BROADVISION INC (Form: 10-Q, Received: 08/14/2018 16:50:04)

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

BROADVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value amounts)



	June 30,		December 31,
	2018		2017
ASSETS		(unaudited)		(See Note 1)
Current assets:
Cash and cash equivalents	$	6,160	$	8,560
Short-term investments		-		1,000
Accounts receivable, net of reserves of $280 and $293 as of June 30, 2018
and December 31, 2017, respectively		579		1,193
Prepaids and other		1,039		983
Total current assets		7,778		11,736
Property and equipment, net		25		35
Other assets		216		208
Total assets	$	8,019	$	11,979
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	423	$	434
Accrued expenses		1,252		1,658
Unearned revenue		676		1,187
Deferred maintenance		544		808
Total current liabilities		2,895		4,087
Other non-current liabilities		547		583
Total liabilities		3,442		4,670
Commitments and contingencies (Note 5)
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; 4,998 and 4,995 shares issued
and outstanding as of June 30, 2018 and December 31, 2017, respectively		-		-
Additional paid-in capital		1,271,825		1,271,585
Accumulated other comprehensive loss		(1,481)		(1,558)
Accumulated deficit		(1,265,767)		(1,262,718)
Total stockholders’ equity		4,577		7,309
Total liabilities and stockholders’ equity	$	8,019	$	11,979

See Accompanying Notes to Condensed Consolidated Financial Statements.

BROADVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Revenues:
Software licenses	$	619	$	872	$	1,544	$	1,761
Services		624		743		1,302		1,662
Total revenues		1,243		1,615		2,846		3,423
Cost of revenues:
Cost of software revenues		44		45		77		98
Cost of services		487		732		1,037		1,528
Total cost of revenues		531		777		1,114		1,626
Gross profit		712		838		1,732		1,797
Operating expenses:
Research and development		1,297		1,655		2,700		3,334
Sales and marketing		464		1,012		1,030		1,969
General and administrative		796		820		1,537		1,884
Total operating expenses		2,557		3,487		5,267		7,187
Operating loss		(1,845)		(2,649)		(3,535)		(5,390)
Interest income, net		20		41		36		64
Other income (expense), net		(334)		236		(151)		368
Loss before provision for income taxes		(2,159)		(2,372)		(3,650)		(4,958)
(Provision) benefit for income taxes		(1)		10		(2)		(2)
Net loss		(2,160)		(2,362)		(3,652)		(4,960)
Other comprehensive (loss) gain, net of tax:
Foreign currency translation adjustment		259		(257)		77		(333)
Comprehensive loss	$	(1,901)	$	(2,619)	$	(3,575)	$	(5,293)
Net loss per share, basic and diluted:
Basic and diluted net loss per share	$	(0.43)	$	(0.48)	$	(0.73)	$	(1.00)
Shares used in computing:
Weighted average shares, basic and diluted		4,997		4,967		4,996		4,962

See Accompanying Notes to Condensed Consolidated Financial Statements.

BROADVISION, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands, Unaudited)



	Six Months Ended
	June 30,
	2018		2017
Cash flows from operating activities:
Net loss	$	(3,652)	$	(4,960)
Depreciation and amortization		12		16
Stock-based compensation		233		466
Benefit of receivable reserves		(11)		(15)
Accumulated effect for accounting changes		605		-
Changes in operating assets and liabilities:
Accounts receivable		624		(23)
Prepaids and other		(56)		66
Other non-current assets		(8)		(1)
Accounts payable and accrued expenses		(417)		127
Unearned revenue and deferred maintenance		(774)		414
Other noncurrent liabilities		(37)		45
Net cash used for operating activities		(3,481)		(3,865)
Cash flows from investing activities:
Purchase of property and equipment		(2)		(2)
Purchase of short-term investments		-		(4,493)
Maturities of short-term investments		1,000		8,880
Net cash provided by investing activities		998		4,385
Cash flows from financing activities:
Proceeds from issuance of common stock, net		6		46
Net cash provided by financing activities		6		46
Effect of exchange rates on cash and cash equivalents		77		(333)
Net (decrease) increase in cash and cash equivalents		(2,400)		233
Cash and cash equivalents at beginning of period		8,560		11,730
Cash and cash equivalents at end of period	$	6,160	$	11,963

See Accompanying Notes to Condensed Consolidated Financial Statements.

BROADVISION, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. O rganization 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 six -month period ended June 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 six months ended June 30, 2018 and June 30, 2017 are unaudited. The Condensed C onsolidated B alance S heet 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 C ondensed C onsolidated F inancial S tatements 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 six months ended June 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 C ondensed C onsolidated F inancial S tatements have been prepared assuming the Company will continue as a going concern. During the six months ended June 30, 2018 , the Company had a net loss of $ 3.7 million and negative cash flow from operations of $ 3.5 million, and at June 30, 2018 the C ompany had working capital of $ 4.9 million. At June 30, 2018 , the Company has cash and cash equivalents of $ 6.2 million. The Company has implemented a series of cost reduction plans since the second half of 2017 and expects to have reduce d its costs of operation s by at least $ 3 million in 2018 to cover its cash needs through the next twelve months. 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 C ondensed C onsolidated F inancial S tatements .

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 six months ended June 30, 2018 and 2017 (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Cost of services	$	15	$	30	$	28	$	63
Research and development		35		74		77		150
Sales and marketing		27		68		62		131
General and administrative		30		58		66		122
	$	107	$	230	$	233	$	466

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 six months ended June 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				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Net Loss	$	(2,160)	$	(2,362)	$	(3,652)	$	(4,960)
Weighted-average common shares outstanding used to compute basic and
diluted net loss per share		4,997		4,967		4,996		4,962
Basic and diluted net loss per share	$	(0.43)	$	(0.48)	$	(0.73)	$	(1.00)

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.

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. Translation adjustment was a $ 77 ,000 gain and a $333 ,000 loss for the six months ended June 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		77
Balance, June 30, 2018	$	(1,481)

Recent Accounting Pronouncements

Recently issued accounting pronouncements not yet adopted

In February 2016, FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) ("ASU 2016-02"), 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. Early application is permitted, and it is required to recognize and measure leases 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.

Recently adopted accounting pronouncements

In May 2014, the FASB issued a new standard, 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 Topic 606 applying the modified retrospective method to all contracts that were not completed as of the transition date. See Note 2 for further details.

In March 2016, FASB issued Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09"), which simplifies several aspects of the accounting for employee share-based payment transactions for both public and nonpublic entities, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The effective date of the new standard for public companies was for fiscal years beginning after December 15, 2016.

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 six months ended June 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. Revenue s

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 six months ended June 30, 2018 , revenue d e creased by $ 57,000 a s 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. In contrast, revenue recognition related to our hosted software products (cloud offerings) and professional services remains substantially unchanged

Our deferred revenue includes unearned revenue and deferred maintenance. The following table shows the reconciliation of our deferred revenue s at January 1, 2018, including both current and non-current deferred revenue 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 S tatements of C omprehensive L oss is as follows (in thousands):


	Six Months Ended June 30, 2018
	As reported		Amounts without adoption of Topic 606		Effect of change - higher (lower)
Revenue
Software licenses	$	1,544	$	1,959	$	(415)
Services		1,302		944		358
Total revenues		2,846		2,903		(57)

Gross profit		1,732		1,789		(57)

Operating loss		(3,535)		(3,478)		(57)

Net loss	$	(3,652)	$	(3,595)	$	(57)

Basic and diluted net loss per share	$	(0.73)	$	(0.73)	$	-

In accordance with Topic 606, the disclosure of the impact of adoption to our Condensed Consolidated B alance S heet is as follows:


	Six Months Ended June 30, 2018
	As reported		Amounts without adoption of Topic 606		Effect of change - higher (lower)
Assets
Contract assets	$	-	$	-	$	-

Liabilities
Deferred revenues - current		1,220		1,768		(548)
Deferred revenues - non-current		135		135		-

Shareholders' Equity
Accumlated deficit		(1,265,767)		(1,266,315)		548

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 Revenue s - Products with Non-Ratably Recogni z ed Revenue

Licenses for software products with non-ratably recogni z ed 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. Revenue s 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 Revenue s – Products with Ratably- Recogni z ed 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 R evenue s

Maintenance revenues , which include revenue s that are allocated from software license agreements that entitle the customers to technical support and future unspecified enhancements to our products, a re 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 ba sed 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.

Disaggregation of revenues

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


	Six Months Ended June 30, 2018
Geographic region:	Software Licenses - Non-hosted		Software Licenses - Hosted		Maintenance		Professional Services		Total
Americas	$	814	$	123	$	403	$	19	$	1,359
Europe		99		51		368		52		570
Asia/Pacific		-		457		127		333		917
Total revenues	$	913	$	631	$	898	$	404	$	2,846



	Six Months Ended June 30, 2018
Timing of revenue recognition:	Software Licenses - Non-hosted		Software Licenses - Hosted		Maintenance		Professional Services		Total
Transferred at a point in time	$	913	$	-	$	-	$	-	$	913
Transferred over time		-		631		898		404		1,933
Total revenues	$	913	$	631	$	898	$	404	$	2,846

Contract balances

The following table provides information about receivables, contract assets and deferred revenues from contracts with customers (in thousands):


	Six Months Ended June 30, 2018
	Balance at beginning of period		Increases		Decreases		Balance at end of period
Receivables	$	1,193	$	2,467	$	3,081	$	579
Contract assets - current		-		34		(34)		-
Contract assets - non-current		-		-		-		-
Deferred revenues including current and non-current		1,451		2,342		2,438		1,355

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. Increase s to deferred revenues were mainly a result of additional upfront payments received during the period, whereas decrease s to deferred revenues were due to performance obligations satisfied.

Note 3. Selected Condensed Consolidated Balance Sheet Detail

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



	June 30,		December 31,
	2018		2017
	(unaudited)
Employee benefits	$	473	$	518
Income tax		19		25
Sales and other taxes		319		319
Commissions and bonuses		90		224
Deferred rent		3		57
Other		348		515
Total accrued expenses	$	1,252	$	1,658

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



	June 30,		December 31,
	2018		2017
	(unaudited)
Deferred maintenance and unearned revenue	$	135	$	61
Other		412		522
Total other non-current liabilities	$	547	$	583

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 (in thousands) is as follows:


			Fair Value at Reporting Date Using
				Quoted
				Prices in
				Active			Significant
				Markets for			Other		Significant
				Identical			Observable		Unobservable
	June 30,			Assets			Inputs		Inputs
	2018			(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents:
Cash	$	3,335		$	3,335	$	-	$	-
Money market funds		2,825			2,825		-		-
Total cash and cash equivalents	$	6,160		$	6,160	$	-	$	-


			Fair Value at Reporting Date Using
				Quoted
				Prices in
				Active			Significant
				Markets for			Other		Significant
				Identical			Observable		Unobservable
	December 31,			Assets			Inputs		Inputs
	201 7			(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	$	-

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 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 June 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 June 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 June 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 June 30, 2018 (in thousands) is as follows:



	Operating
Years ending December 31,	Lease
2018 (six months)	$	141
2019		205
2020		45
2021 and thereafter		-
Total minimum lease payments	$	391

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				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Software licenses
Non-hosted licenses	$	357	$	596	$	913	$	1,188
Hosted licenses		262		276		631		573
Services
Consulting services		165		305		404		748
Maintenance		459		438		898		914
Total revenues	$	1,243	$	1,615	$	2,846	$	3,423

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				Six Months Ended
	June 30,				June 30,
Revenues:	2018		2017		2018		2017
Americas	$	610	$	756	$	1,359	$	1,596
Europe		234		285		570		593
Asia/Pacific		399		574		917		1,234
Total revenues	$	1,243	$	1,615	$	2,846	$	3,423

For the six months ended June 30, 2018, n o customer accounted for more than 10% of our revenues. For the six months ended June 30, 2017, Indian Railways Catering and Tourism Corporation Limited (IRCTC) a ccounted for 1 4 % of our revenues and NTT Communications Corporation accounted for 1 0 % of our revenues.

Note 7. 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 Chairman, President, Chief Executive Officer, Interim Chief Financial Officer and largest stockholder and in which our former Chief Financial Officer, 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, 20 Class 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 no longer 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) from 2007 through 2016 . 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 $500,000 per quarter for the foreseeable future. We made aggregate payments to BVOD of $1.0 million and $ 1.2 million (based on the RMB to USD exchange rates on the applicable dates of payment) for such services in the six months ended June 30, 2018 and 2017, respectively. These payments in part covered services rendered outside of the applicable years. 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.

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

This report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. Forward-looking statements include all statements that are not historical facts, including statements regarding our future results of operations and financial position, our business strategy and plans, and our objectives for future operations. The words "expect," "anticipate," "intend," "believe," "hope," "assume," "estimate," "plan," "will" and other similar words and expressions. These forward-looking statements, including those described in the section titled “Risk Factors” included under Part II, Item 1A below. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We undertake no obligation to publicly release any revisions to the forward-looking statements or to reflect events and circumstances after the date of this document.

Overview

Since 1993, BroadVision has been a pioneer and consistent innovator of e-business solutions. We deliver a combination of technologies and services into the global market that enable customers of all sizes to power mission-critical web, cloud and mobile initiatives that ultimately deliver high-value to their bottom line. Our offering consists of a robust framework for personalization and self-service, modular applications and agile toolsets that customers use to create e-commerce, portal solutions, Enterprise Social Networks (ESN), and collaboration and knowledge management solutions. Most recently, we have added mobile and cloud capabilities to our platforms to enable rapid deployment of robust, secure, and scalable solutions for our customers.

Our objective is to further our position as a global supplier of innovative e-business solutions with the addition of enterprise collaboration and engagement solutions such as our mobile and cloud-based Vmoso, a collaboration and knowledge management product, and Clearvale, an ESN product. Together with our legacy Business Agility Suite, Commerce Agility Suite and QuickSilver solutions, our new enterprise collaboration and engagement solutions are designed to enhance the communication, collaboration and knowledge management capabilities of organizations with their customers, partners and employees to improve productivity and efficiency. During the quarter ended March 31, 2017, we announced a major incremental release of our Vmoso platform with a range of new functionality across several key modules.

We generate revenues from fees for licenses or access and use of our software products and related maintenance, consulting services and customer training. We generally charge fees for licenses of our software products based on (1) the number of persons registered to use the product; or (2) the number of CPUs utilized by the machines on which the product is installed. We also charge fees for access and use of Cloud or SaaS solutions. Payment terms are generally 30 to 60 days from the date that the software products are delivered, the maintenance or subscription contracts are booked, or the consulting services are provided.

We have not generated net income since 2009. Our ability to generate profits or positive cash flows in future periods remains uncertain.

Our operations face two key challenges: maturity of our major revenue-generating legacy products, and competing in a crowded ESN solution space. We continue to invest heavily in cloud-based, mobile, messaging and collaboration technologies, while continuing to support our legacy base. Total revenues of $1.2 million in the second quarter of 2018 were lower compared to total revenues of $1.6 million for the second quarter of 2017, with the decrease mainly in legacy revenue. We expect that the decline in our legacy revenue, which is the majority of our revenue mix, will continue to dominate our overall financial performance until a significant installed base of new product revenues is established. We are continuing to diligently invest in new technologies in an effort to maintain our competitive advantages in the mobile communications and collaboration and knowledge management spaces.

Recent Developments—MyVmoso Network Product Development Initiatives

In 2018, we began working on initiatives to develop and advance a new platform, MyVmoso Network (MVN), a personal digital hub that will utilize our Vmoso platform in conjunction with blockchain technology to act as a bank for consumers’ personal data, as well as provide secure, personalized, persistent, symmetrical engagement channels between consumers and the businesses with which they have relationships. We are developing MVN to provide secure storage for important data such as health records, financial transactions, product purchases and warranties, such that users can trust, unify, manage and monetize their personal data. We are designing MVN to provide:


			a place for users to communicate with organizations that they deal with on their terms;
			a platform for businesses to build blockchain-enabled applications for customer engagement;
			a way for users to monetize their personal data by allowing third parties to use it in exchange for compensation;
			a consent audit trail for users to keep track of who they have allowed to access their data, for what purpose and for how long; and
			a toolkit for exercising data-related digital rights.

We will make MVN available to consumers at no charge, and MVN users will be able to receive compensation for various actions in the form of a new cryptocurrency called the My Vmoso Token (MVT) or possibly an existing cryptocurrency. Examples of the types of actions that would entitle a user to receive cryptocurrency tokens from third parties include loading personal profile information, purchasing history and other personal data into the network, allowing a third party to use personal data for a specified purpose, and responding to a third-party product offer or survey. We would be compensated through small transaction fees paid by the third parties.

Blockchain is a continuously growing list of records, called “blocks,” linked together via a “chain,” where each block containing data and timestamp is secured with a cryptographic hash key based on the previous block in the chain, thereby ensuring the security and immutability of its data, including its entire transactional history. A cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, control the creation of additional units and verify the transfer of assets. The decentralized control of a cryptocurrency works through blockchain technology.

We expect to launch MVN in 201 9 . We intend to form a new wholly-owned subsidiary, Vmoso, Inc. (VMSO) by the end of 2018 through which we will develop, launch, operate and expand MVN. We have a 25-year history in the web personalization business and a team of employees experienced in building, operating, selling and marketing personalized web applications that we intend to contribute to VMSO for the development of MVN. Since 2008, we have invested over $7 0 million on research and development, most of which was for our Vmoso platform, and have received two critical U.S. patents related to permission-based content sharing and distributed public/private hybrid cloud architecture, all of which we intend to fully leverage into MVN. For information about some of the risks associated with this new product development initiative, see Part I I , Item 1A –Risk Factors—Risks relating to our MVN initiatives.

Results of Operations

The following table sets forth certain items reflected in our Condensed Consolidated Statements of Comprehensive Loss expressed as a percent of total revenues for the periods indicated:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Revenues:
Software licenses	50	%	54	%	54	%	51	%
Services	50		46		46		49
Total revenues	100		100		100		100
Cost of revenues:
Cost of software revenues	4		3		3		3
Cost of services	39		45		36		45
Total cost of revenues	43		48		39		48
Gross profit	57		52		61		52
Operating expenses:
Research and development	104		103		95		97
Sales and marketing	37		63		36		58
General and administrative	64		51		54		55
Total operating expenses	205		217		185		210
Operating loss	(148)		(165)		(124)		(158)
Interest income, net	2		3		1		2
Other income (expense), net	(28)		15		(5)		11
Loss before provision for income taxes	(174)		(147)		(128)		(145)
Provision for income taxes	-		1		-		-
Net loss	(174)	%	(146)	%	(128)	%	(145)	%

Revenues. License revenue from the sales of software licenses for the three months ended June 30, 2018 was $ 0.6 million, down $0. 3 million, or 29 % from $ 0.9 million for the three months ended June 30, 2017. License revenue from the sales of software licenses for the six months ended June 30, 2018 was $1.5 million, down $0.2 million, or 12% from $1.8 million for the six months ended June 30, 2017. Services revenues consist of maintenance revenues and consulting services revenues. Maintenance revenue, which is generally derived from maintenance contracts sold with initial customer licenses and from subsequent contract renewals, for the three months ended June 30, 2018 was $0. 5 million, up $ 21 ,000, or 5 % from $0. 4 million for the three months ended June 30, 2017. Maintenance revenue for the six months ended June 30, 2018 was $0.9 million, down $16,000, or 2% from $0.9 million for the six months ended June 30, 2017. Consulting service revenue, which is generally related to services in connection with our licensed software, for the three months ended June 30, 2018 was $0. 2 million, down $0. 1 million or 46% from $0. 3 million for the three months ended June 30, 2017. Consulting revenue for the six months ended June 30, 2018 was $0.4 million, down $0.3 million or 46% from $0.7 million for the six months ended June 30, 2017 . As compared to the comparable periods in the prior year, the d e creases in our license revenues were primarily due to the change in our accounting for subscription-based Quicksilver products as a result of our adoption of Topic 606 as of January 1, 2018 and the decreases in each of our maintenance and consulting services revenues were primarily due to the decline of our legacy business.

Cost of software revenues. Cost of software revenues includes the cost of our Cloud hosting operation, net costs of product media, duplication, packaging, and other manufacturing costs as well as royalties payable to third parties for software that is either embedded in, or bundled and sold with, our products. Cost of software licenses for the three months ended June 30, 2018 decreased to $44,000 compared to $45,000 for the same period in the prior year. Cost of software licenses for the six months ended June 30, 2018 decreased to $77,000 compared to $98,000 for the same period in the prior year. The decreases were primarily due to the decline in usage of our Cloud hosting operation.

Cost of services. Cost of services consists primarily of employee-related costs, third-party consultant fees incurred on consulting projects, post-contract customer support and instructional training services. Cost of services was $0.5 million for the three months ended June 30, 2018, down $0.2 million, or 33% from $0.7 million for the three months ended June 30, 2017. Cost of services was $1.0 million for the six months ended June 30, 2018, down $0.5 million, or 32% from $1.5 million for the six months ended June 30, 2017. The decreases were primarily due to decreases in third-party consultant fees incurred on consulting projects .

Research and development. Research and development expenses consist primarily of salaries, employee-related benefit costs and consulting fees incurred in association with the development of our products. Research and development expenses were $1.3 million for the three months ended June 30, 2018, down $0.4 million, or 22% from $1.7 million for the three months ended June 30, 2017. Research and development expenses were $2.7 million for the six months ended June 30, 2018, down $0.6 million, or 19% from $3.3 million for the six months ended June 30, 2017. The decreases were primarily due to decreases in employee-related benefit costs arising from headcount reductions.

Sales and marketing. Sales and marketing expenses consist primarily of salaries, employee-related benefit costs, commissions and other incentive compensation, travel and entertainment and marketing program-related expenditures such as for collateral materials, trade shows, public relations, advertising and creative services. Sales and marketing expenses were $0.5 million for the three months ended June 30, 2018, down $0.5 million, or 54%, from $1.0 million for the three months ended June 30, 2017. Sales and marketing expenses were $1.0 million for the six months ended June 30, 2018, down $1.0 million, or 48%, from $2.0 million for the six months ended June 30, 2017. The decreases were primarily due to decreases in employee-related costs and third-party consultant fees incurred on consulting projects.

General and administrative. General and administrative expenses consist primarily of salaries, employee-related benefit costs, provisions and credits related to uncollectible accounts receivable, professional service fees and legal fees. Our general and administrative expenses were $0.8 million for the three months ended June 30, 2018, down $24,000, or 3%, from $0.8 million for the three months ended June 30, 2017. General and administrative expenses were $1.5 million for the six months ended June 30, 2018, down $0.4 million, or 18%, from $1.9 million for the six months ended June 30, 2017. The decreases were primarily due to decreases in employee-related costs arising from headcount reductions and provision for doubtful debt.

Interest income, net. Net interest income includes interest income on investment funds. We generated $36,000 and $64,000 in interest income from our cash and cash equivalents as well as short-term investment balances during the six months ended June 30, 2018 and 2017, respectively.

Other income (expense), net. Other expense, net during the six months ended June 30, 2018, was $151,000 compared to other income, net of $368,000 for the six months ended June 30, 2017. The variances between the periods were primarily due to gains and losses from the remeasurement of the foreign currency exchange rate fluctuation on our Euro cash and investment balances.

Provision for income taxes. The provision for income taxes was $2,000 for both the six months ended June 30, 2018 and the six months ended June 30, 2017. The provision for each of the six months ended June 30, 2018 and 2017 primarily related to foreign income tax expenses.

Liquidity and Capital Resources

Overview

During the six months ended June 30, 2018, we had a net loss of $3.7 million and negative cash flow from operations of $3.5 million, and at June 30, 2018, we had working capital of $4.9 million. At June 30, 2018, we had $6.2 million in cash and cash equivalents. Our combined cash, cash equivalents and short-term investment balances as of June 30, 2018 declined by $3.4 million compared to such balances as of December 31, 2017. This decrease was mainly due to net cash used for operating activities, as described in the Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2018. Our cash, cash equivalents and investment balances may fluctuate during the remainder of fiscal 2018 due to various risks and uncertainties, including, but not limited to, the risks detailed in Part II, Item 1A titled “Risk Factors”.

We currently expect to be able to fund our working capital requirements from our existing cash and cash equivalents and short-term investments through the next twelve months from the date the accompanying condensed consolidated financial statements were issued, however, we could experience unforeseen circumstances, such as an economic downturn, difficulties in retaining customers and/or employees, or other factors that could increase our use of available cash and require us to seek additional financing. We may find it necessary to obtain additional equity or debt financing due to the factors listed above or in order to support a more rapid expansion, develop new or enhanced products or services, respond to competitive pressures, acquire complementary businesses or technologies or respond to unanticipated requirements.

Our future capital requirements will depend on many factors including growth or decline in customer accounts, the timing and extent of spending to support product development efforts , including with respect to our MVN initiatives, and ongoing investments in our products and services, the introduction of new and enhanced products or services, features and functionality, and our ability to control expenses generally. We have implemented a series of cost reduction plans since the second half of 2017 and expect to have reduced the cost of our operations by at least $3 million in 2018 to cover our cash needs through the next twelve months. Management may implement further cost reductions or seek financing from third parties as needed to ensure that our cash and cash equivalents and short-term investments are sufficient to fund operations for the next twelve months. However, further cost reductions may result in voluntary departures of highly skilled technical and managerial personnel from our company, 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.

The following table represents our liquidity at June 30, 2018 and December 31, 2017 (dollars in thousands):


	June 30,		December 31,
	2018		2017

Cash and cash equivalents	$	6,160	$	8,560
Short-term investments	$	-	$	1,000
Working capital	$	4,883	$	7,649
Working capital ratio		2.69		2.87

Cash Used For Operating Activities

Cash used for operating activities was $3.5 million for the six months ended June 30, 2018, mainly attributable to a $3.7 million operating loss offset by noncash items and changes in operating assets and liabilities. Cash used for operating activities was $3.9 million for the six months ended June 30, 2017, mainly attributable to a $5.0 million operating loss offset by other noncash items and changes in operating assets and liabilities.

Cash Provided By Investing Activities

Cash provided by investing activities was $998,000 for the six months ended June 30, 2018. Cash provided by investing activities was $4.4 million for the six months ended June 30, 2017. Cash provided by investing activities for the six months ended June 30, 2018 was primarily due maturities of short-term investment. Cash provided by investing activities in both periods was primarily related to the net maturities of short-term investments.

Cash Provided By Financing Activities

Cash provided by financing activities was $6,000 for the six months ended June 30, 2018. Cash provided by financing activities was $46,000 for the six months ended June 30, 2017. Cash provided by financing activities in both periods was primarily attributable to purchases of common stock under the Employee Stock Purchase Plan.

Leases and Other Contractual Obligations

As of June 30, 2018, we leased our headquarters facility and other facilities under noncancelable operating lease agreements each of which will expire at various dates during or before June 2020.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements in the second quarter of 2018 or in any prior periods.

Critical Accounting Policies, Estimates and Judgments

On January 1, 2018, we adopted a new revenue recognition standard , Revenue from Contracts with Customers (Topic 606) , which was issued by FASB in May 2014. See Note 1 of the Notes to our Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report 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 three month period ended June 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, other than as disclosed herein.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements, if any, and the impact of these pronouncements on our Condensed Consolidated F inancial S tatements, if any, see Note 1 of the Notes to our Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

Item 3 . Quantitative and Qualitative Disclosures About Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 4 . Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Interim Chief Financial Officer, as of June 30, 2018, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based upon that evaluation, our Chief Executive Officer and Interim Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2018 to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

On January 1, 2018, we adopted a new revenue recognition standard , Topic 606, which was issued by FASB in May 2014. We are in the process of adjusting our internal controls as a result of our adoption of Topic 606 but do not expect there will be material changes. There has been no other change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our Chief Executive Officer and Interim Chief Financial Officer have concluded that our disclosure controls and procedures are effective at that reasonable assurance level. However, our management, including our Chief Executive Officer and Interim Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected.

PART II. OTHER INFORMATION

Item 1 . Legal Proceedings

We are subject from time to time to various legal actions and other claims arising in the ordinary course of business. We are not presently a party to any material legal proceedings .

Item 1 A. Risk Factors

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

Risks related to our business and industry

Our business currently depends on revenue related to BroadVision e-business solutions, and we expect that this revenue will continue to decline .

We generate a large portion of our revenue from legacy products, including Business Agility Suite, Commerce Agility Suite and QuickSilver. We expect that these products, and future upgraded versions, will continue to account for a large portion of our revenue in the foreseeable future. We expect that our future financial performance, until we establish a significant installed base of new product revenues, will depend on our ability to sustain our legacy business, which we expect to continue to decline as the result of a decrease in market demand for these products and related products and services . If we fail to deliver the product enhancements that customers want, or if competitors overtake our legacy customers, demand for our legacy products and services, and our revenue, may further decline.

We continue to introduce new products, services and technologies and our business will be harmed if we are not successful in selling these offerings to our existing customers and new customers.

We entered into the business of ESN with the initial release of Clearvale in 2009. We announced the integration of Clearvale’s social and mobile capabilities into our legacy products, as BroadVision 9 in 2013. We have been actively enhancing Clearvale, by adding new functions and editions. We have spent significant resources in developing these offerings and training our employees to implement, support, operate, sell and market the offerings. In February 2015 we launched our newest communication and collaboration offering, Vmoso, and we announced a major incremental release of our Vmoso platform with a range of new functionality across several key modules in September 2016. To date our Vmoso, Clearvale and BroadVision 9 offerings have only contributed to a minor portion of our revenue. We do not yet know whether any of these new offerings will grow into a significant business line, and if so, whether sales of these new offerings will be sufficient for us to offset the costs of development, implementation, support, operation, sales and marketing. Although we have performed extensive testing of our products and technologies, their broad-based implementation may require more support than we anticipate, which would further increase our expenses. If sales of our new products, services and technologies are lower than we expect, or if we must lower our prices or delay

implementation to fix unforeseen problems and develop modifications, our operating margins are likely to decrease and we may not be able to operate profitably.

We face liquidity challenges and will need additional financing in the future.

We currently expect to be able to fund our working capital requirements from our existing cash and cash equivalents and short-term investments through the next twelve months. However, we could experience unforeseen circumstances, such as an economic downturn, difficulties in retaining customers and/or employees, or other factors that could increase our use of available cash and require us to seek additional financing. We may find it necessary to obtain additional equity or debt financing due to the factors listed above or in order to support a more rapid expansion, develop new or enhanced products or services, respond to competitive pressures, acquire complementary businesses or technologies or respond to unanticipated requirements.

We have implemented cost reduction plans since the second half of 2017 and expect to have reduce d the cost of our operations by at least $ 3 million in 2018 to cover our cash needs through the next twelve months. Management may implement further cost reductions or seek financing from third parties as needed to ensure that our cash and cash equivalents and short-term investments are sufficient to fund operations for the next twelve months. However, further cost reductions may result in voluntary departures of highly skilled technical and managerial personnel from our company, which would have a material adverse effect on our business, internal controls, financial condition and results of operations. We may seek to raise additional funds through private or public sales of securities, strategic relationships, bank debt, financing under leasing arrangements or otherwise. If additional funds are raised through the issuance of equity securities, the percentage ownership of our 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. 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.

We have introduced Cloud-based offerings. Our business will be harmed and our growth potential will be limited, if we are unable to provide reliable, scalable, and cost-efficient Cloud hosting operation.

Historically, BroadVision has offered perpetual software licenses, with customers responsible for the IT equipment needed for running BroadVision software. The Vmoso , Clearvale and Clear products, on the other hand, include Cloud-based offerings, where BroadVision provides hosted IT equipment and operation for subscribing customers. The Cloud model is also known as Software-as-a-Service, or SaaS. Our SaaS operations rely upon a distributed computing infrastructure platform for business operations. We have designed our software and computer systems so as to utilize data processing, storage capabilities and other services provided by cloud computing service providers. Currently, our worldwide cloud service providers include leading cloud infrastructure providers such as Amazon. Any disruption of or interference with our use of cloud computing services would impact our operations and our business would be adversely impacted. BroadVision has limited prior experience in operating Cloud hosting. We may be unable to timely provide adequate computing capacity to keep up with business growth and performance requirements. Our hosted operation may fail due to hardware problems, software problems, power problems, network problems, scalability problems, human errors, hacker attacks, disasters, third-party data center problems and other reasons. The failures may cause us to compromise security, lose customer data or identity, endure prolonged downtime, etc., all of which will harm our business and limit our growth. BroadVision has limited prior experience in estimating the costs of Cloud hosting. If we underestimate the costs or under-charge customers, we may not have adequate margins to sustain our Cloud hosting operation. Vmoso and Clearvale allow customers to use basic functions for free, a business practice gaining popularity in our industry. If we do not have enough customers upgrading to for-fee premium packages, we may be unable to sustain our Cloud hosting operation economically.

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

The market for our products is intensely competitive. We expect competition in this market to persist and increase in the future. If we fail to compete successfully with current or future competitors, we may be unable to attract and retain customers. Increased competition could also result in price reductions for our products and lower profit margins and reduced market share, any of which could harm our business, results of operations and financial condition.

Many of our competitors have significantly greater financial, technical, marketing and other resources, greater name recognition, a broader range of products and a larger installed customer base, any of which could provide them with a significant competitive advantage. In addition, new competitors, or alliances among existing and future competitors, may emerge and rapidly gain significant market share. Some of our competitors, particularly established software vendors, may also be able to provide customers with products and services comparable to

ours at lower or at aggressively reduced prices in an effort to increase market share or as part of a broader software package they are selling to a customer. We may be unable to match competitor's prices or price reductions, and we may fail to win customers that choose to purchase an information technology solution as part of a broader software and services package. As a result, we may be unable to compete successfully with current or new competitors.

If we are unable to keep pace with the rapid technological changes in online commerce, portal, social networking and enterprise software, our products and services may fail to be competitive.

Our products and services may fail to be competitive if we do not maintain or exceed the pace of technological developments in mobile, cloud-computing, social and enterprise solutions . Failure to be competitive could cause our revenue to decline. The information services, software and communications industries are characterized by rapid technological change, changes in customer requirements, frequent new product and service introductions and enhancements and evolving industry standards and practices. The introduction of products and services embodying new technologies and the emergence of new industry standards and practices can render existing products and services obsolete. Our future success will depend, in part, on our ability to:


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

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

Our quarterly operating results have fluctuated in the past and may fluctuate significantly in the future as a result of a variety of factors, many of which are outside of our control. As of June 30, 2018 , we had an accumulated deficit of approximately $1.3 billion.

For the foreseeable future we expect our results of operations to fluctuate, and during this period we may incur losses and/or negative cash flows. If our revenue does not increase or if we fail to maintain our expenses at an amount less than our projected revenue, we will not be able to achieve or sustain operating profitability on a consistent basis.

Our failure to operate profitably or control negative cash flows on a quarterly or annual basis could harm our business and the value of BroadVision common stock. If the negative cash flow continues, our liquidity and ability to operate our business would be severely and adversely impacted. Additionally, our ability to raise financial capital may be hindered due to our operational losses and negative cash flows, reducing our operating flexibility.

Our quarterly operating results are volatile and difficult to predict, and our stock price may decline if we fail to meet the expectations of securities analysts or investors.

Historically our quarterly operating results have varied significantly from quarter to quarter and are likely to continue to vary significantly in the future. If our revenues, operating results, earnings or projections are below the levels expected by securities analysts or investors, our stock price is likely to decline.

We are likely to continue to experience significant fluctuations in our future results of operations due to a variety of factors, some of which are outside of our control, including:


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

As a result of these factors, we believe that quarter-to-quarter comparisons of our revenue and operating results are not necessarily meaningful, and that these comparisons are not accurate indicators of future performance. Because our staffing and operating expenses are based on anticipated revenue levels, and because a high percentage of our costs are fixed, small variations in the timing of the recognition of specific revenue could cause significant variations in operating results from quarter to quarter. If we were unable to adjust spending in a timely manner to compensate for any revenue shortfall, any significant revenue shortfall would likely have an immediate negative effect on our operating results. If our operating results in one or more future quarters fail to meet the expectations of securities analysts or investors, we would expect to experience an immediate and significant decline in the trading price of our stock.

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

Our sales and product implementation cycles generally span months. Delays in customer orders or product implementations, which are difficult to predict, can affect the timing of revenue recognition and can adversely affect our quarterly operating results. Licensing our products is often an enterprise-wide decision by prospective customers. The importance of this decision requires that we engage in a lengthy sales cycle with prospective customers. A successful sales cycle may last up to nine months or longer. Our sales cycle is also affected by a number of other factors, some of which we have little or no control over, including the volatility of the overall software market, the business condition and purchasing cycle of each prospective customer, and the performance of our technology partners, systems integrators and resellers. The implementation of our products can also be time and resource intensive, and subject to unexpected delays. Delays in either product sales or implementations could cause our operating results to vary significantly from quarter to quarter.

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

A significant proportion of our sales are concentrated in the last month of each fiscal quarter. Gross margins are high for our license transactions. Customers and prospective customers may use these conditions in an attempt to obtain more favorable terms. While we endeavor to avoid making concessions that could result in lower margins, the negotiations often result in delays in closing license transactions. Small delays in a relatively small number of license transactions could have a significant impact on our reported operating results for that quarter.

If we are unable to maintain our disclosure controls and procedures, including our internal control over financial reporting, our ability to report our financial results on a timely and accurate basis may be adversely affected.

We have evaluated our "disclosure controls and procedures" as such term is defined in Rule 13a-15(e) under the Exchange Act. Effective controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed. Our internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. For example, we delayed the filing of our Annual Report on Form 10-K for the year ended December 31, 2015, in connection with our discovery that a former employee of one of our wholly-owned German subsidiaries, Interleaf Germany, had fraudulently misappropriated funds from us and falsified records to conceal the theft.

We cannot assure you that our controls and procedures will prevent all errors or fraud, or that any related losses would be recoverable. We also cannot assure you that similar circumstances will not arise in the future that will cause us to delay the filing of our periodic consolidated financial reports and, if we are unable to produce accurate or timely consolidated financial statements, we may be subject to adverse regulatory consequences, including sanctions or investigations by the Securities and Exchange Commission, our stock price may be adversely affected, our reputation may suffer and we may be unable to maintain compliance with the Nasdaq Capital Market continued listing requirements. Further, our independent registered public accounting firm did not perform an evaluation of our internal control over financial reporting during the impacted periods in accordance with the provisions of the Sarbanes-Oxley Act. In light of the fraudulent activities that were identified as a result of the limited procedures performed, it is possible that, had our independent registered public accounting firm performed an evaluation of our internal control over financial reporting in accordance with the provisions of the Sarbanes-Oxley Act, additional instances of fraud, or significant deficiencies or material weaknesses, may have been identified.

In addition, maintaining sufficient expertise and historical institutional knowledge in our accounting and finance organization is dependent upon retaining existing employees and filling any open positions with experienced personnel in a timely fashion. In particular, in March 2018, Peter Chu resigned as our Chief Financial Officer and we do not yet have a replacement for him. The market for skilled accounting and finance personnel is competitive and we may have continued difficulty in retaining our staff because the region in which we compete consists of many established companies that can offer more lucrative compensation packages. Our inability to staff the department with competent personnel with sufficient training will affect our internal controls over financial reporting to the extent that we may not be able to prevent or detect material misstatements.

Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the U.S.

We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. These accounting principles are subject to interpretation by the FASB and the SEC. A change in these policies or interpretations could have a significant effect on our reported financial results, may retroactively affect previously reported results, could cause unexpected financial reporting fluctuations, and may require us to make costly changes to our operational processes and accounting systems. For example, on January 1, 2018, we adopted a new revenue recognition standard , Topic 606, which was issued by FASB in May 2014. We adopted Topic 606 applying the modified retrospective method to all contracts that were not completed as of such date, which resulted in a net decrease of $0.6 million to our opening accumulated deficit as of January 1, 2018. In addition, effective January 1, 2018, we began to recognize a portion of the arrangement fees allocated to our QuickSilver software licenses as revenue upon delivery resulting in revenues for these QuickSilver arrangements generally being recorded in an earlier period than prior to the adoption of Topic 606. Since results for our reporting periods beginning on or 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, this may cause financial reporting fluctuations that are not reflective of changes in our actual operating results.

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

To date, we have sold our products primarily through our direct sales force. Our ability to achieve significant revenue growth in the future largely will depend on our success in recruiting, training and retaining sufficient direct sales personnel and establishing and maintaining relationships with distributors, resellers and systems integrators. Our products and services require a sophisticated sales effort targeted at the senior management of our prospective customers. New hires as well as employees of our distributors, resellers and systems integrators require training and may take a significant amount of time before achieving full productivity. Our recent hires may not become as productive as necessary, and we may be unable to hire and retain sufficient numbers of qualified individuals in the future. We have entered into strategic alliance agreements with partners, under which partners have agreed to resell and support our current BroadVision product suite. These contracts are generally terminable by either party upon 30 days' notice of an uncured material breach or for convenience upon 90 days' notice prior to the end of any annual term. Termination of any of these alliances could harm our expected revenues. We may be unable to expand our other distribution channels, and any expansion may not result in revenue increases. If we fail to maintain and expand our direct sales force or other distribution channels, our revenues may not grow or they may decline. Revenue generated from third-party distributors in recent years has not been significant.

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

We derive a significant portion of our revenue from our operations outside North America. In the quarter ended June 30, 2018 , approximately 5 1 % of our revenue was derived from international sales. If we are unable to manage or grow our existing international operations, we may not generate sufficient revenue required to establish and maintain these operations, which could slow our overall growth and impair our operating margins.

As we rely materially on our operations outside of North America, we are subject to significant risks of doing business internationally, including:


	•		difficulties in staffing and managing foreign operations and safeguarding foreign assets;
	•		unexpected changes in regulatory requirements;
	•		export controls relating to encryption technology and other export restrictions;
	•		tariffs and other trade barriers;
	•		political and economic instability;
	•		fluctuations in currency exchange rates;
	•		reduced protection for intellectual property rights in some countries;
	•		cultural barriers;
	•		seasonal reductions in business activity during the summer months in Europe and certain other parts of the world; and
	•		potentially adverse tax consequences.

Our international sales growth could be limited if we are unable to establish additional foreign operations, expand international sales channel management and support, hire additional personnel, customize products for local markets and develop relationships with international service providers, distributors and system integrators. Even if we are able to successfully expand our international operations, we may not succeed in maintaining or expanding international market demand for our products.

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

Our success and ability to compete are dependent to a significant degree on our proprietary technology. We hold a U.S. patent, issued in March 2017, related to the secure sharing of task data over one or more networks, and another U.S. patent, issued January 2014, on the elements of creating and sharing tasks over one or more networks. We also hold a U.S. patent, issued in January 2004, on elements of the BroadVision platform, which covers mechanisms for translating between a word processing document and an XML file. Although we hold these patents, they may not provide an adequate level of intellectual property protection. In addition, litigation may be necessary in the future to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Third parties have claimed and may claim in the future that we have infringed their patent, trademark, copyright or other proprietary rights. Claims may be made for indemnification resulting from allegations of infringement. Intellectual property infringement claims may be asserted against us as a result of the use by third parties of our products. Claims or litigation, with or without merit, could result in substantial costs and diversions of resources, either of which could harm our business.

We also rely on copyright, trademark, service mark, trade secret laws and contractual restrictions to protect our proprietary rights in products and services. We have registered "BroadVision", "Clearvale", "Interleaf" and the Clearvale logo as trademarks in the United States and/or in other countries. It is possible that our competitors or other companies will adopt product names similar to these trademarks, impeding our ability to build brand identity and possibly confusing customers.

As a matter of company policy, we enter into confidentiality and assignment agreements with our employees, consultants, partners and vendors. We also control access to and distribution of our software, documents and other proprietary information. Notwithstanding these precautions, it may be possible for an unauthorized third party to copy or otherwise obtain and use our software or other proprietary information or to develop similar software independently. Policing unauthorized use of our products will be difficult, particularly because the global nature of the Internet makes it difficult to control the ultimate destination or security of software and other transmitted data. The laws of other countries may afford us little or no effective protection of our intellectual property.

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

Cyber-attacks and other malicious Internet-based activity continue to increase generally. If any breach of the security technology embedded in our products or hosted Cloud operations were to occur, we would be exposed to liability and our reputation could be harmed, which could cause us to lose customers. A significant barrier to online commerce, portal, social networking and enterprise software is the secure exchange of valuable and confidential information over public networks. We rely on encryption and authentication technology, such as Open

SSL, public key cryptography, encryption algorithms RC2 and MD5, digital certificates and HTTPS, to provide the security and authentication necessary to affect the secure exchange of confidential information. Advances in computer capabilities, new discoveries in the field of cryptography, new hacking methods, security holes in 3rd-party components (such as operating system bugs) or other events or developments could cause a breach of the above measures that we use to protect customer data and identity.

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

We rely in part on technology that we license from third parties or we obtain from open sources, including cloud-based solutions from Amazon Web Services; relational database management systems from Oracle; Microsoft and MySQL; J2EE from Oracle and JBoss; and others. The loss or malfunction of any third-party technology could harm our business. We integrate or sublicense third-party technology with internally developed software to perform key functions. For example, our products and services incorporate data encryption and authentication technology from Open SSL. Third-party technology might not continue to be available to us on commercially reasonable terms, or at all. Moreover, third-party technology may contain defects that we cannot control. Problems with third-party technology could cause delays in introducing our products or services until equivalent technology, if available, is identified, licensed or obtained, and integrated. Delays in introducing our products and services could adversely affect our results of operations.

Our use of open source software could negatively affect our ability to sell our products and subject us to possible litigation.

We use open source software in our products and may continue to use open source software in the future. We may face claims from others claiming ownership of, or seeking to enforce the terms of, an open source license, including by demanding release of the open source software, derivative works, or our proprietary source code that was developed using such software. These claims could also result in litigation, require us to purchase a costly license, or require us to devote additional research and development resources to change our platform, any of which would have a negative effect on our business and operating results. In addition, if the license terms for the open source software we utilize change, we may be forced to reengineer or discontinue our products or incur additional costs. We cannot be certain that we have not incorporated open source software in our products in a manner that is inconsistent with our policies.

Our officers, and highly skilled technical and managerial personnel are critical to our business, and they may not remain with us.

Our performance substantially depends on the performance of our management team. We also rely on our ability to retain and motivate qualified personnel, especially our management and highly skilled development teams. The loss of the services of any of our officers or highly skilled technical and managerial personnel , particularly our founder, Chief Executive Officer, President and Interim Chief Financial Officer, Dr. Pehong Chen, could cause us to incur increased operating expenses and divert senior management resources in searching for replacements. In March 2018, Peter Chu resigned as our Chief Financial Officer and Vice President of Strategy and Product Management. In connection with Mr. Chu’s resignation, Dr. Chen was appointed as our Interim Chief Financial Officer. As a result of this change, Dr. Chen has taken on substantially more responsibility for the management of our business and of our financial reporting, which has resulted in greater workload demands and could divert his attention away from certain key areas of our business. Changes in our organization as a result of Mr. Chu’s departure may have a disruptive impact on our ability to implement our strategy and could have a material adverse effect on our business, internal controls, financial condition and results of operations. Management transition inherently causes some loss of institutional knowledge, which can negatively affect strategy and execution. Until we find and integrate a replacement for Dr. Chu, and unless his replacement is able to succeed in the position, we may be unable to successfully manage and grow our business, and our results of operations, internal controls and financial condition could suffer as a result. The loss of the services of our officers or other personnel also could harm our reputation if our customers were to become concerned about our future operations. We do not carry "key person" life insurance policies on any of our employees. Our future success also depends on our continuing ability to identify, hire, train and retain other highly qualified technical and managerial personnel. Competition for these personnel is intense, especially in the Internet industry. We have in the past experienced, and may continue to experience, difficulty in hiring and retaining sufficient numbers of highly skilled employees. The significant downturn in our business over the past several years has had and may continue to have a negative impact on our operations. We have restructured our operations by reducing our workforce and implementing other cost containment activities. These actions could lead to disruptions in our business, reduced employee morale and productivity, increased attrition, and problems with retaining existing and recruiting future employees.

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

Online (web or mobile) users' resistance to providing personal data, and laws and regulations prohibiting use of personal data gathered online without express consent or requiring businesses to notify their web site visitors of the possible dissemination of their personal data, could limit the effectiveness of our products. This in turn could adversely affect our sales and results of operations.

One of the principal features of our products is the ability to develop and maintain profiles of online users to assist business managers in determining the nature of the content to be provided to these online users. Typically, profile information is captured when consumers, business customers and employees visit a web site or use applications and volunteer information in response to survey questions or to application

forms concerning their backgrounds, interests and preferences. Profiles can be augmented over time through the subsequent collection of usage data. Although our products are designed to enable the development of applications that permit online users to prevent the distribution of any of their personal data beyond that specific web site or application services, privacy concerns may nevertheless cause visitors to resist providing the personal data necessary to support this profiling capability. The mere perception by prospective customers that substantial security and privacy concerns exist among online users, whether or not valid, may indirectly inhibit market acceptance of our products.

In addition, new laws and regulations could heighten privacy concerns by requiring businesses to notify online users that the data captured from them while online may be used by marketing entities to direct product messages to them. We are subject to increasing regulation at the federal and state levels relating to online privacy and the use of personal user information. Several states have proposed legislation that would limit the uses of personal user information gathered online. In addition, the U.S. Federal Trade Commission (the “FTC”), has urged Congress to adopt legislation regarding the collection and use of personal identifying information obtained from individuals when accessing web sites. The FTC has settled several proceedings resulting in consent decrees in which Internet companies have been required to establish programs regarding the manner in which personal information is collected from users and provided to third parties. While we adhere to the privacy policies published with our solutions, we could become a party to a similar enforcement proceeding. These regulatory and enforcement efforts could also harm our customers' ability to collect demographic and personal information from users, which could impair the effectiveness of our products.

In addition, the collection and use of personal data in the European Union, presently governed by the provisions of the Data Protection Directive, will be replaced with the General Data Protection Regulation, or GDPR, in May 2018. GDPR will impose several requirements relating to the collection, use, processing and transfer of personal data, such as requirements for using consent or other legal grounds to process personal data, providing information to individuals about how their personal data is used, maintaining adequate security and data protection measures, giving data breach notifications, complying with individuals’ requests to access, correct or delete their personal data and using third party processors of personal data. GDPR will also maintain the European Union’s strict rules limiting the transfer of personal data out of the European Economic Area. Failure to comply with the requirements of GDPR and the applicable national data protection laws of the European Union Member States may result in fines and other administrative penalties. GDPR will introduce substantial potential fines for violations and increase our responsibility and liability in relation to personal data that we process. To comply with the GDPR we may be required to put in place additional technical and administrative measures and controls mechanisms. This may be onerous and adversely affect our business, financial condition, results of operations and prospects.

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

We may not have adequate back-up and redundant systems for both customer-used service and internal information technology. A natural or manmade disaster could severely harm our business because our service and operation could be interrupted for an indeterminate length of time. Our operations depend upon our ability to maintain and protect our computer systems at our facility in Redwood City, California, which reside on or near known earthquake fault zones. These systems are vulnerable to damage from fire, floods, earthquakes, power loss, cyber-attacks, acts of terrorism, telecommunications failures and similar events. We also have significantly reduced our workforce since 2000, which has placed different requirements on our systems and has caused us to lose personnel knowledgeable about our systems, both of which could make it more difficult to quickly resolve system disruptions. Disruptions in our internal business operations could harm our business by resulting in delays, disruption of our customers' business, loss of data, and loss of customer confidence.

We are subject to foreign currency exchange risk.

A total of 5 0 % and 53 % revenues for each of the six months of 2018 and 2017 , respectively, were derived from international operations for which we transact business in foreign currencies. International revenues and expenses denominated in foreign currencies translate into higher or lower revenues and expenses in U.S. Dollars as the U.S. Dollar weakens or strengthens against such other currencies. Substantially all of the revenues of our international operations are received, and substantially all expenses are incurred, in currencies other than the U.S. Dollar, which increases or decreases the related U.S. Dollar-reported revenues and expenses depending on the fluctuations in foreign currency exchange rates. These fluctuations could cause our revenues outside the United States and other results of operations to differ from our expectations or the expectations of our investors. Additionally, such foreign currency exchange rate fluctuations could make it more difficult to detect underlying trends in our business and results of operations . In addition, a total of 35 % of our cash and cash equivalents as well as investments were denominated in foreign currencies as of June 30, 2018 . Accordingly, changes in the value of foreign currencies relative to the U.S. dollar can affect our operating results due to transactional and translational re-measurements that are reflected in our results of operations. To the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our common stock could be adversely affected.

We do not engage in any hedging activities in order to manage any potential adverse financial impact resulting from unfavorable changes in foreign currency exchange rates. We cannot predict with any certainty changes in foreign currency exchange rates or the degree to which we can address these risks.

Our business could be negatively affected as a result of actions of activist stockholders.

The actions of activist stockholders could adversely affect our business. Specifically, responding to common actions of an activist stockholder, including without limitation public proposals, requests to pursue a strategic combination or other transaction or other special requests, could disrupt our operations, be costly and time-consuming or divert the attention of our management and employees. In addition, perceived uncertainties as to our future direction in relation to the actions of an activist stockholder may result in the loss of potential business opportunities or the perception that we are unstable as a company, which may be exploited by our competitors and make it more difficult to attract and retain personnel as well as consumers and service providers. Actions of an activist stockholder may also cause fluctuations in our stock price based on speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

Weakened global economic conditions or tariffs and other trade restrictions may harm our industry, business, and results of operations.

We derive revenue from clients in many countries, and our overall performance depends in part on worldwide economic conditions. Global financial developments and downturns seemingly unrelated to us, our products or our industry may harm us. The United States and other key international economies have been impacted by falling demand for a variety of goods and services, restricted credit, poor liquidity, reduced corporate profitability, volatility in credit, equity and foreign exchange markets, bankruptcies, and overall uncertainty with respect to the economy. The revenue growth and potential profitability of our business depends on demand for our products generally. Historically, during economic downturns there have been reductions in spending on technology systems as well as pressure for extended billing terms and other financial concessions, which would negatively affect our operating results. These conditions affect the rate of technology spending and could adversely affect our customers’ ability or willingness to purchase our products, delay prospective customers’ purchasing decisions, reduce the value or duration of their subscriptions, or affect renewal rates, all of which could harm our operating results.

Additionally, the new U.S. presidential administration has called for substantial changes to foreign trade policy and has raised the possibility of imposing significant increases in tariffs on international trade. We also rely on various U.S. corporate tax provisions related to international commerce. If we are subject to new regulations, or if restrictions and tariffs increase our operating costs in the future, and we are not able to recapture those costs from our customers, or if such initiatives regulations, restrictions and tariffs make it more difficult for us to compete in overseas markets, our business, financial condition and results of operations could be adversely impacted.

Risks related to our MVN initiatives

We have no history operating and managing a platform utilizing blockchain-based technology, which makes it hard to evaluate our ability to generate revenue through operation of such a platform, and at the date of this filing, we have not generated revenue from any blockchain-based products.

We have no history or experience developing or operating a platform utilizing blockchain-based technology, such as MVN, which makes it difficult to evaluate our prospects for success with the MVN initiative. We are likely to encounter risks and difficulties frequently experienced by growing companies in rapidly developing and changing industries, including challenges in forecasting accuracy, determining appropriate uses of our limited resources, gaining market acceptance, managing a complex regulatory landscape and developing new products. We are still developing MVN and MVT, we have not generated revenue from any blockchain-based products and we may never generate revenue from MVN, MVT or any blockchain-based product or platform.

Our management has relatively little experience in the blockchain technology industry.

Our management only recently determined to dedicate significant corporate resources and management efforts towards the exploration of, and investment in, utilizing blockchain technology to develop MVN and MVT. Our management has limited experience in the blockchain technology industry. As a result, our management may be unable to successfully develop, launch, implement and maintain MVN and MVT.

Even if we successfully develop MVN, we may not be able to successfully market and launch MVN, or MVN and MVT may not be widely adopted.

MVN, if successfully developed, may not meet customer or user expectations. Furthermore, despite our efforts to develop and complete the launch of, and subsequently to maintain, MVN and MVT, it is possible that they will experience malfunctions or otherwise fail to be adequately secured and maintained. We may not have or may not be able to obtain the technical skills, expertise, or regulatory approvals needed to successfully develop MVN and MVT and progress them to a successful launch. In addition, there are significant legal and regulatory considerations that will need to be addressed in order to develop and maintain MVN, and addressing such considerations will require significant time and resources. There can be no assurance that we will be able to develop MVN in such a way that achieves all of the features we anticipate that it will provide, or that the features provided will be sufficient to attract a significant number of users such that MVN and MVT will be

widely adopted. If we are not successful in our efforts to demonstrate to customers and users the utility and value of MVN, there may not be sufficient demand for MVN and MVT, and our business would be materially adversely affected.

MVN and MVT, if successfully developed and launched, may not function properly.

MVN and MVT may not function properly or the technology may not operate as anticipated, which would have a material adverse effect on our plans, operations and financial condition. The technology may malfunction because of internal problems or as a result of cyber-attacks or external security breaches. Any problems in the functionality of the technology underlying MVN and MVT would have a direct materially adverse effect on our plans and expectations for revenues.

MVN and blockchains on which MVN and its associated cryptocurrency may rely may be the target of malicious cyber-attacks or may contain exploitable flaws in its underlying code, which may result in security breaches and the loss or theft of cryptocurrency tokens or other digital assets. If such attacks occur or security is compromised, this could expose us to liability and reputational harm and could seriously curtail the adoption and utilization of MVN and could result in claims against us. This is a significant risk in light of the importance of consumer trust to MVN’s success.

If we successfully develop and launch MVN and MVT, our software, the software applications and other interfaces or applications upon which they rely, and any software that may be built upon MVN, will be unproven, and there can be no assurances that MVN and the creation, transfer or storage of its associated cryptocurrency will be uninterrupted or fully secure, which may result in impermissible or unauthorized transfers, a complete loss of users’ cryptocurrency tokens or an unwillingness of customers and users to access, adopt and utilize MVN. MVT will be an ERC20-compliant token based on the Ethereum protocol. As such, any malfunction, unintended function, unexpected functioning of or attack on the Ethereum protocol may cause MVT to malfunction or function in an unexpected or unintended manner. Such attacks may come in anticipated forms or unanticipated forms.

We and our subsidiaries are, and MVN, if developed and launched, may be, subject to cyber-attacks, security risks and risks of security breaches. This is an especially significant risk for MVN, since its success is completely dependent on large numbers of consumers placing enough trust in the MVN’s security to store their sensitive personal data on the network. An attack or a breach of security could result in a loss of private data, lost or stolen cryptocurrency tokens and an interruption of functionality or inability to access MVN for an extended period of time. Any such attack or breach could adversely affect our ability to effectively operate MVN, attract new users to MVN and retain existing users of MVN, which could have a material adverse effect on our operations and financial condition. Such an attack may also damage our reputation and any breach of data security that exposes or compromises the security of any of the private digital keys used to authorize or validate transactions within MVN, or that enables any unauthorized person to generate any of the private digital keys, could result in lost or stolen cryptocurrency tokens. The occurrence of any of the foregoing could result in claims against us and us and could have a material adverse effect on us and the holders of our common stock.

The prices of digital assets are extremely volatile. Fluctuations in the price of digital assets could materially and adversely affect our business.

The prices of cryptocurrencies, such as Bitcoin and Ether, and other digital assets have historically been subject to dramatic fluctuations and are highly volatile. A decrease in the price of a single digital asset may cause volatility in the entire digital asset and security token industry. For example, a security breach that affects purchaser or user confidence in Bitcoin or Ether may affect the industry as a whole. This volatility may adversely affect interest in and demand for MVN, which would materially adversely affect our business.

The value of existing blockchain assets such as Bitcoin and Ether has historically been subject to significant volatility. The market price of our common stock could be subject to similar volatility if the value of our business and common stock is viewed as being linked to the price and value of certain cryptocurrencies and blockchain assets.

Market prices for publicly traded common stock such as our common stock often are subject to arbitrary pricing factors that are not necessarily directly associated with traditional factors that influence stock prices or the value of non-cryptocurrency assets such as revenue, cash flows, profitability, growth prospects or corporate events such as new product introductions, entry into major contracts or achievement of other corporate milestones. As we develop, launch and implement MVN, the market price of shares of our common stock may be influenced by investors’ perception of and speculative expectations regarding existing blockchain assets such as Bitcoin and Ether as well as future anticipated adoption or appreciation in value of cryptocurrencies, such as MVT, or overall growth in and demand for blockchain-based technologies, factors over which the Company has little or no influence or control. If investors view our business and the value of our common stock as dependent upon or linked to the value or growth of cryptocurrencies generally or blockchain assets, the price of such cryptocurrencies or blockchain asset may influence significantly the market price of shares of our common stock. The prices of blockchain assets such as Bitcoin have historically been subject to dramatic fluctuations and are highly volatile which may cause the market price of our common stock to experience significant volatility.

The market price of shares of our common stock may also be subject to speculative forces—both positive and negative --following announcement of our intent to develop MVN due to the highly speculative investment environment currently surrounding blockchain technologies and cryptocurrencies. Growth in mainstream media coverage has resulted in investors that were previously unfamiliar with the cryptocurrency markets and digital assets now seeking out investment opportunities in these areas. With few or limited public company options for investment exposure to blockchain technologies or cryptocurrencies, interest in our common stock may be unusually high for a period of time, and our common stock price may continue to be volatile as we provide updates on the development, launch and implementation of MVN. If blockchain technology development or acceptance slows or is subject to unfavorable media coverage or investor sentiment, if the trading prices of cryptocurrency decrease or if we are unable to successfully develop and launch MVN and MVT in a timely way, the trading price of our common stock may decrease dramatically. When significant stock price volatility occurs, particularly when accompanied by signs of speculative trading, it is not uncommon for the Securities and Exchange Commission or other regulatory or self-regulatory authorities to investigate the circumstances, which can be costly and divert the attention of senior management from the management of normal business operations.

The regulatory regime governing blockchain technologies, cryptocurrencies, digital assets, MVN and distribution and utilization of digital assets such as MVT is uncertain, and new regulations or policies may materially adversely affect the development and the value of MVN and MVT.

The regulation of blockchain technologies and platforms like MVN, cryptocurrencies and other digital assets and cryptocurrency exchanges is currently undeveloped and uncertain and likely to rapidly evolve as government agencies take action to regulate and monitor them. Regulation also varies significantly among international, federal, state and local jurisdictions and is subject to significant uncertainty.

Various legislative and executive bodies in the United States and in other countries may in the future adopt laws, regulations, or guidance, or take other actions, which may severely impact the operability of MVN and permissibility of cryptocurrencies generally and the technology behind them or the means of transaction or in transferring them. Failure by us to comply with any laws, rules and regulations, some of which may not exist yet or are subject to interpretation and may be subject to change, could result in a variety of adverse consequences, including civil penalties and fines.

Blockchain-based networks and distributed ledger technologies also face an uncertain regulatory landscape in many foreign jurisdictions such as the European Union, China and Russia. Various foreign jurisdictions may, in the near future, adopt laws, regulations or directives that may conflict with those of the United States or may directly and negatively impact our business. The effect of any future regulatory change is impossible to predict, but such change could be substantial and materially adverse to our business.

The further development and acceptance of blockchain networks, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of blockchain networks and blockchain assets would have a material adverse effect on our business plans and could have a material adverse effect on us.

The growth of the blockchain industry in general, as well as the blockchain networks on which MVN will rely, is subject to a high degree of uncertainty. The factors affecting the further development of the cryptocurrency and cryptosecurity industries, as well as blockchain networks, include uncertainty regarding:


	·		Worldwide growth in the adoption and use of cryptocurrencies, and other blockchain technologies;
	·		Government and quasi-government regulation of cryptocurrencies and other blockchain assets and their use, or restrictions on or regulation of access to and operation of blockchain networks or similar systems;
	·		The maintenance and development of the open-source software protocol of the blockchain networks;
	·		Changes in consumer demographics and public tastes and preferences;
	·		The availability and popularity of other forms or methods of buying and selling goods and services, or trading assets including new means of using traditional currencies or existing networks;
	·		General economic conditions and the regulatory environment relating to cryptocurrencies; and
	·		The popularity or acceptance of Bitcoin or other blockchain-based tokens.

The cryptocurrency and cryptosecurities industries as a whole have been characterized by rapid changes and innovations and are continually evolving. Although blockchain networks and blockchain assets have experienced significant growth in recent years, the slowing or stopping of the development, general acceptance and adoption and usage of these networks and assets may materially adversely affect our business plans and results of operations.

The development and operation of MVN and MVT may require us to in-license technology and intellectual property rights.

Our ability to develop and operate MVN and MVT may depend on technology and intellectual property rights that we may license from unaffiliated third parties. If for any reason we were to fail to obtain or develop the technology and intellectual property that MVN or MVT requires or fail to comply with our obligations under any material license agreement, MVN might be unable to operate effectively, which would have a material adverse effect on our operations and financial condition and could have a material adverse effect on us.

MVN may face substantial competition from a number of known and unknown competitors. Alternative networks may be established that compete with or are more widely used than MVN.

It is possible that alternative networks or technologies could be established that utilize the same or similar open source code and protocol underlying MVN and attempt to facilitate services that are materially similar to the services and feature that we intend to make available on MVN. Additionally, existing technologies that do not rely on blockchain technologies may perform better or be more trusted by consumers than MVN. Competition with new and existing alternatives to MVN could negatively impact the success and adoption of MVN and MVT.

Risks related to our common stock

One stockholder beneficially owns a substantial portion of the outstanding BroadVision common stock, and as a result exerts substantial control over us.

As of June 30, 2018, Dr. Pehong Chen, our Chairman, President, Chief Executive Officer and Interim Chief Financial Officer, beneficially owned approximately 1.6 million shares of our common stock, which represents approximately 32% of the outstanding common stock as of such date. As a result, Dr. Chen exerts substantial control over all matters coming to a vote of our stockholders, including with respect to:


	•		the composition of our board of directors and, through it, any determination with respect to our business direction and policies, including the appointment and removal of officers;
	•		any determinations with respect to mergers and other business combinations;
	•		our acquisition or disposition of assets;
	•		our financing activities; and
	•		the payment of dividends on our capital stock.

This control by Dr. Chen could depress the market price of our common stock or delay or prevent a change in control of BroadVision.

We recently transferred the listing of our common stock from the Nasdaq Global Market to the Nasdaq Capital Market. If we fail to maintain the requirements for continued listing on the Nasdaq Capital Market, our common stock could be delisted from trading, which would adversely affect the liquidity of our common stock and our ability to raise additional capital.

In November 2017, we transferred the listing of our common stock from the Nasdaq Global Market to the Nasdaq Capital Market as our stockholders’ equity had decreased from $12.1 million at June 30, 2017 to $9.7 million at September 30, 2017. We are required to meet specified listing criteria in order to maintain our listing on the Nasdaq Capital Market. If we fail to satisfy the Nasdaq Capital Market’s continued listing requirements, our common stock could be delisted from the Nasdaq Capital Market, in which case we may be able to transfer to the over-the-counter bulletin board. For example, Nasdaq Rule 5550(b)(1) requires companies listed on the Nasdaq Capital Market to maintain a minimum of $2.5 million in stockholders’ equity for continued listing. If our stockholders’ equity falls below $2.5 million, the Nasdaq Capital Market may take formal action and determine that we are no longer suitable for listing and may commence delisting procedures. Any potential delisting of our common stock from the Nasdaq Capital Market would make it more difficult for our stockholders to sell our stock in the public market and would likely result in decreased liquidity and increased volatility for our common stock.

Our stock price has been highly volatile.

The high and low price of BroadVision common stock on the Nasdaq Stock Market ranged from $1. 77 per share to $6.70 per share between July 1, 2016 and June 30, 2018 . Our stock price is subject to wide fluctuations in response to a variety of factors, including:


	•		quarterly variations in operating results;
	•		announcements of technological innovations;
	•		announcements of new software or services by us or our competitors;
	•		changes in financial estimates by securities analysts;
	•		low trading volume on the Nasdaq Stock Market;
	•		general economic conditions; or
	•		other events or factors that are beyond our control.

In addition, the stock market has experienced significant price and volume fluctuations that have particularly affected the trading prices of equity securities of many technology companies. These fluctuations have often been unrelated or disproportionate to the operating performance of these companies. Any negative change in the public's perception of the prospects of Internet, enterprise social networking or electronic commerce companies could further depress our stock price regardless of our results. Other broad market fluctuations may decrease the trading price of BroadVision common stock. In the past, following declines in the market price of a company's securities, securities class action litigation, such as the class action lawsuits filed against us and certain of our officers and directors in early 2001, has often been instituted against that company. Litigation could result in substantial costs and a diversion of management's attention and resources.

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

Not applicable.

Item 3 . Defaults Upon Senior Securities

Not applicable.

Item 4 . Mine Safety Disclosures

Not applicable.

Item 5 . Other Information

We have delayed the date of our 2018 Annual Meeting of Stockholders by more than 30 calendar days from the anniversary of the date of our 2017 Annual Meeting of Stockholders. We will inform stockholders of the date of the 2018 Annual Meeting of Stockholders, as well as the deadlines for submitting shareholders proposals for the meeting, once determined.

Item 6 . Exhibits


Exhibits Number	Description
3.1	Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to Amendment No. 2 to the Company's Registration Statement on Form S-1 filed on May 29, 1996 (File No. 333-03844)).
3.2	Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 4.6 to the Company's Form 10-K for the fiscal year ended December 31, 2006 filed on March 27, 2007 (File No. 000-28252)).
3.3	Certificate of Amendment of Certificate of Incorporation (incorporated by reference to Exhibit 3.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2008, filed on November 6, 2008 (File No. 000-28252)).
3.4	Amended and Restated Bylaws (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed on October 16, 2008 (File No. 000-28252)).
10.1	Lease Agreement, dated March 30, 2018, between Portside Investors and BroadVision
31.1	Certification of the Chief Executive Officer and Interim Chief Financial Officer of BroadVision pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1(1)	Certification of the Chief Executive Officer and Interim Chief Financial Officer of BroadVision pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	The following materials from BroadVision, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Consolidated Balance Sheets at June 30, 2018 and December 31, 2017 , (ii) Condensed Consolidated Statement of Comprehensive Loss for the three and six months ended June 30, 2018 and 2017 , (iii) Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2018 and 2017 , and (iv) Notes to Condensed Consolidated Financial Statements
(1)	The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Broadvision, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

SIGNA T URES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		BROADVISION, INC.

Date : August 14 , 2018	By:	/s/ Pehong Chen
		Pehong Chen
		Chairman of the Board, President, Chief Executive Officer and Interim Chief Financial Officer

STANDARD LEASE AGREEMENT

This Lease Agreement (this “ Lease ” ) is made and entered into as of the 16 th day of March 2018, between PORTSIDE INVESTORS, a California limited partnership (hereinafter called “ Landlord ” ) and BROADVISION, having its principal office at 460 Seaport Court, Suite102, Redwood City, California 94063 (hereinafter called “ Tenant ” ).

1.0

PROPERTY LEASED

Premises:

Landlord, in consideration of the rents to be paid and the covenants and agreements to be performed and observed by Tenant, does hereby lease unto Tenant and Tenant does hereby lease and take from Landlord approximately 2,067 rentable square feet of floor area, in that certain building ( “ Building ” ) located in Redwood City, San Mateo County, State of California, and delineated on the site plan comprising Exhibit A annexed hereto and made a part hereof. The area of the Building being leased to Tenant under this Lease is commonly known by its street address as 460 Seaport Court, Suite 102, Redwood City, California 94063, and is hereinafter referred to as the “ Premises. ” The Building is located on certain land ( “ Land ” ) located in Redwood City, California and more particularly described on Exhibit B, and the Building is one of 14 buildings (collectively, the “ Buildings ” ) located on the Land.

Parking:

Tenant, during the term hereof and so long as not in default hereunder, is granted a non-exclusive license to park or permit the parking of up to eight (8) automobiles in the parking area shown on Exhibit B hereto. Tenant, its employees, agents, invitees and licensees shall not park automobiles or other motor vehicles in excess of the permitted number.

Use:

As more fully set forth in paragraph 5, Tenant shall use the Premises only for sales office and general business use.

2.0

TERM AND POSSESSION

The term of this Lease ( “ the Term ” ) shall commence on the Commencement Date specified below (the “ Commencement Date ” ) and, unless sooner terminated pursuant to the provisions of this Lease or extended pursuant to any extension option provided for herein, shall expire on the expiration date (the “ Expiration Date ” ) set forth below. When the Commencement Date and the Expiration Date have been established, Landlord and Tenant shall confirm the same in the form of the Commencement Letter attached hereto as Exhibit C.

The “ Commencement Date ” shall be the date upon which Tenant actually occupies the Premises, with Landlord ’ s permission, for any use permitted under the terms of this Lease. The anticipated Commencement Date is July 1 , 2018.

If Landlord, for any reason whatsoever, cannot deliver possession of said Premises to Tenant at the Commencement Date of the term hereof, this Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for any loss or damage resulting therefrom, but in that event, (a) all Rent (as defined in paragraph 3.7) shall be abated during the period between the Commencement Date of said term and the time when Landlord delivers possession, (b) Tenant shall commence paying Rent on the date of delivery of possession of the Premises, and (c) the Expiration Date shall be on the two (2) year anniversary of the date of delivery of possession of the Premises.

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In the event that Landlord shall permit Tenant to occupy the Premises prior to the Commencement Date of the term, such occupancy shall be subject to all the provisions of this Lease and the Rent shall start on the date of occupancy of the Premises. Said early possession shall not advance the Expiration Date hereinabove provided.

3.0

RENT

Base Rent:

Tenant shall pay Landlord as base rent the sum of $7,234.50 (the “ Monthly Installment ” ) each month in advance on the first day of each month, in U.S. dollars, without offset or deduction of any nature whatsoever, commencing on the Commencement Date and continuing through the term of this Lease, together with such additional rents as are hereinafter specified. In the event that the Commencement Date is not on the first day of a calendar month, the Monthly Installment payable on the Commencement Date shall be equal to the product obtained by multiplying the Monthly Installment by the quotient obtained by dividing 30 into the number of days remaining in such calendar month.

Months Rent
1 — 12 $3.50 Full Service

The rent shall be increased annually by three percent (3%), commencing with the 13 th month of the Lease Term and at every anniversary date thereafter.

3.2 Rent Adjustment:

The base rent Monthly Installment provided for in paragraph 3.1 above shall be increased at intervals as follows: ____________________________________________________________________
__________. The Monthly Installment payable by Tenant in accordance with paragraph 3.1 shall be adjusted, upwards only, effective ____________ of each year ( “ Adjustment Date ” ) during the term of this Lease in accordance with percentage increase, if any, in the Consumer Price Index Urban Wage Earners and Clerical Workers (___________, Base: 1982 84-100) ( “ Index ” ), as published by the United States Department of L abor, Bureau of L abor Statistics ( “ Bureau ” ). The Index for each February during the term of this Lease shall be compared with the Index for the preceding February, and the Monthly Installment shall be increased in accordance with the percentage increase, if any, between such February Indices. Landlord shall use its best efforts to calculate and give Tenant notice of any such increase in the Monthly Installment on or near the Adjustment Date, and Tenant shall commence to pay the increased Monthly Insta ll ment effective on the Adjustment D ate of each year. Notwithstanding the foregoing, in the event this Lease has not been in effect for an entire year prior to the first Adjustment Date, that first adjustment only shall be determined by comparing the Index for February with the Index published for the month first preceding the Commencement Date. All other adjustments shall be determined by the comparison of the February Indices. In the event that Landlord is unable to deliver to Tenant the notice of the increased Monthly Installment at least five business days prior to the Adjustment Date, Tenant shall commence to pay the increased Monthly Installment on the first day of the month following the receipt of such notice, which notice must be sent at least five business days prior to the first day of such month “ Payment Date), and shall also pay, together with the first payment of the increased Monthly Installment, an amount determined by multiplying the amount of the increase in the Monthly Installment times the number of months which have elapsed between the Adjustment Date and the Payment Date. Should the Bureau discontinue the publication of the Index, or publish the same less frequently, or alter the same in some other manner, Landlord, in its

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discretion, shall adopt a substitute index or procedure which reasonably reflects and monitors consumer prices.

1.1 Security Deposit:

Upon the execution of this Lease by Tenant, Tenant shall deposit with Landlord the sum of $7,234.50 ( “ Security Deposit ” ) to secure the faithful performance by Tenant of each term, covenant and condition to be performed or kept by Tenant under this Lease. If Tenant shall at any time fail to make any payment or fail to keep or perform any term, covenant and condition on its part to be made or performed or kept under this Lease, including, without limitation, payment of Rent, maintenance of the Premises in good repair, and surrendering the Premises in a clean condition, Landlord may, but shall not be obligated to and without waiving or releasing Tenant from any obligation under this Lease, and without waiving its right to treat such failure as a default hereof, use, apply or retain the whole or any part of the Security Deposit reasonably necessary to remedy such failure of Tenant. In such event, Tenant shall within five days of written demand by Landlord, remit to Landlord sufficient funds to restore said Security Deposit to its original sum. Landlord is not a trustee of the Security Deposit and may commingle it, use it in ordinary business, transfer or assign it, or use it in any combination of those ways. No interests shall accrue on the Security Deposit. Should Tenant comply with all of said terms, covenants and conditions and timely pay all amounts due hereunder as the same become due, and at the end of the term of this Lease leave the Premises in the condition required by the terms of this Lease, then said Security Deposit shall be returned to Tenant following the termination of this Lease and vacancy of the Premises by Tenant. At all times the Security Deposit shall be equal to the Monthly Installment due. When the Monthly Installment is increased, the Tenant shall immediately increase the Security Deposit to equal the Monthly Installment.

Late Charge:

Tenant acknowledges that late payment of Rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such cost being extremely difficult and impractical to fix. Such costs include, without limitation, processing and accounting charges and late charges that may be imposed on Landlord by the terms of any encumbrance, and notes secured by any encumbrance covering the Premises. Therefore, if any installment of Rent or other amount due from Tenant is not received by Landlord within five days after the same is due, Tenant shall pay to Landlord upon demand an additional sum of 10% of said installment of Rent or other amount as a late charge. This late charge shall be charged for each calendar month (without proration) in which all or any portion of Rent or other amount due hereunder is delinquent for more than five days from its original due date. The parties agree that this late charge represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment by Tenant. Acceptance of any late charges shall not constitute a waiver of Tenant ’ s default with respect to the overdue amount, or prevent Landlord from exercising any of the rights and remedies available to Landlord under this Lease or by law. Such late charge shall be considered additional Rent.

Governmental Assessments:

In addition to the Monthly Installment, Tenant shall pay, prior to delinquency, (i) all personal property taxes, charges, rates, duties and license fees assessed against or levied upon Tenant ’ s occupancy of the Premises, or upon any tenant improvements, trade fixtures, furnishings, equipment or other personal property contained in the Premises (collectively “ Personal Property ” ), and (ii) any governmental fees or charges, general and special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind whatsoever levied upon Tenant ’ s occupancy of the Premises or any Personal Property, other than Taxes (as defined in paragraph 3.10.14), which shall be handled in accordance with the provisions of paragraph 3.9 (collectively “ Assessments ” ). Tenant shall cause such Assessments upon Personal Property to be billed separately from the property of

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Landlord. Tenant indemnifies and holds Landlord harmless from and against the payment of all such Assessments.

Special Charges for Special Services:

Tenant agrees to pay to Landlord, within 10 days following written demand, all charges for any services, utilities, goods or materials furnished by Landlord at Tenant ’ s request which are not required to be furnished by Landlord under this Lease without separate charge or reimbursement.

Definition of Rent:

Any and all payments of the Monthly Installment and any and all Taxes, fees, charges, costs, expenses, insurance obligations, late charges, Assessments, Operating Expense Adjustments (as defined in paragraph 3.8), and all other payments, disbursements or reimbursements (collectively “ Rent ” ) which are attributable to, payable by or the responsibility of Tenant under the Lease, constitute “ rent ” within the meaning of California Civil Code Section 1951(a). All payments owed by Tenant under the Lease shall be paid to Landlord in lawful money of the United States of America at the location specified by Landlord for payment from time to time pursuant to this Lease.

Operating Expense Adjustments:

Tenant shall pay, in addition to the Monthly Installments computed and due pursuant to paragraphs 3.1 and 3.2, an additional sum as an operating expense adjustment ( “ Operating Expense Adjustment ” ) an amount equal to Tenant ’ s Pro Rata Share (as defined in paragraph 3.10) of any excess of Operating Expenses (as defined in paragraph 3.10) over the Base Amount (as defined in paragraph 3.10).

Procedure for Payment of Operating Expense Adjustments:

Tenant shall pay for Tenant ’ s Pro Rata Share of any excess of Operating Expenses over the Base Amount, as follows:

Landlord may, from time to time by 10 days notice to Tenant, reasonably estimate in advance the amounts Tenant shall owe on a monthly basis for excesses of Operating Expenses over the Base Amount for any full or partial calendar year of the term of this Lease. In such event, Tenant shall pay such estimated amounts, on a monthly basis, on or before the first day of each calendar month, together with Tenant ’ s payment of Monthly Installment. Such estimate may be reasonably adjusted from time to time by Landlord by written notice to Tenant.

Within 120 days after the end of each calendar year, or as soon thereafter as practicable, Landlord shall provide a statement (the “ Statement ” ) to Tenant showing: (i) the amount of actual Operating Expenses for such calendar year, (ii) any amount paid by Tenant towards excesses of Operating Expenses over the Base Amount during such calendar year on an estimated basis and (iii) any revised estimate of Tenant ’ s obligations for excesses of Operating Expenses over the Base Amount for the current calendar year.

If the Statement shows that Tenant ’ s estimated payments were less than Tenant ’ s actual obligations for excesses of Operating Expenses over the Base Amount for such year, Tenant shall pay the difference. If the Statement shows an increase in Tenant ’ s estimated payments for the current calendar year, Tenant shall pay the difference between the new and former estimates, for the period from January 1 of the current calendar year through the month in which the Statement is sent. Tenant shall make such payments within 30 days after Landlord sends the Statement.

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If the Statement shows that Tenant ’ s estimated payments exceeded Tenant ’ s actual obligations for excesses of Operating Expenses over the Base Amount, Tenant shall receive a refund of such difference against payments of Rent next due. If the term of this Lease shall have expired and no further Rent shall be due, Tenant shall receive a refund of such difference within 30 days after Landlord sends the Statement.

So long as Tenant ’ s obligations hereunder are not materially adversely affected, Landlord reserves the right to reasonably change, from time to time, the manner or timing of the foregoing payments. No delay by Landlord in providing the Statement (or separate statements) shall be deemed a default by Landlord or a waiver of Landlord ’ s right to require payment of Tenant ’ s obligations for actual or estimated excesses of Operating Expenses over the Base Amount.

If the term of this Lease commences other than on January 1, or ends other than on December 31, Tenant ’ s obligations to pay estimated and actual amounts towards excesses of Operating Expenses over the Base Amount for such first or final calendar years shall be prorated to reflect the portion of such years included in the term of this Lease. Such proration shall be made by multiplying the total estimated or actual (as the case may be) excesses of Operating Expenses over the Base Amount for such calendar years by a fraction, the numerator of which shall be the number of days of the term of this Lease during such calendar year, and the denominator of which shall be 365.

Defined Terms:

“ Tenant ’ s Pro Rata Share ” means the ratio, from time to time, of the rentable square feet of the Premises to the rentable square feet in the Buildings. Tenant ’ s Pro Rata Share as of the Commencement Date is stipulated to be 3.1% which has been computed using the stipulated square footage set forth in Paragraph 1.1. The “ Base Amount ” will be the Operating Expenses per year per rentable square foot in the Buildings for the year ending December 31, 2018. “ Operating Expenses ” are defined to be the sum of all costs, expenses, and disbursements, of every kind and nature whatsoever, and the Taxes, incurred by Landlord in connection with the ownership, management, maintenance, operation, administration and repair of all or any portion of the Buildings, the Land, the Common Areas (as defined in paragraph 9.2) and the roads, walks, plazas, landscaped areas, parking facilities, improvements and facilities thereon (collectively, “ Property ” ) including, but not limited to, the following:

All utility costs not otherwise charged (pursuant to paragraph 3.6) directly to Tenant or any other tenant of the Property;

All wages and benefits and costs of employees or independent contractors or employees of independent contractors engaged in the operation, maintenance and security of the Property;

All expenses for janitorial, maintenance, security and safety services;

All repairs to, replacement of, and physical maintenance of the Property, including the cost of all supplies, uniforms, equipment, tools and materials;

Any license, permit and inspection fees required in connection with the operation of the Property;

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Any auditor ’ s fees for accounting provided for the operation and maintenance of the Property;

Any legal fees, costs and disbursements as would normally be incurred in connection with the operation, maintenance and repair of the Property;

All reasonable fees for management services provided by a management company or by Landlord or an agent of the Landlord;

The annual amortization of costs, including financing costs, if any incurred by Landlord after completion of the Property for any capital improvements installed or paid for by Landlord and required by any new (or change in) laws, rules or regulations of any governmental or quasi-governmental authority (collectively “ Laws ” );

The annual amortization of costs, including financing costs, if any, of any equipment, device or capital improvement incurred after completion of the Property and reasonably intended as a labor-saving measure or to affect other economies in the operation or maintenance of the Property (provided the annual amortized cost does not exceed the actual cost savings realized and such savings do not redound primarily to the benefit of any particular tenant);

The annual amortization of costs incurred after completion of the Property, if any, for the replacement of (i) exterior perimeter window draperies or blinds provided by Landlord and (ii) carpeting and wall coverings in the public areas of the Buildings;

All insurance expenses which shall mean all premiums and other charges by Landlord with respect to the insurance of the Property including, without limitation, the following to the extent carried by the Landlord: (i) fire and extended coverage insurance, windstorm, hail and explosion; (ii) riot attending a strike, civil commotion, aircraft, vehicle and smoke insurance; (iii) public liability, bodily injury and property damage insurance; (iv) elevator insurance; (v) Workers ’ Compensation insurance for the employees specified in paragraph 3.10.2 above; (vi) boiler and machinery insurance, sprinkler leakage, water damage, property, burglary, fidelity and pilferage insurance on equipment and materials; (vii) loss of rent, rent abatement, rent continuation, business interruption insurance, and similar types of insurance; (viii) earthquake insurance; and (ix) such other insurance as is customarily carried by operators of other comparable projects in Northern California;

Such other usual costs and expenses which are paid by other landlords for the purpose of providing for the on-site operation, servicing, maintenance and repair of comparable projects in Northern California; and

All actual taxes, assessments, levies, charges, water and sewer charges, rapid transit and other similar or comparable governmental charges (collectively “ Taxes ” ) levied or assessed on, imposed upon or attributable to the calendar year in question (a) to the Property, and/or (b) to the operation of the Property, including but not limited to Taxes against the Property, personal property taxes or assessments levied or assessed against the Property, plus any tax measured by gross rentals received from the Property, together with any costs incurred by Landlord, including attorneys ’ fees, in contesting any such Taxes but excluding any net income, franchise, capital stock, estate or inheritance taxes imposed by the State or Federal Government or by their respective agencies, branches or departments; provided that, if at any time during the term of this Lease there shall be levied, assessed or

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imposed on Landlord or the Property by any gove rn mental entity, any general or special, ad valorem or specific excised capital levy or other Taxes on the payments received by Landlord under this Lease or other leases affecting the Property and/or any license fee, excise of Franchise Taxes measured by or based, in whole or in part, upon such payments, and/or transfer, transaction, or Taxes based directly or indirectly upon the transaction represented by this Lease or other leases affecting the Property, and/or any occupancy, use, per capita or other Taxes, based directly or indirectly upon the use or occupancy of the Premises or the Property, then all such Taxes shall be deemed to be included within the definition of the term Taxes.

If the Buildings do not have at least 95% of the rentable area of the Buildings occupied during any calendar year period, then the Operating Expenses for such period shall be deemed to be equal to the total of (i) the Operating Expenses, other than Taxes which would have been incurred by Landlord if 95% of the rentable area of the Buildings had been occupied for the entirety of such calendar year and (ii) the actual Taxes. The annual amortization of costs shall be determined by dividing the original cost of such capital expenditure by the number of years useful life of the capital item acquired, which useful life shall be reasonably determined by Landlord, or by the number of years permitted by the Internal Revenue Service for amortization, whichever is shorter. Operating expenses shall be computed according to the cash or accrual basis of accounting, as Landlord may elect in accordance with standard and reasonable accounting principles employed by Landlord.

Review of Operating Expenses:

Tenant shall have a period of three months following receipt of the Statement, within which to inspect, at Landlord ’ s office during normal business hours, Landlord ’ s books and records concerning Operating Expenses for the preceding calendar year period in question. Such inspection may only be done by a generally recognized Accounting Firm. If Tenant shall not have availed itself of such inspection, Tenant shall be deemed to have accepted final and determinative the amounts shown on the Statement. If Tenant shall have availed itself of its right to inspect the books and records, and then disputes the accuracy of the information set forth in Landlord ’ s books and records with respect to the Statement, Tenant shall nevertheless continue to pay the amounts as required by the provisions of paragraphs 3.8 and 3.9; provided however, that no later than six months after receipt of the Statement, Tenant must (or its right to contest such charges shall be deemed waived) institute arbitration proceedings against Landlord in an arbitration proceeding governed by the rules of the American Arbitration Association to collect and recover any overpayments made by Tenant resulting from errors in the books and records of Landlord; and provided further, that Tenant shall, within 10 days of filing of the complaint, serve Landlord with a copy of the complaint filed in any such proceeding. Tenant shall be precluded from contesting Operating Expenses and Landlord ’ s computations of the amounts payable by Landlord or Tenant pursuant to these paragraphs 3.8 and 3.9, unless an arbitration complaint is filed and served within such six month period. Should the arbitrator find errors in excess of 10% of the Statement, then Landlord shall be responsible for all reasonable fees incurred by Tenant with respect to the arbitration proceeding. Should the arbitrator find errors of between 4% and 10% of the Statement, then each party shall be responsible for all fees incurred by it with respect to the arbitration proceeding.

If Tenant institutes such arbitration procedures, then the arbitrator shall have the power to, and shall inquire into and determine, not only whether or not Tenant was overcharged for any excesses of Operating Expenses over the Base Amount, but whether or not Tenant was undercharged for such excesses of Operating Expenses. At the conclusion of the arbitration, the arbitrator shall issue a

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ruling as to what the excesses of Operating Expenses should have been had Landlord strictly complied with the provisions of this Lease. If Landlord overcharged Tenant for excesses of Operating Expenses, the amount of the overcharge shall be returned to Tenant within 30 days following the conclusion of the arbitration. If the arbitrator determines that Tenant was undercharged for excesses of Operating Expenses, Tenant shall pay the amount of such undercharge to Landlord within 30 days following the issuance of the arbitration ruling.

4.0

CONSTRUCTION BY LANDLORD

Landlord shall, at its own cost and expense, construct certain improvements to the Premises ( “ Tenant ’ s Improvements ” ) in accordance with the final plans and specifications attached hereto as Exhibit E. Tenant shall approve or disapprove all plans and specifications within 10 days after receipt thereof. If Landlord and Tenant cannot reach agreement on said plans and specifications within 30 days after their initial delivery to Tenant, then Landlord may terminate this Lease, without being subject to any claims of or liability to Tenant.

5.0

USE OF PREMISES

Tenant shall use the Premises only in conformance with applicable laws for the specific purpose of sales office and general business use and for no other purpose. Tenant shall not do or permit to be done in or about the Property nor bring, keep or permit to be brought or kept therein, anything which is prohibited by any reasonable rules or regulations adopted by Landlord with respect to the Property or any standard form fire insurance policy or which will in any way increase the existing rate of, or affect, any fire or other insurance upon the Building or its contents, or which will cause a weight load or stress on the floor or any other portion of the Premises in excess of the weight load or stress which the floor or other portion of the Premises is designed to bear. Tenant, at Tenant ’ s sole cost, shall comply with all Laws, affecting the Premises, and the requirements of any Board of Fire Underwriters or other similar body now or hereafter instituted, and shall also comply with any order, directive or certificate of occupancy issued pursuant to any Laws, which affect the condition, use or occupancy of the Premises, including, but not limited to, any requirements of structural changes related to or affected by Tenant ’ s acts, occupancy or use of the Premises. The judgment of any court of competent jurisdiction or the admission of Tenant in any action against Tenant, whether or not Landlord is a party to such action, shall be conclusive as between Landlord and Tenant in establishing such violation.

Hazardous Materials:

Landlord and Tenant agree as follows with respect to the existence or use of Hazardous Materials (as defined in paragraph 5.2.3) on the Property:

Tenant shall not cause or permit any Hazardous Material to be brought upon, kept or used in or about the Premises or the Property by Tenant, its agents, employees, contractors or invitees, without the prior written consent of Landlord, which Landlord shall not unreasonably withhold as long as Tenant demonstrates to Landlord ’ s reasonable satisfaction that such Hazardous Material is necessary or useful to Tenant ’ s business and will be used, kept and stored in a manner that complies with all laws regulating to any such Hazardous Material so brought upon or used or kept in or about the Premises. If Tenant breaches the obligations stated in the preceding sentence, or if the presence of Hazardous Material on the Premises or the Property caused or permitted by Tenant results in contamination of the Premises of the Property, or if contamination of the Premises or the Property by Hazardous Material otherwise occurs for which Tenant is legally liable to Landlord for damage resulting therefrom, then Tenant shall indemnify, defend and hold

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Landlord harmless from any and all claims, judgments, damages, penalties, fines, costs, liabilities or losses (including, without limitation, diminution in value of the Premises or the Property, damages for the loss or restriction on use of rentable or usable space or of any amenity of the Premises of the Property, damages arising from any adverse impact on marketing of space in the Buildings, and sums paid in settlement of claims, attorneys ’ fees, consultant fees and expert fees) which arise during or after the term of this Lease as a result of such contamination. This indemnification of Landlord by Tenant includes, without limitation, costs incurred in connection with any investigation of site conditions or any cleanup, remedial, removal or restoration work required by any federal, state or local governmental agency or political subdivision because of Hazardous Material present in the soil or ground water on or under the Property. Without limiting the foregoing, if the presence of any Hazardous Material on the Premises or the Property caused or permitted by Tenant results in any contamination of the Premises or the Property, Tenant shall promptly take all actions at its sole expense as are necessary to return the Premises and the Property to the condition existing prior to the introduction of any such Hazardous Material to the Premises or the Property.

Landlord Costs:

Landlord and Tenant agree that the cost of complying with laws relating to Hazardous Material on the Premises and the Property for which Landlord is legally liable and which are paid or incurred by Landlord shall be an Operating Expense, and Tenant shall pay Tenant ’ s Pro Rata Share thereof unless the cost of such compliance, as between Landlord and Tenant, is the responsibility of Tenant pursuant to this paragraph. To the extent any such Operating Expense relating to Hazardous Material is subsequently recovered or reimbursed through insurance, or recovery from responsible third parties, or other action, Tenant shall be entitled to a proportionate reimbursement to the extent it has paid its share of such Operating Expenses to which such recovery or reimbursement relates.

Definition:

As used herein, the term “ Hazardous Material ” means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State of California or the United States Government. The term “ Hazardous Material ” includes, without limitation, any material or substance which is (i) defined as a “ hazardous waste, ” or “ extremely hazardous waste ” or “ restricted hazardous waste ” under Sections 15115, 25117 or 25122.7, or is listed pursuant to Section 25140, of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law), (ii) defined as a “ hazardous substance ” under Section 25316 of the California Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley-Tanner Hazardous Substance Account Act), (iii) defined as a “ hazardous material, ” hazardous substance, ” or “ hazardous waste ” under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory), (iv) defined as a “ hazardous substance ” under Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7 (Underground Storage of Hazardous Substances), (v) petroleum, (vi) asbestos, (vii) listed under Article 9 or defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20, (viii) designated as a “ hazardous substance ” pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. § 1317), (xi) defined as a “ hazardous waste ” pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (42 U.S.C. § 6903), or (x) defined as a “ hazardous substance ” pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq. (42-U.S.C. § 9601).

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Americans With Disabilities Act:

Notwithstanding anything to the contrary contained in the Lease, Tenant will be responsible for designing and constructing, at its own cost and expense, all future alterations, additions, substitutions and improvements which Tenant makes to the Premises so that they comply with any physical barrier removal requirements contained in Title III of the Americans With Disabilities Act (as amended from time to time, the “ ADA ” ) which may be applicable to the Premises. Tenant covenants and agrees that, if Tenant is required to bring all or any portion of the Premises (including, without limitation, any toilet rooms within the Premises) into compliance with the physical barrier removal requirements of Title III of the ADA, Tenant will make, at its sole cost, any alterations, additions, substitutions or improvements required to bring the Premises or such portion thereof into compliance.

6.0

ACCEPTANCE OF THE PREMISES

Tenant ’ s acceptance of possession of the Premises shall be deemed to be acceptance of the Premises in their condition existing as of the date of such acceptance of possession thereof, subject to all applicable zoning, municipal, county, state and federal laws, ordinances and regulations governing and relating to the use of Premises and subject to all matters of record. Landlord and Landlord ’ s agent make no warranty concerning title to or physical, geological or financial condition of the Premises, adverse governmental controls, climate, air, water, zoning, soil, drainage, sewer, access to public roads, hazardous wastes or other similar matters relating to Tenant ’ s use of the Premises. Tenant acknowledges that neither Landlord nor Landlord ’ s agent has made any representation or warranty as to the suitability of the Premises for the conduct of Tenant ’ s business. Any agreements, warranties or representations not expressly contained herein shall in no way bind Landlord, and Tenant expressly waives all claims for damages against Landlord and Landlord ’ s agent by reason of any statement, representation, warranty, promise or agreement, if any, not contained in this Lease. This Lease constitutes the entire understanding between the parties hereto concerning the subject matter hereof. The Premises are accepted by Tenant subject to any and all rights, uses, easements and encumbrances reserved to and by the City of Redwood City pursuant to the Master Lease, between Landlord and said City, or any successor lease thereto, which Master Lease is described in paragraph 33.16 hereof.

7.0

SIGNS, DISPLAYS AND WINDOW COVERINGS

Signs and Displays:

Tenant shall not place or allow to be placed or maintained, any sign, awning, canopy, display material, or advertising matter on any door, wall or window of the Premises, Building or Common Areas, including without limitation, any location within the Premises which is in plain view from the Common Areas, without the prior written consent of Landlord. Any sign or display installed by Tenant shall be installed and maintained by Tenant at its sole cost and risk, and in compliance with all law and legal requirements, and Tenant shall indemnify and hold Landlord harmless against all loss or liability of any nature whatsoever arising from an actual or claimed breach by Tenant of any of its obligations hereunder, including, without limitation, all attorney ’ s fees and costs incurred by Landlord in defending against same.

Window Coverings:

Tenant may not install window coverings except for No. 112 alabaster Levolor or Landlord approved comparable window coverings.

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8.0

BUILDING SERVICES

Standard Building Services:

Subject to the full performance by Tenant of all of Tenant ’ s obligations under this Lease, Landlord shall furnish the Premises with the standard building services and utilities as set forth in the attached Exhibit D.

Additional Services:

Tenant agrees to immediately pay on demand all reasonable charges imposed by the Landlord from time to time for all building services and utilities supplied to or used by Tenant in excess of or in addition to those standard building services and utilities which Landlord agrees to provide to Tenant in accordance with Exhibit D. Said excess and additional building services and utilities are referred to as “ Additional Services ” and Landlord may at any time cause a switch and/or metering system to be installed at Tenant ’ s expenses (which expense Tenant shall pay within 10 business days of receipt of an invoice from Landlord covering the installment cost of such switch or metering system) to measure the amount of building services, utilities and/or Additional Services consumed by Tenant or used in the Premises. In addition, in the event Tenant desires to contest any charges for Additional Services levied by Landlord under this paragraph 8.2, Tenant may, as its sole remedy, have Landlord install in the Premises a switch and/or metering system. Unless it is determined from the switch and/or metering system that the charges for Additional Services levied by Landlord were excessive in relation to Tenant ’ s actual use of the Additional Services, the cost of any such switch and/or metering system shall be paid for by Tenant, and Tenant agrees to pay Landlord, within five business days, for all such Additional Services consumed as shown by said meters, at the rates charged for such services by the local public or private utility furnishing the same, if applicable, plus any additional expense incurred by Landlord in keeping records or accounts of the Additional Services so consumed.

Landlord ’ s Right To Cease Providing Services:

Landlord reserves the right in its sole and absolute discretion with respect to item (i) and it its reasonable discretion with respect to item (ii) to reduce, interrupt or cease service of the heating, air conditioning, ventilation, elevator, plumbing, electrical systems, telephone systems and/or utilities services of the Premises, the Building or the Property, for any or all of the following reasons or causes:

any accident, emergency, governmental regulation, or Act of God, including, but not limited to, any cause set forth in paragraph 33.13 of this Lease; or

the making of any repairs, additions, alterations or improvements to the Premises or the Property until said repairs, alterations or improvements shall have been completed.

No such interruption, reduction or cessation of any such building services or utilities shall constitute an eviction or disturbance of Tenant ’ s use or possession of the Premises or Property, or an ejection of Tenant from the Premises, or a breach by Landlord of any of its obligations, or render Landlord liable for any damages, including but not limited to any damages, compensation or claims arising from any interruption or cessation of Tenant ’ s business, or entitle Tenant to be relieved from any of its obligations under the Lease, or result in any abatement of Rent. In the event of any such interruption, reduction or cessation, Landlord shall use

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reasonable diligence to restore such service where it is within Landlord ’ s reasonable control to do so.

9.0

REPAIRS AND MAINTENANCE

Landlord:

Landlord shall maintain and repair the HVAC, electrical and other utilities supplied by Landlord to the Premises and the structural integrity only of the exterior walls, the foundation, and the roof of that portion of the Building in which the Premises are located. If the damage thereto is caused by reason of an act or omission of Tenant or its agents, servants, invitees, licensees, and employees, such costs shall be not Operating Expenses and Tenant shall reimburse Landlord for said cost and expense upon demand. Landlord shall have no obligation to make repairs under this paragraph 9.1 until a reasonable time after receipt of written notice from Tenant of the need for such repairs. Landlord shall have no responsibilities for repair or maintenance of the Premises other than as set forth in this paragraph 9.1.

Common Areas:

The “ Common Areas ” are hereby defined to be the landscaped areas, parking areas and walkways of Parcel MA, described in Exhibit A to the Master Lease, along with the corridors and common facilities of the Buildings. Landlord shall maintain the Common Areas in good condition at all times. Landlord shall have the right to:

Establish and enforce reasonable rules and regulations concerning the maintenance, management, use, and operation of the Common Areas.

Close any of the Common Areas to whatever extent required in the opinion of Landlord ’ s counsel to prevent a dedication of any of the Common Areas or the accrual of any rights of any person or of the public to the Common Areas.

Close temporarily any of the Common Areas for maintenance purposes.

Designate other property outside the present boundaries of the Common Areas to become part of the Common Areas.

Select a person to maintain and operate any of the Common Areas if at any time Landlord determines in its sole discretion that such is in the best interests of the Premises. Landlord shall have the right to negotiate and enter into a contract with that person on such terms and conditions and for such period of time as Landlord deems reasonable and proper both as to service and as to cost.

Make changes to the Common Areas including, without limitation, changes in the location of driveways, entrances, exists, vehicular parking spaces, parking area, or the direction of the flow of traffic.

Tenant:

Except as expressly provided for in paragraph 9.1, Tenant shall, at its sole cost, keep and maintain the Premises, and every part of the interior thereof, including, without limitation, windows, plate glass, glazing, doors and all door hardware, walls, flooring, and any other interior improvements installed by Landlord for Tenant in accordance with Exhibit A, or installed by Tenant, (but excepting Common Areas), in good watertight and sanitary order, condition, appearance and repair, and in good working, operating and functioning condition. Tenant shall, at its sole cost, keep and

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maintain all fixtures and equipment and other similar items, installed by Landlord for Tenant in accordance with Exhibit A, or installed by Tenant, in good order, condition and repair, and in good working, operating and functioning condition. All maintenance and repair which is the obligation of Tenant shall be completed expeditiously in a good and workmanlike manner, with good quality materials and in compliance with applicable legal and insurance requirements. For all fixtures and equipment installed by Landlord for Tenant in accordance with Exhibit A, or installed by Tenant, the maintenance and repair of said fixtures and equipment shall be provided by Tenant at its expense. Tenant waives the provisions of Subsection 1 of Section 1932 (pertaining to quiet possession, condition and repair and the right of a tenant to terminate a lease) and Sections 1941 and 1942 (pertaining to condition and repair of the Premises and a tenant ’ s right to repair or vacate) of the Civil Code of Califo rn ia and all right to make repairs at the expense of Landlord or to terminate this Lease as provided in said Sections of said Civil code or otherwise.

Tenant ’ s Failure:

If Tenant fails to commence and diligently and continuously prosecute to completion repairs or perform any of its other obligations hereunder required of Tenant forthwith upon notice by Landlord, either immediately in an emergency situation or within 15 days, Landlord, in addition to all other remedies available hereunder or by law, and without waiving any alte rn ative remedies, including the right to declare Tenant in breach and default of this Lease, may make the same, and in that event, Tenant shall reimburse Landlord as additional Rent for all costs Landlord incurs in taking steps to perform such obligations or repairs on the next date upon which Rent becomes due after Landlord gives notices of such cost, regardless of which party completes the same.

Surrender:

Immediately upon the expiration, or sooner termination of the tenancy hereby created, Tenant shall surrender the Premises in good condition and repair and in substantially the same condition as the Premises were in upon delivery of possession thereto under this Lease, reasonable and normal wear and tear and other differences permitted by this Lease excepted, broom clean and shall surrender all keys for the Premises to Landlord at the place then fixed for the payment of Rent and shall inform Landlord of all combinations on locks, safes and vaults, if any, in the Premises. Tenant ’ s right to remove its alterations and additions to the Premises shall be as set forth in paragraph 10. If Tenant is in default under this Lease it shall have no right to remove its trade fixtures, alterations, additions or improvements to the Premises. Tenant shall indemnify Landlord against all loss or liability, including attorneys ’ fees and all other expenses, resulting from delay or failure by Tenant in so surrendering the Premises including without limitation any claims made by any succeeding tenant founded on such delay. Tenant ’ s obligation to observe or perform the covenants contained in this paragraph 9.5 shall survive the expiration or other termination of the term of this Lease.

10.0

ALTERATIONS

Tenant shall not make any alterations or additions to the Premises without the prior written consent of Landlord. Each and every permitted alteration and addition (i) must not, individually or in the aggregate, lessen the fair market value of the Premises, or materially affect the usefulness of the Premises, either for Tenant ’ s business or the business of potential successor tenants, (ii) shall be completed expeditiously in a good and workmanlike manner, with good quality materials, and in compliance with all applicable legal and insurance requirements, and (iii) shall become part of the Premises and subject to this Lease, provided at Landlord ’ s option, Tenant shall remove any such alteration or addition and restore the Premises to their condition prior to the occurrence of same, normal wear and tear excepted, upon the expiration or earlier termination of this Lease. Landlord shall exercise its option by written notice given to Tenant within 30 days after such expiration or termination and, if Tenant has not so removed and restored within 30 days of Landlord

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giving said written notice, Landlord may, but shall not be obligated to, remove and restore the same and Tenant shall pay Landlord its cost of same upon demand. Any alterations, improvements or additions made hereunder shall comply with the provisions of the Master Lease referred to in paragraph 34.16 hereof, between Landlord and the City of Redwood City.

11.0

MECHANICS ’ LIENS

Except as it relates to the initial construction of the Building and the Tenant ’ s Improvements as provided in ARTICLE FOUR, Tenant shall (1) pay for all labor and services performed for and materials used by or furnished to Tenant or any contractor employed by Tenant with respect to the Premises, whether or not the labor and materials relate to trade fixtures, at any time prior to or during the term of this Lease or any extension hereof, and hold Landlord, the City of Redwood City and the Premises harmless and free from any liens, claims, encumbrances or judgments created or suffered and (2) give notice to Landlord in writing 15 days prior to employing any laborer or contractor to perform services related to, or receiving materials for use upon, the Premises and shall give notice to Landlord by telephone call immediately upon the commencement of any work of improvement on the Premises, and shall permit Landlord and the City of Redwood City to post a notice of non – responsibility in accordance with the requirements of California Civil Code Section 3094 or any amendment thereof. In the event Tenant is required to post an improvement bond with a public agency in connection with the above, Tenant agrees to include Landlord as an additional obligee.

12.0

INDEMNITY AND INSURANCE

Indemnity:

Tenant agrees to indemnify and hold Landlord and the City of Redwood City harmless from any and all liability, loss, expense, cost, (including all costs and attorneys fees incurred in defending against claims of same) or obligation on account of, or arising out of or alleged to be on account of or arising out of, the existence, condition, use or occupancy of the Premises, or any part thereof, and including, without limitation, claims arising out of any breach or default in the performance of any obligation on Tenant ’ s part to be performed hereunder except for liabilities arising solely out of Landlord ’ s active negligence or greater culpability. This Lease is made on the express condition that Landlord shall not be liable for, or suffer loss or expense of any nature whatsoever by reason of, injury or claim of injury to person or property, from whatever cause, entirely or in any way connected with the existence, condition, use or occupancy of the Premises, or any part thereof, specifically including, without limitation, any liability for injury to the person or property of Tenant, its agents, officers, employees, licensees and invitees, or other third persons, and Tenant hereby assumes all risk of and liability for same unless caused solely by Landlord ’ s active negligence or greater culpability. This indemnity and hold harmless provision shall survive the expiration or other termination of the term of this Lease.

Liability Insurance:

Tenant agrees to procure and maintain at its sole expense during the term of this Lease, and any extensions thereof, comprehensive public liability insurance covering liabilities related to the condition, use or occupancy of the Premises, with limits of not less than $1,000,000.00 for bodily injury to or death as a result of any one occurrence, and $500,000.00 for damages to property or such greater limits as Landlord may from time to time reasonably require.

Fire and Extended Coverage Insurance:

Landlord agrees to procure and maintain during the term of this Lease, and any extensions thereof fire and extended coverage insurance, including “ All Risk ” coverage on the Buildings in the full

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amount of the replacement value of the Buildings, with stipulated amount endorsement, which value shall be re - determined by Landlord from time to time. Tenant shall have no interest in or any right to the proceeds of any insurance procured by Landlord on the Buildings or Premises.

Personal Property Insurance and Waiver:

Tenant, at Tenant ’ s sole expense, shall maintain in full force and effect during the term of this Lease, and any extensions thereof, on all of its fixtures, equipment, leasehold improvements and personal property on the Premises, a policy or policies of fire and extended coverage insurance, including “ All Risk ” coverage, to the extent of at least 80% of their insurable value. Tenant hereby waives all claims against Landlord for damage to Tenant ’ s fixtures, equipment leasehold improvements and personal property in, upon or about the Premises or not.

Joint Waiver of Subrogation:

Landlord hereby releases Tenant, and Tenant hereby releases Landlord, and each other ’ s respective officers, agents, employees and servants, from any and all claims of damages, loss, expense of injury to the Premises or to the furnishings, fixtures and equipment or inventory or other property of either Landlord or Tenant in, about or upon the Premises, as the case may be, which is caused by or results from perils, events or happenings which are the subject of insurance carried by the respective parties and in force at the time of any such loss; provided, however, that such waiver shall be effective only to the extent of insurance proceeds actually received and to the extent such insurance is not prejudiced thereby.

General:

All policies which Tenant is required to procure and maintain as provided herein shall be with companies approved by Landlord which approval Landlord agrees not to unreasonably withhold. Certificates of insurance evidencing the policies provided for herein shall be delivered to Landlord and the Port Manager of the City of Redwood City, and shall certify that the policy (1) names Landlord, the City of Redwood City, its council, the Port of Redwood City, its Board of Port Commissioners and the respective officers, agents and employees of said City and Port as additional insureds, and (2) shall not be canceled or altered without 20 days prior written notice to Landlord and the City of Redwood City. The certificate evidencing the comprehensive liability policy shall also certify that (1) the coverage provided insures performance of the indemnity set forth in paragraph 12.1 “ Indemnity ” above and the waiver of claims and of subrogation set forth in 12.4 and 12.5 above and (2) the coverage is primary and any coverage by Landlord or the City of Redwood City is in excess thereto. Tenant shall furnish to Landlord a certified copy of each such insurance policy prior to the Commencement Date.

13.0

NOTICES

Any notice, demand, request, consent, or other communication required or permitted to be given hereunder shall be in writing and may be served personally or by first class, certified mail, postage prepaid, retu rn receipt requested, addressed to Landlord and Tenant respectively at the addresses set forth in this Lease or at such other address as either may designate to the other by notice given hereunder provided that a copy of any such notice, demand, request, consent or other communication given to Tenant after the Commencement Date shall be deemed served if served at or addressed to the Premises.

14.0

ESTOPPEL CERTIFICATES

Tenant, within five days of a request by Landlord to do so shall (1) execute and deliver to Landlord documents, including estoppel certificates, (a) certifying that this Lease is unmodified

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and in full force and effect or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect and the date to which the Rent and other charges are paid in advance, if any, and (b) acknowledging that there are not, to Tenant ’ s knowledge, any uncured defaults on the part of Landlord hereunder, and (c) evidencing the status of the Lease, as may be required either by a lender making a loan to Landlord or a purchaser of the Premises from Landlord and (2) deliver to Landlord current financial statements of Tenant with an opinion of a certified public accountant, if available, including a balance sheet and profit and loss statement for the most recent prior year all prepared in accordance with generally accepted accounting principles consistently applied. Tenant ’ s failure to perform timely each of its obligations under this ARTICLE 14 shall constitute a material breach of this Lease, entitling Landlord to exercise all of its remedies for same, and without limiting or waiving Landlord ’ s right to so exercise same, also shall be conclusive upon Tenant as to Landlord and any third party at whose request Landlord has requested the aforesaid documents from Tenant, (i) that this Lease is in full force and effect, without modification except as may be represented by Landlord, (ii) that there are no uncured defaults in Landlord ’ s performance (iii) that no Rent has been paid in advance except as expressly set forth in this Lease.

15.0

ENTRY BY LANDLORD

Tenant shall permit Landlord and Landlord ’ s agents to enter the Premises and all portions thereof during normal business hours of Landlord and at all other reasonable times for the purpose of inspecting or maintaining the same, or for the purpose of making repairs, alterations, or additions to any portion of same, including the erection and maintenance of such scaffolding, canopies, fences, and props as may be required, or for the purpose of posting notices of non-responsibility for alterations, additions, or repairs, without any rebate of Rent and without any liability to Tenant for any loss of occupation or quiet enjoyment of the Premises thereby occasioned and shall permit Landlord to place upon the Premises any usual or ordinary “ to let ” or “ to lease ” signs. Redwood City ’ s agents shall have the right at all reasonable times to enter upon and inspect the Premises for cleanliness and safety.

16.0

ABANDONMENT

Tenant shall not vacate or abandon the Premises or substantially cease or suspend its full business operation at any time during the term of this Lease; and if Tenant shall abandon, vacate or surrender the Premises, or be dispossessed by process of law or otherwise, any personal property belonging to Tenant and left on the Premises shall be deemed to be abandoned at the option of Landlord, and Landlord may dispose of same at Tenant ’ s expense as it deems appropriate and Tenant waives any claim for damages or otherwise which it, or any other party claiming an interest in such property, might otherwise have against Landlord with respect to such disposition and Tenant shall indemnify and hold Landlord harmless from any loss or expense it might incur as a result of such claim, including all attorney fees and related costs of defending against same.

17.0

WASTE AND QUIET ENJOYMENT

Tenant shall not commit, or suffer to be committed, any waste upon the Premises, or any nuisance, or other acts, omissions or things which may disturb the quiet enjoyment of any other tenant or occupant in the Building provided that nothing herein shall be deemed to require Landlord to enforce this provision on behalf of any such other tenant or any other person.

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18.0

TENANT TO COMPLY WITH ALL APPLICABLE LAWS

Tenant shall, at Tenant ’ s sole cost and expense, comply with all of the statutes, ordinances, rules, regulations, and requirements of all city, county, municipal, state, federal and other applicable governmental or other public authorities, now in force, or which may hereafter be in force, pertaining to the Premises or the use of the Premises, including the installation of additional facilities as required for the conduct and continuance of Tenant ’ s business. The judgment of any court of competent jurisdiction or the admission by Tenant in any action or proceeding against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any such statute, ordinance rule, regulation, or requirement shall be conclusive of the fact of such violation by Tenant.

19.0

NON – ASSIGNMENT

No Assignment or Subletting:

Tenant ’ s interest, or any portion thereof, in this Lease is not assignable, by operation of law or otherwise, nor shall Tenant have the right to sublet the Premises, or any portion thereof, without the prior written consent of Landlord which consent shall not be unreasonably withheld and the prior written consent of the City of Redwood City, provided, should Landlord or the City of Redwood City withhold their consent for any of the following reasons, which list is not exclusive, such withholding shall be deemed to be reasonable: (i) a conflict with other uses or users in the Building of which the Premises forms a part; (ii) the incompatibility of the proposed use with other uses, proposed or existent within such Building; (iii) the financial inadequacy or lack of established business history of the proposed sublessee or assignee; (iv) a proposed use or user which would cause a diminution in the reputation of said Building or the other businesses located therein; (v) the failure of Tenant and any proposed assignee or subtenant to agree in any assignment or sublease of all or any portion of the Premises ( “ Transferred Space ” ) that the assignee or subtenant pay directly to Landlord as additional Rent under this Lease any rental reserved and all other consideration paid by or on behalf of the assignee or subtenant for such assignment or sublease, no matter how characterized and without regard to whether such appears in the assignment or sublease, which exceed or are in addition to the rental reserve in this Lease applicable to such Transferred Space. A consent to one assignment, subletting, occupation or use by one party shall not be deemed to be a consent to any subsequent assignment, subletting, occupation or use by another party. Any assignment or subletting without such consent shall be void, and shall, at the option of Landlord, terminate this Lease. Landlord ’ s or the City of Redwood City ’ s waiver or consent to any assignment or subletting hereunder shall not relieve Tenant from any obligation under this Lease unless the consent shall so provide. Tenant shall pay upon demand all legal fees of Landlord or the City of Redwood City incurred with respect to any proposed assignment or subletting, whether or not the same is approved by Landlord or the City of Redwood City or becomes consummated.

Transfer of Interest:

If Tenant is a corporation (other than a corporation which has 50 or more shareholders and tangible assets of $10,000,000 or more in fair market value), or is an unincorporated association or partnership (other than a partnership which has 50 or more partners and tangible assets of $10,000,000 or more in fair market value), the transfer, assignment or hypothecation of any stock or interest in such corporation, association or partnership in the aggregate in excess of 50% shall be deemed an assignment within the meaning and provisions of this ARTICLE 19.

No Hypothecation:

Tenant shall not pledge, hypothecate or otherwise encumber or suffer encumbrance of all or any part of its interest in this Lease.

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20.0

BREACH BY TENANT

Remedies Upon Breach:

Upon the breach of this Lease by Tenant, Tenant shall be in default and Landlord shall have the following remedies, in addition to all other rights and remedies provided by law or equity, to which Landlord may resort cumulatively, or in the alternative.

Reentry Without Termination:

Landlord may at Landlord ’ s election, reenter the Premises and, without terminating this Lease, at any time, and from time to time, relet for a term equal to or longer or shorter than the term of this Lease, the Premises or any part or parts of them, for the account and in the name of Tenant. Landlord may, at Landlord ’ s election, eject Tenant or any of Tenant ’ s subtenants, assignees, or other person or persons claiming any right under or through this Lease or otherwise. Tenant shall nevertheless pay to Landlord on the due dates specified in this Lease all sums required by Tenant under this Lease, plus Landlord ’ s expenses, less the proceeds of any sublease or reletting. The expenses allowed Landlord shall include, without limitation: costs paid to retake possession (including attorneys ’ fees), costs to place the Premises in good condition and to alter them for reletting, costs to secure new tenants (including broker ’ s commissions), and costs to fulfill all of Tenant ’ s covenants and conditions to the end of the term. No act or omission by or on behalf of Landlord under this provision shall constitute a termination of this Lease unless Landlord gives Tenant written notice of termination which landlord may do at any time after a default or breach by Tenant.

Recovery of Rent:

Landlord shall be entitled, at Landlord ’ s election, to keep this Lease in effect and to enforce all of its rights and remedies under the Lease, including the right to recover Rent and other sums as they become due plus interest at the rate of 10% per year or the highest percent then permitted by law, whichever is greater, from the due date of each installment of Rent or other sum until paid.

Termination:

Landlord may, at any time after any breach by Tenant, at Landlord ’ s election, terminate this Lease by giving Tenant written notice of termination. On the giving of the notice, all of Tenant ’ s rights in the Premises shall terminate. Immediately upon such notice of termination being given, Tenant shall surrender and vacate the Premises in a broom-clean condition, and Landlord may reenter and take possession of the Premises and all remaining improvements and eject Tenant or any of Tenant ’ s subtenants, assignees, or other person or persons claiming any right under or through Tenant or eject some and not others or eject none. This Lease may also be terminated by a judgment specifically providing for termination. Any termination under this paragraph shall not relieve Tenant from the payment of any sum then due to Landlord or from any claim for damages or Rent previously accrued or then or thereafter accruing against Tenant. In no event shall any one or more of the following actions by Landlord constitute a termination of the Lease:

Maintenance or preservation of the Premises;

Efforts to relet the Premises;

Appointment of a receiver in order to protect Landlord ’ s interest hereunder;

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Consent to any subletting of the Premises or assignment of this Lease by Tenant, whether pursuant to provisions hereof concerning subletting and assignment, or otherwise;

Any other action by Landlord or Landlord ’ s agents intended to mitigate the adverse effects of any breach of this Lease by Tenant.

Damages. In the event of termination pursuant to paragraph 20.4 above, Landlord shall be entitled to damages in the following sums:

The worth at the time of award of the unpaid Rent which has been earned at the time of termination; plus

The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided; plus

The worth at the time of award of the amount by which the unpaid Rent for the balance of the term after the time of awards exceeds the amount of such rental that Tenant proves could be reasonably avoided; and

Any other amount necessary to compensate Landlord for all detriment proximately caused by Tenant ’ s failure to perform Tenant ’ s obligations under this Lease, or which in the ordinary course of things would be likely to result therefrom including without limitation, the following: (i) expenses for cleaning, repairing, or restoring the Premises; (ii) expenses for altering, remodeling or otherwise improving the Premises for the purpose of reletting, including installation of leasehold improvements (whether such installation be funded by a reduction of Rent, direct payment or allowance to Tenant or otherwise); (iii) broker ’ s fees, advertising costs and other expenses of reletting the Premises; (iv) costs of carrying the Premises such as taxes and insurance premiums thereon, mortgage payments, utilities and security precautions; (v) expenses in retaking possession of the Premises; (vi) attorneys ’ fees and court costs; and (vii) any brokers ’ commissions paid or due for the portion of the term for which Rent and all other monies due from Tenant are not paid.

The “ worth at the time of award ” of the amounts referred to in subparagraphs (a) and (b) of this paragraph, is computed by allowing interest at the rate of 10% per annum or the higher rate then permitted by law, whichever is greater. The “ worth at the time of award ” of the amount referred to in subparagraph (c) of this paragraph is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus 1%.

Receivership:

In addition to the above enumerated remedies and at Landlord ’ s option and in order to enable Landlord to effectuate and use any of the above-provided remedies, Landlord may upon any default, breach, failure or neglect of Tenant, and without notice to Tenant, petition for, and be entitled as a matter of right to, the appointment of a receiver and a court may appoint such receiver and vest in such receiver such powers and authorities as may be necessary or proper to fully protect all the rights herein granted or reserved to Landlord and to fully enable Landlord to exercise any of

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the remedies provided for Landlord herein and by law. Any such receiver may take possession of any personal property belonging to Tenant and used in the conduct of business then being carried on by Tenant at the Premises and may use the same in conducting such business upon the Premises without compensation to Tenant.

Cumulative:

All remedies hereinbefore and hereafter conferred upon Landlord shall be deemed cumulative and no one exclusive of the other, or of any other remedy conferred by law or equity.

Default:

Tenant ’ s breach and default of this Lease shall include, without limitation, any of the following events:

Tenant shall fail to timely pay in full when due any installment of Rent or other payment; or

Tenant shall have attempted to assign or sublet or encumber any part of its interest in this Lease without the prior written consent of Landlord; or

Tenant shall have committed or suffered the commission of waste, nuisance or other acts, omissions or things which may disturb the quiet enjoyment of any other tenant or occupant in the Building; or

Tenant shall have assigned its assets for the benefit of its creditors; or

The sequestration, attachment, or execution on any substantial part of the property of Tenant or on any property essential to the conduct of Tenant ’ s business shall have failed to obtain a return or release of such property within 30 days thereafter, or prior to sale pursuant to such sequestration, attachment or levy, whichever is earlier; or

Tenant shall have vacated or abandoned the Premises or substantially eased or suspended its business at the Premises; or

Tenant shall have failed to perform timely any other term, covenant or condition contained in this Lease and such failure shall have continued for 30 days after service of written notice to Tenant; or

A court having jurisdiction shall have made or entered any decree or order; (i) adjudging Tenant to be bankrupt or insolvent; (ii) approving as properly filed a petition seeking reorganization of Tenant or an arrangement under the bankruptcy laws or any other applicable debtor ’ s relief law or statute of the United States or any State thereof; (iii) appointing a receiver, trustee or assignee of Tenant in bankruptcy or insolvency or for its property; or (iv) directing the winding up or liquidation of Tenant; and such decree or order shall have continued for a period of 30 days; or (v) Tenant shall have voluntarily submitted to or filed a petition seeking any such decree or order.

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21.0

CONDEMNATION

Definition of Terms:

For the purpose of this Lease the term

“ Taking ” means the taking of or damage to the Premises or any part thereof related to the exercise of the power of eminent domain and includes a voluntary conveyance, in lieu of court proceedings, to any agency, authority, public utility, person or corporate entity empowered to condemn property.

“ Total Taking ” means the taking of the entire Premises or so much of the premises as to prevent or substantially impair the use thereof by Tenant for the uses herein specified; provided, however, in no event shall the taking of less than 20% of the Premises be considered a Total Taking.

“ Partial Taking ” means the taking of only a portion of the Premises which does not constitute a Total Taking.

“ Date of Taking ” means the date upon which title to the Premises, or a portion thereof, passes to and vests in the condemnor or the effective date of any order for possession is issued prior to the date title vests in the condemnor.

“ Award ” means the amount of any award made, consideration paid, or damages ordered as a result of a Taking.

Rights:

The parties agree that, in the event of any taking, all rights between them or in and to an Award shall be as set forth herein and Tenant shall have no right to any Award except as set forth herein. Each party waives any statutory right in conflict with the provisions hereof, including, without limitation, Code of Civil Procedures Section 1265.130 pertaining to partial taking.

Total Taking:

In the event of a Total Taking during the term hereof (1) the rights of Tenant under the Lease and the leasehold estate of Tenant in and to the Premises shall cease and terminate as of the Date of Taking, (2) Landlord shall refund to Tenant any unearned Rent, (3) Tenant shall pay to Landlord any Rent or charges due from Tenant under this Lease each prorated as of the Date of Taking, (4) Tenant shall receive from the Award those portions of the Award attributable to trade fixtures of Tenant and for moving expenses of Tenant, and (5) the remainder of the Award shall be paid to and be the property of Landlord.

Partial Taking:

In the event of a Partial Taking during the term hereof, (1) the rights of Tenant under this Lease and the leasehold estate of Tenant in and to the portion of the Premises taking shall cease and terminate as of the Date of Taking, (2) from and after the Date of Taking the Monthly Installment shall be the product obtained by multiplying the Monthly Installment by the quotient obtained by dividing the fair market value of the Premises after the Taking by the fair market value of the Premises prior to the Taking, (3) Tenant shall receive from the Award those portions of the Award attributable to trade fixtures of Tenant, and (4) the remainder of the Award shall be paid to Landlord.

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Dispute; Arbitration:

Landlord, in its sole discretion, shall determine any revised Monthly Installment as provided in paragraph 21.4 and its decision shall be conclusively binding on Tenant provided that Tenant may within 10 days of Landlord giving notice of the revised Monthly Installment notify Landlord of its request for arbitration, but, as a condition of its right to arbitrate, Tenant shall pay the revised Monthly Installment determined by Landlord until the effective date of any arbitration award to the contrary. If the arbitration results in a reduction of Rent, Tenant shall be permitted to deduct the amount of any excess paid in equal amounts against the Monthly Installments next falling due after notice of the decision of the arbitration is given. If the arbitration results in an increase in Rent, Tenant shall begin paying the increased rate immediately and shall pay upon demand the difference between Rent paid at the rate determined by Landlord and Rent which would have been paid at such increased rate.

22.0

DESTRUCTION

Landlord Option:

In the event the Premises are destroyed in whole or in part from any cause, Landlord may, at its option: (i) rebuild or restore the Premises to substantially their prior condition, or (ii) terminate this Lease.

Notice; Rent Reduction:

Landlord shall give Tenant notice in writing within 30 days from such destruction of the Premises of its election to either rebuild or restore them, or to terminate this Lease. Tenant hereby expressly waives the provisions of Section 1932, Subdivision 2, and Section 1933, Subdivision 4, (both pertaining to termination or destruction) of the California Civil Code. In the event Landlord elects to rebuild or restore the Premises, this Lease shall remain in full force and effect except that the Monthly Installment shall be reduced in proportion to the degree to which Tenant ’ s reasonable use of the Premises is impaired during the period of rebuilding or restoration, provided that if such damage or destruction is caused by Tenant ’ s act or omission or that of Tenant ’ s employee, agent, invitee, licensee, permittee or guest, there shall be no abatement or reduction of Rent and the cost of rebuilding or restoration, to the extent not covered by insurance proceeds and including time spent by Landlord and its employees, shall be paid by Tenant upon demand of Landlord.

Dispute:

Landlord, in its sole discretion, shall determine the amount, if any, of Rent reduction provided for in paragraph 22.2 and notify Tenant of same within 30 days of the date of such damage or destruction. Landlord ’ s determination shall be conclusively binding on Tenant provided that if Tenant wishes to dispute the determination of Landlord, Tenant shall nonetheless timely pay the Rent determined by Landlord and Tenant shall, within 10 days of Landlord ’ s notice of determination, notify Landlord of Tenant ’ s request to arbitrate said determination. As a condition of such right to arbitrate, Tenant must timely pay the Rent determined by Landlord, until the effective date of any arbitration award to the contrary. If the arbitration results in a further reduction of Rent, Tenant shall be permitted to deduct the amount of any excess paid in equal amounts against the Monthly Installments next falling due after notice of the decision of the arbitration is given. If the arbitration results in an increase in Rent, Tenant shall begin to pay the increased rate immediately and shall pay upon demand the difference between Rent paid at the rate determined by Landlord and Rent which would have been paid at such increased rate.

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23.0

SUBORDINATION

Rights:

The rights of Tenant under this Lease are and shall be subordinate to the Master Lease between Landlord and the City of Redwood City, any mortgage (including a consolidated mortgage), deed of trust or other hypothecation encumbering the Premises or any part thereof, whether such Master Lease, mortgage, deed of trust or other hypothecation has heretofore been, or may hereafter be, placed upon the Premises by Landlord.

Documents:

Tenant shall, upon Landlord ’ s request, execute any instrument (including an amendment to this Lease) or instruments of subordination necessary to subordinate this Lease to the Master Lease between Landlord and the City of Redwood City, or to any mortgage of deed of trust to be placed on the Premises, or any part thereof, by Landlord in accordance with paragraph 23.1 above. Tenant agrees to attorn to any mortgagee or beneficiary of a deed of trust subsequently encumbering the Premises and to any party acquiring title to the Premises, by judicial foreclosure or a trustee ’ s sale, as the successor to Landlord hereunder.

24.0

MORTGAGEE PROTECTION

In the event of any default on the part of Landlord, Tenant will give notice by certified mail to any beneficiary of a deed of trust or mortgagee or a mortgage encumbering the Premises whose address shall have been furnished it, and shall offer such beneficiary or mortgagee a reasonable opportunity to cure the default, including time to obtain possession of the Premises by power of sale or judicial foreclosure, if such should prove necessary to effect a cure.

25.0

SURRENDER OF LEASE NOT MERGER

The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger and shall, at the option of Landlord terminate all or any existing subleases or subtenants, or may, at the option of Landlord, operate as an assignment to Landlord or any or all such subleases or subtenants.

26.0

WAIVER

The waiver by Landlord of any breach of any term, covenant or condition herein contained shall not be deemed to be a waiver of such term, covenant or condition or subsequent or continuing breach of the same or any other term, covenant or condition herein contained. Landlord ’ s acceptance of Rent or other money due hereunder shall not be deemed a waiver of any breach of default, regardless of Landlord ’ s knowledge of same, and acceptance of such money shall not be a waiver of breach or default as to the specific amount of Rent or other money if acceptance occurs after expiration of a notice to pay or quit served as a result of such breach or default.

27.0

ATTORNEYS ’ FEES

In the event either Landlord or Tenant shall bring any action or legal proceeding for damages or possession or both for an alleged breach of any provision of this Lease, to recover Rent, to terminate the tenancy of Tenant at the Premises, or to enforce, protect or establish any term or covenant of this Lease or right or remedy of Landlord or Tenant, the prevailing party in such action or proceeding shall be entitled to recover as part of such action or proceeding, reasonable attorneys ’

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fees and court costs as may be fixed by the court or jury but this provision shall not apply to any cross-complaint filed by anyone other than Landlord in such action.

28.0

HOLDING OVER

This Lease shall terminate without further notice at the expiration of the term. Any holding over by Tenant after expiration or sooner termination of this Lease shall be construed to be a tenancy from month to month, at 150% of the Monthly Installment of rental due for the last month of the term, and shall otherwise be on the terms and conditions herein specified insofar as applicable, including, without limitation, those providing for additional Rent.

29.0

SUCCESSORS

The covenants and agreements contained in this Lease shall be binding on the parties hereto and on their respective heirs, personal representatives, successors and assigns (to the extent the Lease is assignable).

30.0

CORPORATE AUTHORITY

If Tenant is a corporation, each individual executing this Lease on behalf of said corporation represents and warrants that he or she is duly authorized to execute and deliver this Lease on behalf of said corporation, in accordance with a duly adopted resolution of the Board of Directors of said corporation and in accordance with the Bylaws of said corporation, and that this Lease is binding upon said corporation in accordance with its terms, and such person shall within 10 days after execution of this Lease deliver to Landlord an original of said resolution of the Board of Directors.

31.0

ARBITRATION

Wherever it is provided in this Lease that a party may request arbitration and provided a party timely gives notice of its request for same, arbitration shall occur as provided in this ARTICLE 31. The party requesting arbitration shall appoint an arbitrator and give the other party written notice of the name and address of such arbitrator in the request for arbitration. The other party shall serve written notice of the name and address of its arbitrator within five days after the written request for arbitration has been served. The two arbitrators so appointed shall, within 10 days after their appointment appoint a third arbitrator. The decision in writing of any two of the three arbitrators so appointed shall be binding and conclusive on both parties to this Lease. The arbitrators may apportion on the costs and expenses of the arbitration proceeding, including the arbitrator ’ s fees but excluding attorneys ’ fees, between the parties to this Lease in such a manner as any two of the three arbitrators deem just.

32.0

LANDLORD LIABILITY

Tenant agrees that if Landlord shall fail to perform any covenant or obligation on its part to be performed, and as a consequence thereof, or if on any other claim by Tenant concerning the Premises or this Lease, Tenant shall recover a money judgment against Landlord, then such judgment shall be satisfied only of Landlord ’ s estate in the Premises, and Landlord shall have no personal or further liability whatsoever with respect to any such default or judgment.

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33.0

GENERAL PROVISIONS

Headings:

The paragraph headings used in this Lease are for the purpose of convenience only; they shall not be construed to limit or to extend the meaning of any part of this Lease. This is a negotiated Lease. Should any provision of this Lease be found to create an ambiguity, Tenant waives any right it may have to construe and the ambiguity against Landlord on the basis that Landlord provided the Lease from or the particular provision.

Landlord:

The term Landlord as used in this Lease, so far as the covenants or obligations on the part of Landlord are concerned, shall be limited to mean and include only the owner of an interest in the Premises at the time in question, and in the event of any transfer or transfers of such interest, the Landlord herein named (and in case of any subsequent transfers or conveyances, the then grantor) shall after the date of such transfer or conveyance be automatically freed and relieved of all liability with respect to performance of any covenants or obligations on the part of the Landlord contained in this Lease, thereafter to be performed, provided, that any funds in the hands of Landlord or the then grantor at the time of such transfer, in which Tenant has an interest, shall be turned over to the grantee. It being intended hereby that the covenants and obligations contained in this Lease on the part of Landlord shall, subject as aforesaid, be binding upon each Landlord, its heirs, personal representatives, successors and assigns only during its respective period of ownership of such interest in the Premises.

Executed Copies:

Any fully executed copy of this Lease shall be deemed an original for all purposes.

Time:

Time is of the essence as to each and every provision of this Lease.

Brokerage:

Landlord and Tenant represent and warrant each to the other that each has not dealt with any real estate broker, agent, finder, or other person, with respect to this Lease in any manner, except Tenant has dealt with Cornish & Carey Commercial, a real estate broker. Each party shall hold harmless the other party from all damages resulting from any claims that may be asserted against the other party by any broker, agent, finder, or other person, with whom the other party has or purportedly has dealt, except Landlord shall pay the commissions that are payable to the above-named broker with respect to this Lease in accordance with the provisions of a separate written commission contract between Landlord and said broker.

Entire Agreement:

This Lease contains all agreements of the parties with respect to any matter mentioned herein. No prior agreement or understanding either expressed or implied pertaining to any such matter shall be effective. This Lease may be modified in writing only, signed by the parties in interest at the time of the modification.

Auctions:

Tenant shall not conduct, or permit to be conducted, any sale by auction on the Premises.

Relationship:

Nothing contained herein shall be deemed or construed by the parties hereto nor by any third party as creating the relationship of principal and agent or of partnership or of joint venture between the

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parties hereto, it being understood and agreed that neither any provision contained herein, nor any acts of the parties hereto, shall be deemed to create any relationship between the parties hereto other than the relationship of Landlord and Tenant.

Cumulative Remedies:

No remedy or election provided to Landlord hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies in law or equity.

Covenants and Conditions:

Each provision of this Lease performable by Tenant shall be deemed both a covenant and condition; any failure of timely performance shall be a material breach hereof.

Exhibits:

All exhibits attached hereto are incorporated herein as though set forth in full.

Rents:

All amounts due hereunder from Tenant to Landlord shall be deemed Rent and shall be due and payable as Rent unless Landlord elects otherwise.

Force Majeure:

Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts of God, inability to obtain labor or materials or reasonable substitutes therefore, governmental restrictions, governmental regulations, governmental controls, judicial orders, enemy or hostile governmental action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of the party obligated to perform, shall excuse the performance by such party for a period equal to any such prevention, delay or stoppage, except the obligations imposed with regard to rental and other charges to be paid by Tenant pursuant to this Lease.

Port Approval:

Landlord is the holder of a leasehold interest in the land on which the Premises are located in accordance with a written Lease Agreement (the “ Master Lease ” ). This Lease is conditioned and contingent upon its approval by the Board of Port Commissioners of the City of Redwood City, which approval shall be evidenced by the execution of the space set forth below.

Master Lease:

Notwithstanding any other provision of this Lease, it is agreed between Landlord and Tenant that the Lease entered into hereunder is a sublease and that a Master Lease has been executed between the City of Redwood City, a municipal corporation of the State of California, acting by and through its Board of Port Commissioners, and Landlord (referred to throughout this Lease as the “ Master Lease ” ), which includes the Premises. Tenant acknowledges that it has received a copy of the Master Lease and has read the same. The terms, covenants and conditions of the Master Lease, as amended from time - to - time, are hereby incorporated herein in the same manner and with the same effect as though fully set forth at length. Tenant agrees that it will comply with each and every term, covenant and condition of the Master Lease insofar as applicable to the Premises, and in the event of any conflict between the provisions of the Master Lease and this Lease the provisions of the Master Lease shall control. Should an amendment to the Master Lease be required, Landlord will seek Tenant ’ s consent. Said consent shall not be unreasonably withheld.

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34.0

CONSTRUCTION OF INITIAL TENANT IMPROVEMENTS BY TENANT

Notwithstanding the provisions of paragraph 4.1 of this Lease, Tenant may elect to construct, at its own cost and expense, tenant improvements to the Premises. Tenant shall make such election by giving written notice thereof to Landlord pursuant to paragraph 14.1 of the Lease. Once such notice has been given the provisions of paragraph 4.1 and any other provisions in this Lease concerning Landlord ’ s construction of tenant improvements for Tenant shall be of no further force and effect and Landlord shall have no obligation to construct any tenant or other improvements to the Premises. If Tenant provides such written notice to Landlord, Tenant shall furnish Landlord with final plans and specifications within 20 days of the notice. Landlord shall approve or disapprove the plans and specifications within 10 days after receipt thereof. Tenant agrees to construct said improvements in accordance with the plans and specification as approved by Landlord. If Landlord and Tenant cannot reach agreement on said plans and specification within 30 days after their initial delivery to Landlord, then Landlord may terminate the Lease without being subject to any claims of, or liability to, Tenant.

Tenant shall construct said tenant improvements at its sole cost and expense using union labor for said work. Tenant shall indemnify and hold Landlord, the City of Redwood City and the Premises harmless from and against any and all liens, claims, encumbrances, liabilities, obligations and judgments (including reasonable attorneys ’ fees and costs).

Tenant shall furnish Landlord with written notice 15 days prior to employing any laborer or contractor to perform services related to, or receiving any materials or supplies at the Premises to be used in connection with, the construction of the tenant improvements. Tenant shall permit Landlord and the City of Redwood City to post a notice of non-responsibility in accordance with the requirements of California Civil Code Section 3094 or any amendment thereof.

i. Portside is located at the Port of Redwood City. The Port is a marine freight terminal and provides berths for dry bulk, liquid bulk, and project cargoes, along with certain recreational opportunities and public access to San Francisco Bay. As a result, tenants at Portside should be aware that the industrial activities (including construction activities from time to time) conducted at the Port will and do create noise, odor and dust. By executing this rental agreement, Tenant acknowledges that he/she has been aware of the Port activities and consequences and voluntarily executes this rental agreement.

/s/ PAC (Tenant ’ s Initials)

35.0

SPECIAL PROVISIONS

Special provisions of this Lease, Exhibits A through E are attached hereto and made a part hereof.



Delaware		94-3184303
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

46 0 Seaport Ct ., Suite 102		94063
Redwood City, California
(Address of principal executive offices)		(Zip code)


Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer (do not check if a smaller reporting company) ☐
Smaller reporting company ☑		Emerging growth company ☐


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



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



PART I. FINANCIAL INFORMATION

Item 1 . Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2018 (unaudited) a nd December 31, 2017	1
Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2018 and 2017 (unaudited)	2
Condensed Consolidated Statements of Cash Flows for the six months ended June 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	1 5
Item 3 . Quantitative and Qualitative Disclosures About Market Risk	20
Item 4 . Controls and Procedures	20

PART II. OTHER INFORMATION

Item 1 . Legal Proceedings	2 1
Item 1A . Risk Factors	2 1
Item 2 . Unregistered Sales of Equity Securities and Use of Proceeds	3 3
Item 3 . Defaults Upon Senior Securities	3 3
Item 4 . Mine Safety Disclosures	3 3
Item 5 . Other Information	3 3
Item 6 . Exhibits	3 4

SIGNATURES	3 5
EXHIBIT 10.1
EXHIBIT 31.1
EXHIBIT 32.1