Notes to Consolidated Financial Statements
Note 1---Organization and Summary of Significant Accounting Policies
Nature of Business
BroadVision, Inc. (collectively with its subsidiaries, "BroadVision" or "we") was incorporated in the state of Delaware on May 13, 1993 and has been a publicly traded corporation since 1996. 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.
Principles of Consolidation
The accompanying Consolidated Financial Statements include our and our subsidiaries’ accounts. All significant intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of 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 the reasonableness of our estimates, including those related to receivable reserves, stock-based compensation, investments
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. We believe the following
significant
accounting policies reflect the more significant judgments and estimates used in the preparation of our Consolidated Financial Statements.
Revenue Recognition
Overview
Our revenue consists of fees for licenses of our software products, maintenance, consulting services and training.
Our revenue recognition policies comply with Accounting Standards Codification ASC 985-605,
Software: Revenue Recognition
, and Staff Accounting Bulletin SAB 104,
Revenue Recognition
. In October 2009, the FASB amended the accounting standards in Accounting Standards Update ("ASU") 2009-13 (an update to ASC 605-25) ("ASU 2009-13") for certain multiple deliverable revenue arrangements to: 1) provide updated guidance on whether multiple deliverables exist, how the deliverables in an arrangement should be separated, and how the consideration should be allocated; 2) require an entity to allocate revenue in an arrangement using best estimated selling price ("BESP") of deliverables if a vendor does not have VSOE of selling price or third-party evidence ("TPE") of selling price; and 3) eliminate the use of the residual method and require an entity to allocate revenue using the relative selling price method. We adopted ASU 2009-13 at the beginning of the first quarter of fiscal 2011. The application of these new accounting standards did not have a material impact on total net revenues for fiscal year 2011.
We recognize revenue when all four of the following revenue recognition criteria have been met:
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Persuasive evidence of an arrangement exists;
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•
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We have delivered the product or performed the service;
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•
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The fee is fixed or determinable; and
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Collection is probable.
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We qualify the second of the above listed criteria differently for different types of revenues, as follows.
Software License Revenue, Non-Subscription and Non-Hosted Products
Delivery of non-subscription and non-hosted software products is considered to have occurred when title to the physical media and risk of loss have been transferred to the customer, which generally occurs when media containing the licensed programs is provided to a common carrier. In case of electronic delivery, delivery occurs when the customer is given access to the licensed programs. For products that cannot be used without a licensing key, the delivery requirement is met when the licensing key is made available to the
customer. We do not grant a right of return for non-subscription or non-hosted software products. We recognize revenue upon delivery of our software.
Software License Revenue, Subscription Products or Hosted Products
Although we made the software available to the customer at a particular point in time, the delivery of subscription software products (such as
QuickSilver
) and hosted software products (such as
Vmoso,
Clearvale
and
Clear
) is considered to have occurred ratably over the duration of the contract. We recognize revenue ratably
over the contract periods
.
Services Revenues
Consulting services revenues and training revenues are recognized as such services are performed. These services are not essential to the functionality of the software. We record reimbursement
s
from our customers for out-of-pocket expenses as an increase to services revenues.
Maintenance revenue, which includes revenue that is derived from software license agreements that entitle the customers to technical support and future unspecified enhancements to our products, is recognized ratably over the related agreement period, which time period is generally twelve months.
Cash and Cash Equivalents, and Short-term Investments
We consider all debt with remaining maturities of three months or less at the date of purchase to be cash equivalents. Short-term investments consist of debt that ha
s
a remaining maturity of less than one year as of the date of the balance sheet.
Management determines the appropriate classification of short-term investments at the time of purchase and evaluates such designation as of each balance sheet date. All short-term investments to date have been classified as held-to-maturity and carried at amortized cost, which approximates fair market value, on our Consolidated Balance Sheets. Our held-to-maturity securities did not have any gross unrealized
gains
and
losses
as of December 31, 201
5
and 201
4
, respectively. Our short-term investments’ contractual maturities occur before
Decem
ber
201
6
.
Total interest income during fiscal years
2015
and
2014
was
$
76
,000
and
$
54
,000
, respectively.
Research and Development and Software Development Costs
ASC 985-20,
Cost of Software to be Sold, Leased, or Marketed
("ASC 985-20"), requires capitalization of certain software development costs subsequent to the establishment of technological feasibility. Based on our product development process, technological feasibility is established upon the completion of a working model. To date, costs incurred by us from the completion of the working model to the point at which the product is ready for general release have been insignificant. Accordingly, we have charged all such costs to research and development expense
s
in the period incurred.
Advertising Costs
Advertising costs are expensed as incurred. Advertising expense, which is included in sales and marketing expense in the accompanying Consolidated Statements of Comprehensive Loss, amounted to
$
22
,000
and
$
1
,000
in
2015
and
2014
, respectively.
Receivable Reserves
Occasionally, our customers experience financial difficulty after we
recognize
the revenue but before payment has been received. We maintain receivable reserves for estimated losses resulting from the inability of our customers to make required payments. Our normal payment terms are generally 30 to 90 days from the invoice date. If the financial condition of our customers were to deteriorate, resulting in their inability to make the contractual payments, additional reserves may be required. Losses from customer receivables in the two-year period ended December 31,
2015
, have not been significant. If all efforts to collect a receivable fail, and the receivable is considered uncollectible, such receivable would be written off against the receivable reserve.
Concentrations of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments, and accounts receivable. We maintain our cash and cash equivalents and short-term investments with high-quality institutions. Our management performs ongoing credit evaluations of our customers and requires certain of these customers to provide security deposits or letters of credit.
Cash deposits and cash equivalents in foreign countries of approximately
$
3.4
million and
$
4.8
million on December 31,
2015
and
2014
, respectively, are subject to local banking laws and may bear higher or lower risk than cash deposited in the United States. As part of our cash and investment management processes, we perform periodic evaluations of the credit standing of the financial
institutions and we have not sustained any credit losses from instruments held at these financial institutions. From time to time, our financial instruments maintained in our foreign subsidiaries may be subject to political risks or instability that may arise in foreign countries where we operate.
For the year ended December 31,
2015
,
no
customer accounted for more than 10% of our total revenues
. For the year ended December 31,
2014
,
one
g
overnment entity accounted for
11%
of our total revenues.
Property and Equipment
Property and equipment are stated at cost and depreciated on a straight-line basis over their estimated useful lives (generally
two
years for software,
three
years for computer equipment and
four
years for furniture and fixtures). Leasehold improvements are amortized over the lesser of the remaining life of the lease term or their estimated useful lives.
Maintenance and repairs are charged to operations as incurred. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in operations in the period realized.
Fair Value of Financial Instruments
We adopted the provisions of ASC 820-10,
Fair Value Measurement
("ASC 820-10 "). ASC 820-10 establishes a framework for measuring fair value and requires disclosures about fair value measurements by establishing a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
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Level 1 – Quoted prices in active markets for identical assets or liabilities.
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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.
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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.
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We measure the
following financial assets at fair value on a recurring basis. The fair value of these financial assets as of December 31,
2015
and
2014
(in thousand
s) were as follows
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Fair Value at Reporting Date Using
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Quoted
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Prices in
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Active
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Significant
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Significant
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Markets for
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Other
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Identical
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Observable
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Unobservable
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December 31,
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Assets
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Inputs
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Inputs
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2015
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(Level 1)
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(Level 2)
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(Level 3)
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Cash and cash equivalents:
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Cash
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$
|
8,909
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|
$
|
8,909
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|
$
|
-
|
|
$
|
-
|
|
Money market funds
|
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|
691
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|
|
691
|
|
|
-
|
|
|
-
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|
Total cash and cash equivalents
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$
|
9,600
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|
$
|
9,600
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|
$
|
-
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|
$
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-
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Fixed income securities
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Corporate bonds - financial
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$
|
3,267
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|
$
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-
|
|
$
|
3,267
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|
$
|
-
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|
Corporate bonds - industrial
|
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|
5,051
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|
|
-
|
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|
5,051
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|
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-
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U.S. Treasury Securities
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2,488
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|
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-
|
|
|
2,488
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|
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-
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Certificates of deposits
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8,725
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-
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8,725
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|
-
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Total fixed income securities
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$
|
19,531
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|
$
|
-
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|
$
|
19,531
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$
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-
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Fair Value at Reporting Date Using
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Quoted
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Prices in
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Active
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Significant
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Markets for
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Other
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Significant
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Identical
|
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Observable
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Unobservable
|
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|
December 31,
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Assets
|
|
Inputs
|
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Inputs
|
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|
2014
|
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(Level 1)
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(Level 2)
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(Level 3)
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Cash and cash equivalents:
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Cash
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$
|
24,726
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|
$
|
24,726
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|
$
|
-
|
|
$
|
-
|
|
Money market funds
|
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|
215
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|
215
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|
|
-
|
|
|
-
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Total cash and cash equivalents
|
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$
|
24,941
|
|
$
|
24,941
|
|
$
|
-
|
|
$
|
-
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|
Fixed income securities
|
|
|
|
|
|
|
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|
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Corporate bonds - financial
|
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|
9,094
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|
$
|
-
|
|
$
|
9,094
|
|
$
|
-
|
|
Corporate bonds - Industrial
|
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|
1,832
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|
|
-
|
|
|
1,832
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|
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-
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Certified of Deposit
|
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|
1,212
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-
|
|
|
1,212
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|
|
-
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|
Total fixed income securities
|
|
$
|
12,138
|
|
$
|
-
|
|
$
|
12,138
|
|
$
|
-
|
|
|
|
|
|
|
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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.
Employee Benefit Plans
Amended and Restated 2006 Equity Incentive Plan:
At our 2006 annual meeting held on August 8, 2006, our stockholders approved the adoption of our 2006 Equity Incentive Plan (the "Equity Plan"). At that time, our 1996 Equity Incentive Plan (the "Prior Equity Plan") was terminated and replaced by the Equity Plan. On January 21, 2009, our Board of Directors adopted the Amended and Restated BroadVision, Inc. 2006 Equity Incentive Plan (the "Amended and Restated Plan"), which was subsequently approved by our stockholders on April 30, 2009. The Amended and Restated Plan includes an "evergreen" provision that provides for automatic annual increases in the number of shares authorized for issuance. As of December 31,
2015
, we had
1,
208,057
shares of our Common Stock reserved for issuance under the plan
. In addition, the number of shares of our Common Stock available for issuance under the Plan will automatically increase on January 1st of each year for a period of ten years, commencing on January 1, 2010 and ending on (and including) January 1, 2019. Further, our Board of Directors may grant incentive or nonqualified stock options at prices not less than
100%
of the fair market value of our common stock, as determined by the Board of Directors, at the date of grant. The vesting of individual options may vary but in each case at least
20%
of the total number of shares subject to vesting will become exercisable per year. These options generally expire
ten
years after the grant date.
2000 Non-Officer Plan:
In February 2000, we adopted our 2000 Non-Officer Plan under which
106,666
shares of common stock were reserved for issuance to selected employees, consultants, and our affiliates who are not Officers or Directors. As of December 31,
2015
, we had
72,625
shares available for issuance under the 2000 Non-Officer Plan. Under the 2000 Non-Officer Plan, we may grant non-statutory stock options at prices not less than
85%
of the fair market value of our common stock at the date of grant. Options granted under the 2000 Non-Officer Plan generally vest over
two
years and are exercisable for not more than
ten
years.
Employee Stock Purchase Plan:
We also have a compensatory Employee Stock Purchase Plan (the "Purchase Plan") that enables employees to purchase, through payroll deductions, shares of our common stock at a discount from the market price of the stock at the time of purchase.
As of December 31,
2015
, we had
130,133
shares available for issuance under the Purchase Plan. The Purchase Plan permits eligible employees to purchase common stock with a value equivalent to a percentage of the employee's earnings, not to exceed the lesser
of
15%
of the employee's earnings or
$25,000
under Section 423(b)(8) of the Internal Revenue Code of 1986
, at a price equal to the lesser of
85%
of the fair market value of the common stock on the date of the offering or the date of purchase. In accordance with ASC 718-10,
Compensation – Stock Compensation
("ASC 718-10"), we record stock-based compensation expense related to the fair value of the employee purchase rights in our Consolidated Statements of Comprehensive Loss. During
2015
and
2014
, we received a total of
$
275
,000
and
$3
3
2
,000
, respectively, primarily from the purchase of shares under the Purchase Plan.
Stock-Based Compensation
Under the fair value recognition provisions of ASC 718-10, share-based compensation cost is estimated at the grant date based on the fair value of the award and is recognized as expense, net of estimated pre-vesting forfeitures, ratably over the vesting period of the award. In addition, the adoption of ASC 718-10 requires additional accounting related to the income tax effects and disclosure regarding the cash flow effects resulting from share-based payment arrangements. Calculating share-based compensation expense requires the input of highly subjective assumptions, including the expected term of the share-based awards, stock price volatility, dividend yield, risk free interest rates, and pre-vesting forfeitures. The assumptions used in calculating the fair value of stock-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected pre-vesting forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, our share-based compensation expense could be significantly different from what we have recorded in the current period. The total amount of stock-based compensation expense recognized during the years ended December 31,
2015
and
2014
is as follows
(in thousands)
:
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Years Ended December 31,
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2015
|
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2014
|
Cost of services
|
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$
|
162
|
|
$
|
137
|
Research and development
|
|
|
309
|
|
|
279
|
Sales and marketing
|
|
|
355
|
|
|
396
|
General and administrative
|
|
|
238
|
|
|
188
|
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|
$
|
1,064
|
|
$
|
1,000
|
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|
We adopted the alternative transition method for calculating the tax effects of stock-based compensation pursuant to ASC 718-10. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid-in capital pool ("APIC pool") related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and Consolidated Statements of Cash Flows of the tax effects of employee stock-based compensation awards that are outstanding upon adoption of ASC 718-10.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model based on assumptions noted in the following table below. The expected term of our options represents the period that our stock-based awards are expected to be outstanding based on the simplified method provided for in SAB 107, as amended by SAB No. 110,
Share-Based Payment
.
Because we do not have sufficient historical exercise data, we used the simplified method for estimating the stock option expected term. The risk-free interest rate for periods related to the expected life of the options is based on the U.S. Treasury yield curve in effect at the time of grant. The expected volatility is based on historical volatilities of our stock over the expected life of the option. The expected dividend yield is
zero
, as we do not anticipate paying dividends in the near future.
The following assumptions were used to determine stock-based compensation during the years ended December 31,
2015
and
2014
:
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Years Ended December 31,
|
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|
2015
|
|
2014
|
|
Expected volatility
|
|
59
|
%
|
|
65
|
%
|
|
Expected dividends
|
|
0
|
%
|
|
0
|
%
|
|
Expected term (in years)
|
|
6.25
|
|
|
6.25
|
|
|
Risk free interest rate
|
|
2
|
%
|
|
2
|
%
|
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The following assumptions were used to determine the expense related to the Employee Stock Purchase Plan:
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Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
Expected volatility
|
|
22
|
%
|
|
29
|
%
|
|
Weighted average volatility
|
|
29
|
%
|
|
35
|
%
|
|
Risk-free interest rate
|
|
0
|
%
|
|
0
|
%
|
|
Expected term (in years)
|
|
1
|
|
|
1
|
|
|
Expected dividend yield
|
|
0
|
%
|
|
0
|
%
|
|
|
|
|
|
|
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|
The weighted-average fair value of the purchase rights granted in the years ended December 31,
2015
and
2014
, were
$
1
.
4
0
and
$
2.
4
0
, respectively.
Earnings Per Share Information
Basic loss per share is computed using the weighted-average number of shares of common stock outstanding. Diluted 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 following table sets forth the basic and diluted net loss per share computational data for the periods presented (in thousands, except per share amounts):
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|
Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
Net Loss
|
|
$
|
(11,437)
|
|
$
|
(9,481)
|
|
Weighted-average common shares outstanding used to compute basic and diluted net loss per share
|
|
|
4,857
|
|
|
4,799
|
|
Basic and diluted net loss per share
|
|
$
|
(2.36)
|
|
$
|
(1.98)
|
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|
|
|
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Foreign Currency Transactions
The functional currencies of all foreign subsidiaries are the local currencies of the respective countries. Assets and liabilities of these subsidiaries are translated into U.S. dollars at the balance sheet date. Income and expense items are translated at average exchange rates for the period. Foreign exchange gains and losses resulting from the remeasurement of foreign currency assets and liabilities are included as other income, net in the Consolidated Statements of Comprehensive Loss. For the years ended December 31,
2015
and
2014
, translation
(loss)
income
was
$
(
6
,000)
and
$
123,000
, respectively, and is included in other
c
omprehensive
loss
account in the Consolidated Statements of Stockholder's Equity.
Comprehensive Loss
Comprehensive loss includes net loss and other comprehensive loss, which consist of cumulative translation adjustments. Total accumulated other comprehensive loss is displayed as a separate component of Consolidated Statement of Stockholder's Equity in the
accompanying Consolidated Balance Sheets. The accumulated balance of other comprehensive loss,
only
consisting
of
foreign currency translation, net of taxes is as follows (in thousands):
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Accumulated
|
|
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|
Other
|
|
|
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Comprehensive
|
|
|
|
Loss
|
|
Balance, December 31, 2014
|
|
$
|
(733)
|
|
Net change during period
|
|
|
(6)
|
|
Balance, December 31, 2015
|
|
$
|
(739)
|
|
|
|
|
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|
Income Taxes and Deferred Tax Assets
Income taxes are computed using an asset and liability approach in accordance with ASC 740-10,
Income Taxes
("ASC 740-10"), which requires the recognition of taxes payable or refundable for the current year and deferred tax assets and liabilities for the future tax consequences of events that have been recognized in our Consolidated Financial Statements or tax returns. The measurement of current and deferred tax assets and liabilities is based on provisions of the enacted tax law; the effects of future changes in tax laws or rates are not anticipated. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on available evidence, is not expected to be realized.
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 that it is more likely than not that some portion or all of the deferred tax asset will not be realized based upon the uncertainty of their realization. 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.
Segment and Geographic Information
We operate in
one
segment, electronic commerce business solutions. Our CEO is our chief operating decision maker. The CEO reviews financial information presented on a consolidated basis accompanied by disaggregated information about revenues by geographic region and by product for purposes of making operating decisions and assessing financial performance.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers: Topic 606 (ASU 2014-09), which amended the existing accounting standards for revenue recognition and will supersede most existing revenue recognition guidance under U.S. GAAP. ASU 2014-09 establishes principles to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. ASU 2014-09 is effective for us using either of two methods: (i) retrospective application of ASU 2014-09 to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU 2014-09; or (ii) retrospective application of ASU 2014-09 with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application and providing certain additional disclosures as defined per ASU 2014-09. As currently issued and amended, ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016. We are currently evaluating the impact of ASU 2014-09 on our condensed consolidated financial statements and related disclosures.
In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements — Going Concern (Subtopic 205-40). The new guidance addresses management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. Management’s evaluation should be based on relevant conditions and events that are known and reasonably knowable at the date that the financial statements are issued. The standard will be effective
for
annual periods ending after December 15, 2016 and interim periods within annual periods beginning after December 15,2016
. Early adoption is permitted. The Company does not expect to early adopt this guidance and does not believe that the adoption of this guidance will have a material impact on its consolidated financial statements.
Note 2---Property and Equipment
Property and equipment consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
2014
|
|
Furniture and fixtures
|
|
$
|
158
|
|
$
|
184
|
|
Computer and software
|
|
|
2,177
|
|
|
2,214
|
|
Leasehold improvements
|
|
|
178
|
|
|
178
|
|
Total property and equipment
|
|
|
2,513
|
|
|
2,576
|
|
Less accumulated depreciation and amortization
|
|
|
(2,426)
|
|
|
(2,428)
|
|
Property and equipment, net
|
|
$
|
87
|
|
$
|
148
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense for the years ended December 31,
201
5
and
201
4
was
$
77
,000
and
$1
18
,000
, respectively. We retired
$
69
,000
and
$
8
3
,000
in fully depreciated property and equipment in
201
5
and
201
4
, respectively.
Note 3---Accrued Expenses
Accrued expenses consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
2014
|
|
Employee benefits
|
|
$
|
615
|
|
$
|
799
|
|
Income tax
|
|
|
278
|
|
|
265
|
|
Sales and other taxes
|
|
|
144
|
|
|
101
|
|
Commissions and bonuses
|
|
|
298
|
|
|
251
|
|
Customer advances
|
|
|
-
|
|
|
27
|
|
Deferred rent
|
|
|
89
|
|
|
50
|
|
Other
|
|
|
737
|
|
|
799
|
|
Total accrued expenses
|
|
$
|
2,161
|
|
$
|
2,292
|
|
|
|
|
|
|
|
|
|
Note 4---Other Non-Current Liabilities
Other non-current liabilities consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
2014
|
|
Deferred maintenance and unearned revenue
|
|
$
|
301
|
|
$
|
261
|
|
Other
|
|
|
617
|
|
|
513
|
|
Total other non-current liabilities
|
|
$
|
918
|
|
$
|
774
|
|
|
|
|
|
|
|
|
|
Note 5---Income Taxes
Losses before income taxes as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
Domestic
|
|
$
|
(10,223)
|
|
$
|
(6,963)
|
|
Foreign
|
|
|
(1,185)
|
|
|
(2,361)
|
|
Loss before income taxes
|
|
$
|
(11,408)
|
|
$
|
(9,324)
|
|
|
|
|
|
|
|
|
|
The components of
benefit/(
expense
)
for income taxes are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
Current:
|
|
|
|
|
|
|
|
Federal
|
|
$
|
4
|
|
$
|
(22)
|
|
State
|
|
|
(1)
|
|
|
(2)
|
|
Foreign
|
|
|
(32)
|
|
|
(133)
|
|
Total current
|
|
|
(29)
|
|
|
(157)
|
|
Deferred:
|
|
|
|
|
|
|
|
Federal
|
|
|
-
|
|
|
-
|
|
State
|
|
|
-
|
|
|
-
|
|
Foreign
|
|
|
-
|
|
|
|
|
Total deferred
|
|
|
-
|
|
|
-
|
|
Provision for income taxes
|
|
$
|
(29)
|
|
$
|
(157)
|
|
|
|
|
.
|
|
|
|
|
The differences between the
benefit/
(expense) for income taxes computed at the federal statutory rate of
35%
and our actual income tax expense
for the periods presented are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
Expected income tax benefit
|
|
$
|
3,993
|
|
$
|
3,263
|
|
Expected state income taxes expense, net of federal tax benefit
|
|
|
(771)
|
|
|
(2,212)
|
|
Research and development credit
|
|
|
147
|
|
|
262
|
|
Foreign taxes and foreign loss not benefited
|
|
|
(904)
|
|
|
(929)
|
|
Change in valuation allowance
|
|
|
(2,224)
|
|
|
55
|
|
Stock-based compensation
|
|
|
(198)
|
|
|
(342)
|
|
True-ups
|
|
|
(155)
|
|
|
(162)
|
|
Unrealized tax benefits
|
|
|
154
|
|
|
(9)
|
|
Others
|
|
|
(71)
|
|
|
(83)
|
|
Provision for income taxes
|
|
$
|
(29)
|
|
$
|
(157)
|
|
|
|
|
|
|
|
|
|
The individual components of our deferred tax assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
$
|
265
|
|
$
|
423
|
|
Accrued, allowance and others
|
|
|
3,085
|
|
|
3,477
|
|
Net operating losses
|
|
|
204,693
|
|
|
203,536
|
|
Tax credits
|
|
|
8,407
|
|
|
8,139
|
|
Unrealized losses on marketable securities
|
|
|
1,349
|
|
|
-
|
|
Total deferred tax assets
|
|
|
217,799
|
|
|
215,575
|
|
Less: valuation allowance
|
|
|
(217,799)
|
|
|
(215,575)
|
|
Net deferred tax assets
|
|
$
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
We have provided a valuation allowance for all of our deferred tax assets as of December 31,
201
5
and
201
4
, due to the uncertainty regarding their future realization. The total valuation
allowance
increased
$
2,
224
,000
from
December 31,
201
4
to December 31,
201
5
.
As of December 31,
201
5
, we had federal and state net operating loss ("NOL") carryforwards of approximately
$570,
79
8
,000
and $
26,569,
000
,
subject to
Section 382 of the Internal Revenue Code ("IRC") limitations respectively, available to offset future regular and alternative minimum taxable income.
Our federal net operating loss carryforwards expire in various years from
2018
through
203
5
, if not used. The state net operating loss carryforwards expire in various years from
20
31
to
203
5
, if not used.
As of December 31,
201
5
, we had federal and state research and development credit carryforwards of approximately $
6
,
530
,000
and $
5,
791
,000
, respectively, available to offset future tax liabilities. The federal tax credit carryforwards expire in the tax years
from
2018
through
203
5
, if not utilized. The state research and development credits can be
carried forward indefinitely
.
Federal and state tax laws impose substantial restrictions on the utilization of net operating loss (“NOL”) and credit carryforwards in the event of an "ownership change" for tax purposes, as defined in IRC Section 382. Based on a high-level ownership change analysis performed each year, management concluded that there were no ownership changes through December
31,
201
5
.
We follow the provision of ASC 740-10-25,
Income Taxes: Recognition
("ASC 740-10-25"). Our total amount of unrecognized tax benefits as of December 31,
201
5
and
201
4
were
$2,
800
,000
and
$2,
915
,000
, respectively. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate were $
16
0
,000
as of December 31,
201
5
and
201
4
, respectively.
A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits for the year ended December 31,
201
5
is as follows
(in thousands)
:
|
|
|
|
|
Balance at January 1, 2015
|
|
$
|
2,915
|
|
Additions based on tax provisions related to the current year
|
|
|
105
|
|
Additions (or decreases) for tax provisions of prior year
|
|
|
(190)
|
|
Settlements
|
|
|
-
|
|
Lapse of the statute of limitation
|
|
|
(30)
|
|
Balance at December 31, 2015
|
|
$
|
2,800
|
|
|
|
|
|
|
We recognize interest and penalties accrued related to unrecognized tax benefits in our provision for income taxes. During the years ended December 31,
201
5
and
201
4
,
respectively,
we
did not
recognize
any
interest and penalties.
We are subject to taxation in the United States and various foreign jurisdictions. Our tax years
1998
and forward
remain open in several jurisdictions due to the NOL carry
forward
from those tax years.
It is possible that the amount of our liability for unrecognized tax benefits may change within the next 12 months. However, an estimate of the range of possible changes cannot be made at this time.
Note 6 - 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 December 31,
201
5
and
201
4
, 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 is generally limited to the amount the customer paid for the software. Historically, costs related to these indemnification provisions have been immaterial. We also maintain liability insurance that limits our exposure. As a result, we believe the potential liability of these indemnification clauses is minimal. We rarely have litigation initiated against us by customers.
We entered into agreements whereby we indemnify our officers and directors for certain events or occurrences while the officer is, or was, serving in such capacity. The term of the indemnification period is for so long as such officer or director is subject to an indemnifiable event by reason of the fact that such person was serving in such capacity. The maximum potential amount of future payments we could be required to make under these indemnification agreements may be unlimited; however, we have a director and officer insurance policy that limits our exposure and enables us to recover a portion of any future amounts paid. As a result of our insurance policy coverage, we believe the estimated fair value of these indemnification agreements is insignificant. Accordingly, we have no liabilities recorded for these agreements as of December 31,
201
5
and
201
4
. We assess the need for an indemnification reserve on a quarterly basis and there can be no guarantee that an indemnification reserve will not become necessary in the future.
Leases
We lease our headquarters facility and our other facilities under noncancelable operating lease agreements expiring through the year 201
8
. Under the terms of the agreements, we are required to pay property taxes, insurance and normal maintenance costs.
A summary of total future minimum lease payments under noncancelable operating lease agreements is as follows (in thousands):
|
|
|
|
|
|
|
Operating
|
|
|
|
Leases
|
|
Years ending December 31,
|
|
|
|
|
2016
|
|
$
|
938
|
|
2017
|
|
|
779
|
|
2018
|
|
|
365
|
|
2019
|
|
|
-
|
|
2020 and thereafter
|
|
|
-
|
|
Total minimum lease payments
|
|
$
|
2,082
|
|
|
|
|
|
|
Rent expense for the years ended December 31,
201
5
, and
201
4
was $
1
,
3
00,000
and $
1
,
2
00,000
, respectively.
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.
Note
7
---Stockholders' Equity
Convertible Preferred Stock
As of December 31,
201
5
, there were
no
outstanding shares of convertible preferred stock. Our Board of Directors and our stockholders have authorized
1,000,000
shares of convertible preferred stock that are available for issuance.
Common Stock
As of December 31,
201
5
, we had reserved
398,707
common shares for future issuance upon the exercise of stock options.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2015
|
|
|
|
|
|
|
Weighted-
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
Average
|
|
Average
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
Options
|
|
Price
|
|
Contractual
|
|
Intrinsic
|
|
|
|
|
(000's)
|
|
Per Share
|
|
Term (Years)
|
|
Value
|
|
Outstanding at beginning of period
|
|
|
848
|
|
$
|
9.35
|
|
|
|
|
|
|
|
Granted
|
|
|
28
|
|
$
|
5.68
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
$
|
-
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(84)
|
|
$
|
8.29
|
|
|
|
|
|
|
|
Expired
|
|
|
(58)
|
|
$
|
12.82
|
|
|
|
|
|
|
|
Outstanding at end of period
|
|
|
734
|
|
$
|
9.06
|
|
|
7.70
|
|
$
|
9
|
|
Options exercisable at end of period
|
|
|
375
|
|
$
|
10.59
|
|
|
6.87
|
|
$
|
-
|
|
Options vested and expected to vest at end of period
|
|
|
649
|
|
$
|
9.31
|
|
|
7.57
|
|
$
|
7
|
|
The weighted-average fair market value per share of options granted under
our stock option plans
during fiscal
201
5
and
201
4
was
$
3.2
0
and
$
4.
42
,
respectively.
We granted
10,832
shares of restricted stock to the non-employee members of our Board of Directors in June
2015
, and recorded a stock-based compensation expense of $
63
,0
0
0
. We
granted
6,8
70
shares of restricted stock to the non-employee members of our Board of Directors in
201
4
, and recorded a stock-based compensation expense of
$
65
,0
00
. The restricted stock will vest over a
one
-year period measured from the date of the annual meeting of stockholders with one quarter of the shares included in such Director Grant vesting on each of the dates that are three months, six months, nine months and twelve months from the annual meeting, so long as each board member continues to serve as a member of our board of directors on such vesting date.
As of December 31,
201
5
, total unrecognized compensation cost related to unvested stock options was
$
1,737,000
, which is expected to be recognized over the remaining weighted-average vesting periods
of
1.
29
years
. During the
year ended December 31,
201
5
and
201
4
, we have received cash of
$
275,000
and
$
557
,000
, respectively from
the employee stock purchases and
exercise of stock options.
Note
8
---Geographic, Segment and Significant Customer Information
We operate in one segment: electronic business solutions. Our reportable segment includes our facilities in North and South America (Americas), Europe and Asia Pacific and the Middle East (Asia/Pacific). Our chief operating decision maker is considered to be the CEO. The CEO reviews financial information presented on a consolidated basis accompanied by disaggregated information about revenues by geographic region and by product for purposes of making operating decisions and assessing financial performance. The disaggregated revenue information reviewed by the CEO is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
Software licenses
|
|
$
|
4,414
|
|
$
|
6,495
|
|
Consulting services
|
|
|
2,056
|
|
|
3,017
|
|
Maintenance
|
|
|
2,972
|
|
|
4,073
|
|
Total revenues
|
|
$
|
9,442
|
|
$
|
13,585
|
|
|
|
|
|
|
|
|
|
We sell our products and provide global services through a direct sales force and through a channel of independent distributors, value-added resellers ("VARs") and Application Service Providers ("ASPs"). In addition, the sales of our products are promoted through independent professional consulting organizations known as systems integrators ("SIs"). We provide global services through our
BroadVision Global Services organization
and indirectly through distributors, VARs, ASPs, and SIs. We currently operate in three primary geographical territories.
Disaggregated financial information regarding our product and service revenues by geographic region is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Years Ended December 31,
|
|
|
|
2015
|
|
2014
|
|
Americas
|
|
$
|
3,903
|
|
$
|
6,171
|
|
Europe
|
|
|
2,149
|
|
|
2,758
|
|
Asia/Pacific
|
|
|
3,390
|
|
|
4,656
|
|
Total revenues
|
|
$
|
9,442
|
|
$
|
13,585
|
|
|
|
|
|
|
|
|
|
In
201
5
, license sales through independent distributors, VARs, ASPs, and SIs became significant. Although it was immaterial in the Americas and Europe, license sales via these channels accounted for
6
1
%
in Asia Pacific in
201
5
.
Note
9
---Related Party Transactions
On November 14, 2008, BroadVision (Delaware) LLC, a Delaware limited liability company (“BVD”), which was then our wholly owned subsidiary, entered into a Share Purchase Agreement with CHRM LLC, a Delaware limited liability company, that is controlled by Dr. Pehong Chen, our CEO and largest stockholder and in which our CFO, Peter Chu holds a minority interest. We and CHRM LLC then entered into an Amended and Restated Operating Agreement of BroadVision (Delaware) LLC dated as of November 14, 2008 (the “BVD Operating Agreement”). Under these agreements, CHRM LLC received, in exchange for the assignment of certain intellectual property rights,
20Class B Shares of BVD, representing the right to receive a portion of any distribution of Funds from “Capital Transactions” (as such term is defined in the BVD Operating Agreement), with the exact amount to be determined based on our and CHRM LLC’s capital account balances at the time of such distribution. A “capital transaction” under that agreement is any merger or sale of substantially all of the assets of BVD as a result of which the members of BVD will
nolonger have an interest in BVD or the assets of BVD will be distributed to its members. Class B Shares do not participate in any profits of BVD except for net profits related to a “capital transaction,” in which case the net profits are allocated to the owners of Class A and Class B Shares in proportion to their respective number of shares. To the extent BVD’s losses do not exceed undistributed net profits accumulated since the date of issuance of Class B Shares, such losses are allocated to Class A Shares. To the extent net losses exceed the undistributed net profits accumulated since the date of issuance of Class B Shares, such excess is allocated to the owners of Class A and Class B Shares in proportion to their respective cumulative capital contributions less any return of capital, until allocation of such losses results in having the capital account balances equal to
zero. Then, net losses are allocated to the owners of Class A and Class B Shares in proportion to their respective number of shares. Upon liquidation the net assets of BVD are distributed to the owners of Class A and Class B in proportion to their capital account balances.
BVD is the sole owner of BroadVision (Barbados) Limited (“BVB”) and BVB is the sole owner of BroadVision On Demand, a Chinese entity (“BVOD”). We have invested approximately
$9.0
million in BVOD (directly and through BVD and BVB). In 2014 we began making payments directly to BVOD for certain labor outsourcing services and expect to continue to pay BVOD for such services at the rate of approximately
$400,000
per quarter for the foreseeable future. We have a controlling voting interest in BVD. Pursuant to the terms of the BVD Operating Agreement, the Class B Shares held by CHRM LLC have no voting rights.
The 20 Class B Shares of BVD represent a non-controlling interest. We allocate profits and losses of BVD to the non-controlling interest under the Hypothetical Liquidation Book Value (“HLBV”) method. Under this method the profits and losses are allocated by reference to the profit sharing provisions in the BVD Operating Agreement assuming liquidation of BVD at its book value at the end of each reporting period. Profits and losses allocated to the balance of such interest under the HLBV method have not been material.
In April
2015, we executed a renewal contract with a third party of which Dr. Pehong Chen, our CEO and largest stockholder, is a board member.
The total renewal license associated with that contract is
$184,000. In 2014, we executed a renewal contract with the same customer with an associated value of $166,000. We recognized $
1
76
,000 and $164,000 of license revenue for the fiscal year 2015 and 2014, respectively.
Note 1
0
---Employee Benefit Plan
We provide for a defined contribution employee retirement plan in accordance with section 401(k) of the Internal Revenue Code.
Eligible employees are entitled to contribute up to the lower of
100%
of their compensation or the IRS annual maximum.
The Plan allows for discretionary contributions by us.
As of July 1, 2011, we started a discretionary matching contribution. The amount is equal to a percentage determined annually by our management for the contribution period.
Employees will be eligible for the match after 12 months of service and after completing 1,000 hours of work during the plan year. Employees must be employed on the last business day of the plan year to be eligible for the match.
We
have funded
$
69
,000
and
$
88
,000
for the year ended December 31,
201
5
and
2014
, respectively
.