##### Table of Contents



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 September 30, 2006
 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)
 585 Broadway,Redwood City, California
    
    94063(Address of principal executive offices)
    
    (Zip code)
 (650) 542-5100
 þ o
  o o þ
 o þ




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##### Table of Contents



BROADVISION, INC. AND SUBSIDIARIES
FORM 10-Q
Quarter Ended September 30, 2006
 TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Condensed Consolidated Balance Sheets at September 30, 2006 (unaudited) and December 31, 2005
    
    
    3Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)  For the
three and nine months ended September 30, 2006 and 2005 (unaudited)
    
    
    4Condensed Consolidated Statements of Cash Flows  For the nine months ended September 30,
2006 and 2005 (unaudited)
    
    
    5Notes to Condensed Consolidated Financial Statements (unaudited)
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    32PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    34Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    41Item 3. Defaults In Senior Securities
    
    
    41Item 4. Submission of Matters to a Vote of Security Holders
    
    
    41Item 5. Other Information
    
    
    42Item 6. Exhibits
    
    
    42SIGNATURES
    
    
    43EXHIBIT 31.1EXHIBIT 32.1
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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 BROADVISION, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 September 30,
    
    
    December 31,2006
    
    
    2005(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    16,904
    
    
    $
    4,849Accounts receivable, less allowance for doubtful accounts of $1,190 as of
September 30, 2006 and $731 as of December 31, 2005
    
    
    6,882
    
    
    
    12,640Prepaids and other
    
    
    2,014
    
    
    
    1,914Total current assets
    
    
    25,800
    
    
    
    19,403Property and equipment, net
    
    
    1,390
    
    
    
    2,334Restricted cash
    
    
    1,997
    
    
    
    1,997Goodwill
    
    
    25,066
    
    
    
    25,066Other assets
    
    
    1,043
    
    
    
    1,142Total assets
    
    $
    55,296
    
    
    $
    49,942LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities:Accounts payable
    
    $
    2,103
    
    
    $
    4,396Accrued expenses
    
    
    11,951
    
    
    
    16,090Warrant liability
    
    
    980
    
    
    
    277Unearned revenue
    
    
    2,186
    
    
    
    2,678Deferred maintenance revenue
    
    
    12,696
    
    
    
    10,910Current portion of bank borrowings
    
    
    
    
    
    
    389Current portion of convertible notes due to a related party
    
    
    
    
    
    
    20,535Total current liabilities
    
    
    29,916
    
    
    
    55,275Other non-current liabilities
    
    
    5,702
    
    
    
    4,390Total liabilities
    
    
    35,618
    
    
    
    59,665Commitments and contingenciesStockholders equity (deficit):Convertible preferred stock, $0.0001 par value; 10,000 shares authorized; none issued
and outstanding
    
    
    
    
    
    
    Common stock, $0.0001 par value; 2,000,000 shares authorized; 69,503 shares issued
and outstanding as of September 30, 2006 and 34,522 shares issued and outstanding
as of December 31, 2005
    
    
    7
    
    
    
    3Additional paid-in capital
    
    
    1,236,580
    
    
    
    1,215,256Accumulated other comprehensive income
    
    
    169
    
    
    
    93Accumulated deficit
    
    
    (1,217,078
    )
    
    
    (1,225,075
    )Total stockholders equity (deficit)
    
    
    19,678
    
    
    
    (9,723
    )Total liabilities and stockholders equity (deficit)
    
    $
    55,296
    
    
    $
    49,942
 See Accompanying Notes to Condensed Consolidated Financial Statements
 Page 3




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BROADVISION, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share data)
(unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(restated)
    
    
    
    
    
    
    (restated)Revenues:Software licenses
    
    $
    4,750
    
    
    $
    3,134
    
    
    $
    11,259
    
    
    $
    10,941Services
    
    
    8,835
    
    
    
    10,943
    
    
    
    27,679
    
    
    
    35,017Total revenues
    
    
    13,585
    
    
    
    14,077
    
    
    
    38,938
    
    
    
    45,958Cost of revenues:Cost of software licenses
    
    
    22
    
    
    
    106
    
    
    
    226
    
    
    
    (137
    )Cost of services
    
    
    2,729
    
    
    
    5,641
    
    
    
    10,283
    
    
    
    17,235Total cost of revenues
    
    
    2,751
    
    
    
    5,747
    
    
    
    10,509
    
    
    
    17,098Gross Margin
    
    
    10,834
    
    
    
    8,330
    
    
    
    28,429
    
    
    
    28,860Operating expenses:Research and development
    
    
    2,766
    
    
    
    3,095
    
    
    
    7,802
    
    
    
    11,336Sales and marketing
    
    
    1,761
    
    
    
    2,948
    
    
    
    6,124
    
    
    
    13,819General and administrative
    
    
    2,429
    
    
    
    2,162
    
    
    
    7,406
    
    
    
    7,526Business combination costs
    
    
    
    
    
    
    977
    
    
    
    
    
    
    
    977Restructuring (credit) charge
    
    
    (1,878
    )
    
    
    246
    
    
    
    (1,403
    )
    
    
    (149
    )Goodwill impairment
    
    
    
    
    
    
    13,198
    
    
    
    
    
    
    
    13,198Total operating expenses
    
    
    5,078
    
    
    
    22,626
    
    
    
    19,929
    
    
    
    46,707Operating income (loss)
    
    
    5,756
    
    
    
    (14,296
    )
    
    
    8,500
    
    
    
    (17,847
    )Interest (expense) income, net
    
    
    225
    
    
    
    (778
    )
    
    
    457
    
    
    
    (1,054
    )Amortization of discount on convertible notes
    
    
    
    
    
    
    (1,295
    )
    
    
    
    
    
    
    (5,273
    )(Loss) gain on revaluation of warrants and
change in value of derivatives
    
    
    (317
    )
    
    
    794
    
    
    
    (703
    )
    
    
    11,042Other (expense) income, net
    
    
    (71
    )
    
    
    (478
    )
    
    
    191
    
    
    
    (564
    )Income (loss) before provision for income taxes
    
    
    5,593
    
    
    
    (16,053
    )
    
    
    8,445
    
    
    
    (13,696
    )(Provision) benefit for income taxes
    
    
    (228
    )
    
    
    541
    
    
    
    (449
    )
    
    
    2,502Net income (loss)
    
    $
    5,365
    
    
    $
    (15,512
    )
    
    $
    7,996
    
    
    $
    (11,194
    )Basic income (loss) per share
    
    $
    0.08
    
    
    $
    (0.45
    )
    
    $
    0.13
    
    
    $
    (0.33
    )Diluted income (loss) per share
    
    $
    0.08
    
    
    $
    (0.45
    )
    
    $
    0.13
    
    
    $
    (0.33
    )Shares
used in computing income (loss) per share:Weighted average shares-basic
    
    
    69,489
    
    
    
    34,320
    
    
    
    60,630
    
    
    
    34,159Weighted average shares-diluted
    
    
    69,489
    
    
    
    34,320
    
    
    
    60,630
    
    
    
    34,159Comprehensive income (loss):Net income (loss)
    
    $
    5,365
    
    
    $
    (15,512
    )
    
    $
    7,996
    
    
    $
    (11,194
    )Other comprehensive gain (loss), net of tax:Foreign currency translation adjustment
    
    
    120
    
    
    
    (19
    )
    
    
    (76
    )
    
    
    4Total comprehensive income (loss)
    
    $
    5,485
    
    
    $
    (15,531
    )
    
    $
    7,920
    
    
    $
    (11,190
    )
 See Accompanying Notes to Condensed Consolidated Financial Statements
 Page 4




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BROADVISION, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 Nine Months Ended September 30,2006
    
    
    2005(restated)Cash flows from operating activities:Net income (loss)
    
    $
    7,996
    
    
    $
    (11,194
    )Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:Depreciation and amortization
    
    
    1,059
    
    
    
    973Allowance for doubtful accounts
    
    
    459
    
    
    
    (319
    )Restructuring credit
    
    
    (1,403
    )
    
    
    (149
    )Stock based compensation
    
    
    569
    
    
    
    Gain on cost method investments
    
    
    (386
    )
    
    
    (1,117
    )Loss on sale or abandonment of fixed assets
    
    
    
    
    
    
    78Provision (benefits) for income tax
    
    
    24
    
    
    
    (2,032
    )Loss (gain) on revaluation of warrants and change in value of derivatives
    
    
    703
    
    
    
    (11,042
    )Amortization of prepaid royalties
    
    
    
    
    
    
    54Amortization of discount on convertible notes
    
    
    
    
    
    
    5,875Impairment of goodwill
    
    
    
    
    
    
    13,198Changes in operating assets and liabilities:Accounts receivable
    
    
    5,299
    
    
    
    4,113Prepaids and other
    
    
    (100
    )
    
    
    299Other non-current assets
    
    
    99
    
    
    
    293Accounts payable and accrued expenses
    
    
    (2,010
    )
    
    
    (5,220
    )Restructuring accrual
    
    
    (1,160
    )
    
    
    (24,023
    )Unearned revenue and deferred maintenance revenue
    
    
    1,294
    
    
    
    (4,345
    )Other non-current liabilities
    
    
    (404
    )
    
    
    (81
    )Net cash provided by (used in) operating activities
    
    
    12,039
    
    
    
    (34,639
    )Cash flows from investing activities:Purchase of property and equipment
    
    
    (115
    )
    
    
    (132
    )Transfer from restricted cash
    
    
    
    
    
    
    20,324Proceeds from sale of cost method investments
    
    
    386
    
    
    
    590Proceeds from dividends
    
    
    
    
    
    
    1,101Net cash provided by investing activities
    
    
    271
    
    
    
    21,883Cash flows from financing activities:Proceeds from bank line of credit, term debt, and convertible notes
    
    
    
    
    
    
    35,000Repayments of bank line of credit, term debt, and convertible notes
    
    
    (389
    )
    
    
    (58,623
    )Proceeds from issuance of common stock, net
    
    
    58
    
    
    
    598Net cash used for financing activities
    
    
    (331
    )
    
    
    (23,025
    )Effect of exchange rates on cash and cash equivalents
    
    
    76
    
    
    
    (4
    )Net increase (decrease) in cash and cash equivalents
    
    
    12,055
    
    
    
    (35,785
    )Cash and cash equivalents at beginning of period
    
    
    4,849
    
    
    
    41,851Cash and cash equivalents at end of period
    
    $
    16,904
    
    
    $
    6,066Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    197
    
    
    $
    663Cash paid (refunds received) for income taxes
    
    $
    384
    
    
    $
    (547
    )Cash paid for restructuring accrual
    
    $
    1,112
    
    
    $
    27,875Supplemental information of noncash financing and investing activities:Exchange of convertible debt to common stock
    
    $
    20,535
    
    
    $
    Conversion of accrued interest to common stock
    
    $
    167
    
    
    $
    
 See Accompanying Notes to Condensed Consolidated Financial Statements
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BROADVISION, INC. AND SUBSIDIARIES
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 Note 1. Organization and Summary of Significant Accounting Policies
 Nature of Business
    Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Companys Own Stock
 Basis of Presentation
    Page 6




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Use of Estimates
  Revenue Recognition
 Overview Software Revenue Recognition Software Revenue Recognition,
With Respect to Certain Transactions Revenue Recognition .
 Software License Revenue
   Page 7




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##### Table of Contents



Services Revenue
    Employee Stock Option and Purchase Plans
 Share-Based Payment Accounting for Stock Issued to
Employees
     Page 8




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##### Table of Contents



September 30, 2006Three Months Ended
    
    Nine Months EndedWeighted average volatility
    
    
    85
    %
    
    
    85
    %Expected dividends
    
    
    
    
    
    
    Expected term (in years)
    
    
    3
    
    
    
    3Risk free rate
    
    
    5
    %
    
    
    5
    %Forfeiture rate
    
    
    18
    %
    
    
    18
    %
 Accounting for Certain Transactions Involving Stock Compensationan Interpretation of APB
Opinion 25 Accounting
for Equity Instruments That Are Issued to Other Than Employees For Acquiring or in Conjunction with
Selling Goods or Services.
  Page 9




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September 30, 2005Three Months Ended
    
    
    Nine Months Ended(restated)
    
    
    (restated)Net loss, as reported
    
    $
    (15,512
    )
    
    $
    (11,194
    )Add: Stock-based employee compensation expense included in reported
net loss, net of related tax effects
    
    
    
    
    
    
    Deduct: Total stock-based employee compensation expense determined under
fair value based method for all awards, net of related tax effects
    
    
    (219
    )
    
    
    (1,668
    )Pro forma net loss
    
    $
    (15,731
    )
    
    $
    (12,862
    )Weighted average common shares outstanding utilized for:Basic net loss
    
    
    34,320
    
    
    
    34,159Diluted net loss
    
    
    34,320
    
    
    
    34,159Loss per share:Basicas reported
    
    $
    (0.45
    )
    
    $
    (0.33
    )Basicpro forma
    
    $
    (0.46
    )
    
    $
    (0.38
    )Dilutedas reported
    
    $
    (0.45
    )
    
    $
    (0.33
    )Dilutedpro forma
    
    $
    (0.46
    )
    
    $
    (0.38
    )
   Date Granted
    
    Options Granted
    
    
    Options Price
    
    
    Vested
    
    
    Vesting Period (Months)6/23/1999
    
    
    500,000
    
    
    $
    60
    
    
    
    500,000
    
    
    
    605/25/2001
    
    
    500,000
    
    
    
    67
    
    
    
    500,000
    
    
    
    4811/27/2001
    
    
    4,444
    
    
    
    35
    
    
    
    4,444
    
    
    
    242/19/2002
    
    
    55,555
    
    
    
    19
    
    
    
    55,555
    
    
    
    4810/30/2002
    
    
    644,445
    
    
    
    2
    
    
    
    644,445
    
    
    
    48Totals
    
    
    1,704,444
    
    
    
    
    
    
    
    1,704,444
  Nine Months Ended,September 30, 2006Weighted
    
    AggregateAverage
    
    Intrinsic
    
    Number ofOptions
    
    Exercise
    
    Value
    
    Nonvested(000)
    
    Price
    
    (000)
    
    OptionsOutstanding at December 31, 2005
    
    
    3,765
    
    
    $
    23.48
    
    
    $
    
    
    
    
    Granted
    
    
    3,512
    
    
    
    0.57
    
    
    
    451
    
    
    
    2,413Exercised
    
    
    (27
    )
    
    
    0.56
    
    
    
    
    
    
    
    Forefeited
    
    
    (184
    )
    
    
    3.74
    
    
    
    
    
    
    
    Expired
    
    
    (942
    )
    
    
    5.13Outstanding at September 30, 2006
    
    
    6,124
    
    
    $
    13.86
    
    
    $
    451
    
    
    
    2,413Option exercisable at the end of period
    
    
    3,712
    
    
    $
    22.49
    
    
    $
    115Weighted-average fair value of options granted during the period
    
    $
    0.32Number of options vested during the period
    
    
    821
    
    
    $
    0.57
 Page 10




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Nine Months Ended,September 30, 2006Weighted
    
    AggregateAverage
    
    Intrinsic
    
    Number ofOptions
    
    Exercise
    
    Value
    
    Nonvested(000)
    
    Price
    
    (000)
    
    OptionsOutstanding at December 31, 2005
    
    
    588
    
    
    $
    23.48
    
    
    $
    
    
    
    
    Granted
    
    
    432
    
    
    
    0.53
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forefeited
    
    
    (193
    )
    
    
    6.86
    
    
    
    
    
    
    
    Expired
    
    
    (10
    )
    
    
    100.06Outstanding at September 30, 2006
    
    
    817
    
    
    $
    9.39
    
    
    $
    
    
    
    
    Option exercisable at the end of period
    
    
    501
    
    
    $
    14.98
    
    
    $
    8Weighted-average fair value of options granted during the period
    
    $
    0.29Number of options vested during the period
    
    
    27
    
    
    $
    0.57
   Earnings Per Share Information
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(restated)
    
    
    
    
    
    
    (restated)Net income (loss)
    
    $
    5,365
    
    
    $
    (15,512
    )
    
    $
    7,996
    
    
    $
    (11,194
    )Weighted average common shares outstanding
utilized for basic net income per share
    
    
    69,489
    
    
    
    34,320
    
    
    
    60,630
    
    
    
    34,159Potential common stock issued for options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average common shares outstanding utilized for
diluted net income per share:
    
    
    69,489
    
    
    
    34,320
    
    
    
    60,630
    
    
    
    34,159Basic net income (loss) per share
    
    $
    0.08
    
    
    $
    (0.45
    )
    
    $
    0.13
    
    
    $
    (0.33
    )Diluted net income (loss) per share
    
    $
    0.08
    
    
    $
    (0.45
    )
    
    $
    0.13
    
    
    $
    (0.33
    )
 Page 11




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Foreign Currency Transactions
  Valuation of Long-Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived Assets Business Combinations Goodwill and Other Intangible Assets
 Goodwill and Other Intangible Assets
 Reclassification
  Comprehensive Income (Loss)
  Foreign
    
    
    Accumulated OtherCurrency
    
    
    ComprehensiveTranslation
    
    
    Income (Loss)Balance, December 31, 2005
    
    $
    93
    
    
    $
    93Net change during period
    
    
    76
    
    
    
    76Balance, September 30, 2006
    
    $
    169
    
    
    $
    169
 New Accounting Pronouncements
 How Taxes Collected from Customers
and Remitted to Governmental Authorities Should Be Presented in the Income Statement.
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Accounting for Uncertainty in Income Taxes
 Considering the Effects of Prior Year Misstatements
when Quantifying Misstatements in Current Year Financial Statements.
 FairValue Measurements.
 Note 2. Selected Balance Sheet Detail
  September 30,
    
    
    December 31,2006
    
    
    2005(unaudited)Furniture and fixtures
    
    $
    2,531
    
    
    $
    2,791Computers and software
    
    
    32,369
    
    
    
    32,705Leasehold improvements
    
    
    5,652
    
    
    
    6,21940,552
    
    
    
    41,715Less accumulated depreciation and amortization
    
    
    (39,162
    )
    
    
    (39,381
    )$
    1,390
    
    
    $
    2,334
  September 30,
    
    
    December 31,2006
    
    
    2005(unaudited)Employee benefits
    
    $
    1,085
    
    
    $
    1,048Commissions and bonuses
    
    
    744
    
    
    
    533Sales and other taxes
    
    
    3,261
    
    
    
    3,885Restructuring (See Note 6)
    
    
    1,254
    
    
    
    5,533Accrued royalties
    
    
    2,594
    
    
    
    2,483Other
    
    
    3,013
    
    
    
    2,608$
    11,951
    
    
    $
    16,090
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Note 3. Bank Borrowings, Convertible Notes and Other Non-Current Liabilities
  September 30,
    
    
    December 31,2006
    
    
    2005(unaudited)Bank borrowings  Term debt
    
    $
    
    
    
    $
    389
    
    
    
    389Less: Current portion of bank borrowings
    
    
    
    
    
    
    (389
    )Long-term debt, net of current portion
    
    $
    
    
    
    $
    
  
    
    At December 31, 2005, the Company maintained a revolving line of credit in the form
of a loan and security agreement with a commercial lender, which expired in February
2006. No amounts were outstanding under this credit facility as of the third quarter
of 2006.
    
    The Company has entered into term debt in the form of notes payable with the same
lender. The term debt requires monthly payments of approximately $38,000 plus interest
through October 2006, and monthly payments of approximately $2,000 for the five months
ending March 2007. A portion of the term debt was utilized for an equipment line of
credit. Principal and interest are due in monthly payments through maturity based on
the terms of the facilities. As of December 31, 2005, the entire balance of $389,000
was classified as currently due. The Company paid off the entire balance in the third
quarter of 2006.
 Convertible Notes
  Extinguishment of Debt
  Accounting for Derivative
Instruments and Hedging Activities
 Page 14




---



##### Table of Contents



Underlying
    
    
    Exercise PriceDescription
    
    Shares
    
    
    Per ShareIssued to landlord in real estate buyout transaction in August 2004
    
    
    700,000
    
    
    $
    5.00Issued to convertible notes investors in November 2004
    
    
    3,082,219
    
    
    
    2.02Other issued in connection with revenue transactions in 1997 and 2000
    
    
    4,798
    
    
    VariousTotal warrants
    
    
    3,787,017
     Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005(restated)
    
    
    
    
    
    
    (restated)Warrants related to the Notes
    
    $
    (271
    )
    
    $
    523
    
    
    $
    (670
    )
    
    $
    3,019Warrants related to real estate buyout
    
    
    (46
    )
    
    
    175
    
    
    
    (33
    )
    
    
    1,192Conversion Feature
    
    
    
    
    
    
    96
    
    
    
    
    
    
    
    5,964Additional Investment Rights
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    867(Loss) gain on revaluation of warrants and
change in value of derivatives
    
    $
    (317
    )
    
    $
    794
    
    
    $
    (703
    )
    
    $
    11,042
 Page 15




---



##### Table of Contents



Other Non-Current Liabilities
  September 30,
    
    
    December 31,2006
    
    
    2005Restructuring (Note 6)
    
    $
    3,438
    
    
    $
    1,722Deferred maintenance and unearned revenue
    
    
    1,887
    
    
    
    2,334Other
    
    
    377
    
    
    
    334Total other non-current liabilities
    
    $
    5,702
    
    
    $
    4,390
 Note 4. Commitments and Contingencies
 Warranties and Indemnification
   Leases
   Total futureminimumYears Ending December 31,
    
    payments2006
    
    $
    0.42007
    
    
    2.72008
    
    
    1.72009
    
    
    1.72010
    
    
    1.22011 and thereafter
    
    
    1.7Total
minimum lease payments
    
    $
    9.4
 Standby Letter of Credit Commitments
  Page 16




---



##### Table of Contents



Legal Matters
  Note 5. Geographic, Segment and Significant Customer Information
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Software licenses
    
    $
    4,750
    
    
    $
    3,134
    
    
    $
    11,259
    
    
    $
    10,941Consulting services
    
    
    2,702
    
    
    
    4,403
    
    
    
    9,697
    
    
    
    14,706Maintenance
    
    
    6,133
    
    
    
    6,540
    
    
    
    17,982
    
    
    
    20,311Total revenues
    
    $
    13,585
    
    
    $
    14,077
    
    
    $
    38,938
    
    
    $
    45,958
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Revenues:Americas
    
    $
    8,119
    
    
    $
    8,252
    
    
    $
    28,771
    
    
    $
    25,948Europe
    
    
    3,029
    
    
    
    4,359
    
    
    
    5,650
    
    
    
    15,688Asia/Pacific
    
    
    2,437
    
    
    
    1,466
    
    
    
    4,517
    
    
    
    4,322Total revenues
    
    $
    13,585
    
    
    $
    14,077
    
    
    $
    38,938
    
    
    $
    45,958
 September 30,
    
    
    December 31,2006
    
    
    2005(unaudited)Long-Lived Assets:Americas
    
    $
    26,695
    
    
    $
    29,039Europe
    
    
    220
    
    
    
    328Asia/Pacific
    
    
    584
    
    
    
    445Total long-lived assets
    
    $
    27,499
    
    
    $
    29,812
  Page 17




---



##### Table of Contents



Note 6. Restructuring Charges
 Restructuring and
Impairment
   Severance and Termination Benefits Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain
Costs Incurred in a Restructuring) Accounting For Costs Associated with Exit Activities
  Excess Facilities Costs Associated with
Lease Modification or Termination
  Current
    
    
    Non-Current
    
    
    TotalSeverance and Termination
    
    $
    0.4
    
    
    $
    
    
    
    $
    0.4Excess Facilities
    
    
    0.9
    
    
    
    3.4
    
    
    
    4.3Total
    
    $
    1.3
    
    
    $
    3.4
    
    
    $
    4.7
  Total futureminimumYears Ending December 31,
    
    payments2006
    
    $
    0.12007
    
    
    1.22008
    
    
    0.82009
    
    
    0.82010
    
    
    0.62011 and thereafter
    
    
    0.8Total minimum lease payments
    
    $
    4.3
 Page 18




---



##### Table of Contents



Accrued
    
    
    Charged torestructuring
    
    
    restructuring
    
    
    
    
    
    
    Accruedcosts,
    
    
    costs
    
    
    Amounts paid
    
    
    restructuringbeginning
    
    
    and other
    
    
    or written off
    
    
    costs, endingThree Months Ended September 30, 2006Lease cancellations and commitments
    
    $
    4,399
    
    
    $
    (2,035
    )
    
    $
    (46
    )
    
    $
    2,318Termination payments to employees and related costs
    
    
    38
    
    
    
    (6
    )
    
    
    
    
    
    
    32$
    4,437
    
    
    $
    (2,041
    )
    
    $
    (46
    )
    
    $
    2,350Three Months Ended September 30, 2005Lease cancellations and commitments
    
    $
    3,964
    
    
    $
    (61
    )
    
    $
    175
    
    
    $
    4,078Termination payments to employees and related costs
    
    
    655
    
    
    
    444
    
    
    
    (776
    )
    
    
    323$
    4,619
    
    
    $
    383
    
    
    $
    (601
    )
    
    $
    4,401Nine Months Ended September 30, 2006Lease cancellations and commitments
    
    $
    4,188
    
    
    $
    (1,927
    )
    
    $
    57
    
    
    $
    2,318Termination payments to employees and related costs
    
    
    105
    
    
    
    368
    
    
    
    (441
    )
    
    
    32$
    4,293
    
    
    $
    (1,559
    )
    
    $
    (384
    )
    
    $
    2,350Nine Months Ended September 30, 2005Lease cancellations and commitments
    
    $
    21,824
    
    
    $
    (838
    )
    
    $
    (16,908
    )
    
    $
    4,078Termination payments to employees and related costs
    
    
    365
    
    
    
    975
    
    
    
    (1,017
    )
    
    
    323$
    22,189
    
    
    $
    137
    
    
    $
    (17,925
    )
    
    $
    4,401
  Accrued
    
    
    Charged torestructuring
    
    
    restructuring
    
    
    
    
    
    
    Accruedcosts,
    
    
    costs
    
    
    Amounts paid
    
    
    restructuringbeginning
    
    
    and other
    
    
    or written off
    
    
    costs, endingThree Months Ended September 30, 2006Lease cancellations and commitments
    
    $
    1,992
    
    
    $
    163
    
    
    $
    (150
    )
    
    $
    2,005Termination payments to employees and related costs
    
    
    332
    
    
    
    
    
    
    
    4
    
    
    
    336$
    2,324
    
    
    $
    163
    
    
    $
    (146
    )
    
    $
    2,341Three Months Ended September 30, 2005Lease cancellations and commitments
    
    $
    6,326
    
    
    $
    (137
    )
    
    $
    (2,930
    )
    
    $
    3,259Termination payments to employees and related costs
    
    
    422
    
    
    
    
    
    
    
    (70
    )
    
    
    352$
    6,748
    
    
    $
    (137
    )
    
    $
    (3,000
    )
    
    $
    3,611Nine Months Ended September 30, 2006Lease cancellations and commitments
    
    $
    2,651
    
    
    $
    156
    
    
    $
    (802
    )
    
    $
    2,005Termination payments to employees and related costs
    
    
    311
    
    
    
    
    
    
    
    25
    
    
    
    336$
    2,962
    
    
    $
    156
    
    
    $
    (777
    )
    
    $
    2,341Nine Months Ended September 30, 2005Lease cancellations and commitments
    
    $
    11,515
    
    
    $
    (287
    )
    
    $
    (7,969
    )
    
    $
    3,259Termination payments to employees and related costs
    
    
    459
    
    
    
    
    
    
    
    (107
    )
    
    
    352$
    11,974
    
    
    $
    (287
    )
    
    $
    (8,076
    )
    
    $
    3,611
 Page 19




---



##### Table of Contents



Note 7. Stockholders Equity (Deficit)
  Note 8. Related Party Transactions
    Note 9. Subsequent Event
  
 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.
 Page 20




---



##### Table of Contents



Overview
        Recent Events
   Page 21




---



##### Table of Contents



Critical Accounting Policies
    Page 22




---



##### Table of Contents



Revenue Recognition
 Overview Software Revenue Recognition Software Revenue
Recognition, With Respect to Certain Transactions Revenue Recognition .
 Software License Revenue
    Services Revenue
   Allowances and Reserves
  Page 23




---



##### Table of Contents



Impairment Assessments
  Deferred Tax Assets
  Accounting for Stock-Based Compensation
   Aggregate Number of Common Shares
    
    Weighted AverageIssuable Under Accelerated Stock Options
    
    Exercise Price Per ShareTotal Non-Employee Directors
    
    
    122,181
    
    
    $
    2.98Total Named Executive Officers
    
    
    391,886
    
    
    
    2.87Total Directors and Named Executive
    
    
    514,067
    
    
    
    2.89Total All Other Employees
    
    
    610,707
    
    
    
    2.97Total
    
    
    1,124,774
    
    
    
    2.94
    Page 24




---



##### Table of Contents




    
    The expected volatility of our common stock price, which we determine based on
historical volatility of our common stock over the expected term of the option;
    
    Expected dividends, which are nil, as we do not currently anticipate issuing
dividends;
    
    Expected life of the stock option, which is estimated based on the historical stock
option exercise behavior of our employees; and
    
    Expected forfeitures of stock options, which is estimated based on the historical
turnover of our employees. Prior to adoption of FAS 123R, we recognized forfeitures
under FAS 123 as they occurred.
  Restructuring Charges
 .
 Severance and Termination Costs
  
 
 Excess Facilities Costs
   Costs
Associated with Lease Modification or Termination
 
  Page 25




---



##### Table of Contents



Research and Development and Software Development Costs
 Accounting for the Cost of Computer Software to be
Sold, Leased or Otherwise Marketed
 Cash and Cash Equivalents
   September 30,
    
    
    December 31,2006
    
    
    2005(unaudited)(Fair value)
    
    
    (Fair value)Cash and certificates of deposits
    
    $
    15,746
    
    
    $
    4,030Money market
    
    
    1,158
    
    
    
    819Total cash and equivalents
    
    $
    16,904
    
    
    $
    4,849
 Concentrations of Credit Risk
  Fair Value of Financial Instruments
  Page 26




---



##### Table of Contents



Foreign Currency
  Legal Matters
  Results of Operations
 Revenues
 Total revenues
 SoftwareLicenses
    
    
    %
    
    
    Services
    
    
    %
    
    
    Total
    
    
    %Three Months Ended:September 30, 2006Americas
    
    $
    3,249
    
    
    
    68
    %
    
    $
    4,870
    
    
    
    55
    %
    
    $
    8,119
    
    
    
    60
    %Europe
    
    
    462
    
    
    
    10
    
    
    
    2,567
    
    
    
    29
    
    
    
    3,029
    
    
    
    22Asia Pacific
    
    
    1,039
    
    
    
    22
    
    
    
    1,398
    
    
    
    16
    
    
    
    2,437
    
    
    
    18Total
    
    $
    4,750
    
    
    
    100
    %
    
    $
    8,835
    
    
    
    100
    %
    
    $
    13,585
    
    
    
    100
    %September 30, 2005Americas
    
    $
    1,724
    
    
    
    55
    %
    
    $
    6,528
    
    
    
    60
    %
    
    $
    8,252
    
    
    
    59
    %Europe
    
    
    830
    
    
    
    26
    
    
    
    3,529
    
    
    
    32
    
    
    
    4,359
    
    
    
    31Asia Pacific
    
    
    580
    
    
    
    19
    
    
    
    886
    
    
    
    8
    
    
    
    1,466
    
    
    
    10Total
    
    $
    3,134
    
    
    
    100
    %
    
    $
    10,943
    
    
    
    100
    %
    
    $
    14,077
    
    
    
    100
    %Nine Months Ended:September 30, 2006Americas

    
    $
    8,645
    
    
    
    77
    %
    
    $
    20,126
    
    
    
    73
    %
    
    $
    28,771
    
    
    
    74
    %Europe
    
    
    1,175
    
    
    
    10
    
    
    
    4,475
    
    
    
    16
    
    
    
    5,650
    
    
    
    14Asia Pacific
    
    
    1,439
    
    
    
    13
    
    
    
    3,078
    
    
    
    11
    
    
    
    4,517
    
    
    
    12Total
    
    $
    11,259
    
    
    
    100
    %
    
    $
    27,679
    
    
    
    100
    %
    
    $
    38,938
    
    
    
    100
    %September 30, 2005Americas
    
    $
    5,430
    
    
    
    50
    %
    
    $
    20,518
    
    
    
    59
    %
    
    $
    25,948
    
    
    
    57
    %Europe
    
    
    3,814
    
    
    
    35
    
    
    
    11,874
    
    
    
    34
    
    
    
    15,688
    
    
    
    34Asia Pacific
    
    
    1,697
    
    
    
    15
    
    
    
    2,625
    
    
    
    7
    
    
    
    4,322
    
    
    
    9Total
    
    $
    10,941
    
    
    
    100
    %
    
    $
    35,017
    
    
    
    100
    %
    
    $
    45,958
    
    
    
    100
    %
  Page 27




---



##### Table of Contents



Software license revenues
 Services revenues
  Cost of Revenues
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    % (1)
    
    
    2005
    
    
    % (1)
    
    
    2006
    
    
    % (1)
    
    
    2005
    
    
    % (1)Cost of software licenses
    
    $
    22
    
    
    
    0
    %
    
    $
    106
    
    
    
    1
    %
    
    $
    226
    
    
    
    1
    %
    
    $
    (137
    )
    
    
    -1
    %Cost of services
    
    
    2,729
    
    
    
    20
    %
    
    
    5,641
    
    
    
    40
    %
    
    
    10,283
    
    
    
    26
    %
    
    
    17,235
    
    
    
    38
    %Total cost of revenues
    
    $
    2,751
    
    
    
    20
    %
    
    $
    5,747
    
    
    
    41
    %
    
    $
    10,509
    
    
    
    27
    %
    
    $
    17,098
    
    
    
    37
    %
 
 (1)
    
    Expressed as a percent of total revenues for the period indicated Cost of (credit for) software licenses
 Cost of services
 Gross margin
 Page 28




---



##### Table of Contents



Operating Expenses and Other Income, net
   Research and development expenses
  Sales and marketing expenses
  General and administrative expenses
  Restructuring charges
 Goodwill
impairment
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,

    
    
    September 30,2006
    
    
    % (1)
    
    
    2005
    
    
    % (1)
    
    
    2006
    
    
    % (1)
    
    
    2005
    
    
    % (1)Research and development
    
    $
    2,766
    
    
    
    20
    %
    
    $
    3,095
    
    
    
    22
    %
    
    $
    7,802
    
    
    
    20
    %
    
    $
    11,336
    
    
    
    25
    %Sales and marketing
    
    
    1,761
    
    
    
    13
    %
    
    
    2,948
    
    
    
    21
    %
    
    
    6,124
    
    
    
    16
    %
    
    
    13,819
    
    
    
    30
    %General and
administrative
    
    
    2,429
    
    
    
    18
    %
    
    
    2,162
    
    
    
    15
    %
    
    
    7,406
    
    
    
    19
    %
    
    
    7,526
    
    
    
    16
    %Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    13,198
    
    
    
    94
    %
    
    
    
    
    
    
    
    
    
    
    13,198
    
    
    
    29
    %Restructuring charges
    
    
    (1,878
    )
    
    
    -14
    %
    
    
    246
    
    
    
    2
    %
    
    
    (1,403
    )
    
    
    -4
    %
    
    
    (149
    )
    
    
    0
    %Business combination
    
    
    
    
    
    
    
    
    
    
    977
    
    
    
    7
    %
    
    
    
    
    
    
    
    
    
    
    977
    
    
    
    2
    %Total operating expenses
    
    $
    5,078
    
    
    
    37
    %
    
    $
    22,626
    
    
    
    161
    %
    
    $
    19,929
    
    
    
    51
    %
    
    $
    46,707
    
    
    
    102
    %
 
 (1)
    
    Expressed as a percent of total revenues for the period indicated Research and development expenses
 Sales and marketing expenses
 General and administrative expenses
 Page 29




---



##### Table of Contents



Restructuring charges. .
  Goodwill impairment.
 Interest income (expense), net
 (Loss) gain on revaluation of warrants and change in value of derivatives
 Other income, net,
 (Provision) benefit for income taxes
 Liquidity and Capital Resources
 Background and Overview
  Page 30




---



##### Table of Contents



September 30,
    
    
    December 31,2006
    
    
    2005(unaudited)Cash and cash equivalents
    
    $
    16,905
    
    
    $
    4,849Restricted cash and investments
    
    $
    1,997
    
    
    $
    1,997Working capital (deficit)
    
    $
    (4,116
    )
    
    $
    (35,872
    )Working capital ratio
    
    
    0.86
    
    
    
    0.35
   Cash Provided By (Used In) Operating Activities
   Page 31




---



##### Table of Contents



Cash Provided By Investing Activities
  Cash Used In Financing Activities
  Leases and Other Contractual Obligations
   OperatingYears Ending December 31,
    
    Leases2006
    
    $
    0.42007
    
    
    2.72008
    
    
    1.72009
    
    
    1.72010
    
    
    1.22011 and thereafter
    
    
    1.7Total
minimum lease payments
    
    $
    9.4
    
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 ITEM 4. Controls and Procedures
  Page 32




---



##### Table of Contents



Changes in Internal Control over Financial Reporting
     Limitations on the Effectiveness of Controls
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  Page 33




---



##### Table of Contents



Item 1A. Risk Factors
 The risks and uncertainties described below are not the only ones facing us. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial also may impair
our business operations. If any of the following risks actually occur, our business could be
harmed. In that event, the trading price of our common stock could decline.
 We have a history of losses and our future profitability on a quarterly or annual basis is
uncertain, which could have a harmful effect on our business and the value of BroadVision common
stock.
    We face liquidity challenges and may need additional near-term financing.
   Our management identified a material weakness in the effectiveness of our internal control over
financial reporting as of December 31, 2005 and restated our historical operating results, and we
cannot assure you that additional material weaknesses will not be discovered or additional
restatements will not be made in the future.
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Our business currently depends on revenue related to our BroadVision Self-Service Suite, and if the
market does not increasingly accept this product and related products and services, our revenue may
continue to decline.
  If we are unable to keep pace with the rapid technological changes in online commerce and
communication, our products and services may fail to be competitive.
  
    
    develop leading technologies;
    
    enhance our existing products and services;
    
    develop new products and services that address the increasingly sophisticated
and varied needs of our prospective customers; and
    
    respond to technological advances and emerging industry standards and practices
on a timely and cost-effective basis.
 Our sales and product implementation cycles are lengthy and subject to delay, which make it
difficult to predict our quarterly results.
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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.
   
    
    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.
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Because a significant portion of our sales activity occurs at the end of each fiscal quarter,
delays in a relatively small number of license transactions could adversely affect our quarterly
operating results.
  We have substantially modified our business and operations and will need to manage and support
these changes effectively in order for our business plan to succeed.
  Modifications to our business and operations may not result in a reduced cost structure as
anticipated and may otherwise adversely impact our productivity.
  We are dependent on direct sales personnel and third-party distribution channels to achieve revenue
growth.
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Failure to maintain relationships with third-party systems integrators could harm our ability to
achieve our business plan.
  
    
    Systems integrators may not view their relationships with us as valuable to their own
businesses. The related arrangements typically may be terminated by either party with
limited notice and in some cases are not covered by a formal agreement.
    
    Under our business model, we often rely on our system integrators employees to perform
implementations. If we fail to work together effectively, or if these parties perform
poorly, our reputation may be harmed and deployment of our products may be delayed or
inadequate.
    
    Systems integrators may attempt to market their own products and services rather than
ours.
    
    Our competitors may have stronger relationships with our systems integrators than us
and, as a result, these integrators may recommend a competitors products and services over
ours.
    
    If we lose our relationships with our systems integrators, we will not have the
personnel necessary to deploy our products effectively, and we will need to commit
significant additional sales and marketing resources in an effort to reach the markets and
customers served by these parties.
 We may be unable to manage or grow our international operations and assets, which could impair our
overall growth or financial position.
   
    
    difficulties in staffing and managing foreign operations and safeguarding foreign assets;
    
    unexpected changes in regulatory requirements;
    
    export controls relating to encryption technology and other export restrictions;
    
    tariffs and other trade barriers;
    
    difficulties in staffing and managing foreign operations;
    
    political and economic instability;
    
    fluctuations in currency exchange rates;
    
    reduced protection for intellectual property rights in some countries;
    
    cultural barriers;
    
    seasonal reductions in business activity during the summer months in Europe and
certain other parts of the world; and
    
    potentially adverse tax consequences.
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Current and potential competitors could make it difficult for us to acquire and retain customers
now and in the future.
   Our success and competitive position will depend on our ability to protect our proprietary
technology.
    A breach of the encryption technology that we use could expose us to liability and harm our
reputation, causing a loss of customers.
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The loss or malfunction of technology licensed from third parties could delay the introduction of
our products and services.
  Our executive officers, key employees and highly skilled technical and managerial personnel are
critical to our business, and they may not remain with us in the future.
  Limitations on the online collection of profile information could impair the effectiveness of our
products.
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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.
  Risks related to BroadVision common stock
 Our stock price has been highly volatile.
  
    
    quarterly variations in operating results;
    
    announcements of technological innovations;
    
    announcements of new software or services by us or our competitors;
    
    changes in financial estimates by securities analysts;
    
    general economic conditions; or
    
    other events or factors that are beyond our control.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults In Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
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1)
    
    Pehong Chen, James D. Dixon, Robert Lee and Francois Stieger were elected members of the
Board of Directors to serve until the 2007 Annual Meeting of Stockholders and until their
successors are elected and qualified. The votes were
 For
    
    
    WithheldPehong Chen
    
    
    57,667,060
    
    
    
    156,398James D. Dixon
    
    
    57,703,123
    
    
    
    120,335Robert Lee
    
    
    57,702,183
    
    
    
    121,275Francois Stieger
    
    
    57,686,690
    
    
    
    136,768
 2)
    
    The BroadVision, Inc. 2006 Equity Incentive Plan was ratified and approved. There were
40,906,045 votes for to 262,872 votes against with 18,179 votes abstaining and 16,634,362
broker non-votes.
 3)
    
    The amendment to the Companys Amended and Restated Certificate of Incorporation was ratified
and approved to reduce the Companys (i) total authorized number of shares from 2,010,000,000
to 91,000,000 shares; (ii) authorized number of shares of common stock from 2,000,000,000 to
90,000,000 shares; (iii) authorized number of shares of preferred stock from 10,000,000 to
1,000,000 shares. The vote was 41,041,945 votes for to 128,554 votes against with 18,596
votes abstaining and 16,634,363 broker non-votes.
 4)
    
    The amendment to the Companys Amended and Restated Certificate of Incorporation was ratified
and approved to reduce the Companys (i) total authorized number of shares from 2,010,000,000
to 141,000,000 shares; (ii) authorized number of shares of common stock from 2,000,000,000 to
140,000,000 shares; (iii) authorized number of shares of preferred stock from 10,000,000 to
1,000,000 shares. The vote was 41,027,522 votes for to 141,472 votes against with 20,101
votes abstaining and 16,634,363 broker non-votes.
 5)
    
    The amendment to the Companys Amended and Restated Certificate of Incorporation was ratified
and approved to reduce the Companys (i) total authorized number of shares from 2,010,000,000
to 281,000,000 shares; (ii) authorized number of shares of common stock from 2,000,000,000 to
280,000,000 shares; (iii) authorized number of shares of preferred stock from 10,000,000 to
1,000,000 shares. The vote was 41,026,569 votes for to 143,109 votes against with 19,417
votes abstaining and 16,634,363 broker non-votes.
 6)
    
    The amendment to the Companys Amended and Restated Certificate of Incorporation was ratified
and approved to remove a provision that prevents the Companys stockholders from taking
actions by written consent. The vote was 40,936,190 votes for to 239,219 votes against with
13,687 votes abstaining and 16,634,362 broker non-votes.
 7)
    
    The appointment of Stonefield Josephson, Inc. as independent auditors for the Companys
fiscal year ending December 31, 2006 was ratified and approved. The vote was 57,748,590 votes
for to 62,058 votes against with 12,810 votes abstaining and none broker non-votes.
 
 Item 5. Other Information
  
 Item 6. Exhibits
 (a) Exhibits
 Exhibits
    
    Description3.1 (1)
    
    Amended and Restated Certificate of Incorporation.3.2 (2)
    
    Certificate of Amendment of Certificate of Incorporation.3.3 (3)
    
    Amended and Restated Bylaws.4.1 (1)
    
    References are hereby made to Exhibits 3.1 to 3.231.1
    
    Certification of the Chief Executive Officer and 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
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SIGNATURES
  BROADVISION, INC.Date: December 15, 2006
    By:
    /s/ Pehong ChenPehong ChenChairman of the Board, President, Chief Executive Officer and Chief Financial Officer Page 43




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EXHIBIT
INDEX
 Exhibits
    
    Description3.1 (1)
    
    Amended and Restated Certificate of Incorporation.3.2 (2)
    
    Certificate of Amendment of Certificate of Incorporation.3.3 (3)
    
    Amended and Restated Bylaws.4.1 (1)
    
    References are hereby made to Exhibits 3.1 to 3.231.1
    
    Certification of the Chief Executive Officer and 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.