Company Quick10K Filing
Quick10K
Broadvision
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$1.42 5 $7
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-01-03 Enter Agreement, M&A, Exhibits
8-K 2018-12-28 Shareholder Vote
8-K 2018-11-05
8-K 2018-09-30 Earnings, Exhibits
8-K 2018-08-13 Earnings, Exhibits
8-K 2018-03-09
8-K 2017-12-31 Earnings, Exhibits
INTU Intuit
SSNC Ss&C Technologies Holdings
ANSS Ansys
RP Realpage
EIGI Endurance International
AVID Avid Technology
CLPS CLPS
DWCH Datawatch
SHSP Sharpspring
QUMU Qumu
BVSN 2018-09-30
Part I. Financial Information
Item 1. Financial Statements
Note 1. Organization and Summary of Significant Accounting Policies
Note 2. Revenues
Note 3. Selected Condensed Consolidated Balance Sheet Detail
Note 4. Fair Value of Financial Instruments
Note 5. Commitments and Contingencies
Note 6. Geographic, Segment and Significant Customer Information
Note 7. Related Party Transactions
Note 8. Subsequent Event
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 bvsn-20180930xex31_1.htm
EX-32.1 bvsn-20180930xex32_1.htm

Broadvision Earnings 2018-09-30

BVSN 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 bvsn-20180930x10q.htm 10-Q BVSN-20180930 Q3

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

 

 

 

 

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

For the quarterly period ended September 30, 2018

OR



 

 

 

 

 

 

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

For the transaction period from _________ to __________

Commission File Number 001-34205

BROADVISION, INC.

(Exact name of registrant as specified in its charter)



 

 

 

 

 

Delaware

 

94-3184303

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

460 Seaport Ct., Suite 102

 

94063

Redwood City, California

 

 

(Address of principal executive offices)

 

(Zip code)

(650) 331-1000

(Registrant's telephone number, including area code)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 



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



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





 

Large accelerated filer          

Accelerated filer        



 

Non-accelerated filer

Smaller reporting company



Emerging growth company



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



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



As of November 9, 2018, the registrant had 4,999,154 shares of common stock outstanding.


 

 

BROADVISION, INC. AND SUBSIDIARIES

 

FORM 10-Q

 

Quarter Ended September 30, 2018

 

TABLE OF CONTENTS





 



 

PART I. FINANCIAL INFORMATION

 



 

Item 1.   Financial Statements

 

Condensed Consolidated Balance Sheets at September 30, 2018 (unaudited) and December 31, 2017

1

Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2018 and 2017 (unaudited)

2

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 (unaudited)

3

Notes to Condensed Consolidated Financial Statements (unaudited)

4

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

16

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.   Controls and Procedures

22



 

PART II.  OTHER INFORMATION

 



 

Item 1.   Legal Proceedings

22

Item 1A.Risk Factors

22

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

36

Item 3.   Defaults Upon Senior Securities

36

Item 4.   Mine Safety Disclosures

36

Item 5.   Other Information

36

Item 6.   Exhibits

37



 

SIGNATURES

38



 

EXHIBIT 31.1

 

EXHIBIT 32.1

 







 

 

 


 

 



PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BROADVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)











 

 

 

 

 

 



 

 

 

 

 

 



 

September 30,

 

December 31,



 

2018

 

2017

ASSETS

 

 

(unaudited)

 

 

(See Note 1)

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,349 

 

$

8,560 

Short-term investments

 

 

 -

 

 

1,000 

Accounts receivable, net of reserves of $216 and $293 as of September 30, 2018

 

 

 

 

 

 

and December 31, 2017, respectively

 

 

320 

 

 

1,193 

Prepaids and other

 

 

969 

 

 

983 

Total current assets

 

 

5,638 

 

 

11,736 

Property and equipment, net

 

 

19 

 

 

35 

Other assets

 

 

217 

 

 

208 

Total assets

 

$

5,874 

 

$

11,979 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

335 

 

$

434 

Accrued expenses

 

 

1,098 

 

 

1,658 

Unearned revenue

 

 

507 

 

 

1,187 

Deferred maintenance

 

 

380 

 

 

808 

Total current liabilities

 

 

2,320 

 

 

4,087 

Other non-current liabilities

 

 

593 

 

 

583 

Total liabilities

 

 

2,913 

 

 

4,670 

Stockholders’ equity:

 

 

 

 

 

 

Convertible preferred stock, $0.0001 par value; 1,000 shares authorized; none issued and

 

 

 

 

 

 

outstanding

 

 

 

 

 

 

Common stock, $0.0001 par value; 11,200 shares authorized; 4,999 and 4,995 shares issued

 

 

 

 

 

 

and outstanding as of September 30, 2018 and December 31, 2017, respectively

 

 

 -

 

 

 -

Additional paid-in capital

 

 

1,271,894 

 

 

1,271,585 

Accumulated other comprehensive loss

 

 

(1,452)

 

 

(1,558)

Accumulated deficit

 

 

(1,267,481)

 

 

(1,262,718)

Total stockholders’ equity

 

 

2,961 

 

 

7,309 

Total liabilities and stockholders’ equity

 

$

5,874 

 

$

11,979 



 

 

 

 

 

 









 

 

 

 

 

 



See Accompanying Notes to Condensed Consolidated Financial Statements.



 

1

 


 

 

 

BROADVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(Unaudited)











 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2018

 

2017

 

2018

 

2017

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Software licenses

 

$

489 

 

$

844 

 

$

2,033 

 

$

2,605 

Services

 

 

475 

 

 

611 

 

 

1,777 

 

 

2,273 

Total revenues

 

 

964 

 

 

1,455 

 

 

3,810 

 

 

4,878 

Cost of revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of software revenues

 

 

28 

 

 

36 

 

 

105 

 

 

134 

Cost of services

 

 

463 

 

 

672 

 

 

1,500 

 

 

2,200 

Total cost of revenues

 

 

491 

 

 

708 

 

 

1,605 

 

 

2,334 

Gross profit

 

 

473 

 

 

747 

 

 

2,205 

 

 

2,544 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

1,085 

 

 

1,661 

 

 

3,785 

 

 

4,995 

Sales and marketing

 

 

508 

 

 

974 

 

 

1,538 

 

 

2,943 

General and administrative

 

 

535 

 

 

825 

 

 

2,072 

 

 

2,709 

Total operating expenses

 

 

2,128 

 

 

3,460 

 

 

7,395 

 

 

10,647 

Operating loss

 

 

(1,655)

 

 

(2,713)

 

 

(5,190)

 

 

(8,103)

Interest income, net

 

 

13 

 

 

37 

 

 

49 

 

 

101 

Other income (expense), net

 

 

(72)

 

 

176 

 

 

(223)

 

 

544 

Loss before provision for income taxes

 

 

(1,714)

 

 

(2,500)

 

 

(5,364)

 

 

(7,458)

Provision for income taxes

 

 

 

 

 

 

 

 

Net loss

 

 

(1,716)

 

 

(2,502)

 

 

(5,368)

 

 

(7,462)

Other comprehensive (loss) gain, net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

29 

 

 

(198)

 

 

106 

 

 

(531)

Comprehensive loss

 

$

(1,687)

 

$

(2,700)

 

$

(5,262)

 

$

(7,993)

Net loss per share, basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

$

(0.34)

 

$

(0.50)

 

$

(1.07)

 

$

(1.50)

Shares used in computing:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares, basic and diluted

 

 

4,998 

 

 

4,985 

 

 

4,997 

 

 

4,970 







 

 

 

 

 

 

 

 

 

 

 

 

 






See Accompanying Notes to Condensed Consolidated Financial Statements.



 



2

 


 

 

BROADVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, Unaudited)









 

 

 

 

 

 



 

 

 

 

 

 



 

Nine Months Ended



 

September 30,



 

2018

 

2017

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(5,368)

 

$

(7,462)

Depreciation and amortization

 

 

17 

 

 

25 

Stock-based compensation

 

 

300 

 

 

728 

Provision of receivable reserves

 

 

(77)

 

 

(35)

Accumulated effect on accounting changes

 

 

605 

 

 

 -

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

950 

 

 

180 

Prepaids and other

 

 

14 

 

 

56 

Other non-current assets

 

 

(9)

 

 

(1)

Accounts payable and accrued expenses

 

 

(659)

 

 

(64)

Unearned revenue and deferred maintenance

 

 

(1,108)

 

 

(234)

Other noncurrent liabilities

 

 

10 

 

 

(99)

Net cash used in operating activities

 

 

(5,325)

 

 

(6,906)

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(1)

 

 

(7)

Purchase of short-term investments

 

 

 -

 

 

(4,497)

Maturities of short-term investments

 

 

1,000 

 

 

10,474 

Net cash provided by investing activities

 

 

999 

 

 

5,970 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock, net

 

 

 

 

64 

Net cash provided by financing activities

 

 

 

 

64 

Effect of exchange rates on cash and cash equivalents

 

 

106 

 

 

(531)

Net (decrease) increase in cash and cash equivalents

 

 

(4,211)

 

 

(1,403)

Cash and cash equivalents at beginning of period

 

 

8,560 

 

 

11,730 

Cash and cash equivalents at end of period

 

$

4,349 

 

$

10,327 





 



 

 

 

 

 

 






 See Accompanying Notes to Condensed Consolidated Financial Statements.

 

3

 


 

 

BROADVISION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 (Unaudited)



Note 1. Organization and Summary of Significant Accounting Policies



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



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

On January 1, 2018, we adopted a new revenue recognition standard, Revenue from Contracts with Customers (Topic 606), which was issued by the Financial Accounting Standards Board (“FASB”) in May 2014. See Recent Accounting Pronouncements included below in this Note 1 for additional discussion of our accounting changes related to our adoption of this standard.  There have been no other material changes in our critical accounting policies, estimates and judgments during the nine month period ended September 30, 2018 compared to the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the Securities and Exchange Commission (the “SEC”) on April 2, 2018, as amended.



Basis of Presentation



The condensed consolidated financial results and related information as of and for the nine months ended September 30, 2018 and September 30, 2017 are unaudited. The Condensed Consolidated Balance Sheet at December 31, 2017 has been derived from the audited consolidated financial statements as of that date but does not necessarily reflect all of the disclosures previously reported in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The unaudited Condensed Consolidated Financial Statements should be reviewed in conjunction with the audited consolidated financial statements and related notes contained in our 2017 Annual Report on Form 10-K filed with the SEC on April 2, 2018, as amended.



The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. GAAP for interim financial information and with the instructions in Form 10-Q and Article 8-03 of Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by U.S. GAAP for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of interim financial information have been included. Operating results for the nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the remainder of the year ending December 31, 2018 or any future interim period. The condensed consolidated financial statements include our accounts and those of our wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in the consolidation.



Use of Estimates



The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make certain assumptions and estimates that affect reported amounts of assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to receivable reserves, stock-based compensation, investments, impairment assessments and income taxes, 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.



Liquidity



The accompanying Condensed Consolidated Financial Statements have been prepared assuming the Company will continue as a going concern. During the nine months ended September 30, 2018, the Company had a net loss of $5.4 million and net cash used in operations of $5.3 million, and at September 30, 2018 the Company had working capital of $3.3 million. At September 30, 2018, the Company has cash and cash equivalents of $4.3 million. The Company has implemented a series of cost reduction plans since the second half of 2017, has since continued to implement cost reduction plans to reduce the cost of its operations.



4

 


 

 

Management may implement further cost reductions and seek financing from third parties as needed to ensure that the Company’s cash, cash equivalents and short-term investments are sufficient to fund its operations for at least the next twelve months from the date of issuance of these Condensed Consolidated Financial Statements.



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



Stock-Based Compensation



The following table sets forth the components of the total stock-based compensation expense recognized in our Condensed Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2018 and 2017 (in thousands):









 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2018

 

2017

 

2018

 

2017

Cost of services

 

$

13 

 

$

38 

 

$

41 

 

$

101 

Research and development

 

 

25 

 

 

89 

 

 

102 

 

 

239 

Sales and marketing

 

 

22 

 

 

72 

 

 

84 

 

 

203 

General and administrative

 

 

 

 

63 

 

 

73 

 

 

185 



 

$

67 

 

$

262 

 

$

300 

 

$

728 







Net Loss Per Share

 

Basic net loss per share is computed using the weighted-average number of shares of common stock outstanding, excluding the effects of any potentially dilutive securities. Diluted net 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 using the treasury stock method. The Company incurred net losses for the nine months ended September 30, 2018 and 2017, and therefore, basic and diluted net loss per share for those periods are the same, as all potential common equivalent shares would be anti-dilutive. The following table sets forth the basic and diluted net loss per share computational data for the periods presented (in thousands, except per share amounts):  









 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2018

 

2017

 

2018

 

2017

Net Loss

 

$

(1,716)

 

$

(2,502)

 

$

(5,368)

 

$

(7,462)

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

 

 

4,998 

 

 

4,985 

 

 

4,997 

 

 

4,970 

Basic and diluted net loss per share

 

$

(0.34)

 

$

(0.50)

 

$

(1.07)

 

$

(1.50)







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

 


 

 



Foreign Currency Translations



The functional currencies of all foreign subsidiaries are the local currencies of their respective countries.  Assets and liabilities of these subsidiaries are translated into U.S. dollars at the balance sheet date. Income and expense items are translated at average exchange rates for the periods presented. Foreign exchange gains and losses resulting from the remeasurement of foreign currency assets and liabilities are included as other income (expense), net in the Condensed Consolidated Statements of Comprehensive Loss. The translation adjustment was $106,000 of income and $531,000 loss for the nine months ended September 30, 2018 and 2017, respectively.  These amounts are included in the accumulated other comprehensive loss account in the Condensed Consolidated Balance Sheets.



Comprehensive Loss

 

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



 

 

 



 

 

 



 

Accumulated



 

Other



 

Comprehensive



 

Loss

Balance, December 31, 2017

 

$

(1,558)

Net change during period

 

 

106 

Balance, September 30, 2018

 

$

(1,452)







Recent Accounting Pronouncements



Recently issued accounting pronouncements not yet adopted



In February 2016, FASB issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), which requires the recognition of an asset and liability for lease arrangements longer than twelve months. ASU 2016-02 will be effective for the Company beginning in the first quarter of fiscal 2019. Entities may early adopt the ASU. The ASU requires application at the beginning of the earliest period presented using a modified retrospective approach. The Company is currently assessing the potential impact of adopting this new guidance on its Condensed Consolidated Financial Statements.



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



In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders' equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders' equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. This final rule became effective on November 5, 2018 and allows  for the first presentation in the quarter that begins after the effective date. This Release will require additional disclosures in the Company’s interim Condensed Consolidated Financial Statements.



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



6

 


 

 

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



Recently adopted accounting pronouncements



In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606).  Under the standard, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. On January 1, 2018, we adopted ASU 2014-09 applying the modified retrospective method to all contracts that were not completed as of the transition date.  See Note 2 of the Notes to our Condensed Consolidated Financial Statements,



We adopted ASU 2016-09 during the first quarter of fiscal 2017. ASU 2016-09 requires entities to record all tax effects related to share-based payments at settlement or expiration through the statements of comprehensive income and the windfall tax benefit to be recorded when it arises, subject to normal valuation allowance considerations. Our excess tax benefits for the year ended December 31, 2017 and the cumulative effect to retained earnings from previously unrecognized excess tax benefits for Federal and state were $2,652,000 and $1,908,000, respectively. Our excess tax benefits for the nine months ended September 30, 2018 were not significant to our Condensed Consolidated Balance Sheets after offset by the related valuation allowance.  We analyze our deferred tax assets with regard to potential realization. We have established a valuation allowance on our deferred tax assets to the extent that management has determined,  based upon the uncertainty of realizing such deferred tax assets, that it is more likely than not that some portion or all of the deferred tax assets will not be realized. We consider the effects of estimated future taxable income, current economic conditions and ongoing prudent and feasible tax planning strategies in assessing the amount of the valuation allowance.



Presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to all periods presented as such cash flows have historically been presented as financing activities. Further, we did not elect an accounting policy change to record forfeitures as they occur and thus we continue to estimate forfeitures at each period.



Note 2. Revenues



On January 1, 2018, we adopted Topic 606 applying the modified retrospective method to all contracts that were not completed as of the transition date.  Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with the historic accounting under Topic 605. We recorded a net increase of $605,000 to our opening retained earnings balance as of January 1, 2018 due to the cumulative effect of adopting Topic 606.  For the nine months ended September 30, 2018, the impact on the Company’s revenue was significant by type of revenue but was not significant to total revenues as a result of the adoption of Topic 606.



The most significant impact of the new revenue standard relates to our accounting for subscription-based Quicksilver products, which are arrangements that include term-based QuickSilver software licenses bundled with maintenance and support. Under the accounting standards in effect prior to January 1, 2018, we recognized revenue attributable to these software subscription licenses ratably over the term of the arrangement. Under Topic 606, the requirement to have VSOE for undelivered elements to enable the separation of revenue for the delivered software licenses is eliminated.  Accordingly, effective January 1, 2018, we began to recognize a portion of the arrangement fees allocated to QuickSilver software license as revenue upon delivery. As a result, revenues for these QuickSilver arrangements are generally recorded in an earlier period upon the adoption of Topic 606 and software license revenue recognition in the nine months ended September 30, 2018 has decreased.  In contrast, revenue recognition related to hosted software products (cloud offerings) and professional services recognition for the nine months ended September 30, 2018 has increased upon the adoption of Topic 606.

7

 


 

 



Deferred revenues include unearned revenue and deferred maintenance. The following table shows the reconciliation of our deferred revenues at January 1, 2018, including both current and non-current deferred revenues from what we disclosed in the Form 10-K for the year ended December 31, 2017 and giving effect to our modified retrospective adoption of Topic 606 (in thousands):









 

 



 

 

Deferred revenues balance at December 31, 2017

$

2,056 

Cumulative effect of adoption of Topic 606

 

(605)

Deferred revenues balance at January 1, 2018

$

1,451 





In accordance with Topic 606, the disclosure of the impact of adoption to our Condensed Consolidated Statements of Comprehensive Loss is as follows (in thousands):







 

 

 

 

 

 

 

 

 



 

Nine Months Ended September 30, 2018



 

As reported

 

Amounts without adoption of Topic 606

 

Effect of change - higher (lower)

Revenue

 

 

 

 

 

 

 

 

 

   Software licenses

 

$

2,033 

 

$

2,575 

 

$

(542)

   Services

 

 

1,777 

 

 

1,247 

 

 

530 

Total revenues

 

 

3,810 

 

 

3,822 

 

 

(12)



 

 

 

 

 

 

 

 

 

Gross profit

 

 

2,205 

 

 

2,217 

 

 

(12)



 

 

 

 

 

 

 

 

 

Operating loss

 

 

(5,190)

 

 

(5,178)

 

 

(12)



 

 

 

 

 

 

 

 

 

Net loss

 

$

(5,368)

 

$

(5,356)

 

$

(12)



 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

$

(1.07)

 

$

(1.07)

 

$

-









 

 

 

 

 

 

 

 

 



In accordance with Topic 606, the disclosure of the impact of adoption to our Condensed Consolidated Balance Sheet is as follows. Deferred revenues includes unearned revenue and deferred maintenance. (in thousands):









 

 

 

 

 

 

 

 

 



 

Nine Months Ended September 30, 2018



 

As reported

 

Amounts without adoption of Topic 606

 

Effect of change - higher (lower)

Liabilities

 

 

 

 

 

 

 

 

 

   Deferred revenues - current

 

$

887 

 

$

1,439 

 

$

(552)

   Deferred revenues - non-current

 

 

170 

 

$

211 

 

 

(41)



 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

 

 

 

 

 

 

 

   Accumulated deficit

 

 

(1,267,481)

 

 

(1,268,074)

 

 

593 







 

 

 

 

 

 

 

 

 





8

 


 

 



New Revenue Accounting Policies Upon Adoption of Topic 606

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



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



Software License Revenues-  Products with Non-Ratably Recognized Revenue



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



Software License RevenuesProducts with Ratably-Recognized Revenue



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



Maintenance Revenues



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



Consulting Services Revenues



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



Significant Judgments



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



Practical Expedients and Exemptions



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







 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



9

 


 

 

Disaggregation of revenues

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











 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Nine Months Ended September 30, 2018

Geographic region:

 

Software Licenses - Non-hosted

 

Software Licenses - Hosted

 

Maintenance

 

Professional Services

 

Total

Americas

 

$

1,082 

 

$

187 

 

$

592 

 

$

24 

 

$

1,885 

Europe

 

 

115 

 

 

58 

 

 

548 

 

 

71 

 

 

792 

Asia/Pacific

 

 

 

 

589 

 

 

179 

 

 

363 

 

 

1,133 

Total revenues

 

$

1,199 

 

$

834 

 

$

1,319 

 

$

458 

 

$

3,810 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

Nine Months Ended September 30, 2018

Timing of revenue recognition:

 

Software Licenses - Non-hosted

 

Software Licenses - Hosted

 

Maintenance

 

Professional Services

 

Total

Transferred at a point in time

 

$

1,199 

 

$

 -

 

$

 -

 

$

 -

 

$

1,199 

Transferred over time

 

 

 -

 

 

834 

 

 

1,319 

 

 

458 

 

 

2,611 

Total revenues

 

$

1,199 

 

$

834 

 

$

1,319 

 

$

458 

 

$

3,810 





Contract balances

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







 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

Nine Months Ended September 30, 2018



 

Balance at beginning of period

 

Increases

 

Decreases

 

Balance at end of period

Receivables

 

$

1,193 

 

$

3,471 

 

$

4,344 

 

$

320 

Contract assets - current

 

 

 -

 

 

38 

 

 

34 

 

 

Deferred revenues-current and non-current

 

 

1,451 

 -

 

2,956 

 

 

3,350 

 

 

1,057 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

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

10

 


 

 





Note 3. Selected Condensed Consolidated Balance Sheet Detail



Other current assets at September 30, 2018 and December 31, 2017 consisted of the following (in thousands):







 

 

 

 

 

 



 

September 30,

 

December 31,



 

2018

 

2017



 

(unaudited)

 

 

 

VAT receivable

 

$

416 

 

$

427 

Other

 

 

553 

 

 

556 

Total other current assets

 

$

969 

 

$

983 



Accrued expenses at September 30, 2018 and December 31, 2017 consisted of the following (in thousands):









 

 

 

 

 

 



 

 

 

 

 

 



 

September 30,

 

December 31,



 

2018

 

2017



 

(unaudited)

 

 

 

Employee benefits

 

$

438 

 

$

518 

Income tax

 

 

21 

 

 

25 

Sales and other taxes

 

 

318 

 

 

319 

Commissions and bonuses

 

 

37 

 

 

224 

Deferred rent

 

 

 

 

57 

Other

 

 

283 

 

 

515 

Total accrued expenses

 

$

1,098 

 

$

1,658 









 Other non-current liabilities at September 30, 2018 and December 31, 2017 consisted of the following (in thousands):  



 

 

 

 

 

 



 

 

 

 

 

 



 

September 30,

 

December 31,



 

2018

 

2017



 

(unaudited)

 

 

 

Deferred maintenance and unearned revenues

 

$

170 

 

$

61 

Other

 

 

423 

 

 

522 

Total other non-current liabilities

 

$

593 

 

$

583 











11

 


 

 













Note 4.  Fair Value of Financial Instruments

 

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



 

 

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

 

 

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

 

 

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



We measure the following financial assets at fair value on a recurring basis.  The fair value of these financial assets as of September 30, 2018 and December 31, 2017 (in thousands) were as follows:



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

Fair Value at  Reporting Date Using



 

 

 

 

Quoted

 

 

 

 

 

 



 

 

 

 

Prices in

 

 

 

 

 

 



 

 

 

 

Active

 

 

Significant

 

 

 



 

 

 

 

Markets for

 

 

Other

 

 

Significant



 

 

 

 

Identical

 

 

Observable

 

 

Unobservable



 

September 30,

 

Assets

 

 

Inputs

 

 

Inputs



 

2018

 

(Level 1)

 

(Level 2)

 

(Level 3)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

2,011 

 

$

2,011 

 

$

 -

 

$

 -

Money market funds

 

 

2,338 

 

 

2,338 

 

 

 -

 

 

 -

Total cash and cash equivalents

 

$

4,349 

 

$

4,349 

 

$

 -

 

$

 -



 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

Fair Value at  Reporting Date Using



 

 

 

 

Quoted

 

 

 

 

 

 



 

 

 

 

Prices in

 

 

 

 

 

 



 

 

 

 

Active

 

 

Significant

 

 

 



 

 

 

 

Markets for

 

 

Other

 

 

Significant



 

 

 

 

Identical

 

 

Observable

 

 

Unobservable



 

December 31,

 

Assets

 

 

Inputs

 

 

Inputs



 

2017

 

(Level 1)

 

(Level 2)

 

(Level 3)

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

4,266 

 

$

4,266 

 

$

 -

 

$

 -

Money market funds

 

 

4,294 

 

 

4,294 

 

 

 -

 

 

 -

Total cash and cash equivalents

 

$

8,560 

 

$

8,560 

 

$

 -

 

$

 -

Fixed income securities

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds - industrial

 

$

1,000 

 

$

 -

 

$

1,000 

 

$

 -

Total fixed income securities

 

$

1,000 

 

$

 -

 

$

1,000 

 

$

 -







12

 


 

 

Level 2 securities are priced using quoted market prices for similar instruments, nonbinding market prices that are corroborated by observable market data, or discounted cash flow techniques. 



The fair value of cash and cash equivalents, short-term investments, accounts receivable and accounts payable for all periods presented approximates their respective carrying amounts due to the short-term nature of these balances.

 

Note 5. Commitments and Contingencies



Warranties and Indemnification

 

We provide a warranty to our perpetual license 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 September 30, 2018 and December 31, 2017, respectively.



Our perpetual 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 are 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 to any indemnification claims that may arise. As a result, we believe the potential liability of these indemnification clauses is minimal. Accordingly, we did not record any liabilities for these agreements as of September 30, 2018 and December 31, 2017, respectively.



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 to such claims 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 September 30, 2018 or December 31, 2017. 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 each of which will expire at various dates during or before June 2020. We recognize the rent expense on a straight line basis over the lease period. Under the terms of our lease 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 as of September 30, 2018 (in thousands) is as follows: 







 

 

 



 

 

 



 

Operating

Years ending December 31,

 

Lease

2018 (three months)

 

$

51 

2019

 

 

130 

2020

 

 

45 

2021 and thereafter

 

 

 -

Total minimum lease payments

 

$

226 































13

 


 

 









Note 6. Geographic, Segment and Significant Customer Information



We operate in one segment: electronic business solutions. The disaggregated revenue information regarding types of revenues is as follows (in thousands): 







 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,



 

2018

 

2017

 

2018

 

2017

Software licenses

 

 

 

 

 

 

 

 

 

 

 

 

   Non-hosted licenses

 

$

286 

 

$

568 

 

$

1,199 

 

$

1,756 

   Hosted licenses

 

 

203 

 

 

276 

 

 

834 

 

 

849 

Services

 

 

 

 

 

 

 

 

 

 

 

 

   Consulting services

 

 

54 

 

 

229 

 

 

458 

 

 

977 

   Maintenance

 

 

421 

 

 

382 

 

 

1,319 

 

 

1,296 

Total revenues

 

$

964 

 

$

1,455 

 

$

3,810 

 

$

4,878 











We currently operate in three primary geographical territories: North and South America (Americas); Europe, Middle East and Africa (Europe); and Asia, Pacific and Japan (Asia/Pacific).



Disaggregated financial information regarding our geographic revenues is as follows (in thousands):







 

 

 

 

 

 

 

 

 

 

 

 



 

Three Months Ended

 

Nine Months Ended



 

September 30,

 

September 30,

Revenues:

 

2018

 

2017

 

2018

 

2017

Americas