##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-K


FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark one) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the Year Ended December 31, 2005                                                        
|          
|OR        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                             

Commission File Number 0-28252


BROADVISION, INC.


(Exact Name of Registrant as Specified in its Charter)


|                                                                                   |  |                                         
|---------------------------------------------------------------------------------- |  | ----------------------------------------
|Delaware                                                                           |  | 94-3184303                              
|(State or Other Jurisdiction of
    Incorporation or Organization)                 |  | (I.R.S. Employer
    Identification No.)
|585 Broadway, Redwood City,
    California(Address of principal executive offices) |  | 94063(Zip Code)                         

(650) 542-5100


(Registrants telephone number, including area code)


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


None


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


Common Stock, $.0001 par value


(Title of Class)





o þ


o þ


þ o


S-K 10-K 10-K. þ


12b-2.


o o þ


o þ














---



##### 










BROADVISION, INC.


ANNUAL REPORT ON
FORM 10-K


YEAR ENDED DECEMBER 31, 2005


TABLE OF CONTENTS


|             |  |                                                                                                                      |  |    
|------------ |  | -------------------------------------------------------------------------------------------------------------------- |  | ---
|PART I      
|Item 1.      |  | Business                                                                                                             |  | 1  
|Item 1A.     |  | Risk Factors                                                                                                         |  | 9  
|Item 2.      |  | Properties                                                                                                           |  | 18 
|Item 3.      |  | Legal Proceedings                                                                                                    |  | 18 
|Item 4.      |  | Submission of Matters to a Vote of Security
    Holders                                                              |  | 19 
|            
|PART II     
|Item 5.      |  | Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities |  | 20 
|Item 6.      |  | Selected Consolidated Financial Data                                                                                 |  | 22 
|Item 7.      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations                            |  | 23 
|Item 7A.     |  | Quantitative and Qualitative Disclosures
    About Market Risk                                                       |  | 53 
|Item 8.      |  | Financial Statements and Supplementary
    Data                                                                      |  | 54 
|Item 9.      |  | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure                             |  | 98 
|Item 9A.     |  | Controls and Procedures                                                                                              |  | 98 
|Item 9B.     |  | Other Information                                                                                                    |  | 99 
|            
|PART III    
|Item 10.     |  | Directors and Executive Officers of the
    Registrant                                                               |  | 99 
|Item 11.     |  | Executive Compensation                                                                                               |  | 102
|Item 12.     |  | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters                   |  | 107
|Item 13.     |  | Certain Relationships and Related
    Transactions                                                                   |  | 108
|Item 14.     |  | Principal Accountant Fees and Services                                                                               |  | 108
|            
|PART IV     
|Item 15.     |  | Exhibits and Financial Statement
    Schedules                                                                       |  | 109
|SIGNATURES   |  | 110                                                                                                                 
|EXHIBIT 4.5 
|EXHIBIT 23.1
|EXHIBIT 23.2
|EXHIBIT 31.1
|EXHIBIT 31.2
|EXHIBIT 32.1

tm e-Business, Click-to




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CAUTIONARY STATEMENT PURSUANT TO THE PRIVATE SECURITIES


LITIGATION REFORM ACT OF 1995


10-K,


10-K.




|                                                       |  |  |   | 
|------------------------------------------------------ |  |  | - | 
|PART I, ITEM 1 TABLE OF CONTENTS (BUSINESS SECTION)    |  | 
|                                                       |  | 
|Overview and Industry Background                       |  |  | 1 | 
|The BroadVision Solution                               |  |  | 2 | 
|Products                                               |  |  | 3 | 
|BroadVision Self-Service Extensions                    |  |  | 3 | 
|Product Bundles                                        |  |  | 4 | 
|Technology                                             |  |  | 4 | 
|Alliances                                              |  |  | 5 | 
|Services                                               |  |  | 5 | 
|Customers                                              |  |  | 6 | 
|Sales and Marketing                                    |  |  | 6 | 
|Competition                                            |  |  | 7 | 
|Intellectual Property and Other Proprietary
    Rights |  |  | 8 | 
|Employees                                              |  |  | 8 | 
|Executive Officers                                     |  |  | 8 | 

ii



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##### Table of Contents






PART I







|        |         
|------- | --------
|ITEM 1. | BUSINESS




Overview and Industry Background




| |             
| | ------------
| | Our Business

e-business




| |                      
| | ---------------------
| | Corporate Information











1



---



##### Table of Contents



Overview


e-business




Industry Background


e-business









BroadVision Solution








| |   |                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Scalability  Advanced load balancing
    and multi-layered caching allow BroadVision applications to
    support large numbers of concurrent customers and transactions.                                                                                                      
|
| |  | Personalization  BroadVisions
    advanced personalization technology, including session and
    event-based observations and transaction information, provide a
    better understanding of site visitors and allow our customers to
    dynamically tailor content to them.
|
| |  | Ease of use  BroadVision applications
    and tools are designed with graphical user interfaces that allow
    non-technical business managers to modify business rules and
    content in real time.                                                                         
|
| |  | Unification  BroadVisions robust
    self-service framework pre-integrates the technologies necessary
    to deploy content-rich, process-aware, user-centric portals,
    including data integration, business logic, process logic and
    user experience.                
|
| |  | All-in-one
    solution  BroadVision provides a significant
    portion of needed functionality
    out-of-the-box. This
    accelerates time to value and reduces Information Technology
    cost and complexity.                                                            
|
| |  | Legacy integration  A comprehensive set
    of application programming interfaces (APIs) allows for rapid,
    seamless integration with a variety of legacy business systems
    such as Oracle, PeopleSoft, SAP and custom mainframe systems.                               
|
| |  | Secure transaction processing 
    BroadVision applications provide secure handling of a wide range
    of commercial and financial services transactions including
    order pricing and discount/incentive handling,                                                        

2



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##### Table of Contents



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | tax computation, shipping and handling charges, payment
    authorization, credit card processing, order tracking, news and
    stock feeds through a combination of built-in functionality and
    integration with third-party products.                                                                                                                                                                                                                                             
|
| |  | Multi-platform availability 
    BroadVision applications are optimized for a variety of hardware
    and software platforms including IBM AIX, Sun Solaris, Microsoft
    Windows NT and Hewlett-Packards HP-UX. Supported
    databases include Oracle, Sybase, Informix, IBM and Microsoft
    SQL Server. Supported application servers include WebLogic,
    WebSphere and SunOne. BroadVision also supports Open Source
    platforms, such as Linux with Jboss and Hypersonic.
|
| |  | Multilingual/multicurrency  BroadVision
    applications are global ready and designed to support multiple
    languages (Arabic, Chinese, Hebrew, Japanese, Korean, Slovakian,
    Turkish and most Western European languages) and a wide range of
    currencies, including the euro.                                                                                                                                                                                              




Products




| |                         
| | ------------------------
| | BroadVision
    Portaltm





| |                           
| | --------------------------
| | BroadVision
    Commercetm

business-to business-to easy-to




| |                          
| | -------------------------
| | BroadVision
    Processtm






BroadVision Self-Service Extensions






| |                             
| | ----------------------------
| | BroadVision
    eMarketingtm

e-mail




| |                                    
| | -----------------------------------
| | BroadVision Shopping
    Servicestm





| |                                   
| | ----------------------------------
| | BroadVision Content
    Servicestm

easy-to


3



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##### Table of Contents





| |                               
| | ------------------------------
| | BroadVision
    QuickSilver®tm





| |                                   
| | ----------------------------------
| | BroadVision Staging
    Servicestm








| |                
| | ---------------
| | Product Bundles





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | TAS(Total Agility Suite) is a risk-free introduction to
    BroadVision Process. It includes a
    60-day BroadVision
    Process software license (Designer, Developer and Server
    Editions) and the necessary training and specialized services to
    develop a mutually agreed upon web-based self-service business
    process. Customers purchase the bundle, or the license expires,
    after the 60-day trial.
|
| |  | PAS(Portal Agility Suite) is a pre-integrated product
    bundle that includes BroadVision Portal, BroadVision Process and
    selected BroadVision Content Services; an
    all-in-one solution
    that makes it easier (through BroadVision Process) to keep pace
    with changing business requirements.                                                                                                             
|
| |  | CAS(Commerce Agility Suite) is a pre-integrated product
    bundle that includes BroadVision Commerce, BroadVision
    eMarketing, BroadVision Process and selected BroadVision content
    services; an all-in-one
    commerce solution that makes it easier (through BroadVision
    Process) to keep pace with changing business requirements.                                                                        




Technology




| |                                  
| | ---------------------------------
| | Open Standards-Based Architecture



e-business






4



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| |                        
| | -----------------------
| | Support for Open Source






Alliances


e-business. best-of




| |                    
| | -------------------
| | Consulting Partners





| |                         
| | ------------------------
| | Technology/ OEM Partners






Services






| |                    
| | -------------------
| | Consulting Services





| |                   
| | ------------------
| | Education Services

on-site


5



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##### Table of Contents





| |                                 
| | --------------------------------
| | Support and Maintenance Services

on-site





Customers











Sales and Marketing










e-business








| |   |                                                                              
| | - | -----------------------------------------------------------------------------
| |  | developing and supporting marketing programs to enhance customer
    loyalty;
|
| |  | building market awareness through press and industry analyst
    relations;  
|
| |  | generating and developing marketing and sales leads;                         

6



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| |   |                                                                                                
| | - | -----------------------------------------------------------------------------------------------
| |  | producing and maintaining marketing collateral and sales tools;                                
|
| |  | developing and supporting marketing programs associated with
    various alliance partners; and
|
| |  | developing materials associated with industry solutions.                                       




Competition






| |   |                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | in-house development efforts by prospective customers or
    partners;                                                                                                                                                                                 
|
| |  | other vendors of application software or application development
    platforms and tools directed at interactive commerce and portal
    applications, such as Art Technology Group, BEA, IBM
    Corporation, Microsoft, Oracle, SAP and Vignette; and
|
| |  | web content developers that develop custom software or integrate
    other application software into custom solutions.                                                                                                                                 





| |   |                                                  
| | - | -------------------------------------------------
| |  | depth and breadth of functionality offered;      
|
| |  | personalization and other features;              
|
| |  | integration of portal applications and framework;
|
| |  | availability of knowledgeable developers;        
|
| |  | time required for application deployment;        
|
| |  | reliance on industry standards;                  
|
| |  | product reliability;                             
|
| |  | proven track record;                             
|
| |  | scalability;                                     
|
| |  | maintainability;                                 
|
| |  | product quality;                                 
|
| |  | price; and                                       
|
| |  | technical support.                               



7



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Intellectual Property and Other Proprietary Rights


e-commerce


One-To







Employees









Executive Officers




|                 |  |     |    |  |          |                                                             
|---------------- |  | --- | -- |  | -------- | ------------------------------------------------------------
|Name             |  | Age |    |  | Position
|                 |  |     |    |  |         
|Pehong Chen      |  |     | 48 |  |          | Chairman of the Board, Chief Executive Officer and President
|William E. Meyer |  |     | 44 |  |          | Executive Vice President and Chief Financial Officer        

Pehong Chen


8



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William E. Meyer







|         |             
|-------- | ------------
|ITEM 1A. | RISK FACTORS

The risks and uncertainties described below are not the only
ones facing us. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair
our business operations. If any of the following risks actually
occur, our business could be harmed. In that event, the trading
price of our common stock could decline.




| |                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have a history of losses and our future profitability
    on a quarterly or annual basis is uncertain, which could have a
    harmful effect on our business and the value of BroadVision
    common stock.









| |                                                                              
| | -----------------------------------------------------------------------------
| | We face liquidity challenges and may need additional
    near-term financing.



9



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| |                                                                                                                                                                                                                                                                                                                                                              
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our management identified a material weakness in the
    effectiveness of our internal control over financial reporting
    as of December 31, 2005 and restated our historical
    operating results, and we cannot assure you that additional
    material weaknesses will not be discovered or additional
    restatements will not be made in the future.







10



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| |                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our business currently depends on revenue related to our
    BroadVision Self-Service Suite, and if the market does not
    increasingly accept this product and related products and
    services, our revenue may continue to decline.





| |                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If we are unable to keep pace with the rapid technological
    changes in online commerce and communication, our products and
    services may fail to be competitive.





| |   |                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------
| |  | develop leading technologies;                                                                                                           
|
| |  | enhance our existing products and services;                                                                                             
|
| |  | develop new products and services that address the increasingly
    sophisticated and varied needs of our prospective
    customers; and
|
| |  | respond to technological advances and emerging industry
    standards and practices on a timely and cost-effective basis.               



| |                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------
| | Our sales and product implementation cycles are lengthy
    and subject to delay, which make it difficult to predict our
    quarterly results.





| |                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because our quarterly operating results are volatile and
    difficult to predict, our quarterly operating results in one or
    future periods are likely to fluctuate significantly, which
    could cause our stock price to decline if we fail to meet the
    expectations of securities analysts or investors.



11



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| |   |                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | introduction of products and services and enhancements by us and
    our competitors;                                                                                      
|
| |  | competitive factors that affect our pricing;                                                                                                                               
|
| |  | market acceptance of new products;                                                                                                                                         
|
| |  | the mix of products sold by us;                                                                                                                                            
|
| |  | changes in our pricing policies or our competitors;                                                                                                                        
|
| |  | changes in our sales incentive plans;                                                                                                                                      
|
| |  | the budgeting cycles of our customers;                                                                                                                                     
|
| |  | customer order deferrals in anticipation of new products or
    enhancements by us or our competitors or because of
    macro-economic conditions;                         
|
| |  | nonrenewal of our maintenance agreements, which generally
    automatically renew for one-year terms unless earlier terminated
    by either party upon
    90-days notice;
|
| |  | product life cycles;                                                                                                                                                       
|
| |  | changes in strategy;                                                                                                                                                       
|
| |  | seasonal trends;                                                                                                                                                           
|
| |  | the mix of distribution channels through which our products are
    sold;                                                                                                  
|
| |  | the mix of international and domestic sales;                                                                                                                               
|
| |  | the rate at which new sales people become productive;                                                                                                                      
|
| |  | changes in the level of operating expenses to support projected
    growth;                                                                                                
|
| |  | increase in the amount of third party products and services that
    we use in our products or resell with royalties attached;                                             
|
| |  | fluctuations in the recorded value of outstanding common stock
    warrants that will be based upon changes to the underlying
    market value of BroadVision common stock;
|
| |  | the timing of receipt and fulfillment of significant
    orders; and                                                                                                       
|
| |  | costs associated with litigation, regulatory compliance and
    other corporate events such as operational reorganizations.                                                

quarter-to


12



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| |                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Because a significant portion of our sales activity occurs
    at the end of each fiscal quarter, delays in a relatively small
    number of license transactions could adversely affect our
    quarterly operating results.





| |                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We have substantially modified our business and operations
    and will need to manage and support these changes effectively in
    order for our business plan to succeed.





| |                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Modifications to our business and operations may not
    result in a reduced cost structure as anticipated and may
    otherwise adversely impact our productivity.





| |                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------
| | We are dependent on direct sales personnel and third-party
    distribution channels to achieve revenue growth.



13



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| |                                                                                                                                    
| | -----------------------------------------------------------------------------------------------------------------------------------
| | Failure to maintain relationships with third-party systems
    integrators could harm our ability to achieve our business
    plan.





| |   |                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Systems integrators may not view their relationships with us as
    valuable to their own businesses. The related arrangements
    typically may be terminated by either party with limited notice
    and in some cases are not covered by a formal agreement.                                                 
|
| |  | Under our business model, we often rely on our system
    integrators employees to perform implementations. If we
    fail to work together effectively, or if these parties perform
    poorly, our reputation may be harmed and deployment of our
    products may be delayed or inadequate.                 
|
| |  | Systems integrators may attempt to market their own products and
    services rather than ours.                                                                                                                                                                                                                 
|
| |  | Our competitors may have stronger relationships with our systems
    integrators than us and, as a result, these integrators may
    recommend a competitors products and services over ours.                                                                                                                  
|
| |  | If we lose our relationships with our systems integrators, we
    will not have the personnel necessary to deploy our products
    effectively, and we will need to commit significant additional
    sales and marketing resources in an effort to reach the markets
    and customers served by these parties.



| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | We may be unable to manage or grow our international
    operations and assets, which could impair our overall growth or
    financial position.







| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | difficulties in staffing and managing foreign operations and
    safeguarding foreign assets;
|
| |  | unexpected changes in regulatory requirements;                                               
|
| |  | export controls relating to encryption technology and other
    export restrictions;         
|
| |  | tariffs and other trade barriers;                                                            
|
| |  | difficulties in staffing and managing foreign operations;                                    
|
| |  | political and economic instability;                                                          
|
| |  | fluctuations in currency exchange rates;                                                     
|
| |  | reduced protection for intellectual property rights in some
    countries;                   
|
| |  | cultural barriers;                                                                           

14



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| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | seasonal reductions in business activity during the summer
    months in Europe and certain other parts of the world; and
|
| |  | potentially adverse tax consequences.                                                                                    







| |                                                                                                                                
| | -------------------------------------------------------------------------------------------------------------------------------
| | Current and potential competitors could make it difficult
    for us to acquire and retain customers now and in the
    future.







| |                                                                                                           
| | ----------------------------------------------------------------------------------------------------------
| | Our success and competitive position will depend on our
    ability to protect our proprietary technology.





15



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| |                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------
| | A breach of the encryption technology that we use could
    expose us to liability and harm our reputation, causing a loss
    of customers.





| |                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------
| | The loss or malfunction of technology licensed from third
    parties could delay the introduction of our products and
    services.





| |                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our executive officers, key employees and highly skilled
    technical and managerial personnel are critical to our business,
    and they may not remain with us in the future.



16



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##### Table of Contents







| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | Limitations on the online collection of profile
    information could impair the effectiveness of our
    products.









| |                                                                                                                                                                        
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may not have adequate
    back-up systems, and
    natural or manmade disasters could damage our operations, reduce
    our revenue and lead to a loss of customers.



17



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Risks related to BroadVision common stock




| |                                          
| | -----------------------------------------
| | Our stock price has been highly volatile.





| |   |                                                                        
| | - | -----------------------------------------------------------------------
| |  | quarterly variations in operating results;                             
|
| |  | announcements of technological innovations;                            
|
| |  | announcements of new software or services by us or our
    competitors;
|
| |  | changes in financial estimates by securities analysts;                 
|
| |  | general economic conditions; or                                        
|
| |  | other events or factors that are beyond our control.                   








|        |           
|------- | ----------
|ITEM 2. | PROPERTIES












|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS



18



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|        |                                                    
|------- | ---------------------------------------------------
|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS



19



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PART II







|        |                                                                                                                     
|------- | --------------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
    STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
    SECURITIES



|                 |  |      |      |  |     |   |      | 
|---------------- |  | ---- | ---- |  | --- | - | ---- | 
|                 |  | High |      |  | Low |  
|                 |  |      |      |  |     |  
|Fiscal Year 2005 |  |      |      |  |     |   |      | 
|First Quarter    |  | $    | 2.84 |  |     | $ | 1.62 | 
|Second Quarter   |  |      | 1.94 |  |     |   | 1.06 | 
|Third Quarter    |  |      | 1.42 |  |     |   | 0.81 | 
|Fourth Quarter   |  |      | 0.83 |  |     |   | 0.32 | 
|Fiscal Year 2004 |  |      |      |  |     |   |      | 
|First Quarter    |  |      | 9.05 |  |     |   | 4.28 | 
|Second Quarter   |  |      | 6.87 |  |     |   | 2.92 | 
|Third Quarter    |  |      | 4.35 |  |     |   | 2.10 | 
|Fourth Quarter   |  |      | 3.13 |  |     |   | 2.05 | 
|Fiscal Year 2003 |  |      |      |  |     |   |      | 
|First Quarter    |  |      | 4.80 |  |     |   | 3.43 | 
|Second Quarter   |  |      | 7.95 |  |     |   | 3.66 | 
|Third Quarter    |  |      | 7.22 |  |     |   | 4.50 | 
|Fourth Quarter   |  |      | 5.89 |  |     |   | 4.06 | 

®








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | On December 20, 2005, we entered into an agreement with
    Honu to cancel the convertible note debt obligations held by
    Honu in exchange for approximately 34,500,000 shares of
    BroadVision common stock. The transaction was consummated in
    March 2006, and we issued the common shares in reliance on
    Section 4(2) of the Securities Act. In connection with the
    issuance of shares to Honu, we entered into a registration
    rights agreement with Honu, pursuant to which we agreed to
    prepare and file a registration statement registering the resale
    of the shares of BroadVision common stock issued to Honu on
    commercially reasonable terms.



20



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Equity Compensation Plan Information


|                                                              |  |                      |           |  |                      |                      |                    |                         |  |  |           | 
|------------------------------------------------------------- |  | -------------------- | --------- |  | -------------------- | -------------------- | ------------------ | ----------------------- |  |  | --------- | 
|                                                              |  |                      |           |  |                      | Number of Securities |                   
|                                                              |  |                      |           |  |                      | Remaining Available  |                   
|                                                              |  | Number of Securities |           |  |                      |                      | for Issuance Under |                        
|                                                              |  | to be Issued Upon    |           |  | Weighted-Average     |                      |                    | Equity Compensation     | 
|                                                              |  | Exercise of          |           |  | Exercise Price of    |                      |                    | Plans (Excluding        | 
|                                                              |  | Outstanding Options, |           |  | Outstanding Options, |                      |                    | Securities Reflected in | 
|                                                              |  | Warrants and Rights  |           |  | Warrants and Rights  |                      |                    | Column (a))             | 
|Plan Category                                                 |  | (a)                  |           |  | (b)                  |                      |                    | (c)                     | 
|                                                              |  |                      |           |  |                      |                      |                    |                         | 
|Equity compensation plans approved by security holders(1)     |  |                      | 4,469,745 |  |                      | $                    | 20.63              |                         |  |  | 3,498,794 | 
|Equity compensation plans not approved by security holders(2) |  |                      | 587,838   |  |                      |                      | 16.70              |                         |  |  | 2,741,744 | 
|                                                              |  |                      |           |  |                      |                      |                    |                         | 
|Total                                                         |  |                      | 5,057,583 |  |                      | $                    | 20.17              |                         |  |  | 6,240,538 | 
|                                                              |  |                      |           |  |                      |                      |                    |                         | 






|    |                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes the following: Incentive Plan, Employee Stock Purchase
    Plan, 1993 Interleaf Stock Option Plan and 1994 Interleaf
    Employee Stock Option Plan.
|   
|(2) | Includes the following: the 2000 Non-Officer Equity Incentive
    Plan (the 2000 Non-Officer Plan) and non-plan grants.                                    

21



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|        |                                     
|------- | ------------------------------------
|ITEM 6. | SELECTED CONSOLIDATED FINANCIAL DATA

10-K. 10-K.


|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |          |         |         |   |          |         |         | 
|------------------------------------------ | ------------------------------------------------------------------ | --------------------------------------- | ------- | ------ | ------ | - | ------ | ------- | ------ | - | ------- | ------ | ------ | ---- | -------- | ------- | ------- | - | -------- | ------- | ------- | 
|                                           |                                                                    | Years Ended December 31,                |        
|                                           |                                                                    |                                         |        
|                                           |                                                                    | 2005                                    |         |        | 2004   |   |        | 2003    |        |   | 2002    |        |        | 2001 |         
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|                                           |                                                                    | (Restated)(1)                           |         |        |        |   |       
|                                           |                                                                    | (In thousands, except per share amount) |        
|Consolidated Statement of Operations Data: |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |          |         |         |   |          |        
|Revenues:                                  |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |          |         |         |   |          |        
|                                           | Software licenses                                                  |                                         | $       | 14,721 |        |   | $      | 26,883  |        |   | $       | 30,230 |        |      | $        | 40,483  |         |   | $        | 101,480 |        
|                                           | Services                                                           |                                         |         | 45,400 |        |   |        | 51,121  |        |   |         | 57,851 |        |      |          | 75,415  |         |   |          | 146,943 |        
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|                                           |                                                                    | Total revenues                          |         |        | 60,121 |   |        |         | 78,004 |   |         |        | 88,081 |      |          |         | 115,898 |   |          |         | 248,423 | 
|Cost of revenues:                          |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |          |         |         |   |          |        
|                                           | Cost of software licenses                                          |                                         |         | (38    | )      |   |        | 1,303   |        |   |         | 2,561  |        |      |          | 8,144   |         |   |          | 9,895   |        
|                                           | Cost of services                                                   |                                         |         | 21,931 |        |   |        | 24,978  |        |   |         | 25,708 |        |      |          | 38,898  |         |   |          | 97,639  |        
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|                                           |                                                                    | Total cost of revenues                  |         |        | 21,893 |   |        |         | 26,281 |   |         |        | 28,269 |      |          |         | 47,042  |   |          |         | 107,534 | 
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|Gross profit                               |                                                                    |                                         | 38,228  |        |        |   | 51,723 |         |        |   | 59,812  |        |        |      | 68,856   |         |         |   | 140,889  |        
|Operating expenses:                        |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |          |         |         |   |          |        
|                                           | Research and development                                           |                                         |         | 13,831 |        |   |        | 18,024  |        |   |         | 21,067 |        |      |          | 41,432  |         |   |          | 78,677  |        
|                                           | Sales and marketing                                                |                                         |         | 16,208 |        |   |        | 27,340  |        |   |         | 26,394 |        |      |          | 48,918  |         |   |          | 139,799 |        
|                                           | General and administrative                                         |                                         |         | 9,479  |        |   |        | 9,538   |        |   |         | 9,790  |        |      |          | 16,288  |         |   |          | 42,311  |        
|                                           | Litigation settlement costs                                        |                                         |         |       |        |   |        |        |        |   |         | 4,250  |        |      |          |        |         |   |          |        |        
|                                           | Goodwill and intangible amortization                               |                                         |         |       |        |   |        |        |        |   |         | 886    |        |      |          | 3,548   |         |   |          | 211,216 |        
|                                           | Charge for acquired in-process technology                          |                                         |         |       |        |   |        |        |        |   |         |       |        |      |          |        |         |   |          | 6,418   |        
|                                           | Impairment of assets                                               |                                         |         |       |        |   |        |        |        |   |         |       |        |      |          | 3,129   |         |   |          |        |        
|                                           | Impairment of goodwill and other intangibles                       |                                         |         | 31,368 |        |   |        |        |        |   |         |       |        |      |          |        |         |   |          | 336,379 |        
|                                           | Restructuring (credit) charge                                      |                                         |         | (462   | )      |   |        | (23,545 | )      |   |         | 35,356 |        |      |          | 110,449 |         |   |          | 153,284 |        
|                                           | Business combination charge                                        |                                         |         | 2,817  |        |   |        |        |        |   |         |       |        |      |          |        |         |   |          |        |        
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|                                           |                                                                    | Total operating expenses                |         |        | 73,241 |   |        |         | 31,357 |   |         |        | 97,743 |      |          |         | 223,764 |   |          |         | 968,084 | 
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|Operating income (loss)                    |                                                                    |                                         | (35,013 | )      |        |   | 20,366 |         |        |   | (37,931 | )      |        |      | (154,908 | )       |         |   | (827,195 | )      
|Other income (expense), net                |                                                                    |                                         | (6,564  | )      |        |   | (2,109 | )       |        |   | 2,899   |        |        |      | (8,011   | )       |         |   | (6,928   | )      
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|Income (loss) before income taxes          |                                                                    |                                         | (41,577 | )      |        |   | 18,257 |         |        |   | (35,032 | )      |        |      | (162,919 | )       |         |   | (834,123 | )      
|Income tax benefit (provision)             |                                                                    |                                         | 2,611   |        |        |   | 309    |         |        |   | (439    | )      |        |      | (7,603   | )       |         |   | (2,136   | )      
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|Net income (loss)                          |                                                                    | $                                       | (38,966 | )      |        | $ | 18,566 |         |        | $ | (35,471 | )      |        | $    | (170,522 | )       |         | $ | (836,259 | )      
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|Net income (loss) per share:               |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |          |         |         |   |          |        
|                                           | Basic earnings (loss) per share                                    |                                         | $       | (1.14  | )      |   | $      | 0.55    |        |   | $       | (1.08  | )      |      | $        | (5.32   | )       |   | $        | (27.20  | )      
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|                                           | Shares used in computation  basic earnings (loss) per
    share   |                                         |         | 34,228 |        |   |        | 33,539  |        |   |         | 32,800 |        |      |          | 32,036  |         |   |          | 30,748  |        
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|                                           | Diluted earnings (loss) per share                                  |                                         | $       | (1.14  | )      |   | $      | 0.54    |        |   | $       | (1.08  | )      |      | $        | (5.32   | )       |   | $        | (27.20  | )      
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         
|                                           | Shares used in computation  diluted earnings (loss)
    per share |                                         |         | 34,228 |        |   |        | 34,321  |        |   |         | 32,800 |        |      |          | 32,036  |         |   |          | 30,748  |        
|                                           |                                                                    |                                         |         |        |        |   |        |         |        |   |         |        |        |      |         

22



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|                                              |  |                    |           |   |      |   |           |      |  |   |            |   |  |      |            |   |  |   |          |  
|--------------------------------------------- |  | ------------------ | --------- | - | ---- | - | --------- | ---- |  | - | ---------- | - |  | ---- | ---------- | - |  | - | -------- | -
|                                              |  | As of December 31, |          
|                                              |  |                    |          
|                                              |  | 2005               |           |   | 2004 |   |           | 2003 |  |   | 2002       |   |  | 2001 |           
|                                              |  |                    |           |   |      |   |           |      |  |   |            |   |  |      |           
|                                              |  | (Restated)(1)      |           |   |      |   |          
|                                              |  | (In thousands)     |          
|Consolidated Balance Sheet Data:              |  |                    |           |   |      |   |           |      |  |   |            |   |  |      |            |   |  |   |          |  
|Cash and cash equivalents                     |  | $                  | 4,849     |   |      | $ | 41,851    |      |  | $ | 78,776     |   |  | $    | 77,386     |   |  | $ | 75,758   |  
|Working capital (deficit)                     |  |                    | (35,872   | ) |      |   | (20,273   | )    |  |   | 748        |   |  |      | 5,616      |   |  |   | 67,165   |  
|Total assets                                  |  |                    | 49,942    |   |      |   | 144,653   |      |  |   | 195,082    |   |  |      | 240,136    |   |  |   | 392,417  |  
|Debt and capital leases, less current portion |  |                    |          |   |      |   | 4,227     |      |  |   | 969        |   |  |      | 1,945      |   |  |   | 2,922    |  
|Accumulated deficit                           |  |                    | 1,225,075 |   |      |   | 1,186,109 |      |  |   | (1,204,675 | ) |  |      | (1,169,204 | ) |  |   | (998,682 | )
|Total stockholders equity (deficit)          |  |                    | (9,723    | ) |      |   | 28,341    |      |  |   | 7,950      |   |  |      | 41,633     |   |  |   | 203,147  |  






|    |                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Certain information presented above has been restated for 2004.
    See Item 7. Managements Discussion and Analysis of Financial
    Condition and Results of Operations, below.






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
    CONDITION AND RESULTS OF OPERATIONS

You should read this discussion and analysis in conjunction
with our consolidated financial statements and the related notes
appearing elsewhere in this report. In addition to the
historical consolidated information, the following discussion
contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, which are subject to the
safe harbor created by those sections. These
forward-looking statements are generally identified by words
such as expect, anticipate,
intend, believe, hope,
assume, estimate, plan,
will and other similar words and expressions. These
forward-looking statements involve risks and uncertainties that
could cause our actual results to differ materially from those
expressed or implied in the forward-looking statements as a
result of certain factors. Factors that could cause or
contribute to differences include those discussed below and
elsewhere in this
Form 10-K,
particularly in Item 1A, Risk Factors. We
undertake no obligation to publicly release any revisions to the
forward-looking statements or to reflect events and
circumstances after the date of this document.


Certain information presented below has been restated for
fiscal year 2004. See Note 1 to the Notes to our
Consolidated Financial Statements. This discussion and analysis
gives effect to the restatement. Because the restatement for
such periods is included in this Report on
Form 10-K, the
Company does not anticipate amending its quarterly reports on
Form 10-Q for the
quarters ended March 31, 2005, June 30, 2005 and
September 30, 2005.


Overview


e-business






23



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Background and Recent Events








24



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25



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##### Table of Contents







Goodwill and
Other Intangible Assets






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the three years ended December 31, 2005, we
    maintained a revolving line of credit in the form of a loan and
    security agreement with a commercial lender. In June 2005, we
    entered into a $20 million renewed and amended loan and
    security agreement with the lender that made more stringent the
    requirements we must meet in order to access the credit
    facility. We were not in compliance with these new requirements
    as of December 31, 2005, and the loan and security
    agreement expired in February 2006. The agreement required us to
    maintain certain levels of unrestricted cash and cash
    equivalents (excluding equity investments), and to maintain
    certain levels on deposit with the lender. At December 31,
    2004, $20.0 million was outstanding under the line of
    credit. As of December 31, 2005, there was no outstanding
    balance on the line of credit. Borrowings bear interest at the
    banks prime rate (7.25% as of December 31, 2005 and
    5.25% as of December 31, 2004) plus up to 1.25% and were
    collateralized by all of our assets. Interest was due monthly
    and principal was due at the expiration in February 2006.
|
| |  | We have entered into term debt in the form of notes payable with
    the same lender. The term debt requires monthly payments of
    approximately $38,000 plus interest through October 2006, and
    monthly payments of approximately $2,000 for the five months
    ending March 2007. A portion of the term debt was utilized for
    an equipment line of credit. Principal and interest are due in
    monthly payments through maturity based on the terms of the
    facilities. Principal payments of $389,000 are due in 2006. As
    of December 31, 2005, the entire balance of $389,000 was
    classified as currently due.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    



| |            
| | -----------
| | Restatement

10-K, 00-19, Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Companys Own Stock.


26



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|                                  |  |                   |         |   |          |   |         |  
|--------------------------------- |  | ----------------- | ------- | - | -------- | - | ------- | -
|                                  |  | December 31, 2004 |        
|                                  |  |                   |        
|                                  |  | Previously        |         |   |         
|                                  |  | Reported          |         |   | Restated |  
|                                  |  |                   |         |   |          |  
|Interest expense, net             |  | $                 | (228    | ) |          | $ | (629    | )
|Income (expense) from derivatives |  | $                 | (753    | ) |          | $ | (2,421  | )
|Net income                        |  | $                 | 20,635  |   |          | $ | 18,566  |  
|Basic net income per share        |  | $                 | 0.62    |   |          | $ | 0.55    |  
|Diluted net income per share      |  | $                 | 0.60    |   |          | $ | 0.54    |  
|Total liabilities                 |  | $                 | 114,243 |   |          | $ | 116,312 |  
|Total stockholders equity        |  | $                 | 30,410  |   |          | $ | 28,341  |  



|                                    |  |                   |         |   |                |   |            |               |  |   |                    |            |  |          |        |   |            |   |        |          |  |   |          |   |  |   |         |   |  |   |         |  
|----------------------------------- |  | ----------------- | ------- | - | -------------- | - | ---------- | ------------- |  | - | ------------------ | ---------- |  | -------- | ------ | - | ---------- | - | ------ | -------- |  | - | -------- | - |  | - | ------- | - |  | - | ------- | -
|                                    |  | December 31, 2004 |         |   | March 31, 2005 |   |            | June 30, 2005 |  |   | September 30, 2005 |           
|                                    |  |                   |         |   |                |   |            |               |  |   |                    |           
|                                    |  | Previously        |         |   |                |   | Previously |               |  |   |                    | Previously |  |          |        |   | Previously |   |        |         
|                                    |  | Reported          |         |   | Restated       |   |            | Reported      |  |   | Restated           |            |  | Reported |        |   | Restated   |   |        | Reported |  |   | Restated |  
|                                    |  |                   |         |   |                |   |            |               |  |   |                    |            |  |          |        |   |            |   |        |          |  |   |          |  
|Interest expense, net               |  | $                 | (516    | ) |                | $ | (917       | )             |  | $ | (744               | )          |  | $        | (1,723 | ) |            | $ | (1,090 | )        |  | $ | (2,532   | ) |  | $ | (1,002  | ) |  | $ | (2,073  | )
|Income (expense) from derivatives   |  | $                 | (753    | ) |                | $ | (2,421     | )             |  | $ | 2,517              |            |  | $        | 7,991  |   |            | $ | 997    |          |  | $ | 2,257    |   |  | $ | 698     |   |  | $ | 794     |  
|Net (loss) income                   |  | $                 | (386    | ) |                | $ | (2,455     | )             |  | $ | 2,919              |            |  | $        | 7,413  |   |            | $ | (2,914 | )        |  | $ | (3,095   | ) |  | $ | (14,538 | ) |  | $ | (15,512 | )
|Basic net (loss) income per share   |  | $                 | (0.01   | ) |                | $ | (0.07      | )             |  | $ | 0.09               |            |  | $        | 0.22   |   |            | $ | (0.09  | )        |  | $ | (0.09    | ) |  | $ | (0.42   | ) |  | $ | (0.45   | )
|Diluted net (loss) income per share |  | $                 | (0.01   | ) |                | $ | (0.07      | )             |  | $ | 0.07               |            |  | $        | 0.19   |   |            | $ | (0.09  | )        |  | $ | (0.09    | ) |  | $ | (0.42   | ) |  | $ | (0.45   | )
|Total liabilities                   |  | $                 | 114,243 |   |                | $ | 116,312    |               |  | $ | 85,099             |            |  | $        | 82,673 |   |            | $ | 75,424 |          |  | $ | 73,179   |   |  | $ | 50,963  |   |  | $ | 49,694  |  
|Total stockholders equity          |  | $                 | 30,410  |   |                | $ | 28,341     |               |  | $ | 33,743             |            |  | $        | 36,167 |   |            | $ | 30,959 |          |  | $ | 33,205   |   |  | $ | 16,480  |   |  | $ | 17,749  |  

Critical Accounting Policies, Judgments and Estimates






| |                      
| | ---------------------
| | Basis of Presentation



27



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| |                    
| | -------------------
| | Revenue Recognition

Overview Software Revenue Recognition 97-2), Software Revenue
Recognition, With Respect to Certain Transactions Revenue
Recognition .


Software License Revenue




28



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##### Table of Contents







Services Revenue percentage-of


out-of




| |                        
| | -----------------------
| | Allowances and Reserves





| |                                                            
| | -----------------------------------------------------------
| | Research and Development and Software Development
    Costs

Accounting for
the Cost of Computer Software to be Sold, Leased or Otherwise
Marketed




| |                       
| | ----------------------
| | Impairment Assessments



29



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Goodwill and
Other Intangible Assets




| |                    
| | -------------------
| | Deferred Tax Assets





| |                                        
| | ---------------------------------------
| | Accounting for Stock-Based Compensation

Accounting for Stock Issued
to Employees




Accounting for Stock-Based
Compensation


30



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|                                                                                                                                                    |                       |                          |         |            |      |   |        |      |  |   |         |       |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ------------------------ | ------- | ---------- | ---- | - | ------ | ---- |  | - | ------- | ----- | -
|                                                                                                                                                    |                       | Years Ended December 31, |        
|                                                                                                                                                    |                       |                          |        
|                                                                                                                                                    |                       | 2005                     |         |            | 2004 |   |        | 2003 | 
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|                                                                                                                                                    |                       |                          |         | (Restated) |      |   |       
|Net income (loss), as reported                                                                                                                      |                       | $                        | (38,966 | )          |      | $ | 18,566 |      |  | $ | (35,471 | )    
|Add: Stock-based compensation (income) expense included in
    reported net loss, net of related tax effects                                        |                       |                          |        |            |      |   | (19    | )    |  |   | 342     |      
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects |                       |                          | (2,263  | )          |      |   | (4,545 | )    |  |   | (9,275  | )    
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|Pro forma net income (loss)                                                                                                                         |                       | $                        | (41,229 | )          |      | $ | 14,002 |      |  | $ | (44,404 | )    
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|Net income (loss) per share:                                                                                                                        |                       |                          |         |            |      |   |        |      |  |   |         |      
|                                                                                                                                                    | Basic  as reported   |                          | $       | (1.14      | )    |   | $      | 0.55 |  |   | $       | (1.08 | )
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|                                                                                                                                                    | Basic  pro forma     |                          | $       | (1.20      | )    |   | $      | 0.42 |  |   | $       | (1.35 | )
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|                                                                                                                                                    | Diluted  as reported |                          | $       | (1.14      | )    |   | $      | 0.54 |  |   | $       | (1.08 | )
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|                                                                                                                                                    | Diluted  pro forma   |                          | $       | (1.20      | )    |   | $      | 0.41 |  |   | $       | (1.35 | )
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 

Share Based Payment


out-of


31



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|                                                |  |                   |           |  |           |   |      | 
|----------------------------------------------- |  | ----------------- | --------- |  | --------- | - | ---- | 
|                                                |  | Aggregate Number  |           |  | Weighted  |  
|                                                |  | of Common Shares  |           |  | Average   |  
|                                                |  | Issuable Under    |           |  | Exercise  |  
|                                                |  | Accelerated Stock |           |  | Price per |  
|                                                |  | Options           |           |  | Share     |  
|                                                |  |                   |           |  |           |  
|Total Non-Employee Directors                    |  |                   | 122,181   |  |           | $ | 2.98 | 
|Total Named Executive Officers                  |  |                   | 391,886   |  |           |   | 2.87 | 
|                                                |  |                   |           |  |           |  
|Total Directors and Named Executive Officers(1) |  |                   | 514,067   |  |           |   | 2.89 | 
|Total All Other Employees                       |  |                   | 610,707   |  |           |   | 2.97 | 
|                                                |  |                   |           |  |           |  
|Total(2)                                        |  |                   | 1,124,774 |  |           |   | 2.94 | 
|                                                |  |                   |           |  |           |  






|    |                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists of current executive officers named in the Summary
    Compensation Table in the Companys 2005 Proxy Statement
    filed with the Securities and Exchange Commission on
    April 22, 2005.
|   
|(2) | The accelerated options represent approximately 22% of total
    outstanding options.                                                                                                                





| |                     
| | --------------------
| | Reverse Stock Splits







| |                      
| | ---------------------
| | Restructuring Charges

Restructuring and Impairment Charges.


Severance and Termination Costs.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | For exit or disposal activities initiated on or prior to
    December 31, 2002, we account for costs in accordance with
    EITF Issue No. 94-3, Liability Recognition for Certain
    Employee Termination Benefits and Other Costs to Exit an
    Activity (Including Certain Costs Incurred in a Restructuring)(EITF 94-3).
    Accordingly, we record the liability related to these
    termination costs when the following conditions have been met:
    (1) management with the appropriate level of authority
    approves a termination plan that commits us to such plan and
    establishes the benefits the employees will receive upon
    termination; (2) the benefit arrangement is communicated to
    the employees in sufficient detail to enable the employees to
    determine the termination benefits; (3) the plan
    specifically identifies the number of employees to be
    terminated, their locations and their job classifications; and
    (4) the period of time to implement the plan does not
    indicate changes to the plan are likely.

32



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | For exit or disposal activities initiated after
    December 31, 2002, we account for costs in accordance with
    SFAS No. 146, Accounting For Costs Associated with
    Exit Activities(SFAS 146). SFAS 146
    requires that a liability for a cost associated with an exit or
    disposal activity be recognized and measured initially at fair
    value only when the liability is incurred. This differs from
    EITF 94-3, which
    required that a liability for an exit cost be recognized at the
    date of an entitys commitment to an exit plan.

Excess Facilities Costs.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | For exit or disposal activities initiated on or prior to
    December 31, 2002, we account for lease termination and/or
    abandonment costs in accordance with EITF Issue No. 88-10,
    Costs Associated with Lease Modification or Termination(EITF 88-10). Accordingly, we recorded the costs
    associated with lease termination and/or abandonment when the
    leased property had no substantive future use or benefit to us.
|
| |  | For exit or disposal activities initiated after
    December 31, 2002, we account for lease termination and/or
    abandonment costs in accordance with SFAS 146, which
    requires that a liability for such costs be recognized and
    measured initially at fair value on the cease use date of the
    facility.                                                                                                                    











| |              
| | -------------
| | Legal Matters



33



---



##### Table of Contents









Gary
Goberville, et al., vs. Pehong Chen, et al. Cookie Schwartz, et al., vs. BroadVision,
Inc., et al. Leon Kotovich,
et al., vs. BroadVision, Inc., et al. Anthony Noblett, et al., vs. BroadVision, Inc.,
et al.


34



---



##### Table of Contents



Statement of Operations as a Percent of Total Revenues




|                                                          |                                                     |                          |     |    |      |  |    |      |     |  |     |    |     | 
|--------------------------------------------------------- | --------------------------------------------------- | ------------------------ | --- | -- | ---- |  | -- | ---- | --- |  | --- | -- | --- | 
|                                                          |                                                     | Years Ended              |    
|                                                          |                                                     | December 31,             |    
|                                                          |                                                     |                          |    
|                                                          |                                                     | 2005                     |     |    | 2004 |  |    | 2003 |    
|                                                          |                                                     |                          |     |    |      |  |    |      |    
|                                                          |                                                     | (Restated)               |    
|Revenues:                                                 |                                                     |                          |     |    |      |  |    |      |     |  |     |   
|                                                          | Software licenses                                   |                          |     | 24 | %    |  |    | 34   | %   |  |     | 34 | %  
|                                                          | Services                                            |                          |     | 76 |      |  |    | 66   |     |  |     | 66 |    
|                                                          |                                                     |                          |     |    |      |  |    |      |    
|                                                          |                                                     | Total revenues           |     |    | 100  |  |    |      | 100 |  |     |    | 100 | 
|Cost of revenues:                                         |                                                     |                          |     |    |      |  |    |      |     |  |     |   
|                                                          | Cost of software licenses                           |                          |     |   |      |  |    | 2    |     |  |     | 3  |    
|                                                          | Cost of services                                    |                          |     | 36 |      |  |    | 32   |     |  |     | 29 |    
|                                                          |                                                     |                          |     |    |      |  |    |      |    
|                                                          |                                                     | Total cost of revenues   |     |    | 36   |  |    |      | 34  |  |     |    | 32  | 
|                                                          |                                                     |                          |     |    |      |  |    |      |    
|Gross profit                                              |                                                     |                          | 64  |    |      |  | 66 |      |     |  | 68  |   
|Operating expenses:                                       |                                                     |                          |     |    |      |  |    |      |     |  |     |   
|                                                          | Research and development                            |                          |     | 23 |      |  |    | 23   |     |  |     | 24 |    
|                                                          | Sales and marketing                                 |                          |     | 27 |      |  |    | 35   |     |  |     | 30 |    
|                                                          | General and administrative                          |                          |     | 16 |      |  |    | 12   |     |  |     | 11 |    
|                                                          | Litigation settlement costs                         |                          |     |   |      |  |    |     |     |  |     | 5  |    
|                                                          | Goodwill and intangible write-offs and amortization |                          |     | 52 |      |  |    |     |     |  |     | 1  |    
|                                                          | Restructuring (reversals) charges                   |                          |     | (1 | )    |  |    | (30  | )   |  |     | 40 |    
|                                                          | Business combination charges                        |                          |     | 5  |      |  |    |     |     |  |     |   |    
|                                                          |                                                     |                          |     |    |      |  |    |      |    
|                                                          |                                                     | Total operating expenses |     |    | 122  |  |    |      | 40  |  |     |    | 111 | 
|                                                          |                                                     |                          |     |    |      |  |    |      |    
|Operating income (loss)                                   |                                                     |                          | (58 | )  |      |  | 26 |      |     |  | (43 | ) 
|Other (expense) income, net                               |                                                     |                          | (11 | )  |      |  | (3 | )    |     |  | 3   |   
|                                                          |                                                     |                          |     |    |      |  |    |      |    
|Income (loss) before provision (benefit) for income taxes |                                                     |                          | (69 | )  |      |  | 23 |      |     |  | (40 | ) 
|Benefit (provision) for income taxes                      |                                                     |                          | 4   |    |      |  | 1  |      |     |  |    |   
|                                                          |                                                     |                          |     |    |      |  |    |      |    
|Net income (loss)                                         |                                                     |                          | (65 | )% |      |  | 24 | %    |     |  | (40 | )%
|                                                          |                                                     |                          |     |    |      |  |    |      |    

35



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##### Table of Contents



Results of Operations


|                              |  |                        |        |  |   |  |     |          |  |   |        |  |  |       |     |   |   |   |        |  |  |  |     |  
|----------------------------- |  | ---------------------- | ------ |  | - |  | --- | -------- |  | - | ------ |  |  | ----- | --- | - | - | - | ------ |  |  |  | --- | -
|                              |  | Software               |        |  | % |  |     | Services |  |   | %      |  |  | Total |     |   | % |  
|                              |  |                        |        |  |   |  |     |          |  |   |        |  |  |       |     |   |   |  
|                              |  | (Dollars in thousands) |       
|Year Ended December 31, 2005: |  |                        |        |  |   |  |     |          |  |   |        |  |  |       |     |   |   |   |        |  |  |  |     |  
|Americas                      |  | $                      | 7,615  |  |   |  | 52  |          |  | $ | 26,713 |  |  |       | 59  |   |   | $ | 34,328 |  |  |  | 57  |  
|Europe                        |  |                        | 4,918  |  |   |  | 33  |          |  |   | 15,310 |  |  |       | 34  |   |   |   | 20,228 |  |  |  | 34  |  
|Asia/ Pacific                 |  |                        | 2,188  |  |   |  | 15  |          |  |   | 3,377  |  |  |       | 7   |   |   |   | 5,565  |  |  |  | 9   |  
|                              |  |                        |        |  |   |  |     |          |  |   |        |  |  |       |     |   |   |  
|Total                         |  | $                      | 14,721 |  |   |  | 100 |          |  | $ | 45,400 |  |  |       | 100 |   |   | $ | 60,121 |  |  |  | 100 |  
|                              |  |                        |        |  |   |  |     |          |  |   |        |  |  |       |     |   |   |  
|Year Ended December 31, 2004: |  |                        |        |  |   |  |     |          |  |   |        |  |  |       |     |   |   |   |        |  |  |  |     |  
|Americas                      |  | $                      | 9,545  |  |   |  | 36  |          |  | $ | 27,733 |  |  |       | 54  |   |   | $ | 37,278 |  |  |  | 48  |  
|Europe                        |  |                        | 13,894 |  |   |  | 52  |          |  |   | 19,427 |  |  |       | 38  |   |   |   | 33,321 |  |  |  | 43  |  
|Asia/ Pacific                 |  |                        | 3,444  |  |   |  | 12  |          |  |   | 3,961  |  |  |       | 8   |   |   |   | 7,405  |  |  |  | 9   |  
|                              |  |                        |        |  |   |  |     |          |  |   |        |  |  |       |     |   |   |  
|Total                         |  | $                      | 26,883 |  |   |  | 100 |          |  | $ | 51,121 |  |  |       | 100 |   |   | $ | 78,004 |  |  |  | 100 |  
|                              |  |                        |        |  |   |  |     |          |  |   |        |  |  |       |     |   |   |  
|Year Ended December 31, 2003: |  |                        |        |  |   |  |     |          |  |   |        |  |  |       |     |   |   |   |        |  |  |  |     |  
|Americas                      |  | $                      | 14,435 |  |   |  | 48  |          |  | $ | 30,700 |  |  |       | 53  |   |   | $ | 45,135 |  |  |  | 51  |  
|Europe                        |  |                        | 11,725 |  |   |  | 39  |          |  |   | 23,733 |  |  |       | 41  |   |   |   | 35,458 |  |  |  | 40  |  
|Asia/ Pacific                 |  |                        | 4,070  |  |   |  | 13  |          |  |   | 3,418  |  |  |       | 6   |   |   |   | 7,488  |  |  |  | 9   |  
|                              |  |                        |        |  |   |  |     |          |  |   |        |  |  |       |     |   |   |  
|Total                         |  | $                      | 30,230 |  |   |  | 100 | %        |  | $ | 57,851 |  |  |       | 100 | % |   | $ | 88,081 |  |  |  | 100 | %
|                              |  |                        |        |  |   |  |     |          |  |   |        |  |  |       |     |   |   |  



| |         
| | --------
| | Revenues







36



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##### Table of Contents



Cost of Revenues






|                                          |  |                          |        |   |   |  |    |      |  |   |        |  |  |      |    |   |   |   |        |  |  |  |    |  
|----------------------------------------- |  | ------------------------ | ------ | - | - |  | -- | ---- |  | - | ------ |  |  | ---- | -- | - | - | - | ------ |  |  |  | -- | -
|                                          |  | Years Ended December 31, |       
|                                          |  |                          |       
|                                          |  | 2005                     |        |   | % |  |    | 2004 |  |   | %      |  |  | 2003 |    |   | % |  
|                                          |  |                          |        |   |   |  |    |      |  |   |        |  |  |      |    |   |   |  
|                                          |  | (Dollars in thousands)   |       
|Cost of (credit for) software licenses(1) |  | $                        | (38    | ) |   |  |   | %    |  | $ | 1,303  |  |  |      | 5  | % |   | $ | 2,561  |  |  |  | 8  | %
|Cost of services(2)                       |  |                          | 21,931 |   |   |  | 48 |      |  |   | 24,978 |  |  |      | 49 |   |   |   | 25,708 |  |  |  | 44 |  
|                                          |  |                          |        |   |   |  |    |      |  |   |        |  |  |      |    |   |   |  
|Total cost of revenues(3)                 |  | $                        | 21,893 |   |   |  | 36 | %    |  | $ | 26,281 |  |  |      | 34 | % |   | $ | 28,269 |  |  |  | 32 | %
|                                          |  |                          |        |   |   |  |    |      |  |   |        |  |  |      |    |   |   |  






|    |                                                                                                
|--- | -----------------------------------------------------------------------------------------------
|(1) | Percentage is calculated based on total software license
    revenues for the period indicated.
|   
|(2) | Percentage is calculated based on total services revenues for
    the period indicated.        
|   
|(3) | Percentage is calculated based on total revenues for the period
    indicated.                 













37



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##### Table of Contents





Operating Expenses






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Research and development expensesconsist primarily of
    salaries, employee-related benefit costs and consulting fees
    incurred in association with the development of our products.
    Costs incurred for the research and development of new software
    products are expensed as incurred until such time that
    technological feasibility, in the form of a working model, is
    established at which time such costs are capitalized and
    recorded at the lower of unamortized cost or net realizable
    value. The costs incurred subsequent to the establishment of a
    working model but prior to general release of the product have
    not been significant. To date, we have not capitalized any costs
    related to the development of software for external use.
|
| |  | Sales and marketing expensesconsist primarily of
    salaries, employee-related benefit costs, commissions and other
    incentive compensation, travel and entertainment and marketing
    program-related expenditures such as collateral materials, trade
    shows, public relations, advertising and creative services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | General and administrative expensesconsist primarily of
    salaries, employee-related benefit costs, provisions and credits
    related to uncollectible accounts receivable and professional
    service fees.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Litigation settlement costsconsist of costs incurred to
    settle pending or threatened litigation matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Goodwill and intangible write-offs and amortizationrepresents costs to write-off or amortize goodwill and other
    intangible assets. As of January 1, 2002, we no longer
    amortize goodwill or the assembled workforce as we have
    identified the assembled workforce as an intangible asset that
    does not meet the criteria of a recognizable intangible asset as
    defined by SFAS 142.                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Restructuring (reversals) chargesrepresent costs
    incurred to restructure our operations. These charges, including
    charges for excess facilities, severance and certain non-cash
    items, were recorded under the provisions of
    EITF 94-3, and
    SFAS 146.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Business combination chargesrepresent costs incurred in
    connection with merger or acquisition activity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   



|                                     |                          |                          |        |        |   |  |    |      |   |   |         |        |  |      |     |    |   |   |        |        |  |  |    |     |  
|------------------------------------ | ------------------------ | ------------------------ | ------ | ------ | - |  | -- | ---- | - | - | ------- | ------ |  | ---- | --- | -- | - | - | ------ | ------ |  |  | -- | --- | -
|                                     |                          | Years Ended December 31, |       
|                                     |                          |                          |       
|                                     |                          | 2005                     |        |        | % |  |    | 2004 |   |   | %       |        |  | 2003 |     |    | % |  
|                                     |                          |                          |        |        |   |  |    |      |   |   |         |        |  |      |     |    |   |  
|Research and development             |                          | $                        | 13,831 |        |   |  | 23 | %    |   | $ | 18,024  |        |  |      | 23  | %  |   | $ | 21,067 |        |  |  | 24 | %  
|Sales and marketing                  |                          |                          | 16,208 |        |   |  | 27 |      |   |   | 27,340  |        |  |      | 35  |    |   |   | 26,394 |        |  |  | 30 |    
|General and administrative           |                          |                          | 9,479  |        |   |  | 16 |      |   |   | 9,538   |        |  |      | 12  |    |   |   | 9,790  |        |  |  | 11 |    
|Litigation settlement costs          |                          |                          |       |        |   |  |   |      |   |   |        |        |  |      |    |    |   |   | 4,250  |        |  |  | 5  |    
|Goodwill write-offs and amortization |                          |                          | 31,368 |        |   |  | 52 |      |   |   |        |        |  |      |    |    |   |   | 886    |        |  |  | 1  |    
|Restructuring (reversals) charges    |                          |                          | (462   | )      |   |  | (1 | )    |   |   | (23,545 | )      |  |      | (30 | )  |   |   | 35,356 |        |  |  | 40 |    
|Business combination charges         |                          |                          | 2,817  |        |   |  | 5  |      |   |   |        |        |  |      |    |    |   |   |       |        |  |  |   |    
|                                     |                          |                          |        |        |   |  |    |      |   |   |         |        |  |      |     |    |   |  
|                                     | Total operating expenses |                          | $      | 73,241 |   |  |    | 122  | % |   | $       | 31,357 |  |      |     | 40 | % |   | $      | 97,743 |  |  |    | 111 | %
|                                     |                          |                          |        |        |   |  |    |      |   |   |         |        |  |      |     |    |   |  

Research and development.


38



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##### Table of Contents





Sales and marketing.


General and administrative.


Litigation settlement costs.


Goodwill write-offs and amortization.


Restructuring (reversals) charges. Accounting for Contingencies.


Business combination charges.


39



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##### Table of Contents





|                                    |  |           |        |   |                   |   |         |       |  |   |         |  
|----------------------------------- |  | --------- | ------ | - | ----------------- | - | ------- | ----- |  | - | ------- | -
|                                    |  | Severance |        |   |                   |   |        
|                                    |  | and       |        |   | Facilities/Excess |   |         |      
|                                    |  | Benefits  |        |   | Assets            |   |         | Total | 
|                                    |  |           |        |   |                   |   |         |       | 
|Accrual balances, December 31, 2002 |  | $         | 1,504  |   |                   | $ | 94,691  |       |  | $ | 96,195  |  
|Restructuring charges               |  |           | 1,509  |   |                   |   | 33,847  |       |  |   | 35,356  |  
|Cash payments                       |  |           | (2,342 | ) |                   |   | (23,829 | )     |  |   | (26,171 | )
|                                    |  |           |        |   |                   |   |         |       | 
|Accrual balances, December 31, 2003 |  |           | 671    |   |                   |   | 104,709 |       |  |   | 105,380 |  
|Restructuring charges               |  |           | 1,114  |   |                   |   | (24,659 | )     |  |   | (23,545 | )
|Cash payments                       |  |           | (961   | ) |                   |   | (46,711 | )     |  |   | (47,672 | )
|                                    |  |           |        |   |                   |   |         |       | 
|Accrual balances, December 31, 2004 |  |           | 824    |   |                   |   | 33,339  |       |  |   | 34,163  |  
|Restructuring charges (credits)     |  |           | 1,006  |   |                   |   | (1,468  | )     |  |   | (462    | )
|Cash payments                       |  |           | (1,414 | ) |                   |   | (25,032 | )     |  |   | (26,446 | )
|                                    |  |           |        |   |                   |   |         |       | 
|Accrual balances, December 31, 2005 |  | $         | 416    |   |                   | $ | 6,839   |       |  | $ | 7,255   |  
|                                    |  |           |        |   |                   |   |         |       | 

94-3






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Severance and benefits  On June 29, 2005,
    our Board of Directors approved a business restructuring plan,
    primarily consisting of headcount reductions, designed to adjust
    expenses to a level more consistent with anticipated revenues.
    The reduction included approximately 63 employees, or 22% of our
    workforce. We recorded severance charges of approximately
    $1.0 million in the year ended December 31, 2005,
    related to workforce reductions as a component of our
    restructuring plans executed during the year. We estimate that
    the accrual as of December 31, 2005 of $416,000 will be
    paid in full by December 31, 2006.
|
| |  | Facilities/excess assets  During the twelve
    months ended December 31, 2005, we recorded a
    facilities-related restructuring credit of $1.5 million.
    During the third and fourth quarters of 2004 and the first
    quarter of 2005, we reached agreements with certain landlords to
    extinguish future real estate obligations. We made cash payments
    of $25.0 million during the twelve months ended
    December 31, 2005 related to these agreements.                                                                                                                                                                                                   





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Severance and benefits  We recorded a charge
    of $1.1 million during the twelve months ended
    December 31, 2004, related to workforce reductions as a
    component of the our restructuring plans executed during the
    year.                                                                                                                                                                                                                                                                                                            
|
| |  | Facilities/excess assets  During the twelve
    months ended December 31, 2004, we recorded a
    facilities-related restructuring credit of $24.7 million.
    During the third and fourth quarters of 2004, we reached
    agreements with certain landlords to extinguish approximately
    $155.0 million of future real estate obligations. We made
    cash payments of $19.0 million during the third quarter and
    $1.7 million during the fourth quarter. Standby letters of
    credit of $21.9 million were issued on our behalf from

40



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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | financial institutions as of December 31, 2004, in favor of
    the landlords to secure the fiscal 2005 payments. Accordingly,
    $21.9 million, along with additional letters of credit
    securing other long-term leases of $2.3 million, has been
    included in restricted cash in the accompanying Consolidated
    Balance Sheets at December 31, 2004. We also transferred
    ownership of certain furniture, fixtures, and leasehold
    improvements with a net book value of $8.5 million to the
    previous landlords.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As a component of the settlement of one of the previous leases,
    we have a residual lease obligation beginning in 2007 of
    approximately $9.1 million. We may make an additional cash
    payment of $4.5 million if we exercise an option to
    terminate this residual real estate obligation prior to the
    commencement of the lease term (January 2007). This option to
    terminate the residual lease obligation is accounted for in
    accordance with SFAS 146 and is a part of the facilities
    related restructuring credit of $24.6 million recorded in
    fiscal 2004.
|
| | In connection with one of the buyout transactions, we issued to
    the landlord a five-year warrant to purchase approximately
    700,000 shares of our common stock at an exercise price of
    $5.00 per share, exercisable beginning in August 2005.                                                                                                                                                                                                                                                                                                                                         
|
| | The nature of the charges in 2003 is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Severance and benefits  The $1.5 million
    charge in fiscal 2003 related to workforce reductions as a
    component of our restructuring plans executed during the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Facilities/excess assets  During the twelve
    months ended December 31, 2003, we recorded a
    facilities-related restructuring charge of $33.8 million.
    This charge related to our revisions of estimates with respect
    to the planned future occupancy and anticipated future
    subleases. These revisions were necessary due to a reduction in
    our planned future space needs and a further decline in the
    market for commercial real estate. We estimated future sublease
    timing and rates based upon current market indicators and
    information obtained from a third party real estate expert.



|                          |  |         |     |      |         |   |     |       |  |   |     | 
|------------------------- |  | ------- | --- | ---- | ------- | - | --- | ----- |  | - | --- | 
|                          |  |         |     | Non- |         |   |    
|                          |  | Current |     |      | Current |   |     | Total | 
|                          |  |         |     |      |         |   |     |       | 
|Severance and Termination |  | $       | 0.4 |      |         | $ |    |       |  | $ | 0.4 | 
|Excess Facilities         |  |         | 5.1 |      |         |   | 1.7 |       |  |   | 6.8 | 
|                          |  |         |     |      |         |   |     |       | 
|Total                     |  | $       | 5.5 |      |         | $ | 1.7 |       |  | $ | 7.2 | 
|                          |  |         |     |      |         |   |     |       | 



|                                  |  |              |     | 
|--------------------------------- |  | ------------ | --- | 
|                                  |  | Total Future |    
|                                  |  | Payments     |    
|                                  |  |              |    
|Years Ending December 31,         |  |              |     | 
|2006                              |  | $            | 5.1 | 
|2007                              |  |              | 0.7 | 
|2008                              |  |              | 0.4 | 
|2009                              |  |              | 0.4 | 
|2010                              |  |              | 0.2 | 
|                                  |  |              |    
|Total minimum facilities payments |  | $            | 6.8 | 
|                                  |  |              |    



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94-3.




|                                                    |  |                  |        |            |               |   |        |             |  |   |               |   |  |   |        | 
|--------------------------------------------------- |  | ---------------- | ------ | ---------- | ------------- | - | ------ | ----------- |  | - | ------------- | - |  | - | ------ | 
|                                                    |  |                  |        | Amounts    |               |   |        |             | 
|                                                    |  |                  |        | Charged to |               |   |        |             | 
|                                                    |  | Accrued          |        |            | Restructuring |   |        | Amounts     |  |   | Accrued       |  
|                                                    |  | Restructuring    |        |            | Costs and     |   |        | Paid or     |  |   | Restructuring |  
|                                                    |  | Costs, Beginning |        |            | Other         |   |        | Written Off |  |   | Costs, Ending |  
|                                                    |  |                  |        |            |               |   |        |             |  |   |               |  
|Year Ended December 31, 2005:                       |  |                  |        |            |               |   |        |             |  |   |               |   |  |   |        | 
|Lease cancellations and commitments                 |  | $                | 21,824 |            |               | $ | (821   | )           |  | $ | (16,815       | ) |  | $ | 4,188  | 
|Termination payments to employees and related costs |  |                  | 365    |            |               |   | 1,006  |             |  |   | (1,266        | ) |  |   | 105    | 
|                                                    |  |                  |        |            |               |   |        |             |  |   |               |  
|                                                    |  | $                | 22,189 |            |               | $ | 185    |             |  | $ | (18,081       | ) |  | $ | 4,293  | 
|                                                    |  |                  |        |            |               |   |        |             |  |   |               |  
|Year Ended December 31, 2004:                       |  |                  |        |            |               |   |        |             |  |   |               |   |  |   |        | 
|Lease cancellations and commitments                 |  | $                | 21,683 |            |               | $ | 9,594  |             |  | $ | (9,453        | ) |  | $ | 21,824 | 
|Termination payments to employees and related costs |  |                  | 242    |            |               |   | 1,114  |             |  |   | (991          | ) |  |   | 365    | 
|Write-off on disposal of assets and related costs   |  |                  |       |            |               |   | (1,193 | )           |  |   | 1,193         |   |  |   |       | 
|                                                    |  |                  |        |            |               |   |        |             |  |   |               |  
|                                                    |  | $                | 21,925 |            |               | $ | 9,515  |             |  | $ | (9,251        | ) |  | $ | 22,189 | 
|                                                    |  |                  |        |            |               |   |        |             |  |   |               |  

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94-3


|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |         |   |  |   |        | 
|--------------------------------------------------- |  | ------------- | ------ | ------- | ------------- | - | ------- | ------------- |  | - | ------- | - |  | ------------- | ------- | - |  | - | ------ | 
|                                                    |  |               |        | Amounts |               |   | Amounts |               |  |   |         |  
|                                                    |  | Accrued       |        |         | Charged to    |   |         | Reversed to   |  |   | Amounts |   |  |              
|                                                    |  | Restructuring |        |         | Restructuring |   |         | Restructuring |  |   | Paid or |   |  | Accrued       |        
|                                                    |  | Costs,        |        |         | Costs and     |   |         | Costs and     |  |   | Written |   |  | Restructuring |        
|                                                    |  | Beginning     |        |         | Other         |   |         | Other         |  |   | Off     |   |  | Costs, Ending |        
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|Year Ended December 31, 2005:                       |  |               |        |         |               |   |         |               |  |   |         |   |  |               |         |   |  |   |        | 
|Lease cancellations and commitments                 |  | $             | 11,515 |         |               | $ |        |               |  | $ | (647    | ) |  | $             | (8,217  | ) |  | $ | 2,651  | 
|Termination payments to employees and related costs |  |               | 459    |         |               |   |        |               |  |   |        |   |  |               | (148    | ) |  |   | 311    | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|                                                    |  | $             | 11,974 |         |               | $ |        |               |  | $ | (647    | ) |  | $             | (8,365  | ) |  | $ | 2,962  | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|Year Ended December 31, 2004:                       |  |               |        |         |               |   |         |               |  |   |         |   |  |               |         |   |  |   |        | 
|Lease cancellations and commitments                 |  | $             | 83,026 |         |               | $ | (32,584 | )             |  | $ |        |   |  | $             | (38,927 | ) |  | $ | 11,515 | 
|Termination payments to employees and related costs |  |               | 429    |         |               |   |        |               |  |   |        |   |  |               | 30      |   |  |   | 459    | 
|Write-off on disposal of assets and related costs   |  |               |       |         |               |   | (477    | )             |  |   |        |   |  |               | 477     |   |  |   |       | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|                                                    |  | $             | 83,455 |         |               | $ | (33,061 | )             |  | $ |        |   |  | $             | (38,420 | ) |  | $ | 11,974 | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|Year Ended December 31, 2003:                       |  |               |        |         |               |   |         |               |  |   |         |   |  |               |         |   |  |   |        | 
|Lease cancellations and commitments                 |  | $             | 94,691 |         |               | $ | 11,649  |               |  | $ |        |   |  | $             | (23,314 | ) |  | $ | 83,026 | 
|Termination payments to employees and related costs |  |               | 1,425  |         |               |   | 41      |               |  |   |        |   |  |               | (1,037  | ) |  |   | 429    | 
|Write-off on disposal of assets and related costs   |  |               | 79     |         |               |   | (41     | )             |  |   | (26     | ) |  |               | (12     | ) |  |   |       | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|                                                    |  | $             | 96,195 |         |               | $ | 11,649  |               |  | $ | (26     | ) |  | $             | (24,363 | ) |  | $ | 83,455 | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        



| |                                   
| | ----------------------------------
| | Goodwill and intangible write-offs

Goodwill and
Other Intangible Assets


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Other Income (Expense), net




|                                  |  |                          |         |   |      |  |     |      |  |   |        |   |  |      |    |    |      |   |       |  |  |  |   |  
|--------------------------------- |  | ------------------------ | ------- | - | ---- |  | --- | ---- |  | - | ------ | - |  | ---- | -- | -- | ---- | - | ----- |  |  |  | - | -
|                                  |  | Years Ended December 31, |        
|                                  |  |                          |        
|                                  |  | 2005                     |         |   | %(1) |  |     | 2004 |  |   | %(1)   |   |  | 2003 |    |    | %(1) |  
|                                  |  |                          |         |   |      |  |     |      |  |   |        |   |  |      |    |    |      |  
|Interest (expense) income, net    |  | $                        | (10,094 | ) |      |  | (17 | )%   |  | $ | (629   | ) |  |      | (1 | )% |      | $ | 803   |  |  |  | 1 | %
|Income (expense) from derivatives |  |                          | 11,346  |   |      |  | 19  |      |  |   | (2,421 | ) |  |      | (3 | )  |      |   |      |  |  |  |  |  
|Loss on debt extinguishment       |  |                          | (6,967  | ) |      |  | (12 | )    |  |   |       |   |  |      |   |    |      |   |      |  |  |  |  |  
|Other income (expense), net       |  |                          | (849    | ) |      |  | (1  | )    |  |   | 941    |   |  |      | 1  |    |      |   | 2,096 |  |  |  | 2 |  














| |             
| | ------------
| | Income Taxes



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| |                                
| | -------------------------------
| | Liquidity and Capital Resources



| |                        
| | -----------------------
| | Background and Overview









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|                                                        |  |              |         |            |      |   |         |  
|------------------------------------------------------- |  | ------------ | ------- | ---------- | ---- | - | ------- | -
|                                                        |  | December 31, |        
|                                                        |  |              |        
|                                                        |  | 2005         |         |            | 2004 |  
|                                                        |  |              |         |            |      |  
|                                                        |  |              |         | (Restated) |     
|Cash and cash equivalents                               |  | $            | 4,849   |            |      | $ | 41,851  |  
|Restricted cash and investments, current portion        |  | $            |        |            |      | $ | 21,933  |  
|Restricted cash and investments, net of current portion |  | $            | 1,997   |            |      | $ | 2,323   |  
|Working capital deficit                                 |  | $            | (35,872 | )          |      | $ | (20,273 | )
|Working capital ratio                                   |  |              | 0.35    |            |      |   | 0.80    |  









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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the three years ended December 31, 2005, we
    maintained a revolving line of credit in the form of a loan and
    security agreement with a commercial lender. In June 2005, we
    entered into a $20 million renewed and amended loan and
    security agreement with the lender that made more stringent the
    requirements we must meet in order to access the credit
    facility. We were not in compliance with these new requirements
    as of December 31, 2005, and the loan and security
    agreement expired in February 2006. The agreement required us to
    maintain certain levels of unrestricted cash and cash
    equivalents (excluding equity investments), and to maintain
    certain levels on deposit with the lender. At December 31,
    2004, $20.0 million was outstanding under the line of
    credit. As of December 31, 2005, there was no outstanding
    balance on the line of credit. Borrowings bear interest at the
    banks prime rate (7.25% as of December 31, 2005 and
    5.25% as of December 31, 2004) plus up to 1.25% and were
    collateralized by all of our assets. Interest was due monthly
    and principal was due at the expiration in February 2006.
|
| |  | We have entered into term debt in the form of notes payable with
    the same lender. The term debt requires monthly payments of
    approximately $38,000 plus interest through October 2006, and
    monthly payments of approximately $2,000 for the five months
    ending March 2007. A portion of the term debt was utilized for
    an equipment line of credit. Principal and interest are due in
    monthly payments through maturity based on the terms of the
    facilities. Principal payments of $389,000 are due in 2006. As
    of December 31, 2005, the entire balance of $389,000 was
    classified as currently due.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    





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| |                                   
| | ----------------------------------
| | Cash Used For Operating Activities









| |                                                 
| | ------------------------------------------------
| | Cash Provided By (Used For) Investing Activities







| |                                      
| | -------------------------------------
| | Cash Provided By Financing Activities



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| |                                         
| | ----------------------------------------
| | Leases and Other Contractual Obligations





|                          |                              |           |     |      | 
|------------------------- | ---------------------------- | --------- | --- | ---- | 
|                          |                              | Operating |    
|                          |                              | Leases    |    
|                          |                              |           |    
|Years Ending December 31, |                              |           |     |     
|2006                      |                              | $         | 3.5 |     
|2007                      |                              |           | 3.9 |     
|2008                      |                              |           | 2.1 |     
|2009                      |                              |           | 2.1 |     
|2010 and thereafter       |                              |           | 4.1 |     
|                          |                              |           |    
|                          | Total minimum lease payments |           | $   | 15.7 | 
|                          |                              |           |    





| |                                         
| | ----------------------------------------
| | Factors That May Affect Future Liquidity



|                                |  |               |     |           |        |   |     |       |  |     |       |  |      |         |     |  |  |   |     | 
|------------------------------- |  | ------------- | --- | --------- | ------ | - | --- | ----- |  | --- | ----- |  | ---- | ------- | --- |  |  | - | --- | 
|                                |  |               |     | Less Than |        |   | 1-3 |       |  | 4-5 |       |  | Over |        
|                                |  | Total         |     |           | 1 Year |   |     | Years |  |     | Years |  |      | 5 Years |    
|                                |  |               |     |           |        |   |     |       |  |     |       |  |      |         |    
|                                |  | (In millions) |    
|Letters of credit               |  | $             | 2.0 |           |        | $ |    |       |  | $   | 1.0   |  |      | $       |    |  |  | $ | 1.0 | 
|Non-cancelable operating leases |  |               | 6.8 |           |        |   | 5.1 |       |  |     | 1.5   |  |      |         | 0.2 |  |  |   |    | 
|                                |  |               |     |           |        |   |     |       |  |     |       |  |      |         |    
|                                |  | $             | 8.8 |           |        | $ | 5.1 |       |  | $   | 2.5   |  |      | $       | 0.2 |  |  | $ | 1.0 | 
|                                |  |               |     |           |        |   |     |       |  |     |       |  |      |         |    



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Quarterly Results of Operations






10-K. period-to


|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |   |  |   |        |   |  |   |        |  
|------------------------------------------------------------ |  | ------------------ | ------- | ------------- | ------- | - | ------------- | ------- |  | ------------- | ------- | - | ------------- | ------- | ------ | - | ------- | - | ------ | ------- |  | - | ------- | - |  | - | ------ | - |  | - | ------ | -
|                                                             |  | Three Months Ended |        
|                                                             |  |                    |        
|                                                             |  | Dec 31,            |         |               | Sep 30, |   |               | Jun 30, |  |               | Mar 31, |   |               | Dec 31, |        |   | Sep 30, |   |        | Jun 30, |  |   | Mar 31, |  
|                                                             |  | 2005               |         |               | 2005    |   |               | 2005    |  |               | 2005    |   |               | 2004    |        |   | 2004    |   |        | 2004    |  |   | 2004    |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|                                                             |  |                    |         | (As restated) |         |   | (As restated) |         |  | (As restated) |         |   | (As restated) |         |        |   |         |   |        |        
|                                                             |  | (In thousands)     |        
|                                                             |  | (Unaudited)        |        
|Statement of Operations Data:                                |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |   |  |   |        |  
|Revenues:                                                    |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |   |  |   |        |   |  |   |        |  
|Software licenses                                            |  | $                  | 3,780   |               |         | $ | 3,134         |         |  | $             | 3,391   |   |               | $       | 4,416  |   |         | $ | 7,292  |         |  | $ | 4,654   |   |  | $ | 7,097  |   |  | $ | 7,840  |  
|Services                                                     |  |                    | 10,383  |               |         |   | 10,943        |         |  |               | 12,123  |   |               |         | 11,951 |   |         |   | 12,471 |         |  |   | 12,570  |   |  |   | 13,031 |   |  |   | 13,049 |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Total revenues                                               |  |                    | 14,163  |               |         |   | 14,077        |         |  |               | 15,514  |   |               |         | 16,367 |   |         |   | 19,763 |         |  |   | 17,224  |   |  |   | 20,128 |   |  |   | 20,889 |  
|Cost of revenues:                                            |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |   |  |   |        |   |  |   |        |  
|Cost of software licenses                                    |  |                    | 99      |               |         |   | 106           |         |  |               | (186    | ) |               |         | (57    | ) |         |   | 156    |         |  |   | 256     |   |  |   | 313    |   |  |   | 578    |  
|Cost of services                                             |  |                    | 4,696   |               |         |   | 5,641         |         |  |               | 5,614   |   |               |         | 5,980  |   |         |   | 6,008  |         |  |   | 6,391   |   |  |   | 6,302  |   |  |   | 6,277  |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Total cost of revenues                                       |  |                    | 4,795   |               |         |   | 5,747         |         |  |               | 5,428   |   |               |         | 5,923  |   |         |   | 6,164  |         |  |   | 6,647   |   |  |   | 6,615  |   |  |   | 6,855  |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Gross profit                                                 |  |                    | 9,368   |               |         |   | 8,330         |         |  |               | 10,086  |   |               |         | 10,444 |   |         |   | 13,599 |         |  |   | 10,577  |   |  |   | 13,513 |   |  |   | 14,034 |  
|Operating expenses:                                          |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |   |  |   |        |   |  |   |        |  
|Research and development                                     |  |                    | 2,494   |               |         |   | 3,095         |         |  |               | 3,955   |   |               |         | 4,287  |   |         |   | 4,027  |         |  |   | 4,600   |   |  |   | 4,509  |   |  |   | 4,888  |  
|Sales and marketing                                          |  |                    | 2,389   |               |         |   | 2,948         |         |  |               | 5,060   |   |               |         | 5,811  |   |         |   | 6,974  |         |  |   | 6,020   |   |  |   | 7,480  |   |  |   | 6,866  |  
|General and administrative                                   |  |                    | 1,953   |               |         |   | 2,162         |         |  |               | 2,829   |   |               |         | 2,535  |   |         |   | 2,386  |         |  |   | 2,335   |   |  |   | 2,400  |   |  |   | 2,417  |  
|Goodwill and intangible write-offs                           |  |                    | 18,170  |               |         |   | 13,198        |         |  |               |        |   |               |         |       |   |         |   |       |         |  |   |        |   |  |   |       |   |  |   |       |  
|Restructuring (reversals) charges                            |  |                    | (312    | )             |         |   | 245           |         |  |               | 309     |   |               |         | (704   | ) |         |   | 660    |         |  |   | (25,454 | ) |  |   | 679    |   |  |   | 570    |  
|Business combination charges                                 |  |                    | 1,840   |               |         |   | 977           |         |  |               |        |   |               |         |       |   |         |   |       |         |  |   |        |   |  |   |       |   |  |   |       |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Total operating expenses (credits)                           |  |                    | 26,534  |               |         |   | 22,625        |         |  |               | 12,153  |   |               |         | 11,929 |   |         |   | 14,047 |         |  |   | (12,499 | ) |  |   | 15,068 |   |  |   | 14,741 |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Operating income (loss)                                      |  |                    | (17,166 | )             |         |   | (14,295       | )       |  |               | (2,067  | ) |               |         | (1,485 | ) |         |   | (448   | )       |  |   | 23,076  |   |  |   | (1,555 | ) |  |   | (707   | )
|Other income (expense), net                                  |  |                    | (10,714 | )             |         |   | (1,757        | )       |  |               | (959    | ) |               |         | 6,866  |   |         |   | (2,457 | )       |  |   | 315     |   |  |   | 57     |   |  |   | (24    | )
|Benefit (provision) for income taxes                         |  |                    | 109     |               |         |   | 540           |         |  |               | (70     | ) |               |         | 2,032  |   |         |   | 450    |         |  |   | (11     | ) |  |   | 6      |   |  |   | (136   | )
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Net (loss) income                                            |  | $                  | (27,771 | )             |         | $ | (15,512       | )       |  | $             | (3,096  | ) |               | $       | 7,413  |   |         | $ | (2,455 | )       |  | $ | 23,380  |   |  | $ | (1,492 | ) |  | $ | (867   | )
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Basic net (loss) income per share                            |  | $                  | (0.81   | )             |         | $ | (0.45         | )       |  | $             | (0.09   | ) |               | $       | 0.22   |   |         | $ | (0.07  | )       |  | $ | 0.70    |   |  | $ | (0.04  | ) |  | $ | (0.03  | )
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Dilute net (loss) income per share                           |  | $                  | (0.81   | )             |         | $ | (0.45         | )       |  | $             | (0.09   | ) |               | $       | 0.19   |   |         | $ | (0.07  | )       |  | $ | 0.69    |   |  | $ | (0.04  | ) |  | $ | (0.03  | )
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Shares used in computing basic net (loss) income per share   |  |                    | 34,430  |               |         |   | 34,320        |         |  |               | 34,181  |   |               |         | 33,971 |   |         |   | 33,768 |         |  |   | 33,599  |   |  |   | 33,476 |   |  |   | 33,300 |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Shares used in computing diluted net (loss) income per share |  |                    | 34,430  |               |         |   | 34,320        |         |  |               | 34,181  |   |               |         | 39,968 |   |         |   | 33,768 |         |  |   | 34,052  |   |  |   | 33,476 |   |  |   | 33,300 |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  

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|                                   |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |   |  |  |     |    |  |  |     |   
|---------------------------------- |  | ------------------ | ---- | ------------- | ------- |  | ------------- | ------- |  | ------------- | ------- | -- | ------------- | ------- | --- | - | ------- |  | --- | ------- |  |  | ------- | - |  |  | --- | -- |  |  | --- | --
|                                   |  | Three Months Ended |     
|                                   |  |                    |     
|                                   |  | Dec 31,            |      |               | Sep 30, |  |               | Jun 30, |  |               | Mar 31, |    |               | Dec 31, |     |   | Sep 30, |  |     | Jun 30, |  |  | Mar 31, |  
|                                   |  | 2005               |      |               | 2005    |  |               | 2005    |  |               | 2005    |    |               | 2004    |     |   | 2004    |  |     | 2004    |  |  | 2004    |  
|                                   |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |  
|                                   |  |                    |      | (As restated) |         |  | (As restated) |         |  | (As restated) |         |    | (As restated) |         |     |   |         |  |     |        
|                                   |  | (In thousands)     |     
|                                   |  | (Unaudited)        |     
|Statement of Operations Data:      |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |   |  |  |     |    |  |  |     |   
|Revenues:                          |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |   |  |  |     |    |  |  |     |   
|Software licenses                  |  |                    | 27   | %             |         |  | 22            | %       |  |               | 22      | %  |               |         | 27  | % |         |  | 37  | %       |  |  | 27      | % |  |  | 35  | %  |  |  | 38  | % 
|Services                           |  |                    | 73   |               |         |  | 78            |         |  |               | 78      |    |               |         | 73  |   |         |  | 63  |         |  |  | 73      |   |  |  | 65  |    |  |  | 62  |   
|                                   |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |  
|Total revenues                     |  |                    | 100  |               |         |  | 100           |         |  |               | 100     |    |               |         | 100 |   |         |  | 100 |         |  |  | 100     |   |  |  | 100 |    |  |  | 100 |   
|Cost of revenues:                  |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |   |  |  |     |    |  |  |     |   
|Cost of software licenses          |  |                    | 1    |               |         |  | 1             |         |  |               | (1      | )  |               |         | (1  | ) |         |  | 1   |         |  |  | 2       |   |  |  | 2   |    |  |  | 3   |   
|Cost of services                   |  |                    | 33   |               |         |  | 40            |         |  |               | 36      |    |               |         | 37  |   |         |  | 30  |         |  |  | 37      |   |  |  | 31  |    |  |  | 30  |   
|                                   |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |  
|Total cost of revenues             |  |                    | 34   |               |         |  | 41            |         |  |               | 35      |    |               |         | 36  |   |         |  | 31  |         |  |  | 39      |   |  |  | 33  |    |  |  | 33  |   
|                                   |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |  
|Gross profit                       |  |                    | 66   |               |         |  | 59            |         |  |               | 65      |    |               |         | 64  |   |         |  | 69  |         |  |  | 61      |   |  |  | 67  |    |  |  | 67  |   
|Operating expenses:                |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |   |  |  |     |    |  |  |     |   
|Research and development           |  |                    | 18   |               |         |  | 22            |         |  |               | 25      |    |               |         | 26  |   |         |  | 21  |         |  |  | 27      |   |  |  | 22  |    |  |  | 23  |   
|Sales and marketing                |  |                    | 17   |               |         |  | 21            |         |  |               | 33      |    |               |         | 36  |   |         |  | 35  |         |  |  | 35      |   |  |  | 37  |    |  |  | 33  |   
|General and administrative         |  |                    | 14   |               |         |  | 15            |         |  |               | 18      |    |               |         | 15  |   |         |  | 12  |         |  |  | 13      |   |  |  | 12  |    |  |  | 12  |   
|Litigation settlement costs        |  |                    |     |               |         |  |              |         |  |               |        |    |               |         |    |   |         |  |    |         |  |  |        |   |  |  |    |    |  |  |    |   
|Goodwill and intangible write-offs |  |                    | 128  |               |         |  | 94            |         |  |               |        |    |               |         |    |   |         |  |    |         |  |  |        |   |  |  |    |    |  |  |    |   
|Restructuring (reversals) charges  |  |                    | (2   | )             |         |  | 2             |         |  |               | 2       |    |               |         | (4  | ) |         |  | 3   |         |  |  | (148    | ) |  |  | 4   |    |  |  | 3   |   
|Business combination charges       |  |                    | 13   |               |         |  | 7             |         |  |               |        |    |               |         |    |   |         |  |    |         |  |  |        |   |  |  |    |    |  |  |    |   
|                                   |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |  
|Total operating expenses (credits) |  |                    | 187  |               |         |  | 161           |         |  |               | 78      |    |               |         | 73  |   |         |  | 71  |         |  |  | (73     | ) |  |  | 75  |    |  |  | 71  |   
|                                   |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |  
|Operating income (loss)            |  |                    | (121 | )             |         |  | (102          | )       |  |               | (13     | )  |               |         | (9  | ) |         |  | (2  | )       |  |  | 134     |   |  |  | (8  | )  |  |  | (3  | ) 
|Other, net                         |  |                    | (75  | )             |         |  | (8            | )       |  |               | (7      | )  |               |         | 54  |   |         |  | (10 | )       |  |  | 2       |   |  |  | 1   |    |  |  | (1  | ) 
|                                   |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |  
|Net (loss) income                  |  |                    | (196 | )%            |         |  | (110          | )%      |  |               | (20     | )% |               |         | 45  | % |         |  | (12 | )%      |  |  | 136     | % |  |  | (7  | )% |  |  | (4  | )%
|                                   |  |                    |      |               |         |  |               |         |  |               |         |    |               |         |     |   |         |  |     |         |  |  |         |  



RECENT ACCOUNTING PRONOUNCEMENTS




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Exchanges of Nonmonetary Assets, an
amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions. Accounting for Nonmonetary
Transactions


Accounting for Conditional Asset Retirement Obligations


Accounting Changes and Error
Corrections a replacement of APB Opinion No. 20 and FASB
Statement No. 3


Determining the Amortization Period for
Leasehold Improvements 05-6). 05-6




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Accounting for Certain
Hybrid Financial Instruments, an amendment of FASB Statements
No. 133 and 140 Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities







|         |                                                               
|-------- | --------------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK





| |                                                                             
| | ----------------------------------------------------------------------------
| | Cash and Cash Equivalents, Short-Term Investments,
    Long-Term Investments





|                                  |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |          |              |        |  |  |   |        |  |  |   |       | 
|--------------------------------- |  | --------- | ------ |  | ---------- | - | ---------- |  | ---------- | ------------------------------- | -------- | ----------- |  | -------- | ------------ |  | -------- | ------------ | ------ |  |  | - | ------ |  |  | - | ----- | 
|                                  |  |           |        |  |            |   |            |  |            | Classified on Balance Sheet as: |         
|                                  |  |           |        |  |            |   |            |  |            |                                 |         
|                                  |  |           |        |  |            |   |            |  |            |                                 |          | Restricted  |  |          | Restricted   | 
|                                  |  | Purchase/ |        |  | Gross      |   | Gross      |  |            |                                 | Cash and |             |  | Cash and |              |  | Cash and |             
|                                  |  | Amortized |        |  | Unrealized |   | Unrealized |  | Aggregate  |                                 |          | Cash        |  |          | Investments, |  |          | Investments, |       
|                                  |  | Cost      |        |  | Gains      |   | Losses     |  | Fair Value |                                 |          | Equivalents |  |          | Current      |  |          | Non-Current  |       
|                                  |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |          |              |       
|As of December 31, 2005:          |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |          |              |        |  |  |   |        |  |  |   |       | 
|Cash and certificates of deposits |  | $         | 6,027  |  |            | $ |           |  |            | $                               |         |             |  | $        | 6,027        |  |          | $            | 4,030  |  |  | $ |       |  |  | $ | 1,997 | 
|Money market                      |  |           | 819    |  |            |   |           |  |            |                                 |         |             |  |          | 819          |  |          |              | 819    |  |  |   |       |  |  |   |      | 
|                                  |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |          |              |        |  | 
|Total                             |  | $         | 6,846  |  |            | $ |           |  |            | $                               |         |             |  | $        | 6,846        |  |          | $            | 4,849  |  |  | $ |       |  |  | $ | 1,997 | 
|                                  |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |          |              |        |  | 
|As of December 31, 2004:          |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |          |              |        |  |  |   |        |  |  |   |       | 
|Cash and certificates of deposits |  | $         | 55,240 |  |            | $ |           |  |            | $                               |         |             |  | $        | 55,240       |  |          | $            | 30,984 |  |  | $ | 21,933 |  |  | $ | 2,323 | 
|Money market                      |  |           | 10,867 |  |            |   |           |  |            |                                 |         |             |  |          | 10,867       |  |          |              | 10,867 |  |  |   |       |  |  |   |      | 
|                                  |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |          |              |        |  | 
|Total                             |  | $         | 66,107 |  |            | $ |           |  |            | $                               |         |             |  | $        | 66,107       |  |          | $            | 41,851 |  |  | $ | 21,933 |  |  | $ | 2,323 | 
|                                  |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |          |              |        |  | 



| |                              
| | -----------------------------
| | Concentrations of Credit Risk



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| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |                 
| | ----------------
| | Foreign Currency





| |                   
| | ------------------
| | Equity Investments








|        |                                            
|------- | -------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

10-K.


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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM












| |                               
| | ------------------------------
| | /s/ STONEFIELD JOSEPHSON, INC.





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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















| |                     
| | --------------------
| | /s/ BDO SEIDMAN, LLP



|                                                                                                                                                                                                                                                        | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|San Jose, California                                                                                                                                                                                                                                    | 
|March 11, 2005, except for the matters affecting the 2004
    consolidated financial statements described in the Restatement
    discussion in Note 1 and the Convertible Debentures
    discussion in Note 5, as to which the date is May 26,
    2006 | 

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BROADVISION, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


|                                                        |                                                                                                                                                                      |                                      |        |             |        |   |         |            |         | 
|------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ------ | ----------- | ------ | - | ------- | ---------- | ------- | 
|                                                        |                                                                                                                                                                      | December 31,                         |       
|                                                        |                                                                                                                                                                      |                                      |       
|                                                        |                                                                                                                                                                      | 2005                                 |        |             | 2004   |  
|                                                        |                                                                                                                                                                      |                                      |        |             |        |  
|                                                        |                                                                                                                                                                      |                                      |        | (Restated,  |       
|                                                        |                                                                                                                                                                      |                                      |        | See Note 1) |       
|                                                        |                                                                                                                                                                      | (In thousands, except                |       
|                                                        |                                                                                                                                                                      | per share amounts)                   |       
|ASSETS                                                 
|Current assets:                                         |                                                                                                                                                                      |                                      |        |             |        |   |         |           
|                                                        | Cash and cash equivalents                                                                                                                                            |                                      | $      | 4,849       |        |   | $       | 41,851     |        
|                                                        | Accounts receivable, less receivable reserves of $731 and $1,409
    as of December 31, 2005 and 2004, respectively                                                  |                                      |        | 12,640      |        |   |         | 14,370     |        
|                                                        | Restricted cash and investments, current portion                                                                                                                     |                                      |        |            |        |   |         | 21,933     |        
|                                                        | Prepaids and other                                                                                                                                                   |                                      |        | 1,914       |        |   |         | 2,232      |        
|                                                        |                                                                                                                                                                      |                                      |        |             |        |  
|                                                        |                                                                                                                                                                      | Total current assets                 |        |             | 19,403 |   |         |            | 80,386  | 
|Property and equipment, net                             |                                                                                                                                                                      |                                      | 2,334  |             |        |   | 3,566   |           
|Restricted cash and investments, net of current portion |                                                                                                                                                                      |                                      | 1,997  |             |        |   | 2,323   |           
|Equity investments                                      |                                                                                                                                                                      |                                      |       |             |        |   | 574     |           
|Goodwill                                                |                                                                                                                                                                      |                                      | 25,066 |             |        |   | 56,434  |           
|Other assets                                            |                                                                                                                                                                      |                                      | 1,142  |             |        |   | 1,370   |           
|                                                        |                                                                                                                                                                      |                                      |        |             |        |  
|Total assets                                            |                                                                                                                                                                      | $                                    | 49,942 |             |        | $ | 144,653 |           
|                                                        |                                                                                                                                                                      |                                      |        |             |        |  
|                                                       
|LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)         
|Current liabilities:                                    |                                                                                                                                                                      |                                      |        |             |        |   |         |           
|                                                        | Current portion of bank borrowings                                                                                                                                   |                                      | $      | 389         |        |   | $       | 20,637     |        
|                                                        | Current portion of convertible debentures                                                                                                                            |                                      |        |            |        |   |         | 10,214     |        
|                                                        | Current portion of convertible debentures due to related party                                                                                                       |                                      |        | 20,535      |        |   |         |           |        
|                                                        | Accounts payable                                                                                                                                                     |                                      |        | 4,396       |        |   |         | 7,470      |        
|                                                        | Accrued expenses                                                                                                                                                     |                                      |        | 16,090      |        |   |         | 40,745     |        
|                                                        | Warrant liability                                                                                                                                                    |                                      |        | 277         |        |   |         | 4,899      |        
|                                                        | Unearned revenue                                                                                                                                                     |                                      |        | 2,678       |        |   |         | 3,573      |        
|                                                        | Deferred maintenance                                                                                                                                                 |                                      |        | 10,910      |        |   |         | 13,121     |        
|                                                        |                                                                                                                                                                      |                                      |        |             |        |  
|                                                        |                                                                                                                                                                      | Total current liabilities            |        |             | 55,275 |   |         |            | 100,659 | 
|Convertible debentures, net of current portion          |                                                                                                                                                                      |                                      |       |             |        |   | 3,837   |           
|Bank borrowings, net of current portion                 |                                                                                                                                                                      |                                      |       |             |        |   | 390     |           
|Other non-current liabilities                           |                                                                                                                                                                      |                                      | 4,390  |             |        |   | 11,426  |           
|                                                        |                                                                                                                                                                      |                                      |        |             |        |  
|                                                        |                                                                                                                                                                      | Total liabilities                    |        |             | 59,665 |   |         |            | 116,312 | 
|Commitments and contingencies                           |                                                                                                                                                                      |                                      |        |             |        |   |         |           
|Stockholders equity (deficit):                         |                                                                                                                                                                      |                                      |        |             |        |   |         |           
|                                                        | Convertible preferred stock, $0.0001 par value;
    10,000 shares authorized; none issued and outstanding                                                            |                                      |        |            |        |   |         |           |        
|                                                        | Common stock, $0.0001 par value; 2,000,000 shares
    authorized; 34,522 and 33,951 shares issued and outstanding
    as of December 31, 2005 and 2004, respectively |                                      |        | 3           |        |   |         | 3          |        
|                                                        | Additional paid-in capital                                                                                                                                           |                                      |        | 1,215,256   |        |   |         | 1,214,619  |        
|                                                        | Accumulated other comprehensive income (loss)                                                                                                                        |                                      |        | 93          |        |   |         | (172       | )      
|                                                        | Accumulated deficit                                                                                                                                                  |                                      |        | (1,225,075  | )      |   |         | (1,186,109 | )      
|                                                        |                                                                                                                                                                      |                                      |        |             |        |  
|                                                        |                                                                                                                                                                      | Total stockholders equity (deficit) |        |             | (9,723 | ) |         |            | 28,341  | 
|                                                        |                                                                                                                                                                      |                                      |        |             |        |  
|Total liabilities and stockholders equity (deficit)    |                                                                                                                                                                      | $                                    | 49,942 |             |        | $ | 144,653 |           
|                                                        |                                                                                                                                                                      |                                      |        |             |        |  



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BROADVISION, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


|                                                             |                                                           |                                          |         |             |        |   |        |         |        |   |         |         |        | 
|------------------------------------------------------------ | --------------------------------------------------------- | ---------------------------------------- | ------- | ----------- | ------ | - | ------ | ------- | ------ | - | ------- | ------- | ------ | 
|                                                             |                                                           | Years Ended December 31,                 |        
|                                                             |                                                           |                                          |        
|                                                             |                                                           | 2005                                     |         |             | 2004   |   |        | 2003    |       
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|                                                             |                                                           |                                          |         | (Restated,  |        |   |       
|                                                             |                                                           |                                          |         | See Note 1) |        |   |       
|                                                             |                                                           | (In thousands, except per share amounts) |        
|Revenues:                                                    |                                                           |                                          |         |             |        |   |        |         |        |   |         |        
|                                                             | Software licenses                                         |                                          | $       | 14,721      |        |   | $      | 26,883  |        |   | $       | 30,230  |       
|                                                             | Services                                                  |                                          |         | 45,400      |        |   |        | 51,121  |        |   |         | 57,851  |       
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|                                                             |                                                           | Total revenues                           |         |             | 60,121 |   |        |         | 78,004 |   |         |         | 88,081 | 
|Cost of revenues:                                            |                                                           |                                          |         |             |        |   |        |         |        |   |         |        
|                                                             | Cost of (credit for) software licenses                    |                                          |         | (38         | )      |   |        | 1,303   |        |   |         | 2,561   |       
|                                                             | Cost of services                                          |                                          |         | 21,931      |        |   |        | 24,978  |        |   |         | 25,708  |       
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|                                                             |                                                           | Total cost of revenues                   |         |             | 21,893 |   |        |         | 26,281 |   |         |         | 28,269 | 
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|Gross profit                                                 |                                                           |                                          | 38,228  |             |        |   | 51,723 |         |        |   | 59,812  |        
|Operating expenses:                                          |                                                           |                                          |         |             |        |   |        |         |        |   |         |        
|                                                             | Research and development                                  |                                          |         | 13,831      |        |   |        | 18,024  |        |   |         | 21,067  |       
|                                                             | Sales and marketing                                       |                                          |         | 16,208      |        |   |        | 27,340  |        |   |         | 26,394  |       
|                                                             | General and administrative                                |                                          |         | 9,479       |        |   |        | 9,538   |        |   |         | 9,790   |       
|                                                             | Litigation settlement costs                               |                                          |         |            |        |   |        |        |        |   |         | 4,250   |       
|                                                             | Goodwill write-offs and amortization                      |                                          |         | 31,368      |        |   |        |        |        |   |         | 886     |       
|                                                             | Restructuring (reversals) charges                         |                                          |         | (462        | )      |   |        | (23,545 | )      |   |         | 35,356  |       
|                                                             | Business combination charges                              |                                          |         | 2,817       |        |   |        |        |        |   |         |        |       
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|                                                             |                                                           | Total operating expenses                 |         |             | 73,241 |   |        |         | 31,357 |   |         |         | 97,743 | 
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|Operating (loss) income                                      |                                                           |                                          | (35,013 | )           |        |   | 20,366 |         |        |   | (37,931 | )      
|Interest (expense) income, net                               |                                                           |                                          | (10,094 | )           |        |   | (629   | )       |        |   | 803     |        
|Income (expense) from derivatives                            |                                                           |                                          | 11,346  |             |        |   | (2,421 | )       |        |   |        |        
|Loss on debt extinguishment                                  |                                                           |                                          | (6,967  | )           |        |   |       |         |        |   |        |        
|Other income (expense), net                                  |                                                           |                                          | (849    | )           |        |   | 941    |         |        |   | 2,096   |        
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|                                                             | Income (loss) before benefit (provision) for income taxes |                                          |         | (41,577     | )      |   |        | 18,257  |        |   |         | (35,032 | )     
|Benefit (provision) for income taxes                         |                                                           |                                          | 2,611   |             |        |   | 309    |         |        |   | (439    | )      
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|                                                             | Net income (loss)                                         |                                          | $       | (38,966     | )      |   | $      | 18,566  |        |   | $       | (35,471 | )     
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|Basic net income (loss) per share                            |                                                           | $                                        | (1.14   | )           |        | $ | 0.55   |         |        | $ | (1.08   | )      
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|Diluted net income (loss) per share                          |                                                           | $                                        | (1.14   | )           |        | $ | 0.54   |         |        | $ | (1.08   | )      
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|Shares used in computing basic net income (loss) per share   |                                                           |                                          | 34,228  |             |        |   | 33,539 |         |        |   | 32,800  |        
|                                                             |                                                           |                                          |         |             |        |   |        |         |       
|Shares used in computing diluted net income (loss) per share |                                                           |                                          | 34,228  |             |        |   | 34,321 |         |        |   | 32,800  |        
|                                                             |                                                           |                                          |         |             |        |   |        |         |       



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BROADVISION, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(DEFICIT)


AND COMPREHENSIVE INCOME (LOSS)


|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |   |   |         |         |         |   |         |         |   | 
|----------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ------------------------------------------------- | ------ | ---------- | ----------- | - | ------------- | ------- |  | ----------- | ------------- | ----- | ------------- | ------------- | ---- | ------ | ------------- | - | ---------- | --------- | - | - | ------- | ------- | ------- | - | ------- | ------- | - | 
|                                                            |                                                                                                            | Common Stock                                      |        |            |             |   |               |         |  |             |              
|                                                            |                                                                                                            |                                                   |        |            | Accumulated |   |               |         |  |             |               | Total |              
|                                                            |                                                                                                            |                                                   |        | Additional |             |   | Other         |         |  |             |               |       |               | Stockholders |     
|                                                            |                                                                                                            |                                                   |        | Paid-in    |             |   | Comprehensive |         |  | Accumulated |               |       | Comprehensive |               |      | Equity |              
|                                                            |                                                                                                            | Shares                                            |        |            | Amount      |   |               | Capital |  |             | Income (Loss) |       |               | Deficit       |      |        | Income (Loss) |   |            | (Deficit) |  
|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |  
|                                                            |                                                                                                            | (In thousands)                                    |       
|Balances as of December 31, 2002                            |                                                                                                            |                                                   | 32,439 |            |             | $ | 3             |         |  | $           | 1,210,797     |       |               | $             | 37   |        |               | $ | (1,169,204 | )         |   |   |         |         |         | $ | 41,633  |        
|Comprehensive income:                                       |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |   |   |         |         |         |   |         |        
|                                                            | Net loss                                                                                                   |                                                   |        |           |             |   |               |        |  |             |               |      |               |               |      |       |               |   |            | (35,471   | ) |   | $       | (35,471 | )       |   |         | (35,471 | )
|                                                            | Unrealized investment gain, less reclassification adjustment for
    gains (losses) included in net loss   |                                                   |        |           |             |   |               |        |  |             |               |      |               |               |      | (86    | )             |   |            |          |   |   |         | (86     | )       |   |         | (86     | )
|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |  
|                                                            |                                                                                                            | Total comprehensive loss                          |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |   |   |         | $       | (35,557 | ) |         |         |   | 
|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |  
|Issuance of common stock under employee stock purchase plan |                                                                                                            |                                                   | 365    |            |             |   |              |         |  |             | 863           |       |               |               |     |        |               |   |           |           |   |   |         |         |         |   | 863     |        
|Issuance of common stock from exercise of options           |                                                                                                            |                                                   | 369    |            |             |   |              |         |  |             | 669           |       |               |               |     |        |               |   |           |           |   |   |         |         |         |   | 669     |        
|Stock-based compensation charge                             |                                                                                                            |                                                   | 25     |            |             |   |              |         |  |             | 342           |       |               |               |     |        |               |   |           |           |   |   |         |         |         |   | 342     |        
|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |  
|Balances as of December 31, 2003                            |                                                                                                            |                                                   | 33,198 |            |             | $ | 3             |         |  | $           | 1,212,671     |       |               | $             | (49  | )      |               | $ | (1,204,675 | )         |   |   |         |         |         | $ | 7,950   |        
|Comprehensive income:                                       |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |   |   |         |         |         |   |         |        
|                                                            | Net income (restated, see Note 1)                                                                          |                                                   |        |           |             |   |               |        |  |             |               |      |               |               |      |       |               |   |            | 18,566    |   |   | $       | 18,566  |         |   |         | 18,566  |  
|                                                            | Foreign currency translations                                                                              |                                                   |        |           |             |   |               |        |  |             |               |      |               |               |      | (116   | )             |   |            |          |   |   |         | (116    | )       |   |         | (116    | )
|                                                            | Unrealized investment gain, less reclassification adjustment for
    gains (losses) included in net income |                                                   |        |           |             |   |               |        |  |             |               |      |               |               |      | 49     |               |   |            |          |   |   |         | 49      |         |   |         | 49      |  
|                                                            | Reclassification adjustment                                                                                |                                                   |        |           |             |   |               |        |  |             |               | 56    |               |               |      | (56    | )             |   |            |          |   |   |         |        |         |   |         |        |  
|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |  
|                                                            |                                                                                                            | Total comprehensive income (restated, see Note 1) |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |   |   |         | $       | 18,499  |   |         |         |   | 
|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |  
|Issuance of common stock under employee stock purchase plan |                                                                                                            |                                                   | 443    |            |             |   |              |         |  |             | 1,296         |       |               |               |     |        |               |   |           |           |   |   |         |         |         |   | 1,296   |        
|Issuance of common stock from exercise of options           |                                                                                                            |                                                   | 304    |            |             |   |              |         |  |             | 615           |       |               |               |     |        |               |   |           |           |   |   |         |         |         |   | 615     |        
|Stock-based compensation charge (reversal)                  |                                                                                                            |                                                   | 6      |            |             |   |              |         |  |             | (19           | )     |               |               |     |        |               |   |           |           |   |   |         |         |         |   | (19     | )      
|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |  
|Balances as of December 31, 2004 (restated, see
    Note 1) |                                                                                                            |                                                   | 33,951 |            |             |   | 3             |         |  |             | 1,214,619     |       |               |               | (172 | )      |               |   | (1,186,109 | )         |   |   |         |         |         |   | 28,341  |        
|Comprehensive loss:                                         |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |   |   |         |         |         |   |         |        
|Net loss                                                    |                                                                                                            |                                                   |       |            |             |   |              |         |  |             |              |       |               |               |     |        |               |   | (38,966    | )         |   | $ | (38,966 | )       |         |   | (38,966 | )      
|Foreign currency translations                               |                                                                                                            |                                                   |       |            |             |   |              |         |  |             |              |       |               |               | 265  |        |               |   |           |           |   |   | 265     |         |         |   | 265     |        
|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |  
|                                                            |                                                                                                            | Total comprehensive loss                          |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |   |   |         | $       | (38,701 | ) |         |         |   | 
|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |  
|Issuance of common stock under employee stock purchase plan |                                                                                                            |                                                   | 516    |            |             |   |              |         |  |             | 512           |       |               |               |     |        |               |   |           |           |   |   |         |         |         |   | 512     |        
|Issuance of common stock from exercise of options           |                                                                                                            |                                                   | 55     |            |             |   |              |         |  |             | 125           |       |               |               |     |        |               |   |           |           |   |   |         |         |         |   | 125     |        
|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |  
|Balances as of December 31, 2005                            |                                                                                                            |                                                   | 34,522 |            |             | $ | 3             |         |  | $           | 1,215,256     |       |               | $             | 93   |        |               | $ | (1,225,075 | )         |   |   |         |         |         | $ | (9,723  | )      
|                                                            |                                                                                                            |                                                   |        |            |             |   |               |         |  |             |               |       |               |               |      |        |               |   |            |           |  



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BROADVISION, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                        |                                                            |                                           |                                                      |             |         |         |         |         |         |         |         |        |         |         |  
|--------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ----------------------------------------- | ---------------------------------------------------- | ----------- | ------- | ------- | ------- | ------- | ------- | ------- | ------- | ------ | ------- | ------- | -
|                                                                                        |                                                            | Years Ended December 31,                  |                                                     
|                                                                                        |                                                            |                                           |                                                     
|                                                                                        |                                                            | 2005                                      |                                                      |             | 2004    |         |         | 2003    |        
|                                                                                        |                                                            |                                           |                                                      |             |         |         |         |         |        
|                                                                                        |                                                            |                                           |                                                      | (Restated,  |         |         |        
|                                                                                        |                                                            |                                           |                                                      | See Note 1) |         |         |        
|                                                                                        |                                                            | (In thousands)                            |                                                     
|Cash flows from operating activities:                                                   |                                                            |                                           |                                                      |             |         |         |         |         |         |         |         |       
|Net income (loss)                                                                       |                                                            | $                                         | (38,966                                              | )           |         | $       | 18,566  |         |         | $       | (35,471 | )     
|Adjustments to reconcile net loss to net cash used for operating
    activities:        |                                                            |                                           |                                                      |             |         |         |         |         |         |         |         |       
|Depreciation and amortization                                                           |                                                            |                                           | 1,231                                                |             |         |         | 3,672   |         |         |         | 11,261  |       
|Stock-based compensation charge (reversal)                                              |                                                            |                                           |                                                     |             |         |         | (19     | )       |         |         | 342     |       
|Provision for (release of) doubtful accounts and reserves                               |                                                            |                                           | (678                                                 | )           |         |         | (1,466  | )       |         |         | (812    | )     
|Amortization of prepaid royalties                                                       |                                                            |                                           | 70                                                   |             |         |         | 613     |         |         |         | 1,167   |       
|(Gain) loss on cost method investments                                                  |                                                            |                                           | (1,117                                               | )           |         |         | 517     |         |         |         | 385     |       
|Loss on sale or abandonment of fixed assets                                             |                                                            |                                           | 117                                                  |             |         |         |        |         |         |         |        |       
|Impairment of assets                                                                    |                                                            |                                           |                                                     |             |         |         | (96     | )       |         |         |        |       
|Amortization and write-offs of goodwill and other intangibles                           |                                                            |                                           | 31,368                                               |             |         |         |        |         |         |         | 886     |       
|Loss on debt extinguishment                                                             |                                                            |                                           | 6,967                                                |             |         |         |        |         |         |         |        |       
|Non-cash restructuring reversals                                                        |                                                            |                                           |                                                     |             |         |         | (24,855 | )       |         |         | (457    | )     
|(Gain) loss on revaluation of embedded derivatives and warrants                         |                                                            |                                           | (11,346                                              | )           |         |         | 2,422   |         |         |         |        |       
|Amortization of discount and revaluation of convertible notes                           |                                                            |                                           | 9,422                                                |             |         |         | 401     |         |         |         |        |       
|Changes in operating assets and liabilities, net of effects from
    acquired business: |                                                            |                                           |                                                      |             |         |         |         |         |         |         |         |       
|                                                                                        |                                                            | Accounts receivable                       |                                                      |             | 2,408   |         |         |         | 2,476   |         |         |        | 8,349   |        
|                                                                                        |                                                            | Prepaid expenses and other current assets |                                                      |             | 248     |         |         |         | 2,501   |         |         |        | 1,621   |        
|                                                                                        |                                                            | Other non-current assets                  |                                                      |             | 228     |         |         |         | 600     |         |         |        | 1,909   |        
|                                                                                        |                                                            | Accounts payable and accrued expenses     |                                                      |             | (6,970  | )       |         |         | (2,237  | )       |         |        | (8,135  | )      
|                                                                                        |                                                            | Restructuring accrual                     |                                                      |             | (26,908 | )       |         |         | (37,788 | )       |         |        | 7,489   |        
|                                                                                        |                                                            | Unearned revenue and deferred maintenance |                                                      |             | (3,921  | )       |         |         | (6,989  | )       |         |        | (11,653 | )      
|                                                                                        |                                                            | Other non-current liabilities             |                                                      |             | (54     | )       |         |         | (168    | )       |         |        |        |        
|                                                                                        |                                                            |                                           |                                                      |             |         |         |         |         |        
|                                                                                        |                                                            |                                           | Net cash used for operating activities               |             |         | (37,901 | )       |         |         | (41,850 | )       |        |         | (23,119 | )
|Cash flows from investing activities:                                                   |                                                            |                                           |                                                      |             |         |         |         |         |         |         |         |       
|Purchase of property and equipment                                                      |                                                            |                                           | (142                                                 | )           |         |         | (730    | )       |         |         | (131    | )     
|Proceeds from sale of assets                                                            |                                                            |                                           | 26                                                   |             |         |         |        |         |         |         | 186     |       
|Sales/maturity of short-term investments                                                |                                                            |                                           |                                                     |             |         |         |        |         |         |         | 27,342  |       
|Purchase of short-term investments                                                      |                                                            |                                           |                                                     |             |         |         |        |         |         |         | (2,917  | )     
|Purchase of long-term investments                                                       |                                                            |                                           |                                                     |             |         |         | (100    | )       |         |         | (2,729  | )     
|Sales/maturity of long-term investments                                                 |                                                            |                                           |                                                     |             |         |         | 624     |         |         |         | 3,403   |       
|Proceeds from sale of cost method investments                                           |                                                            |                                           | 590                                                  |             |         |         |        |         |         |         |        |       
|Transfer (to) from restricted cash/investments                                          |                                                            |                                           | 22,259                                               |             |         |         | (4,428  | )       |         |         | (3,123  | )     
|Proceeds from dividends on equity investments                                           |                                                            |                                           | 1,101                                                |             |         |         | 795     |         |         |         |        |       
|                                                                                        |                                                            |                                           |                                                      |             |         |         |         |         |        
|                                                                                        |                                                            |                                           | Net cash provided by (used for) investing activities |             |         | 23,834  |         |         |         | (3,839  | )       |        |         | 22,031  |  
|Cash flows from financing activities:                                                   |                                                            |                                           |                                                      |             |         |         |         |         |         |         |         |       
|                                                                                        | Proceeds from bank line of credit and term debt borrowings |                                           |                                                      | 35,000      |         |         |         | 89,076  |         |         |         | 2,000  |        
|                                                                                        | Repayments of bank line of credit and term debt borrowings |                                           |                                                      | (55,638     | )       |         |         | (96,994 | )       |         |         | (1,051 | )      
|                                                                                        | Proceeds from issuance of convertible debt, net            |                                           |                                                      |            |         |         |         | 14,887  |         |         |         |       |        
|                                                                                        | Repayment of convertible debt                              |                                           |                                                      | (3,199      | )       |         |         |        |         |         |         |       |        
|                                                                                        | Proceeds from issuance of common stock, net                |                                           |                                                      | 637         |         |         |         | 1,911   |         |         |         | 1,529  |        
|                                                                                        |                                                            |                                           |                                                      |             |         |         |         |         |        
|                                                                                        |                                                            |                                           | Net cash (used in) provided by financing activities  |             |         | (23,200 | )       |         |         | 8,880   |         |        |         | 2,478   |  
|Effect of exchange rates on cash and cash equivalents                                   |                                                            |                                           | 265                                                  |             |         |         | (116    | )       |         |         |        |       
|                                                                                        |                                                            |                                           |                                                      |             |         |         |         |         |        
|Net (decrease) increase in cash and cash equivalents                                    |                                                            |                                           | (37,002                                              | )           |         |         | (36,925 | )       |         |         | 1,390   |       
|Cash and cash equivalents, beginning of year                                            |                                                            |                                           | 41,851                                               |             |         |         | 78,776  |         |         |         | 77,386  |       
|                                                                                        |                                                            |                                           |                                                      |             |         |         |         |         |        
|Cash and cash equivalents, end of year                                                  |                                                            | $                                         | 4,849                                                |             |         | $       | 41,851  |         |         | $       | 78,776  |       
|                                                                                        |                                                            |                                           |                                                      |             |         |         |         |         |        
|Supplemental cash flow disclosures:                                                     |                                                            |                                           |                                                      |             |         |         |         |         |         |         |         |       
|                                                                                        | Cash paid for interest                                     |                                           | $                                                    | 873         |         |         | $       | 99      |         |         | $       | 199    |        
|                                                                                        |                                                            |                                           |                                                      |             |         |         |         |         |        
|                                                                                        | Cash (refunded) paid for income taxes                      |                                           | $                                                    | (445        | )       |         | $       | 426     |         |         | $       | 1,263  |        
|                                                                                        |                                                            |                                           |                                                      |             |         |         |         |         |        



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial Statements


December 31, 2005


Note 1  Organization and Summary of
Significant Accounting Policies




| |                   
| | ------------------
| | Nature of Business

e-business






| |            
| | -----------
| | Restatement

00-19.






|                                  |  |                   |         |   |          |   |         |  
|--------------------------------- |  | ----------------- | ------- | - | -------- | - | ------- | -
|                                  |  | December 31, 2004 |        
|                                  |  |                   |        
|                                  |  | Previously        |         |   |         
|                                  |  | Reported          |         |   | Restated |  
|                                  |  |                   |         |   |          |  
|Interest expense, net             |  | $                 | (228    | ) |          | $ | (629    | )
|Income (expense) from derivatives |  | $                 | (753    | ) |          | $ | (2,421  | )
|Net income                        |  | $                 | 20,635  |   |          | $ | 18,566  |  
|Basic net income per share        |  | $                 | 0.62    |   |          | $ | 0.55    |  
|Diluted net income per share      |  | $                 | 0.60    |   |          | $ | 0.54    |  
|Total liabilities                 |  | $                 | 114,243 |   |          | $ | 116,312 |  
|Total stockholders equity        |  | $                 | 30,410  |   |          | $ | 28,341  |  

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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                    |  |                   |         |   |                |   |            |               |  |   |                    |            |  |          |        |   |            |   |        |          |  |   |          |   |  |   |         |   |  |   |         |  
|----------------------------------- |  | ----------------- | ------- | - | -------------- | - | ---------- | ------------- |  | - | ------------------ | ---------- |  | -------- | ------ | - | ---------- | - | ------ | -------- |  | - | -------- | - |  | - | ------- | - |  | - | ------- | -
|                                    |  | December 31, 2004 |         |   | March 31, 2005 |   |            | June 30, 2005 |  |   | September 30, 2005 |           
|                                    |  |                   |         |   |                |   |            |               |  |   |                    |           
|                                    |  | Previously        |         |   |                |   | Previously |               |  |   |                    | Previously |  |          |        |   | Previously |   |        |         
|                                    |  | Reported          |         |   | Restated       |   |            | Reported      |  |   | Restated           |            |  | Reported |        |   | Reported   |   |        | Restated |  |   | Restated |  
|                                    |  |                   |         |   |                |   |            |               |  |   |                    |            |  |          |        |   |            |   |        |          |  |   |          |  
|Interest expense, net               |  | $                 | (516    | ) |                | $ | (917       | )             |  | $ | (744               | )          |  | $        | (1,723 | ) |            | $ | (1,090 | )        |  | $ | (2,532   | ) |  | $ | (1,002  | ) |  | $ | (2,073  | )
|Income (expense) from derivatives   |  | $                 | (753    | ) |                | $ | (2,421     | )             |  | $ | 2,517              |            |  | $        | 7,991  |   |            | $ | 997    |          |  | $ | 2,257    |   |  | $ | 698     |   |  | $ | 794     |  
|Net (loss) income                   |  | $                 | (386    | ) |                | $ | (2,455     | )             |  | $ | 2,918              |            |  | $        | 7,413  |   |            | $ | (2,914 | )        |  | $ | (3,095   | ) |  | $ | (14,538 | ) |  | $ | (15,512 | )
|Basic net (loss) income per share   |  | $                 | (0.01   | ) |                | $ | (0.07      | )             |  | $ | 0.09               |            |  | $        | 0.22   |   |            | $ | (0.09  | )        |  | $ | (0.09    | ) |  | $ | (0.42   | ) |  | $ | (0.45   | )
|Diluted net (loss) income per share |  | $                 | (0.01   | ) |                | $ | (0.07      | )             |  | $ | 0.07               |            |  | $        | 0.19   |   |            | $ | (0.09  | )        |  | $ | (0.09    | ) |  | $ | (0.42   | ) |  | $ | (0.45   | )
|Total liabilities                   |  | $                 | 114,243 |   |                | $ | 116,312    |               |  | $ | 85,099             |            |  | $        | 82,673 |   |            | $ | 75,424 |          |  | $ | 73,179   |   |  | $ | 50,963  |   |  | $ | 49,674  |  
|Total stockholders equity          |  | $                 | 30,410  |   |                | $ | 28,341     |               |  | $ | 33,743             |            |  | $        | 36,167 |   |            | $ | 30,959 |          |  | $ | 33,205   |   |  | $ | 16,480  |   |  | $ | 17,749  |  



| |                      
| | ---------------------
| | Basis of Presentation





| |                            
| | ---------------------------
| | Principles of Consolidation



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




| |                 
| | ----------------
| | Use of Estimates





| |                    
| | -------------------
| | Revenue Recognition



| |         
| | --------
| | Overview

97-2),




97-2,


63



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)








| |                 
| | ----------------
| | Services Revenue

percentage-of


01-14, out-of




| |                                                  
| | -------------------------------------------------
| | Cash, Cash Equivalents and Short-Term Investments





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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                 |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |              |         |        |  |  |   |        |  |  |   |       | 
|-------------------------------- |  | --------- | ------ |  | ---------- | - | ---------- |  | ---------- | ------------------------------- | -------- | ----------- |  | -------- | ------------ |  | ------------ | ------- | ------ |  |  | - | ------ |  |  | - | ----- | 
|                                 |  |           |        |  |            |   |            |  |            | Classified on Balance Sheet as: |         
|                                 |  |           |        |  |            |   |            |  |            |                                 |         
|                                 |  |           |        |  |            |   |            |  |            |                                 |          | Restricted  | 
|                                 |  |           |        |  |            |   |            |  |            |                                 |          | Restricted  |  |          | Cash and     | 
|                                 |  | Purchase/ |        |  | Gross      |   | Gross      |  |            |                                 | Cash and |             |  | Cash and |              |  | Investments, |        
|                                 |  | Amortized |        |  | Unrealized |   | Unrealized |  | Aggregate  |                                 |          | Cash        |  |          | Investments, |  |              | Non-    |       
|                                 |  | Cost      |        |  | Gains      |   | Losses     |  | Fair Value |                                 |          | Equivalents |  |          | Current      |  |              | Current |       
|                                 |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |              |         |       
|As of December 31, 2005:         |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |              |         |        |  |  |   |        |  |  |   |       | 
|Cash and certificates of deposit |  | $         | 6,027  |  |            | $ |           |  |            | $                               |         |             |  | $        | 6,027        |  |              | $       | 4,030  |  |  | $ |       |  |  | $ | 1,997 | 
|Money market                     |  |           | 819    |  |            |   |           |  |            |                                 |         |             |  |          | 819          |  |              |         | 819    |  |  |   |       |  |  |   |      | 
|                                 |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |              |         |        |  | 
|Total                            |  | $         | 6,846  |  |            | $ |           |  |            | $                               |         |             |  | $        | 6,846        |  |              | $       | 4,849  |  |  | $ |       |  |  | $ | 1,997 | 
|                                 |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |              |         |        |  | 
|As of December 31, 2004:         |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |              |         |        |  |  |   |        |  |  |   |       | 
|Cash and certificates of deposit |  | $         | 55,240 |  |            | $ |           |  |            | $                               |         |             |  | $        | 55,240       |  |              | $       | 30,984 |  |  | $ | 21,933 |  |  | $ | 2,323 | 
|Money market                     |  |           | 10,867 |  |            |   |           |  |            |                                 |         |             |  |          | 10,867       |  |              |         | 10,867 |  |  |   |       |  |  |   |      | 
|                                 |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |              |         |        |  | 
|Total                            |  | $         | 66,107 |  |            | $ |           |  |            | $                               |         |             |  | $        | 66,107       |  |              | $       | 41,851 |  |  | $ | 21,933 |  |  | $ | 2,323 | 
|                                 |  |           |        |  |            |   |            |  |            |                                 |          |             |  |          |              |  |              |         |        |  | 



| |                                                            
| | -----------------------------------------------------------
| | Research and Development and Software Development
    Costs

Accounting for the Cost of Computer Software to be Sold,
Leased or Otherwise Marketed




| |                  
| | -----------------
| | Advertising Costs





| |                  
| | -----------------
| | Prepaid Royalties





| |                        
| | -----------------------
| | Allowances and Reserves



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




| |              
| | -------------
| | Restructuring

Restructuring and Impairment
Charges.


94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring) 94-3), Accounting For Costs Associated with Exit Activities 94-3,


Costs Associated with Lease Modification or Termination Accounting for the
Impairment or Disposal of Long-Lived Assets




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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




| |              
| | -------------
| | Legal Matters





| |                       
| | ----------------------
| | Property and Equipment





| |                               
| | ------------------------------
| | Valuation of Long-Lived Assets

Goodwill and Other Intangible Assets




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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




| |                                    
| | -----------------------------------
| | Fair Value of Financial Instruments





| |                                         
| | ----------------------------------------
| | Employee Stock Option and Purchase Plans

Accounting for Certain Transactions Involving
Stock Compensation  an Interpretation of APB Opinion
25 Accounting for Stock-Based
Compensation Accounting for Equity
Instruments That Are Issued to Other Than Employees For
Acquiring or in Conjunction with Selling Goods or Services.




Share-Based Payment out-of


|                                             |  |                   |           |  |                  |   |      | 
|-------------------------------------------- |  | ----------------- | --------- |  | ---------------- | - | ---- | 
|                                             |  | Aggregate         |           |  |                 
|                                             |  | Number of         |           |  |                 
|                                             |  | Common Shares     |           |  |                 
|                                             |  | Issuable Under    |           |  | Weighted Average |  
|                                             |  | Accelerated Stock |           |  | Exercise Price   |  
|                                             |  | Options           |           |  | per Share        |  
|                                             |  |                   |           |  |                  |  
|Total Non-Employee Directors                 |  |                   | 122,181   |  |                  | $ | 2.98 | 
|Total Named Executive Officers               |  |                   | 391,886   |  |                  |   | 2.87 | 
|                                             |  |                   |           |  |                  |  
|Total Directors and Named Executive Officers |  |                   | 514,067   |  |                  |   | 2.89 | 
|Total All Other Employees                    |  |                   | 610,707   |  |                  |   | 2.97 | 
|                                             |  |                   |           |  |                  |  
|Total                                        |  |                   | 1,124,774 |  |                  |   | 2.94 | 
|                                             |  |                   |           |  |                  |  





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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|                        |  |                          |       |  |      |  |       |      |  |  |      | 
|----------------------- |  | ------------------------ | ----- |  | ---- |  | ----- | ---- |  |  | ---- | 
|                        |  | Years Ended December 31, |      
|                        |  |                          |      
|                        |  | 2005                     |       |  | 2004 |  |       | 2003 | 
|                        |  |                          |       |  |      |  |       |      | 
|Risk-free interest rate |  |                          | 3.84% |  |      |  | 3.61% |      |  |  | 0.9% | 
|Volatility              |  |                          | 89%   |  |      |  | 108%  |      |  |  | 118% | 





|                        |  |                          |           |   |      |  |           |      |  |  |           |  
|----------------------- |  | ------------------------ | --------- | - | ---- |  | --------- | ---- |  |  | --------- | -
|                        |  | Years Ended December 31, |          
|                        |  |                          |          
|                        |  | 2005                     |           |   | 2004 |  |           | 2003 | 
|                        |  |                          |           |   |      |  |           |      | 
|Expected life           |  |                          | 7.4 years |   |      |  | 3.5 years |      |  |  | 3.5 years |  
|Risk-free interest rate |  |                          | 4.12      | % |      |  | 3.61      | %    |  |  | 2.97      | %
|Volatility              |  |                          | 21        | % |      |  | 108       | %    |  |  | 118       | %



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                                                                                    |                       |                          |         |            |      |   |        |      |  |   |         |       |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ------------------------ | ------- | ---------- | ---- | - | ------ | ---- |  | - | ------- | ----- | -
|                                                                                                                                                    |                       | Years Ended December 31, |        
|                                                                                                                                                    |                       |                          |        
|                                                                                                                                                    |                       | 2005                     |         |            | 2004 |   |        | 2003 | 
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|                                                                                                                                                    |                       |                          |         | (Restated) |      |   |       
|Net income (loss), as reported                                                                                                                      |                       | $                        | (38,966 | )          |      | $ | 18,566 |      |  | $ | (35,471 | )    
|Add: Stock-based compensation (income) expense included in
    reported net loss, net of related tax effects                                        |                       |                          |        |            |      |   | (19    | )    |  |   | 342     |      
|Deduct: Total stock-based employee compensation expense
    determined under fair value based method for all awards, net of
    related tax effects |                       |                          | (2,263  | )          |      |   | (4,545 | )    |  |   | (9,275  | )    
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|Pro forma net income (loss)                                                                                                                         |                       | $                        | (41,229 | )          |      | $ | 14,002 |      |  | $ | (44,404 | )    
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|Net income (loss) per share:                                                                                                                        |                       |                          |         |            |      |   |        |      |  |   |         |      
|                                                                                                                                                    | Basic  as reported   |                          | $       | (1.14      | )    |   | $      | 0.55 |  |   | $       | (1.08 | )
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|                                                                                                                                                    | Basic  pro forma     |                          | $       | (1.20      | )    |   | $      | 0.42 |  |   | $       | (1.35 | )
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|                                                                                                                                                    | Diluted  as reported |                          | $       | (1.14      | )    |   | $      | 0.54 |  |   | $       | (1.08 | )
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 
|                                                                                                                                                    | Diluted  pro forma   |                          | $       | (1.20      | )    |   | $      | 0.41 |  |   | $       | (1.35 | )
|                                                                                                                                                    |                       |                          |         |            |      |   |        |      | 



| |                     
| | --------------------
| | Reverse Stock Splits







| |                               
| | ------------------------------
| | Earnings Per Share Information



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                                                                             |  |                          |         |            |      |   |        |      |  |   |         |  
|------------------------------------------------------------------------------------------------------------ |  | ------------------------ | ------- | ---------- | ---- | - | ------ | ---- |  | - | ------- | -
|                                                                                                             |  | Years Ended December 31, |        
|                                                                                                             |  |                          |        
|                                                                                                             |  | 2005                     |         |            | 2004 |   |        | 2003 | 
|                                                                                                             |  |                          |         |            |      |   |        |      | 
|                                                                                                             |  | (In thousands, except    |        
|                                                                                                             |  | per share amounts)       |        
|                                                                                                             |  |                          |         | (Restated) |      |   |       
|Net income (loss)                                                                                            |  | $                        | (38,966 | )          |      | $ | 18,566 |      |  | $ | (35,471 | )
|                                                                                                             |  |                          |         |            |      |   |        |      | 
|Weighted-average common shares outstanding to compute basic
    income (loss) per share                      |  |                          | 34,228  |            |      |   | 33,539 |      |  |   | 32,800  |  
|Weighted-average common equivalent shares from outstanding
    common stock options and warrants             |  |                          |        |            |      |   | 782    |      |  |   |        |  
|                                                                                                             |  |                          |         |            |      |   |        |      | 
|Total weighted-average common and common equivalent shares
    outstanding to compute diluted loss per share |  |                          | 34,228  |            |      |   | 34,321 |      |  |   | 32,800  |  
|                                                                                                             |  |                          |         |            |      |   |        |      | 
|Basic income (loss) per share                                                                                |  | $                        | (1.14   | )          |      | $ | 0.55   |      |  | $ | (1.08   | )
|                                                                                                             |  |                          |         |            |      |   |        |      | 
|Diluted income (loss) per share                                                                              |  | $                        | (1.14   | )          |      | $ | 0.54   |      |  | $ | (1.08   | )
|                                                                                                             |  |                          |         |            |      |   |        |      | 







| |                              
| | -----------------------------
| | Foreign Currency Transactions





| |                            
| | ---------------------------
| | Comprehensive Income (Loss)



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                           |  |                    |     |   |             |   |      |               |  |   |      |  
|-------------------------- |  | ------------------ | --- | - | ----------- | - | ---- | ------------- |  | - | ---- | -
|                           |  | Unrealized         |     |   | Foreign     |   |      | Accumulated   | 
|                           |  | Gain (Loss) in     |     |   | Currency    |   |      | Other         | 
|                           |  | Available-for-Sale |     |   | Translation |   |      | Comprehensive | 
|                           |  | Securities         |     |   | and Other   |   |      | Income (Loss) | 
|                           |  |                    |     |   |             |   |      |               | 
|Balance, December 31, 2002 |  | $                  | 37  |   |             | $ |     |               |  | $ | 37   |  
|Net change during period   |  |                    | (86 | ) |             |   |     |               |  |   | (86  | )
|                           |  |                    |     |   |             |   |      |               | 
|Balance, December 31, 2003 |  |                    | (49 | ) |             |   |     |               |  |   | (49  | )
|Net change during period   |  |                    | 49  |   |             |   | (172 | )             |  |   | (123 | )
|                           |  |                    |     |   |             |   |      |               | 
|Balance, December 31, 2004 |  |                    |    |   |             |   | (172 | )             |  |   | (172 | )
|Net change during period   |  |                    |    |   |             |   | 265  |               |  |   | 265  |  
|                           |  |                    |     |   |             |   |      |               | 
|Balance, December 31, 2005 |  | $                  |    |   |             | $ | 93   |               |  | $ | 93   |  
|                           |  |                    |     |   |             |   |      |               | 



| |                                     
| | ------------------------------------
| | Income Taxes and Deferred Tax Assets







| |                                   
| | ----------------------------------
| | Segment and Geographic Information





| |                  
| | -----------------
| | Reclassifications





| |                              
| | -----------------------------
| | New Accounting Pronouncements

Share Based Payment


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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




Exchanges of Nonmonetary Assets, an
amendment of APB Opinion No. 29, Accounting for Nonmonetary
Transactions. Accounting for Nonmonetary
Transactions


Accounting for Conditional Asset Retirement Obligations




Determining the Amortization Period for
Leasehold Improvements 05-6). 05-6




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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




Accounting for Certain
Hybrid Financial Instruments, an amendment of FASB Statements
No. 133 and 140 Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities




Note 2  Property and Equipment


|                                               |  |                |         |   |      |   |         |  
|---------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                               |  | December 31,   |        
|                                               |  |                |        
|                                               |  | 2005           |         |   | 2004 |  
|                                               |  |                |         |   |      |  
|                                               |  | (In thousands) |        
|Furniture and fixtures                         |  | $              | 2,791   |   |      | $ | 4,036   |  
|Computer and software                          |  |                | 32,705  |   |      |   | 49,258  |  
|Leasehold improvements                         |  |                | 6,219   |   |      |   | 6,086   |  
|                                               |  |                |         |   |      |  
|                                               |  |                | 41,715  |   |      |   | 59,380  |  
|Less accumulated depreciation and amortization |  |                | (39,381 | ) |      |   | (55,814 | )
|                                               |  |                |         |   |      |  
|Total property and equipment, net              |  | $              | 2,334   |   |      | $ | 3,566   |  
|                                               |  |                |         |   |      |  





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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




Note 3  Goodwill




Goodwill and Other Intangible Assets






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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Note 4  Accrued Expenses




|                        |  |                |        |  |      |   |        | 
|----------------------- |  | -------------- | ------ |  | ---- | - | ------ | 
|                        |  | December 31,   |       
|                        |  |                |       
|                        |  | 2005           |        |  | 2004 |  
|                        |  |                |        |  |      |  
|                        |  | (In thousands) |       
|Employee benefits       |  | $              | 1,048  |  |      | $ | 1,253  | 
|Commissions and bonuses |  |                | 533    |  |      |   | 1,334  | 
|Sales and other taxes   |  |                | 3,885  |  |      |   | 5,085  | 
|Restructuring           |  |                | 5,533  |  |      |   | 26,292 | 
|Other                   |  |                | 5,091  |  |      |   | 6,781  | 
|                        |  |                |        |  |      |  
|Total accrued expenses  |  | $              | 16,090 |  |      | $ | 40,745 | 
|                        |  |                |        |  |      |  

Note 5  Bank Borrowings, Convertible
Debentures and Other Non-Current Liabilities




| |                
| | ---------------
| | Bank Borrowings



|                                         |                       |                |      |     |      |   |         |        | 
|---------------------------------------- | --------------------- | -------------- | ---- | --- | ---- | - | ------- | ------ | 
|                                         |                       | December 31,   |     
|                                         |                       |                |     
|                                         |                       | 2005           |      |     | 2004 |  
|                                         |                       |                |      |     |      |  
|                                         |                       | (In thousands) |     
|Revolving line of credit borrowings      |                       | $              |     |     |      | $ | 20,000  |       
|Term debt                                |                       |                | 389  |     |      |   | 1,027   |       
|                                         |                       |                |      |     |      |  
|                                         | Total bank borrowings |                |      | 389 |      |   |         | 21,027 | 
|Less: Current portion of bank borrowings |                       |                | (389 | )   |      |   | (20,637 | )     
|                                         |                       |                |      |     |      |  
|Bank borrowings, net of current portion  |                       | $              |     |     |      | $ | 390     |       
|                                         |                       |                |      |     |      |  





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the three years ended December 31, 2005, we
    maintained a revolving line of credit in the form of a loan and
    security agreement with a commercial lender. In June 2005, we
    entered into a $20 million renewed and amended loan and
    security agreement with the lender that made more stringent the
    requirements we must meet in order to access the credit
    facility. We were not in compliance with these new requirements
    as of December 31, 2005, and the loan and security
    agreement expired in February 2006. The agreement required us to
    maintain certain levels of unrestricted cash and cash
    equivalents (excluding equity investments), and to maintain
    certain levels on deposit with the lender. At December 31,
    2004, $20.0 million was outstanding under the line of
    credit. As of December 31, 2005, there was no outstanding
    balance on the line of credit. Borrowings bear interest at the
    banks prime rate (7.25% as of December 31, 2005 and
    5.25% as of December 31, 2004) plus up to 1.25% and were
    collateralized by all of our assets. Interest was due monthly
    and principal was due at the expiration in February 2006.
|
| |  | We have entered into term debt in the form of notes payable with
    the same lender. The term debt requires monthly payments of
    approximately $38,000 plus interest through October 2006, and
    monthly payments of approximately $2,000 for the five months
    ending March 2007. A portion of the term debt was utilized for
    an equipment line of credit. Principal and interest are due in
    monthly payments through maturity based on the terms of the
    facilities. Principal payments of $389,000 are due in 2006. As
    of December 31, 2005, the entire balance of $389,000 was
    classified as currently due.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




| |                       
| | ----------------------
| | Convertible Debentures



|                                                |  |                |         |            |      |   |         |  
|----------------------------------------------- |  | -------------- | ------- | ---------- | ---- | - | ------- | -
|                                                |  | December 31,   |        
|                                                |  |                |        
|                                                |  | 2005           |         |            | 2004 |  
|                                                |  |                |         |            |      |  
|                                                |  |                |         | (Restated) |     
|                                                |  | (In thousands) |        
|Convertible debentures, 6% coupon               |  | $              | 20,535  |            |      | $ | 16,000  |  
|Discount on convertible debentures              |  |                |        |            |      |   | (8,805  | )
|Embedded derivatives                            |  |                |        |            |      |   | 6,856   |  
|                                                |  |                |         |            |      |  
|Convertible debentures, net of discount         |  |                | 20,535  |            |      |   | 14,051  |  
|Less: Current portion of convertible debentures |  |                | (20,535 | )          |      |   | (10,214 | )
|                                                |  |                |         |            |      |  
|Convertible debentures, net of current portion  |  | $              |        |            |      | $ | 3,837   |  
|                                                |  |                |         |            |      |  



00-19, Accounting for Derivative Financial Instruments Indexed
to, and Potentially Settled in, a Companys Own
Stock Accounting for
Derivative Instruments and Hedging Activities. 00-19, 00-19,


77



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






|                                        |                              |   |        |       | 
|--------------------------------------- | ---------------------------- | - | ------ | ----- | 
|Convertible debentures, at face value   |                              | $ | 16,000 |      
|Less: Discount                          |                              |   | (9,629 | )    
|                                        |                              |   |       
|Convertible debentures, net of discount |                              |   | 6,371  |      
|Embedded derivatives:                   |                              |   |        |      
|                                        | Conversion Feature           |   |        | 4,518 | 
|                                        | Additional Investment Rights |   |        | 670   | 
|Warrants                                |                              |   | 2,906  |      
|Issuance costs                          |                              |   | 1,535  |      
|                                        |                              |   |       
|Total proceeds                          |                              | $ | 16,000 |      
|                                        |                              |   |       



|                                       |  |                          |        |            |      |   |        |      |  |   |   | 
|-------------------------------------- |  | ------------------------ | ------ | ---------- | ---- | - | ------ | ---- |  | - | - | 
|                                       |  | Years Ended December 31,
|                                       |  |                         
|                                       |  | 2005                     |        |            | 2004 |   |        | 2003
|                                       |  |                          |        |            |      |   |        |     
|                                       |  |                          |        | (Restated) |      |   |       
|Warrants related to the Notes          |  | $                        | 3,337  |            |      | $ | (97    | )    |  | $ |  | 
|Warrants related to real estate buyout |  |                          | 1,285  |            |      |   | (656   | )    |  |   |  | 
|Conversion Feature                     |  |                          | 5,857  |            |      |   | (1,471 | )    |  |   |  | 
|Additional Investment Rights           |  |                          | 867    |            |      |   | (197   | )    |  |   |  | 
|                                       |  |                          |        |            |      |   |        |      | 
|Income (expense) from derivatives      |  | $                        | 11,346 |            |      | $ | (2,421 | )    |  | $ |  | 
|                                       |  |                          |        |            |      |   |        |      | 



|                           |  |            |      |   |                   |   |      |          |  |   |          |   |  |   |      |  
|-------------------------- |  | ---------- | ---- | - | ----------------- | - | ---- | -------- |  | - | -------- | - |  | - | ---- | -
|                           |  | Conversion |      |   | Additional        |  
|                           |  | Feature    |      |   | Investment Rights |  
|                           |  |            |      |   |                   |  
|                           |  | At         |      |   |                   |   | At   |          |  |  
|                           |  | Dec. 31,   |      |   | At                |   |      | Dec. 31, |  |   | At       |  
|                           |  | 2004       |      |   | Issuance          |   |      | 2004     |  |   | Issuance |  
|                           |  |            |      |   |                   |   |      |          |  |   |          |  
|Exercise price (per share) |  | $          | 2.76 |   |                   | $ | 2.76 |          |  | $ | 2.76     |   |  | $ | 2.76 |  
|Contractual term (years)   |  |            | 1.58 |   |                   |   | 1.72 |          |  |   | 0.66     |   |  |   | 0.52 |  
|Volatility                 |  |            | 0.75 |   |                   |   | 0.73 |          |  |   | 0.75     |   |  |   | 0.73 |  
|Risk-free interest rate    |  |            | 3.08 | % |                   |   | 2.82 | %        |  |   | 3.08     | % |  |   | 2.82 | %

78



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                           |  |            |      |   |      |   |      |          |  |   |      |  
|-------------------------- |  | ---------- | ---- | - | ---- | - | ---- | -------- |  | - | ---- | -
|                           |  | At Dec. 31 |      |   |     
|                           |  |            |      |   | At   |  
|                           |  | 2005       |      |   | 2004 |   |      | Issuance | 
|                           |  |            |      |   |      |   |      |          | 
|Exercise price (per share) |  | $          | 3.58 |   |      | $ | 3.58 |          |  | $ | 3.58 |  
|Contractual term (years)   |  |            | 3.6  |   |      |   | 4.6  |          |  |   | 5.0  |  
|Volatility                 |  |            | 0.84 |   |      |   | 1.08 |          |  |   | 1.12 |  
|Risk-free interest rate    |  |            | 4.28 | % |      |   | 3.62 | %        |  |   | 3.79 | %





Extinguishment of
Debt




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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




| |                              
| | -----------------------------
| | Other Non-Current Liabilities



|                                          |  |                |       |  |      |   |        | 
|----------------------------------------- |  | -------------- | ----- |  | ---- | - | ------ | 
|                                          |  | December 31,   |      
|                                          |  |                |      
|                                          |  | 2005           |       |  | 2004 |  
|                                          |  |                |       |  |      |  
|                                          |  | (In thousands) |      
|Restructuring                             |  | $              | 1,722 |  |      | $ | 7,871  | 
|Deferred maintenance and unearned revenue |  |                | 2,334 |  |      |   | 3,148  | 
|Other                                     |  |                | 334   |  |      |   | 407    | 
|                                          |  |                |       |  |      |  
|Total other non-current liabilities       |  | $              | 4,390 |  |      | $ | 11,426 | 
|                                          |  |                |       |  |      |  

Note 6  Income Taxes




|                               |                |                          |       |       |      |   |     |      |   |   |      |      |  
|------------------------------ | -------------- | ------------------------ | ----- | ----- | ---- | - | --- | ---- | - | - | ---- | ---- | -
|                               |                | Years Ended December 31, |      
|                               |                |                          |      
|                               |                | 2005                     |       |       | 2004 |   |     | 2003 |  
|                               |                |                          |       |       |      |   |     |      |  
|Current:                       |                |                          |       |       |      |   |     |      |   |   |      |     
|                               | Federal        |                          | $     | 660   |      |   | $   |     |   |   | $    |     |  
|                               | State          |                          |       | (10   | )    |   |     | (110 | ) |   |      | (244 | )
|                               | Foreign        |                          |       | 1,961 |      |   |     | 419  |   |   |      | (195 | )
|                               |                |                          |       |       |      |   |     |      |  
|                               | Total current  |                          |       | 2,611 |      |   |     | 309  |   |   |      | (439 | )
|Deferred:                      |                |                          |       |       |      |   |     |      |   |   |      |     
|                               | Federal        |                          |       |      |      |   |     |     |   |   |      |     |  
|                               | State          |                          |       |      |      |   |     |     |   |   |      |     |  
|                               |                |                          |       |       |      |   |     |      |  
|                               | Total deferred |                          |       |      |      |   |     |     |   |   |      |     |  
|                               |                |                          |       |       |      |   |     |      |  
|Income tax benefit (provision) |                | $                        | 2,611 |       |      | $ | 309 |      |   | $ | (439 | )   
|                               |                |                          |       |       |      |   |     |      |  



|                                                                                 |  |                          |         |   |      |   |        |      |  |   |         |  
|-------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------ | ---- |  | - | ------- | -
|                                                                                 |  | Years Ended December 31, |        
|                                                                                 |  |                          |        
|                                                                                 |  | 2005                     |         |   | 2004 |   |        | 2003 | 
|                                                                                 |  |                          |         |   |      |   |        |      | 
|Expected income tax benefit (provision)                                          |  | $                        | 14,552  |   |      | $ | (6,390 | )    |  | $ | 12,262  |  
|State income tax benefit (provision), net of federal tax benefit
    (provision) |  |                          | 662     |   |      |   | (1,103 | )    |  |   | 1,683   |  
|California net operating loss reduction                                          |  |                          |        |   |      |   |       |      |  |   | (1,186  | )
|Foreign taxes                                                                    |  |                          | (264    | ) |      |   | (72    | )    |  |   | (663    | )
|Utilization of foreign net operating loss carryforwards                          |  |                          | 913     |   |      |   | 688    |      |  |   | 533     |  
|Valuation allowance changes affecting provision                                  |  |                          | (575    | ) |      |   | 7,521  |      |  |   | (11,546 | )
|Foreign losses not benefited                                                     |  |                          | (952    | ) |      |   | (322   | )    |  |   | (1,542  | )
|Non-deductible goodwill and intangible amortization                              |  |                          | (10,806 | ) |      |   |       |      |  |   | (355    | )
|Tax credits                                                                      |  |                          |        |   |      |   | 32     |      |  |   | 351     |  
|Other                                                                            |  |                          | (919    | ) |      |   | (45    | )    |  |   | 24      |  
|                                                                                 |  |                          |         |   |      |   |        |      | 
|Benefit (provision) for income taxes                                             |  | $                        | 2,611   |   |      | $ | 309    |      |  | $ | (439    | )
|                                                                                 |  |                          |         |   |      |   |        |      | 

80



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                          |                                          |              |          |         |      |   |          |         | 
|------------------------- | ---------------------------------------- | ------------ | -------- | ------- | ---- | - | -------- | ------- | 
|                          |                                          | December 31, |         
|                          |                                          |              |         
|                          |                                          | 2005         |          |         | 2004 |  
|                          |                                          |              |          |         |      |  
|Deferred tax assets:      |                                          |              |          |         |      |   |          |        
|                          | Depreciation and amortization            |              | $        | 5,716   |      |   | $        | 11,701  | 
|                          | Accrued liabilities                      |              |          | 5,204   |      |   |          | 16,764  | 
|                          | Capitalized research and development     |              |          | 2,748   |      |   |          | 4,748   | 
|                          | Net operating losses                     |              |          | 214,599 |      |   |          | 164,985 | 
|                          | Tax credits                              |              |          | 13,148  |      |   |          | 13,740  | 
|                          | Unrealized loss on marketable securities |              |          | 1,589   |      |   |          | 5,320   | 
|                          |                                          |              |          |         |      |  
|                          | Total deferred tax assets                |              |          | 243,005 |      |   |          | 217,259 | 
|Less: valuation allowance |                                          |              | (243,005 | )       |      |   | (217,259 | )      
|                          |                                          |              |          |         |      |  
|Net deferred tax assets   |                                          | $            |         |         |      | $ |         |        
|                          |                                          |              |          |         |      |  









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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Note 7  Commitments and Contingencies




| |                               
| | ------------------------------
| | Warranties and Indemnification









| |       
| | ------
| | Leases





|                          |                                   |              |     |      | 
|------------------------- | --------------------------------- | ------------ | --- | ---- | 
|                          |                                   | Total Future |    
|                          |                                   | Payments     |    
|                          |                                   |              |    
|Years ending December 31, |                                   |              |     |     
|2006                      |                                   | $            | 3.5 |     
|2007                      |                                   |              | 3.9 |     
|2008                      |                                   |              | 2.1 |     
|2009                      |                                   |              | 2.1 |     
|2010 and thereafter       |                                   |              | 4.1 |     
|                          |                                   |              |    
|                          | Total minimum facilities payments |              | $   | 15.7 | 
|                          |                                   |              |    



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






| |                   
| | ------------------
| | Equity Investments





| |                                     
| | ------------------------------------
| | Standby Letter of Credit Commitments





| |                  
| | -----------------
| | Legal Proceedings







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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






Note 8  Restructuring


Restructuring and Impairment Charges.


Severance and Termination Costs.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | For exit or disposal activities initiated on or prior to
    December 31, 2002, we account for costs in accordance with
    EITF 94-3.
    Accordingly, we record the liability related to these
    termination costs when the following conditions have been met:
    (1) management with the appropriate level of authority
    approves a termination plan that commits us to such plan and
    establishes the benefits the employees will receive upon
    termination; (2) the benefit arrangement is communicated to
    the employees in sufficient detail to enable the employees to
    determine the termination benefits; (3) the plan
    specifically identifies the number of employees to be
    terminated, their locations and their job classifications; and
    (4) the period of time to implement the plan does not
    indicate changes to the plan are likely.
|
| |  | For exit or disposal activities initiated after
    December 31, 2002, we account for costs in accordance with
    SFAS No. 146. SFAS 146 requires that a liability
    for a cost associated with an exit or disposal activity be
    recognized and measured initially at fair value only when the
    liability is incurred. This differs from
    EITF 94-3, which
    required that a liability for an exit cost be recognized at the
    date of an entitys commitment to an exit plan.                                                                                                                                                                                                                                                                                                                                                                                         

Excess Facilities Costs.




| |   |                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | For exit or disposal activities initiated on or prior to
    December 31, 2002, we account for lease termination and/or
    abandonment costs in accordance with EITF Issue No. 88-10.
    Accordingly, we

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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




| |   |                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | recorded the costs associated with lease termination and/or
    abandonment when the leased property had no substantive future
    use or benefit to us.                                                                                                                                                              
|
| |  | For exit or disposal activities initiated after
    December 31, 2002, we account for lease termination and/or
    abandonment costs in accordance with SFAS 146, which
    requires that a liability for such costs be recognized and
    measured initially at fair value on the cease use date of the
    facility.





|                                    |  |           |        |   |               |   |         |       |  |   |         |  
|----------------------------------- |  | --------- | ------ | - | ------------- | - | ------- | ----- |  | - | ------- | -
|                                    |  | Severance |        |   |               |   |        
|                                    |  | and       |        |   | Facilities/   |   |         |      
|                                    |  | Benefits  |        |   | Excess Assets |   |         | Total | 
|                                    |  |           |        |   |               |   |         |       | 
|Accrual balances, December 31, 2002 |  | $         | 1,504  |   |               | $ | 94,691  |       |  | $ | 96,195  |  
|Restructuring charges               |  |           | 1,509  |   |               |   | 33,847  |       |  |   | 35,356  |  
|Cash payments                       |  |           | (2,342 | ) |               |   | (23,829 | )     |  |   | (26,171 | )
|                                    |  |           |        |   |               |   |         |       | 
|Accrual balances, December 31, 2003 |  |           | 671    |   |               |   | 104,709 |       |  |   | 105,380 |  
|Restructuring charges (credits)     |  |           | 1,114  |   |               |   | (24,659 | )     |  |   | (23,545 | )
|Cash payments                       |  |           | (961   | ) |               |   | (46,711 | )     |  |   | (47,672 | )
|                                    |  |           |        |   |               |   |         |       | 
|Accrual balances, December 31, 2004 |  |           | 824    |   |               |   | 33,339  |       |  |   | 34,163  |  
|Restructuring charges (credits)     |  |           | 1,006  |   |               |   | (1,468  | )     |  |   | (462    | )
|Cash payments                       |  |           | (1,414 | ) |               |   | (25,032 | )     |  |   | (26,446 | )
|                                    |  |           |        |   |               |   |         |       | 
|Accrual balances, December 31, 2005 |  | $         | 416    |   |               | $ | 6,839   |       |  | $ | 7,255   |  
|                                    |  |           |        |   |               |   |         |       | 

94-3


85



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Severance and benefits  On June 29, 2005,
    our Board of Directors approved a business restructuring plan,
    primarily consisting of headcount reductions, designed to adjust
    expenses to a level more consistent with anticipated revenues.
    The reduction included approximately 63 employees, or 22% of our
    workforce. We recorded severance charges of approximately
    $1.1 million in the year ended December 31, 2005,
    related to workforce reductions as a component of the
    Companys restructuring plans executed during the year. The
    Company estimates that the accrual as of December 31, 2005
    of $416,000 will be paid in full by December 31, 2006.                                                                                                        
|
| |  | Facilities/excess assets  During the twelve
    months ended December 31, 2005, the Company recorded a
    facilities-related restructuring credit of $1.5 million.
    During the third and fourth quarters of 2004 and the first
    quarter of 2005, the Company reached agreements with certain
    landlords to extinguish future real estate obligations. In
    addition, the Company entered into subleases in 2005 in excess
    of those anticipated. The Company made cash payments of
    $25.0 million during the twelve months ended
    December 31, 2005 related to buyout agreements. A letter of
    credit of $2.0 million secured by an equal amount of
    restricted cash is available to the landlord and secures certain
    facilities leases as more fully described in Note 8.





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Severance and benefits  The Company recorded a
    related charge of $1.1 million during the twelve months
    ended December 31, 2004, related to workforce reductions as
    a component of the Companys restructuring plans executed
    during the year. The accrual as of December 31, 2004, was
    paid in full by December 31, 2005.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Facilities/excess assets  During the twelve
    months ended December 31, 2004, the Company recorded a
    facilities-related restructuring credit of $24.7 million.
    During the third and fourth quarters of 2004, the Company
    reached agreements with certain landlords to extinguish
    approximately $155 million of future real estate
    obligations. The Company made cash payments of
    $19.0 million during the third quarter of fiscal 2004,
    $1.7 million during the fourth quarter of fiscal 2004 and
    $21.9 million in fiscal 2005. Standby letters of credit of
    $21.9 million were issued on our behalf from financial
    institutions as of December 31, 2004, in favor of the
    landlords to secure the fiscal 2005 payments. Accordingly,
    $21.9 million, along with additional letters of credit
    securing other long-term leases of $2.3 million, has been
    included in restricted cash in the accompanying Consolidated
    Balance Sheets at December 31, 2004. The Company also
    transferred ownership of certain furniture, fixtures, and
    leasehold improvements with a net book value of
    $8.5 million to the previous landlords.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As a component of the settlement of one of the previous leases,
    the Company has a residual lease obligation beginning in 2007 of
    approximately $9.1 million. The Company may make an
    additional cash payment of $4.5 million if it exercises an
    option to terminate this residual real estate obligation prior
    to the commencement of the lease term (January 2007). This
    option to terminate the residual lease obligation is accounted
    for in accordance with SFAS 146 and is a part of the
    restructuring credit of $24.6 million recorded in fiscal
    2004.
|
| | In connection with one of the buyout transactions, the Company
    issued to the landlord a five-year warrant to purchase
    approximately 700,000 shares of its common stock at an
    exercise price of $5.00 per share, exercisable beginning in
    August 2005. See Note 9.                                                                                                                                                                                                                                                                                                               





| |   |                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Severance and benefits  The $1.5 million
    charge in fiscal 2003 related to workforce reductions as a
    component of the Companys restructuring plans executed
    during the year.

86



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Facilities/excess assets  During the twelve
    months ended December 31, 2003, the Company recorded a
    facilities-related restructuring charge of $33.8 million.
    This charge related to the Companys revisions of estimates
    with respect to the planned future occupancy and anticipated
    future subleases. These revisions were necessary due to a
    reduction in planned future BroadVision space needs and a
    further decline in the market for commercial real estate. The
    Company estimated future sublease timing and rates based upon
    current market indicators and information obtained from a third
    party real estate expert.



|                          |  |         |     |      |         |   |     |       |  |   |     | 
|------------------------- |  | ------- | --- | ---- | ------- | - | --- | ----- |  | - | --- | 
|                          |  |         |     | Non- |         |   |    
|                          |  | Current |     |      | Current |   |     | Total | 
|                          |  |         |     |      |         |   |     |       | 
|Severance and termination |  | $       | 0.4 |      |         | $ |    |       |  | $ | 0.4 | 
|Excess facilities         |  |         | 5.1 |      |         |   | 1.7 |       |  |   | 6.8 | 
|                          |  |         |     |      |         |   |     |       | 
|Total                     |  | $       | 5.5 |      |         | $ | 1.7 |       |  | $ | 7.2 | 
|                          |  |         |     |      |         |   |     |       | 



|                                  |  |              |     | 
|--------------------------------- |  | ------------ | --- | 
|                                  |  | Total Future |    
|                                  |  | Payments     |    
|                                  |  |              |    
|Years Ending December 31,         |  |              |     | 
|2006                              |  | $            | 5.1 | 
|2007                              |  |              | 0.7 | 
|2008                              |  |              | 0.4 | 
|2009                              |  |              | 0.4 | 
|2010                              |  |              | 0.2 | 
|                                  |  |              |    
|Total minimum facilities payments |  | $            | 6.8 | 
|                                  |  |              |    

87



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                    |  |               |        |         |               |   |        |         |  |   |               |   |  |   |        | 
|--------------------------------------------------- |  | ------------- | ------ | ------- | ------------- | - | ------ | ------- |  | - | ------------- | - |  | - | ------ | 
|                                                    |  |               |        | Amounts |               |   |        |         | 
|                                                    |  | Accrued       |        |         | Charged to    |   |        | Amounts |  |   |              
|                                                    |  | Restructuring |        |         | Restructuring |   |        | Paid or |  |   | Accrued       |  
|                                                    |  | Costs,        |        |         | Costs and     |   |        | Written |  |   | Restructuring |  
|                                                    |  | Beginning     |        |         | Other         |   |        | Off     |  |   | Costs, Ending |  
|                                                    |  |               |        |         |               |   |        |         |  |   |               |  
|Year Ended December 31, 2005:                       |  |               |        |         |               |   |        |         |  |   |               |   |  |   |        | 
|Lease cancellations and commitments                 |  | $             | 21,824 |         |               | $ | (821   | )       |  | $ | (16,815       | ) |  | $ | 4,188  | 
|Termination payments to employees and related costs |  |               | 365    |         |               |   | 1,006  |         |  |   | (1,266        | ) |  |   | 105    | 
|Write-off on disposal of assets and related costs   |  |               |       |         |               |   |       |         |  |   |              |   |  |   |       | 
|                                                    |  |               |        |         |               |   |        |         |  |   |               |  
|                                                    |  | $             | 22,189 |         |               | $ | 185    |         |  | $ | (18,081       | ) |  | $ | 4,293  | 
|                                                    |  |               |        |         |               |   |        |         |  |   |               |  
|Year Ended December 31, 2004:                       |  |               |        |         |               |   |        |         |  |   |               |   |  |   |        | 
|Lease cancellations and commitments                 |  | $             | 21,683 |         |               | $ | 9,594  |         |  | $ | (9,453        | ) |  | $ | 21,824 | 
|Termination payments to employees and related costs |  |               | 242    |         |               |   | 1,114  |         |  |   | (991          | ) |  |   | 365    | 
|Write-off on disposal of assets and related costs   |  |               |       |         |               |   | (1,193 | )       |  |   | 1,193         |   |  |   |       | 
|                                                    |  |               |        |         |               |   |        |         |  |   |               |  
|                                                    |  | $             | 21,925 |         |               | $ | 9,515  |         |  | $ | (9,251        | ) |  | $ | 22,189 | 
|                                                    |  |               |        |         |               |   |        |         |  |   |               |  

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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


94-3


|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |         |   |  |   |        | 
|--------------------------------------------------- |  | ------------- | ------ | ------- | ------------- | - | ------- | ------------- |  | - | ------- | - |  | ------------- | ------- | - |  | - | ------ | 
|                                                    |  |               |        | Amounts |               |   | Amounts |               |  |   |         |  
|                                                    |  | Accrued       |        |         | Charged to    |   |         | Reversed to   |  |   | Amounts |   |  |              
|                                                    |  | Restructuring |        |         | Restructuring |   |         | Restructuring |  |   | Paid or |   |  | Accrued       |        
|                                                    |  | Costs,        |        |         | Costs and     |   |         | Costs and     |  |   | Written |   |  | Restructuring |        
|                                                    |  | Beginning     |        |         | Other         |   |         | Other         |  |   | Off     |   |  | Costs, Ending |        
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|Year Ended December 31, 2005:                       |  |               |        |         |               |   |         |               |  |   |         |   |  |               |         |   |  |   |        | 
|Lease cancellations and commitments                 |  | $             | 11,515 |         |               |   |        |               |  | $ | (647    | ) |  | $             | (8,217  | ) |  | $ | 2,651  | 
|Termination payments to employees and related costs |  |               | 459    |         |               |   |        |               |  |   |        |   |  |               | (148    | ) |  |   | 311    | 
|Write-off on disposal of assets and related costs   |  |               |       |         |               |   |        |               |  |   |        |   |  |               |         |   |  |   |        | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|                                                    |  | $             | 11,974 |         |               |   |         |               |  | $ | (647    | ) |  | $             | (8,365  | ) |  | $ | 2,962  | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|Year Ended December 31, 2004:                       |  |               |        |         |               |   |         |               |  |   |         |   |  |               |         |   |  |   |        | 
|Lease cancellations and commitments                 |  | $             | 83,026 |         |               | $ | (32,584 | )             |  | $ |        |   |  | $             | (38,927 | ) |  | $ | 11,515 | 
|Termination payments to employees and related costs |  |               | 429    |         |               |   |        |               |  |   |        |   |  |               | 30      |   |  |   | 459    | 
|Write-off on disposal of assets and related costs   |  |               |       |         |               |   | (477    | )             |  |   |        |   |  |               | 477     |   |  |   |       | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|                                                    |  | $             | 83,455 |         |               | $ | (33,061 | )             |  | $ |        |   |  | $             | (38,420 | ) |  | $ | 11,974 | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|Year Ended December 31, 2003:                       |  |               |        |         |               |   |         |               |  |   |         |   |  |               |         |   |  |   |        | 
|Lease cancellations and commitments                 |  | $             | 94,691 |         |               | $ | 11,649  |               |  | $ |        |   |  | $             | (23,314 | ) |  | $ | 83,026 | 
|Termination payments to employees and related costs |  |               | 1,425  |         |               |   | 41      |               |  |   |        |   |  |               | (1,037  | ) |  |   | 429    | 
|Write-off on disposal of assets and related costs   |  |               | 79     |         |               |   | (41     | )             |  |   | (26     | ) |  |               | (12     | ) |  |   |       | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        
|                                                    |  | $             | 96,195 |         |               | $ | 11,649  |               |  | $ | (26     | ) |  | $             | (24,363 | ) |  | $ | 83,455 | 
|                                                    |  |               |        |         |               |   |         |               |  |   |         |   |  |               |        

Note 9  Stockholders Equity
(Deficit)




| |                            
| | ---------------------------
| | Convertible Preferred Stock



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




| |         
| | --------
| | Warrants



|                                                                           |  |        |           |           |       |               |         |      |  |   |      |  |  |   |       | 
|-------------------------------------------------------------------------- |  | ------ | --------- | --------- | ----- | ------------- | ------- | ---- |  | - | ---- |  |  | - | ----- | 
|                                                                           |  |        |           |           |       | Fair Value at |        
|                                                                           |  |        |           |           |       | Dec. 31,      |        
|                                                                           |  |        |           | Price per |       |               |         |     
|Description                                                                |  | Shares |           |           | Share |               |         | 2005 |  |   | 2004 | 
|                                                                           |  |        |           |           |       |               |         |      |  |   |      | 
|Issued to landlord in real estate buyout transaction in August
    2004    |  |        | 700,000   |           |       | $             | 5.00    |      |  | $ | 51   |  |  | $ | 1,337 | 
|Issued to convertible debenture investors in November 2004                 |  |        | 1,739,130 |           |       |               | 3.58    |      |  |   | 226  |  |  |   | 3,562 | 
|Others issued in connection with revenue transactions in 1997
    and 2000 |  |        | 9,628     |           |       |               | Various |      |  |   |     |  |  |   |      | 
|                                                                           |  |        |           |           |       |               |         |      |  |   |      | 
|Total shares and fair value and average price per share                    |  |        | 2,448,758 |           |       |               | 4.71    |      |  | $ | 277  |  |  | $ | 5,899 | 
|                                                                           |  |        |           |           |       |               |         |      |  |   |      | 



00-19,




| |             
| | ------------
| | Common Stock







| |                            
| | ---------------------------
| | Employee Based Compensation



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)






out-of


|                                             |  |                   |           |  |                  |   |      | 
|-------------------------------------------- |  | ----------------- | --------- |  | ---------------- | - | ---- | 
|                                             |  | Aggregate Number  |           |  |                 
|                                             |  | of Common Shares  |           |  |                 
|                                             |  | Issuable Under    |           |  | Weighted Average |  
|                                             |  | Accelerated Stock |           |  | Exercise Price   |  
|                                             |  | Options           |           |  | per Share        |  
|                                             |  |                   |           |  |                  |  
|Total Non-Employee Directors                 |  |                   | 122,181   |  |                  | $ | 2.98 | 
|Total Named Executive Officers               |  |                   | 391,886   |  |                  |   | 2.87 | 
|                                             |  |                   |           |  |                  |  
|Total Directors and Named Executive Officers |  |                   | 514,067   |  |                  |   | 2.89 | 
|Total All Other Employees                    |  |                   | 610,707   |  |                  |   | 2.97 | 
|                                             |  |                   |           |  |                  |  
|Total                                        |  |                   | 1,124,774 |  |                  |   | 2.94 | 
|                                             |  |                   |           |  |                  |  





|             |            |         |         |  |           |       |  |         |        |        |  |          |           |  |  |  |    | 
|------------ | ---------- | ------- | ------- |  | --------- | ----- |  | ------- | ------ | ------ |  | -------- | --------- |  |  |  | -- | 
|             |            |         |         |  |           |       |  | Vesting |       
|             |            | Options |         |  | Options   |       |  |         |        | Period | 
|Date Granted |            |         | Granted |  |           | Price |  |         | Vested |        |  | (Months) |          
|             |            |         |         |  |           |       |  |         |        |        |  |          |          
|             | 6/23/1999  |         |         |  | 500,000   |       |  | $       | 60.00  |        |  |          | 500,000   |  |  |  | 60 | 
|             | 5/25/2001  |         |         |  | 500,000   |       |  |         | 66.51  |        |  |          | 500,000   |  |  |  | 48 | 
|             | 11/27/2001 |         |         |  | 4,444     |       |  |         | 35.01  |        |  |          | 4,444     |  |  |  | 24 | 
|             | 2/19/2002  |         |         |  | 55,555    |       |  |         | 18.63  |        |  |          | 55,555    |  |  |  | 48 | 
|             | 10/30/2002 |         |         |  | 644,445   |       |  |         | 2.16   |        |  |          | 644,445   |  |  |  | 48 | 
|             |            |         |         |  |           |       |  |         |        |        |  |          |          
|             | Totals     |         |         |  | 1,704,444 |       |  |         |        |        |  |          | 1,704,444 |  |  |  |    | 
|             |            |         |         |  |           |       |  |         |        |        |  |          |          

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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                                 |  |                          |        |           |          |   |       |         |           |  |          |   |  |           |       |  |          |  |        |   |  |   |       | 
|---------------------------------------------------------------- |  | ------------------------ | ------ | --------- | -------- | - | ----- | ------- | --------- |  | -------- | - |  | --------- | ----- |  | -------- |  | ------ | - |  | - | ----- | 
|                                                                 |  | Years Ended December 31, |       
|                                                                 |  |                          |       
|                                                                 |  | 2005                     |        |           | 2004     |   |       | 2003    |          
|                                                                 |  |                          |        |           |          |   |       |         |          
|                                                                 |  |                          |        | Weighted- |          |   |       |         | Weighted- |  |          |   |  | Weighted- |      
|                                                                 |  |                          |        | Average   |          |   |       |         | Average   |  |          |   |  | Average   |      
|                                                                 |  | Options                  |        |           | Exercise |   |       | Options |           |  | Exercise |   |  | Options   |       |  | Exercise | 
|Fixed Options                                                    |  | (000s)                  |        |           | Price    |   |       | (000s) |           |  | Price    |   |  | (000s)   |       |  | Price    | 
|                                                                 |  |                          |        |           |          |   |       |         |           |  |          |   |  |           |       |  |          | 
|Outstanding at beginning of period                               |  |                          | 4,876  |           |          | $ | 21.93 |         |           |  | 4,128    |   |  | $         | 27.32 |  |          |  | 6,036  |   |  | $ | 29.03 | 
|Granted                                                          |  |                          | 422    |           |          |   | 2.18  |         |           |  | 1,264    |   |  |           | 3.35  |  |          |  | 190    |   |  |   | 4.77  | 
|Exercised                                                        |  |                          | (26    | )         |          |   | 1.50  |         |           |  | (87      | ) |  |           | 3.07  |  |          |  | (170   | ) |  |   | 2.31  | 
|Forfeited                                                        |  |                          | (1,507 | )         |          |   | 13.24 |         |           |  | (429     | ) |  |           | 21.23 |  |          |  | (1,928 | ) |  |   | 25.10 | 
|                                                                 |  |                          |        |           |          |   |       |         |           |  |          |   |  |           |       |  |          | 
|Outstanding at end of period                                     |  |                          | 3,765  |           |          |   | 23.48 |         |           |  | 4,876    |   |  |           | 21.93 |  |          |  | 4,128  |   |  |   | 27.17 | 
|                                                                 |  |                          |        |           |          |   |       |         |           |  |          |   |  |           |       |  |          | 
|Options exercisable at end of period                             |  |                          | 3,748  |           |          | $ | 23.49 |         |           |  | 2,656    |   |  | $         | 44.90 |  |          |  | 2,060  |   |  | $ | 40.91 | 
|Weighted-average fair value of options granted during the period |  |                          |        |           |          | $ | 0.70  |         |           |  |          |   |  | $         | 2.33  |  |          |  |        |   |  | $ | 3.47  | 



|                         |  |         |       |             |               |  |          |          |  |             |         |  |          |          |       |  |  |   |        | 
|------------------------ |  | ------- | ----- | ----------- | ------------- |  | -------- | -------- |  | ----------- | ------- |  | -------- | -------- | ----- |  |  | - | ------ | 
|                         |  |         |       | Outstanding |               |  |          |          |  |             |        
|                         |  |         |       | Weighted-   |               |  |          |          |  |             |        
|                         |  |         |       | Average     |               |  |          |          |  |             |        
|                         |  |         |       | Remaining   |               |  | Weighted |          |  | Exercisable |         |  | Weighted |         
|                         |  | Options |       |             | Contractual   |  |          | Exercise |  |             | Options |  |          | Exercise |      
|Range of Exercise Prices |  | (000s) |       |             | Life in Years |  |          | Price    |  |             | (000s) |  |          | Price    |      
|                         |  |         |       |             |               |  |          |          |  |             |         |  |          |          |      
|$  0.43 - $  1.52        |  |         | 159   |             |               |  | 7.38     |          |  | $           | 1.42    |  |          |          | 142   |  |  | $ | 1.49   | 
|2.10 -    2.94           |  |         | 1,363 |             |               |  | 7.85     |          |  |             | 2.37    |  |          |          | 1,363 |  |  |   | 2.37   | 
|3.08 -    3.80           |  |         | 431   |             |               |  | 7.43     |          |  |             | 3.65    |  |          |          | 431   |  |  |   | 3.65   | 
|4.25 -    8.50           |  |         | 396   |             |               |  | 6.39     |          |  |             | 6.25    |  |          |          | 396   |  |  |   | 6.25   | 
|10.75 -   30.00          |  |         | 121   |             |               |  | 4.48     |          |  |             | 21.41   |  |          |          | 121   |  |  |   | 21.41  | 
|30.50 -   39.63          |  |         | 176   |             |               |  | 5.53     |          |  |             | 35.01   |  |          |          | 176   |  |  |   | 35.01  | 
|42.75 -   87.19          |  |         | 1,104 |             |               |  | 4.45     |          |  |             | 62.86   |  |          |          | 1,104 |  |  |   | 62.86  | 
|133.06 -  448.31         |  |         | 15    |             |               |  | 4.45     |          |  |             | 186.56  |  |          |          | 15    |  |  |   | 186.56 | 
|                         |  |         |       |             |               |  |          |          |  |             |         |  |          |          |      
|                         |  |         | 3,765 |             |               |  | 6.40     |          |  | $           | 23.48   |  |          |          | 3,748 |  |  | $ | 23.49  | 
|                         |  |         |       |             |               |  |          |          |  |             |         |  |          |          |      

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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                                 |  |                          |       |           |          |   |       |         |           |  |          |   |  |           |       |  |          |  |       |   |  |   |       | 
|---------------------------------------------------------------- |  | ------------------------ | ----- | --------- | -------- | - | ----- | ------- | --------- |  | -------- | - |  | --------- | ----- |  | -------- |  | ----- | - |  | - | ----- | 
|                                                                 |  | Years Ended December 31, |      
|                                                                 |  |                          |      
|                                                                 |  | 2005                     |       |           | 2004     |   |       | 2003    |          
|                                                                 |  |                          |       |           |          |   |       |         |          
|                                                                 |  |                          |       | Weighted- |          |   |       |         | Weighted- |  |          |   |  | Weighted- |      
|                                                                 |  |                          |       | Average   |          |   |       |         | Average   |  |          |   |  | Average   |      
|                                                                 |  | Options                  |       |           | Exercise |   |       | Options |           |  | Exercise |   |  | Options   |       |  | Exercise | 
|Fixed Options                                                    |  | (000s)                  |       |           | Price    |   |       | (000s) |           |  | Price    |   |  | (000s)   |       |  | Price    | 
|                                                                 |  |                          |       |           |          |   |       |         |           |  |          |   |  |           |       |  |          | 
|Outstanding at beginning of period                               |  |                          | 1,151 |           |          | $ | 17.69 |         |           |  | 1,614    |   |  | $         | 15.96 |  |          |  | 2,471 |   |  | $ | 17.61 | 
|Granted                                                          |  |                          | 3     |           |          |   | 2.10  |         |           |  | 71       |   |  |           | 7.07  |  |          |  | 178   |   |  |   | 5.17  | 
|Exercised                                                        |  |                          | (28   | )         |          |   | 1.50  |         |           |  | (210     | ) |  |           | 1.70  |  |          |  | (198  | ) |  |   | 1.54  | 
|Forfeited                                                        |  |                          | (538  | )         |          |   | 19.48 |         |           |  | (324     | ) |  |           | 17.10 |  |          |  | (837  | ) |  |   | 21.59 | 
|                                                                 |  |                          |       |           |          |   |       |         |           |  |          |   |  |           |       |  |          | 
|Outstanding at end of period                                     |  |                          | 588   |           |          |   | 16.70 |         |           |  | 1,151    |   |  |           | 17.69 |  |          |  | 1,614 |   |  |   | 15.96 | 
|                                                                 |  |                          |       |           |          |   |       |         |           |  |          |   |  |           |       |  |          | 
|Options exercisable at end of period                             |  |                          | 588   |           |          |   | 16.70 |         |           |  | 647      |   |  |           | 28.77 |  |          |  | 609   |   |  |   | 31.88 | 
|                                                                 |  |                          |       |           |          |   |       |         |           |  |          |   |  |           |       |  |          | 
|Weighted-average fair value of options granted during the period |  |                          |       |           |          | $ | 0.42  |         |           |  |          |   |  | $         | 7.07  |  |          |  |       |   |  | $ | 3.77  | 



|                         |  |         |     |             |               |  |          |          |  |             |         |          |         |          |     |  |  |   |        | 
|------------------------ |  | ------- | --- | ----------- | ------------- |  | -------- | -------- |  | ----------- | ------- | -------- | ------- | -------- | --- |  |  | - | ------ | 
|                         |  |         |     | Outstanding |               |  |          |          |  |             |        
|                         |  |         |     | Weighted-   |               |  |          |          |  |             |        
|                         |  |         |     | Average     |               |  | Weighted |          |  |             |         | Weighted |        
|                         |  |         |     | Remaining   |               |  | Average  |          |  | Exercisable |         |          | Average |         
|                         |  | Options |     |             | Contractual   |  |          | Exercise |  |             | Options |          |         | Exercise |    
|Range of Exercise Prices |  | (000s) |     |             | Life in Years |  |          | Price    |  |             | (000s) |          |         | Price    |    
|                         |  |         |     |             |               |  |          |          |  |             |         |          |         |          |    
|$ 1.50 - $  4.91         |  |         | 408 |             |               |  | 6.83     |          |  | $           | 1.53    |          |         |          | 408 |  |  | $ | 1.53   | 
|5.00 -    7.92           |  |         | 103 |             |               |  | 6.17     |          |  |             | 6.32    |          |         |          | 103 |  |  |   | 6.32   | 
|35.01 -   64.44          |  |         | 37  |             |               |  | 5.30     |          |  |             | 41.64   |          |         |          | 37  |  |  |   | 41.64  | 
|91.94 -  381.94          |  |         | 40  |             |               |  | 4.00     |          |  |             | 176.40  |          |         |          | 40  |  |  |   | 176.40 | 
|                         |  |         |     |             |               |  |          |          |  |             |         |          |         |          |    
|                         |  |         | 588 |             |               |  | 6.43     |          |  | $           | 16.70   |          |         |          | 588 |  |  |   | 16.70  | 
|                         |  |         |     |             |               |  |          |          |  |             |         |          |         |          |    





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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




Note 10  Employee Benefit Plan




Note 11  Geographic, Segment and Significant
Customer Information




|                  |  |                          |        |  |      |   |        |      |  |   |        | 
|----------------- |  | ------------------------ | ------ |  | ---- | - | ------ | ---- |  | - | ------ | 
|                  |  | Years Ended December 31, |       
|                  |  |                          |       
|                  |  | 2005                     |        |  | 2004 |   |        | 2003 | 
|                  |  |                          |        |  |      |   |        |      | 
|Software licenses |  | $                        | 14,720 |  |      | $ | 26,883 |      |  | $ | 30,230 | 
|Services          |  |                          | 19,095 |  |      |   | 19,942 |      |  |   | 22,012 | 
|Maintenance       |  |                          | 26,306 |  |      |   | 31,179 |      |  |   | 35,839 | 
|                  |  |                          |        |  |      |   |        |      | 
|Total revenues    |  | $                        | 60,121 |  |      | $ | 78,004 |      |  | $ | 88,081 | 
|                  |  |                          |        |  |      |   |        |      | 





|          |               |                          |   |        |      |  |   |        |  |  |   |        | 
|--------- | ------------- | ------------------------ | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|          |               | Years Ended December 31, |  
|          |               |                          |  
|          |               | 2005                     |   |        | 2004 |  |   | 2003   | 
|          |               |                          |   |        |      |  |   |        | 
|Revenues: |               |                          |   |        |      |  |   |        |  |  |   |       
|          | Americas      |                          | $ | 34,328 |      |  | $ | 37,278 |  |  | $ | 45,135 | 
|          | Europe        |                          |   | 20,228 |      |  |   | 33,321 |  |  |   | 35,458 | 
|          | Asia/ Pacific |                          |   | 5,565  |      |  |   | 7,405  |  |  |   | 7,488  | 
|          |               |                          |   |        |      |  |   |        | 
|          | Total Company |                          | $ | 60,121 |      |  | $ | 78,004 |  |  | $ | 88,081 | 
|          |               |                          |   |        |      |  |   |        | 



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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                   |               |              |   |        |      |  |   |        | 
|------------------ | ------------- | ------------ | - | ------ | ---- |  | - | ------ | 
|                   |               | December 31, |  
|                   |               |              |  
|                   |               | 2005         |   |        | 2004 | 
|                   |               |              |   |        |      | 
|Long-Lived Assets: |               |              |   |        |      |  |   |       
|                   | Americas      |              | $ | 29,039 |      |  | $ | 60,312 | 
|                   | Europe        |              |   | 328    |      |  |   | 531    | 
|                   | Asia/ Pacific |              |   | 445    |      |  |   | 527    | 
|                   |               |              |   |        |      | 
|                   | Total Company |              | $ | 29,812 |      |  | $ | 61,370 | 
|                   |               |              |   |        |      | 

Note 12  Subsequent Events




S-1 S-1






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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)


Note 13  Quarterly Results of Operations






period-to 10-K 10-Q


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BROADVISION, INC. AND SUBSIDIARIES


Notes to Consolidated Financial
Statements  (Continued)




|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |   |  |   |        |   |  |   |        |  
|------------------------------------------------------------ |  | ------------------ | ------- | ------------- | ------- | - | ------------- | ------- |  | ------------- | ------- | - | ------------- | ------- | ------ | - | ------- | - | ------ | ------- |  | - | ------- | - |  | - | ------ | - |  | - | ------ | -
|                                                             |  | Three Months Ended |        
|                                                             |  |                    |        
|                                                             |  | Dec 31,            |         |               | Sep 30, |   |               | Jun 30, |  |               | Mar 31, |   |               | Dec 31, |        |   | Sep 30, |   |        | Jun 30, |  |   | Mar 31, |  
|                                                             |  | 2005               |         |               | 2005    |   |               | 2005    |  |               | 2005    |   |               | 2004    |        |   | 2004    |   |        | 2004    |  |   | 2004    |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|                                                             |  |                    |         | (As restated) |         |   | (As restated) |         |  | (As restated) |         |   | (As restated) |         |        |   |         |   |        |        
|                                                             |  |                    |        
|                                                             |  | (In thousands)     |        
|                                                             |  | (Unaudited)        |        
|Statement of Operations Data:                                |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |   |  |   |        |   |  |   |        |  
|Revenues:                                                    |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |   |  |   |        |   |  |   |        |  
|Software licenses                                            |  | $                  | 3,780   |               |         | $ | 3,134         |         |  | $             | 3,391   |   |               | $       | 4,416  |   |         | $ | 7,292  |         |  | $ | 4,654   |   |  | $ | 7,097  |   |  | $ | 7,840  |  
|Services                                                     |  |                    | 10,383  |               |         |   | 10,943        |         |  |               | 12,123  |   |               |         | 11,951 |   |         |   | 12,471 |         |  |   | 12,570  |   |  |   | 13,031 |   |  |   | 13,049 |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Total revenues                                               |  |                    | 14,163  |               |         |   | 14,077        |         |  |               | 15,514  |   |               |         | 16,367 |   |         |   | 19,763 |         |  |   | 17,224  |   |  |   | 20,128 |   |  |   | 20,889 |  
|Cost of revenues:                                            |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |   |  |   |        |   |  |   |        |  
|Cost of software licenses                                    |  |                    | 99      |               |         |   | 106           |         |  |               | (186    | ) |               |         | (57    | ) |         |   | 156    |         |  |   | 256     |   |  |   | 313    |   |  |   | 578    |  
|Cost of services                                             |  |                    | 4,696   |               |         |   | 5,641         |         |  |               | 5,614   |   |               |         | 5,980  |   |         |   | 6,008  |         |  |   | 6,391   |   |  |   | 6,302  |   |  |   | 6,277  |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Total cost of revenues                                       |  |                    | 4,795   |               |         |   | 5,747         |         |  |               | 5,428   |   |               |         | 5,923  |   |         |   | 6,164  |         |  |   | 6,647   |   |  |   | 6,615  |   |  |   | 6,855  |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Gross profit                                                 |  |                    | 9,368   |               |         |   | 8,330         |         |  |               | 10,086  |   |               |         | 10,444 |   |         |   | 13,599 |         |  |   | 10,577  |   |  |   | 13,513 |   |  |   | 14,034 |  
|Operating expenses:                                          |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |   |  |   |        |   |  |   |        |  
|Research and development                                     |  |                    | 2,494   |               |         |   | 3,095         |         |  |               | 3,955   |   |               |         | 4,287  |   |         |   | 4,027  |         |  |   | 4,600   |   |  |   | 4,509  |   |  |   | 4,888  |  
|Sales and marketing                                          |  |                    | 2,389   |               |         |   | 2,948         |         |  |               | 5,060   |   |               |         | 5,811  |   |         |   | 6,974  |         |  |   | 6,020   |   |  |   | 7,480  |   |  |   | 6,866  |  
|General and administrative                                   |  |                    | 1,953   |               |         |   | 2,162         |         |  |               | 2,829   |   |               |         | 2,535  |   |         |   | 2,386  |         |  |   | 2,335   |   |  |   | 2,400  |   |  |   | 2,417  |  
|Goodwill and intangible write-offs                           |  |                    | 18,170  |               |         |   | 13,198        |         |  |               |        |   |               |         |       |   |         |   |       |         |  |   |        |   |  |   |       |   |  |   |       |  
|Restructuring (reversals) charges                            |  |                    | (312    | )             |         |   | 245           |         |  |               | 309     |   |               |         | (704   | ) |         |   | 660    |         |  |   | (25,454 | ) |  |   | 679    |   |  |   | 570    |  
|Business combination charges                                 |  |                    | 1,840   |               |         |   | 977           |         |  |               |        |   |               |         |       |   |         |   |       |         |  |   |        |   |  |   |       |   |  |   |       |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Total operating expenses (credits)                           |  |                    | 26,534  |               |         |   | 22,625        |         |  |               | 12,153  |   |               |         | 11,929 |   |         |   | 14,047 |         |  |   | (12,499 | ) |  |   | 15,068 |   |  |   | 14,741 |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Operating income (loss)                                      |  |                    | (17,166 | )             |         |   | (14,295       | )       |  |               | (2,067  | ) |               |         | (1,485 | ) |         |   | (448   | )       |  |   | 23,076  |   |  |   | (1,555 | ) |  |   | (707   | )
|Other income (expense), net                                  |  |                    | (10,714 | )             |         |   | (1,757        | )       |  |               | (959    | ) |               |         | 6,866  |   |         |   | (2,457 | )       |  |   | 315     |   |  |   | 57     |   |  |   | (24    | )
|Benefit (provision) for income taxes                         |  |                    | 109     |               |         |   | 540           |         |  |               | (70     | ) |               |         | 2,032  |   |         |   | 450    |         |  |   | (11     | ) |  |   | 6      |   |  |   | (136   | )
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Net (loss) income                                            |  | $                  | (27,771 | )             |         | $ | (15,512       | )       |  | $             | (3,096  | ) |               | $       | 7,413  |   |         | $ | (2,455 | )       |  | $ | 23,380  |   |  | $ | (1,492 | ) |  | $ | (867   | )
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Basic net (loss) income per share                            |  | $                  | (0.81   | )             |         | $ | (0.45         | )       |  | $             | (0.09   | ) |               | $       | 0.22   |   |         | $ | (0.07  | )       |  | $ | 0.70    |   |  | $ | (0.04  | ) |  | $ | (0.03  | )
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Dilute net (loss) income per share                           |  | $                  | (0.81   | )             |         | $ | (0.45         | )       |  | $             | (0.09   | ) |               | $       | 0.19   |   |         | $ | (0.07  | )       |  | $ | 0.69    |   |  | $ | (0.04  | ) |  | $ | (0.03  | )
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Shares used in computing basic net (loss) income per share   |  |                    | 34,430  |               |         |   | 34,320        |         |  |               | 34,181  |   |               |         | 33,971 |   |         |   | 33,768 |         |  |   | 33,599  |   |  |   | 33,476 |   |  |   | 33,300 |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  
|Shares used in computing diluted net (loss) income per share |  |                    | 34,430  |               |         |   | 34,320        |         |  |               | 34,181  |   |               |         | 39,968 |   |         |   | 33,768 |         |  |   | 34,052  |   |  |   | 33,476 |   |  |   | 33,300 |  
|                                                             |  |                    |         |               |         |   |               |         |  |               |         |   |               |         |        |   |         |   |        |         |  |   |         |  



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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
    ACCOUNTING AND FINANCIAL DISCLOSURE








|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES



| |                                   
| | ----------------------------------
| | Disclosure Controls and Procedures





| |                                                                     
| | --------------------------------------------------------------------
| | Managements Report on Internal Control Over
    Financial Reporting









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| |                                                         
| | --------------------------------------------------------
| | Changes in Internal Control Over Financial
    Reporting





| |                                             
| | --------------------------------------------
| | Limitations on the Effectiveness of Controls








|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION






PART III







|         |                                                   
|-------- | --------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT



|                    |  |     |    |  |                                                     |                                                                                                       
|------------------- |  | --- | -- |  | --------------------------------------------------- | ------------------------------------------------------------------------------------------------------
|Name                |  | Age |    |  | Principal Occupation/Position Held with the Company
|                    |  |     |    |  |                                                    
|Pehong Chen         |  |     | 48 |  |                                                     | Chairman of the Board of Directors, President, Chief Executive
    Officer and Chief Financial Officer
|David L. Anderson   |  |     | 62 |  |                                                     | Managing Director, Sutter Hill Ventures                                                               
|James D. Dixon      |  |     | 62 |  |                                                     | Formerly an executive with bankofamerica.com                                                          
|Robert Lee          |  |     | 57 |  |                                                     | Formerly an executive with Pacific Bell                                                               
|Roderick C. McGeary |  |     | 55 |  |                                                     | Formerly Chief Executive Officer, Brience, Inc.                                                       
|T. Michael Nevens   |  |     | 56 |  |                                                     | Former Managing Partner, McKinsey & Company                                                           

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Pehong Chen


David L. Anderson


James D. Dixon


Robert Lee


Roderick C. McGeary Co-Chief


T. Michael Nevens


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| |                                    
| | -----------------------------------
| | Code of Business Ethics and Conduct





| |                                 
| | --------------------------------
| | Audit Committee Financial Expert





| |                                                            
| | -----------------------------------------------------------
| | Section 16(A) Beneficial Ownership Reporting
    Compliance





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|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION



| |                        
| | -----------------------
| | Summary of Compensation



Summary Compensation Table


|                            |                                  |      |      |                        |     |              |         |         |              |              |            |         |     |        |              |     |  |   |   |         |  |   |        |        | 
|--------------------------- | -------------------------------- | ---- | ---- | ---------------------- | --- | ------------ | ------- | ------- | ------------ | ------------ | ---------- | ------- | --- | ------ | ------------ | --- |  | - | - | ------- |  | - | ------ | ------ | 
|                            |                                  |      |      |                        |     |              |         |         |              | Long Term    |            |         |    
|                            |                                  |      |      |                        |     | Compensation |         |         |             
|                            |                                  |      |      | Annual Compensation(1) |     | Awards       |         |         |             
|                            |                                  |      |      |                        |     | Securities   |         |         | All Other    |             
|                            |                                  |      |      |                        |     | Annual       |         |         | Other Annual |              | Underlying |         |     | Annual |             
|                            |                                  |      |      | Salary                 |     |              | Bonus   |         |              | Compensation |            | Options |     |        | Compensation |    
|Name and Principal Position |                                  | Year |      |                        | ($) |              |         | ($)     |              |              | ($)(2)     |         | (#) |        |              | ($) | 
|                            |                                  |      |      |                        |     |              |         |         |              |              |            |         |     |        |              |     | 
|Pehong Chen                 |                                  |      | 2005 |                        |     | $            | 350,000 |         |              | $            |           |         |     | $      |             |     |  | $ |  |         |  | $ |       |       
|                            | Chairman of the Board, President |      |      | 2004                   |     |              |         | 350,000 |              |              |            |        |     |        |              |    |  |   |   |        |  |   |        |       | 
|                            | and Chief Executive Officer      |      |      | 2003                   |     |              |         | 350,000 |              |              |            |        |     |        |              |    |  |   |   |        |  |   |        |       | 
|William E. Meyer(3)         |                                  |      | 2005 |                        |     | $            | 224,000 |         |              | $            |           |         |     |        |             |     |  |   |  |         |  |   |       |       
|                            | Executive Vice President         |      |      | 2004                   |     |              |         | 224,000 |              |              |            | 10,000  |     |        |              |    |  |   |   |        |  |   |        |       | 
|                            | and Chief Financial Officer      |      |      | 2003                   |     |              |         | 168,000 |              |              |            | 10,000  |     |        |              |    |  |   |   | 240,000 |  |   |        |       | 
|Alex Kormushoff(4)          |                                  |      | 2005 |                        |     | $            | 203,360 |         |              | $            |           |         |     |        |             |     |  |   |  |         |  |   | 69,000 |       
|                            | Senior Vice President,           |      |      | 2004                   |     |              |         | 205,000 |              |              |            |        |     |        |              |    |  |   |   | 200,000 |  |   |        | 56,250 | 
|                            | Worldwide Field Operations       |      |      | 2003                   |     |              |         | 200,000 |              |              |            | 18,750  |     |        |              |    |  |   |   |        |  |   |        |       | 






|    |                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes amounts earned but deferred at the election of the
    Named Executive Officers under our 401(k) plan.                                                                                                                                                                                                                                                 
|   
|(2) | As permitted by rules promulgated by the SEC no amounts are
    shown with respect to certain perquisites where such
    amounts do not exceed the lesser of 10% of the sum of the amount
    in the salary and bonus columns or $50,000.                                                                                                                     
|   
|(3) | Mr. Meyer joined the Company as Executive Vice President
    and Chief Financial Officer on April 1, 2003.                                                                                                                                                                                                                                                      
|   
|(4) | Mr. Kormushoff joined BroadVision on September 23,
    2002 and became Senior Vice President, Global Services on
    July 1, 2003. Mr. Kornushoff was Senior Vice
    President, Worldwide Field Operations from October 2004 until
    his departure in December, 2005. Other compensation paid to
    Mr. Kormushoff includes payment of commissions on sales.



| |                                  
| | ---------------------------------
| | Stock Option Grants and Exercises



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Fiscal Year End Option Values of Unexercised Options


|                 |  |             |   |  |          |                        |                   |             |                      |                          |               |  |  |             |   |  |               |  |   |  |  |  |   | 
|---------------- |  | ----------- | - |  | -------- | ---------------------- | ----------------- | ----------- | -------------------- | ------------------------ | ------------- |  |  | ----------- | - |  | ------------- |  | - |  |  |  | - | 
|                 |  |             |   |  |          | Number of Securities   |                   |             | Value of Unexercised |                         
|                 |  |             |   |  |          | Underlying Unexercised |                   |             | In-the-Money         |                         
|                 |  |             |   |  |          | Options at             |                   |             | Options at           |                         
|                 |  | Shares      |   |  |          |                        | December 31, 2005 |             |                      | December 31, 2005 ($)(3) |              
|                 |  | Acquired    |   |  | Value    |                        |                   | (#)(2)      |                      |                          | Unexercisable | 
|                 |  | on Exercise |   |  | Realized |                        |                   |             |                      |                          |               | 
|Name             |  | (#)         |   |  | ($)(1)   |                        |                   | Exercisable |                      |                          | Unexercisable |  |  | Exercisable |   |  | Unexercisable | 
|                 |  |             |   |  |          |                        |                   |             |                      |                          |               |  |  |             |   |  |               | 
|Pehong Chen      |  |             |  |  |          |                        |                  |             |                      |                          | 1,704,444     |  |  |             |  |  |               |  |  |  |  |  |  | 
|William E. Meyer |  |             |  |  |          |                        |                  |             |                      |                          | 240,000       |  |  |             |  |  |               |  |  |  |  |  |  | 
|Alex Kormushoff  |  |             |  |  |          |                        |                  |             |                      |                          | 243,333       |  |  |             |  |  |               |  |  |  |  |  |  | 






|    |                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Value received is based on the per share deemed values of our
    common stock on the date of exercise, determined after the date
    of grant solely for financial accounting purposes, less the
    exercise price, without taking into account any taxes that may
    be payable in connection the transaction.
|   
|(2) | Reflects vested and unvested shares at December 31, 2005.
    Options granted are immediately exercisable, but are subject to
    our right to repurchase unvested shares on termination of
    employment.                                                                                                       
|   
|(3) | Fair market value of BroadVisions common stock at
    December 31, 2005, which was $0.49 per share, less the
    exercise price of the options.                                                                                                                                                                  

REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD


OF DIRECTORS ON EXECUTIVE COMPENSATION*




COMPENSATION PHILOSOPHY






| |   |                                                                                                                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The level of compensation paid to executive officers in
    positions of companies similarly situated in size and products.
    To ensure that pay is competitive, the Committee, from time to
    time, compares the Companys executive compensation
    packages with those offered by other companies in the same or






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| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The individual performance of each executive officer. Individual
    performance includes meeting individual performance objectives,
    demonstration of job knowledge, skills, teamwork and acceptance
    of the Companys core values.                                   
|
| |  | Corporate performance, which is evaluated by factors such as
    performance relative to competitors, performance relative to
    business conditions and progress in meeting the Companys
    objectives and goals as typically reflected in the annual
    operating plan.
|
| |  | The responsibility and authority of each position relative to
    other positions within the Company.                                                                                                                                                                        



BASE SALARY




ANNUAL INCENTIVE






LONG-TERM INCENTIVES






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CEO COMPENSATION FOR THE FISCAL YEAR ENDED DECEMBER 31,
2005






CONCLUSION




COMPENSATION COMMITTEE






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PERFORMANCE MEASUREMENT COMPARISON*




COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*











|  |                                                                                                                     
|- | --------------------------------------------------------------------------------------------------------------------
|* | $100 invested on 12/31/00 in stock or index-including
    reinvestment of dividends. Fiscal year ending December 31.








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|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
    MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Controlling Stockholder




Beneficial Ownership of BroadVision Common Stock




|                                                                           |                            |                         |            |  |            |  |       |  | 
|-------------------------------------------------------------------------- | -------------------------- | ----------------------- | ---------- |  | ---------- |  | ----- |  | 
|                                                                           |                            | Beneficial Ownership(1) |           
|                                                                           |                            |                         |           
|                                                                           |                            | Number of               |            |  | Percent of | 
|Beneficial Owner                                                           |                            | Shares (#)              |            |  | Total (%)  | 
|                                                                           |                            |                         |            |  |            | 
|Pehong Chen(2)                                                             |                            |                         | 42,079,429 |  |            |  | 59.4% | 
|William E. Meyer(3)                                                        |                            |                         | 265,061    |  |            |  | *     | 
|Alex Kormushoff                                                            |                            |                         | 0          |  |            |  | *     | 
|David L. Anderson(4)                                                       |                            |                         | 101,437    |  |            |  | *     | 
|James D. Dixon(5)                                                          |                            |                         | 96,000     |  |            |  | *     | 
|Robert Lee(6)                                                              |                            |                         | 85,039     |  |            |  | *     | 
|Roderick C. McGeary(7)                                                     |                            |                         | 84,000     |  |            |  | *     | 
|T. Michael Nevens(8)                                                       |                            |                         | 108,000    |  |            |  | *     | 
|Honu Holdings, LLC(2)                                                      |                            |                         | 34,500,000 |  |            |  | 49.9% | 
|                                                                           | 585 Broadway Redwood City, |                         |            |  |            |  |       |  | 
|                                                                           | CA 94063                   |                         |            |  |            |  |       |  | 
|All Current Directors and Executive Officers as a group
    (7 persons)(9) |                            |                         | 42,818,966 |  |            |  | 60.4% | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Less than one percent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(1) | This table is based upon information supplied by officers,
    directors and principal stockholders and Schedules 13D and 13G
    filed with the SEC. Unless otherwise indicated in the footnotes
    to this table and subject to community property laws where
    applicable, the Company believes that each of the stockholders
    named in this table has sole voting and investment power with
    respect to the shares indicated as beneficially owned.
    Applicable percentages are based on 69,180,991 shares
    outstanding on March 15, 2006, adjusted as required by
    rules promulgated by the SEC. The Companys directors and
    executive officers can be reached at BroadVision, Inc., 585
    Broadway, Redwood City, California 94063.
|   
|(2) | Includes 5,874,985 shares held in trust by Dr. Chen
    and his wife for their benefit and 1,704,444 shares of
    common stock issuable upon the exercise of stock options
    exercisable within 60 days of March 15, 2006. Also
    includes 34,500,000 shares held by Honu Holdings, LLC, of
    which Dr. Chen is the sole member. Excludes
    300,000 shares of common stock held in trust by independent
    trustees for the benefit of Dr. Chens children.                                                                                                                                                                                                                                                                                            
|   
|(3) | Includes 250,000 shares of common stock issuable upon the
    exercise of stock options exercisable within 60 days of
    March 15, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(4) | Includes 46,604 shares of common stock issuable upon the
    exercise of a stock option exercisable within 60 days of
    March 15, 2006 and 30,833 shares held by The Anderson
    Living Trust, of which Mr. Anderson is Trustee.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(5) | Includes 60,000 shares of common stock issuable upon the
    exercise of stock options exercisable within 60 days of
    March 15, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

107



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##### Table of Contents





|    |                                                                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | Includes 60,000 shares of common stock issuable upon the
    exercise of stock options exercisable within 60 days of
    March 15, 2006. Also includes 1,039 shares held in
    trust by Mr. Lee and his wife for their benefit.
|   
|(7) | Includes 60,000 shares of common stock issuable upon the
    exercise of stock options exercisable within 60 days of
    March 15, 2006.                                                                                        
|   
|(8) | Includes 60,000 shares of common stock issuable upon the
    exercise of stock options exercisable within 60 days of
    March 15, 2006.                                                                                        
|   
|(9) | Includes the information contained in the notes above, as
    applicable, for directors and executive officers of the Company
    as of March 15, 2006.                                                                         






|         |                                               
|-------- | ----------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS







| |                                     
| | ------------------------------------
| | Director and Officer Indemnification










|         |                                       
|-------- | --------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES





| |                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Audit Fees. Audit fees billed were $801,000 and $890,000
    for the years ended December 31, 2005 and December 31,
    2004, respectively. The fees were for professional services
    rendered for the audits of our consolidated financial
    statements, reviews of the financial statements included in our
    quarterly reports, consultations on matters that arose during
    our audit and reviews of SEC registration statements.

108



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##### Table of Contents





| |                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Audit-Related Fees. No audit-related fees were billed in
    the years ended December 31, 2005 and December 31,
    2004.                                                                                                                      
|
| | Tax Fees. Tax fees billed were $181,000 and $174,000 for
    the years ended December 31, 2005 and December 31,
    2004, respectively. The tax fees were for professional services
    related to tax compliance, tax advice and tax planning.
|
| | All Other Fees. There were no other fees billed in the
    years ended December 31, 2005 and December 31, 2004.                                                                                                                                





| |                                     
| | ------------------------------------
| | Pre-Approval Policies And Procedures






PART IV







|         |                                           
|-------- | ------------------------------------------
|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES



Consolidated Financial Statements. 10-K.




| |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Reports of Independent Registered Public Accounting Firm                                                                                                                
|
| | Consolidated Balance Sheets as of December 31, 2005 and 2004                                                                                                            
|
| | Consolidated Statements of Operations for each of the years in
    the three-year period ended December 31, 2005                                                        
|
| | Consolidated Statements of Stockholders Equity
    (Deficit) and Comprehensive Income (Loss) for each of the
    years in the three-year period ended December 31, 2005
|
| | Consolidated Statements of Cash Flows for each of the years in
    the three-year period ended December 31, 2005                                                        
|
| | Notes to Consolidated Financial Statements                                                                                                                              

Financial Statement Schedule. 10-K.




| |                                                
| | -----------------------------------------------
| | Schedule II  Valuation and Qualifying Accounts

Exhibits. 10-K.


109



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##### Table of Contents






SIGNATURES






| |                  
| | -----------------
| | BROADVISION, INC.



| |     |                
| | --- | ---------------
| | By: | /s/ Pehong Chen

| |                                      
| | -------------------------------------
| |                                      
| | Pehong Chen                          
| | Chairman of the Board,               
| | Chief Executive Officer and President

POWER OF ATTORNEY


10-K, attorney-in


|                                       |  |                                                                                                |  |              |  | 
|-------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | ------------ |  | 
|Signature                              |  | Title                                                                                          |  | Date        
|                                       |  |                                                                                                |  |             
|                                      
|/s/ Pehong ChenPehong Chen             |  | Chairman of the Board, Chief Executive Officer and President
    (Principal Executive Officer) |  | June 9, 2006
|                                      
|/s/ Pehong ChenPehong Chen             |  | Chief Financial Officer
    (Principal Accounting Officer)                                     |  | June 9, 2006
|                                      
|/s/ David L. AndersonDavid L. Anderson |  | Director                                                                                       |  | June 7, 2006
|                                      
|/s/ James D. DixonJames D. Dixon       |  | Director                                                                                       |  | June 7, 2006
|                                      
|/s/ Bob LeeBob Lee                     |  | Director                                                                                       |  | June 7, 2006
|                                      
|/s/ Roderick McGearyRoderick McGeary   |  | Director                                                                                       |  | June 7, 2006
|                                      
|/s/ T. Michael NevensT. Michael Nevens |  | Director                                                                                       |  | June 7, 2006

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##### Table of Contents



BROADVISION, INC. AND SUBSIDIARIES


SCHEDULE II  VALUATION AND QUALIFYING
ACCOUNTS


|                                              |                              |                |   |         |               |  |   |               |   |            |        |        |   |  |   |       | 
|--------------------------------------------- | ---------------------------- | -------------- | - | ------- | ------------- |  | - | ------------- | - | ---------- | ------ | ------ | - |  | - | ----- | 
|                                              |                              |                |   | Charged |               |  |   |               |  
|                                              |                              | Balance at     |   |         | (Credited) to |  |   |               |   | Balance at |       
|                                              |                              | Beginning of   |   |         | Costs and     |  |   |               |   | End of     |       
|                                              |                              | Period         |   |         | Expenses      |  |   | Deductions(1) |   |            | Period |       
|                                              |                              |                |   |         |               |  |   |               |   |            |        |       
|                                              |                              | (In thousands) |  
|Allowance for doubtful accounts and reserves: |                              |                |   |         |               |  |   |               |   |            |        |        |   |  |   |      
|                                              | Year Ended December 31, 2005 |                | $ | 1,409   |               |  | $ | (598          | ) |            | $      | (80    | ) |  | $ | 731   | 
|                                              | Year Ended December 31, 2004 |                |   | 3,022   |               |  |   | (1,466        | ) |            |        | (147   | ) |  |   | 1,409 | 
|                                              | Year Ended December 31, 2003 |                |   | 5,502   |               |  |   | (812          | ) |            |        | (1,668 | ) |  |   | 3,022 | 






|    |                                                    
|--- | ---------------------------------------------------
|(1) | Represents net charge-offs of specific receivables.

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##### Table of Contents



BROADVISION, INC. ANNUAL REPORT ON
FORM 10-K
DECEMBER 31, 2005


INDEX TO EXHIBITS


|        |    |             |  |                                                                                                                                                                                                                  
|------- | -- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Description
|        |    |            
|        | 3  | .1(1)       |  | Amended and Restated Certificate of Incorporation.                                                                                                                                                               
|       
|        | 3  | .2(6)       |  | Certificate of Amendment of Certificate of Incorporation.                                                                                                                                                        
|       
|        | 3  | .3(21)      |  | Amended and Restated Bylaws.                                                                                                                                                                                     
|       
|        | 4  | .1(1)       |  | References are hereby made to Exhibits 3.1 to 3.2.                                                                                                                                                               
|       
|        | 4  | .4(19)      |  | Registration Rights Agreement dated November 10, 2004 among
    the Company and certain investors listed on Exhibit A
    thereto.                                                                               
|       
|        | 4  | .5          |  | Registration Rights Agreement dated March 8, 2006, between
    the Company and Honu Holdings LLC.                                                                                                                
|       
|        | 10 | .1(8)(a)    |  | Equity Incentive Plan as amended through May 1, 2002 (the
    Equity Incentive Plan).                                                                                                                          
|       
|        | 10 | .2(1)(a)    |  | Form of Incentive Stock Option under the Equity Incentive Plan.                                                                                                                                                  
|       
|        | 10 | .3(1)(a)    |  | Form of Nonstatutory Stock Option under the Equity Incentive
    Plan.                                                                                                                                           
|       
|        | 10 | .4(1)(a)    |  | Form of Nonstatutory Stock Option (Performance-Based).                                                                                                                                                           
|       
|        | 10 | .5(8)(a)    |  | 1996 Employee Stock Purchase Plan as amended May 1, 2002
    (the Employee Stock Purchase Plan).                                                                                                               
|       
|        | 10 | .6(1)(a)    |  | Employee Stock Purchase Plan Offering (Initial Offering).                                                                                                                                                        
|       
|        | 10 | .7(1)(a)    |  | Employee Stock Purchase Plan Offering (Subsequent Offering).                                                                                                                                                     
|       
|        | 10 | .8(1)(b)    |  | Terms and Conditions dated January 1, 1995 between IONA
    Technologies LTD and the Company.                                                                                                                    
|       
|        | 10 | .13(2)      |  | Lease dated February 5, 1997 between the Company and
    Martin/ Campus Associates, L.P.                                                                                                                         
|       
|        | 10 | .20(3)(a)   |  | 2000 Non-Officer Equity Incentive Plan.                                                                                                                                                                          
|       
|        | 10 | .23(4)(b)   |  | Independent Software Vendor Agreement dated June 30, 1998
    between the Company and IONA Technologies, PLC, as amended.                                                                                        
|       
|        | 10 | .27(5)      |  | Amended and Restated Loan and Security Agreement dated
    March 31, 2002 between the Company and Silicon Valley Bank.                                                                                           
|       
|        | 10 | .33(7)      |  | Form of Indemnity Agreement between the Company and each of its
    directors and executive officers.                                                                                                            
|       
|        | 10 | .34(9)      |  | Offer letter dated March 4, 2003 by and between the Company
    and William Meyer.                                                                                                                               
|       
|        | 10 | .35(10)     |  | First Amendment to the Amended and Restated Loan and Security
    Agreement dated February 28, 2003 between the Company and
    Silicon Valley Bank.                                                             
|       
|        | 10 | .36(10)     |  | Second Amendment to the Amended and Restated Loan and Security
    Agreement dated June 30, 2003 between the Company and
    Silicon Valley Bank.                                                                
|       
|        | 10 | .37(10)     |  | BroadVision, Inc. Change in Control Severance Benefit Plan,
    established effective May 22, 2003.                                                                                                              
|       
|        | 10 | .38(10)     |  | BroadVision, Inc. Executive Severance Benefit Plan, established
    effective May 22, 2003.                                                                                                                      
|       
|        | 10 | .39(10)     |  | Third Amendment to the Amended and Restated Loan and Security
    Agreement dated June 30, 2003 between the Company and
    Silicon Valley Bank.                                                                 
|       
|        | 10 | .41(11)     |  | Offer Letter dated September 23, 2002 between the Company
    and Alex Kormushoff.                                                                                                                               
|       
|        | 10 | .42(11)     |  | Fourth Amendment to the Amended and Restated Loan and Security
    Agreement dated January 21, 2004 between the Company and
    Silicon Valley Bank.                                                             
|       
|        | 10 | .43(11)     |  | Fifth Modification to Amended and Restated Loan and Security
    Agreement dated February 27, 2004 between the Company and
    Silicon Valley Bank.                                                              
|       
|        | 10 | .44(13)     |  | Assignment and Assumption of Master Lease, Partial Termination
    of Master Lease and Assignment and Assumption of Subleases,
    dated July 7, 2004, between Pacific Shores Investors, LLC
    and the Company.

112



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|        |    |             |  |                                                                                                                                                                                
|------- | -- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    | Description
|        |    |            
|       
|        | 10 | .45(13)     |  | Warrant to Purchase up to 700,000 share of common stock,
    dated July 7, 2004, issued to Pacific Shores Investors, LLC.                                                      
|       
|        | 10 | .46(13)     |  | Triple Net Space Lease, dated as of July 7, 2004, between
    Pacific Shores Investors, LLC and the Company.                                                                   
|       
|        | 10 | .47(14)     |  | Sixth Amendment to the Amended and Restated Loan and Security
    Agreement dated September 29, 2004 between the Company and
    Silicon Valley Bank.                          
|       
|        | 10 | .48(15)     |  | Securities Purchase Agreement dated as of November 10, 2004.                                                                                                                   
|       
|        | 10 | .49(16)     |  | Seventh Amendment to the Amended and Restated Loan and Security
    Agreement dated November 9, 2004 between the Company and
    Silicon Valley Bank.                          
|       
|        | 10 | .50(17)     |  | Agreement to Restructure Lease and To Assign Subleases dated as
    of October 1, 2004 between VEF III Funding, LLC and
    the Company.                                       
|       
|        | 10 | .51(18)     |  | Amendment No. 5 to IONA Independent Software Vendor
    Agreement dated December 20, 2004, between IONA
    Technologies, Inc. and the Company.                                
|       
|        | 10 | .52(19)     |  | Agreement to Assign Lease and Sublease dated as of
    January 26, 2005 between the Company and 100 Spear Street
    Owners Corporation.                                       
|       
|        | 10 | .53(19)     |  | Letter dated January 26, 2005 amending Agreement to Assign
    Lease and Sublease dated as of January 26, 2005 between the
    Company and 100 Spear Street Owners Corporation.
|       
|        | 10 | .54(20)     |  | Settlement Agreement dated for reference purposes
    February 4, 2005, by and between Metropolitan Life
    Insurance Company and the Company.                                
|       
|        | 10 | .55(21)     |  | Debt Conversion Agreement dated as of December 20, 2005,
    between the Company and Honu Holdings, LLC                                                                        
|       
|        | 21 | .1(22)      |  | Subsidiaries of the Company.                                                                                                                                                   
|       
|        | 23 | .1          |  | Consent of BDO Seidman, LLP.                                                                                                                                                   
|       
|        | 23 | .2          |  | Consent of Stonefield Josephson, Inc.                                                                                                                                          
|       
|        | 24 | .1          |  | Power of Attorney, pursuant to which amendments to this Annual
    Report on Form 10-K may be filed, is included on the
    signature pages hereto.                            
|       
|        | 31 | .1          |  | Certification of the Chief Executive Officer of the Company.                                                                                                                   
|       
|        | 31 | .2          |  | Certification of the Chief Financial Officer of the Company.                                                                                                                   
|       
|        | 32 | .1          |  | Certification of the Chief Executive Officer and Chief Financial
    Officer of the Company pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002                      






| |     |                                                                                                                                                                                                                                                                
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Incorporated by reference to the Companys Registration
    Statement on
    Form S-1 filed on
    April 19, 1996 as amended by Amendment No. 1 filed on
    May 9, 1996, Amendment No. 2 filed on May 29,
    1996 and Amendment No. 3 filed on June 17, 1996.
|
| | (2) | Incorporated by reference to the Companys
    Form 10-K for the
    fiscal year ended December 31, 1996 filed on March 31,
    1997 (SEC File No. 000-28252).                                                                                                 
|
| | (3) | Incorporated by reference to the Companys Registration
    Statement on
    Form S-8 filed on
    October 15, 2003.                                                                                                                                           
|
| | (4) | Incorporated by reference to the Companys
    Form 10-Q for the
    quarter ended June 30, 2001 filed on August 14, 2001.                                                                                                                                     
|
| | (5) | Incorporated by reference to the Companys
    Form 10-Q for the
    quarter ended March 31, 2002 filed on May 16, 2002.                                                                                                                                       
|
| | (6) | Incorporated by reference to the Companys Proxy Statement
    filed on May 14, 2002.                                                                                                                                                                          
|
| | (7) | Incorporated by reference to the Companys
    Form 10-Q for the
    quarter ended September 30, 2002 filed on November 14,
    2002.                                                                                                                          
|
| | (8) | Incorporated by reference to the Companys Registration
    Statement on
    Form S-8 filed on
    August 1, 2002.                                                                                                                                             

113



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| |     |                                                                                                                         
| | --- | ------------------------------------------------------------------------------------------------------------------------
| | (9) | Incorporated by reference to the Companys
    Form 10-Q for the
    quarter ended March 31, 2003 filed on May 14, 2003.



|     |                                                                                                                                      
|---- | -------------------------------------------------------------------------------------------------------------------------------------
|(10) | Incorporated by reference to the Companys
    Form 10-Q for the
    quarter ended June 30, 2003 filed on August 14, 2003.           
|    
|(11) | Incorporated by reference to the Companys
    Form 10-K for the
    fiscal year ended December 31, 2003 filed on March 15,
    2004.
|    
|(12) | Incorporated by reference to the Companys
    Form 10-Q for the
    quarter ended March 31, 2004 filed on May 10, 2004.             
|    
|(13) | Incorporated by reference to the Companys Current Report
    on Form 8-K filed
    on August 9, 2004.                               
|    
|(14) | Incorporated by reference to the Companys Current Report
    on Form 8-K filed
    on October 25, 2004.                             
|    
|(15) | Incorporated by reference to the Companys Current Report
    on Form 8-K filed
    on November 10, 2004.                            
|    
|(16) | Incorporated by reference to the Companys Current Report
    on Form 8-K filed
    on November 17, 2004.                            
|    
|(17) | Incorporated by reference to the Companys Current Report
    on Form 8-K filed
    on November 19, 2004.                            
|    
|(18) | Incorporated by reference to the Companys Current Report
    on Form 8-K filed
    on December 23, 2004.                            
|    
|(19) | Incorporated by reference to the Companys Current Report
    on Form 8-K filed
    on February 1, 2005.                             
|    
|(20) | Incorporated by reference to the Companys Current Report
    on Form 8-K filed
    on February 16, 2005.                            



| |     |                                                                          
| | --- | -------------------------------------------------------------------------
| | (a) | Represents a management contract or compensatory plan or
    arrangement.
|
| | (b) | Confidential treatment requested.                                        



|     |                                                                                                                            
|---- | ---------------------------------------------------------------------------------------------------------------------------
|(21) | Incorporated by reference to the Companys Current Report
    on Form 8-K filed
    on December 22, 2005.                  
|    
|(22) | Filed previously with the Companys Form 10-K for the
    fiscal year ended December 31, 2004, filed on
    March 15, 2005.

114