Quarterly Report (10-q)

Date : 08/15/2019 @ 8:32PM
Source : Edgar (US Regulatory)
Stock : BroadVision Inc (BVSN)
Quote : 2.51  -0.1 (-3.83%) @ 10:59PM

Quarterly Report (10-q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

 

 

 

 

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

For the quarterly period ended June 30, 2019

OR



 

 

 

 

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transaction period from _________ to __________

Commission File Number 001-34205

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 No.)

 

 

 

460 Seaport Ct., Suite 102

 

94063

Redwood City, California

 

 

(Address of principal executive offices)

 

(Zip code)

(650) 331-1000

(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:





 

 

 Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, par value $0.0001 per share

BVSN

Nasdaq Capital Market



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   No 



Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   No 



Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 





 

Large accelerated filer           

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 



Emerging growth company 



If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   No 



As of July 31, 2019, the registrant had 5,061,018 shares of common stock outstanding.


 

BROADVISION, INC. AND SUBSIDIARIES

 

FORM 10-Q

 

Quarter Ended June 30, 2019

 

TABLE OF CONTENTS





 



 

PART I. FINANCIAL INFORMATION

 



 

 Item 1 .   Financial Statements

 

 Condensed Consolidated Balance Sheets at June 30, 2019 (unaudited) and December 31, 2018

 Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and 2018 (unaudited)

 Condensed Consolidated Statements of Stockholders’ Equity for the six months ended June 30, 2019 and 2018 (unaudited)

 Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018 (unaudited)

 Notes to Condensed Consolidated Financial Statements (unaudited)

 Item 2 .   Management’s Discussion and Analysis of Financial Condition and Results of Operations

18 

 Item 3 .   Quantitative and Qualitative Disclosures About Market Risk

23 

 Item 4 .   Controls and Procedures

23 



 

PART II.  OTHER INFORMATION

 



 

 Item 1 .   Legal Proceedings

24 

 Item 1A . Risk Factors

25 

 Item 2 .   Unregistered Sales of Equity Securities and Use of Proceeds

37 

 Item 3 .   Defaults Upon Senior Securities

37 

 Item 4 .   Mine Safety Disclosures

37 

 Item 5 .   Other Information

37 

 Item 6 .   Exhibits

38 



 

 SIGNATURES

39 



 

 EXHIBIT 31.1

 

 EXHIBIT 32.1

 







 

 

 


 

 



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BROADVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)







 

 

 

 

 

 



 

 

 

 

 

 



 

June 30,

 

December 31,



 

2019

 

2018

ASSETS

 

 

(unaudited)

 

 

(See Note 1)

Current assets:

 

 

 

 

 

 

Cash and cash equivalents (amounts related to VIE of $2,087 and $0

 

 

 

 

 

 

as of June 30, 2019 and December 31, 2018, respectively)

 

$

4,620 

 

$

2,574 

Accounts receivable, net of reserves of $100 and $193

 

 

 

 

 

 

as of June 30, 2019 and December 31, 2018, respectively

 

 

246 

 

 

476 

Prepaids and other

 

 

460 

 

 

692 

Total current assets

 

 

5,326 

 

 

3,742 

Property and equipment, net

 

 

10 

 

 

15 

 Operating lease right-of-use assets

 

 

80 

 

 

 —

 Other assets

 

 

94 

 

 

96 

Total assets

 

$

5,510 

 

$

3,853 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

317 

 

$

256 

Accrued expenses

 

 

614 

 

 

847 

Operating lease liabilities – current

 

 

78 

 

 

 —

Unearned revenue

 

 

846 

 

 

449 

Deferred maintenance

 

 

381 

 

 

337 

Total current liabilities

 

 

2,236 

 

 

1,889 

Other non-current liabilities

 

 

587 

 

 

563 

Total liabilities

 

 

2,823 

 

 

2,452 



 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Convertible preferred stock, $0.0001 par value; 1,000 shares authorized;

 

 

 

 

 

 

none issued and outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 11,200 shares authorized; 5,061 and 5,057 shares

 

 

 —

 

 

 —

issued and outstanding as of June 30, 2019 and December 31, 2018, respectively

 

 

 

 

 

 

Additional paid-in capital

 

 

1,271,990 

 

 

1,271,949 

Accumulated other comprehensive loss

 

 

(1,439)

 

 

(1,435)

Accumulated deficit

 

 

(1,269,687)

 

 

(1,269,113)

Total stockholders’ equity before noncontrolling interest

 

 

864 

 

 

1,401 

Noncontrolling interest

 

 

1,823 

 

 

 —

Total stockholders’ equity

 

 

2,687 

 

 

1,401 

Total liabilities and stockholders’ equity

 

$

5,510 

 

$

3,853 



 

 

 

 

 

 







See Accompanying Notes to Condensed Consolidated Financial Statements.

 

1


 

 

BROADVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(Unaudited)









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2019

 

2018

 

2019

 

2018

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Software licenses

 

$

516 

 

$

619 

 

$

1,089 

 

$

1,544 

Services

 

 

415 

 

 

624 

 

 

910 

 

 

1,302 

Total revenues

 

 

931 

 

 

1,243 

 

 

1,999 

 

 

2,846 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of software revenues

 

 

 

 

44 

 

 

 

 

77 

Cost of services

 

 

251 

 

 

487 

 

 

523 

 

 

1,037 

Total cost of revenues

 

 

252 

 

 

531 

 

 

525 

 

 

1,114 

Gross profit

 

 

679 

 

 

712 

 

 

1,474 

 

 

1,732 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

675 

 

 

1,297 

 

 

1,336 

 

 

2,700 

Sales and marketing

 

 

293 

 

 

464 

 

 

595 

 

 

1,030 

General and administrative

 

 

705 

 

 

796 

 

 

1,315 

 

 

1,537 

Total operating expenses

 

 

1,673 

 

 

2,557 

 

 

3,246 

 

 

5,267 

Operating loss

 

 

(994)

 

 

(1,845)

 

 

(1,772)

 

 

(3,535)

Interest income, net

 

 

12 

 

 

20 

 

 

22 

 

 

36 

Other income (loss), net

 

 

107 

 

 

(334)

 

 

15 

 

 

(151)

Loss before income taxes

 

 

(875)

 

 

(2,159)

 

 

(1,735)

 

 

(3,650)

Income tax expense

 

 

(12)

 

 

(1)

 

 

(16)

 

 

(2)

Net loss

 

 

(887)

 

 

(2,160)

 

 

(1,751)

 

 

(3,652)

Net loss attributable to noncontrolling interest

 

 

(602)

 

 

 —

 

 

(1,177)

 

 

 —

Net loss attributable to BroadVision

 

$

(285)

 

$

(2,160)

 

$

(574)

 

$

(3,652)



 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share
attributable to BroadVision

 

$

(0.06)

 

$

(0.43)

 

$

(0.11)

 

$

(0.73)

Shares used in computing:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares, basic and diluted

 

 

5,018 

 

 

4,997 

 

 

5,010 

 

 

4,996 



 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive (loss) gain, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(100)

 

 

259 

 

 

(4)

 

 

77 

Comprehensive loss

 

 

(385)

 

 

(1,901)

 

 

(578)

 

 

(3,575)

Less: comprehensive income attributable to noncontrolling interest

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Comprehensive loss attributable to BroadVision

 

$

(385)

 

$

(1,901)

 

$

(578)

 

$

(3,575)



See Accompanying Notes to Condensed Consolidated Financial Statements.

 

2


 

 

BROADVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, Unaudited)









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

Additional

 

Other

 

 

 

 

 

 

 

 

 

 

Total



 

 

 

 

 

 

Paid-in

 

Comprehensive

 

Accumulated

 

 

 

 

Noncontrolling

 

Stockholders'



 

Shares

 

Amount

 

Capital

 

Loss

 

Deficit

 

Total

 

Interest

 

Equity

Balances as of December 31, 2018

 

5,057 

 

$

 —

 

$

1,271,949 

 

$

(1,435)

 

$

(1,269,113)

 

$

1,401 

 

$

 —

 

$

1,401 

Contribution from noncontrolling
interest

 

 

 

 

 

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

3,000 

 

 

3,000 

Net loss

 

 

 

 

 

 

 

 —

 

 

 —

 

 

(289)

 

 

(289)

 

 

(575)

 

 

(864)

Other comprehensive income

 

 

 

 

 

 

 

 —

 

 

96 

 

 

 —

 

 

96 

 

 

 —

 

 

96 

Stock-based compensation

 

 

 

 

 

 

 

18 

 

 

 —

 

 

 —

 

 

18 

 

 

 —

 

 

18 

Issuance of common stock
under employee stock purchase plan

 

 

 

 —

 

 

 

 

 —

 

 

 —

 

 

 

 

 —

 

 

Balances as of March 31, 2019

 

5,059 

 

 

 —

 

 

1,271,969 

 

 

(1,339)

 

 

(1,269,402)

 

 

1,228 

 

 

2,425 

 

 

3,653 

Net loss

 

 

 

 

 

 

 

 —

 

 

 —

 

 

(285)

 

 

(285)

 

 

(602)

 

 

(887)

Other comprehensive income

 

 

 

 

 

 

 

 —

 

 

(100)

 

 

 —

 

 

(100)

 

 

 —

 

 

(100)

Stock-based compensation

 

 

 

 

 

 

 

19 

 

 

 —

 

 

 —

 

 

19 

 

 

 —

 

 

19 

Issuance of common stock
under employee stock purchase plan

 

 

 

 —

 

 

 

 

 —

 

 

 

 

 

 

 

 —

 

 

Balances as of June 30, 2019

 

5,061 

 

$

 —

 

$

1,271,990 

 

$

(1,439)

 

$

(1,269,687)

 

$

864 

 

$

1,823 

 

$

2,687 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances as of December 31, 2017

 

4,995 

 

$

 —

 

$

1,271,585 

 

$

(1,558)

 

$

(1,262,718)

 

$

7,309 

 

$

 —

 

$

7,309 

Net loss

 

 

 

 

 

 

 

 —

 

 

 —

 

 

(1,492)

 

 

(1,492)

 

 

 —

 

 

(1,492)

Other comprehensive income

 

 

 

 

 

 

 

 —

 

 

(182)

 

 

 —

 

 

(182)

 

 

 —

 

 

(182)

Stock-based compensation

 

 

 

 

 

 

 

126 

 

 

 —

 

 

 —

 

 

126 

 

 

 —

 

 

126 

Issuance of common stock
under employee stock purchase plan

 

 

 

 —

 

 

 

 

 —

 

 

 —

 

 

 

 

 —

 

 

Cumulative effect of adoption
of ASC 606

 

 

 

 

 

 

 

 —

 

 

 —

 

 

605 

 

 

605 

 

 

 —

 

 

605 

Balances as of March 31, 2018

 

4,997 

 

 

 —

 

 

1,271,716 

 

 

(1,740)

 

 

(1,263,605)

 

 

6,371 

 

 

 —

 

 

6,371 

Net loss

 

 

 

 

 

 

 

 —

 

 

 —

 

 

(2,160)

 

 

(2,160)

 

 

 —

 

 

(2,160)

Other comprehensive loss

 

 

 

 

 

 

 

 —

 

 

259 

 

 

 —

 

 

259 

 

 

 —

 

 

259 

Stock-based compensation

 

 

 

 

 

 

 

107 

 

 

 —

 

 

 —

 

 

107 

 

 

 —

 

 

107 

Issuance of common stock
under employee stock purchase plan

 

 

 

 —

 

 

 

 

 —

 

 

 —

 

 

 

 

 —

 

 

Balances as of June 30, 2018

 

4,998 

 

$

 —

 

$

1,271,825 

 

$

(1,481)

 

$

(1,265,765)

 

$

4,579 

 

$

 —

 

$

4,579 



See Accompanying Notes to Condensed Consolidated Financial Statements.

 

3


 

 

BROADVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, Unaudited)









 

 

 

 

 

 



 

 

 

 

 

 



 

Six Months Ended



 

June 30,



 

2019

 

2018

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(1,751)

 

$

(3,652)

Depreciation and amortization

 

 

 

 

12 

Stock-based compensation

 

 

37 

 

 

233 

Provision (benefit) of receivable reserves

 

 

(93)

 

 

(11)

Accumulated effect on accounting changes

 

 

 —

 

 

605 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

323 

 

 

624 

Prepaids and other

 

 

232 

 

 

(56)

Operating lease right-of-use assets

 

 

(80)

 

 

 —

Other non-current assets

 

 

 

 

(8)

Accounts payable and accrued expenses

 

 

(168)

 

 

(417)

Operating lease liabilities - current

 

 

78 

 

 

 —

Unearned revenue and deferred maintenance

 

 

441 

 

 

(774)

Other noncurrent liabilities

 

 

24 

 

 

(37)

Net cash used for operating activities

 

 

(950)

 

 

(3,481)

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

 —

 

 

(2)

Maturities of short term investments

 

 

 —

 

 

1,000 

Net cash provided by investing activities

 

 

 —

 

 

998 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock, net

 

 

3,000 

 

 

Proceeds from exercise of common stock options, net

 

 

 —

 

 

 —

Net cash provided by financing activities

 

 

3,000 

 

 

Effect of exchange rates on cash and cash equivalents

 

 

(4)

 

 

77 

Net increase (decrease) in cash and cash equivalents

 

 

2,046 

 

 

(2,400)

Cash and cash equivalents at beginning of period

 

 

2,574 

 

 

8,560 

Cash and cash equivalents at end of period

 

$

4,620 

 

$

6,160 



See Accompanying Notes to Condensed Consolidated Financial Statements.

 

4


 

 

BROADVISION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



Note 1. O rganization and Summary of Significant Accounting Policies



BroadVision, Inc. was incorporated in the state of Delaware on May 13, 1993, and has been a publicly traded corporation since 1996. We develop, market, and support enterprise portal applications that enable companies to unify their e-business infrastructure and conduct both interactions and transactions with employees, partners, and customers through a personalized self-service model that increases revenues, reduces costs, and improves productivity.



Except where specifically noted or the context otherwise requires, the use of terms such as the “Company”, “BroadVision,” “we” and “our” in these Notes to Condensed Consolidated Financial Statements refers to BroadVision, Inc. and its subsidiaries.



Basis of Presentation and Principles of Consolidation



The condensed consolidated financial results and related information as of and for the three months ended June 30, 2019 and 2018 are unaudited. The Condensed Consolidated Balance Sheet at December 31, 2018 has been derived from the audited consolidated financial statements as of that date but does not necessarily reflect all of the disclosures previously reported in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The unaudited Condensed Consolidated Financial Statements should be reviewed in conjunction with the audited consolidated financial statements and related notes contained in our 2018 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 1, 2019, as amended.



The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions in Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of interim financial information have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the remainder of the year ending December 31, 2019 or any future interim period. The condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidation.



On January 2, 2019, we entered into a Series A Preferred Stock Purchase Agreement with Vmoso, Inc., a Delaware corporation (“VMSO”), for the purchase of 745,000 shares of VMSO’s Series A Preferred Stock for a purchase price comprising the contribution of our intellectual property and other net assets. This transaction was considered a common control transaction, and the assets and liabilities were transferred to VMSO at carrying value and resulted in no gain or loss. The contributed assets represent substantially all of the intellectual property and other assets relating to our Clearvale and Vmoso platforms, including our current Clearvale and Vmoso products and customer relationships and our My Vmoso Network (“MVN”) development project. VMSO will continue the commercialization of the Clearvale and Vmoso products and the development of MVN.



Following the completion of VMSO’s sale of Class 1 Common Stock described below, the shares of Series A Preferred Stock owned by our company represent approximately 19.9% of the total number of shares of VMSO’s capital stock outstanding. The rights, preferences and privileges of VMSO’s Series A Preferred Stock include a liquidation preference of $1.00 per share in addition to participating rights proportionate to the number of shares held. The fair value of the VMSO Series A Preferred Stock held by the Company upon completion of VMSO’s sale of Class 1 Common Stock described below was 33.3% of VMSO.



On January 2, 2019, Dr. Pehong Chen, our and VMSO’s President and Chief Executive Officer and our largest stockholder, purchased 3,000,000 shares of VMSO’s Class 1 Common Stock, representing approximately 80.1% of the total number of shares of VMSO’s capital stock outstanding after such purchase, for a purchase price of $3,000,000 in cash pursuant to a Class 1 Common Stock Purchase Agreement between Dr. Chen and VMSO. The fair value of Dr. Chen’s non-controlling interest in VMSO upon completion of VMSO’s sale of Class 1 Common Stock was 66.7% of VMSO.



On January 2, 2019, we entered into a Services and Facilities Agreement, with VMSO, the terms of which provide for the payment of certain fees to us by VMSO, in exchange for the contribution of our expertise, resources, services, as well as the limited use of our facilities in VMSO’s business and operations.  The Services and Facilities Agreement is effective as of January 1, 2019 and shall continue for a period of one year, unless earlier terminated, and shall be renewable upon written consent from both parties.



 

5


 

 

We and VMSO anticipate that, pursuant to the Services and Facilities Agreement, we will provide substantially all of the personnel, facilities and equipment required for VMSO’s operations for the foreseeable future. The fees contemplated by the Services and Facilities Agreement are generally intended to permit us to recover the cost to us of providing these personnel, facilities, and equipment.



The Company consolidates variable interest entities (“VIEs”) in which it holds a variable interest and for which the Company is determined to be the primary beneficiary.



The Company controls the management of VMSO and has the obligation to absorb the losses of, and receive benefits from VMSO. Accordingly, the Company has identified itself as the primary beneficiary of VMSO and began consolidating VMSO in the first quarter of 2019, resulting in a noncontrolling interest related to Dr. Chen, the holder of Class 1 common stock in VMSO.



The assets, liabilities, operating expenses, and cash flows of VMSO are included in the Condensed Consolidated Financial Statements of the Company. While the assets of VMSO set forth below may be used to settle its liabilities to the Company, they are not otherwise available to settle the Company’s obligations, and, therefore, are shown separately on the Condensed Consolidated Balance Sheet. The liabilities of VMSO set forth below are owed to the Company, and thus are eliminated in consolidation in the Condensed Consolidated Balance Sheet.  The VMSO Class 1 Common Stock owned by Dr. Chen represents a non-controlling interest, and profits and losses in VMSO are allocated pro-rata between the Company and the non-controlling interest based on the proportionate fair value of equity ownership.







 

 

 

 

 



 

 

 

 

 

VMSO Results of Operations (in thousands):



 

 

 

 

 



Three Months

Ended

 

Six Months

Ended



June 30,

 

June 30,



2019

 

2019

Revenues

$

239 

 

$

410 

Cost of revenues

 

187 

 

 

365 

Gross profit

 

52 

 

 

45 

Operating expenses

 

944 

 

 

1,804 

Operating loss

 

(892)

 

 

(1,759)

Interest income

 

 

 

14 

Other expense

 

(20)

 

 

(20)

Net loss attributed to controlling interest

 

(301)

 

 

(588)

Net loss attributed to non-controlling interest

$

(602)

 

$

(1,177)



 

 

 

 

 

VMSO Financial Position (in thousands):



 

 

 

 

 



 

 

 

June 30, 2019

Current assets

 

 

 

$

2,109 

Total assets

 

 

 

$

2,109 

Current liabilities

 

 

 

$

874 

Total liabilities

 

 

 

$

874 

Stockholders' equity attributed to BroadVision

 

 

 

 

(588)

Stockholders’ equity attributed to non-controlling interest

 

 

 

 

1,823 

Total Liabilities and Stockholders' Equity

 

 

 

$

2,109 



Use of Estimates



The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make certain assumptions and estimates that affect reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to receivable reserves, stock-based compensation, investments, impairment assessments and income taxes, valuation of equity instruments, as well as contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe are reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates using different assumptions or conditions.



 

6


 

 

Liquidity



The accompanying Condensed Consolidated Financial Statements have been prepared assuming the Company will continue as a going concern. During the six months ended June 30, 2019, the Company had a net loss of $1.8 million and net cash used for operations of $1.0 million, and at June 30, 2019 the Company had working capital of $3.1 million. At June 30, 2019, the Company had cash and cash equivalents of $4.6 million, including $2.1 million held by VMSO. The Company has implemented cost reduction plans since the second half of 2017 to reduce the Company’s cash needs and reduced the cost of its operations by approximately $5 million in 2018. In January 2019, the Company completed the VMSO financing, pursuant to which VMSO raised $3.0 million in cash from our and VMSO’s President and Chief Executive Officer and our largest stockholder. As a result, VMSO now holds all of the intellectual property and other assets related to our Clearvale and Vmoso platforms, reducing our exposure to future development and commercialization costs of Clearvale, Vmoso and MVN. The Company believes its cash and cash equivalents as of June 30, 2019, which include the proceeds of its VMSO financing, will be sufficient to fund operations for at least twelve months from the date of issuance of these condensed consolidated financial statements.



However, further cost reduction may result in voluntary departures of highly skilled technical and managerial personnel, which would have a material adverse effect on our business, internal controls, financial condition and results of operations. We expect to opportunistically seek to raise additional funds through private or public sales of securities, strategic relationships, bank debt, financing under leasing arrangements or otherwise. If additional funds are raised through the issuance of equity securities, the percentage ownership of our current stockholders will be reduced, stockholders may experience additional dilution or any equity securities we sell may have rights, preferences or privileges senior to those of the holders of our common stock. We expect that obtaining additional financing on acceptable terms would be difficult, at best. If adequate funds are not available or are not available on acceptable terms, we may be unable to pay our debts as they become due, develop our products, take advantage of future opportunities or respond to competitive pressures or unanticipated requirements, which could have a material adverse effect on our business, financial condition and future operating results. The outcome of these matters cannot be predicted at this time. Our ability to continue as a going concern is dependent upon our ability to successfully accomplish these plans and secure sources of financing and/or reduce costs and ultimately attain profitable operations.



Stock-Based Compensation



The following table sets forth the components of the total stock-based compensation expense recognized in our Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and 2018 (in thousands):











 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2019

 

2018

 

2019

 

2018

Cost of services

 

$

 —

 

$

15 

 

$

 —

 

$

28 

Research and development

 

 

 —

 

 

35 

 

 

 —

 

 

77 

Sales and marketing

 

 

 

 

27 

 

 

 

 

62 

General and administrative

 

 

15 

 

 

30 

 

 

29 

 

 

66 



 

$

19 

 

$

107 

 

$

37 

 

$

233 



Leases



The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities on the condensed consolidated balance sheets. As of June 30, 2019 and December 31, 2018, the Company did not have finance leases.

 

ROU assets and operating lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset also includes any lease payments made and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain to be exercised. Operating leases are recognized on a straight-line basis over the lease term.



 

7


 

 

Net Income (Loss) Per Share

 

Basic net income (loss) per share is computed using the weighted-average number of shares of common stock outstanding, excluding the effects of any potentially dilutive securities. Diluted net income (loss) per share is computed using the weighted-average number of shares of common stock outstanding and, when dilutive, common equivalent shares from outstanding stock options and awards using the treasury stock method. The following table sets forth the basic and diluted net income (loss) per share computational data for the periods presented (in thousands, except per share amounts):  











 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Six Months Ended



 

June 30,

 

June 30,



 

2019

 

2018

 

2019

 

2018

Net loss attributable to BroadVision

 

$

(285)

 

$

(2,160)

 

$

(574)

 

$

(3,652)

Weighted-average common shares outstanding
used to compute basic and diluted net loss per share

 

 

5,018 

 

 

4,997 

 

 

5,010 

 

 

4,996 

Basic and diluted net loss per share attributable to BroadVision

 

$

(0.06)

 

$

(0.43)

 

$

(0.11)

 

$

(0.73)



 

 

 

 

 

 

 

 

 

 

 

 



Legal Proceedings



We are subject from time to time to various legal actions and other claims arising in the ordinary course of business.  We are not presently a party to any material legal proceedings.



Foreign Currency Translations



The functional currencies of all foreign subsidiaries are the local currencies of their respective countries.  Assets and liabilities of these subsidiaries are translated into U.S. dollars at the balance sheet date. Income and expense items are translated at average exchange rates for the periods presented. Foreign exchange gains and losses resulting from the remeasurement of foreign currency assets and liabilities are included as other income (expense), net in the Condensed Consolidated Statements of Comprehensive Loss. The translation adjustment was $(4,000) loss and $77,000 gain for the six months ended June 30, 2019 and 2018, respectively.  These amounts are included in the accumulated other comprehensive loss account in the Condensed Consolidated Balance Sheets.



Comprehensive Income (Loss)

 

Comprehensive Income (loss) includes net loss and other comprehensive gains and losses, which primarily consists of foreign currency translation adjustments. Total comprehensive income (loss) is presented in the accompanying Condensed Consolidated Statements of Comprehensive Loss. Total accumulated other comprehensive loss is displayed as a separate component of stockholders’ equity in the accompanying Condensed Consolidated Balance Sheets. The accumulated balances of other comprehensive loss consist of the following, net of taxes (in thousands): 







 

 

 



 

 

 



 

Accumulated



 

Other



 

Comprehensive



 

Loss

Balance, December 31, 2018

 

$

(1,435)

Net change during period

 

 

(4)

Balance, June 30, 2019

 

$

(1,439)







 

8


 

 

Recent Accounting Pronouncements



Recently Adopted Accounting Pronouncement



In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), which requires the recognition of an asset and liability for lease arrangements longer than twelve months. The Company adopted the new accounting standard on January 1, 2019, using the modified retrospective method and elected the package of practical expedients for expired or existing contracts, which allowed the Company not to reassess (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. The Company recorded right-of-use assets of $120,000 in “Operating lease right-of-use assets” on the Company's condensed consolidated balance sheet, and lease liabilities of $120,000 in aggregate in “Operating lease liabilities – current” and “other non-current liabilities” on the Company’s condensed consolidated balance sheet on the adoption date. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.



Recently Issued Accounting Pronouncements Not Yet Adopted



In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326). This ASU requires an organization to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Financial institutions and other organizations will now use forward-looking information to better inform their credit loss estimates. ASU 2016-13 is effective for the Company in the first quarter of fiscal 2020. Entities may early adopt the ASU in their fiscal years beginning after December 15, 2018. The Company does not believe this ASU will have a material impact on its Consolidated Financial Statements.



In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13), which modifies the disclosure requirements on fair value measurements. ASU 2018-13 is effective for the Company in the first quarter of fiscal 2020. Early adoption is permitted. The Company does not believe this ASU will have a material impact on its Consolidated Financial Statements.



In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract. ASU 2018-15 clarifies the accounting for implementation costs in cloud computing arrangements. ASU 2018-15 is effective for the Company in the first quarter of fiscal 2020. Early adoption is permitted. The Company is currently assessing the potential impact of adopting this new guidance on its Consolidated Financial Statements.



 

9


 

 

Note 2. Revenues



Revenue Accounting Policies



Our revenue consists of fees for licenses of our software products, maintenance, consulting services and training.  Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We enter into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. The transaction price is generally in the form of a fixed fee at contract inception without variable considerations. We allocate the transaction price to each distinct performance obligation based on the relative estimated standalone selling prices for each performance obligation. We then look to how control transfers to the customer in order to determine the timing of revenue recognition.



The following is a description of principal activities from which we generate revenue:



Software License Revenues – Products with Non-Ratably Recognized Revenue



Licenses for software products with non-ratably recognized revenue (such as QuickSilver) provide the customer with a right to use the software as it exists when made available to the customer. Customers may purchase perpetual licenses or subscribe to licenses, which provide customers with the same functionality and differ mainly in the duration over which the customer benefits from the software. Revenues from such software licenses are recognized upfront at the point in time when the software is made available to the customer, which is consistent with the timing of the payments received from the customer.  We do not grant a right of return for these software products. 



Software License Revenues – Products with Ratably-Recognized Revenue



These cloud offerings (such as Vmoso, Clearvale and Clear) allow customers to use software over the subscription period without taking possession of the software. Revenue related to these licenses is recognized ratably over the contract period. We receive payments from our customers in advance based on billing schedules established in each contract.  Upfront payments are recorded as deferred revenue and are recognized as revenue as we perform our obligations under these contracts.



Maintenance Revenues



Maintenance revenues, which include revenues that are allocated from software license agreements that entitle the customers to technical support and future unspecified enhancements to our products, are recognized ratably over the related agreement period, which time period is generally twelve months.  Customer payments are usually received annually in advance, which are recorded as deferred revenue and are recognized as revenue as we perform our obligations under these agreements.



Consulting Services Revenues



Consulting services revenues and training revenues are recognized as such services are performed based on time and cost incurred. These services are not essential to the functionality of the software. We record reimbursements from our customers for out-of-pocket expenses as an increase to services revenues.



Significant Judgments



Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.  Judgment is also required to determine the timing of the recognition, as well as the standalone selling price for each distinct performance obligation. In instances where the standalone selling price is not directly observable, such as when we do not sell the product or service separately, we determine such standalone selling price using information that may include market conditions and other observable inputs.



Practical Expedients and Exemptions



We generally expense sales commissions when incurred because the amortization period would have been one year or less. These costs are recorded within sales and marketing expenses.





 

10


 

 

Disaggregation of Revenues



The following table provides information about disaggregated revenue by geographical region, major product line and timing of revenue recognition (in thousands):









 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Six months ended June 30, 2019

Geographic region:

 

Software
Licenses -
Non-hosted

 

Software
Licenses -
Hosted

 

Maintenance

 

Professional
Services

 

Total

Americas

 

$

649 

 

$

128 

 

$

439 

 

$

 —

 

$

1,216 

Europe

 

 

35 

 

 

21 

 

 

329 

 

 

 

 

388 

Asia/Pacific

 

 

 —

 

 

256 

 

 

115 

 

 

24 

 

 

395 

Total revenues

 

$

684 

 

$

405 

 

$

883 

 

$

27 

 

$

1,999 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Six months ended June 30, 2018

Geographic region:

 

Software
Licenses -
Non-hosted

 

Software
Licenses -
Hosted

 

Maintenance

 

Professional
Services

 

Total

Americas

 

$

814 

 

$

123 

 

$

403 

 

$

19 

 

$

1,359 

Europe

 

 

99 

 

 

51 

 

 

368 

 

 

52 

 

 

570 

Asia/Pacific

 

 

 —

 

 

457 

 

 

127 

 

 

333 

 

 

917 

Total revenues

 

$

913 

 

$

631 

 

$

898 

 

$

404 

 

$

2,846 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Six months ended June 30, 2019

Timing of revenue recognition:

 

Software
Licenses -
Non-hosted

 

Software
Licenses -
Hosted

 

Maintenance

 

Professional
Services

 

Total

Transferred at a point in time

 

$

684 

 

$

 —

 

$

 —

 

$

 —

 

$

684 

Transferred over time

 

 

 —

 

 

405 

 

 

883 

 

 

27 

 

 

1,315 

Total revenues

 

$

684 

 

$

405 

 

$

883 

 

$

27 

 

$

1,999 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Six months ended June 30, 2018

Timing of revenue recognition:

 

Software
Licenses -
Non-hosted

 

Software
Licenses -
Hosted

 

Maintenance

 

Professional
Services

 

Total

Transferred at a point in time

 

$

913 

 

$

 —

 

$

 —

 

$

 —

 

$

913 

Transferred over time

 

 

 —

 

 

631 

 

 

898 

 

 

404 

 

 

1,933 

Total revenues

 

$

913 

 

$

631 

 

$

898 

 

$

404 

 

$

2,846 



 

11


 

 

Contract Balances



The following table provides information about receivables, contract assets and deferred revenues from contracts with customers.  Deferred revenues include unearned revenue and deferred maintenance (in thousands):









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Six months ended June 30, 2019



 

Balance at
beginning
of period

 

Increases

 

Decreases

 

Balance
at end
of period

Receivables

 

$

476 

 

$

1,569 

 

$

1,799 

 

$

246 

Unearned and deferred revenues including current and non-current

 

$

928 

 

$

2,461 

 

$

1,999 

 

$

1,390 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Six months ended June 30, 2018



 

Balance at
beginning
of period

 

Increases

 

Decreases

 

Balance
at end
of period

Receivables

 

$

1,193 

 

$

2,467 

 

$

3,081 

 

$

579 

Contract assets - current

 

 

 —

 

 

34 

 

 

(34)

 

 

 —

Unearned and deferred revenues including current and non-current

 

 

1,451 

 

 

2,342 

 

 

2,438 

 

 

1,355 



We receive payments from customers based upon contractual billing schedules; accounts receivables are recorded when the right to consideration becomes unconditional. Contract assets include amounts related to our contractual right to consideration for completed performance obligations not yet invoiced. Deferred revenues include payments received in advance of performance under the contract and are realized with the associated revenue recognized under the contract, which is generally within a year. Increases to deferred revenues were mainly a result of additional upfront payments received during the period, whereas decreases to unearned and deferred revenues were due to performance obligations satisfied. 

 

12


 

 

Note 3. Selected Condensed Consolidated Balance Sheet Detail



Other current assets at June 30, 2019 and December 31, 2018 consisted of the following (in thousands):









 

 

 

 

 

 



 

 

 

 

 

 



 

June 30,

 

December 31,



 

2019

 

2018



 

(unaudited)

 

 

 

VAT receivable

 

$

240 

 

$

480 

Other

 

 

220 

 

 

212 

Total Prepaids and other

 

$

460 

 

$

692 



Accrued expenses at June 30, 2019 and December 31, 2018 consisted of the following (in thousands):









 

 

 

 

 

 



 

 

 

 

 

 



 

June 30,

 

December 31,



 

2019

 

2018



 

(unaudited)

 

 

 

Employee benefits

 

$

411 

 

$

409 

Income tax

 

 

 

 

24 

Sales and other taxes

 

 

103 

 

 

287 

Commissions and bonuses

 

 

 

 

18 

Other

 

 

87 

 

 

109 

Total accrued expenses

 

$

614 

 

$

847 



Other non-current liabilities at June 30, 2019 and December 31, 2018 consisted of the following (in thousands):    





 

 

 

 

 

 



 

 

 

 

 

 



 

June 30,

 

December 31,



 

2019

 

2018



 

(unaudited)

 

 

 

Deferred maintenance and unearned revenue

 

$

163 

 

$

141 

Other

 

 

424 

 

 

422 

Total other non-current liabilities

 

$

587 

 

$

563 

 

 

13


 

 

Note 4.  Fair Value of Financial Instruments

 

We measure assets and liabilities at fair value based on an exit price as defined by the FASB guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:



·

Level 1 - Quoted prices in active markets for identical assets or liabilities;

·

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

·

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.



We measure the following financial assets at fair value on a recurring basis.  The fair value of these financial assets as of June 30, 2019 and December 31, 2018 (in thousands) were as follows: