12 months of the initial filing date as if they were outstanding for all pre-IPO 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 Recent Accounting Pronouncements The Financial Accounting Standards Board recently issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share." SFAS No. 128 requires the presentation of basic earnings per share ("EPS") and, for companies with complex capital structures or potentially dilutive securities, such as convertible debt, options and warrants, diluted EPS. SFAS No. 128 is effective for annual and interim periods ending after December 15, 1997. The Company expects that basic EPS and diluted EPS will not differ materially from earningsloss per share as presented in the accompanying consolidated financial statements. 2) Balance Sheet Detail Property and Equipment Property and equipment consisted of the following (in thousands): March 31,June 30, December 31, 1997 1996 --------- ---------------- ---- (unaudited) Furniture and fixtures $ 575861 $ 539 Computers and software 3,8204,046 3,210 Leasehold improvements 144231 138 ------ ------ 4,5395,138 3,887 Less accumulated depreciation and amortization 1,1891,575 863 ------ ------ $3,350$3,563 $3,024 ====== ====== Accrued Expenses Accrued expenses consisted of the following (in thousands): March 31,June 30, December 31, 1997 1996 --------- ---------------- ---- (unaudited) Employee benefits $ 327387 $ 254 Commissions and bonuses 612513 696 Directors and officers insurance premiums 226170 283 Taxes payable 263258 129 Contractors fees 316165 489 Other 728645 675 ------ ------ $2,472$2,138 $2,526 ====== ====== 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS EXCEPT 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 PROSPECTUS, FORMS 10-K AND 10-Q, AND OTHER DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE SUCH STATEMENTS ARE MADE. OVERVIEW BroadVision provides industrial-strength software application solutions for enterprise class, personalized one-to-one business systems on the global Internet, Intranets, and Extranets. These solutions enable rapidcompanies to rapidly deploy and cost-effective prototyping, development,cost-effectively operate secure, scalable, intelligent, and on-going operation offlexible electronic commerce, customer service, interactive publishingself-service, and knowledge management applications over the Internet.Net. The Company'sBroadVision One-To-One(TM) application system and One-To-One WebApps(TM) family of applications support large user and content databases, high transaction volumes, intelligent agent matching, and seamless integration with existing business systems. BroadVision applications also incorporate a suite of powerful management tools that enable non-technical business people to dynamically manage content and control application behavior from their desktops. BroadVision software products are fully integrated with consulting services, training, and services are targeted at businesses developing Web site applications for consumers and business customers as well as employees. The Company's productstechnical support to provide the open, scalable, database architecture, expert business logic, dynamic control, secure transaction processing, and matching-based personalization capabilities essential for profitable Internet business. The Company specializes incomprehensive, end-to-end solutions for the financial services, retail, travel, mediahigh technology, retail/distribution, and telecommunications industries. In September 1996, the Company launched a personalized Web service called "The Angle," which helps consumers more effectively utilize the Web. Using a combinationBroadVision is headquartered in Los Altos, California and maintains an extensive network of editorssubsidiaries and BroadVision One-to-One technology, The Angle matches daily information with individuals including Web site reviewslicensed resellers in North and recommendations, up-to-the-minute newsSouth America, Europe and special features.Asia. The Company's revenues are derived from software license fees and fees for its services. The Company generally recognizes license fees when the software has been delivered, the customer acknowledges an unconditional obligation to pay, and the Company has no significant obligations remaining. Professional services revenues generally are recognized as services are performed. Maintenance revenues are recognized ratably over the term of the support period, which is typically one year. Since its inception, the 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 March 31,June 30, 1997, had an accumulated deficit of $18.8$20.9 million. The Company anticipates that its operating expenses will increase 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 stage 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 8 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, Form 10-K and 10-Q,10Q, and other documents filed with the SEC. RESULTS OF OPERATIONS Revenues Total revenues increased to $5,291,000$6,027,000 in the three-month period ended March 31,June 30, 1997 from $1,398,000$2,302,000 for the same quarter ofin fiscal 1996. The Company recognized its first licenseFor the six-month period ended June 30, 1997, total revenues inincreased to $11,318,000 from $3,700,000 for the first quarter ofsame period in fiscal 1996. Software product license revenues increased to $3,148,000$4,098,000 for the three-month period ended March 31,June 30, 1997 from $1,099,000$1,564,000 for the same quarter ofin fiscal 1996. For the quarter, the software product license revenues consisted of North American software product license revenues of $1,446,000,$1,147,000, or 46%28% of the total software product license revenues, and Internationalinternational software product license revenues of $1,702,000,$2,951,000, or 54%72% of the total software product license revenues. For the six-month period ended June 30, 1997, software product license revenues increased to $7,246,000 from $2,663,000 for the same period in fiscal 1996. For the six-month period ended June 30, 1997, the software product license revenues consisted of North American software product license revenues of $2,593,000, or 36% of the total software product license revenues, and international software product license revenues of $4,653,000, or 64% of the total software product license revenues. The increases in software product license revenues for the three-month period ended March 31, 1997 reflect the sale of development licenses and web-based applications of the Company's product,products, and the recognition of revenues relating to deployment licenses. Deployment license revenues increased to $1,571,000$2,085,000 for the three-month period ended March 31,June 30, 1997 from $191,000$321,000 for the same quarter of fiscal 1996. For the six-month period ended June 30, 1997, deployment revenues increased to $3,656,000 from $512,000 for the same period in fiscal 1996. As of March 31,June 30, 1997, the Company had deployed ten17 customer sites. Services revenues increased to $2,143,000$1,929,000 for the three-month period ended March 31,June 30, 1997 from $299,000$738,000 for the same quarter of fiscal 1996. For the quarter, North American services revenues were $928,000,$1,060,000, or 43%55% of total services revenues, and Internationalinternational services revenues were $1,215,000,$869,000, or 57%45% of total services revenues. For the six-month period ended June 30, 1997, services revenues increased to $4,072,000 from $1,037,000 for the same period in fiscal 1996. Services revenues increased during the periodthese periods from the respective prior year periodperiods due to the increasing number of licenses of BroadVision One-to-OneOne-To-One with a service or maintenance component. 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. 9 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 and sold with, the Company's products, product media and duplication, and manuals.manuals and commissions payable to distributors. The amount of suchproduct royalties payable is generally related to the volume of sales made by the Company to its customers. The amount of commissions payable to distributors is related to the distributor agreement which is generally based on the percentage of revenue. Cost of software licenses increased to $214,000$425,000 for the three-month period ended March 31,June 30, 1997 from $96,000$93,000 for the same quarter ofin fiscal 1996. CostFor the six-month period ended June 30, 1997, cost of software licenses decreasedincreased to 7% of related license revenues in the three-month period ended March 31, 1997$639,000 from 9%$189,000 for the same quarter ofperiod in fiscal 1996. This decrease primarily is derived fromThe cost of software licenses increased costs spread over the increase induring these periods due to higher volume of license revenues. 9 software sales and sales generated from the Company's Spanish distributor for which a commission payable is incurred. Cost 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 increased to $1,143,000$1,001,000 for the three-month period ended March 31,June 30, 1997 from $165,000$331,000 for the same quarter in fiscal 1996. For the six-month period ended June 30, 1997, cost of services increased to $2,144,000 from $497,000 for the same period in fiscal 1996. The increase in cost of services was due to the increasing number of licenses of BroadVision One-to-OneOne-To-One with a support or maintenance component and the increasing fixed costs resulting from the Company's expansion of its services organization. The Company expects that services costs will continue to increase in absolute dollar amounts as the Company continues to expand its services 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 83%,41% to $1,680,000,$1,802,000, for the three-month period ended March 31,June 30, 1997 from $917,000$1,277,000 for the same quarter ofin fiscal 1996. For the six-month period ended June 30, 1997, research and development expenses increased by 59% to $3,482,000 from $2,193,000 for the same period in fiscal 1996. These increases in the dollar amount of research and development expenses are primarily attributable to costs of additional personnel in the Company's research and development operations. The Company continues to direct product development expenditures toward developing new products and enhancing existing products. The Company anticipates that research and development expenses will continue to increase in absolute dollars for the remainder of 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 $4,204,000$4,257,000 for the three-month period ended March 31,June 30, 1997 from $1,585,000$2,486,000 for the same quarter ofin fiscal 1996. For the six-month period ended June 30, 1997, sales and marketing expenses increased to $8,461,000 from $4,093,000 for the same period in fiscal 1996. These increases in sales and marketing expenses reflect primarily the hiring of additional sales and marketing personnel, developing and expanding its sales distribution channels, and expanding 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 to $746,000$700,000 for the three-month period ended March 31,June 30, 1997 from $340,000$320,000 for the same quarter ofin fiscal 1996. For the six-month period ended June 30, 1997, general and administrative expenses increased to $1,446,000 from $638,000 for the same period in fiscal 1996. These increases for general and administrative expenses 10 reflect primarily the hiring of additional administrative and management personnel, increases in the provision for doubtful accounts, increased professional fees, and the addition of other infrastructure to support the expansion of the Company's operations. The Company expects to continue to add administrative staff to support broadened operations, expand North American and international office facilities, and incur costs related to being a public company and, therefore, expects general and administrative expenses to increase significantly in absolute dollars. Prior to its IPO, the Company recorded deferred compensation 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 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 $110,000decreased to $117,000 from $135,000 for eachthe same quarter in 1996. For the six-month period ended June 30, 1997, deferred compensation amortized to compensation expense decreased to $227,000 from $245,000 for the same period in fiscal 1996. The decrease in the amortization of deferred compensation is due to the three-month periods ended March 31, 1996 and 1997, respectively.cancellation of stock options for terminated employees. 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 in the third quarter of 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, Forms 10-K and 10-Q, and other filed documents with the SEC. The Company expects that a significant portion of its revenues will be derived from a limited number of orders, and the timing of receipt, 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. Specifically, 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. 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. The Company's limited operating history also requires that its prospects be evaluated in light of the risks and uncertainties frequently encountered by a company in its early stage 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, 11 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 and Form 10-K filing with the SEC. 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 the IPO, the Company financed its operations primarily through private placements of Common and Preferred Stock, which provided net proceeds totaling $15.5 million through May 1996. The IPO yielded net proceeds of approximately $20.7 million. At March 31,June 30, 1997, the Company had approximately $15.4$12.4 million in cash, cash equivalents, and short-term investments. The Company currently has no significant capital commitments other than commitments under equipment and operating leases disclosed in theits Form 10-K filed with the SEC. The Company has no credit facilities,entered into a loan and security agreement with a bank for leasehold improvements at the Company's new facility, which the Company anticipates occupying in late 1997, as disclosed in Form 10-K. The Company does not believe that it will require additional credit facilities for at least the 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, 11 Forms 10-K and 10-Q, and other documents filed with the SEC and those discussed under the caption "Factors Affecting Operating Results" above and 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 acceptable terms, if at all. If adequate funds are not available or are not available on 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. 12 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Not applicable ITEM 2. CHANGES IN SECURITIES Not applicable ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicableOn May 28, 1997, the Company held its annual meeting of stockholders, at which meeting the stockholders took the following actions: (i) elected Pehong Chen, David Anderson, Yogan Dalal and Koh Boon Hwee to serve as directors of the Company for the ensuing year and until their successors are duly elected; (ii) ratified the selection of KPMG Peat Marwick LLP as independent auditors of the Company for its fiscal year ending December 31, 1997. Such actions were taken by the following votes: Votes For Votes Withheld --------- -------------- Election of Directors: Pehong Chen 11,922,036 100 David Anderson 11,922,036 100 Yogan Dalal 11,922,036 100 Koh Boon Hwee 11,922,036 100 Votes For Votes Against Abstentions --------- ------------- ----------- Ratification of Auditors 11,922,036 100 200 ITEM 5. OTHER INFORMATION Not applicable ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Item Description ---- ----------- 10.1 Form of IndemnityLoan and Security Agreement, dated July 2, 1997, between Silicon Valley Bank and the Company and each of its executive officersCompany. 11.1 Statement re: Computation of Net Loss Per Share 27.1 Financial Data Schedule 13 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 Date: May 13, 1997 /s/ Pehong Chen ______________________________________________________________ ---------------------------------------------- Pehong Chen President and Chief Executive Officer (Principal Executive Officer) Date: May 13, 1997 /s/ Randall C. Bolten ______________________________________________________________ ---------------------------------------------- Randall C. Bolten Vice President, Operations and Chief Financial Officer (Principal Financial and Accounting Officer) 14 BROADVISION, INC. INDEX TO EXHIBITS Exhibit No. Description - ------- ------------------------------------------------------------------------- -------- ----------- 10.1 Form of IndemnityLoan and Security Agreement, dated July 2, 1997, between Silicon Valley Bank and the Company and each of its executive officers 11.1 Statement regarding Computation of Per Share LossEarnings . . . . . . . 27.1 Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . - - -------------------------------------------------------------------------------- 15