SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 11, 1999
BROADVISION, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
0-28252 94-3184303
(Commission File No.) (IRS Employer Identification No.)
585 Broadway
Redwood City, CA 94063
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (650) 261-5100
----------------------
<PAGE>
Item 5. Other Events.
On October 11, 1999, the Company effected a three-for-one
stock split in the form of a two-for-one stock dividend. A
copy of the Company's restated financial statements to reflect
the stock split for the three-year period ended December 31,
1998 is attached as Exhibit 99.01.
Item 7. Financial Statements and Exhibits.
(a) Exhibits
Exhibit No. Description
----------- -----------
23.01 Report on Financial Statement Schedule and
Consent of Independent Auditors
99.01 BroadVision, Inc. Consolidated Financial
Statements and Schedule as of December 31,
1997 and 1998, and for each of the years in
the three-year period ended December 31, 1998.
2
<PAGE>
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 hereunto duly authorized.
BROADVISION, INC.
Dated: March 1, 2000 By: /s/ Randall C. Bolten
---------------------------------
Randall C. Bolten
Vice President, Operations and
Chief Financial Officer
3
Exhibit 23.01
REPORT ON FINANCIAL STATEMENT SCHEDULE AND CONSENT OF
INDEPENDENT AUDITORS
The Board of Directors and Stockholders
BroadVision, Inc.:
The audits referred to in our report dated January 26, 1999, except as to Note
10 which is as of October 11, 1999, included the related financial statement
schedule as of December 31, 1997 and 1998, and for each of the years in the
three-year period ended December 31, 1998. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to express
an opinion on this financial statement schedule based on our audits. In our
opinion, such financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
We consent to incorporation by reference in the registration statements (Nos.
333-62619 and 333-14057) on Form S-8 of BroadVision, Inc. of our report dated
January 26, 1999, except as to Note 10 which is as of October 11, 1999, relating
to the consolidated balance sheets of BroadVision, Inc. and subsidiaries as of
December 31, 1997 and 1998, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the years in the
three-year period ended December 31, 1998, which report appears in the Current
Report on Form 8-K of BroadVision, Inc. dated October 11, 1999.
KPMG LLP
Mountain View, California
March 1, 2000
4
EXHIBIT 99.01
BROADVISION, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CONTENTS
Page
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations..................................... F-4
Consolidated Statements of Stockholders' Equity........................... F-5
Consolidated Statements of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements................................ F-7
Schedule II--Valuation and Qualifying Accounts............................ S-1
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
BroadVision, Inc.:
We have audited the accompanying consolidated balance sheets of BroadVision,
Inc. and subsidiaries as of December 31, 1997 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the three-year period ended December 31, 1998. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of BroadVision,
Inc. and subsidiaries as of December 31, 1997 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
KPMG LLP
Mountain View, California
January 26, 1999, except as to
Note 10 which is as of
October 11, 1999
F-2
<PAGE>
BROADVISION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
December 31,
----------------------
1997 1998
--------- ---------
ASSETS
Current assets:
Cash, and cash equivalents ......................... $ 8,277 $ 61,878
Restricted cash .................................... 1,400 --
Restricted short-term investments .................. 796 --
Accounts receivable, less allowance for doubtful
accounts of $671 and $788 for
December 31, 1997 and 1998, respectively ........ 8,783 15,361
Prepaids and other ................................. 566 3,589
--------- ---------
Total current assets ....................... 19,822 80,828
Property and equipment, net .......................... 6,467 8,034
Long-term investments ................................ -- 11,546
Other assets ......................................... 250 1,154
--------- ---------
Total assets ............................... $ 26,539 $ 101,562
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................... $ 1,863 $ 2,243
Accrued expenses ................................... 2,168 4,933
Unearned revenue ................................... 532 1,918
Deferred maintenance ............................... 2,552 6,157
Current portion of capital lease obligations ....... 773 709
Current portion of long-term debt .................. 449 548
--------- ---------
Total current liabilities .................. 8,337 16,508
Capital lease obligations ............................ 803 270
Long-term debt ....................................... 2,202 2,924
Deferred income taxes ................................ -- --
Other liabilities .................................... 76 51
--------- ---------
Total liabilities .......................... 11,418 19,753
--------- ---------
Commitments
Stockholders' equity:
Convertible preferred stock, $0.0001 par value;
10,000 shares authorized; none issued and
outstanding ..................................... -- --
Common stock, $0.0001 par value; 500,000 shares
authorized; 61,029 and 74,388 shares issued and
outstanding at December 31, 1997 and 1998,
respectively .................................... 6 7
Additional paid-in capital ......................... 40,362 98,762
Deferred compensation .............................. (1,605) (555)
Accumulated other comprehensive income ............. -- 3,198
Accumulated deficit ................................ (23,642) (19,603)
--------- ---------
Total stockholders' equity ................. 15,121 81,809
--------- ---------
Total liabilities and stockholders' equity . $ 26,539 $ 101,562
========= =========
See accompanying notes to consolidated financial statements
F-3
<PAGE>
BROADVISION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Years Ended December 31,
----------------------------------
1996 1997 1998
-------- -------- --------
Revenues:
Software licenses ...................... $ 7,464 $ 18,973 $ 36,067
Services ............................... 3,418 8,132 14,844
-------- -------- --------
Total revenues ................. 10,882 27,105 50,911
Cost of revenues:
Cost of license revenues ............... 330 1,664 1,001
Cost of service revenues ............... 2,164 4,284 8,704
-------- -------- --------
Total cost of revenues ......... 2,494 5,948 9,705
-------- -------- --------
Gross profit ................... 8,388 21,157 41,206
Operating expenses:
Research and development ............... 4,985 7,392 9,227
Sales and marketing .................... 12,066 18,413 26,269
General and administrative ............. 2,034 2,990 3,786
-------- -------- --------
Total operating expenses ....... 19,085 28,795 39,282
-------- -------- --------
Operating income (loss) ........ (10,697) (7,638) 1,924
Other income, net ........................ 552 265 2,036
-------- -------- --------
Income (loss) before
income taxes ................. (10,145) (7,373) 3,960
Income tax benefit (expense) ............ -- -- 79
-------- -------- --------
Net income (loss) .............. $(10,145) $ (7,373) $ 4,039
======== ======== ========
Basic earnings (loss) per share .......... $ (0.18) $ (0.12) $ 0.06
======== ======== ========
Diluted earnings (loss) per share ........ $ (0.18) $ (0.12) $ 0.05
======== ======== ========
Shares used in computing basic
earnings (loss) per share .............. 56,445 60,624 70,038
======== ======== ========
Shares used in computing diluted
earnings (loss) per share .............. 56,445 60,624 76,959
======== ======== ========
See accompanying notes to consolidated financial statements
F-4
<PAGE>
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except per share amounts)
<CAPTION>
Convertible
Preferred Stock Common Stock Additional
------------------ ------------------ Paid-in Deferred
Shares Amount Shares Amount Capital Compensation
------ ------ ------ ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances as of December 31, 1995 ....................... 25,803 $ 3 18,924 $ 2 $ 11,409 $ (1,036)
Net loss and comprehensive loss ........................ -- -- -- -- -- --
Issuance of Series C convertible preferred
($0.67 per share) ...................................... 9 -- -- -- 6 --
Issuance of Series E convertible preferred
($2.67 per share) ...................................... 1,902 -- -- -- 5,055 --
Conversion of Series A, B, C and E preferred to
common stock ........................................... (27,714) (3) 27,774 3 -- --
Issuance of common stock from public offering,
net of costs ........................................... -- -- 10,080 1 20,754 --
Issuance of stock under employee stock purchase
plan ................................................... -- -- -- -- 394 --
Issuance of common stock from exercise of
options ................................................ -- -- 3,336 -- 205 --
Common stock repurchased ............................... -- -- (390) -- (21) --
Deferred compensation on stock options ................. -- -- -- -- 1,510 (1,510)
Amortization of deferred compensation .................. -- -- -- -- -- 513
------ -------- ------ -------- -------- --------
Balances as of December 31, 1996 ....................... -- -- 59,724 6 39,312 (2,033)
Net loss and comprehensive loss ........................ -- -- -- -- -- --
Issuance of stock under employee stock purchase
plan ................................................... -- -- 726 -- 979 --
Issuance of common stock from exercise of
options ................................................ -- -- 765 -- 81 --
Common stock repurchased ............................... -- -- (186) -- (10) --
Amortization of deferred compensation .................. -- -- -- -- -- 428
------ -------- ------ -------- -------- --------
Balances as of December 31, 1997 ....................... -- -- 61,029 6 40,362 (1,605)
Comprehensive income:
Net income
Unrealized gain on equity securities
Total comprehensive income
Issuance of common stock from public offering,
net of costs ........................................... -- -- 10,368 1 53,744 --
Issuance of common stock for long-term
investments ............................................ -- -- 369 -- 1,322 --
Issuance of common stock from exercise of
warrants ............................................... -- -- 87 -- -- --
Issuance of stock under employee stock purchase
plan ................................................... -- -- 684 -- 1,599 --
Issuance of common stock from exercise of
options ................................................ -- -- 1,899 -- 2,190 --
Common stock repurchased ............................... -- -- (48) -- (2) --
Deferred compensation forfeited due to
voluntary terminations ................................. -- -- -- -- (693) 693
Deferred compensation on stock options ................. -- -- -- -- 240 (240)
Amortization of deferred compensation .................. -- -- -- -- -- 597
------ -------- ------ -------- -------- --------
Balances as of December 31, 1998 ....................... -- -- 74,388 $ 7 $ 98,762 $ (555)
====== ======== ====== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Accumulated
Other Total
Comprehensive Accumulated Comprehensive Stockholders'
Income Deficit Income (loss) Equity
------ ------- ------------- ------
<S> <C> <C> <C>
Balances as of December 31, 1995 ....................... $ -- $ (6,124) $ 4,254
Net loss and comprehensive loss ........................ -- (10,145) $(10,145) (10,145)
Issuance of Series C convertible preferred ========
($0.67 per share) ...................................... -- -- 6
Issuance of Series E convertible preferred
($2.67 per share) ...................................... -- -- 5,055
Conversion of Series A, B, C and E preferred to --
common stock ........................................... -- --
Issuance of common stock from public offering,
net of costs ........................................... -- -- 20,755
Issuance of stock under employee stock purchase
plan ................................................... -- -- 394
Issuance of common stock from exercise of
options ................................................ -- -- 205
Common stock repurchased ............................... -- -- (21)
Deferred compensation on stock options ................. -- -- --
Amortization of deferred compensation .................. -- -- 513
-------- -------- --------
Balances as of December 31, 1996 ....................... -- (16,269) 21,016
Net loss and comprehensive loss ........................ -- (7,373) $ (7,373) (7,373)
========
Issuance of stock under employee stock purchase
plan ................................................... -- -- 979
Issuance of common stock from exercise of
options ................................................ -- -- 81
Common stock repurchased ............................... -- -- (10)
Amortization of deferred compensation .................. -- -- 428
-------- -------- --------
Balances as of December 31, 1997 ....................... -- (23,642) 15,121
Net income 4,039 $ 4,039 4,039
Unrealized gain on equity securities 3,198 3,198 3,198
--------
Total comprehensive income $ 7,237
========
Issuance of common stock from public offering,
net of costs ........................................... -- -- 53,745
Issuance of common stock for long-term
investments ............................................ -- -- 1,322
Issuance of common stock from exercise of
warrants ............................................... -- -- --
Issuance of stock under employee stock purchase
plan ................................................... -- -- 1,599
Issuance of common stock from exercise of -- -- 2,190
options ................................................
Common stock repurchased ............................... -- -- (2)
Deferred compensation forfeited due to
voluntary terminations ................................. -- -- --
Deferred compensation on stock options ................. -- -- --
Amortization of deferred compensation .................. -- -- 597
-------- -------- --------
Balances as of December 31, 1998 ....................... $ 3,198 $(19,603) $ 81,809
======== ======== ========
<FN>
See accompanying notes to consolidated financial statements
</FN>
</TABLE>
F-5
<PAGE>
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<CAPTION>
Years Ended December 31,
--------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ........................................ $(10,145) $ (7,373) $ 4,039
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization .......................... 753 1,613 2,947
Amortization of deferred compensation .................. 513 428 597
Provision for doubtful accounts and returns ............ 196 515 458
Revenue resulting from non-monetary transactions ....... -- -- (2,917)
Amortization of prepaid royalties ...................... -- -- 250
Changes in operating assets and liabilities:
Accounts receivable .................................... (917) (5,966) (7,036)
Prepaid expenses and other ............................. (536) (194) (2,716)
Accounts payable and accrued expenses .................. 2,996 547 3,145
Unearned revenue and deferred maintenance .............. (1,238) 1,751 2,633
-------- -------- --------
Net cash provided by (used for) operating activities (8,378) (8,679) 1,400
Cash flows from investing activities:
Purchase of property and equipment ....................... (2,529) (4,878) (4,198)
Purchase of long-term investments ........................ -- -- (3,000)
Increase in other assets ................................. -- -- (237)
Purchase of short-term investments ....................... (2,112) (796) --
Maturity of short-term investments ....................... 196 2,112 796
-------- -------- --------
Net cash used for investing activities ............. (4,445) (3,562) (6,639)
Cash flows from financing activities:
Proceeds from sale/leaseback ............................. -- 987 --
Net change in restricted cash ............................ -- (1,400) 1,400
Proceeds from borrowings, net ............................ -- 2,651 821
Payments on capital lease obligations .................... (274) (378) (913)
Proceeds from issuance of common stock, net .............. 21,333 1,050 57,532
Proceeds from issuance of preferred stock ................ 5,061 -- --
-------- -------- --------
Net cash provided by financing activities .......... 26,120 2,910 58,840
Net increase (decrease) in cash and cash equivalents ....... 13,297 (9,331) 53,601
Cash and cash equivalents, beginning of period ............. 4,311 17,608 8,277
-------- -------- --------
Cash and cash equivalents, end of period ................... $ 17,608 $ 8,277 $ 61,878
======== ======== ========
Supplemental cash flow disclosures:
Cash paid for interest ................................... $ 86 $ 108 $ 394
Cash paid for income taxes ............................... 66 156 428
Prepaids and other assets acquired through non-monetary
transactions ........................................... -- -- 1,250
Investments acquired through non-monetary transactions ... -- -- 4,025
Unearned revenue and deferred maintenance from non-
monetary transactions .................................. -- -- 2,358
Equipment acquired under capital leases .................. 380 1,165 316
Long-term investment acquired in exchange for common
stock .................................................. -- -- 1,322
Deferred compensation on stock options ................... 1,510 -- 240
Deferred compensation forfeited due to voluntary
terminations ........................................... -- -- 693
Net unrealized gain on long-term investments ............. -- -- 3,198
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
F-6
<PAGE>
BROADVISION, INC. and SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1997 and 1998
Note 1 -- Organization and Summary of Significant Accounting Policies
Nature of Business
BroadVision, Inc. (the "Company") develops, markets and supports application
software solutions for one-to-one relationship management across the extended
enterprise. These solutions enable businesses to use the Internet as a platform
to conduct electronic commerce, offer online customer self-service and support,
deliver targeted information and provide online financial services. Each of
these capabilities can be provided to all constituents of the extended
enterprise, including: customers, suppliers, partners, distributors and
employees. The BroadVision One-To-One product suite allows businesses to tailor
Web site content to the needs and interests of individual users by personalizing
each visit on a real-time basis. The Company's applications interactively
capture Web site visitor profile information, organize the enterprise's content,
target that content to each visitor based on easily constructed business rules
and execute transactions.
Basis of Presentation and Use of Estimates
The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. The preparation
of consolidated financial statements in conformity with generally accepted
accounting principles 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. The actual results could differ from those
estimates.
Revenue Recognition
The Company's revenue recognition policies are in accordance with Statement
of Position ("SOP") 97-2, Software Revenue Recognition, as amended by SOP 98-4,
which was adopted by the Company effective January 1, 1998. There was no
material change to the Company's accounting for revenues as a result of the
adoption of SOP 97-2, as amended. In general, software license revenues are
recognized when a non-cancelable license agreement has been signed and the
customer acknowledges an unconditional obligation to pay, the software product
has been delivered, there are no uncertainties surrounding product acceptance,
the fees are fixed and determinable, and collection is considered probable;
professional services revenues are recognized as such services are performed;
and maintenance revenues, including revenues bundled with software agreements
which entitle the customers to technical support and future unspecified
enhancements to the Company's products, are deferred and recognized ratably over
the related contract period, generally twelve months. Revenues recognized from
multiple-element software arrangements are allocated to each element of the
arrangement based on
F-7
<PAGE>
the fair values of the elements, such as software products, upgrades,
enhancements, post contract customer support, installation, or training. The
determination of fair value is based on objective evidence which is specific to
the Company. If such evidence of fair value for each element of the arrangement
does not exist, all revenue from the arrangement is deferred until such time
that evidence of fair value does exist or until all elements of the arrangement
are delivered.
The Company records unearned revenue for software arrangements when cash has
been received from the customer and the arrangement does not qualify for revenue
recognition under the Company's revenue recognition policy. The Company records
accounts receivable for software arrangements when the arrangement qualifies for
revenue recognition and cash or other consideration has not been received from
the customer.
In December 1998, AcSEC issued SOP 98-9 Software Revenue Recognition, With
Respect to Certain Transactions, which requires recognition of revenue using the
"residual method" in a multiple-element arrangement when fair value does not
exist for one or more of the delivered elements in the arrangement. Under the
"residual method", the total fair value of the undelivered elements is deferred
and subsequently recognized in accordance with SOP 97-2. The Company does not
expect a material change to its accounting for revenues as a result of the
provisions of SOP 98-9.
Research and Development and Software Development Costs
Development costs incurred in the research and development of new software
products are expensed as incurred until technological feasibility in the form of
a working model has been established at which time such costs are capitalized,
subject to recoverability. Products are made available for limited release,
concurrent with the achievement of technological feasibility. Accordingly,
software development costs incurred subsequent to the establishment of
technological feasibility have not been significant, and the Company has not
capitalized any software development costs to date.
Prepaid Royalties
Prepaid royalties relating to purchased software to be incorporated and sold
with the Company's software products are amortized as a cost of revenue either
on a straight-line basis over the remaining term of the royalty agreement or on
the basis of projected product revenues, whichever results in greater
amortization.
Cash Equivalents
The Company considers all debt securities with remaining maturities of three
months or less at the date of purchase to be cash equivalents. The Company's
cash equivalents consisted of the following (in thousands):
December 31,
------------------
1997 1998
------ --------
Money market funds.............. $7,708 $ 48,900
Commercial paper................ -- 11,000
------ --------
$7,708 $ 59,900
====== ========
F-8
<PAGE>
Short-term Investments
Short-term investments as of December 31, 1997, consisted of a one-year
certificate of deposit maintained with the Company's commercial bank as a
guarantee for a standby letter of credit issued by the bank in favor of the
Company's landlord. The short-term investments were classified as
available-for-sale, had maturities of one year or less and were carried at
amortized cost which approximates fair value.
Concentrations of Credit Risk
Financial assets that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, cash equivalents,
short-term investments, and trade accounts receivable. The Company's cash, cash
equivalents and short-term investments are held with a commercial bank. The
Company markets and sells its products throughout the world and performs ongoing
credit evaluations of its customers. The Company generally does not require
collateral on accounts receivable as the majority of its customers are large,
well-established companies. The Company maintains reserves for potential credit
losses but historically has not experienced any significant losses related to
individual customers or groups of customers in any particular industry or
geographic area.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash equivalents, short-term
investments, accounts receivable, accounts payable and debt. The Company does
not have any derivative financial instruments. The Company believes the reported
carrying amounts of its financial instruments approximates fair value, based
upon the short maturity of cash equivalents, short-term investments, accounts
receivable and payable, and based on the current rates available to the Company
on similar debt issues.
Property and Equipment
Property and equipment are stated at cost and depreciated on a straight-line
basis over their estimated useful lives (two to five years). Leasehold
improvements are amortized over the corresponding lease term or their estimated
useful lives, whichever is shorter.
The Company evaluates long-lived assets and certain identifiable intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount of the property and equipment exceeds its fair market value.
F-9
<PAGE>
Long-term Investments
As of December 31, 1998, the Company's long-term investments consisted of
investments in nonmarketable equity securities and an investment in marketable
equity securities. The Company currently has no plans or intentions to dispose
of the investments during 1999. Accordingly, the investments have been
classified as long term. The Company accounts for its investments in
nonmarketable equity securities based on the cost method as the Company does not
have the ability to significantly influence the operating and financial policies
of the investees. Any decline in value, which is other than a temporary decline,
is charged immediately to earnings in the period in which the impairment occurs.
The carrying value of the investments in nonmarketable equity securities
amounted to $3,000,000 at December 31, 1998. The Company classifies its
investment in marketable equity securities as available for sale. Accordingly,
the investment is recorded at its fair value with any unrealized gains or losses
reported as accumulated other comprehensive income in stockholders' equity and
changes in the unrealized gain or loss are reported as other comprehensive
income. Any decline in value, which is other than a temporary decline, is
charged immediately to earnings in the period in which the impairment occurs. As
of December 31, 1998, the Company's investment in marketable equity securities
had a fair value of $8,546,000, a cost basis of $5,348,000, and an unrealized
gain of $3,198,000.
Income Taxes
The Company utilizes the asset and liability method of accounting for income
taxes. Under the asset and liability method, deferred tax assets and liabilities
are established to recognize the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply in the years
in which temporary differences are expected to be recovered or settled. The
effects on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Employee Stock Option and Purchase Plans
The Company accounts for employee stock-based awards in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. As such, compensation
expense is recorded on the date of grant only if the current market price of the
underlying stock exceeded the exercise price. Pursuant to Statement of Financial
Accounting Standard ("SFAS") No. 123, Accounting for Stock-Based Compensation,
the Company discloses the pro forma effects of using the fair value method of
accounting for stock-based compensation arrangements.
F-10
<PAGE>
Per Share Information
Basic earnings (loss) per share is computed using the weighted-average
number of shares of common stock outstanding. Diluted earnings (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 warrants using the treasury stock method.
<TABLE>
Excluded from the computation of diluted earnings per share for the year
ended December 31, 1996, are options to acquire 4,566,000 shares of Common Stock
with a weighted-average exercise price of $0.38 and warrants to acquire 39,000
shares of Common Stock with a weighted-average exercise price of $0.67 because
their effects would be anti-dilutive. Excluded from the computation of diluted
earnings per share for the year ended December 31, 1997, are options to acquire
11,106,000 shares of Common Stock with a weighted-average exercise price of
$1.47 and warrants to acquire 281,250 shares of Common Stock with a
weighted-average exercise price of $2.05 because their effects would be
anti-dilutive. The following table sets forth the basic and diluted earnings
(loss) per share computational data for the periods presented.
<CAPTION>
Years Ended December 31,
--------------------------------------
1996 1997 1998
---------- ---------- -------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net income (loss) for basic and diluted earnings
(loss) per share ......................................................... $ (10,145) $ (7,373) $ 4,039
========== ========== =======
Weighted-average common shares outstanding utilized
for basic earnings (loss) per share ...................................... 56,445 60,624 70,038
Weighted-average common equivalent shares outstanding:
Employee common stock options ......................................... --(1) --(1) 6,864
Common stock warrant .................................................. --(1) --(1) 57
---------- ---------- -------
Total weighted-average common and common equivalent
shares outstanding utilized for diluted earnings
(loss) per share ................................................. 56,445 60,624 76,959
========== ========== =======
Basic earnings (loss) per share ............................................ $ (0.18) $ (0.12) $ 0.06
========== ========== =======
Diluted earnings (loss) per share .......................................... $ (0.18) $ (0.12) $ 0.05
========== ========== =======
<FN>
(1) The Company incurred a net loss for the indicated period. Accordingly,
common equivalent shares are excluded from the diluted loss per share
calculation because they are antidilutive.
</FN>
</TABLE>
Foreign Currency Transactions
The functional currency of the Company's foreign subsidiaries is the U.S.
dollar. Resulting foreign exchange gains and losses are included in the
consolidated results of operations and, to date, have not been significant.
Comprehensive Income (Loss)
The Company adopted SFAS No. 130, Reporting Comprehensive Income effective
January 1, 1998. SFAS No. 130 establishes standards for the reporting and
disclosure of comprehensive income (loss) and its components. Comprehensive
income (loss) includes all changes in equity during a period except those
resulting from investments by or distributions to owners.
F-11
<PAGE>
The Company did not have any significant components of other comprehensive
loss for the years ended December 31, 1996 and 1997 and, thus, the comprehensive
loss is the same as net loss for those periods. Comprehensive income for the
year ended December 31, 1998 was $7,237,000. The Company's only component of
accumulated other comprehensive income and other comprehensive income as of and
for the year ended December 31, 1998 related to the unrealized gain on
available-for-sale investments. As a result of unrecognized tax benefits
represented by a valuation allowance for deferred tax assets, no incremental tax
effects were attributed to unrealized gain for the year ended December 31, 1998.
Accordingly, the unrealized gain is the same on a pre-tax and net of tax basis.
Reclassifications
Certain prior period amounts have been reclassified to conform to the
current period presentation.
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 137, effective for
all fiscal quarters of fiscal years beginning after June 15, 2000. Accordingly,
the Company will adopt SFAS No. 133 beginning on January 1, 2001. SFAS No. 133,
as amended, establishes standards for the accounting and reporting of derivative
instruments and hedging activities, including certain derivative instruments
embedded in other contracts. Under SFAS No. 133, entities are required to carry
all derivative instruments at fair value on their balance sheets. The accounting
for changes in the fair value (i.e., gains or losses) of a derivative instrument
depends on whether it has been designated and qualifies as part of a hedging
activity and the underlying purpose for it. The Company does not believe that
the adoption of SFAS No. 133 will have a significant impact on the Company's
consolidated financial statements or related disclosures.
In March 1998, the AICPA issued SOP 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires that
certain costs related to the development or purchase of internal-use software be
capitalized and amortized over the estimated useful life of the software. SOP
98-1 is effective for fiscal years beginning after December 15, 1998.
Accordingly, the Company will adopt SOP 98-1 beginning on January 1, 1999. The
Company does not believe that the adoption of SOP 98-1 will have a significant
impact on the Company's consolidated financial statements or related
disclosures.
Note 2 -- Property and Equipment (in thousands):
December 31,
-------------------
1997 1998
-------- --------
Furniture and fixtures........ $ 636 $ 1,001
Computer and software......... 5,458 8,662
Leasehold improvements........ 2,780 3,725
-------- --------
8,874 13,388
Less accumulated depreciation and amortization (2,407) (5,354)
-------- --------
$ 6,467 $ 8,034
======== ========
F-12
<PAGE>
As of December 31, 1997 and 1998, leased equipment totaled approximately
$2,256,000 and $2,572,000, respectively. Accumulated amortization for leased
equipment totaled approximately $927,000 and $1,750,000 as of December 31, 1997
and 1998, respectively.
Note 3 -- Accrued Expenses (in thousands):
December 31,
------------------
1997 1998
------- -------
Employee benefits............................ $ 420 $ 678
Commissions and bonuses...................... 833 2,013
Taxes payable................................ 366 785
Other........................................ 549 1,457
------- -------
$ 2,168 $ 4,933
======= =======
Note 4 -- Debt
As of December 31, 1998, the Company has a credit facility with a commercial
lender which included outstanding borrowings of $3,472,000 under a note payable.
Borrowings bear interest at the bank's prime rate (7.75% as of December 31,
1998). Principal and interest is due in consecutive monthly payments through
maturity based on the term of the facility. Principal payments of $548,000 are
due annually from 1999 through 2004 with a final payment of $183,000 due in
2005. The credit facility includes covenants which impose certain restrictions
on the payment of dividends and other distributions and requires the Company to
maintain monthly financial covenants, including a minimum quick ratio, tangible
net worth ratio and minimum cash reserves. The minimum cash reserves covenant is
replaced with a minimum debt service coverage ratio upon six consecutive
quarters of profitability. Borrowings are collateralized by a security interest
in substantially all of the Company's owned assets. The Company was in
compliance with all of its financial covenants as of December 31, 1998.
Available credit under the Company's credit facilities include a term debt
credit facility of $1,000,000 and a revolving line of credit that provides for
up to $2,300,000 of total borrowings (based on eligible accounts receivable). As
of December 31, 1998, the Company has outstanding commitments totaling
$2,196,000 in the form of standby letters of credit under its revolving line of
credit facility (see Note 6).
Note 5 -- Income Taxes
Income before taxes includes losses from foreign operations of approximately
$986,000, $1,567,000 and $2,906,000, for the years ended December 31, 1996, 1997
and 1998, respectively. The components of income tax expense (benefit) are as
follows (in thousands):
Years Ended December 31,
--------------------------------
1996 1997 1998
---------- ---------- ---------
Current:
Federal........................ $ -- $ -- $ 192
State.......................... -- -- 13
Foreign........................ -- -- 416
---- ---- ------
Total current.......... $ -- $ -- $ 621
Deferred:
Federal........................ -- -- (600)
State.......................... -- -- (100)
---- ---- ------
Total deferred......... $ -- $ -- $ (700)
---- ---- ------
$ -- $ -- $ (79)
==== ==== ======
F-13
<PAGE>
<TABLE>
The differences between the income tax expense (benefit) computed at the
federal statutory rate of 34% and the Company's actual income tax expense
(benefit) for the periods presented are as follows (in thousands):
<CAPTION>
Years Ended December 31,
------------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Expected income tax expense....................... $(3,449) $(2,507) $ 1,346
State income taxes, net of federal tax benefit.... -- -- (58)
Foreign taxes..................................... -- -- 416
Alternative minimum tax........................... -- -- 97
Utilization of net operating loss carryforwards... -- -- (2,471)
Decrease in beginning of year valuation allowance. (600)
Foreign losses not benefited...................... -- -- 988
Net operating losses not benefited................ 3,449 2,507 --
Other............................................. -- -- 203
------- ------- -------
Income tax benefit................................ $ -- $ -- $ (79)
======= ======= =======
</TABLE>
The individual components of the Company's deferred tax assets and
liabilities are as follows (in thousands):
December 31,
--------------------
1997 1998
------- -------
Deferred tax assets:
Depreciation and amortization......... $ 401 $ 766
Accrued liabilities................... 887 723
Capitalized research and development.. 1,024 721
Net operating losses.................. 6,408 6,737
Tax credits........................... 1,258 2,180
------- -------
Total deferred tax assets........ 9,978 11,127
Less valuation allowance.............. (9,978) (9,153)
------- -------
-- 1,974
Deferred tax liabilities -- unrealized gain
on marketable securities.............. -- (1,274)
------- -------
Net deferred tax assets.......... $ -- $ 700
======= =======
The total deferred tax assets as of December 31, 1998, include approximately
$1,900,000 relating to the tax benefit arising from the exercise of stock
options, which will be credited to stockholders' equity when recognized in the
form of a reduction of the valuation allowance. In addition, as a result of the
intraperiod income tax allocation provisions of SFAS No. 109, the deferred tax
liability related to the unrealized gain on marketable securities decreased the
valuation allowance for the deferred tax assets and was not charged to
accumulated other comprehensive income in stockholders' equity. The Company has
provided a valuation allowance for a significant portion of its deferred tax
assets as of December 31, 1998. The total valuation allowance decreased $825,000
from December 31, 1997 to December 31, 1998, of which $700,000 relates to a
change in the beginning-of-the-year valuation allowance.
As of December 31, 1998, the Company had federal and state net operating
loss carryforwards of approximately $12,973,000 and $5,539,000, respectively,
available to offset future regular and alternative minimum taxable income. In
addition, the Company had federal and state research and development credit
carryforwards of approximately $790,000 and $666,000, respectively, available to
offset future tax liabilities.
F-14
<PAGE>
The Company's federal net operating loss and tax credit carryforwards expire
in the years 2010 through 2012, if not utilized. The state net operating loss
carryforwards expire in the years 2000 through 2002. The state research and
development credits can be carried forward indefinitely. As of December 31,
1998, the Company's foreign subsidiaries had net operating loss carryforwards in
foreign jurisdictions of approximately $5,400,000 that can be used to offset
future foreign income. Of these losses, approximately $1,600,000 expire in the
years 2001 through 2003. Approximately $3,800,000 of these losses can be carried
forward indefinitely.
Federal and state tax laws limit the use of net operating loss carryforwards
in certain situations where changes occur in the stock ownership of a company.
The Company believes such an ownership change, as defined, may have occurred
and, accordingly, certain of the Company's federal and state net operating loss
carryforwards may be limited in their annual usage.
Note 6 -- Commitments
Leases
The Company entered into its headquarters facility lease during 1997. The
Company leases this and its other facilities under noncancelable operating lease
agreements expiring through the year 2007. Under the terms of the agreements,
the Company is required to pay property taxes, insurance and normal maintenance
costs. The Company also leases certain equipment under capital leases expiring
through the year 2000.
Subsequently, during March 1999, the Company entered into an operating lease
agreement through December 2007 for an additional 55,000 square feet of office
space adjacent to its corporate headquarters building in Redwood City,
California with annual rental payments of approximately $1,500,000.
A summary of future minimum lease payments is as follows (in thousands):
Capital Operating
Year Ended December 31, leases leases
- ----------------------- ------- --------
1999...................................................... $ 849 $ 2,236
2000...................................................... 330 1,734
2001...................................................... -- 1,297
2002...................................................... -- 1,346
2003...................................................... -- 1,426
Thereafter.............................................. -- 6,018
------- --------
Total minimum lease payments.............................. 1,179 $ 14,057
========
Less amount representing imputed interest................. 200
-------
Present value of net minimum capital lease payments....... 979
Less current portion...................................... (709)
-------
Capital leases, excluding current portion................. $ 270
=======
Rental expense relating to operating leases was approximately $571,000,
$1,161,000, and $1,101,000 for the years ended December 31, 1996, 1997 and 1998,
respectively. Total minimum sublease payments to be received in the future under
noncancelable subleases total $1,093,000 through May 2000.
F-15
<PAGE>
Standby Letter of Credit Commitments
As of December 31, 1998, the Company had outstanding commitments in the form
of two standby letters of credit. A letter for $1,400,000 was issued in favor of
the Company's equipment leasing financier on November 12, 1997; with provisions
for automatic annual renewals not to extend beyond April 10, 2000. A letter for
$796,000 was issued in favor of the Company's corporate facility landlord to
secure obligations under the Company's corporate headquarters facility lease.
Subsequently, during March 1999, a standby letter of credit in the amount of
$498,000 was issued in favor of the Company's corporate facility landlord to
secure obligations relating to a lease for additional facility office space.
Note 7 -- Stockholders' Equity
Convertible Preferred Stock
All outstanding convertible preferred stock and warrants to purchase
convertible preferred stock were converted to common stock and warrants to
purchase common stock at the time of the Company's initial public offering in
June 1996.
Warrants
As of December 31, 1998, there were warrants outstanding to acquire 180,000
shares of common stock at $2.83 per share related to a facilities lease. At the
date these warrants were granted, the fair value of these warrants was not
significant.
Common Stock
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its stock option and stock purchase plans. Accordingly, the
Company has recorded deferred compensation of $1,510,000 and $240,000 in the
years ended December 31, 1996 and 1998, respectively, for the difference between
the exercise price and the fair value of the common stock underlying options
granted. The deferred compensation is being amortized to expense over the
vesting period of the individual options, generally five years.
As of December 31, 1998, the Company had reserved 17,925,000 shares of
common stock for issuance under its Equity Incentive Plan. In May 1998, the
Board of Directors increased the total shares authorized and available for grant
under the Equity Incentive Plan by 2,925,000 shares.
Under this plan, the Board of Directors may grant incentive or nonqualified
stock options at prices not less than 100% or 85%, respectively, of the fair
market value of the Company's common stock, as determined by the Board of
Directors, at the date of grant. The vesting of individual options may vary but
in each case at least 20% of the total number of shares subject to options will
become exercisable per year. These options generally expire ten years after the
grant date. When an employee option is exercised prior to vesting, any unvested
shares so purchased
F-16
<PAGE>
are subject to repurchase by the Company at the original purchase price of the
stock upon termination of employment. The Company's right to repurchase lapses
at a minimum rate of 20% per year over five years from the date the option was
granted or, for new employees, the date of hire. Such right is exercisable only
within 90 days following termination of employment. Approximately 48,000
unvested shares were repurchased by the Company during the year ended December
31, 1998. As of December 31, 1998, 706,545 shares were subject to repurchase at
a weighted-average price of $0.15.
As of December 31, 1998, the Company's President and Chief Executive Officer
held an option to purchase 1,500,000 shares of common stock at an exercise price
of $1.33 per share. The shares subject to option vest ratably on a monthly basis
over a 60-month period commencing April 1, 1995. As of December 31, 1998,
approximately 1,101,000 shares were vested.
<TABLE>
Activity in the Company's stock option plan is as follows:
<CAPTION>
Years ended December 31,
------------------------------------------------------------------
1996 1997 1998
-------------------- --------------------- ---------------------
Weighted- Weighted- Weighted-
Average Average Average
Options Exercise Options Exercise Options Exercise
Fixed Options (000's) Price (000's) Price (000's) Price
- ------------- -------------------- -------------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year.. 5,772 $ 0.04 7,179 $ 0.92 8,721 $ 1.50
Granted........................... 5,547 1.33 4,038 2.23 4,764 4.56
Exercised......................... (3,276) 0.06 (765) 0.10 (1,731) 1.21
Forfeited......................... (864) 0.94 (1,731) 1.40 (1,260) 1.91
----- ------ ------
Outstanding at end of year........ 7,179 $ 0.92 8,721 $ 1.50 10,494 $ 2.89
===== ====== ======
Options vested at end of year..... 927 $ 0.07 1,923 $ 0.88 2,409 $ 1.43
===== ====== ======
Weighted-average fair value of
options granted during the year.. $ 0.76 $ 2.23 $ 2.96
====== ====== ======
</TABLE>
<TABLE>
The following table summarizes stock options outstanding as of December 31,
1998:
<CAPTION>
Options Outstanding
------------------------------------------------- Options Vested
Weighted-Avg. ----------------------------
Number Remaining Number
Range of Outstanding Contractual Life Weighted-Avg. Exercisable Weighted-Avg.
Exercise Prices (000's) In Years Exercise Price (000's) Exercise Price
- --------------- ------------ ------------------- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$0.02 -- $1.77...... 1,938 7.15 $ 0.31 1,044 $ 0.22
1.83 -- 2.31.... 2,364 7.40 2.00 618 1.97
2.33 -- 2.60.... 2,286 8.25 2.47 576 2.41
2.63 -- 4.21.... 1,869 9.05 3.76 144 2.75
4.31 -- 9.27.... 2,037 9.57 6.03 27 8.06
----- -----
$0.02 -- $9.27...... 10,494 8.25 $ 2.89 2,409 $ 1.43
====== =====
</TABLE>
F-17
<PAGE>
<TABLE>
The Company grants options outside of the Company's stock option plan. A
summary of options outside of the plan is presented below:
<CAPTION>
Years ended December 31,
---------------------------------------------------------------------
1996 1997 1998
--------------------- ---------------------- -----------------------
Weighted- Weighted- Weighted-
Average Average Average
Shares Exercise Shares Exercise Shares Exercise
Fixed Options (000's) Price (000's) Price (000's) Price
------------- ---------- ---------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 60 $ 0.07 2,133 $ 1.17 2,385 $ 1.36
Granted.................. 2,181 1.15 462 1.83 -- --
Exercised................ (60) 0.07 -- -- (168) 0.62
Forfeited................ (48) 0.27 (210) 0.27 -- --
----- ----- -----
Outstanding at end of year 2,133 $ 1.17 2,385 $ 1.36 2,217 $ 1.41
===== ===== =====
Options vested at end of year 591 $ 1.45 1,185 $ 1.20 1,491 $ 1.34
===== ===== =====
Weighted-average fair value of
options granted during the
period $ 0.68 $ 1.83 $ --
====== ====== ======
</TABLE>
The 2,217,000 options outstanding as of December 31, 1998 have exercise
prices ranging from $0.27 to $2.33 and a weighted-average contractual life of
6.22 years. As of December 31, 1998, no shares were subject to repurchase.
Employee Stock Purchase Plan
As of December 31, 1998, the Company had reserved 2,400,000 shares for
issuance under the Company's Employee Stock Purchase Plan (the "Purchase Plan").
In May 1998, the Board of Directors increased the total shares authorized and
available for grant under the Purchase Plan by 600,000 shares. The Purchase Plan
permits eligible employees to purchase common stock equivalent to a percentage
of the employee's earnings, not to exceed 15%, at a price equal to 85% of the
fair market value of the common stock at dates specified by the Board of
Directors as provided in the Plan. Under the Purchase Plan, the Company issued
726,000 and 684,000 shares to employees in the years ended December 31, 1997 and
1998, respectively.
Under SFAS No. 123, compensation cost is recognized for the fair value of
the employees' purchase rights, which was estimated using the Black-Scholes
option pricing model with no expected dividends, an expected life of 7 months,
and the following weighted-average assumptions:
Years ended December 31,
-------------------------------------
1996 1997 1998
----------- ---------- ---------
Risk-free interest rate.......... 6.50% 5.05% 4.48%
Volatility....................... 60% 67% 112%
The weighted-average fair value of the purchase rights granted in the years
ended December 31, 1996, 1997, and 1998 was $0.87, $0.72, and $1.39,
respectively.
F-18
<PAGE>
Pro Forma Disclosure
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with no expected dividends and the
following weighted-average assumptions:
Years ended December 31,
----------------------------------------
1996 1997 1998
------------ ------------ -------------
Expected life....................... 5.0 years 2.8 years 3.0 years
Risk-free interest rate............. 6.50% 5.91% 4.70%
Volatility.......................... 60% 67% 112%
Had compensation cost for the Company's stock option plan and stock purchase
plan been determined consistent with SFAS No. 123, the Company's reported net
income (loss) and net income (loss) per share would have been changed to the
amounts indicated below (in thousands except per share data):
Years ended December 31,
---------------------------------
1996 1997 1998
-------- --------- --------
Net income (loss):
As reported................... $(10,145) $ (7,373) $ 4,039
Pro forma..................... $(11,270) $ (9,551) $ (1,885)
Basic net income (loss) per share:
As reported................... $ (0.18) $ (0.12) $ 0.06
Pro forma..................... $ (0.20) $ (0.16) $ (0.03)
Diluted net income (loss) per share:
As reported................... $ (0.18) $ (0.12) $ 0.05
Pro forma..................... $ (0.20) $ (0.16) $ (0.03)
Note 8 -- Employee Benefit Plan
In November 1994, the Company adopted a 401(k) employee retirement plan
under which eligible employees may contribute up to 20% of their annual
compensation, subject to a limitation of $10,000 in the year ended December 31,
1998. Employees vest immediately in their contributions and earnings thereon.
The plan allows for, but does not require, Company matching contributions. As of
December 31, 1998, the Company has not made any such matching contributions.
Note 9 -- Geographic, Segment and Significant Customer Information
The Company adopted the provisions of SFAS No. 131, Disclosure about
Segments of an Enterprise and Related Information, during 1998. SFAS No. 131
establishes standards for the reporting by public business enterprises of
information about operating segments, products and services, geographic areas,
and major customers. The method for determining what information to report is
based on the way that management organizes the operating segments within the
Company for making operational decisions and assessments of financial
performance. The Company's chief operating decision maker is considered to be
the Company's Chief Executive Officer ("CEO"). The CEO reviews financial
information presented on a consolidated basis accompanied by disaggregated
information about revenues by geographic region and by product for purposes of
making operating decisions and assessing financial performance.
F-19
<PAGE>
The disaggregated financial information on a product basis reviewed by the
CEO is as follows (in thousands):
Years Ended December 31,
-------------------------------
1996 1997 1998
--------- --------- ----------
Software licenses:
One-To-One Enterprise..................... $ 7,464 $14,479 $ 17,799
One-To-One Packaged Solutions............. -- 4,494 18,268
Services.................................... 2,819 5,981 9,739
Maintenance................................. 599 2,151 5,105
-------- ------- --------
Total Company............................. $ 10,882 $27,105 $ 50,911
======== ======= ========
The Company sells its products and provides services worldwide through a
direct sales force, independent distributors, value-added resellers, and system
integrators. It currently operates in three primary regions, the Americas which
includes North and South America, Europe which includes Eastern and Western
Europe and the Middle East, and Asia/Pacific which includes the Pacific Rim and
the Far East. Information regarding the business operations of these regions are
as follows (In thousands):
Years Ended December 31,
-------------------------------
1996 1997 1998
--------- --------- ----------
Revenues:
Americas..................... $ 4,406 $12,872 $ 29,330
Europe....................... 3,280 10,850 16,944
Asia/Pacific................. 3,196 3,383 4,637
-------- ------- --------
Total Company................ $ 10,882 $27,105 $ 50,911
======== ======= ========
December 31,
-------------------
1997 1998
-------- ---------
Identifiable assets:
Americas............................. $ 25,362 $ 99,343
Europe............................... 822 1,754
Asia/Pacific......................... 355 465
-------- ---------
Total Company........................ $ 26,539 $ 101,562
======== =========
During the year ended December 31, 1996, approximately 10% of the Company's
revenues were attributable to one customer. During the year ended December 31,
1997, approximately 11% of the Company's revenues were attributable to one
customer. During the year ended December 31, 1998, no customer accounted for 10%
or more of the Company's revenues.
F-20
<PAGE>
Note 10 -- Subsequent events
On October 6, 1999, the Company's Board of Directors increased the
authorized shares of common stock and convertible preferred stock to 500,000,000
and 10,000,000, respectively. In addition, the Board of Directors increased the
aggregate number of shares of common stock available to be issued under the
Company's Equity Incentive Plan by 3,000,000 shares.
On October 11, 1999, the Company effected a three-for-one stock split of its
common stock in the form of a stock dividend. Stockholders of record on October
11, 1999, will receive two additional shares of common stock for each share held
on that date. The shares are to be distributed on October 25, 1999. The
accompanying consolidated financial statements have been retroactively restated
to give effect to the stock split.
F-21
<PAGE>
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<CAPTION>
Balance at Charged to
Beginning of Costs and Balance at
Period Expenses Deductions (1) End of Period
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996 $ -- $ 196 $ 5 $ 191
=============== =============== =============== ===============
Year Ended December 31, 1997 $ 191 $ 515 $ 35 $ 671
=============== =============== =============== ===============
Year Ended December 31, 1998 $ 671 $ 458 $ 341 $ 788
=============== =============== =============== ===============
<FN>
(1) Represents net charge-offs of specific receivables.
</FN>
</TABLE>
S-1
