UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
 (Mark One)
 þ
              
              QUARTERLY REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 For the Quarter ended March 31,
2008
 OR
 o
              
              TRANSITION REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 0-28252(Commission File
Number)
 BROADVISION, INC.
 
 Delaware
                
                94-3184303(State or other jurisdiction of
                
                (I.R.S. Employerincorporation or organization)
                
                Identification Number)1600 Seaport
      Blvd., Suite 550, North Bldg,
                
                94063Redwood
      City, California(Address of principal executive offices)
                
                (Zip code)
 (650) 331-1000
   þ o
  o þ o
  o þ
 As of
April 30, 2008 there were 109,241,459 shares of the Registrant's Common Stock
issued and outstanding.
 
  BROADVISION, INC. AND
SUBSIDIARIES FORM 10-Q Quarter Ended March 31,
2008
 TABLE OF
CONTENTS
 PART
      I.
                  
                  FINANCIAL INFORMATIONItem 1.
                  
                  Financial StatementsCondensed Consolidated Balance Sheets at March 31, 2008
      (unaudited) and December 31, 2007
                  
                  1Condensed Consolidated Income Statements and Comprehensive
      Income (Loss) for the three months ended
                      March 31, 2008 and
    2007 (unaudited)
                  
                  2Condensed Consolidated Statements of Cash Flows for the three
      months ended March 31, 2008 and
      2007 (unaudited)
                  
                  3Notes to Condensed Consolidated Financial
      Statements (unaudited)
                  
                  4Item 2.
                  
                  Management's
      Discussion and Analysis of Financial Condition and Results ofOperations
                  
                  11Item 3.
                  
                  Quantitative and Qualitative Disclosures About Market
      Risk
                  
                  15Item 4.
                  
                  Controls and Procedures
                  
                  15PART II.
                  
                  OTHER
      INFORMATIONItem 1.
                  
                  Legal Proceedings
                  
                  16Item 1A.
                  
                  Risk Factors
                  
                  16Item 2.
                  
                  Unregistered Sales of Equity Securities and Use of
      Proceeds
                  
                  23Item 3.
                  
                  Defaults Upon Senior Securities
                  
                  23Item 4.
                  
                  Submission of Matters to a Vote of Security
      Holders
                  
                  23Item 5.
                  
                  Other Information
                  
                  23Item 6.
                  
                  Exhibits
                  
                  24SIGNATURES
 EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  Table of Contents
 PART I. FINANCIAL
INFORMATION
 
 Item 1.
Financial Statements
  BROADVISION, INC. AND
      SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE SHEETS(In thousands, except par value
      amounts)March
31,
                        
                        December
    31,2008
                        
                        2007(unaudited)
                        
                        *ASSETSCurrent
      assets:Cash
      and cash equivalents
                        
                        $
                        57,710
                        
                        $
                        53,973Accounts
      receivable, less allowance for doubtful accounts of$490
      as of March 31, 2008 and $585 as of
                          December 31,
      2007
                        
                        
                        8,985
                        
                        
                        7,614Restricted
      cash
                        
                        
                        20
                        
                        
                        20Prepaids
      and other
                        
                        
                        1,650
                        
                        
                        1,410Total
      current assets
                        
                        
                        68,365
                        
                        
                        63,017Property
      and equipment, net
                        
                        
                        643
                        
                        
                        688Restricted
      cash, net of current portion
                        
                        
                        1,000
                        
                        
                        1,000Goodwill
                        
                        
                        25,066
                        
                        
                        25,066Other
      assets
                        
                        
                        538
                        
                        
                        541Total
      assets
                        
                        $
                        95,612
                        
                        $
                        90,312LIABILITIES AND STOCKHOLDERS
      EQUITYCurrent
      liabilities:Accounts
      payable
                        
                        $
                        1,395
                        
                        $
                        1,359Accrued
      expenses
                        
                        
                        6,368
                        
                        
                        6,386Warrant
      liability
                        
                        
                        1,741
                        
                        
                        4,195Unearned
      revenue
                        
                        
                        2,814
                        
                        
                        2,857Deferred
      maintenance
                        
                        
                        9,494
                        
                        
                        7,726Total
      current liabilities
                        
                        
                        21,812
                        
                        
                        22,523Other
      non-current liabilities
                        
                        
                        3,269
                        
                        
                        3,024Total
      liabilities
                        
                        
                        25,081
                        
                        
                        25,547Stockholders
      equity:Convertible
      preferred stock, $0.0001 par value; 1,000 shares authorized as of March
      31, 2008 andDecember
      31, 2007
                          respectively;
      none issued and outstanding
                        
                        
                        -
                        
                        
                        -Common
      stock, $0.0001 par value; 280,000 shares authorized and 108,965 shares
      issued and outstanding as of March 31,
                          2008;
      280,000 shares authorized and 108,929 shares issued and outstanding as of
      December 31, 2007
                        
                        
                        10
                        
                        
                        10Additional
      paid-in capital
                        
                        
                        1,257,532
                        
                        
                        1,257,132Accumulated
      other comprehensive income
                        
                        
                        21
                        
                        
                        16Accumulated
      deficit
                        
                        
                        (1,187,032
                        )
                        
                        (1,192,393
                        )Total
      stockholders equity
                        
                        
                        70,531
                        
                        
                        64,765Total
      liabilities and stockholders equity
                        
                        $
                        95,612
                        
                        $
                        90,312*
      Derived from audited consolidated financial statements filed in the
      Company's 2007 Annual Report on
Form 10-K.
 See Accompanying Notes to Condensed
Consolidated Financial Statements
 
 ~ 1
~
 Table of Contents
  BROADVISION, INC. AND
      SUBSIDIARIESCONDENSED
      CONSOLIDATED INCOME STATEMENTS AND COMPREHENSIVE
      INCOME (LOSS)(In thousands, except par share
      amounts)(Unaudited)Three Months Ended March
      31,2008
                        
                        2007Revenues:Software
      licenses
                        
                        $
                        3,977
                        
                        $
                        5,733Services
                        
                        
                        6,053
                        
                        
                        7,012Total
      revenues
                        
                        
                        10,030
                        
                        
                        12,745Cost of
      revenues:Cost
      of software licenses
                        
                        
                        7
                        
                        
                        12Cost
      of services
                        
                        
                        2,253
                        
                        
                        2,393Total
      cost of revenues
                        
                        
                        2,260
                        
                        
                        2,405Gross
      profit
                        
                        
                        7,770
                        
                        
                        10,340Operating
      expenses:Research
      and development
                        
                        
                        2,337
                        
                        
                        2,655Sales
      and marketing
                        
                        
                        1,885
                        
                        
                        2,069General
      and administrative
                        
                        
                        1,698
                        
                        
                        1,067Restructuring
      (credit) charge
                        
                        
                        (18
                        )
                        
                        278Total
      operating expenses
                        
                        
                        5,902
                        
                        
                        6,069Operating
      income
                        
                        
                        1,868
                        
                        
                        4,271Interest
      income, net
                        
                        
                        464
                        
                        
                        355Gain
      (loss) on revaluation of warrants
                        
                        
                        2,454
                        
                        
                        (7,343
                        )Other
      income, net
                        
                        
                        858
                        
                        
                        277Income (loss) before
      provision for income taxes
                        
                        
                        5,644
                        
                        
                        (2,440
                        )Provision
      for income taxes
                        
                        
                        (283
                        )
                        
                        (56
                        )Net
      income (loss)
                        
                        $
                        5,361
                        
                        $
                        (2,496
                        )Basic
      income (loss) per share
                        
                        $
                        0.05
                        
                        $
                        (0.02
                        )Diluted
      income (loss) per share
                        
                        $
                        0.05
                        
                        $
                        (0.02
                        )Shares used in
      computing:Weighted
      average shares-basic
                        
                        
                        108,961
                        
                        
                        106,667Weighted
      average shares-diluted
                        
                        
                        110,327
                        
                        
                        106,667Comprehensive
      income (loss):Net
      income (loss)
                        
                        $
                        5,361
                        
                        $
                        (2,496
                        )Other
      comprehensive gain (loss), net of tax:Foreign
      currency translation adjustment
                        
                        
                        5
                        
                        
                        (26
                        )Total
      comprehensive income (loss)
                        
                        $
                        5,366
                        
                        $
                        (2,522
                        )
 See Accompanying Notes to Condensed
Consolidated Financial Statements
  ~ 2
~
 Table of Contents
   BROADVISION, INC. AND SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS(In thousands, Unaudited)Three Months Ended March
      31,2008
                        
                        2007Cash flows from operating
      activities:Net
      income (loss)
                        
                        $
                        5,361
                        
                        $
                        (2,496
                        )Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Depreciation
      and amortization
                        
                        
                        118
                        
                        
                        532Reversal
      of allowance for doubtful accounts
                        
                        
                        (95
                        )
                        
                        (397
                        )Stock
      based compensation
                        
                        
                        185
                        
                        
                        300Loss
      on sale or abandonment of fixed assets
                        
                        
                        -
                        
                        
                        3(Gain)
      loss on revaluation of warrants
                        
                        
                        (2,454
                        )
                        
                        7,343Changes
      in operating assets and liabilities:Accounts
      receivable
                        
                        
                        (1,276
                        )
                        
                        (50
                        )Prepaids
      and other
                        
                        
                        (240
                        )
                        
                        (35
                        )Other
      non-current assets
                        
                        
                        3
                        
                        
                        17Accounts
      payable and accrued expenses
                        
                        
                        560
                        
                        
                        (1,104
                        )Restructuring
      accrual
                        
                        
                        (122
                        )
                        
                        (125
                        )Unearned
      revenue and deferred maintenance
                        
                        
                        1,725
                        
                        
                        392Other
      noncurrent liabilities
                        
                        
                        (175
                        )
                        
                        (544
                        )Net
      cash provided by operating activities
                        
                        
                        3,590
                        
                        
                        3,836Cash flows from investing
      activities:Purchase
      of property and equipment
                        
                        
                        (73
                        )
                        
                        (495
                        )Transfer
      from restricted cash
                        
                        
                        -
                        
                        
                        201Net
      cash used for investing activities
                        
                        
                        (73
                        )
                        
                        (294
                        )Cash flows from financing
      activities:Proceeds
      from issuance of common stock, net
                        
                        
                        215
                        
                        
                        498Net
      cash provided by financing activities
                        
                        
                        215
                        
                        
                        498Effect
      of exchange rates on cash and cash equivalents
                        
                        
                        5
                        
                        
                        (26
                        )Net
      increase in cash and cash equivalents
                        
                        
                        3,737
                        
                        
                        4,014Cash
      and cash equivalents at beginning of period
                        
                        
                        53,973
                        
                        
                        37,003Cash
      and cash equivalents at end of period
                        
                        $
                        57,710
                        
                        $
                        41,017Supplemental information of
      noncash financing and investing activities:Reclassification
      of tax liability to accumulated deficit
                        
                        $
                        -
                        
                        $
                        388
 See Accompanying Notes to Condensed
Consolidated Financial Statements
  ~ 3
~
 Table of Contents
 
 BROADVISION, INC. AND
SUBSIDIARIES
 NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
  (Unaudited)
  Note 1. Organization and Summary of
Significant Accounting Policies
 
 There
have been no material changes in our critical accounting policies, estimates and
judgments during the three months ended March 31, 2008 compared to the
disclosures in Part II, Item 8 of our Annual Report on Form 10-K for the year
ended December 31, 2007, filed with the SEC on February 20, 2008.
 
 
 Basis of
Presentation
 
 The
condensed consolidated financial results and related information as of and for
the three months ended March 31, 2008 and 2007 are unaudited. The Condensed
Consolidated Balance Sheet at December 31, 2007 has been derived from the
audited consolidated financial statements as of that date but does not
necessarily reflect all of the informational disclosures previously reported in
accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). The
unaudited condensed consolidated financial statements should be reviewed in
conjunction with the audited consolidated financial statements and related notes
contained in our 2007 Annual Report on Form 10-K filed with the SEC on February
20, 2008.
 
 The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with U.S. GAAP for interim financial information and with
the instructions in Form 10-Q and Article 10 of Regulation S-X. Accordingly,
these statements do not include all of the information and footnotes required by
U.S. GAAP for annual financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation of interim financial information have been included. Operating
results for the three months ended March 31, 2008 are not necessarily indicative
of the results that may be expected for the remainder of the fiscal year ending
December 31, 2008 or any future interim period. The condensed consolidated
financial statements include our accounts and our wholly owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated.
 
 Use of
Estimates
 
 The
preparation of our Condensed Consolidated Financial Statements in conformity
with U.S. GAAP requires management to make certain assumptions and estimates
that affect reported amounts of assets and liabilities as of the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. On an ongoing basis, we evaluate our estimates, including
those related to allowance for doubtful accounts, stock-based compensation,
investments, goodwill and intangible assets, income taxes and restructuring, as
well as contingencies and litigation. We base our estimates on historical
experience and on various other assumptions that we believe are reasonable, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates using different assumptions or
conditions. We believe the following critical accounting policies reflect the
more significant judgments and estimates used in the preparation of our
Condensed Consolidated Financial Statements.
 
 Revenue Recognition
  Consulting
revenues from these arrangements are generally accounted for separately from new
software license revenues because the arrangements qualify as service
transactions as defined in Statement
of Position ("SOP") No. 97-2, Software Revenue Recognition("SOP 97-2"), as
amended by SOP No. 98-9, Software Revenue
Recognition, With Respect to Certain Transactions("SOP 98-9"), and Staff
Accounting Bulletin ("SAB") 104, Revenue Recognition("SAB 104").The more
significant factors considered in determining whether the revenue should be
accounted for separately include the nature of services (i.e., consideration of
whether the services are essential to the functionality of the licensed
product), degree of risk, availability of services from other vendors, timing of
payments and impact of milestones or acceptance criteria on the realizability of
the software license fee. Revenues for consulting services are generally
recognized as the services are performed. If there is a significant uncertainty
about the project completion or receipt of payment for the consulting services,
revenue is deferred until the uncertainty is sufficiently resolved. For the
fixed or not to exceed fees contracts, revenue are recognized based on SOP No.
81-1, Accounting for Performance of
Construction-Type and Certain Production-Type Contracts (SOP
81-1). We estimate the proportional performance on contracts on a basis of
utilizing hours incurred to date as a percentage of total estimated hours to
complete the project.
  Maintenance
revenues, which include revenues bundled with software license agreements that
entitle the customers to technical support and future unspecified enhancements
to our products, are deferred and recognized ratably over the related agreement
period, generally twelve months.
 
 Our
consulting services, which consist of consulting, maintenance and training, were
delivered through the BroadVision Global Services (BVGS) organization until
December 2007. In January 2008, we renamed BVGS to Worldwide E-Business Solution
Organization (WebSo). In order to support our customers expanded needs relating
to recently launched products, WebSo involves more internal departments than
did the BVGS organization. The services that we provide are not
essential to the functionality of the software. We record reimbursement from our
customers for out-of-pocket expenses as an increase to services
revenues.
 
 ~ 4
~
 Table of Contents
 Stock-Based
Compensation
 
 We
measure stock-based compensation at the grant date based on the awards fair
value and recognize the expense ratably over the requisite vesting period, net
of estimated forfeitures, for all stock-based awards granted after January 1,
2006 and all stock-based awards granted prior to, but not vested as of, January
1,2006.
 
 We have
elected to calculate an awards fair value based on the Black-Scholes option
pricing model. The Black-Scholes model requires various assumptions, including
expected option life and volatility. If any of the assumptions used in the
Black-Scholes model or the estimated forfeiture rate change significantly,
stock-based compensation expense may differ materially in the future from that
recorded in the current period.
 
 We
currently have in effect the following stock-based compensation plans: the 2006
Equity Incentive Plan (the Equity Plan), the 2000 Non-Officer Plan and Non-plan
Grants, and the Employee Stock Purchase Plan (the Purchase Plan). These are
described in detail in Note 1 of Notes to Condensed Consolidated Financial
Statements in our 2007 Annual Report on Form 10-K.
 
 The
following table sets forth the total stock-based compensation expense recognized
in our Condensed Consolidated Income Statements for the three months ended
March 31, 2008 and 2007:
  Three Months Ended March
      31,2008
                        
                        2007Cost
      of services
                        
                        $
                        36,966
                        
                        $
                        53,822Research
      and development
                        
                        
                        38,888
                        
                        
                        122,236Sales
      and marketing
                        
                        
                        53,737
                        
                        
                        67,932General
      and administrative
                        
                        
                        55,568
                        
                        
                        55,856$
                        185,159
                        
                        $
                        299,846
 As of
March 31, 2008, the total compensation cost related to the non-vested stock
options, net of estimated forfeitures, is approximately $296,000 for the
remainder of year 2008, $295,000 for year 2009, $187,000 for year 2010, and
$6,000 for year 2011.
  Earnings Per Share
Information
  Basic net
income (loss) per share is computed using the weighted-average number of shares
of common stock outstanding less shares subject to repurchase. Diluted net
income (loss) per share is computed using the weighted-average number of shares
of common stock outstanding and, when dilutive, common equivalent shares from
outstanding stock options and warrants using the treasury stock method, and
shares subject to repurchase, if any using the as-if converted method. There
were 6.4 million and 3.6 million
potential common shares excluded from the determination of diluted net income
per share for the three months ended March 31, 2008 and 2007, respectively,
as the effect of each share was anti-dilutive because the per-share strike price
of the options under which these shares may be issued is higher than current
market price. The following table sets forth the basic and diluted net income
per share computational data for the periods presented (in thousands, except per
share amounts):
  Three Months Ended March
      31,2008
                        
                        2007Net
      income (loss)
                        
                        
                        5,361
                        
                        
                        (2,496
                        )Weighted-average
      common shares outstanding used to compute basic income (loss) per
      share
                        
                        
                        108,961
                        
                        
                        106,667Weighted-average
      common equivalent shares from outstanding common stock options and
      warrants
                        
                        
                        1,366
                        
                        
                        -Total
      weighted-average common and common equivalent shares outstanding used to
      compute diluted loss per share
                        
                        
                        110,327
                        
                        
                        106,667Basic
      income (loss) per share
                        
                        $
                        0.05
                        
                        $
                        (0.02
                        )Diluted
      income (loss) per share
                        
                        $
                        0.05
                        
                        $
                        (0.02
                        )
 Legal
Proceedings
  We are
subject from time to time to various legal actions and other claims arising in
the ordinary course of business. We are not presently a party to any material
legal proceedings.
  ~ 5
~
 Table of Contents
 Foreign Currency
Transactions
  During
fiscal 2004, we changed the functional currencies of all foreign subsidiaries
from the U.S. dollar to the local currency of the respective countries. Assets
and liabilities of these subsidiaries are translated into U.S. dollars at the
balance sheet date. Income and expense items are translated at average exchange
rates for the period. Foreign exchange gains and losses resulting from the
remeasurement of foreign currency assets and liabilities are included as other
income (expense) in the Condensed Consolidated Income Statements. For the
three-month period ended March 31, 2008, the translation gain was $5,000. For
the three-month period ended March 31, 2007, the translation loss was $26,000.
These amounts are included in the accumulated other comprehensive income account
in the Condensed Consolidated Balance Sheets.
 
 Our cash
and cash equivalents consisted of the following as of March 31, 2008 and
December 31, 2007 (in thousands):
  March 31,
      2008
                        
                        December 31,
      2007Fair
    value
                        
                        Fair
    valueCash
      and certificates of deposits
                        
                        $
                        17,431
                        
                        $
                        13,229Money
      market
                        
                        
                        40,279
                        
                        
                        40,744Total
      cash and equivalents
                        
                        $
                        57,710
                        
                        $
                        53,973
 Comprehensive
Income
  Comprehensive
income includes net income and other comprehensive income, which primarily
consists of foreign currency translation adjustments. Total comprehensive income
is presented in the accompanying Condensed Consolidated Income Statements. Total
accumulated other comprehensive income is displayed as a separate component of
stockholder's equity in the accompanying Condensed Consolidated Balance Sheets.
The accumulated balances of other comprehensive income consist of the following,
net of taxes (in thousands):
 Accumulated
      OtherComprehensiveIncomeBalance,
      December 31, 2007
                        
                        $
                        16Net
      change during period
                        
                        
                        5Balance,
      March 31, 2008
                        
                        $
                        21
 Recent Accounting
Pronouncements
  In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combination ("SFAS
141R"), which replaces FASB Statement No. 141. SFAS 141R establishes principles
and requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill acquired. SFAS
141R also establishes disclosure requirements which will enable users to
evaluate the nature and financial effects of the business combination. SFAS 141R
is to be applied prospectively to business combinations for which the
acquisition date is on or after an entity's fiscal year that begins after
December 15, 2008. We are currently evaluating the potential impact, if any, of
the adoption of SFAS 141R on our Condensed Consolidated Financial
Statements.
  In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements - an amendment of Accounting Research Bulletin
No. 51 ("SFAS
160"), which establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parent's ownership interest and the valuation of retained
noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160
also establishes reporting requirements that provide sufficient disclosures that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. SFAS 160 is effective as of the
beginning of an entity's fiscal year that begins after December 15, 2008. We are
currently evaluating the potential impact, if any, of the adoption of SFAS 160
on our Condensed Consolidated Financial Statements.
  In
February 2007, the FASB issued Statement No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities ("SFAS
159"). SFAS No. 159 permits the measurement of many financial instruments and
certain other items at fair value. Entities may choose to measure eligible items
at fair value at specified election dates, reporting unrealized gains and losses
on such items at each subsequent reporting period. The objective of SFAS No. 159
is to provide entities with the opportunity to mitigate volatility in reported
earnings caused by measuring related assets and liabilities differently without
having to apply complex hedge accounting provisions. It is intended to expand
the use of fair value measurement. SFAS No. 159 is effective for fiscal years
beginning after November 15, 2007. We are currently evaluating what effect, if
any, the adoption of SFAS No. 159 will have on our Condensed Consolidated
Financial Statements.
  In
September 2006, the FASB issued SFAS No. 157, Fair Value
Measurements ("SFAS
157") . SFAS 157 establishes a framework for measuring the fair value of assets and
liabilities. This framework is intended to provide increased consistency in how
fair value determinations are made under various existing accounting standards
which permit, or in some cases require, estimates of fair market value.
SFAS 157 is effective for fiscal years beginning after November 15,
2007, and interim periods within those fiscal years. Earlier application is
encouraged, provided that the reporting entity has not yet issued financial
statements for that fiscal year, including any financial statements for an
interim period within that fiscal year. We are currently evaluating what effect,
if any, the adoption of SFAS 157 will have on our Condensed Consolidated
Financial Statements.
 
 ~ 6
~
 Table of Contents
 Note 2. Selected Condensed
Consolidated Balance Sheet Detail
  Property
and equipment consisted of the following (in thousands):
  March
31,
                        
                        December
    31,2008
                        
                        2007(unaudited)Furniture
      and fixtures
                        
                        $
                        675
                        
                        $
                        654Computers
      and software
                        
                        
                        5,402
                        
                        
                        5,359Leasehold
      improvements
                        
                        
                        1,305
                        
                        
                        1,2967,382
                        
                        
                        7,309Less
      accumulated depreciation and amortization
                        
                        
                        (6,739
                        )
                        
                        (6,621
                        )$
                        643
                        
                        $
                        688
 Accrued
expenses consisted of the following (in thousands):
 March
31,
                        
                        December
    31,2008
                        
                        2007(unaudited)Employee
      benefits
                        
                        $
                        1,160
                        
                        $
                        1,076Commissions
      and bonuses
                        
                        
                        609
                        
                        
                        656Sales
      and other taxes
                        
                        
                        1,438
                        
                        
                        1,245Income
      tax and tax contingency reserves
                        
                        
                        652
                        
                        
                        427Restructuring
                        
                        
                        408
                        
                        
                        439Customer
      advances
                        
                        
                        288
                        
                        
                        288Royalties
                        
                        
                        1,376
                        
                        
                        1,376Other
                        
                        
                        436
                        
                        
                        879Total
      accrued expenses
                        
                        $
                        6,368
                        
                        $
                        6,386
 Note 3. Warrants and Other
Non-Current Liabilities
  As of
March 31, 2008, the following warrants to purchase our common stock were
outstanding:
 Underlying
                        
                        ExerciseShares
                        
                        Price per
      ShareIssued
      to landlord in real estate buyout transaction in
      August 2004
                        
                        
                        700,000
                        
                        $
                        5.00Issued
      to convertible notes investors in November 2004
                        
                        
                        3,865,811
                        
                        
                        1.48Other
      issued in connection with revenue transactions in 2000
                        
                        
                        620
                        
                        
                        435.98Total
      warrants
                        
                        
                        4,566,431
 Gains
(l osses) on
the revaluation of warrants were recorded as follows (in
thousands):
  Three Months Ended March
      31,2008
                        
                        2007Warrants
      related to the Notes
                        
                        $
                        2,327
                        
                        $
                        (6,660
                        )Warrants
      related to real estate buyout
                        
                        
                        127
                        
                        
                        (683
                        )Gain
      (loss) on revaluation of warrants
                        
                        $
                        2,454
                        
                        $
                        (7,343
                        )
 Other Non-Current
Liabilities
  Other
non-current liabilities consist of the following (in thousands):
 March
31,
                        
                        December
    31,2008
                        
                        2007Restructuring
                        
                        $
                        802
                        
                        $
                        895Deferred
      maintenance and unearned revenue
                        
                        
                        1,758
                        
                        
                        1,481Other
                        
                        
                        709
                        
                        
                        648Total
      other non-current liabilities
                        
                        $
                        3,269
                        
                        $
                        3,024
  ~ 7
~
 Table of Contents
 Note 4. Commitments and
Contingencies
 
 Warranties and
Indemnification
  We
provide a warranty to our customers that our software will perform substantially
in accordance with the documentation we provide with the software, typically for
a period of 90 days following receipt of the software. Historically, costs
related to these warranties have been immaterial. Accordingly, we have not
recorded any warranty liabilities as of March 31, 2008 and December 31,
2007.
 
 Our
software license agreements typically provide for indemnification of customers
for intellectual property infringement claims caused by use of a current release
of our software consistent with the terms of the license agreement. The term of
these indemnification clauses is generally perpetual. The potential future
payments we could be required to make under these indemnification clauses is
generally limited to the amount the customer paid for the software.
Historically, costs related to these indemnification provisions have been
immaterial. We also maintain liability insurance that limits our exposure. As a
result, we believe the potential liability of these indemnification clauses is
minimal. Accordingly, we have not recorded any liabilities for these agreements
as of March 31, 2008 and December 31, 2007.
 
 We
entered into agreements whereby we indemnify our officers and directors for
certain events or occurrences while the officer is, or was, serving in such
capacity. The term of the indemnification period is for so long as such officer
or director is subject to an indemnifiable event by reason of the fact that such
person was serving in such capacity. The maximum potential amount of future
payments we could be required to make under these indemnification agreements may
be unlimited; however, we have a director and officer insurance policy that
limits our exposure and enables us to recover a portion of any future amounts
paid. As a result of our insurance policy coverage, we believe the estimated
fair value of these indemnification agreements is insignificant. Accordingly, we
have no liabilities recorded for these agreements as of either March 31,
2008 or December 31, 2007. We assess the need for an indemnification reserve on
a quarterly basis and there can be no guarantee that an indemnification reserve
will not become necessary in the future.
  Leases
  We lease
our headquarters facility and our other facilities under noncancelable operating
lease agreements expiring in or prior to the year 2012. Under the terms of these
agreements, we are required to pay property taxes, insurance and normal
maintenance costs.
 
 A summary
of total future minimum lease payments under noncancelable operating lease
agreements is as follows (in millions):
  Total
    futureminimumYears ending March
      31,
                          
                          payments2008
                          
                          $
                          1.62009
                          
                          
                          1.72010
                          
                          
                          1.32011
                          
                          
                          1.22012
      and thereafter
                          
                          
                          0.6Total
      minimum facilities payments
                          
                          $
                          6.4
  These
future minimum lease payments are net of approximately $2.9 million of
sublease income to be received under sublease agreements. As of March 31, 2008,
we have accrued $1.2 million of estimated future facilities costs as a
restructuring accrual.
  Standby Letter of Credit
Commitments
  As of
March 31, 2008 and December 31, 2007, we had $1.0 million
respectively, of outstanding commitments in the form of standby letter of
credit, primarily in favor of our various landlords to secure obligations under
our facility leases. These standby letters of credit are collateralized by the
restricted cash listed in the Condensed Consolidated Balance Sheets.
  ~ 8
~
 Table of Contents
 
 Note 5. Geographic, Segment and
Significant Customer Information
 
 We
operate in one segment, electronic business commerce solutions. Our reportable
segment includes our facilities in North and South America (Americas), Europe
and Asia Pacific and the Middle East (Asia/Pacific). We consider our CEO to be
our chief operating decision-maker. Our CEO reviews financial information
presented on a consolidated basis accompanied by disaggregated information about
revenues by geographic region and by product for purposes of making operating
decisions and assessing financial performance. The disaggregated revenue
information reviewed by the CEO is as follows (in thousands):
  Three Months
      EndedMarch
31,Revenues:
                        
                        2008
                        
                        2007Software
      licenses
                        
                        $
                        3,977
                        
                        $
                        5,733Consulting
      services
                        
                        
                        1,505
                        
                        
                        1,287Maintenance
                        
                        
                        4,549
                        
                        
                        5,725Total
      revenues
                        
                        $
                        10,030
                        
                        $
                        12,745
 We sell
our products and provide services worldwide through a direct sales force and
through a channel of independent distributors, value-added resellers ("VARs")
and Application Service Providers ("ASP").
 
 Disaggregated
financial information regarding our geographic revenues and long-lived assets is
as follows (in thousands):
  Three months
      endedMarch
31,2008
                        
                        2007Revenues:Americas
                        
                        $
                        4,926
                        
                        $
                        6,910Europe
                        
                        
                        3,669
                        
                        
                        4,010Asia/Pacific
                        
                        
                        1,436
                        
                        
                        1,825Total
      revenues
                        
                        $
                        10,030
                        
                        $
                        12,745
  March
31,
                          
                          December
    31,2008
                          
                          2007Long-Lived
      Assets:Americas
                          
                          $
                          25,536
                          
                          $
                          25,581Europe
                          
                          
                          54
                          
                          
                          62Asia/Pacific
                          
                          
                          119
                          
                          
                          111Total
      long-lived assets
                          
                          $
                          25,709
                          
                          $
                          25,754
 For
the three-month period ended March 31, 2008, one customer accounted for
more than 10% of our revenues. For the three-month period ended
March 31, 2007, no single customer accounted for more than 10% of our
revenues.
  ~ 9
~
 Table of Contents
 Note 6. Restructuring
Charges
 
 As
of March 31, 2008, the total restructuring accrual of $1.2 million consisted of
the following (in millions):
  Current
                        
                        Non-Current
                        
                        TotalExcess
      Facilities
                        
                        
                        0.4
                        
                        
                        0.8
                        
                        
                        1.2
 We
expect to pay the excess facilities amounts related to restructured or abandoned
leased space as follows (in millions):
 OperatingYears Ending March
      31,
                        
                        Leases2008
                        
                        $
                        0.42009
                        
                        
                        0.32010
                        
                        
                        0.22011
                        
                        
                        0.12012
      and thereafter
                        
                        
                        0.2Total
      minimum lease payments
                        
                        $
                        1.2
 The
following table summarizes the activity related to the restructuring plans
initiated subsequent to December 31, 2002, and accounted for in accordance
with Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with
Exit or Disposal Activities (SFAS
146) (in thousands):
  AmountsAccrued
                        
                        charged
    torestructuring
                        
                        restructuring
                        
                        
                        
                        Accruedcosts
                        
                        costs
                        
                        Amounts
    paid
                        
                        restructuringbeginning
                        
                        and
other
                        
                        or written
      off
                        
                        costs,
      endingThree Months Ended
      March 31, 2008Lease
      cancellations and commitments
                        
                        $
                        8
                        
                        $
                        (27
                        )
                        $
                        14
                        
                        $
                        (5
                        )Three Months Ended
      March 31, 2007Lease
      cancellations and commitments
                        
                        $
                        77
                        
                        $
                        110
                        
                        $
                        (69
                        )
                        $
                        118
 The
following table summarizes the activity related to the restructuring plans
initiated on or prior to December 31, 2002, and accounted for in accordance
with Emerging Issues Task Force 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) (in thousands):
  AmountsAccrued
                        
                        charged
    torestructuring
                        
                        restructuring
                        
                        
                        
                        Accruedcosts,
                        
                        costs
                        
                        Amounts
    paid
                        
                        restructuringbeginning
                        
                        and
other
                        
                        or written
      off
                        
                        costs,
      endingThree Months Ended
      March 31, 2008Lease
      cancellations and commitments
                        
                        $
                        1,325
                        
                        $
                        9
                        
                        $
                        (118
                        )
                        $
                        1,216Three Months Ended
      March 31, 2007Lease
      cancellations and commitments
                        
                        $
                        2,138
                        
                        $
                        164
                        
                        $
                        (336
                        )
                        $
                        1,966Termination
      payments to employees and related costs
                        
                        
                        347
                        
                        
                        5
                        
                        
                        -
                        
                        
                        352$
                        2,485
                        
                        $
                        169
                        
                        $
                        (336
                        )
                        $
                        2,318
 Note 7. Related Party
Transactions
  In June
2007, we executed a software license agreement with a third party in which Dr.
Pehong Chen, our CEO and largest stockholder, is a board member. In March 2008,
we executed a renewal of the license agreement and we will recognize license
revenue starting April 1, 2008. The contract value of the renewed agreement is
$71,000.
  ~ 10
~
 Table of Contents
  Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
  This report
on Form 10-Q 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, including those described herein and in the Company's most
recently filed Annual Report on Form 10-K and other documents filed with the
SEC. 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.
 
 Critical Accounting Policies,
Estimates and Judgments
  There
have been no material changes in our critical accounting policies, estimates and
judgments during the three months ended March 31, 2008 compared to the
disclosures in Part II, Item 8 of our Annual Report on Form 10-K for the year
ended December 31, 2007, other than as disclosed herein.
 
 Revenue Recognition
  Consulting
revenues from these arrangements are generally accounted for separately from new
software license revenues because the arrangements qualify as service
transactions as defined in SOP 97-2. The more significant factors considered in
determining whether the revenue should be accounted for separately include the
nature of services (i.e., consideration of whether the services are essential to
the functionality of the licensed product), degree of risk, availability of
services from other vendors, timing of payments and impact of milestones or
acceptance criteria on the realizability of the software license fee. Revenues
for consulting services are generally recognized as the services are performed.
If there is a significant uncertainty about the project completion or receipt of
payment for the consulting services, revenue is deferred until the uncertainty
is sufficiently resolved. For the fixed or not to exceed fees contracts, revenue
are recognized based on SOP 81-1. We estimate the proportional performance on
contracts on a basis of utilizing hours incurred to date as a percentage of
total estimated hours to complete the project.
  Maintenance
revenues, which include revenues bundled with software license agreements that
entitle the customers to technical support and future unspecified enhancements
to our products, are deferred and recognized ratably over the related agreement
period, generally twelve months.
 
 Our
consulting services, which consist of consulting, maintenance and training, were
delivered through the BVGS organization until December 2007. In January 2008, we
renamed BVGS to WebSo. In order to support our customers expanded needs relating
to recently launched products, WebSo involves more internal departments than
did the BVGS organization. The services that we provide are not essential
to the functionality of the software. We record reimbursement from our customers
for out-of-pocket expenses as an increase to services revenues.
  ~ 11
~
 Table of Contents
  Results of
Operations
  Revenues
  Total
revenues decreased
21% during the three months ended March 31, 2008 to $10.0 million as
compared to $12.7 million for the three months ended March 31, 2007. A
summary of our revenues by geographic region is as follows (dollars in
thousands, unaudited):
 SoftwareLicenses
                        
                        %
                        
                        Services
                        
                        %
                        
                        Total
                        
                        %Three Months
      Ended:March 31,
      2008Americas
                        
                        $
                        2,157
                        
                        
                        55
                        %
                        $
                        2,768
                        
                        
                        45
                        %
                        $
                        4,925
                        
                        
                        49
                        %Europe
                        
                        
                        1,211
                        
                        
                        30
                        
                        
                        2,458
                        
                        
                        41
                        
                        
                        3,669
                        
                        
                        37Asia
      Pacific
                        
                        
                        609
                        
                        
                        15
                        
                        
                        827
                        
                        
                        14
                        
                        
                        1,436
                        
                        
                        14Total
                        
                        $
                        3,977
                        
                        
                        100
                        %
                        $
                        6,053
                        
                        
                        100
                        %
                        $
                        10,030
                        
                        
                        100
                        %March 31,
      2007Americas
                        
                        $
                        3,110
                        
                        
                        54
                        %
                        $
                        3,800
                        
                        
                        54
                        %
                        $
                        6,910
                        
                        
                        54
                        %Europe
                        
                        
                        1,855
                        
                        
                        32
                        
                        
                        2,155
                        
                        
                        31
                        
                        
                        4,010
                        
                        
                        31Asia
      Pacific
                        
                        
                        768
                        
                        
                        14
                        
                        
                        1,057
                        
                        
                        15
                        
                        
                        1,825
                        
                        
                        15Total
                        
                        $
                        5,733
                        
                        
                        100
                        %
                        $
                        7,012
                        
                        
                        100
                        %
                        $
                        12,745
                        
                        
                        100
                        %
 We
operate in a competitive industry. Although general economic conditions have
improved in recent years, general economic conditions have declined in 2008. We
may experience declines in revenues as a result of a decline in general economic
conditions. Financial comparisons discussed herein may not be indicative of
future performance.
  Software
license revenues de creased
30% during the three months ended March 31, 2008 to $4.0 million as
compared to $5.7 million for the three months ended March 31, 2007.
This decrease is mainly due to decline in demand for additional licenses by
existing customers.
  Services
revenues consisting
of consulting revenues, customer training revenues and maintenance revenues
decreased 13% during the three months ended March 31, 2008 to
$6.1 million as compared to $7.0 million for the three months ended
March 31, 2007. The decrease in service revenues was mainly attributable to
lower maintenance revenues. Maintenance revenues decreased 13% for the three
months ended March 31, 2008 to $4.6 million as compared to
$5.7 million for the three months ended March 31, 2007.  
Consulting and training revenues increased 17% for the three months ended
March 31, 2008 to $1.5 million as compared to $1.3 million for the
three months ended March 31, 2007.  This increase in consulting
revenues is attributable primarily to the launch of new products in late 2007.
Consulting revenues tend to trail license revenues by 6 to 12
months.
  ~ 12
~
 Table of Contents
  Cost of Revenues
  Cost
of software license revenues includes the costs of product media, duplication,
packaging and other manufacturing costs, as well as royalties payable to third
parties for software that is either embedded in, or bundled and licensed with,
our products. Cost of services consists primarily of employee-related costs,
third-party consultant fees incurred on consulting projects, post-contract
customer support and instructional training services. A summary of our cost of
revenues is as follows (dollars in thousands, unaudited):
 Three Months Ended March
      31,2008
                        
                        %(1)
                        
                        2007
                        
                        %(1)Cost
      of software licenses
                        
                        $
                        7
                        
                        
                        -
                        %
                        $
                        12
                        
                        
                        -
                        %Cost
      of services
                        
                        
                        2,253
                        
                        
                        23
                        %
                        
                        2,393
                        
                        
                        19
                        %Total
      cost of revenues
                        
                        $
                        2,260
                        
                        
                        23
                        %
                        $
                        2,405
                        
                        
                        19
                        %
 (1)
                          Expressed
      as a percent of total revenues for the period
  indicated.
 Cost of software licenses decreased
42% during the three months ended March 31, 2008 to $7,000 as compared to
$12,000 for the three months ended March 31, 2007.  This decrease
is primarily a result of a decrease in the portion of license revenues generated
from royalty-bearing products.
  Cost of
services decreased
4% during the three months ended March 31, 2008 to $2.3 million as
compared to $2.4 million for the three months ended March 31, 2007.
  Gross margin decreased
to 77% during the three months ended March 31, 2008 from 81% for the three
months ended March 31, 2007. This decrease is a result of a decline in
total revenues along with steady cost of revenues.
  A
summary of operating expenses, including as a percentage of total revenues, is
set forth in the following table (dollars in thousands, unaudited):
  Three months
      endedMarch
31,2008
                        
                        %(1)
                        
                        2007
                        
                        %(1)Research
      and development
                        
                        $
                        2,337
                        
                        
                        23
                        %
                        $
                        2,655
                        
                        
                        21
                        %Sales
      and marketing
                        
                        
                        1,885
                        
                        
                        19
                        %
                        
                        2,069
                        
                        
                        16General
      and administrative
                        
                        
                        1,698
                        
                        
                        17
                        %
                        
                        1,067
                        
                        
                        8Restructuring
      (credit) charge
                        
                        
                        (18
                        )
                        
                        -
                        %
                        
                        278
                        
                        
                        2Total
      operating expenses
                        
                        $
                        5,902
                        
                        
                        59
                        %
                        $
                        6,069
                        
                        
                        47
                        %
 (1)
                      Expressed
      as a percent of total revenues for the period
  indicated.
  Research and
development expenses decreased
15% during
the three months ended March 31, 2008 to $2.3 million as compared to
$2.7 million for the three months ended March 31,
2007.  This decrease was the result of minor cost reductions in a
number of areas, including a reduction in contractor expense.
  Sales and
marketing expenses decreased
10% during
the three months ended March 31, 2008 to $1.9 million compared to $2.1
million for the three months ended March 31, 2007.  This decrease
was the result of minor cost reductions in a number of areas, including a
reduction in consultant cost.
  General and
administrative expenses increased
55% during the three months ended March 31, 2008 to $1.7 million as compared to
$1.1 million for the three months ended March 31, 2007. This increase is
primarily as a result of a one-time reduction of approximately $550,000 due to a
settlement with our telephone provider for the three months ended March 31,
2008.
  Interest income, net increased
31% during for the
three months ended March 31, 2008 to $464,000 as compared to $355,000 for
the three months ended March 31, 2007.  The increase is due to
increased cash balances from positive cash from operating
activities.
  Gain on
revaluation of warrants increased
133% during for the
three months ended March 31, 2008 to $2,454,000 as compared to a loss of
$7,343,000 for the three months ended March 31, 2007.   This
increase is primarily due to fluctuations in our stock price during the relevant
periods.
  Other
income, net, increased
209% during the
three months ended March 31, 2008 to $858,000 as compared to income of
$277,000 for the three months ended March 31, 2007.  The changes
were primarily due to net gains on realized foreign exchange
transactions.
  Provision for income
taxes expense increased 405% during the three
months ended March 31, 2008 to $283,000 as compared to a provision of $56,000
for the three months ended March 31, 2007.   The provision relates to
Alternative Minimum Taxes (AMT) calculated at both Federal and State levels
after application of net operating loss (NOL) carryforwards.   The
increase is primarily due to an increase in income in the United States in the
first quarter of year 2008 compared to a loss in the first quarter of year
2007.
  ~ 13
~
 Table of Contents
  Liquidity and Capital
Resources
  Overview
 
 Our
consolidated balance sheet strengthened considerably throughout 2007 and in the
first three months of 2008 compared to prior period.. As of March 31, 2008, we
had $57.7 million of cash and cash equivalents, with no long-term debt
borrowings. This compares with a cash position of $54.0 million at December 31,
2007. The increase was due primarily to $36 million cash generated from our
operations in the three months ended March 31, 2008.
 
 Revenues
for the first three months of 2008 were $10.0 million, compared to revenues of
$12.7 million for the first three months of 2007. License revenue for the first
three months of 2008 was $4.0 million compared to $5.7 million for the first
three months of 2007. The majority of our license revenue for the first three
months of 2008 was generated by our core Commerce and Process solutions, from
customers such as Saipem SPA, Bank Sinopac, Mobile Telecommunications Company,
Raiffeisen Hungary, Molex, Center for Railway Information Systems and several
other international, brand-name customers. License revenues decreased in all
regions as compared to the first three months of 2007. The most significant
change was an increase in consulting revenues due to the effect of our latest
products upgrade. We attribute the overall decline in revenues in part to the
general economic slowdown in 2008.
 
 We
continued to focus on expense control in the first quarter of 2008. Operating
expenses for the first quarter of 2008 were $5.9 million, as compared to $6.1
million for the first quarter of 2007. For the three months ended of March 31,
2008 and 2007, we had a gain of $2.4 million and a loss of $7.3 million,
respectively, on the revaluation of warrants. As a result, for the three months
ended March 31, 2008, net income was $5.4 million, or $0.05 per diluted share.
This compares to net loss of $2.5 million, or $0.02 per diluted share, for the
three months ended March 31, 2007.
 
 The
following table represents our liquidity at March 31, 2008 and December 31, 2007
(dollars in thousands):
  March
31,
                        
                        December
    31,2008
                        
                        2007(unaudited)Cash
      and cash equivalents
                        
                        $
                        57,710
                        
                        $
                        53,973Restricted
      cash, current portion
                        
                        $
                        20
                        
                        $
                        20Restricted
      cash, net of current portion
                        
                        $
                        1,000
                        
                        $
                        1,000Working
      capital
                        
                        $
                        46,553
                        
                        $
                        40,494Working
      capital ratio
                        
                        
                        3.13
                        
                        
                        2.80
 Cash Provided By Operating
Activities
  Cash
provided by operating activities was $3.6 million for the three months ended
March 31, 2008. Net cash provided operating activities in this period consisted
primarily of $2.8 million in operating profit (excluding restructuring charges
and revaluation of warrants) generated from sales margin improvement and
company-wide cost reduction efforts, plus the increase of $0.8 million in
accounts payable and accrued expenses and unearned revenue
accounts.
  Cash
provided by operating activities was $3.8 million for the three months ended
March 31, 2007. Net cash provided by operating activities in this period
consisted primarily of $4.5 million in operating profit (excluding restructuring
charges) generated from sales margin improvement and company-wide cost reduction
efforts, offset by payment of $0.9 million of accounts payable and accrued
expenses.
 
 Cash Used For Investing
Activities
  Cash used
for investing activities was $73,000 for the three months ended March 31, 2008.
This figure reflects the purchase of property and equipment and leasehold
improvements. Cash used for investing activities was $294,000 for the three
months ended March 31, 2007. This figure reflects the release of $201,000 in
restricted cash, offset by $495,000 in leasehold improvement for our new
headquarters facility.
  Cash Provided By Financing
Activities
  Cash
provided by financing activities was $215,000 for the three months ended March
31, 2008, primarily consisting of cash received in connection with the exercise
of stock options and employees purchases of common stock under the Purchase
Plan. Cash provided by financing activities was $498,000 for the three months
ended March 31, 2007, primarily consisting of cash received in connection with
the issuance of common stock.
  Leases and Other Contractual
Obligations
  We lease
our headquarters facility and other facilities under non-cancelable operating
lease agreements expiring through the year 2012. $1.0 million of restricted cash
as shown on our Condensed Consolidated Balance Sheets represents collateral for
letters of credit.  This letter of credit has been issued in
connection with our facility lease obligations.
   ~ 14
~
 Table of Contents
 Item 3. Quantitative and Qualitative Disclosures About Market
Risk
  Our
exposure to market risk for changes in interest rates relates primarily to our
investment portfolio. We had no derivative financial instruments as of
March 31, 2008 and 2007. We place our investments in instruments that meet
high credit quality standards and the amount of credit exposure to any one
issue, issuer and type of instrument is limited.
  Item 4. Controls and Procedures
  Evaluation of Disclosure Controls
and Procedures
 
 Our Chief
Executive Officer and our Chief Financial Officer have concluded, based on an
evaluation of the effectiveness of our disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of
1934, as amended) by our management, with the participation of our Chief
Executive Officer and our Chief Financial Officer, that our disclosure controls
and procedures were effective as of the end of the period covered by this
report.
  Changes in Internal Control over
Financial Reporting
  There has
been no change in our internal control over financial reporting during the
quarter ended March 31, 2008 that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
 
 Limitations on the Effectiveness of
Controls
  Our
management, including our Chief Executive Officer and Chief Financial Officer,
does not expect that our disclosure controls and procedures or our internal
controls will prevent all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within our Company have been detected.
   ~ 15
~
 Table of Contents
  PART II. OTHER INFORMATION
  Item 1. Legal Proceedings
  We
are subject from time to time to various legal actions and other claims arising
in the ordinary course of business. We are not presently a party to any material
legal proceedings.
  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.
  While we
have recently generated positive operating income and cash flow, we have
incurred substantial cumulative net operating losses and negative cash flows
from operations since 2000. As of March 31, 2008, we had an accumulated deficit
of approximately $1.2 billion.
  Given our
planned operating and capital expenditures, for the foreseeable future we expect
our results of operations to fluctuate, and during this period we may incur
losses and/or negative cash flows. If our revenue does not increase or if we
fail to maintain our expenses at an amount less than our projected revenue, we
will not be able to achieve or sustain operating profitability on a consistent
basis. We are continuing our efforts to reduce and control our expense
structure. We believe strict cost containment and expense reductions are
essential to achieving positive cash flow and profitability. A number of factors
could preclude us from successfully bringing costs and expenses in line with our
revenues, including unplanned uses of cash, the inability to accurately forecast
business activities and further deterioration of our revenues. If we are not
able to effectively reduce our costs and achieve an expense structure
commensurate with our business activities and revenues, we may have inadequate
levels of cash for operations or for capital requirements, which could
significantly harm our ability to operate our business.
  Our
failure to operate profitably or control negative cash flows on a quarterly or
annual basis could harm our business and the value of BroadVision common stock.
If the negative cash flow continues, our liquidity and ability to operate our
business would be severely and adversely impacted. Additionally, our ability to
raise financial capital may be hindered due to our operational losses and
negative cash flows, reducing our operating flexibility.
 
 Our business currently depends on
revenue related to BroadVision e-business solutions, and if the market does not
increasingly accept these products and related products and services, our
revenue may continue to decline.
  We
generate our revenue from licenses of BroadVision e-business solutions,
including process, commerce, portal and content management and related products
and services. We expect that these products, and future upgraded versions, will
continue to account for a large portion of our revenue in the foreseeable
future. Our future financial performance will depend on increasing acceptance of
our current product and on the successful development, introduction and customer
acceptance of new and enhanced versions of our products. If new and future
versions and updates of our products and services do not gain market acceptance
when released commercially, or if we fail to deliver the product enhancements
and complementary third party products that customers want, demand for our
products and services, and our revenue, may decline.
  We have recently introduced new
products, services and technologies and our business will be harmed if we are
not successful in selling these offerings to our existing customers and new
customers.
 
 In early
2007, we introduced a product roadmap that included new products, services and
technologies, to complement and replace certain of our existing products,
services and technologies.  We formally released the BroadVision 8.1
version at the end of the third quarter of 2007. We have spent significant
resources in developing these offerings and training our employees to implement
and support the offerings, and we plan to add additional sales and marketing
resources to support these new products, services and technologies.  We do
not yet know whether any of these new offerings will appeal to existing and
potential new customers, and if so, whether sales of these new offerings will be
sufficient for us to offset the costs of development, implementation, support
and marketing. Our existing customers may determine that the BroadVision
products and services they currently use are sufficient for their purposes, or
that the added benefit from these new offerings is not sufficient to merit the
additional cost.  As a result we may need to decrease our prices or develop
modifications.  Although we have performed extensive testing of our new
products and technologies, their broad-based implementation may require more
support than we anticipate, which would further increase our expenses. If sales
of our new products, services and technologies are lower than we expect, or if
we must lower our prices or delay implementation to fix unforeseen problems and
develop modifications, our operating margins are likely to decrease and we may
not be able to operate profitably.  A failure to operate profitably would
significantly harm our business.
 
 ~ 16
~
 Table of Contents
  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.
  Prior to
year 2006 our quarterly operating results have varied significantly and are
likely to continue to vary significantly in the future even though our recent
quarterly operating results have relatively stabilized. We cannot guarantee that
our quarterly operating results in the future will not fluctuate significantly.
If our revenues, operating results, earnings or future projections are below the
levels expected by securities analysts or investors, our stock price is likely
to decline.
  We may
continue to experience significant fluctuations in our future results of
operations due to a variety of factors, some of which are outside of our
control, including:
  ●
                      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 our
      competitors or us 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.
 
 As a
result of these factors, we believe that quarter-to-quarter comparisons of our
revenue and operating results are not necessarily meaningful, and that these
comparisons are not accurate indicators of future performance. Because our
staffing and operating expenses are based on anticipated revenue levels, and
because a high percentage of our costs are fixed, small variations in the timing
of the recognition of specific revenue could cause significant variations in
operating results from quarter to quarter. If we were unable to adjust spending
in a timely manner to compensate for any revenue shortfall, any significant
revenue shortfall would likely have an immediate negative effect on our
operating results. If our operating results in one or more future quarters fail
to meet the expectations of securities analysts or investors, we would expect to
experience an immediate and significant decline in the trading price of our
stock.
  ~ 17
~
 Table of Contents
  If we are unable to maintain our
disclosure controls and procedures, including our internal control over
financial reporting, our ability to report our financial results on a timely and
accurate basis may be adversely affected.
  We have
evaluated our disclosure controls and procedures as such term is defined in Rule
13a-15(e) under the Securities Exchange Act of 1934, as well as our internal
control over financial reporting as required by Section 404 of the
Sarbanes-Oxley Act of 2002. Our independent registered public accounting firm
has performed a similar evaluation of our internal control over financial
reporting. Effective controls are necessary for us to provide reliable financial
reports and effectively prevent fraud. If we cannot provide reliable financial
reports or prevent fraud, our operating results could be harmed. As of
December 31, 2007, we concluded that our internal controls over financial
reporting were effective, as further described below in Item 9A, Controls
and Procedures.
  We
previously reported that as of March 31, 2006, we did not have a sufficient
number of experienced personnel in our accounting and finance organization to
facilitate an efficient financial statement close process and permit the
preparation of our financial statements in accordance with U.S. GAAP. For
example, there were a significant number of adjustments to our financial
statements during the course of the 2005 audit, at least one of which was
individually material and required us to restate several prior quarters. Our
personnel also lacked certain required skills and competencies to oversee the
accounting operations and perform certain important control functions, such as
the review, periodic inspection and investigation of transactions of our foreign
locations. We consider this to be a deficiency that was also a material weakness
in the operation of entity-level controls. Despite taking a variety of remedial
measures, we were unable to conclude that no material weakness existed as of
December 31, 2006. Accordingly, when our management assessed the effectiveness
of our internal control over financial reporting as of December 31, 2006,
this assessment identified one material weakness.
  While we
have remedied this material weakness as of December 31, 2007, maintaining
sufficient expertise and historical institutional knowledge in our accounting
and finance organization is dependent upon retaining existing employees and
filling any open positions with experienced personnel in a timely fashion. The
market for skilled accounting and finance personnel is competitive and we may
have continued difficulty in retaining our staff because (1) the region in which
we compete consists of many established companies that can offer more
lucrative compensation packages and (2) some professionals are reluctant to
deal with the complex accounting issues relating to our historical operations.
We lost three experienced senior accountants in March and April 2008 to
established companies who offered more lucrative compensation package. Our
inability to staff the department with competent personnel with sufficient
training will affect our internal controls over financial reporting to the
extent that we may not be able to prevent or detect material
misstatements.
  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.
 
 Our
products and services may fail to be competitive if we do not maintain or exceed
the pace of technological developments in Internet commerce and communication.
Failure to be competitive could cause our revenue to decline. The information
services, software and communications industries are characterized by rapid
technological change, changes in customer requirements, frequent new product and
service introductions and enhancements and evolving industry standards and
practices. The introduction of products and services embodying new technologies
and the emergence of new industry standards and practices can render existing
products and services obsolete. Our future success will depend, in part, on our
ability to:
  ●
                      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.
  Our sales
and product implementation cycles generally span months. Delays in customer
orders or product implementations, which are difficult to predict, can affect
the timing of revenue recognition and adversely affect our quarterly operating
results. Licensing our products is often an enterprise-wide decision by
prospective customers. The importance of this decision requires that we engage
in a lengthy sales cycle with prospective customers. A successful sales cycle
may last up to nine months or longer. Our sales cycle is also affected by a
number of other factors, some of which we have little or no control over,
including the volatility of the overall software market, the business condition
and purchasing cycle of each prospective customer, and the performance of our
technology partners, systems integrators and resellers. The implementation of
our products can also be time and resource intensive, and subject to unexpected
delays. Delays in either product sales or implementations could cause our
operating results to vary significantly from quarter to quarter.
  ~ 18
~
 Table of Contents
  Current and potential competitors
could make it difficult for us to acquire and retain customers now and in the
future.
 
 The
market for our products is intensely competitive. We expect competition in this
market to persist and increase in the future. If we fail to compete successfully
with current or future competitors, we may be unable to attract and retain
customers. Increased competition could also result in price reductions for our
products and lower profit margins and reduced market share, any of which could
harm our business, results of operations and financial condition.
  Many of
our competitors have significantly greater financial, technical, marketing and
other resources, greater name recognition, a broader range of products and a
larger installed customer base, any of which could provide them with a
significant competitive advantage. In addition, new competitors, or alliances
among existing and future competitors, may emerge and rapidly gain significant
market share. Some of our competitors, particularly established software
vendors, may also be able to provide customers with products and services
comparable to ours at lower or at aggressively reduced prices in an effort to
increase market share or as part of a broader software package they are selling
to a customer. We may be unable to match competitor's prices or price
reductions, and we may fail to win customers that choose to purchase an
information technology solution as part of a broader software and services
package. As a result, we may be unable to compete successfully with current or
new competitors.
  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.
  A
significant proportion of our sales are concentrated in the last month of each
fiscal quarter. Gross margins are high for our license transactions. Customers
and prospective customers may use these conditions in an attempt to obtain more
favorable terms. While we endeavor to avoid making concessions that could result
in lower margins, the negotiations often result in delays in closing license
transactions. Small delays in a relatively small number of license transactions
could have a significant impact on our reported operating results for that
quarter.
  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.
  We have
substantially expanded and subsequently contracted our business and operations
since our inception in 1993. We grew from 652 employees at the end of 1999 to
2,412 employees at the end of 2000 and then reduced our numbers to 181 at the
end of 2005, and 159 at the end of 2006. On March 31, 2008, we had 200
employees. As a consequence of our employee base growing and then contracting so
rapidly, we entered into significant contracts for facilities space for which we
ultimately determined we did not have a future use. We announced during the
third and fourth quarters of 2004 that we had agreed with the landlords of
various facilities to renegotiate future lease commitments, extinguishing a
total of approximately $155 million of future obligations. The management
of the expansion and later reduction of our operations has taken a considerable
amount of our management's attention during the past several years. As we manage
our business to introduce and support new products, we will need to continue to
monitor our workforce and make appropriate changes as necessary. If we are
unable to support past changes and implement future changes effectively, we may
have to divert additional resources away from executing our business plan and
toward internal administration. If our expenses significantly outpace our
revenues, we may have to make additional changes to our management systems and
our business plan may not succeed.
  We may face liquidity challenges and
need additional financing in the future.
  We
currently expect to be able to fund our working capital requirements from our
existing cash and cash equivalents and our anticipated cash flows from
operations and subleases through at least March 31, 2009. However, we could
experience unforeseen circumstances, such as an economic downturn, difficulties
in retaining customers and/or key employees, or other factors that could
increase our use of available cash and require us to seek additional financing.
We may find it necessary to obtain additional equity or debt financing due to
the factors listed above or in order to support a more rapid expansion, develop
new or enhanced products or services, respond to competitive pressures, acquire
complementary businesses or technologies or respond to unanticipated
requirements.
 
 We may
seek to raise additional funds through private or public sales of securities,
strategic relationships, bank debt, financing under leasing arrangements or
otherwise. If additional funds are raised through the issuance of equity
securities, the percentage ownership of our stockholders will be reduced,
stockholders may experience additional dilution or any equity securities we sell
may have rights, preferences or privileges senior to those of the holders of our
common stock. We expect that obtaining additional financing on acceptable terms
would be difficult, at best. If adequate funds are not available or are not
available on acceptable terms, we may be unable to pay our debts as they become
due, develop our products, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements, which could have a material
adverse effect on our business, financial condition and future operating
results.
 
 ~ 19
~
 Table of Contents
 We are dependent on direct sales
personnel and third-party distribution channels to achieve revenue
growth.
  To date,
we have sold our products primarily through our direct sales force. Our ability
to achieve significant revenue growth in the future largely will depend on our
success in recruiting, training and retaining sufficient direct sales personnel
and establishing and maintaining relationships with distributors, resellers and
systems integrators. Our products and services require a sophisticated sales
effort targeted at the senior management of our prospective customers. New hires
as well as employees of our distributors, resellers and systems integrators
require training and may take a significant amount of time before achieving
full productivity. Our recent hires may not become as productive as necessary,
and we may be unable to hire and retain sufficient numbers of qualified
individuals in the future. We have entered into strategic alliance agreements
with partners, under which partners have agreed to resell and support our
current BroadVision product suite. These contracts are generally terminable by
either party upon 30 days' notice of an uncured material breach or for
convenience upon 90 days' notice prior to the end of any annual term.
Termination of any of these alliances could harm our expected revenues. We may
be unable to expand our other distribution channels, and any expansion may not
result in revenue increases. If we fail to maintain and expand our direct sales
force or other distribution channels, our revenues may not grow or they may
decline. Revenue generated from third-party distributors in recent years has not
been significant.
  Failure to maintain relationships
with third-party systems integrators could harm our ability to achieve our
business plan.
  Our
relationships with third-party systems integrators who deploy our products have
been a key factor in our overall business strategy, particularly because many of
our current and prospective customers rely on integrators to develop, deploy and
manage their online marketplaces. Our efforts to manage our relationships with
systems integrators may not succeed, which could harm our ability to achieve our
business plan due to a variety of factors, including:
  ●
                      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.
  We derive
a significant portion of our revenue from our operations outside North America.
In the three months ended March 31, 2008, approximately 51% of our revenue was
derived from international sales. If we are unable to manage or grow our
existing international operations, we may not generate sufficient revenue
required to establish and maintain these operations, which could slow our
overall growth and impair our operating margins.
  As we
rely materially on our operations outside of North America, we are subject to
significant risks of doing business internationally, including:
 
 ●
                      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;●
                      seasonal
      reductions in business activity during the summer months in Europe and
      certain other parts of the world; and●
                      potentially
      adverse tax consequences.
 
 Management
of international operations presents special challenges, particularly at our
reduced staffing levels. For example, in December 2005, an inappropriate
transfer of approximately $60,000 was made from our bank account in Japan to a
consulting services provider affiliated with two officers of our Japan
subsidiary without the approvals required under our internal control policies.
Although this transfer was later detected, the funds were recaptured and the
services of the Japan subsidiary officers involved were terminated, we face the
risk that other similar misappropriations of assets may occur in the
future.
  During
the second quarter of 2007, we recorded, for the first time, modest subscription
and consulting revenues related to our new CHRM on-demand solution, which
we officially launched in Beijing in August 2007.  Our
international sales growth could be limited if we are unable to establish
additional foreign operations, expand international sales channel management and
support, hire additional personnel, customize products for local markets and
develop relationships with international service providers, distributors and
system integrators. Even if we are able to successfully expand our international
operations, we may not succeed in maintaining or expanding international market
demand for our products.
  ~ 20
~
 Table of Contents
  Our success and competitive position
will depend on our ability to protect our proprietary
technology.
  Our
success and ability to compete are dependent to a significant degree on our
proprietary technology. We hold a U.S. patent, issued in January 1998, on
elements of the BroadVision platform, which covers electronic commerce
operations common in today's web business. We also hold a U.S. patent,
issued in November 1996, acquired as part of the Interleaf acquisition on the
elements of the extensible electronic document processing system for creating
new classes of active documents. Although we hold these patents, they may not
provide an adequate level of intellectual property protection. In addition,
litigation may be necessary in the future to enforce our intellectual property
rights, to protect our trade secrets, or to determine the validity and scope of
the proprietary rights of others. It is also possible that third parties may
claim we have infringed their patent, trademark, copyright or other proprietary
rights. Claims may be made for indemnification resulting from allegations of
infringement. Intellectual property infringement claims may be asserted against
us as a result of the use by third parties of our products. Claims or
litigation, with or without merit, could result in substantial costs and
diversions of resources, either of which could harm our business.
  We also
rely on copyright, trademark, service mark, trade secret laws and contractual
restrictions to protect our proprietary rights in products and services. We have
registered BroadVision, iGuide, Interleaf and Interleaf Xtreme as trademarks in
the United States and in other countries. It is possible that our competitors or
other companies will adopt product names similar to these trademarks, impeding
our ability to build brand identity and possibly confusing
customers.
  As a
matter of our company policy, we enter into confidentiality and assignment
agreements with our employees, consultants and vendors. We also control access
to and distribution of our software, documents and other proprietary
information. Notwithstanding these precautions, it may be possible for an
unauthorized third party to copy or otherwise obtain and use our software or
other proprietary information or to develop similar software independently.
Policing unauthorized use of our products will be difficult, particularly
because the global nature of the Internet makes it difficult to control the
ultimate destination or security of software and other transmitted data. The
laws of other countries may afford us little or no effective protection of our
intellectual property.
  A breach of the encryption
technology that we use could expose us to liability and harm our reputation,
causing a loss of customers.
  If any
breach of the security technology embedded in our products were to occur, we
would be exposed to liability and our reputation could be harmed, which could
cause us to lose customers. A significant barrier to online commerce and
communication is the secure exchange of valuable and confidential information
over public networks. We rely on encryption and authentication technology,
including Open SSL and public key cryptography technology featuring the major
encryption algorithms RC2 and MD5, to provide the security and authentication
necessary to affect the secure exchange of confidential information. Advances in
computer capabilities, new discoveries in the field of cryptography or other
events or developments could cause a breach of the RSA or other algorithms that
we use to protect customer transaction data.
  The loss or malfunction of
technology licensed from third parties could delay the introduction of our
products and services.
  We rely
in part on technology that we license from third parties, including relational
database management systems from Oracle and Sybase, Informix object request
broker software from IONA Technologies PLC, and database access technology from
Rogue Wave Software. The loss or malfunction of any of these technology licenses
could harm our business. We integrate or sublicense this technology with
internally developed software to perform key functions. For example, our
products and services incorporate data encryption and authentication technology
licensed from Open SSL. Third-party technology licenses might not continue to be
available to us on commercially reasonable terms, or at all. Moreover, the
licensed technology may contain defects that we cannot control. Problems with
our technology licenses could cause delays in introducing our products or
services until equivalent technology, if available, is identified, licensed and
integrated. Delays in introducing our products and services could adversely
affect our results of operations.
  ~ 21
~
 Table of Contents
  Our 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.
  Our
performance substantially depends on the performance of our officers and key
employees. We also rely on our ability to retain and motivate qualified
personnel, especially our management and highly skilled development teams. The
loss of the services of any of our officers or key employees, particularly our
founder and Chief Executive Officer, Dr. Pehong Chen, could cause us to
incur increased operating expenses and divert senior management resources in
searching for replacements. The loss of their services also could harm our
reputation if our customers were to become concerned about our future
operations. We do not carry key person life insurance policies on any of our
employees. Our future success also depends on our continuing ability to
identify, hire, train and retain other highly qualified technical and managerial
personnel. Competition for these personnel is intense, especially in the
Internet industry. We have in the past experienced, and may continue to
experience, difficulty in hiring and retaining sufficient numbers of highly
skilled employees. The significant downturn in our business over the past
several years has had and may continue to have a negative impact on our
operations. We have restructured our operations by reducing our workforce and
implementing other cost containment activities. These actions could lead to
disruptions in our business, reduced employee morale and productivity, increased
attrition, and problems with retaining existing and recruiting future
employees.
 
 Limitations on the online collection
of profile information could impair the effectiveness of our
products.
  Online
users' resistance to providing personal data, and laws and regulations
prohibiting use of personal data gathered online without express consent or
requiring businesses to notify their web site visitors of the possible
dissemination of their personal data, could limit the effectiveness of our
products. This in turn could adversely affect our sales and results of
operations.
  One of
the principal features of our products is the ability to develop and maintain
profiles of online users to assist business managers in determining the nature
of the content to be provided to these online users. Typically, profile
information is captured when consumers, business customers and employees visit a
web site and volunteer information in response to survey questions concerning
their backgrounds, interests and preferences. Profiles can be augmented over
time through the subsequent collection of usage data. Although our products are
designed to enable the development of applications that permit web site visitors
to prevent the distribution of any of their personal data beyond that specific
web site, privacy concerns may nevertheless cause visitors to resist providing
the personal data necessary to support this profiling capability. The mere
perception by prospective customers that substantial security and privacy
concerns exist among online users, whether or not valid, may indirectly inhibit
market acceptance of our products.
 
 In
addition, new laws and regulations could heighten privacy concerns by requiring
businesses to notify web site users that the data captured from them while
online may be used by marketing entities to direct product messages to them. We
are subject to increasing regulation at the federal and state levels relating to
online privacy and the use of personal user information. Several states have
proposed legislation that would limit the uses of personal user information
gathered online or require online services to establish privacy policies. In
addition, the U.S. Federal Trade Commission, or FTC, has urged Congress to
adopt legislation regarding the collection and use of personal identifying
information obtained from individuals when accessing web sites. The FTC has
settled several proceedings resulting in consent decrees in which Internet
companies have been required to establish programs regarding the manner in which
personal information is collected from users and provided to third parties. We
could become a party to a similar enforcement proceeding. These regulatory and
enforcement efforts could also harm our customers' ability to collect
demographic and personal information from users, which 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.
  We do not
have fully redundant systems for service at an alternate site. A disaster could
severely harm our business because our service could be interrupted for an
indeterminate length of time. Our operations depend upon our ability to maintain
and protect our computer systems at our facility in Redwood City, California,
which reside on or near known earthquake fault zones. Although these systems are
designed to be fault tolerant, they are vulnerable to damage from fire, floods,
earthquakes, power loss, acts of terrorism, telecommunications failures and
similar events. In addition, our facilities in California could be subject to
electrical blackouts if California faces another power shortage similar to that
of 2001. Although we do have a backup generator that would maintain critical
operations, this generator could fail. We also have significantly reduced our
workforce in a short period of time, which has placed different requirements on
our systems and has caused us to lose personnel knowledgeable about our systems,
both of which could make it more difficult to quickly resolve system
disruptions. Disruptions in our internal business operations could harm our
business by resulting in delays, disruption of our customers' business, loss of
data, and loss of customer confidence.
  ~ 22
~
 Table of Contents
  Risks related to BroadVision common
stock
 
 One stockholder beneficially owns a
substantial portion of the outstanding BroadVision common stock, and as a result
exerts substantial control over us.
 
 As of
March 31, 2008, Dr. Pehong Chen, our Chairman and CEO, beneficially owned
approximately 42.0 million shares of our common stock, which represents
approximately 39% of the outstanding common stock as of such date. As a result,
Dr. Chen exerts substantial control over all matters coming to a vote of our
stockholders, including with respect to:
 
 ●
                      the
      composition of our board of directors and, through it, any determination
      with respect to our business direction and policies, including the
      appointment and removal of officers;●
                      any
      determinations with respect to mergers and other business
      combinations;●
                      our
      acquisition or disposition of assets;●
                      our
      financing activities; and●
                      the
      payment of dividends on our capital
stock.
 
 This
control by Dr. Chen could depress the market price of our common stock or delay
or prevent a change in control of BroadVision.
  Our stock price has been highly
volatile.
  The
trading price of BroadVision common stock has been highly volatile. For example,
the trading price of BroadVision common stock has ranged from $0.41 per
share to $4.57 per share between January 1, 2006 and March 31,
2008. On May 6, 2008 the closing price of BroadVision common stock was
$1.07 per share. Our
stock price is subject to wide fluctuations in response to a variety of factors,
including:
  ●
                      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;●
                      low
      trading volume on the OTC Bulletin Board;●
                      general
      economic conditions; or●
                      other
      events or factors that are beyond our
control.
  In
addition, the stock market has experienced significant price and volume
fluctuations that have particularly affected the trading prices of equity
securities of many technology companies. These fluctuations have often been
unrelated or disproportionate to the operating performance of these companies.
Any negative change in the public's perception of the prospects of Internet or
electronic commerce companies could further depress our stock price regardless
of our results. Other broad market fluctuations may decrease the trading price
of BroadVision common stock. In the past, following declines in the market price
of a company's securities, securities class action litigation, such as the class
action lawsuits filed against us and certain of our officers and directors in
early 2001, has often been instituted against that company. Litigation could
result in substantial costs and a diversion of management's attention and
resources.
  Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
  Not
applicable.
  Item 3. Defaults Upon Senior Securities
  Not
applicable.
  Item 4. Submission of Matters to a Vote of Security
Holders
  Not
applicable.
 
 Item 5. Other
Information
  Not
applicable.
   ~ 23
~
 Table of Contents
  Item 6.
Exhibits
  Exhibits
                      
                      Description3.1
      (1)
                      
                      Amended
      and Restated Certificate of Incorporation.3.2
      (2)
                      
                      Certificate
      of Amendment of Certificate of Incorporation.3.3
      (4)
                      
                      Certificate
      of Amendment of Certificate of Incorporation.3.4
      (3)
                      
                      Amended
      and Restated Bylaws.4.1
      (1)
                      
                      References
      are hereby made to Exhibits 3.1 to 3.331.1
                      
                      Certification
      of the Chief Executive Officer of BroadVision.31.2
                      
                      Certification
      of the Chief Financial Officer of BroadVision.32.1
                      
                      Certification
      of the Chief Executive Officer and Chief Financial Officer of BroadVision
      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 Proxy Statement filed on May 14,
      2002.(3)
                      
                      Incorporated
      by reference to the Company's Current Report on Form 8-K filed on December
      22, 2005.(4)
                      
                      Incorporated
      by reference to the Company's Form 10-K for the fiscal year ended December
      31, 2007 filed on February 20,
2008.
  ~ 24
~
 Table of Contents
 
 SIGNATURES
  Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
  BROADVISION,
      INC.Date:
      May 7, 2008
                      
                      By:
                      
                      /s/ Pehong
      ChenPehong
      ChenChairman
      of the Board, President and Chief Executive Officer
  BROADVISION,
      INC.Date:
      May 7, 2008
                      
                      By:
                      
                      /s/Shin-Yuan
      TzouShin-Yuan
      TzouChief
      Financial Officer
   ~ 25
~
 Table of Contents
  EXHIBIT INDEX
 
 Exhibits
                      
                      Description3.1
      (1)
                      
                      Amended
      and Restated Certificate of Incorporation.3.2
      (2)
                      
                      Certificate
      of Amendment of Certificate of Incorporation.3.3
      (4)
                      
                      Certificate
      of Amendment of Certificate of Incorporation.3.4
      (3)
                      
                      Amended
      and Restated Bylaws.4.1
      (1)
                      
                      References
      are hereby made to Exhibits 3.1 to 3.331.1
                      
                      Certification
      of the Chief Executive Officer of BroadVision.31.2
                      
                      Certification
      of the Chief Financial Officer of BroadVision.32.1
                      
                      Certification
      of the Chief Executive Officer and Chief Financial Officer of BroadVision
      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 Proxy Statement filed on May 14,
      2002.(3)
                      
                      Incorporated
      by reference to the Company's Current Report on Form 8-K filed on December
      22, 2005.(4)
                      
                      Incorporated
      by reference to the Company's Form 10-K for the fiscal year ended December
      31, 2007 filed on February 20,
2008.
 
 ~ 26
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Contents