##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




---

Form 10-K

|   |  |                                                                                                 
|-- |  | ------------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended December 31,
    2003                                                 
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to                                                 

Commission File
Number 001-15473



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OpenTV Corp.

(Exact name of Registrant as specified in its
charter)


|                                                                                                |  |                                         
|----------------------------------------------------------------------------------------------- |  | ----------------------------------------
|British Virgin Islands                                                                          |  | 98-0212376                              
|(State or other jurisdiction of
    incorporation or organization)                              |  | (I.R.S. Employer
    Identification No.)
|275 Sacramento Street
    San Francisco, California(Address of principal executive
    offices) |  | 94111(Zip Code)                         

Registrants telephone number, including
area code:

(415) 962-5000




---

Securities registered pursuant to
Section 12(b) of the Act: None

Securities registered pursuant to
Section 12(g) of the Act:


Class A ordinary shares, no par
value




---

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

Indicate
by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.     þ

Indicate
by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the
Act).     Yes þ          No o

The aggregate market value of the Class A
ordinary shares of the Registrant held of record by
non-affiliates of the Registrant as of June 30, 2003,
computed by reference to the last sales price of such
Class A ordinary shares on the Nasdaq National Market as of
the close of trading on June 30, 2003, was approximately
$46,836,071. For purposes of this calculation, the directors and
executive officers of the Registrant as of June 30, 2003
and the holders of record of 10% or more of any class of the
Registrants ordinary shares outstanding as of
June 30, 2003 (excluding Cede & Co., nominee of
the Depository Trust Company) are deemed to be affiliates of the
Registrant. Treasury shares are excluded. The determination of
affiliate status for this calculation is not necessarily a
conclusive determination for other purposes.

As of February 27, 2004, the Registrant had
outstanding (not including 76,327 Class A ordinary shares
held in treasury):

89,500,635 Class A ordinary shares; and

30,631,746 Class B ordinary shares.


Portions of the Registrants definitive
Proxy Statement, to be delivered to stockholders in connection
with the Registrants 2004 Annual Meeting of Stockholders,
are incorporated by reference into Part III of this Report.



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TABLE OF CONTENTS



|                                                                                              |  |  |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|PART I                                                                                       
|Item 1. Business                                                                             
|Item 2. Properties                                                                           
|Item 3. Legal Proceedings                                                                    
|Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II.                                                                                     
|Item 5. Market for Registrants Common Equity and Related Stockholder Matters                
|Item 6. Selected Financial Data                                                              
|Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|Item 8. Financial Statements and Supplementary Data                                          
|Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 
|Item 9A. Controls and Procedures                                                             
|PART III.                                                                                    
|Item 10. Directors and Executive Officers of OpenTV                                          
|Item 11. Executive Compensation                                                              
|Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|Item 13. Certain Relationships and Related Transactions                                      
|Item 14. Principal Accounting Fees and Services                                              
|PART IV.                                                                                     
|Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|LETTER FROM KPMG LLP                                                                         
|LIST OF SUBSIDIARIES                                                                         
|CONSENT OF KPMG LLP                                                                          
|CONSENT OF PRICEWATERHOUSECOOPERS LP                                                         
|CERTIFICATION OF CEO                                                                         
|CERTIFICATION OF CFO                                                                         
|CERTIFICATION OF CEO AND CFO                                                                 



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##### Table of Contents



OPENTV CORP.

2003 ANNUAL REPORT ON FORM 10-K


TABLE OF CONTENTS

|         |  |                                                                                           |  |      |    | 
|-------- |  | ----------------------------------------------------------------------------------------- |  | ---- | -- | 
|         |  |                                                                                           |  | Page
|         |  |                                                                                           |  |     
|PART I  
|Item 1.  |  | Business                                                                                  |  |      | 2  | 
|Item 2.  |  | Properties                                                                                |  |      | 12 | 
|Item 3.  |  | Legal Proceedings                                                                         |  |      | 12 | 
|Item 4.  |  | Submission of Matters to a
    Vote of Security Holders                                   |  |      | 15 | 
|PART II 
|Item 5.  |  | Market for Registrants
    Common Equity and Related Stockholder Matters                 |  |      | 15 | 
|Item 6.  |  | Selected Financial Data                                                                   |  |      | 19 | 
|Item 7.  |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations |  |      | 21 | 
|Item 7A. |  | Quantitative and Qualitative
    Disclosures About Market Risk                            |  |      | 42 | 
|Item 8.  |  | Financial Statements and
    Supplementary Data                                           |  |      | 43 | 
|Item 9.  |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure  |  |      | 43 | 
|Item 9A. |  | Controls and
    Procedures                                                               |  |      | 43 | 
|PART III
|Item 10. |  | Directors and Executive
    Officers of OpenTV                                            |  |      | 44 | 
|Item 11. |  | Executive
    Compensation                                                                |  |      | 44 | 
|Item 12. |  | Security Ownership of
    Certain Beneficial Owners and Management                        |  |      | 44 | 
|Item 13. |  | Certain Relationships and
    Related Transactions                                        |  |      | 44 | 
|Item 14  |  | Principle Accounting Fees
    and Services                                                |  |      | 44 | 
|PART IV 
|Item 15. |  | Exhibits, Financial
    Statement Schedules, and Reports on Form 8-K                      |  |      | 45 | 

OpenTV, the OpenTV logo and our product names
are trademarks or registered trademarks of OpenTV Corp. or its
subsidiaries in the United States and other countries. Other
product names mentioned herein may be trademarks or registered
trademarks of their respective owners.

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##### Table of Contents



This Annual Report on Form 10-K,
including Managements Discussion and Analysis of
Financial Condition and Results of Operations in
Item 7, contains forward-looking statements that involve
risks and uncertainties, as well as assumptions that, if they
never materialize or prove incorrect, could cause the results of
OpenTV Corp. and its consolidated subsidiaries to differ
materially from those expressed or implied by such
forward-looking statements. All statements other than statements
of historical fact are statements that could be deemed
forward-looking statements, including any projections of
revenue, gross margin, expenses, earnings or losses from
operations; any statements of the plans, strategies and
objectives of management for future operation; any statements
concerning developments, performance or market conditions
relating to products or services; any statements regarding
future economic conditions or performance; any statements of
expectation or belief; and any statements of assumptions
underlying any of the foregoing. You should not place undue
reliance on these forward-looking statements, which speak only
as of the date of this Annual Report on Form 10-K. All
these forward-looking statements are based on information
available to us at this time, and we assume no obligation to
update any of these statements. Actual results could differ
materially from those projected in these forward-looking
statements as a result of many factors, including those
identified in the section titled Factors That May Affect
Future Results under Item 7, Managements
Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere. We urge you to review and consider the
various disclosures made by us in this report, and those
detailed from time to time in our filings with the Securities
and Exchange Commission, that attempt to advise you of the risks
and factors that may affect our future results.







PART I







Item 1.     Business

Overview

We are one of the worlds leading providers
of software, content and applications and professional services
for interactive and enhanced television. We provide the core
software and related technologies that permit cable, satellite
and terrestrial operators, which we refer to as network
operators, television programmers and advertisers to offer
viewers interactive and enhanced television experiences. By
developing content and applications designed for digital
television and by offering professional services focused on the
integration of interactive software, content and applications,
we believe that we are uniquely positioned within the digital
television industry to help our customers differentiate their
product offerings, enhance viewer retention and accelerate the
use of television for gaming, commerce, information retrieval,
entertainment and similar purposes.

Since our founding in 1996, we have offered our
customers a comprehensive suite of interactive and enhanced
television solutions that leverage our software and technologies
and worldwide patent portfolio. Our core software products
enable network operators to manage the creation and delivery of
interactive and enhanced television services to their
subscribers. We develop and manage branded television channels
that allow viewers to play interactive games, and we offer
applications that enable viewers to engage in commerce
transactions, retrieve information such as weather reports and
sports updates, and engage in other interactive services, such
as fixed-odds gaming, through their televisions. We also
recently began efforts to market and commercially deploy
targeted and addressable advertising solutions and research
analyses detailing how viewers engage and interact with programs
and advertisements. Each of those offerings, and others that we
anticipate offering in the future, leverages and extends our
fundamental core technologies, which we believe provide us with
the foundation for further penetration of the digital television
market as it continues to evolve. To complement our technologies
and interactive content and applications, we also offer a full
suite of professional engineering and consulting services. These
services allow us to manage various interactive television
projects, from discrete integration or development assignments
to complete end-to-end digital programming solutions for network
operators.

We provide our technologies, interactive content
and applications and professional services in more than
90 countries. We have deployed our software solutions and
technologies to more than 40 network operators throughout
the world. Major set-top box manufacturers incorporate our
software directly into over 100

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different set-top box models, with over
40 million digital set-top boxes embedded with our
technologies deployed worldwide. This integration directly into
the set-top boxes allows our solutions to be easily activated by
network operators upon deployment.


We have invested significant resources in
developing our software solutions and believe that our patent
portfolio protects many of the key elements necessary to support
digital interactive and enhanced television. We believe that we
have established an industry leading technology position, and,
as of December 31, 2003, had 82 patents issued in the
United States, 335 patents issued outside of the United
States and 711 patent applications pending throughout the
world.

Corporate Background

We are incorporated in the British Virgin
Islands. Over the past several years, we have significantly
extended our product and service offerings through a number of
acquisitions.

In 2000, we acquired Spyglass, Inc., a provider
of Internet software solutions and professional services, and
CableSoft Corporation, a provider of on-demand
information software solutions for broadband network
operators. In 2001, we acquired Static 2358 Holdings Limited, an
interactive television media and entertainment company that
developed our PlayJam games offering.

In 2002, we acquired Wink Communications, Inc., a
provider of technology that enables network operators,
programmers and advertisers to add interactive content to
television broadcasts. In July 2003, we acquired ACTV, Inc., a
developer and provider of technologies and services for
interactive television advertising, personalized programming
applications and enhanced media, and in August 2003, we acquired
substantially all of the assets of BettingCorp Limited, a
developer and operator of remote betting and gaming technologies
and services.

With these acquisitions and the continued
evolution of our technologies, content and applications, we are
able to offer an end-to-end solution for interactive and
enhanced television.

Liberty Media Corporation beneficially owns an
approximately 32.9% economic interest in our company, which
because of its ownership of approximately 99.6% of our
super-voting Class B ordinary shares, provides it with an
approximate 79.4% voting interest in our company, in each
case based on the number of our ordinary shares outstanding as
of December 31, 2003. As a result of that voting power,
Liberty Media has the ability to elect all of the members of our
board of directors and, subject to applicable law and
stockholder agreements, the right to approve or disapprove all
matters presented to a vote of our stockholders. Liberty Media
initially acquired its controlling interest in our company in
August 2002 in a transaction with our former controlling
shareholder, MIH Limited. Liberty Media is a holding company,
which, through its ownership of interests in other companies, is
primarily engaged in (i) electronic retailing,
(ii) international cable television distribution, telephony
and programming and (iii) the production, acquisition and
distribution through various media of branded entertainment,
educational and informational programming and software.
Companies in which Liberty Media owns interests are also
engaged, among other things, in (i) interactive commerce
through the Internet, television and telephone, (ii) cable
and satellite broadband distribution services within the United
States and (iii) wireless telephony and other technology
ventures. From time to time, we have entered into commercial
relationships with Liberty Media affiliates and expect to
continue to do so in the future if advantageous opportunities
become available.

Financial Information about Operating Segments
and Geographic Areas

We are not organized into business units and we
do not calculate our revenues, profits or loss, or total assets
based on segmentation of our business. We believe that we
operate in a single industry segment. Please see
Note 14. Segment Information to our
Consolidated Financial Statements for a further discussion of
segment information.

A significant portion of our total net revenue
comes from outside of the United States. A summary of our
domestic and international revenue, capital expenditures and
long-lived assets is set forth in Note 14. Segment
Information to our Consolidated Financial Statements,
which is incorporated herein by reference.

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Products and Services

Overview

We develop the software solutions and related
technologies that many network operators utilize to permit them
to manage and deliver interactive and enhanced programming,
advertising and other content and applications. Our product and
service offerings generally fall into the following categories:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Software and Related Technologies.Our core software and technologies
    consist of integrated and modular software products that enable
    network operators to manage the creation, delivery and execution
    of interactive and enhanced television services to their
    subscribers. We develop and provide interactive solutions that
    permit targeted and addressable advertising, purchase and sales
    transactions through a viewers remote control, requests
    for information from advertisers or programmers in real-time as
    the viewer sees the advertisement or television program and
    audience and media research capabilities to determine viewing
    preferences. We generally realize revenues from our software and
    technology solutions through one-time royalty payments and
    ongoing license fees.                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Content and Applications.We develop and manage branded
    interactive television channels, including our games channel
    PlayJam and our fixed-odds and casino games service
    PlayMonteCarlo. We also work jointly with network
    operators, programmers and advertisers to develop applications
    that help to differentiate their programming content. We provide
    email applications, interactive weather applications that permit
    viewers to obtain local weather information, applications that
    permit multiple camera angles and audio feeds to be delivered
    for viewing and listening on a single television screen and many
    other applications that transform the conventional television
    into a more expansive source of information and entertainment.
    In addition, we support a third-party development community that
    seeks to develop compelling interactive television content for
    our platform. We generally realize revenues from our content and
    applications through license and other fees and revenue sharing
    arrangements. We also may seek, in the future, to derive more of
    our revenues from those product offerings through
    subscriber-based fee arrangements.
|
| |  | Interactive Network.We offer a suite of managed services
    and applications to simplify the business of interactive
    television and market research for network operators,
    programmers and advertisers. We accomplish this by leveraging
    our technology, content and operational and distribution
    experience in the field of interactive television. We generally
    realize revenues from our interactive network services from
    service fees and revenue sharing arrangements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Professional Services and Support.Our worldwide team of skilled and
    experienced managers and software engineers help network
    operators and set-top box manufacturers build, integrate and
    deploy interactive and enhanced television services. We can
    provide the professional services necessary for discrete
    projects, as well as the resources that allow a network operator
    effectively to outsource an entire end-to-end digital solution.
    We also help train our customers in the use of our development
    tools and can provide other educational services that allow our
    customers to accelerate their use of interactive technologies.
    In addition, we provide worldwide, around-the-clock support for
    our product offerings. We generally realize revenues from fees
    paid for professional services and support rendered to our
    customers, which we charge on a time and materials, fixed cost
    or other basis.                                                                                                                                                                                                                                                                          



| |                                      
| | -------------------------------------
| | Software and Related
    Technologies

Our integrated software and related technologies
provide a common platform for network operators, set-top box
manufacturers and manufacturers of other devices, programmers,
content producers, advertisers and interactive application
developers to create, deliver and manage interactive and
enhanced television applications and content for different
digital television environments and network architectures. Our
software and technologies enable interactive content and
applications to run on cable, satellite and terrestrial networks
and through various set-top boxes and other products
manufactured by a multitude of vendors. In general, that means
interactive and enhanced television content and applications
only have to be written once in order to run on the various
set-top boxes that a network operator may have deployed in its
network.

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We have software and technologies that work on
set-top boxes as well as at the network operators head
end. We also offer enterprise solutions that more effectively
integrate the software in a set-top box with the
operators, programmers and advertisers backend
systems. Additionally, we have development tools that permit
users to create, test and deliver interactive content and
applications. Our software and related technologies consist of
the following:

OpenTV Embedded Set-top Box
Solutions.The foundation of our
offering is a software platform that is installed primarily on
set-top boxes and serves as the gateway for delivering and
managing interactive and enhanced television to viewers.

OpenTV Embedded Set-top Box Solutions consist of
OpenTV Core, OpenTV ProSync, OpenTV SpotOn, and OpenTV Device
Mosaic, as described below:



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | OpenTV Core.This is
    our principal set-top box middleware product, which includes the
    software and related components that provide network operators
    with a full-featured interactive and enhanced television
    delivery and development environment for both basic and advanced
    set-top boxes. OpenTV Core can manage a wide range of
    interactive television applications, including virtual channels,
    enhanced broadcasts, electronic commerce applications, games and
    on-demand news and information services.

The following features and functions are
supported by OpenTV Core:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Basic and Advanced Set-top Boxes.OpenTV Core can run with the
    relatively limited processing power and memory found in most
    mass-market digital set-top boxes currently deployed by network
    operators. OpenTV Core is also suitable for more advanced
    digital set-top boxes expected to be deployed in the future,
    which contain increased processing power and memory. This
    capability permits us to offer technical solutions that address
    the limited capabilities of many set-top boxes that are
    currently deployed by various network operators, while
    simultaneously offering a solution that will position them to
    take advantage of more powerful set-top boxes in the future.
|
| |  | HTML Applications.Our OpenTV HTML Package is an extension to OpenTV Core which
    allows network operators to deliver existing Web-based HTML and
    JavaScript content to its subscribers through a digital set-top
    box.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | MHP Applications.Our OpenTV MHP Package is an extension to OpenTV Core which
    allows network operators to deliver Java-based content to its
    subscribers through a digital set-top box in a manner that is
    compliant with the Multimedia Home Platform standard that is
    being developed in Europe.                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | OpenTV Measure.Our
    OpenTV Measure Package is an extension to OpenTV Core that we
    are currently developing to enable network operators,
    programmers and advertisers to collect information and data
    regarding viewer preferences, viewing habits and other
    analytical information that helps to assess the efficacy of
    programming and advertising.                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Connectivity.OpenTV
    Core provides solutions for broadcast or point-to-multipoint
    networks as well as high bandwidth, bi-directional,
    point-to-point networks. OpenTV Core includes modules that
    support common interactive television-related communication
    protocols, including the DOCSIS communications protocol
    (providing a data return channel for cable modem set-top boxes
    that enables viewers to retrieve information from the Internet
    at broadband speed).                                                                                                                                                                                                                       
|
| |  | Localization.OpenTV
    Core supports text input and presentation of substantially all
    languages in common use (including double byte Asian languages),
    which allows for localization of interactive television services
    for different countries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Personal Video Recorders.Many network operators are specifying
    that set-top boxes support the ability to record and playback a
    broadcast program using an internal hard drive resident in the
    set-top box. OpenTV Core currently enables the seamless
    integration of third-party mass storage solutions to meet this
    requirement.                                                                                                                                                                                                                                                                                                                                                                        

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | OpenTV ProSync.OpenTV ProSync is an application
    engine that enables network operators to deliver interactive
    applications along with broadcast video to viewers
    televisions. Network operators may choose to deploy OpenTV
    ProSync where a full OpenTV Core solution is not required or
    where set-top box resources are limited. This product enables
    advertisers and programmers to process e-commerce transactions
    while offering viewers instant interactive entertainment and
    information retrieval.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | OpenTV SpotOn.OpenTV SpotOn enables network operators to offer addressable
    advertising that can be delivered to particular households based
    on individual profiles. Advertisers have the ability to develop
    different ads for the same product or service that are designed
    for specific audiences, ensuring that the message appeals to all
    of the audience for the commercial. Different advertising
    messages are then simultaneously targeted to households through
    the use of technology that permits set-top boxes to seamlessly
    jump between video signals, thereby invisibly tailoring the
    video experience to the profile of the viewing household. With
    this technology, which we acquired when we purchased ACTV in
    2003, a network operator can for example deliver an
    advertisement for a pick-up truck to one household while
    simultaneously delivering an advertisement, in the same
    interval, for a sedan or sports coupe to a different household
    based on demographic profiles.
|
| | OpenTV Device
    Mosaic.OpenTV Device Mosaic is a
    customizable, stand-alone browser designed specifically for
    information appliances other than personal computers. OpenTV
    Device Mosaic supports HTML, Broadcast Markup Language, or BML,
    and JavaScript based applications and is optimized and designed
    for advanced products and applications. We have developed an
    integrated browser with Matsushita Electric Company, one of
    Japans largest consumer electronics companies, which has
    been incorporated into certain Panasonic branded digital
    television sets shipped within Japan since September 2003.                                                                                                                                                                                                                                                                                                                                                                                                      

OpenTV Headend Solutions.OpenTV Headend Solutions consist of
OpenTV Streamer, OpenTV Publisher, OpenTV H2O and OpenTV
Gateway. These components are installed at a network
operators broadcast facility or cable headend and enable
the network operator to utilize their existing digital
television broadcast infrastructure to manage the creation and
delivery of interactive and enhanced television services to and
from the set-top boxes where OpenTV Embedded Set-top Box
Solutions reside.



| |                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | OpenTV Streamer.OpenTV Streamer, the foundation of our
    headend solutions, enables network operators to integrate
    applications and data with audio and video signals for reception
    on set-top boxes enabled with OpenTV Core. OpenTV Streamer
    relies on hardware architecture that is capable of interfacing
    with any standard digital broadcast system.
|
| | OpenTV Publisher.OpenTV Publisher works in conjunction with OpenTV Streamer to
    enable content developers and network operators to use the
    popular Web-based Extensible Markup Language, or XML, content
    format to build and deliver interactive content to set-top boxes
    enabled with OpenTV Core.                                                         
|
| | OpenTV H2O.OpenTV
    H2O enables the transformation of Web-based HTML and JavaScript
    content into interactive applications that can run on basic
    digital set-top boxes.                                                                                                                                                                                           
|
| | OpenTV Gateway.OpenTV Gateway manages communications traffic originating from
    basic digital set-top boxes to standard e-mail and commerce
    servers.                                                                                                                                                                                                                 

OpenTV Enterprise Solutions.Our enterprise solutions, consisting
of OpenTV Account, OpenTV Advertise, OpenTV Notify and OpenTV
AdVision, are used in conjunction with our embedded set-top box
solutions to manage the secure commerce and advertising
functions of a network operators interactive television
service.



| |                                                                                                                                                                                                                                                                                                                                                                                                                            
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | OpenTV Account.OpenTV Account enables electronic
    commerce features within interactive television applications and
    gives network operators the opportunity to develop
    commerce-related interactive television revenue streams. Key
    features of OpenTV Account include single sign-on management,
    electronic-receipt management, electronic-wallet and address
    book management and security features.

6



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| |                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | OpenTV Advertise.OpenTV Advertise enables network
    operators to control the process of integrating and managing
    advertisements within content and applications running on OpenTV
    Core. Key features of OpenTV Advertise include the ability to
    schedule and insert advertisements, and to generate reports on
    the status of advertising campaign delivery and performance.
|
| | OpenTV Notify.OpenTV Notify enables network operators to send broadcast
    notifications to individual or multiple set-top boxes allowing
    network operators to deliver convenient messaging, such as
    email, instant messaging, order confirmation and news alerts, to
    their subscribers.                                                                                        
|
| | OpenTV Advision.OpenTV Advision is an advertising sales and traffic system that
    manages various media platforms and outlets, simultaneously
    providing network operators the tools to manage local cable
    television, cable networks, and proprietary broadband networks.                                                                                                          

OpenTV Tools.We
encourage content developers to design and create applications
that are compatible with OpenTV software and technologies by
offering a series of application development tools and
supporting toolsets enabling them to develop and market
applications directly to network operators. The tools can be
used alone or in combination with other third-party tools to
meet virtually any interactive television development need, such
as creating virtual channels, building interactive ads,
enhancing existing programs with interactive features and
testing interactive television content through a simulated
broadcast environment.



| |                         
| | ------------------------
| | Content and Applications

We develop and operate branded interactive
television channels that are distributed by network operators
utilizing OpenTV Core and interactive television middleware
platforms provided by third parties. These channels feature
play-for-fun or fee based entertainment, fixed-odds and casino
games and help network operators around the world realize new
revenue streams and business opportunities from interactive
television. In addition, we provide email applications,
interactive weather applications that permit viewers to obtain
local weather information, and many other applications, many of
which are also included as managed services as
described in more detail below under Interactive
Network, that transform the conventional television into a
more expansive source of information and entertainment.

PlayJam.PlayJam is
one of the worlds first multi-platform interactive
television entertainment and gaming channels. We offer a library
of more than 300 different single- or multi-player games that
can run on PlayJam. These include quizzes, arcade-style games,
puzzles, adult-theme games, and competition and editorial games.
A wide selection of these games can be customized and used as
unique branding vehicles.

Launched in early 2001 on the British Sky
Broadcasting, or BSkyB, network in the United Kingdom, PlayJam
currently is available to over 20 million subscribers
through distribution on BSkyB, cable operators NTL Group Ltd.
and Telewest Broadband in the United Kingdom, satellite
operators Television Par Satellite (TPS) and Canal
Satellite in France, and satellite operator EchoStar
Communications Corporation in the United States. PlayJam runs on
the OpenTV platform as well as those provided by other
middleware providers.

In the United Kingdom and in France, PlayJam
charges a fee, via a premium rate telephone call using the
telephone or the remote control, for membership registration,
game score registration for the chance to win prizes, and for
access to pay-per-play content. We have also sold advertising
and sponsorship space from time to time on PlayJam games. In the
United States, PlayJam is offered as a subscription based
service on EchoStar, for which we receive a revenue share.

Fixed-Odds and Casino
Gaming.With our acquisition of the assets of
BettingCorp in 2003, we began to focus additional efforts on
developing fixed-odds and casino games for interactive
television. Through BettingCorp, we can enable a network
operator to offer a wide variety of products, from casino games
and pool products to scratchcards and lotteries, across multiple
media using a single back-end management system.

Subject to local laws and regulations and based
on the licenses BettingCorp holds, we are able to offer our
customers fixed-odds and casino gaming services. These services
include PlayMonteCarlo, which is offered as an interactive
television application and through the Internet, and
PlayMonteCarlo.com and TotoPools.com,

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both of which are available through the Internet.
Our gambling and betting products are made available to users
only in jurisdictions in which it is legal to do so. Our gaming
offerings are supported by our back-end management system which
enables operators to monitor usage of the games and tailor
promotions on an individual basis.


Third Party
Applications.We also encourage
content developers to design and create applications for the
OpenTV platform through the use of our series of application
development tools. In addition, we offer the OpenTV Partner
Program to support independent developers that create
OpenTV-enabled applications. Through the OpenTV Partner Program,
members can gain access to various resources, including free
evaluation periods for selected releases of our software,
discounts on our authoring and development tools, training
sessions, e-mail support, access to a members-only Web site and
regional conferences.



| |                    
| | -------------------
| | Interactive Network

The OpenTV Interactive Network simplifies the
business of interactive television for network operators,
programmers and advertisers by offering a suite of managed
services and applications. OpenTV Interactive Network is a
customized interactive television offering, which includes those
applications specifically desired by the customer, such as a
combination of OpenTV ProSync, OpenTV SpotOn, OpenTV Measure,
PlayMonteCarlo and PlayJam. This service allows our customers to
stay focused on what they do best while we enable them to
deliver a compelling interactive television experience in a
cost-effective manner. Network operators can use the network to
gain access to interactive content. Programmers can use a single
interactive platform on which to develop content, making the
process of enhancing their content more affordable. Advertisers
can utilize the network to enhance their advertisements with
interactivity and rely on a single source for transaction
management and data processing.

The OpenTV Interactive Network offers our
customers a suite of standardized applications that can be
licensed by or customized for a particular customer. These
applications include:



| |   |                                                                               
| | - | ------------------------------------------------------------------------------
| |  | Interactive and Addressable Advertising                                       
|
| |  | Enhanced Television                                                           
|
| |  | News                                                                          
|
| |  | Games                                                                         
|
| |  | Commerce                                                                      
|
| |  | Gambling and Lottery                                                          
|
| |  | Messaging and Communications (including email,
    instant messaging and chat)
|
| |  | Customer Care                                                                 
|
| |  | Activity Reporting and Analysis                                               

Apart from these standardized applications, we
also develop stand-alone applications for network operators on a
revenue sharing or fee-for-service basis.



| |                                      
| | -------------------------------------
| | Professional Services and
    Support

To complement our technologies and interactive
content and applications, we provide a comprehensive suite of
professional engineering and consulting services on a worldwide
basis to network operators, set-top box manufacturers and
content and application developers in support of our product
offerings. The services that we provide include interactive
television business consulting, middleware porting and
integration, application customization and localization, launch
management and educational training services. These services
allow us to manage various interactive television projects, from
discrete integration or development assignments to complete
end-to-end digital programming solutions for network operators.
Our services include around-the-clock maintenance and support
for our products after they have been installed and commercially
deployed by our network operators and set-top box manufacturers,
including the provision of product updates. Services are
provided on a paid engagement basis and are either executed on a
time and materials or fixed price contract basis.

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We also provide platform-neutral testing,
development, integration and certification services. We use a
state-of-the-art interactive television infrastructure solution
center that enables network operators, set-top box
manufacturers, infrastructure providers and application
developers to develop interactive television products and
services in a controlled environment.

Customer and Industry Relationships

We have established significant relationships
with many of the leading network operators, set-top box
manufacturers, chip set manufacturers, programming networks and
advertisers around the world. Our customer and industry
relationships include the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Network Operators.Over 40 network operators around the
    world have launched our OpenTV Core platform, including Auna
    Telecommunications, S.A. in Spain, Austar Entertainment Pty Ltd.
    and Foxtel in Australia, Bell ExpressVu in Canada, BSkyB in the
    United Kingdom, EchoStars DISH Network in the United
    States, Noos and TPS in France and Shanghai Cable Network Co.
    Ltd. (SCN) in China. In addition, two network operators
    have deployed our OpenTV ProSync offering, Charter
    Communications in the United States and Rogers Communications,
    Inc. in Canada.
|
| |  | Set-top Box Manufacturers.Our software is available on
    35 manufacturers set-top boxes, including Advanced
    Digital Broadcast (ADB), Matsushita Electric, Motorola, Inc.,
    Nokia Satellite Systems, Pace Micro Technology, Sagem, S.A.,
    Samsung, Scientific-Atlanta, Inc., Sony Corporation, Thomson and
    UEC Technologies (Pty) Ltd.                                                                                                                                                                                                                                                
|
| |  | Chip Set Manufacturers.A number of chip set manufacturers
    have licensed our software tools to assure the compatibility of
    their products with ours, including STMicroelectronics,
    Conexant, and NEC Electronics Corporation.                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Programming Networks.We have worked with numerous
    programming networks including American Broadcasting Company
    (ABC), Turner Broadcasting System, Inc., Discovery
    Communications, Inc., ESPN Networks, National Broadcasting
    Company (NBC) and Showtime Networks, Inc. to enhance
    programming content and advertising on their networks.                                                                                                                                                                                                                                          
|
| |  | Advertisers.Over
    seventy advertisers representing more than 130 brands in North
    America have enhanced their television advertisements through
    use of our ProSync service, including Ford Motor Company,
    General Motors Corporation, Johnson & Johnson, MasterCard
    International, Nestle and Wal-Mart Stores, Inc.                                                                                                                                                                                                                                                                 

Motorola (together with its subsidiary General
Instrument Corporation) accounted for approximately 10% of our
revenues in 2003. The revenues received from Motorola in 2003
were associated with professional services and support. BSkyB
directly and indirectly accounted for approximately 11% of our
revenues during 2003 in the form of set-top box royalties and
services and support. EchoStar accounted for approximately 12%
of our revenues during 2003 in the form of royalties, services
and support and license fees.

Sales and Marketing

We promote and sell the majority of our products
and services through our direct sales organization to corporate
enterprises, including network operators, programmers,
advertisers and set-top box manufacturers. As of
December 31, 2003, we had a total of 26 people in our sales
and marketing organization located in the United States, Europe
and Asia Pacific.

Competition

The markets in which we compete are intensely
competitive and rapidly changing. Current and potential
competitors in one or more aspects of our business include
interactive television technology companies and companies
developing interactive television content and applications. The
principal competitive factors in our industry include product
functionality, speed of product integration, breadth of network
and platform coverage, scalability, price, possession of
adequate intellectual property rights and sales and marketing
efforts.

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Our competitors offering interactive
television-enabling technology include NDS Group plc, Microsoft
Corporation, Liberate Technologies and Scientific-Atlanta, Inc.
NDS Group historically provided conditional access and limited
interactive application technologies to its customers. In 2003,
it extended its interactive services offerings with its
acquisition of MediaHighway from Thomson Multimedia and has
begun to offer solutions that are more directly competitive with
many of those that we offer. NDS Group is controlled by The News
Corporation. The News Corporation recently completed its
acquisition of a controlling stake in Hughes Electronics, the
parent of DirecTV, one of the two largest satellite operators in
the United States. The News Corporation also controls BSkyB, the
largest satellite operator in the United Kingdom and one of our
most significant customers, and other satellite operators
throughout the world. While we continue to work with, and
provide technology and services to many affiliates of The News
Corporation, including BSkyB, its control of NDS Group, and the
extension by NDS Group of its product offering, may
significantly increase our competitive pressures and affect the
willingness of other News Corporation affiliates to work with us
or to obtain products or services from us. We cannot, therefore,
be certain of the long-term implications related to News
Corporations control of NDS Group or the effects that such
control may have upon our relationships and opportunities to
work with the many satellite operators throughout the world that
are controlled by News Corporation.

For several years, Microsoft Corporation has been
working to create interactive television solutions. With equity
interests in several network operators, Microsoft may be able to
influence the network operators choice of providers of
interactive television solutions. We expect that Microsoft will
likely become a strong competitor in the market for interactive
television solutions. Liberate Technologies manufactures and
licenses its software to network operators and set-top box
manufacturers and has announced relationships with several
United States and United Kingdom cable operators.
Scientific-Atlanta, Inc., in the form of PowerTV, develops and
markets operating system and middleware software products for
the advanced digital interactive cable television markets.
Scientific-Atlanta is also a major manufacturer of set-top
boxes, and many of our customers or potential customers may seek
to deploy set-top boxes manufactured by Scientific-Atlanta. We
have in the past competed with, and expect in the future to
continue to compete with, both Liberate and Scientific-Atlanta.

In the markets for enhanced television technology
and services and addressable and interactive advertising
technology, our primary competition comes from companies such as
Navic Networks, Visible World Corporation and NDS Group.
Addressable and interactive technology is in its initial stages,
and we expect additional competitors to appear as the market
continues to develop. Navic provides set-top data services for
data connectivity to, from, and among digital set-top boxes.
Visible World provides a suite of services enabling a media
outlet to develop and deliver content and advertising that can
be geographically and demographically customized as well as
dynamically updated based on business parameters, market trends
and demands.

In the area of research and audience measurement,
which we have begun efforts to market, we may encounter
competition from traditional providers such as Nielsen Media
Research, AGB Group and TNS, as well as new entrants into the
markets such as DigiSoft or Erin Media Inc. Nielsen Media and
others have significantly more experience and brand recognition
in this sector than we do. We may, therefore, be at a
significant disadvantage in light of the market acceptance and
long term relationships that many of our likely competitors will
have.

While we expect that interactive television
betting and gaming may provide a future source of potential
growth, we also expect to face intense competition in
jurisdictions in which we are permitted to deploy those product
offerings. Companies with which we expect to compete include TVG
Network, BSkyB and Fancy a Flutter. Because this aspect of
interactive television remains nascent, we cannot be certain as
to how competition will develop or the precise nature of the
competitors that we may expect to encounter. Because of the
significant regulatory issues affecting this sector and the
benefits derived from operating under that regulatory framework
over a long period, we may also face competition in the future
from more traditional casino companies with long histories in
the betting and gaming sector.

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Our interactive applications face competition
from numerous parties. Companies that compete with our efforts
to develop and launch applications on our middleware platform
include dedicated applications providers (such as Gemstar-TV
Guide International, NDS, Visiware, WorldGate Communications,
and MetaTV), independent third parties that develop and provide
applications for our middleware platform, and other middleware
providers (such as Microsoft, Liberate Technologies and Canal+
Technologies)_ We also face competition from media companies
that have publicly announced interactive television initiatives,
such as The Discovery Channel, ESPN, Time Warner Cable and CNN.
In addition, certain network operators such as BSkyB in the
United Kingdom have entered into agreements, joint ventures, and
other relationships with technology and entertainment companies.
We expect competition in the interactive content and
applications area to intensify as the general market for
interactive television services further develops, particularly
in the case of independent third parties that have the ability
to develop applications for our middleware platform at
relatively modest expense through the use of our applications
development tools.

In the professional services area, we compete
with third party system integrators such as Accenture and
Imagine Broadband, as well as with internal information
technology staffs at our network operator customers. Other
interactive television technology providers, such as Liberate
Technologies and NDS Group, also provide a level of professional
services in conjunction with their product offerings.

Regulations

The telecommunications, media, broadcast and
cable television industries are subject to extensive regulation
by governmental agencies. These governmental agencies continue
to oversee and adopt legislation and regulation over these
industries, particularly in the areas of user privacy, consumer
protection, the online distribution of content and the
characteristics and quality of online products and services,
which may affect our business, the development of our products,
the decisions by market participants to adopt our products and
services or the acceptance of interactive television by the
marketplace in general.

Recent attempts to establish industry-wide
standards for interactive television software include an
initiative by cable network operators in the United States to
create a uniform platform for interactive television called Open
Cable and an initiative by European television industry
participants to create a platform called Multimedia Home
Platform. The establishment of these standards or other similar
standards could adversely affect the pricing of our products and
services, significantly reduce the value of our intellectual
property and the competitive advantage our proprietary
technology provides, cause us to incur substantial expenditures
to adapt our products or services to respond to these
developments, or otherwise hurt our business, particularly if
our products require significant redevelopment in order to
conform to the newly established standards.

If, and to the extent that, we continue to
develop applications for the gaming and betting market, we also
expect to become subject to additional regulatory oversight.
Those laws and regulations are quickly evolving and changing. To
adequately address the legal and regulatory issues inherent in
that market, we will need to dedicate significant resources to
those matters and maintain effective controls to monitor changes
in various laws and the effects on our business.

Intellectual Property and Research and
Development

As of December 31, 2003, we had 82 patents
issued in the United States, 335 patents issued outside of the
United States, and 711 patent applications pending throughout
the world. We believe that our patent portfolio protects many of
the key elements necessary to support digital interactive
television. Our research and development expenses, excluding
in-process research and development charges related to
acquisitions, amortization of share-based compensation, and
non-cash warrant expense, for the years ended December 31,
2003, 2002 and 2001 were $25.3 million, $33.9 million
and $40.3 million, respectively.

Employees

As of December 31, 2003, we had 386
full-time employees, including 148 in engineering, 99 in sales,
marketing, service and support, 84 in content and programming
and 55 in finance and administrative services.

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Available Information

Our Internet website is located at
http://www.opentv.com, but the information contained on
our website is not deemed to be incorporated herein. We make
available free of charge on the investor relations page of our
website our annual report on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K and
amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Exchange Act, as soon as
reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange
Commission, or SEC.

The public may also read and copy any materials
we file with the SEC at the SECs Public Reference Room at
450 Fifth Street, N.W., Washington, D.C. 20549. The public
may obtain information on the operation of the Public Reference
Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains an Internet website that contains reports, proxy and
information statements and other information regarding issuers
that file electronically with the SEC. The SECs Internet
site is located at http://www.sec.gov.







Item 2.Properties

Our corporate headquarters and principal
executive offices are presently located at 275 Sacramento
Street, San Francisco, California, 94111, where we occupy
60,458 square feet of space under a seven year lease that
expires on January 31, 2010. In addition to the corporate
headquarters, we have leased regional office space elsewhere in
the United States, Europe, Asia and Australia.

In May 2003, we completed the closure of our
former headquarters in Mountain View, California as well as the
facilities of our subsidiary Wink Communications in Alameda,
California and relocated both operations to our new
San Francisco location in an effort to reduce lease
expense, consolidate operations and generate operational
synergies and efficiencies. This restructuring also resulted in
the closure of certain regional offices in 2003.

We expect that we may from time to time close
further regional offices or open additional regional offices as
the circumstances of our business may require.







Item 3.Legal
Proceedings

OpenTV, Inc. v. Liberate Technologies,
Inc.On February 7, 2002, OpenTV,
Inc., our subsidiary, filed a lawsuit against Liberate
Technologies, Inc. alleging patent infringement in connection
with two patents held by OpenTV, Inc. relating to interactive
technology. The lawsuit is pending in the United States District
Court for the Northern District of California. On March 21,
2002, Liberate Technologies filed a counterclaim against OpenTV,
Inc. for alleged infringement of four patents allegedly owned by
Liberate Technologies. Liberate Technologies has since dismissed
its claims of infringement on two of those patents. In January
2003, the District Court granted two of OpenTV, Inc.s
motions for summary judgment pursuant to which the court
dismissed Liberate Technologies claim of infringement on
one of the remaining patents and dismissed a defense asserted by
Liberate Technologies to OpenTV, Inc.s infringement
claims, resulting in only one patent of Liberate Technologies
remaining in the counterclaim. The District Court issued a
claims construction ruling for the two OpenTV patents and one
Liberate patent remaining in the suit on December 2, 2003.
We believe that our lawsuit is meritorious, and we intend to
vigorously pursue prosecution of our claims against Liberate
Technologies. In addition, we believe that we have meritorious
defenses to the counterclaims brought against OpenTV, Inc. and
will defend ourselves vigorously. No provision has been made in
our consolidated financial statements for this matter. We are
unable to predict the likelihood of a favorable outcome or
estimate our potential liability, if any.

Walt Disney
Litigation.On December 20, 2000,
ACTV, Inc. and its wholly owned subsidiary HyperTV Networks,
Inc. filed a lawsuit in the United States District Court for the
Southern District of New York against The Walt Disney Company
and certain of its affiliates, which we collectively refer to as
Walt Disney. We acquired ACTV, Inc. in July 2003. Walt Disney
filed counterclaims against ACTV that sought a declaration that
ACTVs patents in the suit have not been infringed, are
invalid and are unenforceable. On May 24, 2002, the
District Court granted Walt Disneys motion for summary
judgment of non-infringement

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with respect to the three patents in suit. On
July 3, 2002, ACTV appealed the District Court decision to
the U.S. Court of Appeals for the Federal Circuit. On
October 8, 2003, the Court of Appeals vacated the District
Courts grant of summary judgment, reversed the District
Courts claim construction for the term uniform
resource locator, and remanded the case to the District
Court for further proceedings. The District Court proceedings
have now resumed. We believe that ACTVs lawsuit is
meritorious and intend to vigorously pursue prosecution of
ACTVs claims against Walt Disney. In addition, we believe
that ACTV has meritorious defenses to the counterclaims brought
against it and that ACTV will defend itself vigorously against
such counterclaims. We are unable to predict the likelihood of
an unfavorable outcome or estimate our potential liability, if
any.


Initial Public Offering Securities
Litigation.In July 2001, the first of
a series of putative securities class actions, Brody v.
OpenTV Corp., et al., was filed in United States District
Court for the Southern District of New York against certain
investment banks which acted as underwriters for our initial
public offering, us and various of our officers and directors.
These lawsuits were consolidated and are captioned In re
OpenTV Corp. Initial Public Offering Securities Litigation.
The complaints allege undisclosed and improper practices
concerning the allocation of our initial public offering shares,
in violation of the federal securities laws, and seek
unspecified damages on behalf of persons who purchased OpenTV
Class A ordinary shares during the period from
November 23, 1999 through December 6, 2000. The Court
has appointed a lead plaintiff for the consolidated cases. On
April 19, 2002, the plaintiffs filed an amended complaint.
Other actions have been filed making similar allegations
regarding the initial public offerings of more than 300 other
companies, including Wink Communications as discussed in greater
detail below. All of these lawsuits have been coordinated for
pretrial purposes as In re Initial Public Offering Securities
Litigation. Defendants in these cases have filed omnibus
motions to dismiss on common pleading issues. Oral arguments on
these omnibus motions to dismiss were held on November 1,
2002. All claims against our officers and directors have been
dismissed without prejudice in this litigation. On
February 19, 2003, the Court denied in part and granted in
part the motion to dismiss filed on behalf of defendants,
including us. The Courts order dismissed all claims
against us except for a claim brought under Section 11 of
the Securities Act of 1933. However, the Court has given
plaintiffs an opportunity to amend their claims in order to
state a claim. A proposal has been made for the settlement and
release of claims against the issuer defendants, including us,
in exchange for a guaranteed recovery to be paid by the
insurance carriers of the issuer defendants and an assignment of
certain claims. We have approved the settlement proposal and are
awaiting definitive documentation. The settlement is subject to
a number of conditions, including approval of the proposed
settling parties and the Court. If the settlement does not
occur, and the litigation against us continues, we believe that
we have meritorious defenses to the claims asserted against us
and will defend ourselves vigorously. No provision has been made
in our consolidated financial statements for this matter. We are
unable to predict the likelihood of an unfavorable outcome or
estimate our potential liability, if any.

In November 2001, a putative securities class
action was filed in United States District Court for the
Southern District of New York against Wink Communications and
two of its officers and directors and certain investment banks
which acted as underwriters for Wink Communications
initial public offering. We acquired Wink Communications in
October 2002. The lawsuit is now captioned In re Wink
Communications, Inc. Initial Public Offering Securities
Litigation. The operative amended complaint alleges
undisclosed and improper practices concerning the allocation of
Wink Communications initial public offering shares in
violation of the federal securities laws, and seeks unspecified
damages on behalf of persons who purchased Wink
Communications common stock during the period from
August 19, 1999 through December 6, 2000. This action
is among the over 300 lawsuits that have been consolidated for
pretrial purposes as In re Initial Public Offering Securities
Litigation. On February 19, 2003, the Court ruled on
the motions to dismiss filed by all defendants in the
consolidated cases. The Court denied the motions to dismiss the
claims under the Securities Act of 1933, granted the motion to
dismiss the claims under Section 10(b) of the Securities
Exchange Act of 1934 against Wink Communications and one
individual defendant, and denied that motion against the other
individual defendant. As described above, a proposal has been
made for the settlement and release of claims against the issuer
defendants. Wink Communications has approved the settlement
proposal and is awaiting the definitive documentation. The
settlement is subject to a number of conditions, including
approval of the proposed settlement parties and the Court. If
the settlement does not occur, and the litigation

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against Wink Communications continues, we believe
that Wink Communications has meritorious defenses to the claims
brought against it and that Wink Communications will defend
itself vigorously. No provision has been made in our
consolidated financial statements for this matter. We are unable
to predict the likelihood of an unfavorable outcome or estimate
our potential liability, if any.


Litigation Relating to the Acquisition of
ACTV, Inc.On November 18, 2002,
a purported class action complaint was filed in the Court of
Chancery of the State of Delaware in and for the County of New
Castle against ACTV, Inc., its directors and us. The complaint
generally alleges that the directors of ACTV breached their
fiduciary duties to the ACTV shareholders in approving the ACTV
merger agreement pursuant to which we acquired ACTV on
July 1, 2003, and that, in approving the ACTV merger
agreement, ACTVs directors failed to take steps to
maximize the value of ACTV to its shareholders. The complaint
further alleges that we aided and abetted the purported breaches
of fiduciary duties committed by ACTVs directors on the
theory that the merger could not occur without our
participation. No proceedings on the merits have occurred with
respect to this action, and the case is dormant. We believe that
the allegations are without merit and intend to defend against
the complaint vigorously. No provision has been made in our
consolidated financial statements for this matter. We are unable
to predict the likelihood of an unfavorable outcome or estimate
our potential liability, if any.

Broadcast Innovation
Matter.On November 30, 2001, a
suit was filed in the United States District Court for the
District of Colorado by Broadcast Innovation, L.L.C., or BI,
alleging that DIRECTV, Inc., EchoStar Communications
Corporation, Hughes Electronics Corporation, Thomson Multimedia,
Inc., Dotcast, Inc. and Pegasus Satellite Television, Inc. are
infringing certain claims of United States patent
no. 6,076,094, assigned to or licensed by BI. Though we are
not currently a defendant in the suit, BI may allege that
certain of our products, possibly in combination with the
products provided by some of the defendants, infringe BIs
patent. The agreements between (1) OpenTV, Inc. and
EchoStar and (2) Wink Communications and DIRECTV include
indemnification obligations of OpenTV, Inc. and Wink
Communications, respectively, that may be triggered by the
litigation. If liability is found against EchoStar in this
matter, and if such a decision implicates our technology or
products, EchoStar has notified OpenTV, Inc. of its expectation
of indemnification, in which case our business performance,
financial position, results of operations or cash flows may be
adversely affected. Likewise, if OpenTV, Inc. were to be named
as a defendant and it is determined that the products of OpenTV,
Inc. infringe any of the asserted claims, and/or it is
determined that OpenTV, Inc. is obligated to defend EchoStar in
this matter, our business performance, financial position,
results of operations or cash flows may be adversely affected.
Based on publicly available information, we believe that certain
of the defendants in the suit, including DIRECTV, reached
agreement with BI to settle the litigation on July 17,
2003. We are unaware of the specific terms of that settlement
and are unable to assess the implications of that settlement, if
any, on Wink Communications. No provision has been made in our
condensed consolidated financial statements for these matters.
We are unable to estimate our potential liability, if any.

Personalized Media Communications, LLC.On December 4, 2000, a suit was
filed in the United States District Court for the District of
Delaware by Pegasus Development Corporation and Personalized
Media Communications, LLC alleging that DIRECTV, Inc., Hughes
Electronics Corp., Thomson Consumer Electronics and Philips
Electronics North America, Inc. are willfully infringing certain
claims of seven U.S. patents assigned or licensed to
Personalized Media Communications. Based on publicly available
information, we believe that the case has been stayed in the
District Court pending re-examination by the United States
Patent and Trademark Office. Though Wink Communications is not a
defendant in the suit, Personalized Media Communications may
allege that certain products of Wink Communications, possibly in
combination with products provided by the defendants, infringe
Personalized Media Communications patents. The agreements
between Wink Communications and each of the defendants include
indemnification obligations that may be triggered by this
litigation. If it is determined that Wink Communications is
obligated to defend any defendant in this matter, and/or that
the products of Wink Communications infringe any of the asserted
claims, our business performance, financial position, results of
operations or cash flows may be adversely affected. No provision
has been made in our consolidated financial statements for this
matter. We are unable to estimate our potential liability, if
any.

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Other Matters.From
time to time in the ordinary course of our business, we are also
party to other legal proceedings or receive correspondence
regarding potential or threatened legal proceedings. While we
currently believe that the ultimate outcome of these other
proceedings, individually and in the aggregate, will not have a
material adverse effect on our financial position or overall
trends in our results of operations, litigation is subject to
inherent uncertainties. Were an unfavorable ruling to occur,
there exists the possibility of a material adverse impact on the
results of operations of the period in which the ruling occurs.
The estimate of the potential impact on our financial position
or overall results of operations for any of the legal
proceedings described in this section could change in the future.







Item 4.Submission
of Matters to a Vote of Security Holders

No matters were submitted to a vote of our
security holders during the fourth quarter of 2003.







PART II.







Item 5.Market
for Registrants Common Equity and Related Stockholder
Matters

Market Information

Our Class A ordinary shares began trading on
the Nasdaq National Market and on the Official Segment of the
stock market of Euronext Amsterdam N.V., or Euronext Amsterdam,
under the symbol OPTV on November 23, 1999. On
December 31, 2003, we consolidated the public trading of
our Class A ordinary shares on the Nasdaq National Market
by discontinuing the listing of our Class A ordinary shares
on Euronext Amsterdam. Our Class B ordinary shares are not
publicly traded.

The following table lists the high and low sales
prices for our Class A ordinary shares on both the Nasdaq
National Market and the Euronext Amsterdam for the periods
indicated. We obtained our Euronext Amsterdam quotes, which are
reported in United States dollars, from Bloomberg L.P.

|     |                |                 |   |           |  |      |   |      |  |  |   |      |  |  |   |      | 
|---- | -------------- | --------------- | - | --------- |  | ---- | - | ---- |  |  | - | ---- |  |  | - | ---- | 
|     |                |                 |   |          
|     |                | Nasdaq National |   | Euronext 
|     |                | Market          |   | Amsterdam
|     |                |                 |   |          
|     |                | High            |   | Low       |  | High |   | Low 
|     |                |                 |   |           |  |      |   |     
|2003 |                |                 |   |           |  |      |   |      |  |  |   |      |  |  |   |     
|     | First Quarter  |                 | $ | 1.40      |  |      | $ | 0.70 |  |  | $ | 1.18 |  |  | $ | 0.69 | 
|     | Second Quarter |                 |   | 2.23      |  |      |   | 0.88 |  |  |   | 2.11 |  |  |   | 0.89 | 
|     | Third Quarter  |                 |   | 4.55      |  |      |   | 1.37 |  |  |   | 4.40 |  |  |   | 1.38 | 
|     | Fourth Quarter |                 |   | 5.34      |  |      |   | 2.28 |  |  |   | 5.10 |  |  |   | 2.54 | 
|2002 |                |                 |   |           |  |      |   |      |  |  |   |      |  |  |   |     
|     | First Quarter  |                 | $ | 9.09      |  |      | $ | 5.36 |  |  | $ | 9.28 |  |  | $ | 5.30 | 
|     | Second Quarter |                 |   | 5.75      |  |      |   | 2.91 |  |  |   | 5.95 |  |  |   | 2.85 | 
|     | Third Quarter  |                 |   | 3.23      |  |      |   | 1.00 |  |  |   | 3.37 |  |  |   | 1.20 | 
|     | Fourth Quarter |                 |   | 1.70      |  |      |   | 1.00 |  |  |   | 1.75 |  |  |   | 1.00 | 

Holders

As of February 29, 2004, there were
approximately 650 holders of record of our Class A ordinary
shares and three holders of record of our Class B ordinary
shares. Banks, brokers and other institutions hold many of our
Class A ordinary shares on behalf of our stockholders.

Dividends

We have never paid any cash dividends on our
ordinary shares. We anticipate that any earnings in the
foreseeable future will be retained to finance our business, and
we have no current intention to pay cash dividends on our
ordinary shares. The payment of dividends is within the
discretion of our board of directors and will be dependent upon,
among other factors, our results of operations, financial
condition, capital requirements, legal requirements and any
restrictions imposed by financing arrangements.

15



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##### Table of Contents



Certain Aspects of British Virgin Islands
Law

There are no governmental laws, decrees or
regulations in the British Virgin Islands that restrict the
export or import of capital, including, but not limited to,
foreign exchange controls, or that affect the remittance of
dividends or other payments to holders of our ordinary shares
who are not residents of the British Virgin Islands. In
particular, the British Virgin Islands does not impose a
withholding tax on dividends paid by companies such as us that
are incorporated under the International Business Companies Act
of the British Virgin Islands.

Under the International Business Companies Act of
the British Virgin Islands, a holder of our ordinary shares who
is not a resident of the British Virgin Islands is exempt from
British Virgin Islands income tax on dividends paid on our
ordinary shares and no holders of our ordinary shares are liable
to the British Virgin Islands for income tax on gains realized
during any taxable year on sale or disposal of our ordinary
shares. There are no capital gains, gift or inheritance taxes
levied by the British Virgin Islands on the holders of our
ordinary shares. In addition, our ordinary shares are not
subject to transfer taxes, stamp duties or other similar charges
as a matter of British Virgin Islands law.

There is no income tax treaty or convention
currently in effect between the United States and the British
Virgin Islands. If we were to be classified as a passive foreign
investment company under applicable United States tax
regulations, for the prior, current, or subsequent taxable
years, stockholders who are U.S. taxpayers could be subject to
adverse tax consequences.

Securities Authorized for Issuance Under
Equity Compensation Plans

The following table presents information about
our equity compensation plans as of December 31, 2003:

Equity Compensation Plan Information

|                                                               |  |                   |           |                   |  |                      |      |     |  |  |           |    
|-------------------------------------------------------------- |  | ----------------- | --------- | ----------------- |  | -------------------- | ---- | --- |  |  | --------- | ---
|                                                               |  | Number of         |           |                   |  | Number of           
|                                                               |  | Securities to be  |           |                   |  | Securities          
|                                                               |  | Issued Upon       |           | Weighted-average  |  | Remaining Available 
|                                                               |  | Exercise of       |           | Exercise Price of |  | for Future Issuance 
|                                                               |  | Outstanding       |           | Outstanding       |  | (excluding          
|                                                               |  | Options, Warrants |           | Options, Warrants |  | Securities reflected
|Plan Category                                                  |  | and Rights        |           | and Rights        |  | in column(a))       
|                                                               |  |                   |           |                   |  |                     
|                                                               |  | (a)               |           | (b)               |  | (c)                 
|Equity compensation plans approved by security
    holders     |  |                   | 8,956,698 | (1)               |  | $                    | 6.83 |     |  |  | 7,680,986 | (2)
|Equity compensation plans not approved by
    security holders |  |                   | 831,852   | (3)               |  | $                    | 5.58 | (4) |  |  | 445,242   | (5)
|Total                                                          |  |                   | 9,788,550 |                   |  | $                    | 6.81 | (4) |  |  | 8,126,228 |    



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents (i) 2,137,291 Class A
    ordinary shares issuable upon the exercise of options
    outstanding under our Amended and Restated 1999 Share Option/
    Share Issuance Plan, or the 1999 Plan, (ii) 232,684
    Class A ordinary shares issuable upon the exercise of
    outstanding options assumed in connection with our acquisition
    of Spyglass, Inc. in July 2000, (iii) 1,531,800
    Class A ordinary shares issuable upon the exercise of
    options outstanding under our 2003 Incentive Plan, or the 2003
    Plan, and (iv) 5,054,923 Class A ordinary shares issuable
    upon the exercise of outstanding options, assumed in connection
    with our acquisition of ACTV, Inc. in July 2003.
|   
|(2) | Represents (i) 3,716,539 Class A
    ordinary shares available for future issuance under the 1999
    Plan, (ii) 3,464,447 Class A ordinary shares available
    for future issuance under the 2003 Plan and (iii) 500,000
    Class A ordinary shares available for future issuance under our
    Amended and Restated 1999 Employee Stock Purchase Plan, or ESPP.
    The number of Class A ordinary shares issuable under the
    ESPP was reset at 500,000 on December 31, 2002 and will be
    reset at 500,000 each successive December 31 through
    calendar year 2008, in each case for issuance during the
    following year.                                                                                

Our board of directors has suspended offering
periods under our ESPP, and no options or purchase rights are
currently outstanding under the ESPP.

16



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##### Table of Contents





|    |                                                                                                                                                                                                                                                                                                                                                  
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Represents (i) 54,758 Class A ordinary
    shares issuable upon exercise of outstanding stock options
    granted under our 2001 Nonstatutory Stock Option Plan, or the
    2001 Plan, and (ii) 777,094 Class A ordinary shares
    issuable upon the exercise of exchange rights granted under our
    2000 Exchange Plan, or the Exchange Plan.



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Exchange rights granted under the Exchange Plan
    enable the holder to exchange, generally on a one for one basis,
    shares of the common stock of our majority-owned subsidiary
    OpenTV, Inc. (including shares of OpenTV, Inc. common stock that
    may be acquired pursuant to the exercise of options outstanding
    under OpenTV, Inc.s Amended and Restated 1998 Stock
    Purchase/ Stock Issuance Plan, or the 1998 Plan, for our
    Class A ordinary shares. Although 822,534 Class A
    ordinary shares were reserved for future issuance under the
    Exchange Plan as of December 31, 2003, only 777,094 shares
    of OpenTV, Inc. common stock (62,000 of which were underlying
    options to purchase shares of OpenTV, Inc. common stock
    previously granted under the 1998 Plan at a weighted-average
    exercise price of $4.64) were actually eligible for exchange
    under the Exchange Plan as of that date. We no longer grant
    options under the 1998 Plan.



|    |                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | Does not include information regarding
    weighted-average exercise price of Class A ordinary shares
    issuable under the Exchange Plan because such issuances do not
    involve the payment of an exercise price or the provision of
    other monetary consideration.
|   
|(5) | Represents 445,242 Class A ordinary shares
    available for future issuance under the 2001 Plan.                                                                                                                                                                          



| |                                        
| | ---------------------------------------
| | 2001 Nonstatutory Stock Option
    Plan

Our board of directors adopted the 2001
Nonstatutory Stock Option Plan, or the 2001 Plan, in October
2001. The 2001 Plan did not require the approval of our
stockholders, and no stockholder approval was obtained or
sought. The material features of the 2001 Plan are summarized
below.

Share Reserve.We
have reserved an aggregate of 500,000 Class A ordinary
shares for issuance upon the exercise of options granted under
the 2001 Plan. As of December 31, 2003, no Class A
ordinary shares had been issued upon the exercise of options
granted under the 2001 Plan. Options to purchase 54,758
Class A ordinary shares were outstanding under the 2001
Plan as of December 31, 2003. If options awarded under the
2001 Plan are forfeited or cancelled, expire or otherwise
terminate without being exercised, then those options will again
become available for grant under the 2001 Plan.

Administration.The
compensation committee of our board of directors administers the
2001 Plan. The compensation committee has complete discretion to
make all decisions relating to the administration,
interpretation and operation of the 2001 Plan.

Eligibility.The
following groups of individuals are eligible to participate in
the 2001 Plan:



| |   |                                                                     
| | - | --------------------------------------------------------------------
| |  | employees (other than employees who are executive
    officers); and
|
| |  | consultants.                                                        

Structure of Plan.The 2001 Plan permits the grant of options to purchase
Class A ordinary shares to eligible participants. Options
to purchase our Class A ordinary shares that may be granted
under the 2001 Plan are non-statutory options and do not qualify
for the favorable tax treatment afforded incentive options under
Section 422 of the Code. The exercise price and other terms
of non-statutory options granted under the 2001 Plan will be
determined by the compensation committee. The compensation
committee may provide that non-statutory options will be
transferable.

Corporate
Transaction.Options granted under the
2001 Plan will automatically vest in full upon the occurrence of
certain change of control events, if such options are not
assumed or exchanged for equivalent rights by the successor
entity in accordance with the terms of the 2001 Plan. In the
event of a corporate transaction that does not result in the
automatic vesting of options and other awards, the board of
directors or the compensation committee has discretion to
accelerate vesting of such options and other awards.

Amendment and
Termination.The board of directors
may amend the 2001 Plan at any time. If our board of directors
amends the 2001 Plan, stockholder approval will be sought if
required by applicable law.

17



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##### Table of Contents



The 2001 Plan will terminate upon the earliest of
(i) ten years after its adoption by our board, or
(ii) such earlier date as determined by our board of
directors.


Recent Sales of Unregistered
Securities

During the year ended December 31, 2003, an
aggregate of 158,654 of our Class A ordinary shares were
issued upon the exercise of stock options granted under the
former incentive plans of ACTV, Inc., which we acquired in July
2003, at purchase prices ranging from $0.33 to $1.91. As a
result of our acquisition of ACTV, options outstanding under its
incentive plans were converted into options to purchase our
Class A ordinary shares. No underwriter was involved in
these sales of securities. These securities were issued without
registration under the Securities Act of 1933 pursuant to
Section 4(2) thereof, as a transaction not involving a
public offering.

18



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##### Table of Contents











|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

The selected consolidated financial data set
forth below should be read in conjunction with Item 7
Managements Discussion and Analysis of Financial Condition
and Results of Operations, and the Consolidated Financial
Statements and notes thereto included elsewhere in this report.
The historical results are not necessarily indicative of results
to be expected for any future period.

|                                                          |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |          |         | 
|--------------------------------------------------------- | ----------------------------------------------------------------------- | -------------------------------------------------- | ------- | ------- | ------- | ---- | -------- | -------- | ------- | ---- | ---------- | ---------- | --------- |  | -------- | -------- | ------- |  | ------- | -------- | ------- | 
|                                                          |                                                                         |                                                   
|                                                          |                                                                         | Year Ended December 31,                           
|                                                          |                                                                         |                                                   
|                                                          |                                                                         | 2003                                               |         | 2002    |         | 2001 |          | 2000     |         | 1999
|                                                          |                                                                         |                                                    |         |         |         |      |          |          |         |     
|                                                          |                                                                         |                                                   
|                                                          |                                                                         | (In thousands, except share and per share amounts)
|Consolidated Statement of Operations
    Data             |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |         
|Revenues:                                                 |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |         
|                                                          | Royalties                                                               |                                                    | $       | 25,192  |         |      | $        | 20,052   |         |      | $          | 33,800     |           |  | $        | 29,898   |         |  | $       | 14,782   |        
|                                                          | Services, support and other                                             |                                                    |         | 22,588  |         |      |          | 23,812   |         |      |            | 36,486     |           |  |          | 19,805   |         |  |         | 8,205    |        
|                                                          | Fees and revenue shares                                                 |                                                    |         | 12,961  |         |      |          | 11,278   |         |      |            | 3,346      |           |  |          |         |         |  |         |         |        
|                                                          | License fees                                                            |                                                    |         | 3,456   |         |      |          | 4,544    |         |      |            | 13,295     |           |  |          | 13,444   |         |  |         | 2,964    |        
|                                                          |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |         
|                                                          |                                                                         | Total revenues                                     |         |         | 64,197  |      |          |          | 59,686  |      |            |            | 86,927    |  |          |          | 63,147  |  |         |          | 25,951  | 
|Operating expenses:                                       |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |         
|                                                          | Cost of revenues(1)                                                     |                                                    |         | 45,713  |         |      |          | 47,344   |         |      |            | 37,775     |           |  |          | 18,837   |         |  |         | 6,002    |        
|                                                          | Research and development(2 and 5)                                       |                                                    |         | 25,321  |         |      |          | 35,200   |         |      |            | 43,542     |           |  |          | 60,508   |         |  |         | 82,403   |        
|                                                          | Sales and marketing(3)                                                  |                                                    |         | 13,833  |         |      |          | 32,865   |         |      |            | 37,649     |           |  |          | 28,481   |         |  |         | 11,971   |        
|                                                          | General and administrative(4)                                           |                                                    |         | 15,168  |         |      |          | 21,141   |         |      |            | 19,870     |           |  |          | 22,345   |         |  |         | 17,798   |        
|                                                          | Restructuring costs                                                     |                                                    |         | 6,587   |         |      |          | 29,414   |         |      |            |           |           |  |          |         |         |  |         |         |        
|                                                          | Amortization of intangible assets                                       |                                                    |         | 9,549   |         |      |          | 13,055   |         |      |            | 19,243     |           |  |          | 5,446    |         |  |         | 1,210    |        
|                                                          | Impairment of intangible assets                                         |                                                    |         | 1,497   |         |      |          | 24,796   |         |      |            |           |           |  |          |         |         |  |         |         |        
|                                                          | Amortization of goodwill                                                |                                                    |         |        |         |      |          |         |         |      |            | 394,495    |           |  |          | 170,706  |         |  |         |         |        
|                                                          | Impairment of goodwill                                                  |                                                    |         |        |         |      |          | 514,501  |         |      |            | 816,247    |           |  |          |         |         |  |         |         |        
|                                                          |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |         
|                                                          |                                                                         | Total operating expenses                           |         |         | 117,668 |      |          |          | 718,316 |      |            |            | 1,368,821 |  |          |          | 306,323 |  |         |          | 119,384 | 
|                                                          |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |         
|Loss from operations                                      |                                                                         |                                                    | (53,471 | )       |         |      | (658,630 | )        |         |      | (1,281,894 | )          |           |  | (243,176 | )        |         |  | (93,433 | )       
|Interest income                                           |                                                                         |                                                    | 1,572   |         |         |      | 5,205    |          |         |      | 10,518     |            |           |  | 12,232   |          |         |  | 898     |         
|Other expense, net                                        |                                                                         |                                                    | (1,103  | )       |         |      | (66      | )        |         |      | (33        | )          |           |  | (111     | )        |         |  | (75     | )       
|Impairment of equity investments and notes
    receivable |                                                                         |                                                    |        |         |         |      | (10,923  | )        |         |      | (14,915    | )          |           |  | (10,000  | )        |         |  |        |         
|Share of losses of equity investee                        |                                                                         |                                                    |        |         |         |      | (7,275   | )        |         |      |           |            |           |  |         |          |         |  |        |         
|Realized loss on sale of marketable equity
    securities |                                                                         |                                                    |        |         |         |      |         |          |         |      | (24,014    | )          |           |  | (1,687   | )        |         |  |        |         
|Minority interest                                         |                                                                         |                                                    | 171     |         |         |      | 518      |          |         |      | 202        |            |           |  | 34       |          |         |  | 2,153   |         
|                                                          |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |         
|                                                          | Loss before income taxes and cumulative effect of
    accounting change |                                                    |         | (52,831 | )       |      |          | (671,171 | )       |      |            | (1,310,136 | )         |  |          | (242,708 | )       |  |         | (90,457  | )      
|Income tax benefit (expense)                              |                                                                         |                                                    | (1,263  | )       |         |      | (1,541   | )        |         |      | 5,854      |            |           |  | 509      |          |         |  |        |         
|                                                          |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |         
|                                                          | Loss before cumulative effect of accounting change                      |                                                    |         | (54,094 | )       |      |          | (672,712 | )       |      |            | (1,304,282 | )         |  |          | (242,199 | )       |  |         | (90,457  | )      
|Cumulative effect of accounting change, net of tax        |                                                                         |                                                    |        |         |         |      | (129,852 | )        |         |      |           |            |           |  |         |          |         |  |        |         
|                                                          |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |         
|                                                          | Net loss                                                                |                                                    |         | (54,094 | )       |      |          | (802,564 | )       |      |            | (1,304,282 | )         |  |          | (242,199 | )       |  |         | (90,457  | )      
|Preferred stock deemed dividend                           |                                                                         |                                                    |        |         |         |      |         |          |         |      |           |            |           |  |         |          |         |  | 31,250  |         
|                                                          |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |         
|                                                          | Net loss attributable to ordinary shareholders                          |                                                    | $       | (54,094 | )       |      | $        | (802,564 | )       |      | $          | (1,304,282 | )         |  | $        | (242,199 | )       |  | $       | (121,707 | )      
|                                                          |                                                                         |                                                    |         |         |         |      |          |          |         |      |            |            |           |  |          |          |         |  |         |         

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|                                                                                 |                                                    |                                                    |            |       |   |      |            |       |   |      |            |        |   |   |            |       |   |   |            |       |  
|-------------------------------------------------------------------------------- | -------------------------------------------------- | -------------------------------------------------- | ---------- | ----- | - | ---- | ---------- | ----- | - | ---- | ---------- | ------ | - | - | ---------- | ----- | - | - | ---------- | ----- | -
|                                                                                 |                                                    |                                                   
|                                                                                 |                                                    | Year Ended December 31,                           
|                                                                                 |                                                    |                                                   
|                                                                                 |                                                    | 2003                                               |            | 2002  |   | 2001 |            | 2000  |   | 1999
|                                                                                 |                                                    |                                                    |            |       |   |      |            |       |   |     
|                                                                                 |                                                    |                                                   
|                                                                                 |                                                    | (In thousands, except share and per share amounts)
|Net loss per share attributable to ordinary
    shareholders, basic and diluted: |                                                    |                                                    |            |       |   |      |            |       |   |      |            |        |   |   |            |       |   |   |            |      
|                                                                                 | Before cumulative effect of accounting change      |                                                    | $          | (0.57 | ) |      | $          | (9.36 | ) |      | $          | (19.20 | ) |   | $          | (4.64 | ) |   | $          | (3.11 | )
|                                                                                 | Cumulative effect of accounting change, net of tax |                                                    |            |      |   |      |            | (1.81 | ) |      |            |       |   |   |            |      |   |   |            |      |  
|                                                                                 |                                                    |                                                    |            |       |   |      |            |       |   |      |            |        |   |   |            |       |   |   |            |      
|                                                                                 | Preferred stock deemed dividend                    |                                                    |            |      |   |      |            |      |   |      |            |       |   |   |            |      |   |   |            | (1.08 | )
|                                                                                 |                                                    |                                                    |            |       |   |      |            |       |   |      |            |        |   |   |            |       |   |   |            |      
|                                                                                 |                                                    | $                                                  | (0.57      | )     |   | $    | (11.17     | )     |   | $    | (19.20     | )      |   | $ | (4.64      | )     |   | $ | (4.19      | )    
|                                                                                 |                                                    |                                                    |            |       |   |      |            |       |   |      |            |        |   |   |            |       |   |   |            |      
|Shares used in per share calculation, basic and
    diluted                      |                                                    |                                                    | 94,818,278 |       |   |      | 71,839,101 |       |   |      | 67,937,686 |        |   |   | 52,190,338 |       |   |   | 29,065,478 |      
|                                                                                 |                                                    |                                                    |            |       |   |      |            |       |   |      |            |        |   |   |            |       |   |   |            |      



---



|    |                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Inclusive of $55, $1,277, $3,541, $2,603 and $53
    of share-based compensation for the years ended
    December 31, 2003, 2002, 2001 2000 and 1999, respectively.     
|   
|(2) | Inclusive of $59, $321, $1,171, $1,538 and $662
    of share-based compensation for the years ended
    December 31, 2003, 2002, 2001, 2000 and 1999, respectively.     
|   
|(3) | Inclusive of $24, $298, $1,644, $2,100 and $556
    of share-based compensation for the years ended
    December 31, 2003, 2002, 2001, 2000 and 1999, respectively.     
|   
|(4) | Inclusive of $33, $1,143, $3,233, $8,185 and
    $11,827 of share-based compensation for the years ended
    December 31, 2003, 2002, 2001, 2000 and 1999, respectively.
|   
|(5) | Inclusive of $24,909 non-cash warrant expense for
    the year ended 2000.                                                                                              

|                                      |  |                    |         |      |  |      |         |      |  |      |         |  |  |   |           |  |  |   |         | 
|------------------------------------- |  | ------------------ | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | --------- |  |  | - | ------- | 
|                                      |  |                   
|                                      |  | As of December 31,
|                                      |  |                   
|                                      |  | 2003               |         | 2002 |  | 2001 |         | 2000 |  | 1999
|                                      |  |                    |         |      |  |      |         |      |  |     
|                                      |  |                   
|                                      |  | (In thousands)    
|Consolidated Balance Sheet Data       |  |                    |         |      |  |      |         |      |  |      |         |  |  |   |           |  |  |   |         | 
|Cash and cash equivalents             |  | $                  | 47,747  |      |  | $    | 38,568  |      |  | $    | 69,249  |  |  | $ | 94,003    |  |  | $ | 6,307   | 
|Short-term marketable debt securities |  |                    | 10,577  |      |  |      | 26,940  |      |  |      | 28,454  |  |  |   | 115,367   |  |  |   | 180,228 | 
|Long-term marketable debt securities  |  |                    | 15,172  |      |  |      | 22,199  |      |  |      | 91,839  |  |  |   | 15,612    |  |  |   |        | 
|Working capital                       |  |                    | 19,395  |      |  |      | 30,276  |      |  |      | 100,083 |  |  |   | 219,966   |  |  |   | 182,238 | 
|Total assets                          |  |                    | 219,555 |      |  |      | 197,336 |      |  |      | 966,199 |  |  |   | 2,197,143 |  |  |   | 206,790 | 
|Total shareholders equity            |  |                    | 156,983 |      |  |      | 140,996 |      |  |      | 928,358 |  |  |   | 2,157,903 |  |  |   | 194,561 | 

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Item 7.                      Managements
Discussion and Analysis of Financial Condition and Results of
Operations

The following discussion and analysis provides
information concerning our financial condition and results of
operations. This discussion should be read in conjunction with
our consolidated financial statements and the notes
thereto.

Overview

We are one of the worlds leading providers
of software and solutions for interactive and enhanced
television.

We derive our revenues from the licensing of our
core software and related technologies, the licensing and
distribution of our content and applications and the delivery of
professional services. We typically receive one-time royalty
fees from manufacturers or network operators once a set-top box,
which incorporates our software, has been shipped to, or
activated by, the network operator. We also receive professional
services fees from consulting, engineering and training
engagements, fees for the maintenance and support of our
products and fees from revenue sharing arrangements related to
the use of our interactive content and applications. In
addition, we also receive ongoing licensing fees for various
software products that we sell.

Our financial results are largely dependent upon
the continued development of the digital television market and
the related capital expenditures being made and expected to be
made in the future by network operators to implement those
enhanced technologies. During 2002, reductions by network
operators in their capital spending and rollout of interactive
television-related products, and similar reductions by other
participants in the interactive television market, had a
significant adverse effect on the overall digital television
market, and, as a result, on our results of operations. We
addressed these economic issues by controlling and reducing
expenses during the second half of 2002 and into 2003. In 2003,
several of our existing network operator customers accelerated
their marketing efforts for digital television, and, as a
result, we experienced an increase in revenue from 2002.

In addition, our operating results for the past
several years have been affected by various acquisitions that we
completed. We acquired Static2358 Holdings Limited in 2001, Wink
Communications, Inc. in 2002, ACTV, Inc. in July 2003, and
substantially all of the assets of BettingCorp Limited in August
2003.

We earn significant revenues from customers who
are, or were, strategic investors in our business and certain
other related parties. In August 2002, Liberty Media Corporation
acquired a controlling interest in us from MIH Limited. As of
December 31, 2003, Liberty Medias total ownership
represented approximately 32.9% of the economic interest and
approximately 79.4% of the voting power of our ordinary shares
on an undiluted basis.

Revenues from these current and former related
parties (and their controlled affiliates) are set forth in the
table below (in millions). Other than Liberty Media, none of the
parties referred to in the table below held an equity interest,
as of December 31, 2003, in our company that exceeded five
percent.

|                                |  |                         |      |      |  |      |      |  |  |   |      | 
|------------------------------- |  | ----------------------- | ---- | ---- |  | ---- | ---- |  |  | - | ---- | 
|                                |  |                        
|                                |  | Year Ended December 31,
|                                |  |                        
|                                |  | 2003                    |      | 2002 |  | 2001
|                                |  |                         |      |      |  |     
|Motorola and General Instrument |  | $                       | 6.4  |      |  | $    | 6.8  |  |  | $ | 8.5  | 
|EchoStar                        |  |                         | 7.6  |      |  |      | 3.7  |  |  |   | 3.5  | 
|MIH Limited and its affiliates  |  |                         | 1.0  |      |  |      | 1.4  |  |  |   | 6.5  | 
|Liberty Media affiliates        |  |                         | 1.1  |      |  |      | 0.5  |  |  |   |     | 
|Time Warner                     |  |                         |     |      |  |      |     |  |  |   | 0.9  | 
|WowTV                           |  |                         |     |      |  |      | 0.4  |  |  |   | 0.9  | 
|                                |  |                         |      |      |  |      |      |  |  |   |      | 
|                                |  | $                       | 16.1 |      |  | $    | 12.8 |  |  | $ | 20.3 | 
|                                |  |                         |      |      |  |      |      |  |  |   |      | 

There has been a worldwide trend of consolidation
in the cable and satellite industries. We believe this trend is
likely to continue due to economic and competitive concerns and
it appears to be expanding to include

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other companies involved with the interactive
television industry. The News Corporation, for example, recently
completed its acquisition of a controlling stake in Hughes
Electronics, the parent of DirecTV, one of the two largest
satellite operators in the United States. The News Corporation
also controls British Sky Broadcasting, the largest satellite
operator in the United Kingdom and one of our most significant
customers, and other satellite operators throughout the world.
It also controls one of our competitors, NDS Group plc. That
type of consolidation, and similar trends in the industry, may
affect our long-term relationships with various customers and
may also affect our ability to obtain business in the future.
While the short and long-term effects of this trend remain
uncertain, they may require us to modify our business to adapt
to those changing relationships with industry participants and
to address competitive concerns that may arise as companies
consolidate.


Critical Accounting Policies and
Estimates

Our discussion and analysis of our financial
condition and results of operations is based upon our
consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the
reported amounts of assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and
expenses during the reporting period. In preparing these
consolidated financial statements, we made our best estimates
and judgments, which are normally based on knowledge and
experience with regards to past and current events and
assumptions about future events, giving due consideration to
materiality. Actual results could differ materially from these
estimates under different assumptions or conditions.

We believe the following critical accounting
estimates have the greatest potential impact on our consolidated
financial statements: revenue recognition; valuation allowances,
specifically the allowance for doubtful accounts and deferred
tax assets; valuation of investments in privately-held
companies; impairment of goodwill and intangible assets; and
restructuring costs. All of these accounting policies, estimates
and assumptions, as well as the resulting impact to our
financial statements, have been discussed with our audit
committee. For a detailed discussion on the application of these
and other accounting policies, see Note 2. Summary of
Significant Accounting Policies to our Consolidated
Financial Statements.



| |                    
| | -------------------
| | Revenue Recognition

We recognize revenue in accordance with current
generally accepted accounting principles that have been
prescribed for the software industry. Revenue recognition
requirements in the software industry are very complex and are
subject to change. Our revenue recognition policy is one of our
critical accounting policies because revenue is a key component
of our results of operations and is based on complex rules that
require us to make judgments and estimates. In applying our
revenue recognition policy we must determine what portions of
our revenue are recognized currently and which portions must be
deferred. In order to determine current and deferred revenue, we
make judgments and estimates with regard to future deliverable
products and services and the appropriate pricing for those
products and services. Our assumptions and judgments regarding
future products and services could differ from actual events.

Professional services revenues from software
development contracts, customization services and implementation
support are recognized generally on the percentage of completion
method. For fixed bid contracts under the percentage of
completion method, the extent of progress towards completion is
measured based on actual costs incurred to total estimated
costs. The actual results could differ from the percentage
estimates by the time a project is completed.

The recognition of revenues is partly based on
our assessment of the probability of collection of the resulting
accounts receivable balance. As a result, the timing or amount
of revenue recognition may have been different if different
assessments of the probability of collection of accounts
receivable had been made at the time the transactions were
recorded in revenue.

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| |                     
| | --------------------
| | Valuation Allowances

We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers
to make required payments. If the financial condition of our
customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be
required.

We record a valuation allowance to reduce our
deferred tax assets to the amount that is more likely than not
to be realized. We consider our potential future taxable income
and ongoing prudent and feasible tax planning strategies in
assessing the amount of our valuation allowance. Currently we
have a full valuation allowance on deferred tax assets in excess
of deferred tax liabilities. Adjustments may be required in the
future if we determine that an amount of deferred tax assets can
be realized.



| |                                                         
| | --------------------------------------------------------
| | Valuation of Investments in Privately-Held
    Companies

We invest in equity and debt instruments of
privately-held companies for business and strategic objectives,
and typically we do not attempt to reduce or eliminate the
inherent market risks of these investments. We perform periodic
reviews of these investments for impairment. Our investments in
privately-held companies are considered impaired when a review
of the investees operations and other indicators of
impairment indicate that there has been a decline in the fair
value that is other than temporary and that the carrying value
of the investment is not likely to be recoverable. Such
indicators include, but are not limited to, limited capital
resources, need for additional financing, and prospects for
liquidity of the related securities. Impaired investments in
privately-held companies are written down to estimated fair
value, which is the amount we believe is recoverable from the
investment.



| |                                                       
| | ------------------------------------------------------
| | Impairment of Goodwill and Other Intangible
    Assets

Our long-lived assets include goodwill and other
intangible assets, which are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable and in the case of
goodwill, annually. In assessing the recoverability of our
long-lived assets, we consider changes in economic conditions
and make assumptions regarding estimated future cash flows and
other factors. The biggest assumption impacting estimated future
cash flows is revenue growth. Estimates of future cash flows are
highly subjective judgments that can be significantly impacted
by changes in global and local business and economic conditions,
operating costs, competition and demographic trends. If our
estimates or underlying assumptions change in the future, we may
be required to record additional impairment charges.



| |                    
| | -------------------
| | Restructuring Costs

We monitor our organization structure and
associated operating expenses periodically. Depending upon
events and circumstances, actions may be taken to restructure
the business, including terminating employees, abandoning excess
lease space and incurring other exit costs. Any resulting
restructuring costs include numerous estimates made by us based
on our knowledge of the activity being affected and the cost to
exit existing commitments. These estimates could differ from
actual results. We monitor the initial estimates periodically
and record an adjustment for any significant changes in
estimates.

Years Ended December 31, 2003, 2002 and
2001



| |         
| | --------
| | Revenues

Revenues for the year ended December 31,
2003 were $64.2 million, an increase of 7.5% or
$4.5 million, from $59.7 million in 2002. Revenues for
the year ended December 31, 2002 were $59.7 million, a
decrease of 31% or $27.2 million, from $86.9 million
in 2001. Royalties accounted for 39% of revenues in 2003, 34% in
2002 and 39% in 2001. The acquisitions of Wink, ACTV and the
BettingCorp assets accounted for

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$3.1 million of revenues in 2003 and
$0.5 million of revenues in 2002. Revenues by line item
were as follows (in millions):


|                            |                |                         |      |      |  |      |    |     |   |      |      |      |  |  |    |     |   |   |      |      |  |  |    |     |  
|--------------------------- | -------------- | ----------------------- | ---- | ---- |  | ---- | -- | --- | - | ---- | ---- | ---- |  |  | -- | --- | - | - | ---- | ---- |  |  | -- | --- | -
|                            |                |                        
|                            |                | Year Ended December 31,
|                            |                |                        
|                            |                | 2003                    |      | %    |  | 2002 |    | %   |   | 2001 |      | %   
|                            |                |                         |      |      |  |      |    |     |   |      |      |     
|Royalties                   |                | $                       | 25.2 |      |  |      | 39 | %   |   | $    | 20.1 |      |  |  | 34 | %   |   | $ | 33.8 |      |  |  | 39 | %  
|Services, support and other |                |                         | 22.6 |      |  |      | 36 | %   |   |      | 23.8 |      |  |  | 40 | %   |   |   | 36.5 |      |  |  | 42 | %  
|Fees and revenue shares     |                |                         | 13.0 |      |  |      | 20 | %   |   |      | 11.3 |      |  |  | 19 | %   |   |   | 3.3  |      |  |  | 4  | %  
|License fees                |                |                         | 3.4  |      |  |      | 5  | %   |   |      | 4.5  |      |  |  | 7  | %   |   |   | 13.3 |      |  |  | 15 | %  
|                            |                |                         |      |      |  |      |    |     |   |      |      |      |  |  |    |     |   |   |      |      |  |  |    |    
|                            | Total Revenues |                         | $    | 64.2 |  |      |    | 100 | % |      | $    | 59.7 |  |  |    | 100 | % |   | $    | 86.9 |  |  |    | 100 | %
|                            |                |                         |      |      |  |      |    |     |   |      |      |      |  |  |    |     |   |   |      |      |  |  |    |    

Royalties.We derive
royalties from the sale of set-top boxes and other products that
incorporate our software to manufacturers and network operators
around the world. Royalty revenues are dependent on continued
deployment of set-top boxes by existing customers, upgrades to
newer versions of our software by existing customers and new
customers launching our technologies in their systems. Should
set-top box deployments and software upgrades by existing
customers slow or the acquisition of new customers not occur,
our royalty revenues would be negatively impacted in future
years. As there are a limited number of network operators
capable of deploying interactive television on a large-scale
basis, we expect that our ability to achieve incremental royalty
revenues could diminish in future years.

We recognize royalties upon notification of unit
shipments or activation of our software by manufacturers or
network operators. Royalty reports are generally received one
quarter in arrears. For non-refundable prepaid royalties, we
recognize revenues upon delivery of the software.

Royalties for the year ended December 31,
2003 were $25.2 million, an increase of 25% or
$5.1 million from $20.1 million in 2002. Growth was
experienced in all regions. Europe had an increase of
$1.3 million due to strong shipments by BSkyB, which was
partially offset by lower shipments by other customers in
Europe. Americas had an increase of $2.7 million due to
strong shipments by EchoStar, which was partially offset by
lower shipments by other customers. Asia Pacific had an increase
of $1.1 million.

Royalties for the year ended December 31,
2002 were $20.1 million, a decrease of 41% or
$13.7 million, from $33.8 million in 2001. During 2002
we experienced a significant decline in set-top box shipments.
The decline was especially acute in Europe, where unit volume
declined by 51% in 2002 compared to 2001. In Americas there was
a nominal increase in royalties due to strong shipments by
EchoStar, which was offset by lower shipments by other
customers. In Asia Pacific there was also a significant decline
in royalties in 2002.

Five of our customers sell set-top boxes to
BSkyB, which accounted for $6.4 million, or 25%, of
royalties in 2003 and $4.4 million, or 22%, of royalties in
2002. In 2001, a marketing payment we made to BSkyB of
$8.4 million was offset against revenues we received from
BSkyB in accordance with new accounting regulations that
generally require us to offset consideration we give to a
customer against revenue received from that customer, rather
than recording the consideration as an expense. From an
accounting perspective, this resulted in a negative amount of
revenues from BSkyB of $1.7 million in 2001.

The EchoStar royalty revenue is being amortized
over the seven-year term of our EchoStar agreements because
EchoStar has a right to receive unspecified future applications
when they are made available. As such, the royalties recognized
from EchoStar were $7.1 million, or 28% of royalties, in
2003, $3.3 million, or 16%, in 2002 and $1.9 million,
or 6%, in 2001. Until we are able to recognize that royalty
revenue, amounts that we receive from EchoStar are recorded as
deferred revenue on our balance sheet.

Our former controlling stockholder, MIH Limited,
through its subsidiaries, purchased set-top boxes from two of
our customers. Effective April 1, 2001, all royalties were
paid directly to us by the MIH subsidiaries. MIH subsidiaries,
directly and indirectly, accounted for $0.4 million of
royalties in 2003, zero royalties in 2002 and $4.6 million
of royalties in 2001.

Services, Support and Other.Services, support and other revenue
consist primarily of professional services consulting
engagements for set-top box manufacturers, network operators and
system integrators and maintenance, support and training for
set-top box manufacturers and network operators. As a result of
a general

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slowdown in interactive television-related
spending by our customers in 2002, revenues in this category
have declined for the last two years. For the year ended
December 31, 2003 revenues in this category were
$22.6 million, a decline of $1.2 million, or 5%, from
$23.8 million in 2002. For the year ended December 31,
2002, revenues in this category were $23.8 million, a
decline of $12.7 million, or 35%, from $36.5 million
in 2001.


One of our stockholders, General Instrument
Corporation, and its parent company, Motorola Inc., accounted
for $6.4 million in services, support and other revenue in
2003, $6.8 million in 2002 and $6.6 million in 2001.
In November 2000, we entered into a seven-year services
agreement under which Motorola guaranteed a minimum level of
business over the first four years of the agreement. The
remaining minimum guaranteed level of business through the end
of 2004 is $1.1 million. We expect our professional
services revenues to decline in 2004 unless we are successful in
obtaining additional professional services engagements.

Liberty Media and affiliates accounted for
$0.6 million of services, support and other revenue in 2003
and $0.3 million in 2002. MIH Limited and its related
entities accounted for $0.6 million of services, support
and other revenue in 2003, $1.2 million in 2002 and
$1.0 million in 2001. EchoStar accounted for
$0.4 million of services, support and other revenue in
2003, $0.4 million in 2002 and $0.2 million in 2001.

Fees and Revenue Shares.Fees and revenue shares consist of
PlayJam games channel fees, interactive advertising fees, net
betting and gaming revenues, and revenue shares received for
advertising and other interactive services.

For the year ended December 31, 2003, fees
and revenue shares were $13.0 million, an increase of
$1.7 million, or 15%, from $11.3 million in 2002. Our
PlayJam fees accounted for $0.4 million of the increase due
to favorable currency exchange rates. Advertising fees related
to the acquisition of Wink accounted for an increase of
$0.8 million due to the inclusion of Wink for twelve months
in 2003 compared with four months in 2002. Our betting and
gaming fees related to the acquisition of the BettingCorp assets
accounted for $0.3 million in 2003. Revenue shares
accounted for an increase of $0.2 million. For the year
ended December 31, 2002 fees and revenue shares were
$11.3 million, an increase of $8.0 million from
$3.3 million in 2001. The increase was attributable
primarily to the inclusion of PlayJam fees for twelve months in
2002 compared with six months in 2001, and the development of
new and more popular games combined with the introduction of an
interactive payment mechanism. Advertising fees related to the
acquisition of Wink accounted for $0.4 million in 2002.

Digital Interactive Television Group, or DITG, a
British telecommunications company that supports the collection
from end users of premium rate telephony fees for the PlayJam
channel on BSkyB, accounted for $7.4 million of our total
fees and revenue shares for 2003 compared with $6.6 million
for 2002. Individuals who play games on the PlayJam channel make
payments to their telecommunications provider. However, we
receive our revenues from DITG, which acts as the payment
intermediary.

On December 22, 2003, our carriage agreement
with DirecTV expired and we discontinued our ProSync product
offering on DirecTV. The fees we derived from ProSync-enabled
set-top boxes deployed in DirecTVs network, such as fees
from advertising, programming and licensing relationships, were
approximately $0.9 million in 2003.

License Fees.We
derive license fees from the licensing of products such as
Device Mosaic, OpenTV Streamer, OpenTV Software Developers Kit
and various applications.

Due to a slowdown in interactive
television-related spending by network operators for the launch
and expansion of their networks, we experienced a significant
decline in license fees in 2002 and 2003. In order to reverse
this declining trend, we will need to either license our
software to new customers or sell additional licenses to
existing customers. License fees for the year ended
December 31, 2003 were $3.4 million, a decline of
$1.1 million, or 24%, from $4.5 million in 2002.
License fees for the year ended December 31, 2002 were
$4.5 million, a decrease of $8.8 million, or 66%, from
$13.3 million in 2001.

Liberty Media affiliates accounted for
$0.5 million of license fees in 2003 and $0.2 million
in 2002. MIH and its related entities accounted for
$0.2 million of license fees in 2002 and $0.9 million
in 2001. Motorola accounted for $2.0 million of license
fees in 2001. EchoStar accounted for $1.4 million of
license fees in 2001.

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##### Table of Contents



Operating Expenses

Our total operating expenses were $117.7 million
for the year ended December 31, 2003, $718.3 million for
the year ended December 31, 2002 and $1.4 billion for the
year ended December 31, 2001. Excluding charges for
impairment and amortization of goodwill and intangible assets
and charges for restructuring costs, all as described in more
detail below, our operating expenses would have been $100.0
million for the year ended December 31, 2003, $136.5
million for the year ended December 31, 2002 and $138.8
million for the year ended December 31, 2001.

The acquisition of Wink in 2002 accounted for
$11.4 million of operating expenses for the year ended
December 31, 2002 and $12.9 million of operating
expenses for the year ended December 31, 2003. The
acquisitions of ACTV and the BettingCorp assets in 2003
accounted for $9.0 million of operating expenses for the
year ended December 31, 2003. The significant reduction in
expenses in 2003 was attributable to the restructuring actions
taken in 2002 and early 2003.

We expect our total operating expenses for 2004
to be lower than 2003, assuming no material changes to our
business or significant changes necessary to reflect additional
customer commitments.

Operating expenses by line item were as follows
(in millions):

|                                  |  |                         |       |         |  |      |     |         |  |      |       |         |  |  |      |   |  |   |         |  |  |  |      |  
|--------------------------------- |  | ----------------------- | ----- | ------- |  | ---- | --- | ------- |  | ---- | ----- | ------- |  |  | ---- | - |  | - | ------- |  |  |  | ---- | -
|                                  |  |                        
|                                  |  | Year Ended December 31,
|                                  |  |                        
|                                  |  |                         |       | % of    |  |      |     | % of    |  |      |       | % of   
|                                  |  | 2003                    |       | Revenue |  | 2002 |     | Revenue |  | 2001 |       | Revenue
|                                  |  |                         |       |         |  |      |     |         |  |      |       |        
|Cost of revenues                  |  | $                       | 45.7  |         |  |      | 71  | %       |  | $    | 47.3  |         |  |  | 79   | % |  | $ | 37.8    |  |  |  | 43   | %
|Research and development          |  |                         | 25.3  |         |  |      | 39  | %       |  |      | 35.2  |         |  |  | 59   | % |  |   | 43.5    |  |  |  | 50   | %
|Sales and marketing               |  |                         | 13.8  |         |  |      | 21  | %       |  |      | 32.9  |         |  |  | 55   | % |  |   | 37.6    |  |  |  | 43   | %
|General and administrative        |  |                         | 15.2  |         |  |      | 24  | %       |  |      | 21.1  |         |  |  | 35   | % |  |   | 19.9    |  |  |  | 23   | %
|Restructuring costs               |  |                         | 6.6   |         |  |      | 10  | %       |  |      | 29.4  |         |  |  | 49   | % |  |   |        |  |  |  |     |  
|Amortization of intangible assets |  |                         | 9.6   |         |  |      | 15  | %       |  |      | 13.1  |         |  |  | 22   | % |  |   | 19.3    |  |  |  | 22   | %
|Impairment of intangible assets   |  |                         | 1.5   |         |  |      | 2   | %       |  |      | 24.8  |         |  |  | 42   | % |  |   |        |  |  |  |     |  
|Amortization of goodwill          |  |                         |      |         |  |      |    |         |  |      |      |         |  |  |     |   |  |   | 394.5   |  |  |  | 454  | %
|Impairment of goodwill            |  |                         |      |         |  |      |    |         |  |      | 514.5 |         |  |  | 862  | % |  |   | 816.2   |  |  |  | 939  | %
|                                  |  |                         |       |         |  |      |     |         |  |      |       |         |  |  |      |   |  |   |         |  |  |  |      |  
|Total Operating Expenses          |  | $                       | 117.7 |         |  |      | 183 | %       |  | $    | 718.3 |         |  |  | 1203 | % |  | $ | 1,368.8 |  |  |  | 1575 | %
|                                  |  |                         |       |         |  |      |     |         |  |      |       |         |  |  |      |   |  |   |         |  |  |  |      |  

Cost of Revenues.Cost of revenues consist primarily of
compensation-related expenses and related overhead costs
associated with professional services engagements, network
infrastructure and bandwidth costs of our interactive games and
betting channels, and amortization of developed technology.

Cost of revenues for the year ended
December 31, 2003 were $45.7 million, a decrease of
$1.6 million from $47.3 million in 2002. As a
percentage of revenues, cost of revenues were 71% in 2003
compared with 79% in 2002. The primary reason for the decrease
was the restructuring actions taken in 2002 and early 2003.
There was also a decrease of $4.0 million relating to a
contract termination cost that did not recur in 2003. In
addition, there was a decrease of $1.2 million in
amortization of share-based compensation for certain options
that were cancelled or became fully-vested during 2003. These
reductions more than offset the increase of $6.2 million of
expenses incurred from the acquisition of Wink and the
$4.0 million of expenses incurred from the acquisitions of
ACTV and the BettingCorp assets.

Cost of revenues for the year ended
December 31, 2002 were $47.3 million, an increase of
$9.5 million from $37.8 million in 2001. As a
percentage of revenues, cost of revenues were 79% in 2002
compared with 43% in 2001. The primary reason for the increase
was $11.7 million of costs related to the growth of the
PlayJam business and the inclusion of PlayJam for twelve months
in 2002 compared with six months in 2001. In addition, there
were $3.8 million of costs associated with Wink, which was
acquired in 2002, $2.8 million for estimated contract
termination costs, and $1.0 million for additional
amortization of developed technology. These increases were
offset by decreases of $6.4 million due to reduced
staffing, consultants, travel and overhead costs for the
professional services group as a result of the reduced volume of
engagements,

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$1.1 million in bonus compensation, and
$2.3 million in share-based compensation for certain
options which were cancelled or became fully-vested during 2002.


Research and Development.Research and development expenses
consist primarily of compensation-related expenses and related
overhead costs incurred for both new product development and
enhancements to our range of software and application products.

Research and development expenses for the year
ended December 31, 2003 were $25.3 million, a decrease
of $9.9 million from $35.2 million in 2002. As a
percentage of revenues, research and development expenses were
39% in 2003 compared with 59% in 2002. The primary reason for
the decrease was the restructuring actions taken in 2002 and
early 2003. This decrease more than offset the increase of
$3.7 million from the acquisitions of ACTV and the
BettingCorp assets.

Research and development expenses for the year
ended December 31, 2002 were $35.2 million, a decrease
of $8.3 million from $43.5 million in 2001. As a
percentage of revenues, research and development expenses were
59% in 2002 compared with 50% in 2001. The primary reason for
the decrease was reduced staffing, travel and overhead costs of
$7.9 million coupled with a decrease of $1.6 million
in bonus compensation, and a decrease of $0.8 million due
to lower share-based compensation for certain options which were
cancelled or became fully-vested. The results for 2001 included
a provision of $2.1 million for in-process research and
development associated with the acquisition of Spyglass. These
decreases were offset by an increase of $2.8 million,
including $1.0 million of in-process research and
development costs resulting from the acquisition of Wink and an
increase of $1.3 million resulting from Static being
included in the 2002 results for the full year.

We believe that research and development spending
is critical to remain competitive in the marketplace. We will
continue to focus on the timely development of new and enhanced
interactive television products for our customers, and we plan
to continue investing at levels that are adequate to develop our
technologies and product offerings.

Sales and Marketing.Sales and marketing expenses consist
primarily of advertising and other marketing-related expenses,
compensation-related expenses and related overhead costs, and
travel costs.

Sales and marketing expenses for the year ended
December 31, 2003 were $13.8 million, a decrease of
$19.1 million from $32.9 million in 2002. As a
percentage of revenues, sales and marketing expenses were 21% in
2003 compared with 55% in 2002. As part of the restructuring
actions taken in 2002 and early 2003, discretionary marketing
spending was reduced. In addition, as a result of the
cancellation of the agreement with DirecTV in December 2003, we
reversed a $3.8 million accrual that we had made for
development funds which were no longer due to DirecTV.

Sales and marketing expenses for the year ended
December 31, 2002 were $32.9 million, a decrease of
$4.7 million from $37.6 million in 2001. As a
percentage of revenues, sales and marketing expenses were 55% in
2002 compared with 43% in 2001. Expenses attributable to our
advertising, trade show, branding and other discretionary
marketing programs decreased by $3.3 million as we reduced
expenses in response to the significant decrease in total
revenues. Furthermore, expenses decreased by $3.4 million
due to reduced staffing, overhead and travel; $1.7 million
due to lower sales commissions and bonus compensation; and
$1.4 million due to lower share-based compensation for
certain options which were cancelled or became fully vested in
2002. These decreases were offset by an increase of
$3.9 million attributable to the acquisition of Wink and
$1.2 million resulting from Static being included in the
2002 results for a full year.

General and Administrative.General and administrative expenses
consist primarily of compensation-related expenses and related
overhead costs, provision for doubtful accounts and fees for
professional services.

General and administrative expenses for the year
ended December 31, 2003 were $15.2 million, a decrease
of $5.9 million from $21.1 million in 2002. As a
percentage of revenues, general and administrative expenses were
24% in 2003 compared with 35% in 2002. The primary reason for
the decrease was the restructuring actions taken in 2002 and
early 2003. In addition, there was a decrease of
$1.6 million in the provision for doubtful accounts, a
decrease of $1.1 million in amortization of share-based
compensation for

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certain options which were cancelled or became
fully-vested during 2003, and a decrease of $0.8 million in
retention payments for certain key management personnel. These
decreases more than offset the increase in general and
administrative expenses of $0.9 million from the
acquisitions of ACTV and the BettingCorp assets.


Commencing in August 2002, Liberty Broadband
Interactive Television, Inc., or Liberty Broadband, a wholly
owned subsidiary of Liberty Media, provided management services
for us. We reimbursed them for the services based on the
estimated percentage of time that various individuals employed
by Liberty Broadband dedicated to the performance of services
for us. In addition, we also reimbursed them for an allocated
portion of their administrative costs. For the year ended
December 31, 2003, total management charges from Liberty
Broadband for compensation and general administrative costs were
$2.0 million. In February 2004, our management relationship
with Liberty Broadband was terminated, which we expect to help
reduce our general and administrative expenses in 2004.

General and administrative expenses for the year
ended December 31, 2002 were $21.1 million, an
increase of $1.2 million from $19.9 million in 2001.
As a percentage of revenues, general and administrative expenses
were 35% in 2002 compared with 23% in 2001. The increase
included $0.6 million from the inclusion of four months of
operating results of Wink, and $1.1 million from the
inclusion of Statics operating results for a full year in
2002. In addition, the 2002 results include $1.1 million
for retention payments to certain key management personnel with
no comparable expense in 2001 and an increase of
$0.5 million in the provision for doubtful accounts. These
increases were offset by a decrease of $2.1 million due to
lower share-based compensation for certain options which were
cancelled or became fully vested and lower bonus compensation.

Restructuring Costs.During 2003 and 2002, we took several
initiatives to reduce operating expenses around the world. As a
result of these actions, headcount was reduced by
79 employees in 2003 and approximately 260 employees
in 2002. Provision was also made for excess office space and the
write-down of leasehold improvements and other property and
equipment that was abandoned. These initiatives resulted in
total restructuring costs of $6.6 million in 2003 and
$29.4 million in 2002.

Impairment and Amortization of Goodwill and
Intangible Assets.In July 2000, we
acquired Spyglass, which resulted in approximately $1.9 billion
of goodwill. At December 31, 2001, we recorded an
impairment of $816.2 million against the carrying value of
goodwill as a result of our cash flow projections that indicated
that the future cash flows were not sufficient to result in the
recovery of the carrying value of our fixed and intangible
assets. In accordance with the adoption of Statement of
Financial Accounting Standards No. 142, Goodwill and
Other Intangible Assets, we re-evaluated the amount
recorded as goodwill as of January 1, 2002 and determined
that a transitional impairment of $129.9 million had
occurred. This amount has been shown as a cumulative effect of
an accounting change in the consolidated statements of
operations. In the third quarter of 2002, due to reductions by
network operators in their capital spending and rollout of
interactive television-related products and similar reductions
by other customers, we revised our cash flow projections for the
remainder of calendar year 2002 and future years. Based on these
cash flow projections and other factors, including the decline
in the market price of our Class A ordinary shares, we
determined that the remaining goodwill was impaired, and
accordingly, wrote off the balance of $514.5 million. As a
result of new accounting rules for goodwill, there was no
amortization required in 2002, whereas the amortization of
goodwill was $394.5 million for the year ended
December 31, 2001.

In the third quarter of 2002, we determined that
an impairment of $24.8 million had occurred in the value of
the patents related to our OpenStar joint venture with EchoStar
due to the absence of any current or future expected cash flow
generated by the joint venture. In the fourth quarter of 2003,
we determined than an impairment of $1.5 million had
occurred in the value of patents related to our acquisition of
Cablesoft due to the absence of any current or future expected
cash flow associated with the Cablesoft technologies.

Intangible assets are amortized on a
straight-line basis over the estimated benefit periods of
1.5 to 13 years. Amortization of developed
technologies was $5.1 million for the year ended
December 31, 2003, $5.2 million for the year ended
December 31, 2002, and $4.2 million for the year ended
December 31, 2001. These amounts have been included in the
consolidated statements of operations as cost of revenues.
Amortization of other intangible assets was $9.6 million
for the year ended December 31, 2003, $13.1 million

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for the year ended December 31, 2002, and
$19.3 million for the year ended December 31, 2001.
The decrease of $3.5 million in amortization expense for
2003 compared to 2002 was due primarily to the expiration of the
amortization of certain Spyglass intangibles that had an
amortization period of three years. The decrease of
$6.2 million in amortization expense for 2002 compared to
2001 was due primarily to the impairment of the patents related
to the OpenStar joint venture and the expiration of the
amortization of certain Spyglass intangibles that had an
amortization period of 1.5 years.




| |                
| | ---------------
| | Interest Income

As a result of declining interest rates in the
United States coupled with decreases in our investment portfolio
resulting from the sale of investment securities both to support
our operations and to finance our acquisitions of Wink in 2002
and ACTV and the BettingCorp assets in 2003, interest income for
the year ended December 31, 2003 was $1.6 million
compared with $5.2 million for the year ended
December 31, 2002 and $10.5 million for the year ended
December 31, 2001.

Other Income and Expense Items

Historically we made various equity investments
in, and loans to, certain privately-held companies. Most of
these companies subsequently experienced severe cash flow
problems, and we found it necessary to write down the value of
our private equity investments. For the year ended
December 31, 2002, we wrote down the remaining balance of
$10.9 million of such private equity investments and our
share of losses of private equity investee was
$7.3 million. For the year ended December 31, 2001,
there was a write-down of private equity investments of
$14.9 million.

As a result of the acquisition of Spyglass in
July 2000, we acquired certain marketable equity securities.
These securities were sold for realized losses of
$24.0 million for the year ended December 31, 2001.

During the year ended December 31, 2003
other expense was $1.1 million, which included
$0.9 million for the settlement of fees due under an
investment banking arrangement.

Minority Interest

In November 2000, we established Spyglass
Integration, Inc., a co-owned venture with Motorola. Due to the
losses of this venture, we recorded minority interest income of
$0.2 million for the year ended December 31, 2003,
$0.5 million for the year ended December 31, 2002, and
$0.2 million for the year ended December 31, 2001.

Income Taxes

We have significant United States federal tax
loss carryforwards. However, we are subject to income taxes in
certain state and foreign jurisdictions and we have foreign
taxes withheld from certain royalty payments. Income tax expense
was $1.3 million for the year ended December 31, 2003
and $1.5 million for the year ended December 31, 2002.
For the year ended December 31, 2001, there was a net
income tax benefit of $5.9 million, which was comprised of
a current tax provision of $1.4 million offset by a
deferred tax credit of $7.3 million resulting from the fair
value calculations for the aforementioned marketable equity
securities acquired in connection with our acquisition of
Spyglass and which were subsequently sold.

Liquidity and Capital Resources

We expect to be able to fund our capital
requirements for at least the next twelve months by using
existing cash balances and short-term and long-term marketable
debt securities, if our assumptions about our revenues, expenses
and cash commitments are generally accurate. Because we cannot
be certain that our assumptions about our business or the
interactive television market in general will prove to be
accurate, our capital requirements may differ from our current
expectations.

As of December 31, 2003, we had cash and
cash equivalents of $47.7 million, which was an increase of
$9.1 million from the prior year. Cash and cash equivalents
as of December 31, 2002 and 2001 were $38.6 million
and $69.2 million, respectively. Taking into account
short-term and long-term marketable debt securities of
$25.8 million, our cash, cash equivalents and marketable
debt securities were $73.5 million as of December 31,
2003 compared to $87.7 million as of December 31, 2002
and $189.5 million as of

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December 31, 2001. Our primary source of
cash is receipts from revenue. One customer accounted for 17% of
net accounts receivable as of December 31, 2003. The
primary uses of cash are payroll, general operating expenses and
cost of revenues.


Cash used in operating activities was
$42.5 million for the year ended December 31, 2003,
compared with $43.9 million for the year ended
December 31, 2002 and $34.3 million for 2001. The
increases in cash uses were due primarily to our continuing
operating losses, including restructuring payments.

Cash provided from investing activities was
$48.2 million for the year ended December 31, 2003,
due primarily to the sale of marketable debt securities. Uses of
cash included $10.1 million for acquisitions and
$2.9 million for capital expenditures. Cash provided from
investing activities was $5.3 million for the year ended
December 31, 2002, primarily due to the sale of marketable
debt securities to finance the acquisition of Wink. Uses of cash
included $81.5 million for acquisitions, net of cash
acquired, and $7.7 million for capital expenditures. For
the year ended December 31, 2001, net cash used in
investing activities was $2.9 million. Uses of cash
included $14.2 million for the acquisition of Static and
$14.2 million for capital expenditures, offset by
$16.5 million from the sale of marketable equity securities
and $9.0 million net from a decrease in marketable debt
securities and other items.

Cash provided from financing activities was
$3.3 million for the year ended December 31, 2003,
primarily due to proceeds from the exercise of stock options and
a capital contribution to fund management retention payments
from our former controlling stockholder, MIH Limited. For the
year ended December 31, 2002, cash provided from financing
activities was $7.4 million due to proceeds from the
issuance of ordinary shares and a capital contribution from MIH
Limited. For the year ended December 31, 2001, cash
provided from financing activities was $12.7 million due to
the exercise of warrants and stock options and issuance of
shares under our employee stock purchase plan.

We use professional investment management firms
to manage most of our invested cash. The portfolio consists of
highly liquid, high-quality investment grade securities of the
United States government and agencies, corporate notes and bonds
and certificates of deposit that predominantly have maturities
of less than three years. All investments are made according to
our investment policy, which has been approved by our Board of
Directors.



| |                                            
| | -------------------------------------------
| | Commitments and Contractual
    Obligations

Information as of December 31, 2003
concerning the amount and timing of required payments under our
contractual obligations is summarized below (in millions):

|                              |  |       |      |           |  |       |     |       |  |        |      |  |  |   |      |  |  |   |     | 
|----------------------------- |  | ----- | ---- | --------- |  | ----- | --- | ----- |  | ------ | ---- |  |  | - | ---- |  |  | - | --- | 
|                              |  |       |      | Less than |  | 1-3   |     | 4-5   |  | Over 5
|                              |  | Total |      | 1 Year    |  | Years |     | Years |  | Years 
|                              |  |       |      |           |  |       |     |       |  |       
|Operating leases              |  | $     | 26.1 |           |  | $     | 4.6 |       |  | $      | 8.6  |  |  | $ | 6.4  |  |  | $ | 6.5 | 
|Purchase obligations          |  |       | 9.8  |           |  |       | 4.2 |       |  |        | 1.6  |  |  |   | 4    |  |  |   |    | 
|                              |  |       |      |           |  |       |     |       |  |        |      |  |  |   |      |  |  |   |     | 
|Total contractual obligations |  | $     | 35.9 |           |  | $     | 8.8 |       |  | $      | 10.2 |  |  | $ | 10.4 |  |  | $ | 6.5 | 
|                              |  |       |      |           |  |       |     |       |  |        |      |  |  |   |      |  |  |   |     | 

In the ordinary course of business we enter into
various arrangements with vendors and other business partners
for bandwidth, marketing, and other services. Minimum
commitments under these arrangements as of December 31,
2003 were $3.2 million, $1.5 million and
$0.1 million for the years ending December 31, 2004,
2005, and 2006, respectively. In addition, we have a variable
commitment with a cable provider that is based on households
that receive our ProSync service. Based on current expectations,
we believe that this commitment may aggregate up to
approximately $1.0 million for the year ended
December 31, 2004.

As of December 31, 2003, we had two standby
letters of credit aggregating approximately $2.0 million
that were issued to landlords at two of our leased properties
and we had $10.0 million of marketable debt securities
pledged with a bank for foreign exchange facilities.

In March 1998, we entered into a licensing and
distribution agreement with Sun Microsystems, Inc. under which
Sun Microsystems granted us a non-exclusive, non-transferable
license to develop and distribute

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products based upon Sun Microsystemss Java
technology. Subsequent amendments extended our license through
December 2006. As amended, the agreement requires us to make a
payment of $4.0 million to Sun Microsystems in February
2007, less any amounts previously paid for support and royalty
fees, which have been nominal to date.




| |                 
| | ----------------
| | Indemnifications

In the normal course of our business, we provide
indemnification to customers against claims of intellectual
property infringement made by third parties arising from the use
of our products. Historically, costs related to these
indemnification provisions have not been significant and we are
unable to estimate the maximum potential impact of these
indemnification provisions on our future results of operations,
although our liabilities in those arrangements are customarily
limited in various respects, including monetarily. As permitted
under the laws of the British Virgin Islands, we have agreed to
indemnify our officers and directors for certain events or
occurrences while the officer or director is, or was serving, at
our request in such capacity. The maximum potential amount of
future payments we could be required to make under these
indemnification agreements is unlimited; however, we have
director and officer insurance coverage that limits our exposure
and enables us to recover a portion of any future amounts paid.
We believe the estimated fair value of these indemnification
agreements in excess of applicable insurance coverage is not
material.

Recent Accounting Pronouncements

In November 2002, the Financial Accounting
Standards Board, or FASB, issued Interpretation, or FIN,
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, including Indirect Guarantees of
Indebtedness of Others, which clarifies disclosure and
recognition/measurement requirements related to certain
guarantees. The disclosure requirements are effective for
financial statements issued after December 15, 2002 and the
recognition/measurement requirements are effective on a
prospective basis for guarantees issued or modified after
December 31, 2002. The adoption of FIN 45 did not have
a material impact on our financial position, results of
operations, or cash flows.

In December 2002, the FASB issued Statement of
Financial Accounting Standards, or SFAS, 148, which provides
alternative methods of transition for voluntary change to the
fair value based method of accounting for stock-based employee
compensation. In addition, SFAS 148 amends the disclosure
requirements of SFAS 123 to require more prominent and more
frequent disclosures in financial statements about the effects
of stock-based compensation. The transition guidance and annual
disclosure provisions of SFAS 148 are effective for fiscal
years ending after December 15, 2002. The interim
disclosure provisions are effective for financial reports
containing financial statements for interim periods beginning
after December 15, 2002. The adoption of SFAS 148 did
not have a material impact on our consolidated financial
position, results or operations or cash flows.

In January 2003, the Emerging Issues Task Force,
or EITF, reached a consensus regarding EITF No. 00-21,
Revenue Arrangements with Multiple Deliverables,
which requires companies to determine whether an arrangement
involving multiple deliverables contains more than one unit of
accounting. In applying EITF No. 00-21, revenue
arrangements with multiple deliverables should be divided into
separate units of accounting if the deliverables in the
arrangement meet certain criteria. Arrangement consideration
should be allocated among the separate units of accounting based
on their relative fair values. This issue is effective for
revenue arrangements entered into for fiscal periods beginning
after June 14, 2003. The adoption of this consensus did not
have a material impact on our financial position, results of
operations, or cash flows.

In January 2003, the FASB issued
FIN No. 46, Consolidation of Variable Interest
Entities, which addresses consolidation by a business of
variable interest entities in which it is the primary
beneficiary. FIN 46 is effective immediately for certain
disclosure requirements and variable interest entities created
after January 31, 2003, and in the first interim or annual
period beginning after December 15, 2003 for all other
variable interest entities entered into prior to
January 31, 2003. Certain disclosure requirements apply to
any financial statements issued after December 31, 2004. In
December 2003, the FASB issued FIN 46R, which made certain
amendments to FIN 46. The revision clarifies the definition
of a business by providing a scope

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exemption that eliminates the overly broad
definition in the original release that potentially could have
classified any business as a variable interest entity. The
revision also delays the effective date of the Interpretation
from the first reporting period following December 15, 2003
to the first reporting period ending after March 15, 2004.
We do not have any ownership in any variable interest entities
as of December 31, 2003. We will apply the consolidation
requirements of FIN 46R in future periods if we should own
any interest in any variable interest entity.


In April 2003, the FASB issued SFAS 149,
Amendment of Statement 133 on Derivative Instruments
and Hedging Activities. SFAS 149 amends and clarifies
the accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for
hedging activities under SFAS 133, Accounting for
Derivative Instruments and Hedging Activities.
SFAS 149 is generally effective for contracts entered into
or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. We do not
have any derivative instruments and hedging activities as of
December 31, 2003. We will apply SFAS 149 in future
periods if we should have any derivative instruments and hedging
activities.

In May 2003, the FASB issued SFAS 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.
SFAS 150 requires that certain financial instruments, which
under previous guidance were accounted for as equity, must now
be accounted for as liabilities. The financial instruments
affected include mandatory redeemable stock, certain financial
instruments that require or may require shares of stock.
SFAS 150 is effective for all financial instruments entered
into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning
after June 15, 2003. We do not have any financial
instruments with characteristics of both liabilities and equity
as of December 31, 2003. We will apply SFAS 150 in
future periods if we should have any financial instruments with
characteristics of both liabilities and equity.

In December 2003, the Staff of the Securities and
Exchange Commission issued SAB 104, Revenue
Recognition, which amends SAB 101, Revenue
Recognition in Financial Statements. SAB 104 rescinds
accounting guidance contained in SAB 101 related to
multiple element revenue arrangements, superseded as a result of
the issuance of EITF 00-21. Additionally, SAB 104
rescinds the SECs Revenue Recognition in Financial
Statements Frequently Asked Questions and Answers issued with
SAB 101 that had been codified in SEC Topic 13,
Revenue Recognition. The adoption of SAB 104 did not have a
material impact on our financial position, results of
operations, or cash flows.

Factors That May Affect Future
Results

In addition to the other information contained in
this annual report on Form 10-K, you should consider
carefully the following factors in evaluating OpenTV and our
business.

We have a history of net losses, and we may
continue to experience net losses in the future.

We have incurred significant net losses since our
inception. Our net loss for the years ended December 31,
2001, 2002 and 2003 was approximately $1,304.3 million,
$802.6 million and $54.1 million, respectively. We
expect to continue to incur significant sales and marketing,
product development and administrative expenses and expect to
continue to suffer net losses in the near term. We will need to
generate significant revenue to achieve and maintain
profitability. We cannot be certain that we will achieve,
sustain or increase profitability in the future. Any failure to
significantly increase revenue as we implement our product and
distribution strategies would adversely affect our business,
financial condition and operating results.

We have historically derived a significant
percentage of our revenues from licensing our core middleware
product to network operators. Our opportunities for future
revenue growth with that product, especially outside of the
United States, may be limited.

We have on a historic basis derived a significant
percentage of our total revenues from royalties associated with
the deployment of our core middleware and fees charged for
services rendered in support of our middleware deployments. Only
a limited number of network operators worldwide currently deploy
interactive products and services in a meaningful way. While we
continue to seek deployments within the United States,

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we have a significant number of customers outside
of the United States that have deployed our core middleware. In
most cases, the number of network operators in any particular
country is relatively small, and to the extent that we have
already achieved deployments in those countries, the
opportunities for future growth of our middleware business may
be limited. Accordingly, our ability to generate significant
additional core middleware-related revenues from customers
outside of the United States may be limited.


In addition, to meet the different needs of our
customers, we have deployed multiple versions of our core
middleware platform to network operators around the world.
Maintaining and supporting multiple platforms concurrently is
expensive because it requires us to devote significant
resources, including engineering and technical support, to older
platforms that may not have significant distribution. We intend,
over time, to migrate our network operator customers to a
standard middleware platform in order to reduce our costs.
However, it is difficult to predict the timing of network
upgrades by operators, and when they do decide to upgrade, there
can be no guarantee that they will choose to license our
standard middleware platform or require certain customization.

Our capacity to generate future revenues
associated with our core middleware may also be limited due to a
number of reasons, including:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | network operators that have selected our core
    middleware may switch to another middleware platform for the
    provision of interactive services, reduce their pace of set-top
    box deployment or stop deploying set-top boxes enabled with our
    core middleware, decrease or stop their use of our support
    services, or choose not to upgrade or add additional features to
    the version of our core middleware running on their networks;
|
| |  | network operators that have not selected our core
    middleware may choose another middleware platform for the
    provision of interactive services; or                                                                                                                                                                                                                                                                                                   
|
| |  | a meaningful opportunity to deploy our core
    middleware in the markets that have not yet adopted interactive
    television on a large scale may never develop or may develop at
    a very slow pace.                                                                                                                                                                                                                                                   

Any of these eventualities would have an adverse
effect on our results of operations.

We expect a more significant portion of our
revenue growth in the future to be derived from interactive
content and applications that we develop and market. If we are
not successful in developing and marketing that interactive
content and those applications, our future revenue growth may be
limited.

We expect over the next several years to develop
extensive interactive content and applications, including gaming
channels, addressable and targeted advertising and programming
synchronous applications. The market for interactive content and
applications is still nascent and evolving. Historically, we
have derived only a relatively small percentage of our total
revenue from these offerings. We cannot be certain that the
demand for or the market acceptance of interactive content and
applications will develop as we anticipate, and even if they do,
we cannot be certain that we will be able to market that content
and those applications effectively and successfully respond to
changes in consumer preferences. In addition, our ability to
market those products will be affected to a large degree by
network operators. If network operators determine that our
interactive content and applications do not meet their business
or operational expectations, the operators may choose not to
offer our applications to their customers. To the extent that
network operators fail to renew or enter into new or expanded
contracts with us for provision of interactive content (such as
our enhanced interactive television service) and applications
(such as the PlayJam channel), we will be unable to maintain or
increase the level of distribution of our interactive content
and applications and the associated revenue from those
offerings. Moreover, due to global economic conditions, network
operators may slow down their deployment of new content and
applications offerings, and such actions would negatively impact
our revenue. Accordingly, our ability to generate substantial
revenues from our interactive content and applications offerings
is uncertain.

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We may seek to generate a significantly
greater percentage of our revenue growth in the future from
revenue sharing and subscription based arrangements. If we are
unsuccessful in developing those revenue models, then our future
revenue growth may be limited and our results of operations will
be adversely affected.

We have historically generated a substantial
portion of our revenue from royalty and licensing fees related
to the licensing of our core middleware products and from fees
for professional services that we provide. We believe that our
capacity to generate future revenues in this manner may be
limited, and if we are unsuccessful in evolving our revenue
model, our opportunities for future revenue growth, particularly
outside of the United States, may be limited. We expect, over
time, that we may need to seek an increasing percentage of our
revenues from revenue sharing arrangements with network
operators, programmers and advertisers. In those instances, we
would typically receive a percentage of the payments that a
network operator, programmer or advertiser may receive from
transactions that make use of our interactive content or
applications. We also expect, over time, that we may need to
seek an increasing percentage of our revenues from
subscription-based fee arrangements. In those instances, we
would typically receive a fixed payment, over a period of time,
based on the number of subscribers or viewers that use or access
our technologies, content or applications. There can no
guarantee that we will be successful in entering into future
revenue sharing or subscription-based arrangements with network
operators, programmers or advertisers or that we will be able to
generate a substantial amount of revenue from these sources. If
our efforts are unsuccessful, then our future results of
operations will be adversely affected.

We have acquired several businesses since
October 2002. We continue to implement initiatives designed to
enhance the integration of those businesses and to seek further
consolidation of our worldwide operations. Our failure to
effectively integrate those acquired businesses, or to
streamline our operations, may adversely affect our business,
financial condition and results of operations.

We acquired Wink Communications, Inc., a provider
of interactive and enhanced television services, in October
2002. We acquired ACTV, Inc., a provider of addressable
advertising and related products and services, in July 2003. In
addition, in August 2003, we acquired substantially all of the
assets of BettingCorp Limited, a provider of gaming and gambling
technologies and services. We face many risks and challenges
associated with integrating these acquisitions, including:



| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | difficulties related to the integration of
    operations and personnel of acquired companies into our existing
    business, especially outside the United States as with
    BettingCorp;
|
| |  | diversion of managements attention from our
    business;                                                                                                                                 
|
| |  | incorporation of acquired products and business
    technology into our existing product lines; and                                                                                        
|
| |  | adoption and maintenance of uniform standards,
    controls, procedures and policies.                                                                                                      

While we believe that we have made progress in
integrating those businesses, and their personnel and
technologies, with ours, we have not completed those efforts. If
we are not successful in integrating those businesses with ours,
we may not realize the full benefits of the assets that we
acquired. Moreover, if we do not successfully complete such
integration and consolidation in a timely manner, the increased
demands on managements time, and the increased costs
associated with that process may also have an adverse effect on
our business, financial condition and results of operations.

We continue to pursue restructuring
initiatives that we initiated in 2002. While we have
accomplished many of the objectives we established for that
process, we continue to seek to align our resources
appropriately as our business evolves. That ongoing process may
result in unanticipated consequences and may not be as
successful in reducing expenses as we had
anticipated.

In addition to the integration and consolidation
efforts that we have undertaken in response to our various
acquisitions, we began to implement several restructuring
initiatives in 2002 in an effort to streamline our worldwide
operations and reduce our operating expenses. In this regard, we
continue to undertake efforts to consolidate our operations,
close and relocate various offices around the world, divest
non-strategic assets and reduce our headcount. These initiatives
may yield unanticipated consequences, such as attrition beyond
our

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planned reduction in workforce and loss of
employee morale and diminished performance. Reductions in
personnel, both anticipated and unanticipated, could materially
and adversely impact our sales and marketing efforts, research
and development efforts, and our professional services and
general and administrative functions.


In conjunction with these restructuring
initiatives, we have engaged and are continuing to engage in a
review of our operations with a view towards improving our
business performance. There is a risk that, as new business
strategies and administrative processes are developed and
implemented, the changes we adopt will be unduly disruptive or
less effective than our old strategies and processes. This may
adversely affect our business, results of operations and future
prospects.

We may be unable in the future to raise
additional capital required to support our operating
activities.

We expect that our capital resources will be
sufficient to meet our cash requirements through at least the
next twelve months. Nevertheless, we have incurred to date and
we expect that we will continue to incur in the future
significant expenses, many of which result from non-cancelable
operating commitments. As of December 31, 2003, we had
$73.5 million of cash, cash equivalents and marketable debt
securities. We used approximately $43.9 million in cash for
operating activities during the fiscal year ended
December 31, 2002 and $42.5 million during the fiscal
year ended December 31, 2003. We may need to raise
additional capital in the future if our revenue growth does not
meet our expectations or we are unable to reduce substantially
the amount of cash used in our operating activities. While we
continue to monitor our operating expenses and seek to bring
them in line with our revenues, there can be no assurance that
we will be successful in doing so.

To the extent we are required to raise additional
capital, we may not be able to do so at all or we may be able to
do so only on unacceptable terms. If we cannot raise additional
capital on acceptable terms, we may not be able to develop or
enhance our products and services, take advantage of future
opportunities or respond to competitive pressures or
unanticipated requirements, any of which could have an adverse
effect on our business, results of operations or future
prospects.

The market for our products and services is
subject to significant competition, which could adversely affect
our business.

We face competition from a number of companies,
including many that have significantly greater financial,
technical and marketing resources and a better recognized brand
name than we do. Current and potential competitors in one or
more aspects of our business include interactive technology
companies, companies developing interactive television content
and entertainment, and, in the professional services area, third
party system integrators and internal information technology
staffs at our network operator customers. Some of our customers
or their affiliates offer products or services that compete with
our products and services. For example, in addition to our
PlayJam and PlayMonteCarlo applications, British Sky
Broadcasting also offers its own competitive gaming and gambling
applications through its broadcast network. If any of these
competitors achieves significant market penetration or other
significant success within the markets upon which we rely as a
significant source of revenue, or in new markets that we may
enter in the future, our ability to maintain market share and
sustain our revenues may be materially and adversely affected.

The trend of consolidation among industry
participants may adversely impact our business, results of
operations and future prospects.

There has been a worldwide trend of consolidation
in the cable and direct broadcast satellite industries. We
believe this trend is likely to continue due to economic and
competitive concerns. This trend appears to be expanding to
include other companies involved with the interactive television
industry. For example, The News Corporation Ltd. recently
completed its acquisition of a controlling stake in Hughes
Electronics, the parent of DirecTV, and NDS Group plc, an
affiliate of News Corporation, recently completed its
acquisition of the MediaHighway interactive television business
from Thomson. While the full impact of this trend is uncertain
at the present time, we will need to adapt to changing
relationships with industry participants and address competitive
concerns that may arise as companies consolidate. If we are
unable to successfully

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manage these changing relationships and address
these competitive concerns, our business and results of
operations may be adversely affected.


Unanticipated fluctuations in our quarterly
operating results could affect our stock price.

We believe that quarter-to-quarter comparisons of
our financial results are not necessarily meaningful indicators
of our future operating results and should not be relied on as
an indication of future performance. If our quarterly operating
results fail to meet the expectations of analysts, the trading
price of our Class A ordinary shares could be negatively
affected. Our quarterly operating results have varied
substantially in the past and they may vary substantially in the
future depending upon a number of factors described below,
including many that are beyond our control.

Our operating results may vary from quarter to
quarter as a result of a number of factors, including:



| |   |                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Changes in the rate of capital spending and the
    rollout of interactive television-related products and services
    by network operators;             
|
| |  | The number, size and scope of network operators
    deploying OpenTV-enabled interactive services and the associated
    rollout to subscribers;          
|
| |  | Increased competition in general and any changes
    in our pricing policies that may result from increased
    competitive pressures;                    
|
| |  | Potential downturns in our customers
    businesses or in the domestic or international markets for our
    products and services;                       
|
| |  | The ability to generate applications-related
    revenue from existing and potential customers;                                                           
|
| |  | Changes in technology, whether or not developed
    by us;                                                                                                
|
| |  | Our ability to develop and introduce on a timely
    basis new or enhanced versions of our products that can compete
    favorably in the marketplace; and
|
| |  | The timing of revenue recognition associated with
    major licensing and services agreements.                                                            

Because a high percentage of our expenses,
particularly compensation, is fixed in advance of any particular
quarter, any of the factors listed above could cause significant
variations in our earnings on a quarter-to-quarter basis. You
should not rely on the results of prior periods as an indication
of our future performance. Any decline in revenues or a greater
than expected loss for any quarter could cause the market price
of our Class A ordinary shares to decline.

A significant portion of our senior
management team is new. If they are unable to work together
effectively, we may not be able to execute our business
plan.

Our business is highly dependent on the ability
of our senior management team to work together effectively to
execute our business plan. Our management team has changed
significantly over the past several months. In December 2003,
Michael Zeisser assumed the role of interim Chairman of our
board of directors. In addition, our Chief Operating Officer,
Chief Financial Officer, General Counsel and several other
senior executives in important operational roles joined us in
the last half of 2003. These individuals and our existing
management team have not previously worked together. If they are
unable to effectively integrate themselves into our business or
work together as a management team, we may not be able to manage
our business effectively.

We depend upon key technical, consulting
and support personnel to operate our business, and we may be
unable to attract or retain such personnel.

Our business requires highly trained technical,
consulting and support personnel to assist customers with launch
and deployment of our products. In the future, we may need to
increase our technical, consulting and support staff to support
new customers and the expanding needs of our existing customers.
Notwithstanding the

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current economic climate, hiring consulting and
support personnel has remained very competitive in our industry
due to the limited number of people available with the necessary
technical skills and understanding of the interactive television
market, and we have experienced difficulty in recruiting
qualified personnel in the past. Even if we invest significant
resources in attempting to attract, train and retain these
qualified personnel, we may not be successful in our efforts,
which may have a negative effect on our business and results of
operations.


Interactive television remains an emerging
business and it may not attract widespread market acceptance or
demand.

Our success will depend upon, among other things,
the broad acceptance of interactive television by industry
participants, including operators of broadcast and pay
television networks, network operators and manufacturers of
televisions and set-top boxes, as well as by television viewers
and advertisers. Because the market for interactive television
remains an emerging market, the potential size of the market
opportunity and the timing of its development are uncertain. The
growth and future success of our business will depend in part
upon our ability to penetrate new markets and convince network
operators, television viewers and advertisers to adopt and
maintain their use of our products and services.

Because much of our success and value lie
in our ownership and use of our intellectual property, our
failure to protect our intellectual property and develop new
proprietary technology may negatively affect us.

Our ability to effectively conduct our business
will be dependent in part upon the maintenance and protection of
our intellectual property. We rely on patent, trademark, trade
secret and copyright law, as well as confidentiality procedures
and licensing arrangements, to establish and protect our rights
in and to our technology. We have typically entered into
confidentiality or license agreements with our employees,
consultants, customers, strategic partners and vendors, in an
effort to control access to, and distribution of, our software,
related documentation and other proprietary information. Despite
these precautions, it may be possible for a third party to copy
or otherwise obtain and use our software and other proprietary
information without authorization.

Policing unauthorized use of our software and
proprietary information will be difficult. The steps we take may
not prevent misappropriation of our intellectual property and
the agreements we enter into may not be enforceable in some
instances. In addition, effective patent, copyright, trademark
and trade secret protection may be unavailable or limited in
certain foreign countries or, alternatively, such protection may
be difficult to enforce. Litigation may be necessary in the
future to enforce or protect our intellectual property rights or
to determine the validity and scope of our intellectual property
rights and the proprietary rights of others. Any such litigation
could cause us to incur substantial costs and diversion of
resources, which in turn could adversely affect our business.

Intellectual property infringement claims
may be asserted against us, which could have the effect of
disrupting our business.

We may be the subject of claims by third parties
alleging that we infringe their intellectual property. The
defense of any such claims could cause us to incur significant
costs and could result in the diversion of resources with
respect to the defense of any claims brought, which could
adversely affect our financial condition and operating results.
As a result of such infringement claims, a court could issue an
injunction preventing us from distributing certain products,
which could adversely affect our business. If any claims or
actions are asserted against us, we may seek to obtain a license
under a third partys intellectual property rights in order
to avoid any litigation. However, a license under such
circumstances may not be available on commercially reasonable
terms, if at all.

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We grant certain indemnification rights to
our customers when we license our software technologies. We may,
therefore, become subject to third party infringement claims
through those commercial arrangements. In addition, the damages
to which we are subject may be increased by the use of our
technologies in our customers products.

Many of Wink Communications, ACTVs
and our agreements with customers contain an indemnification
obligation, which could be triggered in the event that a
customer is named in an infringement suit involving their
products or involving the customers products or services
that incorporate or use their products. If it is determined that
our products infringe any of the asserted claims in such a suit,
we may be prevented from distributing certain of our products
and we may incur significant indemnification liabilities, which
may adversely affect our business, financial condition and
operating results.

In addition, while damages claims in respect of
an alleged infringement may, in many cases, be based upon a
presumed royalty rate that the patent holder would have
otherwise been entitled to, it is possible that our liability
may increase as a result of the incorporation of our technology
with our customers products. In some cases, potential
damages against us could be based on the profits derived from a
product that infringes through the use of our software even
though we receive a relatively moderate economic benefit from
the licensing arrangement.

The adoption of incompatible standards by
our industry and rapid technological advances could render our
products and services obsolete or non-competitive.

The migration of television from analog to
digital transmission, the convergence of television, the
Internet, communications and other media, and other emerging
trends, such as the deployment of high definition television and
multicasting, are creating a dynamic and unpredictable
environment in which to operate. Our ability to anticipate
trends and adapt to new technologies and evolving standards is
critical to our success.

Recent attempts to establish industry-wide
standards for interactive television software include an
initiative by cable network operators in the United States to
create a uniform platform for interactive television called Open
Cable and an initiative by European television industry
participants to create a platform called Multimedia Home
Platform. The establishment of these standards or other similar
standards could adversely affect the pricing of our products and
services, significantly reduce the value of our intellectual
property and the competitive advantage our proprietary
technology provides, cause us to incur substantial expenditures
to adapt our products or services to respond to these
developments, or otherwise hurt our business, particularly if
our products require significant redevelopment in order to
conform to the newly established standards.

The deployment of new digital television
applications, such as high-definition television and
multicasting multiple television programs through a single
channel, may compete directly with our products and services for
broadcast distribution capacity. To the extent that such
capacity cannot accommodate all of the applications that a cable
or direct broadcast satellite system operator wants to
distribute, then there is a risk that other applications will be
deployed to the exclusion of our content and applications. If
this occurs, our results of operations could be adversely
affected.

Any delay or failure on our part to respond
quickly, cost-effectively and sufficiently to these developments
could render our products and services obsolete or
non-competitive and have an adverse effect on our business,
financial condition and operating results.

In addition, we must stay abreast of cutting-edge
technological developments and evolving service offerings to
remain competitive and increase the utility of our services, and
we must be able to incorporate new technologies into our
products in order to address the increasingly complex and varied
needs of our customer base. There can be no assurance that we
will be able to do so successfully, and any failure to do so may
adversely affect us.

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Government regulations may adversely affect
our business.

The telecommunications, media, broadcast and
cable television industries are subject to extensive regulation
by governmental agencies. These governmental agencies continue
to oversee and adopt legislation and regulation over these
industries, particularly in the areas of user privacy, consumer
protection, the online distribution of content and the
characteristics and quality of online products and services,
which may affect our business, the development of our products,
the decisions by market participants to adopt our products and
services or the acceptance of interactive television by the
marketplace in general. In particular, governmental laws or
regulations restricting or burdening the exchange of personally
identifiable information could delay the implementation of
interactive services or create liability for us or any other
manufacturer of software that facilitates information exchange.
These governmental agencies may also seek to regulate
interactive television directly. Future developments relating to
any of these regulatory matters may adversely affect our
business.

Through the use of our technology, we have
the ability to collect personal and confidential information
from set-top boxes. If we fail to protect this information from
security breaches or misuse this information, then our
operations could be disrupted and we could be subject to
litigation and liability under privacy laws.

Through the technology that we license for use in
set-top boxes, we have the ability, when requested by our
customers, to collect and store personal information from users
of our applications. Subject to applicable laws, and the
agreement of our customers and consumers, we may also seek to
use such information to help develop addressable and targeted
advertising businesses. Storage and use of such information is
subject to state and federal regulation and may also subject us
to privacy claims relating to its use and dissemination. In
addition, a third party might be able to breach our security
measures and gain unauthorized access to our servers where such
information is stored and misappropriate such information or
cause interruptions to our business operations. We may be
required to expend significant capital and other resources to
monitor the laws applicable to privacy matters, to protect
against security breaches or to deal with the consequences of
any breach. A breach of privacy rights by us, network operators
or other third parties could expose us to liability. Any
compromise of security or misuse of private information could
materially and adversely affect our business, reputation,
operating results and financial condition and expose us to
costly litigation and regulatory action. Concerns over the
security of personal information transmitted through our
applications and the potential misuse of such information might
also inhibit market acceptance of our applications, and if this
occurs, our business and operating results will be adversely
affected.

There are many regulations and restrictions
that affect gaming and gambling activities throughout the world.
As we develop and seek to market gaming and gambling
applications, we must assess the legality of these types of
activities in different jurisdictions. Our inability to legally
launch these applications, the uncertain regulatory landscape
for these applications and the significant costs associated with
ongoing evaluations regarding the state of gaming and gambling
laws around the world may adversely affect our
business.

We expect to develop and market gaming and
gambling applications for interactive television based on
technologies and know-how that we acquired through BettingCorp.
In many jurisdictions throughout the world, the laws regulating
gaming and gambling, particularly through media such as
interactive television and the Internet, are highly uncertain
and subject to frequent change. The penalties in many
jurisdictions include both civil and criminal penalties. While
we continually assess the laws and regulations regarding gaming
and gambling ventures, and engage special outside legal counsel
to assist in that process, we cannot be certain that our
interpretation of, or the advice that we receive from outside
professionals with respect to, those laws will necessarily be
the only possible interpretation. The costs associated with that
evaluative process are not, and will not be, insignificant. In
the event, that we are incorrect in our interpretation of
certain laws or regulations, we may be subject to penalties.
Moreover, we may be required to make significant changes to our
business, if those laws or regulations change in ways that we do
not anticipate or expect. The uncertainty inherent in these
matters, the changing nature of these laws and regulations, and
the significant costs associated with our ongoing evaluation of
those laws and regulations, may adversely affect our business
over time. If we do not believe that we can legally and
effectively launch gaming and gambling applications, our future
growth may be impaired.

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Our multinational operations expose us to
special risks that could increase our expenses, adversely affect
our operating results and require increased time and attention
of management.

We derive a substantial portion of our revenue
from customers located outside of the United States and have
significant operations in a number of countries around the
world. Our international operations are subject to special
risks, including:



| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | differing legal and regulatory requirements and
    changes in those requirements;                                                          
|
| |  | potential loss of proprietary information due to
    piracy, misappropriation or weaker laws regarding intellectual
    property protection;
|
| |  | export and import restrictions, tariffs and other
    trade barriers;                                                                       
|
| |  | currency fluctuations and devaluations;                                                                                                     
|
| |  | difficulties in staffing and managing offices as
    a result of, among other things, distance, language and cultural
    differences;      
|
| |  | longer payment cycles and problems in collecting
    accounts receivable;                                                                   
|
| |  | political and economic instability; and                                                                                                     
|
| |  | potentially adverse tax consequences.                                                                                                       

Any of these factors could have an adverse effect
on our business, financial condition and operating results.

Our software products may contain errors,
which could cause us to lose revenue and incur unexpected
expenses.

Software development is an inherently complex and
subjective process, which frequently results in products that
contain errors, as well as defective features and functions.
Moreover, our technology is integrated into the products and
services of our network operator customers. Accordingly, a
defect, error or performance problem with our technology could
cause the systems of our network operator customers to fail for
a period of time or to be impaired in certain respects. Any such
failure could subject us to damage claims and claims for
indemnification by our customers and result in severe customer
relations problems and harm to our reputation. While our
agreements with customers typically contain provisions designed
to limit or exclude our exposure to potential liability claims
in those circumstances, those provisions may not be effective,
in all respects, under the laws of some jurisdictions. As a
result, we could be required to pay substantial amounts of
damages in settlement or upon the determination of any of these
types of claims.

The interests of our majority owner may
differ from yours and may result in OpenTV acting in a manner
inconsistent with your general interests.

Liberty Media Corporation beneficially owns our
Class A and Class B ordinary shares representing
approximately 32.9% of the economic interest and 79.4% of the
voting power of our ordinary shares outstanding as of
December 31, 2003. As a result of its ownership of our
ordinary shares, Liberty Media has sufficient voting power,
without the vote of any other stockholder, to determine the
outcome of any action presented to a vote of our stockholders,
including amendments of our memorandum of association and
articles of association for any purpose (which could include
increasing or reducing our authorized capital or authorizing the
issuance of additional shares). The interests of Liberty Media
may diverge from your interests, and Liberty Media may be in a
position to cause or require us to act in a way that is
inconsistent with the general interests of the holders of our
Class A ordinary shares.

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Because we are controlled by Liberty Media,
we are exempt from certain listing requirements of the Nasdaq
National Market relating to corporate governance
matters.

Over the past several years, the National
Association of Securities Dealers has adopted certain listing
requirements for the Nasdaq National Market System designed to
enhance corporate governance standards of the companies who are
listed thereon. As a result of Liberty Medias beneficial
ownership of our Class A and Class B ordinary shares,
we are not subject to some of these requirements, including the
requirement that a majority of our board of directors be
independent under the guidelines established by the
National Association of Securities Dealers and certain
requirements regarding the determination of our Chief Executive
Officers compensation and our director nominees. While we
do not believe that our exemption from those requirements
affects the manner and method by which we manage and operate the
company, investors should be aware that we are not subject to
those provisions and may have no obligation to comply with those
requirements in the future unless our ownership profile changes.

Because we are a British Virgin Islands
company, you may not be able to enforce judgments against us
that are obtained in United States courts.

We are incorporated under the laws of the British
Virgin Islands. As a result, it may be difficult for investors
to effect service of process upon us within the United States or
to enforce against us judgments obtained in the United States
courts, including judgments predicated upon the civil liability
provisions of the federal securities laws of the United States.

We have been advised by our British Virgin
Islands counsel, Harney Westwood Riegels, that judgments of
United States courts predicated upon the civil liability
provisions of the federal securities laws of the United States
may be difficult to enforce in British Virgin Islands courts and
that there is doubt as to whether British Virgin Islands courts
will enter judgments in original actions brought in British
Virgin Islands courts predicated solely upon the civil liability
provisions of the federal securities laws of the United States.

Because we are a British Virgin Islands
company, your rights as a stockholder may be less clearly
established as compared to the rights of stockholders of
companies incorporated in other jurisdictions.

Our corporate affairs are governed by our
memorandum of association and articles of association and by the
International Business Companies Act of the British Virgin
Islands. Principles of law relating to such matters as the
validity of corporate procedures, the fiduciary duties of
management and the rights of our stockholders may differ from
those that would apply if we were incorporated in the United
States or another jurisdiction. The rights of stockholders under
British Virgin Islands law are not as clearly established as are
the rights of stockholders in many other jurisdictions. Thus,
our stockholders may have more difficulty protecting their
interests in the face of actions by our board of directors or
our controlling stockholder than they would have as stockholders
of a corporation incorporated in another jurisdiction.

Certain provisions contained in our charter
documents could deter a change of control of us.

Certain provisions of our memorandum of
association and articles of association may discourage attempts
by other companies to acquire or merge with us, which could
reduce the market value of our Class A ordinary shares. The
comparatively low voting rights of our Class A ordinary
shares as compared to our Class B ordinary shares,
approximately 99.6% of which are beneficially owned by Liberty
Media as of December 31, 2003, as well as other provisions
of our memorandum of association and articles of association,
may delay, deter or prevent other persons from attempting to
acquire control of us.

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|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    About Market Risk

We are exposed to financial market risks. This
exposure relates to our holdings of fixed income investment
securities, investments in privately-held companies and assets
and liabilities denominated in foreign currencies.

Fixed Income Investment Risk

We own a fixed income investment portfolio with
various holdings, types and maturities. These investments are
generally classified as available-for-sale. Available-for-sale
securities are recorded on the balance sheet at fair value with
unrealized gains or losses, net of tax, included as a separate
component of the balance sheet line item titled
accumulated other comprehensive income.

Most of these investments consist of a
diversified portfolio of highly liquid United States
dollar-denominated debt securities classified by maturity as
cash equivalents, short-term investments or long-term
investments. These debt securities are not leveraged and are
held for purposes other than trading. Our investment policy
limits the maximum maturity of securities in this portfolio to
three years and weighted-average maturity to 15 months.
Although we expect that market value fluctuations of our
investments in short-term debt obligations will not be
significant, a sharp rise in interest rates could have a
material adverse effect on the value of securities with longer
maturities in the portfolio. Alternatively, a sharp decline in
interest rates could have a material positive effect on the
value of securities with longer maturities in the portfolio. We
do not currently hedge interest rate exposures.

Our investment policy limits investment
concentration in any one issuer (other than with respect to
United States treasury and agency securities) and also restricts
this part of our portfolio to investment grade obligations based
on the assessments of rating agencies. There have been instances
in the past where the assessments of rating agencies have failed
to anticipate significant defaults by issuers. It is possible
that we could lose most or all of the value in an individual
debt obligation as a result of a default. A loss through a
default may have a material impact on our earnings even though
our policy limits investments in the obligations of a single
issuer to no more than five percent of the value of our
portfolio.

The following table presents the hypothetical
changes in fair values in our portfolio of investment securities
with original maturities greater than 90 days as of
December 31, 2003 using a model that assumes immediate
sustained parallel changes in interest rates across the range of
maturities (in thousands):

|                                                 |       |                |        |               |  |                |        |                |  |   |        |        |  |   |        |        | 
|------------------------------------------------ | ----- | -------------- | ------ | ------------- |  | -------------- | ------ | -------------- |  | - | ------ | ------ |  | - | ------ | ------ | 
|                                                 |       | Valuation of   |        |               |  | Valuation of   |        | Valuation of  
|                                                 |       | Securities if  |        |               |  | Securities if  |        | Securities if 
|                                                 |       | Interest Rates |        | Fair Value as |  | Interest Rates |        | Interest Rates
|Issuer                                           |       | Decrease 1%    |        | of 12/31/03   |  | Increase 1%    |        | Increase 2%   
|                                                 |       |                |        |               |  |                |        |               
|United States government and agencies            |       | $              | 20,329 |               |  | $              | 20,130 |                |  | $ | 19,933 |        |  | $ | 19,740 |       
|State and local governments in the United States |       |                |       |               |  |                |       |                |  |   |       |        |  |   |       |       
|Corporate notes and bonds                        |       |                | 3,670  |               |  |                | 3,619  |                |  |   | 3,583  |        |  |   | 3,541  |       
|Non-United States government                     |       |                |       |               |  |                |       |                |  |   |       |        |  |   |       |       
|Certificate of Deposit                           |       |                | 2,030  |               |  |                | 2,000  |                |  |   | 1,962  |        |  |   | 1,915  |       
|                                                 |       |                |        |               |  |                |        |                |  |   |        |        |  |   |        |       
|                                                 | Total |                | $      | 26,029        |  |                | $      | 25,749         |  |   | $      | 25,478 |  |   | $      | 25,196 | 
|                                                 |       |                |        |               |  |                |        |                |  |   |        |        |  |   |        |       

The modeling technique used in the above table
estimates fair values based on changes in interest rates
assuming static maturities. The fair value of individual
securities in our investment portfolio is likely to be affected
by other factors including changes in ratings, market perception
of the financial strength of the issuers of such securities and
the relative attractiveness of other investments. Accordingly,
the fair value of our individual securities could also vary
significantly in the future from the amounts indicated above.

42



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##### Table of Contents



Foreign Currency Exchange Rate Risk

We transact business in various foreign
countries. We incur a substantial majority of our expenses, and
earn most of our revenues, in United States dollars. A majority
of our worldwide customers are invoiced and make payments in
United States dollars. A minority of our worldwide customers are
invoiced by our non-United States business units under contracts
that require payments to be remitted in local currency.

We have a foreign currency exchange exposure
management policy. The policy permits the use of foreign
currency forward exchange contracts and foreign currency option
contracts and the use of other hedging procedures in connection
with hedging foreign currency exposures. The policy requires
that the use of derivatives and other procedures qualify for
hedge treatment under SFAS No. 133 Accounting
for Derivative Instruments and Hedging Activities. We
regularly assess foreign currency exchange rate risk that
results from our global operations. We did not use foreign
currency forward exchange contracts or options in hedging
foreign currency exposures during 2003. There were no foreign
exchange forward contracts or other procedures implemented to
hedge foreign currency exposures outstanding as of
December 31, 2003.









|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

The Consolidated Financial Statements and
Supplementary Data required by this Item are set forth at the
pages indicated in Item 15(a).









|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.









|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

In accordance with Exchange Act Rules 13a-15
and 15d-15, we carried out an evaluation, under the supervision
and with the participation of management, including our Chief
Executive Officer and our Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures as of
the end of the period covered by this report. Based on that
evaluation, our Chief Executive Officer and our Chief Financial
Officer concluded that our disclosure controls and procedures
were effective as of December 31, 2003 to provide
reasonable assurance that information required to be disclosed
in our reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time
periods specified in the SECs rules and forms.

There has been no change in our internal controls
over financial reporting that occurred during the three months
ended December 31, 2003 that has materially affected, or is
reasonably likely to materially affect, our internal controls
over financial reporting.

43



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##### Table of Contents









PART III.









|         |                                               
|-------- | ----------------------------------------------
|Item 10. | Directors and Executive Officers of
    OpenTV

The information regarding our directors and
executive officers required by this Item is incorporated by
reference to the information set forth in the section entitled
Election of Directors and Executive
Officers in the definitive proxy statement for our 2004
annual meeting of stockholders to be filed with the SEC pursuant
to Regulation 14A not later than 120 days after the
end of the fiscal year covered by this Form 10-K (the
Proxy Statement).

Information required by the Item with respect to
compliance with Section 16(a) of the Securities Act of 1934
is incorporated by reference to the information set forth in the
section entitled Section 16(a) Beneficial Ownership
Reporting Compliance in the Proxy Statement.









|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

The information required by this Item is
incorporated by reference to the information set forth in the
section entitled Executive Compensation in the Proxy
Statement.









|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management

The information required by this Item regarding
security ownership of certain beneficial owners is incorporated
by reference to the information set forth in the section
entitled Stock Ownership of Certain Beneficial Owners and
Management in the Proxy Statement.









|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

The information required by this Item is
incorporated by reference to the information set forth in the
section entitled Certain Relationships and Related
Transactions in the Proxy Statement.









|         |                                           
|-------- | ------------------------------------------
|Item 14. | Principal Accounting Fees and
    Services

The information required by this Item is
incorporated by reference to the information set forth in the
section entitled Fees for Independent Auditors in
the Proxy Statement.

44



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##### Table of Contents









PART IV.








|         |                                                                     
|-------- | --------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K



| |     |                                                                 
| | --- | ----------------------------------------------------------------
| | (a) | (1) Financial Statements Included in
    Part II of this Report:

|                                                                                                                                    |  |      |     | 
|----------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --- | 
|                                                                                                                                    |  | Page
|                                                                                                                                    |  |     
|Index to Consolidated Financial Statements                                                                                          |  |      | F-1 | 
|Independent Auditors Report 
    KPMG LLP                                                                                         |  |      | F-2 | 
|Independent Auditors Report 
    PricewaterhouseCoopers LLP                                                                       |  |      | F-3 | 
|Consolidated Balance Sheets as of
    December 31, 2003 and 2002                                                                    |  |      | F-4 | 
|Consolidated Statements of Operations for the
    years ended December 31, 2003, 2002 and 2001                                      |  |      | F-5 | 
|Consolidated Statements of Shareholders
    Equity and Comprehensive Loss for the years ended
    December 31, 2003, 2002 and 2001 |  |      | F-6 | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2003, 2002 and 2001                                      |  |      | F-7 | 
|Notes to the Consolidated Financial Statements                                                                                      |  |      | F-8 | 

(2) Financial Statement
Schedule

|                                                    |  |  |      | 
|--------------------------------------------------- |  |  | ---- | 
|Schedule II  Valuation and
    Qualifying Accounts |  |  | F-40 | 

(3) Exhibits

|         |      |  |  |                                                                                                                                                                                                                                                                                                                                                           
|-------- | ---- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibits |      | 
|         |      | 
|         | 3.1  |  |  | Memorandum of Association of OpenTV Corp.
    (incorporated by reference to Exhibit 3.1 of Amendment
    No. 2 (the Second F-1 Amendment) to the
    Registration Statement on Form F-1 (the
    F-1 Registration Statement) of OpenTV Corp.
    (File No. 333-89609), as filed with the Securities and
    Exchange Commission on November 18, 1999).
|         | 3.2  |  |  | Articles of Association of OpenTV Corp.
    (incorporated by reference to Exhibit 3(ii) to the
    Quarterly Report on Form 10-Q of OpenTV Corp. for the
    quarterly period ended September 30, 2002, as filed with
    the Securities and Exchange Commission on November 14,
    2002).                                                               
|         | 4.1  |  |  | Specimen Certificate for Class A ordinary
    shares of OpenTV Corp. (incorporated by reference to
    Exhibit 4.1 of Amendment No. 1 (the First
    F-1 Amendment) to the F-1 Registration
    Statement, as filed with the Securities and Exchange Commission
    on November 10, 1999).                                                              
|         | 10.1 |  |  | Form of Indemnification Agreement for directors
    and officers of OpenTV Corp. (incorporated by reference to
    Exhibit 4.1 to the Annual Report on Form 20-F of
    OpenTV Corp. for the year ended December 31, 2000 (the
    2000 20-F), as filed with the Securities and
    Exchange Commission on April 18, 2001).                             
|         | 10.2 |  |  | OpenTV Corp.s Amended and Restated 1999
    Employee Stock Purchase Plan (incorporated by reference to
    Exhibit 4.2 to the 2000 20-F).                                                                                                                                                                                                                
|         | 10.3 |  |  | OpenTV Corp.s Amended and Restated
    1999 Share Option/ Share Issuance Plan (incorporated by
    reference to Exhibit 10.3 of Amendment No. 3 (the
    Third F-1 Amendment) to the
    F-1 Registration Statement, as filed with the Securities
    and Exchange Commission on November 19, 1999).                                                   
|         | 10.4 |  |  | Shareholders Agreement among OTV Holdings
    Limited, OpenTV Corp. and Sun TSI Subsidiary, Inc. dated
    October 23, 1999 (incorporated by reference to
    Exhibit 10.4 to the Third F-1 Amendment).                                                                                                                                                  
|         | 10.5 |  |  | Trademark License Agreement between Sun
    Microsystems, Inc. and OpenTV, Inc. dated
    March 20, 1998 (incorporated by reference to
    Exhibit 10.5 to the Third F-1 Amendment).                                                                                                                                                                      
|         | 10.6 |  |  | Technology License and Distribution Agreement
    between Sun Microsystems, Inc. and OpenTV, Inc. dated
    March 20, 1998 (incorporated by reference to
    Exhibit 10.6 to the Third F-1 Amendment).                                                                                                                                                    

45



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##### Table of Contents



|         |       |  |  |                                                                                                                                                                                                                                                                                                                                                                     
|-------- | ----- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibits |       | 
|         |       | 
|         | 10.7  |  |  | First Amendment to Technology License and
    Distribution Agreement between Sun Microsystems, Inc. and
    OpenTV, Inc. dated June 30, 1999 (incorporated by
    reference to Exhibit 10.7 to the Third F-1 Amendment).                                                                                                                                            
|         | 10.8  |  |  | Source Code License and Binary Distribution
    Agreement between Sun Microsystems, Inc. and OpenTV, Inc.
    effective July 1, 1996 (incorporated by reference to
    Exhibit 10.10 to the Third F-1 Amendment).                                                                                                                                                   
|         | 10.9  |  |  | Source Code License and Binary Distribution
    Agreement between Sun Microsystems, Inc. and
    OpenTV, Inc. effective April 1, 1998 (incorporated by
    reference to Exhibit 10.9 to the Third F-1 Amendment).                                                                                                                                                   
|         | 10.10 |  |  | Convertible Preferred Stock Purchase Agreement
    between OpenTV Corp. and Sun TSI Subsidiary, Inc. dated
    October 23, 1999 (incorporated by reference to
    Exhibit 10.11 to the Second F-1 Amendment).                                                                                                                                                       
|         | 10.11 |  |  | Convertible Preferred Stock and Warrant Purchase
    Agreement among OpenTV Corp., America Online, Inc., General
    Instrument Corporation, LDIG OTV, Inc., News America
    Incorporated and TWI-OTV Holdings, Inc., dated
    October 23, 1999 (incorporated by reference to
    Exhibit 10.11 to the First F-1 Amendment).                                      
|         | 10.12 |  |  | Exchange Agreement between OpenTV Corp.,
    OpenTV, Inc. and Sun TSI Subsidiary, Inc., dated
    October 23, 1999 (incorporated by reference to
    Exhibit 10.12 to the First F-1 Amendment).                                                                                                                                                                     
|         | 10.13 |  |  | Investors Rights Agreement among OpenTV
    Corp., America Online, Inc., General Instrument
    Corporation, LDIG OTV, Inc., News America Incorporated,
    TWI-OTV Holdings, Inc., OTV Holdings Limited, Sun TSI
    Subsidiary, Inc. and MIH (BVI) Ltd., dated
    October 23, 1999 (incorporated by reference to
    Exhibit 10.14 to the Second F-1 Amendment).
|         | 10.14 |  |  | Amended and Restated Stockholders Agreement
    among OpenTV Corp., OpenTV, Inc., OTV Holdings Limited, Sun
    Microsystems, Inc. and Sun TSI Subsidiary, Inc., dated
    October 23, 1999 (incorporated by reference to
    Exhibit 10.15 to the Second F-1 Amendment).                                                                                          
|         | 10.15 |  |  | OpenTVs Amended and Restated 2000 Exchange
    Plan (incorporated by reference to Exhibit 10.1 to the
    Form 6-K of OpenTV Corp., as filed with the Securities and
    Exchange Commission on August 30, 2000).                                                                                                                                                  
|         | 10.16 |  |  | Registration Rights Agreement by and among OpenTV
    Corp., General Instrument Corporation and Cable Soft
    Communications, Inc. dated November 13, 2000
    (incorporated by reference to Exhibit 4.1 to the
    Form 6-K of OpenTV Corp., as filed with the Securities and
    Exchange Commission on December 1, 2000).                                       
|         | 10.17 |  |  | Lease Agreement between Renault &
    Handley Employees Investment Co. and OpenTV, Inc., dated
    January 15, 2001 (incorporated by reference to
    Exhibit 4.20 to the 2000 20-F).                                                                                                                                                                               
|         | 10.18 |  |  | Lease Agreement between Middlefield Road Joint
    Venture and OpenTV, Inc., dated January 22, 2001
    (incorporated by reference to Exhibit 4.21 to the
    2000 20-F).                                                                                                                                                                                           
|         | 10.19 |  |  | Marketing Agreement dated as of January 22,
    2001 by and between British Sky Broadcasting Limited and
    OpenTV, Inc. (incorporated by reference to
    Exhibit 4.22 to the 2000 20-F).                                                                                                                                                                         
|         | 10.20 |  |  | Second Amendment to Technology License and
    Distribution Agreement between Sun Microsystems, Inc. and
    OpenTV, Inc., dated December 20, 2000 (incorporated by
    reference to Exhibit 4.23 to the 2000 20-F).                                                                                                                                                
|         | 10.21 |  |  | OpenTVs 2001 Nonstatutory Stock Option Plan
    (incorporated by reference to Exhibit 4.1 to the
    Registration Statement on Form S-8 of OpenTV Corp. (File
    No. 333-74026), as filed with the Securities and Exchange
    Commission on November 27, 2001).                                                                                                  
|         | 10.22 |  |  | Employment Agreement dated as of June 16,
    2000 by and between James Ackerman and OpenTV, Inc.
    (incorporated by reference to Exhibit 4.27 to the Annual
    Report on Form 20-F of OpenTV Corp. for the year ended
    December 31, 2001 (the 2001 20-F) as filed
    with the Securities and Exchange Commission on June 25,
    2002).                   
|         | 10.23 |  |  | Form of Management Retention Agreement
    (incorporated by reference to Exhibit 4.33 to the
    2001 20-F).                                                                                                                                                                                                                                                        

46



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##### Table of Contents



|         |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                   
|-------- | ----- |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibits |       | 
|         |       | 
|         | 10.24 |  |  | Letter Agreement between MIH Limited and OpenTV
    Corp. dated May 8, 2002 (incorporated by reference to
    Exhibit 4.34 to the 2001 20-F).                                                                                                                                                                                                                                                                                     
|         | 10.25 |  |  | License Agreement for OpenTV Interactive
    Applications and Enterprise and Network Solutions, dated as of
    August 16, 2002, by and among OpenTV, Inc.,
    MultiChoice Africa Limited and MIH Limited (incorporated by
    reference to Exhibit 10.31 to the Registration Statement on
    Form S-4 of OpenTV Corp. (File No. 333-102944), as
    filed with the Securities and Exchange Commission on
    February 4, 2003).
|         | 10.26 |  |  | OpenTV Corp. 2003 Incentive Plan (incorporated by
    reference to Exhibit 10.32 to Amendment No. 1 to the
    Registration Statement on Form S-4 of OpenTV Corp. (File
    No. 333-102944), as filed with the Securities and Exchange
    Commission on April 25, 2003).                                                                                                                                                         
|         | 18.1  |  |  | Letter from KPMG LLP dated March 12, 2004
    regarding change in accounting principle.                                                                                                                                                                                                                                                                                                                                           
|         | 21.1  |  |  | List of Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                             
|         | 23.1  |  |  | Consent of KPMG LLP.                                                                                                                                                                                                                                                                                                                                                                                                              
|         | 23.2  |  |  | Consent of PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                                                                                                                                                            
|         | 31.1  |  |  | Certification of Chief Executive Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                           
|         | 31.2  |  |  | Certification of Chief Financial Officer pursuant
    to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                           
|         | 32.1  |  |  | Certifications of Chief Executive Officer and
    Chief Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                          



| |     |                                                                         
| | --- | ------------------------------------------------------------------------
| | (b) | Reports on Form 8-K filed during the
    quarter ended December 31, 2003

|                        |  |                  |               |                            |  |  |     | 
|----------------------- |  | ---------------- | ------------- | -------------------------- |  |  | --- | 
|Date Filed or Furnished |  | Item(s) Reported |               | Financial Statements Filed
|                        |  |                  |               |                           
|October 29, 2003        |  |                  | Items 5 and 7 |                            |  |  | No  | 
|November 12, 2003       |  |                  | Item 12*      |                            |  |  | Yes | 
|November 13, 2003       |  |                  | Items 5 and 7 |                            |  |  | No  | 
|December 22, 2003       |  |                  | Items 5 and 7 |                            |  |  | No  | 



---



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | This Report on Form 8-K was
    furnished to the Securities and Exchange Commission,
    and is not to be deemed (1) filed for purposes
    of Section 18 of the Securities Exchange Act of 1934, as
    amended, or otherwise subject to the liabilities of that Section
    or (2) incorporated by reference into any filing by the
    Company under the Securities Act of 1933, as amended, or the
    Securities Exchange Act of 1934, as amended.

47



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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) 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.



| |             
| | ------------
| | OPENTV CORP.



| |     |                      
| | --- | ---------------------
| | By: | /s/ JAMES J. ACKERMAN

| |                        
| | -----------------------
| |                        
| | James J. Ackerman      
| | Chief Executive Officer
|
| | Dated: March 15, 2004  

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the date indicated.

|                                       |  |                                                                                                |  |                |  | 
|-------------------------------------- |  | ---------------------------------------------------------------------------------------------- |  | -------------- |  | 
|                                       |  |                                                                                                |  |               
|Name                                   |  | Title                                                                                          |  | Date          
|                                       |  |                                                                                                |  |               
|                                      
|/s/ JAMES J. ACKERMANJames J. Ackerman |  | Chief Executive Officer
    (Principal Executive Officer)
    and Director                     |  | March 15, 2004
|                                      
|/s/ RICHARD HORNSTEINRichard Hornstein |  | Chief Financial Officer
    (Principal Financial Officer and
    Principal Accounting Officer) |  | March 15, 2004
|                                      
|/s/ ROBERT R. BENNETTRobert R. Bennett |  | Director                                                                                       |  | March 15, 2004
|                                      
|/s/ J. TIMOTHY BRYANJ. Timothy Bryan   |  | Director                                                                                       |  | March 15, 2004
|                                      
|/s/ JERRY MACHOVINAJerry Machovina     |  | Director                                                                                       |  | March 15, 2004
|                                      
|/s/ J. DAVID WARGOJ. David Wargo       |  | Director                                                                                       |  | March 15, 2004
|                                      
|/s/ ANTHONY G. WERNERAnthony G. Werner |  | Director                                                                                       |  | March 15, 2004
|                                      
|/s/ MICHAEL ZEISSERMichael Zeisser     |  | Chairman of the Board; Director                                                                |  | March 15, 2004



48



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##### Table of Contents



OPENTV CORP.

INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                                                                                                    |  |      |      | 
|----------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|                                                                                                                                    |  | Page
|                                                                                                                                    |  | No. 
|                                                                                                                                    |  |     
|Independent Auditors Report 
    KPMG LLP                                                                                         |  |      | F-2  | 
|Independent Auditors Report 
    PricewaterhouseCoopers LLP                                                                       |  |      | F-3  | 
|Consolidated Balance Sheets as of
    December 31, 2003 and 2002                                                                    |  |      | F-4  | 
|Consolidated Statements of Operations for the
    years ended December 31, 2003, 2002 and 2001                                      |  |      | F-5  | 
|Consolidated Statements of Shareholders
    Equity and Comprehensive Loss for the years ended
    December 31, 2003, 2002 and 2001 |  |      | F-6  | 
|Consolidated Statements of Cash Flows for the
    years ended December 31, 2003, 2002 and 2001                                      |  |      | F-7  | 
|Notes to the Consolidated Financial Statements                                                                                      |  |      | F-8  | 
|Schedule II  Valuation and
    Qualifying Accounts                                                                                 |  |      | F-40 | 

F-1



---



##### Table of Contents



INDEPENDENT AUDITORS REPORT 
KPMG LLP

To the Board of Directors and Shareholders of
OpenTV Corp.:

We have audited the accompanying consolidated
balance sheets of OpenTV Corp. and subsidiaries as of
December 31, 2003 and 2002, and the related consolidated
statements of operations, shareholders equity and
comprehensive loss, and cash flows for each of the years in the
two-year period ended December 31, 2003. In connection with
our audits of consolidated financial statements, we have also
audited the financial statement schedule as of and for each of
the years in the two-year period ended December 31, 2003
listed in Item 15(a)(2). These consolidated financial
statements and financial statement schedule are the
responsibility of OpenTV Corp. and subsidiaries
management. Our responsibility is to express an opinion on these
consolidated financial statements and related financial
statement schedule based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of OpenTV Corp. and
subsidiaries as of December 31, 2003 and 2002, and the
results of their operations and their cash flows for each of the
years in the two-year period ended December 31, 2003 in
conformity with accounting principles generally accepted in the
United States of America. Also, in our opinion, the related
financial statement schedules, when considered in relation to
the consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth
therein.

As discussed in Note 2 to the consolidated
financial statements, OpenTV Corp. and subsidiaries adopted
Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, on
January 1, 2002.

As discussed in Note 2 to the consolidated
financial statements, the consolidated financial statements for
the year ended December 31, 2001 have been revised to
reflect the reclassification of certain marketing expenses to
revenues as required by Emerging Issues Task Force Issue
No. 01-09, Accounting for Consideration Given by a
Vendor to a Customer or Reseller of the Vendors
Products. In our opinion, the reclassification for 2001,
as described in Note 2, is appropriate. However, we were
not engaged to audit, review, or apply any procedures to the
2001 consolidated financial statements of OpenTV Corp. and
subsidiaries other than with respect to such reclassification,
and accordingly, we do not express an opinion or any other form
of assurance on the 2001 consolidated financial statements taken
as a whole.



| |             
| | ------------
| | /s/ KPMG LLP

San Francisco, California

February 16, 2004


F-2



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##### Table of Contents



INDEPENDENT AUDITORS REPORT 
PRICEWATERHOUSECOOPERS LLP

To the Board of Directors and Shareholders of
OpenTV Corp.:

In our opinion, the accompanying consolidated
statements of operations, of shareholders equity and
comprehensive loss, and of cash flows for the period ended
December 31, 2001, prior to the reclassification relating
to the adoption of Consensus 01-09 of the Emerging Issues Task
Force of the Financial Accounting Standards Board (EITF 01-09)
(not separately presented herein), present fairly, in all
material respects, the financial position, results of operations
and cash flows of OpenTV Corp. and its subsidiaries as of
December 31, 2001, in conformity with accounting principles
generally accepted in the United States of America. In addition,
in our opinion, the financial statement schedule as of and for
the year ended December 31, 2001 listed in Item 15(a)(2)
presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related
consolidated financial statements. These consolidated financial
statements and financial statement schedule are the
responsibility of OpenTV Corp.s management; our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audit.
We conducted our audit of these statements in accordance with
auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable
basis for our opinion.



| |                               
| | ------------------------------
| | /s/ PRICEWATERHOUSECOOPERS LLP

San Jose, California

January 23, 2002, except as to Note 16,
which appeared in the 2002 OpenTV Corp. Form 10K, which is as of
April 8, 2003


F-3



---



##### Table of Contents



OPENTV CORP.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)


|                                                                  |                                                                                                                                                                                                                   |                            |         |              |         |   |         |            |         | 
|----------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ------- | ------------ | ------- | - | ------- | ---------- | ------- | 
|                                                                  |                                                                                                                                                                                                                   | December 31,               |         | December 31,
|                                                                  |                                                                                                                                                                                                                   | 2003                       |         | 2002        
|                                                                  |                                                                                                                                                                                                                   |                            |         |             
|ASSETS                                                           
|Current assets:                                                   |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           
|                                                                  | Cash and cash equivalents                                                                                                                                                                                         |                            | $       | 47,747       |         |   | $       | 38,568     |        
|                                                                  | Short-term marketable debt securities                                                                                                                                                                             |                            |         | 10,577       |         |   |         | 26,940     |        
|                                                                  | Accounts receivable, net of allowance for
    doubtful accounts of $789 and $1,966 at December 31, 2003
    and 2002, respectively                                                                                |                            |         | 12,536       |         |   |         | 10,672     |        
|                                                                  | Prepaid expenses and other current assets                                                                                                                                                                         |                            |         | 4,722        |         |   |         | 4,304      |        
|                                                                  |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           
|                                                                  |                                                                                                                                                                                                                   | Total current assets       |         |              | 75,582  |   |         |            | 80,484  | 
|Long-term marketable debt securities                              |                                                                                                                                                                                                                   |                            | 15,172  |              |         |   | 22,199  |           
|Property and equipment, net                                       |                                                                                                                                                                                                                   |                            | 11,689  |              |         |   | 15,020  |           
|Goodwill                                                          |                                                                                                                                                                                                                   |                            | 70,398  |              |         |   | 45,416  |           
|Intangible assets, net                                            |                                                                                                                                                                                                                   |                            | 33,336  |              |         |   | 28,354  |           
|Other assets                                                      |                                                                                                                                                                                                                   |                            | 13,378  |              |         |   | 5,863   |           
|                                                                  |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           
|                                                                  |                                                                                                                                                                                                                   | Total assets               |         | $            | 219,555 |   |         | $          | 197,336 | 
|                                                                  |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           
|LIABILITIES, MINORITY INTEREST AND
    SHAREHOLDERS EQUITY      
|Current liabilities:                                              |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           
|                                                                  | Accounts payable                                                                                                                                                                                                  |                            | $       | 5,854        |         |   | $       | 5,252      |        
|                                                                  | Accrued liabilities                                                                                                                                                                                               |                            |         | 32,174       |         |   |         | 22,845     |        
|                                                                  | Accrued restructuring                                                                                                                                                                                             |                            |         | 7,789        |         |   |         | 14,615     |        
|                                                                  | Due to Liberty Broadband                                                                                                                                                                                          |                            |         | 630          |         |   |         | 1,156      |        
|                                                                  | Current portion of deferred revenue                                                                                                                                                                               |                            |         | 9,740        |         |   |         | 6,340      |        
|                                                                  |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           
|                                                                  |                                                                                                                                                                                                                   | Total current liabilities  |         |              | 56,187  |   |         |            | 50,208  | 
|Deferred revenue, less current portion                            |                                                                                                                                                                                                                   |                            | 5,310   |              |         |   | 4,886   |           
|                                                                  |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           
|                                                                  |                                                                                                                                                                                                                   | Total liabilities          |         |              | 61,497  |   |         |            | 55,094  | 
|Commitments and contingencies (Note 12)                           |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           
|Minority interest                                                 |                                                                                                                                                                                                                   |                            | 1,075   |              |         |   | 1,246   |           
|Shareholders equity:                                             |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           
|                                                                  | Class A ordinary shares, no par value,
    500,000,000 shares authorized; 88,969,550 and
    41,587,033 shares issued and outstanding, including
    treasury shares, at December 31, 2003 and 2002, respectively |                            |         | 2,208,370    |         |   |         | 2,143,124  |        
|                                                                  | Class B ordinary shares, no par value,
    200,000,000 shares authorized; 30,631,746 shares
    issued and outstanding                                                                                            |                            |         | 35,953       |         |   |         | 35,953     |        
|                                                                  | Additional paid-in capital                                                                                                                                                                                        |                            |         | 466,228      |         |   |         | 461,263    |        
|                                                                  | Treasury shares at cost, 76,327 and
    50,629 shares at December 31, 2003 and 2002,
    respectively                                                                                                             |                            |         | (38          | )       |   |         | (16        | )      
|                                                                  | Deferred share-based compensation                                                                                                                                                                                 |                            |         | (36          | )       |   |         | (221       | )      
|                                                                  | Accumulated other comprehensive income                                                                                                                                                                            |                            |         | 201          |         |   |         | 494        |        
|                                                                  | Accumulated deficit                                                                                                                                                                                               |                            |         | (2,553,695   | )       |   |         | (2,499,601 | )      
|                                                                  |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           
|                                                                  |                                                                                                                                                                                                                   | Total shareholders equity |         |              | 156,983 |   |         |            | 140,996 | 
|                                                                  |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           
|Total liabilities, minority interest and
    shareholders equity |                                                                                                                                                                                                                   | $                          | 219,555 |              |         | $ | 197,336 |           
|                                                                  |                                                                                                                                                                                                                   |                            |         |              |         |   |         |           

The accompanying notes are an integral part of
these consolidated financial statements.

F-4



---



##### Table of Contents



OPENTV CORP.

CONSOLIDATED STATEMENTS OF
OPERATIONS

(In thousands, except share and per share
amounts)


|                                                            |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |         |            |           | 
|----------------------------------------------------------- | --------------------------------- | ------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------ | ------ | ------- | ------- | ---------- | ------- | -------- | ------- | ---------- | ------- | ---------- | --------- | 
|                                                            |                                   |                                                                         
|                                                            |                                   | Year Ended December 31,                                                 
|                                                            |                                   |                                                                         
|                                                            |                                   | 2003                                                                     |                                                                                                        | 2002   |         | 2001   
|                                                            |                                   |                                                                          |                                                                                                        |        |         |        
|Revenues:                                                   |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|                                                            | Royalties                         |                                                                          | $                                                                                                      | 25,192 |         |         | $          | 20,052  |          |         | $          | 33,800  |           
|                                                            | Services, support and other       |                                                                          |                                                                                                        | 22,588 |         |         |            | 23,812  |          |         |            | 36,486  |           
|                                                            | Fees and revenue shares           |                                                                          |                                                                                                        | 12,961 |         |         |            | 11,278  |          |         |            | 3,346   |           
|                                                            | License fees                      |                                                                          |                                                                                                        | 3,456  |         |         |            | 4,544   |          |         |            | 13,295  |           
|                                                            |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|                                                            |                                   |                                                                          | Total revenues (inclusive of $16,135, $12,828 and
    $20,339 of related party revenues, respectively) |        |         | 64,197  |            |         |          | 59,686  |            |         |            | 86,927    | 
|Operating expenses:                                         |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|                                                            | Cost of revenues(1)               |                                                                          |                                                                                                        | 45,713 |         |         |            | 47,344  |          |         |            | 37,775  |           
|                                                            | Research and development(2)       |                                                                          |                                                                                                        | 25,321 |         |         |            | 35,200  |          |         |            | 43,542  |           
|                                                            | Sales and marketing(3)            |                                                                          |                                                                                                        | 13,833 |         |         |            | 32,865  |          |         |            | 37,649  |           
|                                                            | General and administrative(4)     |                                                                          |                                                                                                        | 15,168 |         |         |            | 21,141  |          |         |            | 19,870  |           
|                                                            | Restructuring costs               |                                                                          |                                                                                                        | 6,587  |         |         |            | 29,414  |          |         |            |        |           
|                                                            | Amortization of intangible assets |                                                                          |                                                                                                        | 9,549  |         |         |            | 13,055  |          |         |            | 19,243  |           
|                                                            | Impairment of intangible assets   |                                                                          |                                                                                                        | 1,497  |         |         |            | 24,796  |          |         |            |        |           
|                                                            | Amortization of goodwill          |                                                                          |                                                                                                        |       |         |         |            |        |          |         |            | 394,495 |           
|                                                            | Impairment of goodwill            |                                                                          |                                                                                                        |       |         |         |            | 514,501 |          |         |            | 816,247 |           
|                                                            |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|                                                            |                                   |                                                                          | Total operating expenses                                                                               |        |         | 117,668 |            |         |          | 718,316 |            |         |            | 1,368,821 | 
|                                                            |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|Loss from operations                                        |                                   |                                                                          | (53,471                                                                                                | )      |         |         | (658,630   | )       |          |         | (1,281,894 | )      
|Interest income                                             |                                   |                                                                          | 1,572                                                                                                  |        |         |         | 5,205      |         |          |         | 10,518     |        
|Other expense, net                                          |                                   |                                                                          | (1,103                                                                                                 | )      |         |         | (66        | )       |          |         | (33        | )      
|Impairment of equity investments                            |                                   |                                                                          |                                                                                                       |        |         |         | (10,923    | )       |          |         | (14,915    | )      
|Share of losses of equity investee                          |                                   |                                                                          |                                                                                                       |        |         |         | (7,275     | )       |          |         |           |        
|Realized loss on sale of marketable equity
    securities   |                                   |                                                                          |                                                                                                       |        |         |         |           |         |          |         | (24,014    | )      
|Minority interest                                           |                                   |                                                                          | 171                                                                                                    |        |         |         | 518        |         |          |         | 202        |        
|                                                            |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|                                                            |                                   | Loss before income taxes and cumulative effect of
    accounting change  |                                                                                                        |        | (52,831 | )       |            |         | (671,171 | )       |            |         | (1,310,136 | )        
|Income tax benefit (expense)                                |                                   |                                                                          | (1,263                                                                                                 | )      |         |         | (1,541     | )       |          |         | 5,854      |        
|                                                            |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|                                                            |                                   | Loss before cumulative effect of                                         |                                                                                                        |        | (54,094 | )       |            |         | (672,712 | )       |            |         | (1,304,282 | )        
|                                                            |                                   | accounting change Cumulative effect of accounting
    change, net of tax |                                                                                                        |        |        |         |            |         | (129,852 | )       |            |         |           |          
|                                                            |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|                                                            |                                   | Net loss                                                                 |                                                                                                        | $      | (54,094 | )       |            | $       | (802,564 | )       |            | $       | (1,304,282 | )        
|                                                            |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|Net loss per share, basic and diluted:                      |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|                                                            |                                   | Before cumulative effect of accounting change                            |                                                                                                        | $      | (0.57   | )       |            | $       | (9.36    | )       |            | $       | (19.20     | )        
|                                                            |                                   | Cumulative effect of accounting change, net of tax                       |                                                                                                        |        |        |         |            |         | (1.81    | )       |            |         |           |          
|                                                            |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|                                                            |                                   | $                                                                        | (0.57                                                                                                  | )      |         | $       | (11.17     | )       |          | $       | (19.20     | )      
|                                                            |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        
|Shares used in per share calculation, basic and
    diluted |                                   |                                                                          | 94,818,278                                                                                             |        |         |         | 71,839,101 |         |          |         | 67,937,686 |        
|                                                            |                                   |                                                                          |                                                                                                        |        |         |         |            |         |          |         |            |        



---



|    |                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Inclusive of $55, $1,277 and $3,541 of
    share-based compensation for the years ended December 31,
    2003, 2002 and 2001, respectively.
|(2) | Inclusive of $59, $321 and $1,171 of share-based
    compensation for the years ended December 31, 2003, 2002
    and 2001, respectively.  
|(3) | Inclusive of $24, $298 and $1,644 of share-based
    compensation for the years ended December 31, 2003, 2002
    and 2001, respectively.  
|(4) | Inclusive of $33, $1,143 and $3,233 of
    share-based compensation for the years ended December 31,
    2003, 2002 and 2001, respectively.

The accompanying notes are integral part of these
consolidated financial statements.

F-5



---



##### Table of Contents



OPENTV CORP.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY AND COMPREHENSIVE LOSS

(In thousands, except share amounts)


|                                                                                                        |  |         |            |         |  |            |           |          |  |             |            |               |  |              |        |             |  |               |         |       |  |      |     |   |  |   |         |   |  |   |         |   |  |   |            |   |  |   |            |   |  |   |            |  
|------------------------------------------------------------------------------------------------------- |  | ------- | ---------- | ------- |  | ---------- | --------- | -------- |  | ----------- | ---------- | ------------- |  | ------------ | ------ | ----------- |  | ------------- | ------- | ----- |  | ---- | --- | - |  | - | ------- | - |  | - | ------- | - |  | - | ---------- | - |  | - | ---------- | - |  | - | ---------- | -
|                                                                                                        |  |         |            |         |  |            |           |          |  |             |            |               |  |              |        | Accumulated |  |               |         |       |  |     
|                                                                                                        |  |         |            |         |  |            |           |          |  |             |            | Other         |  |              |        |             |  |              
|                                                                                                        |  | Class A |            | Class B |  | Additional |           |          |  | Deferred    |            | Comprehensive |  |              |        |             |  |              
|                                                                                                        |  |         |            |         |  | Paid-In    |           | Treasury |  | Share-based |            | Income        |  | Accumulated  |        |             |  | Comprehensive
|                                                                                                        |  | Shares  |            | Amount  |  | Shares     |           | Amount   |  | Capital     |            | Shares        |  | Compensation |        | (Loss)      |  | Deficit       |         | Total |  | Loss
|                                                                                                        |  |         |            |         |  |            |           |          |  |             |            |               |  |              |        |             |  |               |         |       |  |     
|Balances, December 31, 2000                                                                             |  |         | 34,829,632 |         |  | $          | 2,087,440 |          |  |             | 30,631,746 |               |  | $            | 35,953 |             |  | $             | 455,336 |       |  | $    | (6  | ) |  | $ | (16,711 | ) |  | $ | (11,354 | ) |  | $ | (392,755   | ) |  | $ | 2,157,903  |   |  |   |            |  
|Share options exercised                                                                                 |  |         | 1,075,347  |         |  |            | 3,352     |          |  |             |           |               |  |              |       |             |  |               | 101     |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 3,453      |   |  |   |            |  
|Shares issued for Static2358 acquisition                                                                |  |         | 2,719,048  |         |  |            | 38,203    |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 38,203     |   |  |   |            |  
|Warrants exercised                                                                                      |  |         | 1,449,425  |         |  |            | 7,663     |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 7,663      |   |  |   |            |  
|Shares issued through employee share purchase plan                                                      |  |         | 201,698    |         |  |            | 1,577     |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 1,577      |   |  |   |            |  
|Shares issued for employee compensation                                                                 |  |         | 14,525     |         |  |            | 148       |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 148        |   |  |   |            |  
|Shares issued in exchange for OpenTV, Inc. shares                                                       |  |         | 236,057    |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               | 2,849   |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 2,849      |   |  |   |            |  
|Amortization of deferred share-based compensation                                                       |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   | 9,589   |   |  |   |        |   |  |   |           |   |  |   | 9,589      |   |  |   |            |  
|Reversal of deferred share-based compensation due
    to employee terminations                          |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               | (2,978  | )     |  |      |    |   |  |   | 2,978   |   |  |   |        |   |  |   |           |   |  |   |           |   |  |   |            |  
|Purchase of treasury shares                                                                             |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      | (10 | ) |  |   |        |   |  |   |        |   |  |   |           |   |  |   | (10        | ) |  |   |            |  
|Reclassification for realized losses from sale of
    marketable equity securities, net of income taxes |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   | 11,117  |   |  |   |           |   |  |   | 11,117     |   |  | $ | 11,117     |  
|Unrealized gains on investments, net of income
    taxes                                                |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   | 485     |   |  |   |           |   |  |   | 485        |   |  |   | 485        |  
|Foreign currency translation losses                                                                     |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   | (337    | ) |  |   |           |   |  |   | (337       | ) |  |   | (337       | )
|Net loss                                                                                                |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   | (1,304,282 | ) |  |   | (1,304,282 | ) |  |   | (1,304,282 | )
|                                                                                                        |  |         |            |         |  |            |           |          |  |             |            |               |  |              |        |             |  |               |         |       |  |      |     |   |  |   |         |   |  |   |         |   |  |   |            |   |  |   |            |   |  |   |            |  
|Balances, December 31, 2001                                                                             |  |         | 40,525,732 |         |  |            | 2,138,383 |          |  |             | 30,631,746 |               |  |              | 35,953 |             |  |               | 455,308 |       |  |      | (16 | ) |  |   | (4,144  | ) |  |   | (89     | ) |  |   | (1,697,037 | ) |  |   | 928,358    |   |  | $ | (1,293,017 | )
|                                                                                                        |  |         |            |         |  |            |           |          |  |             |            |               |  |              |        |             |  |               |         |       |  |      |     |   |  |   |         |   |  |   |         |   |  |   |            |   |  |   |            |   |  |   |            |  
|Share options exercised                                                                                 |  |         | 153,703    |         |  |            | 345       |          |  |             |           |               |  |              |       |             |  |               | 13      |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 358        |   |  |   |            |  
|Shares issued per Static earn-out agreement                                                             |  |         | 626,872    |         |  |            | 3,749     |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 3,749      |   |  |   |            |  
|Shares issued through employee share purchase plan                                                      |  |         | 205,427    |         |  |            | 457       |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 457        |   |  |   |            |  
|Shares issued for employee compensation                                                                 |  |         | 22,830     |         |  |            | 190       |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 190        |   |  |   |            |  
|Shares issued in exchange for OpenTV, Inc. shares                                                       |  |         | 52,469     |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               | 295     |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 295        |   |  |   |            |  
|Amortization of deferred share-based compensation                                                       |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   | 3,039   |   |  |   |        |   |  |   |           |   |  |   | 3,039      |   |  |   |            |  
|Reversal of deferred share-based compensation due
    to employee terminations                          |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               | (884    | )     |  |      |    |   |  |   | 884     |   |  |   |        |   |  |   |           |   |  |   |           |   |  |   |            |  
|Capital contribution from MIH Limited                                                                   |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               | 6,531   |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 6,531      |   |  |   |            |  
|Reclassification for realized gains from sale of
    marketable debt securities, net of income taxes    |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   | (880    | ) |  |   |           |   |  |   | (880       | ) |  | $ | (880       | )
|Unrealized gains on investments, net of income
    taxes                                                |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   | 790     |   |  |   |           |   |  |   | 790        |   |  |   | 790        |  
|Foreign currency translation gains                                                                      |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   | 673     |   |  |   |           |   |  |   | 673        |   |  |   | 673        |  
|Net loss                                                                                                |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   | (802,564   | ) |  |   | (802,564   | ) |  |   | (802,564   | )
|                                                                                                        |  |         |            |         |  |            |           |          |  |             |            |               |  |              |        |             |  |               |         |       |  |      |     |   |  |   |         |   |  |   |         |   |  |   |            |   |  |   |            |   |  |   |            |  
|Balances, December 31, 2002                                                                             |  |         | 41,587,033 |         |  |            | 2,143,124 |          |  |             | 30,631,746 |               |  |              | 35,953 |             |  |               | 461,263 |       |  |      | (16 | ) |  |   | (221    | ) |  |   | 494     |   |  |   | (2,499,601 | ) |  |   | 140,996    |   |  | $ | (801,981   | )
|                                                                                                        |  |         |            |         |  |            |           |          |  |             |            |               |  |              |        |             |  |               |         |       |  |      |     |   |  |   |         |   |  |   |         |   |  |   |            |   |  |   |            |   |  |   |            |  
|Share options exercised                                                                                 |  |         | 1,526,637  |         |  |            | 2,453     |          |  |             |           |               |  |              |       |             |  |               | (13     | )     |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 2,440      |   |  |   |            |  
|Shares issued for employee and director
    compensation                                                |  |         | 125,155    |         |  |            | 160       |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 160        |   |  |   |            |  
|Cashless exercise of stock options                                                                      |  |         | 73,332     |         |  |            | 140       |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 140        |   |  |   |            |  
|Shares issued and options assumed for ACTV
    acquisition                                              |  |         | 41,648,399 |         |  |            | 54,559    |          |  |             |           |               |  |              |       |             |  |               | 3,948   |       |  |      |    |   |  |   | (36     | ) |  |   |        |   |  |   |           |   |  |   | 58,471     |   |  |   |            |  
|Shares issued for BettingCorp acquisition                                                               |  |         | 3,225,063  |         |  |            | 6,934     |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 6,934      |   |  |   |            |  
|Shares issued for purchase of minority interest                                                         |  |         | 675,676    |         |  |            | 1,000     |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 1,000      |   |  |   |            |  
|Shares issued in exchange for OpenTV, Inc. shares                                                       |  |         | 115,417    |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               | 277     |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 277        |   |  |   |            |  
|Shares retired                                                                                          |  |         | (7,162     | )       |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   |           |   |  |   |            |  
|Amortization of deferred share-based compensation                                                       |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   | 171     |   |  |   |        |   |  |   |           |   |  |   | 171        |   |  |   |            |  
|Reversal of deferred share-based compensation due
    to employee terminations                          |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               | (50     | )     |  |      |    |   |  |   | 50      |   |  |   |        |   |  |   |           |   |  |   |           |   |  |   |            |  
|Capital contribution from MIH Limited                                                                   |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               | 793     |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   |           |   |  |   | 793        |   |  |   |            |  
|Purchase of treasury shares                                                                             |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               | 10      |       |  |      | (22 | ) |  |   |        |   |  |   |        |   |  |   |           |   |  |   | (12        | ) |  |   |            |  
|Reclassification for realized gains from sale of
    marketable debt securities, net of income taxes    |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   | (246    | ) |  |   |           |   |  |   | (246       | ) |  | $ | (246       | )
|Unrealized losses on investments, net of income
    taxes                                               |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   | (264    | ) |  |   |           |   |  |   | (264       | ) |  |   | (264       | )
|Foreign currency translation gains                                                                      |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   | 217     |   |  |   |           |   |  |   | 217        |   |  |   | 217        |  
|Net loss                                                                                                |  |         |           |         |  |            |          |          |  |             |           |               |  |              |       |             |  |               |        |       |  |      |    |   |  |   |        |   |  |   |        |   |  |   | (54,094    | ) |  |   | (54,094    | ) |  |   | (54,094    | )
|                                                                                                        |  |         |            |         |  |            |           |          |  |             |            |               |  |              |        |             |  |               |         |       |  |      |     |   |  |   |         |   |  |   |         |   |  |   |            |   |  |   |            |   |  |   |            |  
|Balances, December 31, 2003                                                                             |  |         | 88,969,550 |         |  | $          | 2,208,370 |          |  |             | 30,631,746 |               |  | $            | 35,953 |             |  | $             | 466,228 |       |  | $    | (38 | ) |  | $ | (36     | ) |  | $ | 201     |   |  | $ | (2,553,695 | ) |  | $ | 156,983    |   |  | $ | (54,387    | )
|                                                                                                        |  |         |            |         |  |            |           |          |  |             |            |               |  |              |        |             |  |               |         |       |  |      |     |   |  |   |         |   |  |   |         |   |  |   |            |   |  |   |            |   |  |   |            |  

The accompanying notes are an integral part of
these consolidated financial statements.

F-6



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##### Table of Contents



OPENTV CORP.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands)


|                                                                                 |                                                             |                                                           |         |        |         |      |          |         |         |   |            |         |         |  
|-------------------------------------------------------------------------------- | ----------------------------------------------------------- | --------------------------------------------------------- | ------- | ------ | ------- | ---- | -------- | ------- | ------- | - | ---------- | ------- | ------- | -
|                                                                                 |                                                             |                                                          
|                                                                                 |                                                             | Year Ended December 31,                                  
|                                                                                 |                                                             |                                                          
|                                                                                 |                                                             | 2003                                                      |         | 2002   |         | 2001
|                                                                                 |                                                             |                                                           |         |        |         |     
|Cash flows used in operating
    activities:                                     |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|Net loss                                                                         |                                                             | $                                                         | (54,094 | )      |         | $    | (802,564 | )       |         | $ | (1,304,282 | )      
|Adjustments to reconcile net loss to net cash
    used in operating activities:  |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|                                                                                 | Cumulative effect of accounting change, net of tax          |                                                           |         |       |         |      |          | 129,852 |         |   |            |        |        
|                                                                                 | Impairment of goodwill                                      |                                                           |         |       |         |      |          | 514,501 |         |   |            | 816,247 |        
|                                                                                 | Impairment of intangible assets                             |                                                           |         | 1,497  |         |      |          | 24,796  |         |   |            |        |        
|                                                                                 | Depreciation and amortization of property and
    equipment |                                                           |         | 7,490  |         |      |          | 10,276  |         |   |            | 7,189   |        
|                                                                                 | Amortization of intangible assets and goodwill              |                                                           |         | 14,679 |         |      |          | 18,326  |         |   |            | 417,983 |        
|                                                                                 | Amortization of share-based compensation                    |                                                           |         | 171    |         |      |          | 3,039   |         |   |            | 9,589   |        
|                                                                                 | Non-cash employee compensation                              |                                                           |         | 889    |         |      |          | 752     |         |   |            | 752     |        
|                                                                                 | Deferred income tax benefit                                 |                                                           |         |       |         |      |          |        |         |   |            | (7,274  | )      
|                                                                                 | Provision for doubtful accounts                             |                                                           |         | 168    |         |      |          | 1,758   |         |   |            | 1,289   |        
|                                                                                 | Non-cash restructuring costs                                |                                                           |         | 532    |         |      |          | 8,145   |         |   |            |        |        
|                                                                                 | Impairment of equity investments                            |                                                           |         |       |         |      |          | 10,923  |         |   |            | 14,915  |        
|                                                                                 | Share of losses of equity investee                          |                                                           |         |       |         |      |          | 7,275   |         |   |            |        |        
|                                                                                 | Realized loss on sale of marketable equity
    securities   |                                                           |         |       |         |      |          |        |         |   |            | 24,014  |        
|                                                                                 | In-process research and development                         |                                                           |         |       |         |      |          | 1,000   |         |   |            | 2,120   |        
|                                                                                 | Minority interest                                           |                                                           |         | (171   | )       |      |          | (518    | )       |   |            | (202    | )      
|                                                                                 | Changes in operating assets and liabilities:                |                                                           |         |        |         |      |          |         |         |   |            |         |        
|                                                                                 |                                                             | Accounts receivable                                       |         |        | (1,454  | )    |          |         | 11,700  |   |            |         | (9,781  | )
|                                                                                 |                                                             | Due from MIH Limited entities                             |         |        |        |      |          |         | 4,290   |   |            |         | (2,720  | )
|                                                                                 |                                                             | Prepaid expenses and other current assets                 |         |        | 602     |      |          |         | 5,030   |   |            |         | 1,101   |  
|                                                                                 |                                                             | Other assets                                              |         |        | 2,308   |      |          |         | 1,728   |   |            |         | (1,105  | )
|                                                                                 |                                                             | Accounts payable                                          |         |        | (923    | )    |          |         | (1,155  | ) |            |         | 1,674   |  
|                                                                                 |                                                             | Accrued liabilities                                       |         |        | (5,558  | )    |          |         | (4,293  | ) |            |         | (7,019  | )
|                                                                                 |                                                             | Accrued restructuring                                     |         |        | (11,873 | )    |          |         | 10,865  |   |            |         |        |  
|                                                                                 |                                                             | Due to Liberty Broadband                                  |         |        | (526    | )    |          |         | 527     |   |            |         |        |  
|                                                                                 |                                                             | Deferred revenue                                          |         |        | 3,777   |      |          |         | (138    | ) |            |         | 1,258   |  
|                                                                                 |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|                                                                                 |                                                             | Net cash used in operating activities                     |         |        | (42,486 | )    |          |         | (43,885 | ) |            |         | (34,252 | )
|Cash flows provided from (used in) investing
    activities:                     |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|Purchase of property and equipment                                               |                                                             |                                                           | (2,944  | )      |         |      | (7,693   | )       |         |   | (14,243    | )      
|Proceeds from sale of assets                                                     |                                                             |                                                           | 1,000   |        |         |      |         |         |         |   | 4,625      |        
|Cash used for acquisitions, net of cash acquired                                 |                                                             |                                                           | (10,130 | )      |         |      | (81,451  | )       |         |   | (14,187    | )      
|Proceeds from sale of marketable equity securities                               |                                                             |                                                           |        |        |         |      |         |         |         |   | 16,486     |        
|Proceeds from sale of marketable debt securities                                 |                                                             |                                                           | 111,697 |        |         |      | 208,149  |         |         |   | 173,490    |        
|Purchase of marketable debt securities                                           |                                                             |                                                           | (51,384 | )      |         |      | (110,671 | )       |         |   | (163,574   | )      
|Private equity investments                                                       |                                                             |                                                           |        |        |         |      | (3,000   | )       |         |   | (5,448     | )      
|                                                                                 |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|                                                                                 |                                                             | Net cash provided from (used in) investing
    activities |         |        | 48,239  |      |          |         | 5,334   |   |            |         | (2,851  | )
|Cash flows provided from financing
    activities:                               |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|Proceeds from issuance of ordinary shares                                        |                                                             |                                                           | 2,466   |        |         |      | 856      |         |         |   | 12,686     |        
|Capital contribution from MIH Limited                                            |                                                             |                                                           | 793     |        |         |      | 6,531    |         |         |   |           |        
|                                                                                 |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|                                                                                 |                                                             | Net cash provided from financing activities               |         |        | 3,259   |      |          |         | 7,387   |   |            |         | 12,686  |  
|Effect of exchange rate changes on cash and cash
    equivalents                 |                                                             |                                                           | 167     |        |         |      | 483      |         |         |   | (337       | )      
|                                                                                 |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|Net increase (decrease) in cash and cash
    equivalents                         |                                                             |                                                           | 9,179   |        |         |      | (30,681  | )       |         |   | (24,754    | )      
|Cash and cash equivalents, beginning of year                                     |                                                             |                                                           | 38,568  |        |         |      | 69,249   |         |         |   | 94,003     |        
|                                                                                 |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|Cash and cash equivalents, end of year                                           |                                                             | $                                                         | 47,747  |        |         | $    | 38,568   |         |         | $ | 69,249     |        
|                                                                                 |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|Supplemental disclosure of cash flow
    information:                            |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|Cash received (paid) for income taxes                                            |                                                             | $                                                         | 150     |        |         | $    | (195     | )       |         | $ | (1,373     | )      
|                                                                                 |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|Non-cash investing and financing
    activities:                                 |                                                             |                                                           |         |        |         |      |          |         |         |   |            |        
|Value of shares issued in connection with
    acquisitions and intangible assets |                                                             | $                                                         | 61,493  |        |         | $    | 3,749    |         |         | $ | 38,203     |        
|Value of shares issued for purchase of minority
    interest                     |                                                             |                                                           | 1,000   |        |         |      |         |         |         |   |           |        
|Deferred compensation arising from issuance of
    options                       |                                                             |                                                           | 36      |        |         |      |         |         |         |   |           |        

The accompanying notes are an integral part of
these consolidated financial statements.

F-7



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##### Table of Contents



OPENTV CORP.

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS

December 31, 2003




|        |                                 
|------- | --------------------------------
|Note 1. | Ownership and Business of OpenTV

We were formed as an international business
company incorporated under the International Business Companies
Act of the British Virgin Islands in September 1999 to act as a
holding company for OpenTV, Inc., which then became our
principal operating subsidiary.

On August 27, 2002, Liberty Media
Corporation and one of its subsidiaries (collectively,
Liberty Media) completed a transaction with MIH
Limited in which Liberty Media acquired MIHLs controlling
ownership stake in us. Pursuant to the agreement, Liberty Media
acquired 365,460 Class A ordinary shares and 30,206,154
Class B ordinary shares from MIHL. We were not a party to
that agreement. As a result of our acquisition of ACTV in July
2003, Liberty Media received an additional 6,456,969
Class A ordinary shares. As of December 31, 2003,
Liberty Medias total ownership represented approximately
32.9% of the economic interest and approximately 79.4% of the
voting power of our ordinary shares on an undiluted basis.

We provide software, content and applications,
and professional services for interactive and enhanced
television. We operate in a single business segment.



|        |                                               
|------- | ----------------------------------------------
|Note 2. | Summary of Significant Accounting
    Policies



| |                                                          
| | ---------------------------------------------------------
| | Principles of Consolidation and Basis of
    Presentation

The accompanying consolidated financial
statements include the accounts of our majority-owned
subsidiaries. All intercompany balances and transactions have
been eliminated in consolidation.

Certain amounts in the consolidated financial
statements for 2002 and 2001 have been reclassified to conform
to the 2003 presentation.



| |                     
| | --------------------
| | Management Estimates

The preparation of financial statements and
related disclosures in conformity with generally accepted
accounting principles in the United States of America requires
management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and
accompanying notes. Estimates are used for, but not limited to,
the accounting for the allowance for doubtful accounts,
depreciation and amortization, investment valuation, goodwill
and intangible assets valuation, restructuring accruals, taxes
and contingencies. Actual results could differ from these
estimates.



| |                          
| | -------------------------
| | Cash and Cash Equivalents

Cash and cash equivalents are stated at cost,
which approximates fair value. We consider all highly liquid
investments with original or remaining maturities of three
months or less at the date of purchase and money market funds to
be cash equivalents.



| |                           
| | --------------------------
| | Marketable Debt Securities

Our policy is to minimize risk by investing in
investment grade securities which earn returns based on current
interest rates.

We classify all marketable debt securities as
available-for-sale in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity
Securities. Accordingly, our marketable debt securities
are carried at fair value as of the balance sheet date.
Short-term marketable debt securities are those with remaining
maturities at the balance sheet date of one year or less.
Long-term marketable debt securities have remaining maturities
at the balance sheet date of greater than one year. Unrealized
gains and losses are reported as accumulated other comprehensive
income

F-8



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(loss) in the statement of shareholders
equity. Additionally, realized gains and losses on sales of all
such investments are reported in results of operations and
computed using the specific identification cost method.



| |                                        
| | ---------------------------------------
| | Fair Value of Financial
    Instruments

The reported amounts of our financial
instruments, including cash and cash equivalents, short-term
marketable debt securities, accounts receivable (net of the
allowance for doubtful accounts), accounts payable and accrued
liabilities, approximate fair value due to their short
maturities.



| |                             
| | ----------------------------
| | Concentration of Credit Risk

Financial instruments that potentially subject us
to a concentration of credit risk consist principally of cash
and cash equivalents, accounts receivable and short-term and
long-term marketable debt securities. Cash and cash equivalents
are primarily invested in a diverse portfolio of money market
securities and money market funds in accordance with our
investment policy. With respect to accounts receivable, our
customer base is dispersed across many geographic areas and we
generally do not require collateral. We analyze historic
collection experience, customer credit-worthiness, current
economic trends in each country where our customers are located,
and customer payment history when evaluating the adequacy of the
allowance for doubtful accounts.



| |                       
| | ----------------------
| | Property and Equipment

Property and equipment are stated at cost less
accumulated depreciation and amortization. Depreciation is
computed using the straight-line method over the estimated
useful lives of 3 to 7 years. Leasehold improvements are
amortized on a straight-line basis over the life of the lease,
or the estimated useful life of the asset, whichever is shorter.

Major additions and improvements are capitalized,
while replacements, maintenance, and repairs that do not improve
or extend the life of the assets are charged to expense. In the
period assets are retired or otherwise disposed of, the costs
and related accumulated depreciation and amortization are
removed from the accounts, and any gain or loss on disposal is
included in results of operations.



| |                                         
| | ----------------------------------------
| | Long-Term Private Equity
    Investments

We invest in equity and debt instruments of
privately-held companies for business and strategic objectives,
and typically we do not attempt to reduce or eliminate the
inherent market risks of these investments. These investments
are included in other assets and are accounted for under the
cost method when we do not have the ability to exercise
significant influence over operations. When we have the ability
to exercise significant influence over operations, investments
are accounted for under the equity method. We perform periodic
reviews of these investments for impairment. Our investments in
privately-held companies are considered impaired when a review
of the investees operations and other indicators of
impairment indicate that there has been a decline in the fair
value that is other than temporary and that the carrying value
of the investment is not likely to be recoverable. Such
indicators include, but are not limited to, limited capital
resources, need for additional financing, and prospects for
liquidity of the related securities. Impaired investments in
privately-held companies are written down to estimated fair
value, which is the amount we believe is recoverable from the
investment. We recorded impairments of $10.9 million and
$14.9 million for the years ended December 31, 2002
and 2001, respectively. We also recorded $7.3 million for
our share of losses of equity investee for the year ended
December 31, 2002.

F-9



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                   
| | ----------------------------------
| | Goodwill and Intangible
    Assets

Goodwill and intangible assets are stated at cost
less accumulated amortization. Amortization of intangible assets
is computed on a straight-line basis over the estimated benefit
periods. The estimated benefit period ranges from 2 to
13 years.

In July 2001, the Financial Accounting Standards
Board (FASB) issued SFAS No. 141,
Business Combinations, and SFAS No. 142,
Goodwill and Other Intangible Assets. Under
SFAS 141, all business combinations initiated after
June 30, 2001 must be accounted for using the purchase
method. Under SFAS 142, goodwill and intangible assets with
indefinite lives are no longer amortized but are reviewed
annually (or more frequently if there are indicators that such
assets may be impaired) for impairment. Separable intangible
assets that are not deemed to have indefinite lives will
continue to be amortized over their useful lives. The
amortization provisions of SFAS 142 apply to goodwill and
intangible assets acquired after June 30, 2001. In
connection with the adoption of SFAS 142 on January 1,
2002, we were required to complete a transitional goodwill
impairment test which resulted in a transitional impairment
charge for goodwill of $129.9 million that was recorded as
cumulative effect of change in accounting principle in the first
quarter of 2002.



| |                  
| | -----------------
| | Long-Lived Assets

We account for long-lived assets under
SFAS No. 144, Accounting for Impairment or
Disposal of Long-Lived Assets, which requires us to review
for impairment of long-lived assets whenever events or changes
in circumstances indicate that the carrying amount of an asset
might not be recoverable. When such an event occurs, we estimate
the future cash flows expected to result from the use of the
asset and its eventual disposition. If the undiscounted expected
future cash flows are less than the carrying amount of the
asset, an impairment loss is recognized for the difference
between the assets fair value and its carrying value.



| |                    
| | -------------------
| | Revenue Recognition

We derive revenue from four primary sources:
(i) royalties, (ii) professional services, support and
other, (iii) fees and revenue shares, and (iv) license
fees.

Royalties.In
accordance with Statement of Position 97-2, we recognize
royalties upon notification of shipment or activation of our
software in set-top boxes and other products by licensees if a
signed contract exists, delivery has occurred, the fee is fixed
or determinable and collection of the resulting receivable is
probable. For non-refundable prepaid royalties, we recognize
revenue upon delivery of software provided that all other
requirements of SOP 97-2 have been met.

Professional Services, Support and
Other.Professional services revenues
from software development contracts, customization services and
implementation support are recognized generally on the
percentage of completion method. Under the percentage of
completion method, the extent of progress towards completion is
measured based on actual costs incurred to total estimated costs
for fixed bid contracts or based on the hours incurred
multiplied by the hourly rate for time and material engagements.
Provisions for estimated losses on uncompleted contracts are
made in the period in which estimated losses are determined.

For contracts with multiple obligations (e.g.
maintenance and other services), and for which vendor-specific
objective evidence of fair value for the undelivered elements
exists, we recognize revenue for the delivered elements based
upon the residual contract value as prescribed by Statement of
Position No. 98-9, Modification of SOP No. 97-2
with Respect to Certain Transactions. Generally we have
vendor-specific objective evidence of fair value for the
maintenance element of software arrangements based on the
renewal rates for maintenance in future years as specified in
the contracts. In such cases, we defer the maintenance revenue
at the outset of the arrangement and recognize it ratably over
the period during which the maintenance is to be provided, which
generally commences on the date the software is delivered.
Payments for

F-10



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

maintenance and support fees are generally made
in advance and are non-refundable. Vendor-specific objective
evidence of fair value for the service element is determined
based on the price charged when those services are sold
separately. For revenue allocated to consulting services and for
consulting services sold separately, we recognize revenue as the
related services are performed.

Fees and Revenue
Shares.Fees and revenue shares
consist of PlayJam games channel fees, interactive advertising
fees, net betting and gaming revenues, and revenue shares
received for advertising and other interactive services. These
revenues are recognized in accordance with Securities and
Exchange Commission Staff Accounting Bulletin No. 104
(SAB 104), Revenue Recognition and
Emerging Issues Task Force (EITF) Issue 00-21,
Revenue Arrangements with Multiple Deliverables.
Revenue is recognized only when the price is fixed or
determinable, persuasive evidence of an arrangement exists, the
service is performed, and collectibility of the resulting
receivable is reasonably assured.

Under the PlayJam brand, we derive revenue as
consumers interact with our games channels in the United
Kingdom, France and the United States. We receive fees primarily
from premium rate telephone calls that are placed by consumers,
using either the telephone or the remote control, for membership
registration, game score registration for the chance to win
prizes, and for access to pay-per-play content. Premium rate
telephony charges are recorded as revenue upon notification from
the telecommunications companies.

Net betting and gaming revenues are derived from
customers wagering on casino games offered on our casino channel
and via the Internet on PlayMonteCarlo.com. Incentives and
jackpots are deducted to arrive at net betting and gaming
revenues.

We also enter into arrangements whereby our
licensees pay us a percentage of the interactive revenues they
earn from their customers. When we have delivered all of the
software under the arrangement, we recognize the revenue as the
licensee reports to us our revenue share, which is done
generally on a quarterly basis.

Advertising fees are recognized as the
advertisements are delivered or ratably over the contract
period, where applicable, and when collection of the resulting
receivable is reasonably assured.

License Fees.In
accordance with SOP 97-2, we recognize license fees upon
shipment if a signed contract exists, delivery has occurred, the
fee is fixed or determinable and collection of the resulting
receivable is probable.



| |                                      
| | -------------------------------------
| | Other Revenue Accounting
    Policies

Under arrangements where the customer receives
rights for unspecified future applications when they are made
available, we recognize the revenue over the term of the
arrangement, in the appropriate respective revenue category.

In November 2001, the EITF reached consensus
on EITF No. 01-09, Accounting for Consideration Given
by a Vendor to a Customer or Reseller of the Vendors
Products. EITF 01-09 requires that consideration,
including equity instruments, given to a customer should be
classified in the vendors income statement as a reduction
of revenue unless the consideration relates to a separable
identifiable benefit received from the customer and the fair
value of such benefit can be reasonably estimated. OpenTV
adopted EITF 01-09 in the first quarter of 2002. In
accordance with the transition guidance, financial statements
for prior periods presented for comparative purposes were
reclassified to comply with the new income statement
presentation requirement which resulted in a reclassification
from sales and marketing expenses to royalties revenues of
approximately $8.4 million for the year ended
December 31, 2001. The $8.4 million was a one-time
payment made to BSkyB for marketing the BSkyB hard drive set-top
box.

F-11



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                 
| | ----------------
| | Deferred Revenue

Deferred revenue consists primarily of payments
received from customers for prepaid royalties, services and
licenses for undelivered products and services which are
generally amortized over the term of the arrangement.



| |                         
| | ------------------------
| | Research and Development

Costs incurred in the research and development of
new software products are expensed as incurred until
technological feasibility is established. Development costs are
capitalized beginning when a products technological
feasibility has been established and ending when the product is
available for general release to customers, in accordance with
SFAS No. 86, Accounting for the Costs of
Computer Software to be Sold, Leased or Otherwise Marketed.



| |            
| | -----------
| | Advertising

Costs related to advertising and promotion of
products are charged to sales and marketing expense as incurred.
Advertising expense for the years ended December 31, 2003,
2002 and 2001 was $0.7 million, $1.7 million and
$2.4 million respectively.



| |            
| | -----------
| | 401(k) Plan

Employees based in the United States participate
in a 401(k) plan which provides retirement benefits through
tax-deferred salary deductions for all eligible employees
meeting certain age and service requirements. Participating
employees may contribute an amount of their eligible
compensation, subject to an annual limit. We, at the discretion
of our board of directors, may make discretionary matching
contributions on behalf of our employees. We made contributions
to the plan in the amounts of $0.7 million,
$0.8 million and $0.9 million for the years ended
December 31, 2003, 2002, and 2001, respectively.



| |               
| | --------------
| | Employee Bonus

For the year ended December 31, 2003, the
compensation committee of the Board of Directors approved a
bonus plan that provides for the issuance of shares to employees
based on corporate and individual performance objectives. We
were authorized to pay an aggregate bonus to employees equal in
value to not more than 1,000,000 Class A ordinary shares.
We were also authorized, for employees in the United States, the
United Kingdom and elsewhere, as appropriate in
managements discretion, to net against the number of
shares that would otherwise have been issued in respect of any
individuals bonus, applicable employee withholding taxes
based on an average assumed effective tax rate. The result of
such netting will be to issue to those employees entitled to
receive a bonus payable in shares, a number of shares equal in
value to the bonus amount less that number of shares equal to
the value of the net withholding applicable to such employee.
Due to legal restrictions in certain foreign jurisdictions
related to the issuance of shares or the costs associated with
implementing such a program, certain employee bonuses will be
paid in cash. The estimated amount recorded as an expense in the
2003 consolidated statement of operations was $3.7 million.
When the individual employee bonus awards are determined, they
will be deducted from the shares reserved for issuance under our
option plans.



| |             
| | ------------
| | Income Taxes

We account for income taxes using an asset and
liability approach which requires the recognition of taxes
payable or refundable for the current year and deferred tax
liabilities and assets for the future tax consequences of events
that have been recognized in our financial statements or tax
returns. The measurement of current and deferred tax liabilities
and assets is based on provisions of the enacted tax law. The

F-12



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

measurement of deferred tax assets is reduced, if
necessary, by a valuation allowance if it is uncertain the
deferred benefit will be realized.



| |                         
| | ------------------------
| | Share-Based Compensation

We account for share-based employee compensation
arrangements in accordance with the provisions of Accounting
Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and comply
with the disclosure provisions of SFAS No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure, which was effective for the
year ended December 31, 2003. Under APB No. 25
compensation expense is based on the difference, if any, on the
date of the grant, between the fair value of our shares and the
exercise price of the option or purchase right. Had compensation
cost for options plans and our Employee Stock Purchase Plan,
(the ESPP), been determined based on the fair value
at the grant dates for the awards under a method prescribed by
SFAS 148, our net loss would have been increased to the
pro-forma amounts indicated below (amounts in millions, except
per share amounts):

|                                                                                                                                                    |             |                         |       |       |   |      |        |        |   |   |          |        |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- | ----------- | ----------------------- | ----- | ----- | - | ---- | ------ | ------ | - | - | -------- | ------ | -
|                                                                                                                                                    |             |                        
|                                                                                                                                                    |             | Year Ended December 31,
|                                                                                                                                                    |             |                        
|                                                                                                                                                    |             | 2003                    |       | 2002  |   | 2001
|                                                                                                                                                    |             |                         |       |       |   |     
|Net loss, as reported                                                                                                                               |             | $                       | (54.1 | )     |   | $    | (802.6 | )      |   | $ | (1,304.3 | )     
|Add: Share-based employee compensation expense
    included in reported net loss, net of related tax effects                                        |             |                         | 0.2   |       |   |      | 3.0    |        |   |   | 9.6      |       
|Add (deduct): Share-based employee compensation
    expense determined under fair value-based method for all awards,
    net of related tax effects |             |                         | 1.1   |       |   |      | (13.1  | )      |   |   | (32.3    | )     
|                                                                                                                                                    |             |                         |       |       |   |      |        |        |   |   |          |       
|Pro-forma net loss                                                                                                                                  |             | $                       | (52.8 | )     |   | $    | (812.7 | )      |   | $ | (1,327.0 | )     
|                                                                                                                                                    |             |                         |       |       |   |      |        |        |   |   |          |       
|Net loss per share, basic and diluted:                                                                                                              |             |                         |       |       |   |      |        |        |   |   |          |       
|                                                                                                                                                    | As reported |                         | $     | (0.57 | ) |      | $      | (11.17 | ) |   | $        | (19.20 | )
|                                                                                                                                                    |             |                         |       |       |   |      |        |        |   |   |          |       
|                                                                                                                                                    | Pro-forma   |                         | $     | (0.56 | ) |      | $      | (11.31 | ) |   | $        | (19.53 | )
|                                                                                                                                                    |             |                         |       |       |   |      |        |        |   |   |          |       

During the year ended December 31, 2003,
there was a net reversal of share-based employee compensation
expense determined under a fair value-based method for all
awards of $1.5 million due to the termination of certain
employees.

These pro-forma amounts may not be representative
of the effects on reported net loss for future years as options
vest over several years and additional awards are generally made
each year.

We calculated the fair value of each option grant
on the date of the grant using the Black-Scholes option pricing
model with the following assumptions:

|                               |  |      |             |      |  |      |             |   |  |  |             |  
|------------------------------ |  | ---- | ----------- | ---- |  | ---- | ----------- | - |  |  | ----------- | -
|                               |  | 2003 |             | 2002 |  | 2001
|                               |  |      |             |      |  |     
|Risk-free interest rate        |  |      | 2.40%- 3.63 | %    |  |      | 2.23%- 2.75 | % |  |  | 2.30%- 4.71 | %
|Average expected life (months) |  |      | 60          |      |  |      | 60          |   |  |  | 60          |  
|Volatility                     |  |      | 131         | %    |  |      | 101         | % |  |  | 110         | %
|Dividend yield                 |  |      |            |      |  |      |            |   |  |  |            |  

The weighted average fair value of options
granted during 2003, 2002 and 2001 was $2.52, $5.90 and $9.07,
respectively.

F-13



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

We calculated the fair value of purchase rights
under the ESPP using the Black-Scholes option pricing model with
the following assumptions:

|                               |  |      |             |      |  |  |             | 
|------------------------------ |  | ---- | ----------- | ---- |  |  | ----------- | 
|                               |  | 2002 |             | 2001
|                               |  |      |             |     
|Risk-free interest rate        |  |      | 1.97%-2.21% |      |  |  | 3.15%-5.18% | 
|Average expected life (months) |  |      | 6           |      |  |  | 6           | 
|Volatility                     |  |      | 78%-121%    |      |  |  | 105%-114%   | 
|Dividend yield                 |  |      |            |      |  |  |            | 

The weighted average fair value of purchase
rights granted during 2002 and 2001 was $2.39 and $5.00,
respectively. There were no purchase rights granted during 2003.

Comprehensive
income (loss)

We adopted the provisions of
SFAS No. 130, Reporting Comprehensive
Income. This statement requires companies to classify
items of comprehensive income by their nature in the
consolidated financial statements and display the accumulated
balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of
the consolidated balance sheets. Accordingly, we reported
foreign currency translation adjustments and unrealized
gain/loss on marketable securities in comprehensive income
(loss).

Foreign
currency translation

The functional currency of our foreign
subsidiaries is generally the local currency. Assets and
liabilities are translated into U.S. dollars at the balance
sheet date exchange rate. Revenues and expenses are translated
at the average exchange rate prevailing during the period. The
related gains and losses from translation are recorded as a
translation adjustment in a separate component of
shareholders equity. Foreign currency transaction gains
and losses are included in results of operations.

Net loss per
share

Basic and diluted net loss per share were
computed using the weighted-average number of ordinary shares
outstanding during the periods presented. The following items as
of December 31 were not included in the computation of
diluted net loss per share because the effect would be
anti-dilutive:

|                                                                                                                                                                                             |  |      |           |      |  |      |           |  |  |  |           | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- |  |  |  | --------- | 
|                                                                                                                                                                                             |  | 2003 |           | 2002 |  | 2001
|                                                                                                                                                                                             |  |      |           |      |  |     
|Class A ordinary shares issuable upon
    exercise of stock options                                                                                                                          |  |      | 9,011,456 |      |  |      | 5,599,994 |  |  |  | 7,743,329 | 
|Class A ordinary shares issuable upon
    exercise of warrants                                                                                                                               |  |      |          |      |  |      | 506,520   |  |  |  | 681,520   | 
|Class A ordinary shares issuable for shares
    of OpenTV, Inc. Class A common stock (including shares
    of OpenTV, Inc. Class A common stock issuable upon
    exercise of stock options) |  |      | 777,094   |      |  |      | 979,511   |  |  |  | 1,035,981 | 
|Class B ordinary shares issuable for shares
    of OpenTV, Inc. Class B common stock                                                                                                         |  |      | 7,594,796 |      |  |      | 7,594,796 |  |  |  | 7,594,796 | 
|Class A ordinary shares and shares of
    OpenTV, Inc. Class A common stock subject to repurchase                                                                                            |  |      |          |      |  |      |          |  |  |  | 44,316    | 

Had such items been included in the calculation
of diluted net loss per share, shares used in the calculation
would have been increased by approximately 10 million,
9 million and 12 million in the years ended
December 31, 2003, 2002 and 2001, respectively.

F-14



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Recent
accounting pronouncements

In November 2002, the FASB issued Interpretation
(FIN) No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, including Indirect
Guarantees of Indebtedness of Others, which clarifies
disclosure and recognition/measurement requirements related to
certain guarantees. The disclosure requirements are effective
for financial statements issued after December 15, 2002 and
the recognition/measurement requirements are effective on a
prospective basis for guarantees issued or modified after
December 31, 2002. The adoption of FIN 45 did not have
a material impact on our financial position, results of
operations, or cash flows.

In December 2002, the FASB issued SFAS 148,
which provides alternative methods of transition for voluntary
change to the fair value based method of accounting for
stock-based employee compensation. In addition,
SFAS No. 148 amends the disclosure requirements of
SFAS 123 to require more prominent and more frequent
disclosures in financial statements about the effects of
stock-based compensation. The transition guidance and annual
disclosure provisions of SFAS 148 are effective for fiscal
years ending after December 15, 2002. The interim
disclosure provisions are effective for financial reports
containing financial statements for interim periods beginning
after December 15, 2002. The adoption of SFAS 148 did
not have a material impact on our consolidated financial
position, results or operations or cash flows.

In January 2003, the EITF reached a consensus
regarding EITF No. 00-21, Revenue Arrangements with
Multiple Deliverables, which requires companies to
determine whether an arrangement involving multiple deliverables
contains more than one unit of accounting. In applying
EITF 00-21, revenue arrangements with multiple deliverables
should be divided into separate units of accounting if the
deliverables in the arrangement meet certain criteria.
Arrangement consideration should be allocated among the separate
units of accounting based on their relative fair values. This
issue is effective for revenue arrangements entered into for
fiscal periods beginning after June 14, 2003. The adoption
of this consensus did not have a material impact on our
financial position, results of operations, or cash flows.

In January 2003, the FASB issued FIN No. 46,
Consolidation of Variable Interest Entities, which
addresses consolidation by a business of variable interest
entities in which it is the primary beneficiary. FIN 46 is
effective immediately for certain disclosure requirements and
variable interest entities created after January 31, 2003,
and in the first interim or annual period beginning after
December 15, 2003 for all other variable interest entities
entered into prior to January 31, 2003. Certain disclosure
requirements apply to any financial statements issued after
December 31, 2004. In December 2003, the FASB issued
FIN 46R, which made certain amendments to FIN 46. The
revision clarifies the definition of a business by providing a
scope exemption that eliminates the overly broad definition in
the original release that potentially could have classified any
business as a variable interest entity. The revision also delays
the effective date of the Interpretation from the first
reporting period following December 15, 2003 to the first
reporting period ending after March 15, 2004. We do not
have any ownership in any variable interest entities as of
December 31, 2003. We will apply the consolidation
requirements of FIN 46R in future periods if we should own
any interest in any variable interest entity.

In April 2003, the FASB issued SFAS 149,
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. SFAS 149 amends and clarifies the
accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for
hedging activities under SFAS 133, Accounting for
Derivative Instruments and Hedging Activities.
SFAS 149 is generally effective for contracts entered into
or modified after June 30, 2003 and for hedging
relationships designated after June 30, 2003. We do not
have any derivative instruments and hedging activities as of
December 31, 2003. We will apply SFAS 149 in future
periods if we should have any derivative instruments and hedging
activities.

In May 2003, the FASB issued SFAS 150,
Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity.
SFAS 150 requires that certain financial instruments, which

F-15



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

under previous guidance were accounted for as
equity, must now be accounted for as liabilities. The financial
instruments affected include mandatory redeemable stock, certain
financial instruments that require or may require shares of
stock. SFAS 150 is effective for all financial instruments
entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period
beginning after June 15, 2003. We do not have any financial
instruments with characteristics of both liabilities and equity
as of December 31, 2003. We will apply SFAS 150 in
future periods if we should have any financial instruments with
characteristics of both liabilities and equity.

In December 2003, the Staff of the
Securities and Exchange Commission issued SAB 104,
Revenue Recognition, which amends SAB 101,
Revenue Recognition in Financial Statements.
SAB 104 rescinds accounting guidance contained in
SAB 101 related to multiple element revenue arrangements,
superseded as a result of the issuance of EITF 00-21.
Additionally, SAB 104 rescinds the SECs Revenue
Recognition in Financial Statements Frequently Asked Questions
and Answers issued with SAB 101 that had been codified in
SEC Topic 13, Revenue Recognition. The adoption of
SAB 104 did not have a material impact on our financial
position, results of operations, or cash flows.



|        |             
|------- | ------------
|Note 3. | Acquisitions



| |                   
| | ------------------
| | Static Acquisition

In July 2001, we acquired Static2358, a
privately-held, interactive TV (iTV) media and
entertainment company. Static provides iTV application
development expertise across multiple platforms, and owns and
operates the iTV entertainment and games channel, PlayJam. Under
the acquisition agreement, we acquired all of Statics
privately-held stock in a combined stock and cash transaction.
Static shareholders received an aggregate of 2,719,048 of our
Class A ordinary shares with a value of $38.2 million
at the acquisition date, and approximately $12.7 million in
cash was paid to retire certain Static obligations. Pursuant to
certain earn-out provisions contained in the Static acquisition
agreement, the principal shareholders of Static earned an
additional consideration of 626,872 Class A ordinary
shares, which were issued in 2002. Additional goodwill of
$3.8 million was recorded based on the fair value of those
shares on the date the number of shares to be issued was
established.

Tangible assets acquired from Static included
cash and cash equivalents, accounts receivable, property and
equipment, and other assets. Liabilities assumed from Static
included accounts payable and accrued liabilities. The
acquisition was accounted for as a purchase and accordingly, the
results of operations of Static have been included in the
consolidated financial statements commencing on the date of
acquisition. The total purchase price, including expenses, was
allocated based upon an appraisal as follows (in millions):

|                                 |                                     |          |      |      | 
|-------------------------------- | ----------------------------------- | -------- | ---- | ---- | 
|                                 |                                     | Purchase
|                                 |                                     | Price   
|                                 |                                     |         
|Tangible net liabilities assumed |                                     | $        | (5.5 | )   
|Intangible assets acquired:      |                                     |          |      |     
|                                 | Developed technology                |          |      | 5.1  | 
|                                 | In-process research and development |          |      | 2.1  | 
|                                 | Existing relationships              |          |      | 8.5  | 
|                                 | Trademarks                          |          |      | 0.7  | 
|                                 | Goodwill                            |          |      | 45.3 | 
|                                 |                                     |          |      |     
|                                 |                                     | $        | 56.2 |     
|                                 |                                     |          |      |     

The intangible assets are being amortized over
3 years. The $2.1 million identified as in-process
research and development was charged to expense in 2001. The
goodwill was fully impaired in 2002.

F-16



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Wink
Acquisition

On October 4, 2002, we acquired the capital
stock of a subsidiary of Liberty Broadband Interactive
Television, Inc. (Liberty Broadband) that held
the capital stock of Wink Communications for $101 million
in cash, representing the actual cost of Liberty
Broadbands acquisition of Wink Communications which was
completed on August 22, 2002. As both us and Liberty
Broadband are controlled by Liberty Media, the acquisition was
accounted for as a combination of entities under common control
and, accordingly, our results of operations include the results
of Wink subsequent to its acquisition by Liberty Broadband.

Tangible assets acquired from Wink included cash
and cash equivalents, short-term marketable debt securities,
accounts receivable, property and equipment, and other assets.
Liabilities assumed from Wink included accounts payable and
accrued liabilities. The total purchase price, including
expenses, was allocated based upon an appraisal as follows (in
millions):

|                             |                                     |          |       |      | 
|---------------------------- | ----------------------------------- | -------- | ----- | ---- | 
|                             |                                     | Purchase
|                             |                                     | Price   
|                             |                                     |         
|Tangible net assets acquired |                                     | $        | 41.0  |     
|Intangible assets acquired:  |                                     |          |       |     
|                             | Patents                             |          |       | 4.3  | 
|                             | Developed technology                |          |       | 2.7  | 
|                             | In-process research and development |          |       | 1.0  | 
|                             | Contracts and relationships         |          |       | 6.5  | 
|                             | Tradenames and trademarks           |          |       | 0.5  | 
|                             | Goodwill                            |          |       | 45.0 | 
|                             |                                     |          |       |     
|                             |                                     | $        | 101.0 |     
|                             |                                     |          |       |     

The intangible assets are being amortized over
5 years. The $1.0 million identified as in-process
research and development was charged to expense in 2002. In the
allocation of purchase price, we included an adjustment to
accrued liabilities of $1.2 million for estimated severance
and $2.1 million for lease termination costs to be incurred
in connection with a restructuring of Winks operations. As
of December 31, 2003, the remaining balance was
$1.0 million for lease termination costs which will be paid
in 2004. Also included in the adjustment to accrued liabilities
was an obligation of $0.8 million to settle outstanding
vested Wink options which were converted into rights to receive
the merger consideration of $3.00 in cash, net of the option
exercise price.

The following presents our operating results for
the years ended December 31, 2002 and 2001 on a pro-forma
basis as if the acquisition of Wink had been consummated as of
January 1, 2002 and 2001 (in millions, except per share
amounts):

|                                                            |  |      |            |      |  |   |            |  
|----------------------------------------------------------- |  | ---- | ---------- | ---- |  | - | ---------- | -
|                                                            |  | 2002 |            | 2001
|                                                            |  |      |            |     
|Revenues                                                    |  | $    | 62.0       |      |  | $ | 89.2       |  
|Net loss before cumulative effect of accounting
    change  |  | $    | (696.4     | )    |  | $ | (1,421.3   | )
|Net loss                                                    |  | $    | (826.3     | )    |  | $ | (1,421.3   | )
|Net loss per share, basic and diluted                       |  | $    | (11.50     | )    |  | $ | (20.92     | )
|Shares used in per share calculation, basic and
    diluted |  |      | 71,839,101 |      |  |   | 67,937,686 |  

ACTV
Acquisition

On July 1, 2003, we acquired ACTV, Inc.
Each outstanding share of common stock of ACTV was converted
into the right to receive 0.73333 of our Class A ordinary
shares, and we, therefore, became obligated

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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

to issue 41,648,399 Class A ordinary
shares with a value of $54.6 million. These shares were
valued at a per share value of $1.31, which was equal to the
average last sale prices for our Class A ordinary shares
for the trading-day period two days before and after
September 26, 2002, the date the merger was agreed upon and
announced. In addition, we reserved 6,750,103 Class A
ordinary shares for issuance upon the exercise of options that
formerly represented a right to purchase ACTV common stock that
we assumed in the merger. The fair value of these outstanding
stock options of ACTV was $3.9 million and was determined
by estimating the fair value as of the acquisition date using
the Black-Scholes option pricing model. The acquisition was
accounted for as a purchase. We also issued
675,676 Class A ordinary shares in September 2003 as
deferred consideration for ACTVs purchase of a minority
interest in one of its subsidiaries.

Tangible assets acquired from ACTV included cash
and cash equivalents, short-term marketable debt securities,
accounts receivable, property and equipment, and other assets.
Liabilities assumed from ACTV included accounts payable, accrued
liabilities, and deferred revenue. The total purchase price,
including transaction costs of $3.2 million, was allocated
based upon an appraisal as follows (in millions):

|                             |          |   |      |      | 
|---------------------------- | -------- | - | ---- | ---- | 
|Tangible net assets acquired |          | $ | 26.7 |     
|Intangible assets acquired:  |          |   |      |     
|                             | Patents  |   |      | 16.3 | 
|                             | Goodwill |   |      | 18.7 | 
|                             |          |   |      |     
|                             |          | $ | 61.7 |     
|                             |          |   |      |     

The patents are being amortized over their
estimated useful life of 13 years. In the allocation of the
purchase price, we included an adjustment to accrued liabilities
of $4.5 million for estimated severance and
$0.2 million for excess facilities to be incurred in
connection with a restructuring of ACTVs operations. As of
December 31, 2003, the remaining balance was
$0.2 million for severance costs to be paid in 2004 and
$0.1 million for lease termination costs which will be paid
over the term of the lease which expires in 2005.

The following presents our operating results for
the years ended December 31, 2003 and 2002 on a pro-forma
basis as if the acquisition of ACTV had been consummated as of
January 1, 2003 and 2002 (in millions, except per share
amounts):

|                                                            |  |      |             |      |  |   |             |  
|----------------------------------------------------------- |  | ---- | ----------- | ---- |  | - | ----------- | -
|                                                            |  | 2003 |             | 2002
|                                                            |  |      |             |     
|Revenues                                                    |  | $    | 68.4        |      |  | $ | 71.0        |  
|Net loss before cumulative effect of accounting
    change  |  | $    | (79.6       | )    |  | $ | (717.5      | )
|Net loss                                                    |  | $    | (79.6       | )    |  | $ | (847.4      | )
|Net loss per share, basic and diluted                       |  | $    | (0.58       | )    |  | $ | (7.47       | )
|Shares used in per share calculation, basic and
    diluted |  |      | 136,466,677 |      |  |   | 113,487,500 |  

Included in pro-forma operating results for the
year ended December 31, 2003 and 2002 are approximately
$1.8 million and $2.7 million, respectively, of
revenue reported by ACTV resulting from the amortization of
deferred revenues associated with a marketing arrangement with
Ascent Media Group (formerly Liberty Livewire), a related party.
The deferred revenues were adjusted to a fair value of zero in
the allocation of the purchase price and, accordingly, such
revenue recognition will not recur in future periods. The
foregoing operating results have been prepared for comparative
purposes only and do not necessarily reflect the results that
would have occurred had the acquisition actually been
consummated at January 1, 2003 or January 1, 2002 or
the results that may occur in the future.



| |                        
| | -----------------------
| | BettingCorp Acquisition

On August 15, 2003, we acquired
substantially all of the assets of BettingCorp Limited in a
transaction accounted for as a purchase. The purchase price
consisted of $3.1 million of cash and the issuance of

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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

3,225,063 of our Class A ordinary shares
with the value of $6.9 million. The shares were valued at a
per share value of $2.15, which was equal to the average market
price of our Class A ordinary shares for the three trading
days before the acquisition date. Of the Class A ordinary
shares issued, 2,580,050 were issued directly to the sellers and
645,013 were deposited in an escrow fund established for the
purpose of securing the payment of indemnification obligations
arising out of our asset purchase.

The total purchase price, including transaction
costs of $1.4 million, was allocated based upon an
appraisal as follows (in millions):

|                             |                      |   |      |     | 
|---------------------------- | -------------------- | - | ---- | --- | 
|Tangible net assets acquired |                      | $ | 0.1  |    
|Intangible assets acquired:  |                      |   |      |    
|                             | Developed technology |   |      | 4.4 | 
|                             | Customer base        |   |      | 0.4 | 
|                             | Goodwill             |   |      | 6.5 | 
|                             |                      |   |      |    
|                             |                      |   | 11.4 |    
|                             |                      |   |      |    

The identifiable intangible assets are being
amortized over 2-5 years.

Under the terms of a liquidity agreement, we have
guaranteed for a certain time period that the sellers will
realize net proceeds of approximately $6.9 million (or
$2.15 per share), plus interest, upon the disposition of
the shares they received in the transaction, assuming full
release of the escrowed shares. To support this guarantee, we
have deposited approximately $6.9 million in cash into an
escrow account, which is classified as other assets in our
consolidated balance sheet, to fund any shortfall in net
proceeds below $6.9 million, plus interest. Any portion of
the escrow not required to fund a shortfall will be released
from the escrow account to us. No amount has been reflected in
the financial statements for this contingent obligation.
Conversely, the sellers are obligated to remit to us in cash any
amounts realized upon disposition of the shares in excess of
$6.9 million (or $2.15 per share), plus interest,
which amount would be reported as a contribution to capital. In
addition, the entire $6.9 million of funds in escrow, would
be released to us at the end of the guarantee period. No amount
of this contingent payment to us by the sellers has been
reflected in the financial statements. The sellers right
to receive the minimum return expires on the earliest of
(i) the date that the registration statement has been
effective for 30 calendar days, (ii) February 15,
2005, (iii) the date that all of the shares have been sold
or (iv) 30 days after the first date that all of the
shares may be resold pursuant to Rule 144 under the
Securities Act of 1933. The sellers are required under the terms
of the liquidity agreement to use good faith efforts to sell the
maximum number of shares as soon as possible after the
registration statement is declared effective by the Securities
and Exchange Commission. The shares of stock held by the sellers
are not currently registered for resale.

F-19



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|        |                                            
|------- | -------------------------------------------
|Note 4. | Balance Sheet Components (in
    thousands)

|                                               |                                                |              |        |         |   |   |        |        |  
|---------------------------------------------- | ---------------------------------------------- | ------------ | ------ | ------- | - | - | ------ | ------ | -
|                                               |                                                |             
|                                               |                                                | December 31,
|                                               |                                                |             
|                                               |                                                | 2003         |        | 2002   
|                                               |                                                |              |        |        
|Prepaid expenses and other current
    assets: |                                                |              |        |         |   |   |        |       
|                                               | Interest receivable                            |              | $      | 245     |   |   | $      | 278    |  
|                                               | Value Added Tax                                |              |        | 299     |   |   |        | 626    |  
|                                               | Due from officer                               |              |        | 602     |   |   |        |       |  
|                                               | Deferred launch fees                           |              |        | 579     |   |   |        |       |  
|                                               | Other                                          |              |        | 2,997   |   |   |        | 3,400  |  
|                                               |                                                |              |        |         |   |   |        |       
|                                               |                                                | $            | 4,722  |         |   | $ | 4,304  |       
|                                               |                                                |              |        |         |   |   |        |       
|Property and equipment:                        |                                                |              |        |         |   |   |        |       
|                                               | Computers and equipment                        |              | $      | 15,835  |   |   | $      | 13,790 |  
|                                               | Software                                       |              |        | 5,206   |   |   |        | 4,300  |  
|                                               | Furniture and fixtures                         |              |        | 2,576   |   |   |        | 2,411  |  
|                                               | Leasehold improvements                         |              |        | 3,789   |   |   |        | 3,216  |  
|                                               |                                                |              |        |         |   |   |        |       
|                                               |                                                |              | 27,406 |         |   |   | 23,717 |       
|                                               | Less accumulated depreciation and amortization |              |        | (15,717 | ) |   |        | (8,697 | )
|                                               |                                                |              |        |         |   |   |        |       
|                                               |                                                | $            | 11,689 |         |   | $ | 15,020 |       
|                                               |                                                |              |        |         |   |   |        |       
|Other assets:                                  |                                                |              |        |         |   |   |        |       
|                                               | Cash held in escrow (See Note 3)               |              | $      | 6,940   |   |   | $      |       |  
|                                               | Private equity investment                      |              |        | 4,000   |   |   |        |       |  
|                                               | Deposits                                       |              |        | 930     |   |   |        | 1,957  |  
|                                               | Notes receivable                               |              |        | 743     |   |   |        | 743    |  
|                                               | Due from officer                               |              |        |        |   |   |        | 1,229  |  
|                                               | Capitalized transaction costs 
    ACTV, Inc. |              |        |        |   |   |        | 1,543  |  
|                                               | Other                                          |              |        | 765     |   |   |        | 391    |  
|                                               |                                                |              |        |         |   |   |        |       
|                                               |                                                | $            | 13,378 |         |   | $ | 5,863  |       
|                                               |                                                |              |        |         |   |   |        |       
|Accrued liabilities:                           |                                                |              |        |         |   |   |        |       
|                                               | Accrued payroll and related liabilities        |              | $      | 8,082   |   |   | $      | 5,505  |  
|                                               | Accrued professional fees                      |              |        | 1,929   |   |   |        | 1,353  |  
|                                               | Accrued marketing                              |              |        | 3,488   |   |   |        | 5,098  |  
|                                               | Accrued income taxes                           |              |        | 3,148   |   |   |        | 2,302  |  
|                                               | Accrued launch fees and revenue guarantees     |              |        | 2,450   |   |   |        | 1,173  |  
|                                               | Accrued software contract cancellation         |              |        | 736     |   |   |        | 2,788  |  
|                                               | Deferred rent                                  |              |        | 1,550   |   |   |        |       |  
|                                               | Accrual for loss contract                      |              |        | 6,416   |   |   |        |       |  
|                                               | Other                                          |              |        | 4,375   |   |   |        | 4,626  |  
|                                               |                                                |              |        |         |   |   |        |       
|                                               |                                                | $            | 32,174 |         |   | $ | 22,845 |       
|                                               |                                                |              |        |         |   |   |        |       

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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

In connection with the acquisition of ACTV, we
assumed a liability for a loss contract with iN DEMAND to use
ACTVs digital technology for the Nascar In-Car package on
a pay-per view basis on certain digital cable systems in the
United States. As of December 31, 2003 the estimated
liability was $6.4 million which is payable in 2004.

As of December 31, 2003, our private equity
investment, which was assumed in connection with the acquisition
of ACTV, consists of an investment accounted for under the cost
method.



|        |                           
|------- | --------------------------
|Note 5. | Marketable Debt Securities

The following is a summary of marketable debt
securities as of December 31 (in thousands):

|                                |                                             |           |        |            |  |            |   |            |  |   |   |   |  |   |        |        | 
|------------------------------- | ------------------------------------------- | --------- | ------ | ---------- |  | ---------- | - | ---------- |  | - | - | - |  | - | ------ | ------ | 
|                                |                                             |          
|                                |                                             | 2003     
|                                |                                             |          
|                                |                                             | Purchase/ |        | Gross      |  | Gross      |   |           
|                                |                                             | Amortized |        | Unrealized |  | Unrealized |   | Estimated 
|                                |                                             | Cost      |        | Gains      |  | Losses     |   | Fair Value
|                                |                                             |           |        |            |  |            |   |           
|Corporate debt securities       |                                             | $         | 2,535  |            |  | $          | 3 |            |  | $ |  |   |  | $ | 2,538  |       
|U.S. government debt securities |                                             |           | 8,039  |            |  |            |  |            |  |   |  |   |  |   | 8,039  |       
|                                |                                             |           |        |            |  |            |   |            |  |   |   |   |  |   |        |       
|                                | Total short-term marketable debt securities |           |        | 10,574     |  |            |   | 3          |  |   |   |  |  |   |        | 10,577 | 
|                                |                                             |           |        |            |  |            |   |            |  |   |   |   |  |   |        |       
|Corporate debt securities       |                                             |           | 1,076  |            |  |            | 5 |            |  |   |  |   |  |   | 1,081  |       
|U.S. government debt securities |                                             |           | 12,089 |            |  |            | 2 |            |  |   |  |   |  |   | 12,091 |       
|Certificates of deposit         |                                             |           | 2,000  |            |  |            |  |            |  |   |  |   |  |   | 2,000  |       
|                                |                                             |           |        |            |  |            |   |            |  |   |   |   |  |   |        |       
|                                | Total long-term marketable debt securities  |           |        | 15,165     |  |            |   | 7          |  |   |   |  |  |   |        | 15,172 | 
|                                |                                             |           |        |            |  |            |   |            |  |   |   |   |  |   |        |       
|                                | Total marketable debt securities            |           | $      | 25,739     |  |            | $ | 10         |  |   | $ |  |  |   | $      | 25,749 | 
|                                |                                             |           |        |            |  |            |   |            |  |   |   |   |  |   |        |       

|                                |                                             |           |        |            |  |            |     |            |  |   |   |   |  |   |        |        | 
|------------------------------- | ------------------------------------------- | --------- | ------ | ---------- |  | ---------- | --- | ---------- |  | - | - | - |  | - | ------ | ------ | 
|                                |                                             |          
|                                |                                             | 2002     
|                                |                                             |          
|                                |                                             | Purchase/ |        | Gross      |  | Gross      |     |           
|                                |                                             | Amortized |        | Unrealized |  | Unrealized |     | Estimated 
|                                |                                             | Cost      |        | Gains      |  | Losses     |     | Fair Value
|                                |                                             |           |        |            |  |            |     |           
|Corporate debt securities       |                                             | $         | 2,584  |            |  | $          | 27  |            |  | $ |  |   |  | $ | 2,611  |       
|U.S. government debt securities |                                             |           | 23,112 |            |  |            | 217 |            |  |   |  |   |  |   | 23,329 |       
|Certificates of deposit         |                                             |           | 1,000  |            |  |            |    |            |  |   |  |   |  |   | 1,000  |       
|                                |                                             |           |        |            |  |            |     |            |  |   |   |   |  |   |        |       
|                                | Total short-term marketable debt securities |           |        | 26,696     |  |            |     | 244        |  |   |   |  |  |   |        | 26,940 | 
|                                |                                             |           |        |            |  |            |     |            |  |   |   |   |  |   |        |       
|Corporate debt securities       |                                             |           | 5,974  |            |  |            | 92  |            |  |   |  |   |  |   | 6,066  |       
|U.S. government debt securities |                                             |           | 15,949 |            |  |            | 184 |            |  |   |  |   |  |   | 16,133 |       
|                                |                                             |           |        |            |  |            |     |            |  |   |   |   |  |   |        |       
|                                | Total long-term marketable debt securities  |           |        | 21,923     |  |            |     | 276        |  |   |   |  |  |   |        | 22,199 | 
|                                |                                             |           |        |            |  |            |     |            |  |   |   |   |  |   |        |       
|                                | Total marketable debt securities            |           | $      | 48,619     |  |            | $   | 520        |  |   | $ |  |  |   | $      | 49,139 | 
|                                |                                             |           |        |            |  |            |     |            |  |   |   |   |  |   |        |       

F-21



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|        |         
|------- | --------
|Note 6. | Goodwill

Changes in the carrying amount of goodwill during
the years ended December 31, were as follows (in millions):

|                                                                                              |  |      |      |      |  |      |        |   |  |   |         |  
|--------------------------------------------------------------------------------------------- |  | ---- | ---- | ---- |  | ---- | ------ | - |  | - | ------- | -
|                                                                                              |  | 2003 |      | 2002 |  | 2001
|                                                                                              |  |      |      |      |  |     
|Beginning balance                                                                             |  | $    | 45.4 |      |  | $    | 634.3  |   |  | $ | 1,804.6 |  
|Cumulative effect of accounting change                                                        |  |      |     |      |  |      | (129.9 | ) |  |   |        |  
|Reclassification of certain intangible assets in
    connection with the adoption of SFAS 142 |  |      |     |      |  |      | 6.0    |   |  |   |        |  
|Acquisition of Spyglass                                                                       |  |      |     |      |  |      |       |   |  |   | (3.9    | )
|Acquisition of Static                                                                         |  |      |     |      |  |      | 3.8    |   |  |   | 41.5    |  
|Acquisition of Wink                                                                           |  |      | (0.4 | )    |  |      | 45.4   |   |  |   |        |  
|Acquisition of ACTV                                                                           |  |      | 18.7 |      |  |      |       |   |  |   |        |  
|Acquisition of BettingCorp                                                                    |  |      | 6.5  |      |  |      |       |   |  |   |        |  
|Goodwill related to exchangeable shares                                                       |  |      | 0.2  |      |  |      | 0.3    |   |  |   | 2.8     |  
|Impairment                                                                                    |  |      |     |      |  |      | (514.5 | ) |  |   | (816.2  | )
|Amortization                                                                                  |  |      |     |      |  |      |       |   |  |   | (394.5  | )
|                                                                                              |  |      |      |      |  |      |        |   |  |   |         |  
|Ending balance                                                                                |  | $    | 70.4 |      |  | $    | 45.4   |   |  | $ | 634.3   |  
|                                                                                              |  |      |      |      |  |      |        |   |  |   |         |  

During the third quarter of 2003,
$25.2 million of goodwill was recorded as a result of the
acquisitions of ACTV and substantially all of the assets of
BettingCorp. See Note 3.

In accordance with SFAS 121, we reassessed
the recoverability of goodwill as of December 31, 2001 and
recorded an impairment of $816.2 million because our cash
flow projections indicated that future cash flows were not
sufficient to result in recovery of the carrying value of our
fixed and intangible assets.

Pursuant to the adoption of SFAS 142, we
performed a transitional impairment test as of January 1,
2002. As a result, we recorded an impairment charge of
$129.9 million, which was recorded as a cumulative effect
of an accounting change in the consolidated statements of
operations. In the third quarter of 2002, we performed an
additional impairment test of our remaining goodwill. Due to
reductions by cable and satellite providers in their capital
spending and rollout of interactive television-related products
and similar reductions by other customers, we revised our cash
flow projections for the remainder of calendar year 2002 and
future years. Based on these cash flow projections and other
factors, including the decline in the market price of our
Class A ordinary shares, we determined that the remaining
goodwill was impaired and, accordingly, wrote off the remaining
balance of $514.5 million. We wrote down our goodwill to
fair value as determined using various appraisal methods
including discounted cash flows and market comparables.

In the fourth quarter of 2003, we changed the
annual goodwill impairment testing date under SFAS 142 from
September 30 to December 31. We believe that this
change in accounting principle is preferable because it conforms
with the methodology applied by our controlling shareholder,
Liberty Media. This change had no impact on our financial
position or results of operations.

F-22



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

As a result of adopting SFAS 142, we ceased
amortizing goodwill. The following summarizes the impact on
prior periods had we accounted for goodwill consistent with the
provisions of SFAS 142 (in millions, except per share
amounts):

|                                                       |  |                         |       |      |  |      |        |   |  |   |          |  
|------------------------------------------------------ |  | ----------------------- | ----- | ---- |  | ---- | ------ | - |  | - | -------- | -
|                                                       |  |                        
|                                                       |  | Year Ended December 31,
|                                                       |  |                        
|                                                       |  | 2003                    |       | 2002 |  | 2001
|                                                       |  |                         |       |      |  |     
|Net loss as reported                                   |  | $                       | (54.1 | )    |  | $    | (802.6 | ) |  | $ | (1,304.3 | )
|Goodwill amortization, net of tax                      |  |                         |      |      |  |      |       |   |  |   | 394.5    |  
|                                                       |  |                         |       |      |  |      |        |   |  |   |          |  
|As adjusted net loss                                   |  | $                       | (54.1 | )    |  | $    | (802.6 | ) |  | $ | (909.8   | )
|                                                       |  |                         |       |      |  |      |        |   |  |   |          |  
|Basic and diluted net loss per share 
    as reported |  | $                       | (0.57 | )    |  | $    | (11.17 | ) |  | $ | (19.20   | )
|Basic and diluted net loss per share 
    as adjusted |  |                         | (0.57 | )    |  |      | (11.17 | ) |  |   | (13.39   | )

Minority shareholders of OpenTV, Inc., which
is a subsidiary of ours, have the ability, under certain
arrangements, to exchange their shares of OpenTV, Inc. for
our shares, generally on a one-for-one basis. As the shares are
exchanged, they are accounted for at fair value. This accounting
effectively provides that at each exchange date, the exchange is
accounted for as a purchase of a minority interest in
OpenTV, Inc., valued at the number of our Class A
ordinary shares issued to effect the exchange multiplied by the
market price of a Class A ordinary share on that date. As a
result of applying purchase accounting to the exchanges, we
recorded additional amounts of goodwill in the periods presented.



|        |                       
|------- | ----------------------
|Note 7. | Intangible Assets, Net

The components of intangible assets, excluding
goodwill, were as follows (in millions):

|                   |                             |         |  |                   |  |           |      |             |  |              |      |              |  |        |      |      |   |   |       |       |   |   |      |      |  |   |      |      | 
|------------------ | --------------------------- | ------- |  | ----------------- |  | --------- | ---- | ----------- |  | ------------ | ---- | ------------ |  | ------ | ---- | ---- | - | - | ----- | ----- | - | - | ---- | ---- |  | - | ---- | ---- | 
|                   |                             |         |  |                   |  |          
|                   |                             |         |  | December 31, 2003 |  |          
|                   |                             |         |  |                   |  |          
|                   |                             |         |  | Opening           |  |           |      | Closing     |  | December 31,
|                   |                             | Useful  |  | Gross             |  |           |      | Net         |  | 2002        
|                   |                             | Life in |  | Carrying          |  |           |      | Accumulated |  | Carrying     |      | Net Carrying
|                   |                             | Years   |  | Amount            |  | Additions |      | Impairment  |  | Amortization |      | Amount       |  | Amount
|                   |                             |         |  |                   |  |           |      |             |  |              |      |              |  |       
|Intangible assets: |                             |         |  |                   |  |           |      |             |  |              |      |              |  |        |      |      |   |   |       |       |   |   |      |      |  |   |      |     
|                   | Patents                     |         |  | 3-13              |  |           | $    | 29.8        |  |              | $    | 16.3         |  |        | $    | (1.5 | ) |   | $     | (25.7 | ) |   | $    | 18.9 |  |   | $    | 8.7  | 
|                   | Developed technologies      |         |  | 3-5               |  |           |      | 21.0        |  |              |      | 4.4          |  |        |      |     |   |   |       | (18.3 | ) |   |      | 7.1  |  |   |      | 7.9  | 
|                   | Contracts and relationships |         |  | 2-5               |  |           |      | 19.5        |  |              |      | 0.4          |  |        |      |     |   |   |       | (13.3 | ) |   |      | 6.6  |  |   |      | 10.6 | 
|                   | Purchased technologies      |         |  | 3.5-5             |  |           |      | 0.7         |  |              |      |             |  |        |      |     |   |   |       | (0.5  | ) |   |      | 0.2  |  |   |      | 0.4  | 
|                   | Trademarks                  |         |  | 3-5               |  |           |      | 1.2         |  |              |      |             |  |        |      |     |   |   |       | (0.7  | ) |   |      | 0.5  |  |   |      | 0.8  | 
|                   |                             |         |  |                   |  |           |      |             |  |              |      |              |  |        |      |      |   |   |       |       |   |   |      |      |  |   |      |     
|                   |                             |         |  |                   |  | $         | 72.2 |             |  | $            | 21.1 |              |  | $      | (1.5 | )    |   | $ | (58.5 | )     |   | $ | 33.3 |      |  | $ | 28.4 |     
|                   |                             |         |  |                   |  |           |      |             |  |              |      |              |  |        |      |      |   |   |       |       |   |   |      |      |  |   |      |     

Intangible assets of $21.1 million were
recorded as a result of the acquisitions of ACTV and
substantially all of the assets of BettingCorp. See Note 3.

During the fourth quarter of 2003, we determined
that an impairment had occurred with respect to the value of the
patents related to our acquisition of CableSoft due to the
absence of any current or future expected cash flow associated
with CableSoft technologies. In accordance with SFAS 144,
we recorded an impairment charge for the unamortized balance of
$1.5 million.

During the third quarter of 2002, we determined
that an impairment had occurred with respect to the value of the
patents related to the OpenStar joint venture with EchoStar due
to the absence of any current or future expected cash flow
generated by the joint venture. In accordance with
SFAS 144, we recorded an impairment charge of $24.8 million.

F-23



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The intangible assets are all being amortized on
a straight-line basis over their estimated useful lives.
Amortization of intangible assets (including amounts reported in
cost of revenues) was $14.7 million, $18.3 million and
$23.5 million for the years ended December 31, 2003,
2002 and 2001, respectively. The future annual amortization
expense is expected to be as follows (in millions):

|                         |  |              |      | 
|------------------------ |  | ------------ | ---- | 
|                         |  | Amortization
|Year Ending December 31, |  | Expense     
|                         |  |             
|2004                     |  | $            | 9.6  | 
|2005                     |  |              | 6.7  | 
|2006                     |  |              | 6.6  | 
|2007                     |  |              | 4.6  | 
|2008                     |  |              | 1.2  | 
|Thereafter               |  |              | 4.6  | 
|                         |  |              |      | 
|                         |  | $            | 33.3 | 
|                         |  |              |      | 



|        |                    
|------- | -------------------
|Note 8. | Restructuring Costs

We monitor our organizational structure and
associated operating expenses periodically. Depending upon
events and circumstances, actions may be taken to restructure
the business, including terminating employees, abandoning excess
lease space and incurring other exit costs. Restructuring costs
are recorded in accordance with EITF No. 94-3,
Liability Recognition of Certain Employee Termination
Benefits and Other Costs Incurred in a Restructuring prior
to January 1, 2003 and in accordance with
SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities after December 31,
2002. The principal difference between SFAS 146 and
EITF 94-3 relates to SFAS 146s timing for
recognition of a liability for a cost associated with an exit or
disposal activity. SFAS 146 requires that a liability for a
cost associated with an exit or disposal activity be recognized
when the liability is incurred. Under EITF 94-3, a
liability for an exit cost was recognized at the date of an
entitys commitment to an exit plan. Any resulting
restructuring accrual includes numerous estimates made by
management, which are developed based on managements
knowledge of the activity being affected and the cost to exit
existing commitments. These estimates could differ from actual
results. We monitor the initial estimates periodically and
record an adjustment for any significant changes in estimates.



| |                   
| | ------------------
| | 2002 Restructuring

In 2002, we announced the termination of
approximately 260 employees located in the United States and
foreign offices, the reduction of excess office space and the
write-down of certain property and equipment. The employee costs
included severance payments and certain employee benefit
obligations estimated at $8.0 million. Facilities
consolidation charges for the reduction of excess office space
were estimated to be $12.7 million. These costs included
payments required under non-cancelable lease contracts,
estimated lease buyout costs and shut-down costs. Asset
write-offs of $8.2 million were incurred in connection with
leasehold improvements and other property and equipment that was
abandoned. The provision also included $0.5 million for
estimated legal fees for the restructuring.

F-24



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The following sets forth the activity relating to
these restructuring activities (in millions):

|                             |  |              |      |            |  |            |      |       |  |       |      |   |  |   |      |   |  |   |      |  
|---------------------------- |  | ------------ | ---- | ---------- |  | ---------- | ---- | ----- |  | ----- | ---- | - |  | - | ---- | - |  | - | ---- | -
|                             |  | Employee     |      |            |  |            |      |       |  |      
|                             |  | Severance    |      | Excess     |  | Assets     |      | Legal |  |      
|                             |  | and Benefits |      | Facilities |  | Write-Offs |      | Fees  |  | Total
|                             |  |              |      |            |  |            |      |       |  |      
|2002 provision               |  | $            | 8.0  |            |  | $          | 12.7 |       |  | $     | 8.2  |   |  | $ | 0.5  |   |  | $ | 29.4 |  
|Cash payments                |  |              | (6.1 | )          |  |            | (3.1 | )     |  |       |     |   |  |   | (0.3 | ) |  |   | (9.5 | )
|Non-cash charges             |  |              |     |            |  |            |     |       |  |       | (8.2 | ) |  |   |     |   |  |   | (8.2 | )
|Currency effect              |  |              |     |            |  |            | 0.4  |       |  |       |     |   |  |   |     |   |  |   | 0.4  |  
|                             |  |              |      |            |  |            |      |       |  |       |      |   |  |   |      |   |  |   |      |  
|Balance, December 31, 2002   |  |              | 1.9  |            |  |            | 10.0 |       |  |       |     |   |  |   | 0.2  |   |  |   | 12.1 |  
|Cash payments                |  |              | (1.2 | )          |  |            | (4.6 | )     |  |       |     |   |  |   | (0.2 | ) |  |   | (6.0 | )
|Reversal of excess provision |  |              | (0.1 | )          |  |            | (0.2 | )     |  |       |     |   |  |   |     |   |  |   | (0.3 | )
|                             |  |              |      |            |  |            |      |       |  |       |      |   |  |   |      |   |  |   |      |  
|Balance, December 31, 2003   |  | $            | 0.6  |            |  | $          | 5.2  |       |  | $     |     |   |  | $ |     |   |  | $ | 5.8  |  
|                             |  |              |      |            |  |            |      |       |  |       |      |   |  |   |      |   |  |   |      |  

The outstanding accrual for employee severance
and benefits is expected to be paid in 2004 and the accrual for
excess facilities relates to operating lease obligations that
continue through 2006. During the year ended December 31,
2003 there was a reversal of the provision established in the
prior year of $0.3 million principally due to the sublease
of some office space in the United States.



| |                   
| | ------------------
| | 2003 Restructuring

In the first quarter of 2003, we announced the
termination of approximately 70 employees located in France, the
reduction of excess office space and the write-down of certain
property and equipment. In the third quarter of 2003, we reduced
the management of our Static UK operations by 9 employees. The
employee costs included severance payments and certain employee
benefit obligations estimated at $4.9 million. Facilities
consolidation charges for the reduction of excess office space
were estimated to be $1.5 million. These costs included a
lease buyout and shut-down costs. Asset write-offs of
$0.5 million were incurred in connection with leasehold
improvements and other property and equipment that was abandoned.

The following sets forth the activity relating to
these restructuring activities (in millions):

|                           |  |              |      |            |  |        |      |       |  |   |      |   |  |   |      |  
|-------------------------- |  | ------------ | ---- | ---------- |  | ------ | ---- | ----- |  | - | ---- | - |  | - | ---- | -
|                           |  | Employee     |      |            |  | Assets |      |      
|                           |  | Severance    |      | Excess     |  | Write- |      |      
|                           |  | and Benefits |      | Facilities |  | Offs   |      | Total
|                           |  |              |      |            |  |        |      |      
|2003 provision             |  | $            | 4.9  |            |  | $      | 1.5  |       |  | $ | 0.5  |   |  | $ | 6.9  |  
|Cash payments              |  |              | (4.4 | )          |  |        | (1.5 | )     |  |   |     |   |  |   | (5.9 | )
|Non-cash charges           |  |              |     |            |  |        |     |       |  |   | (0.5 | ) |  |   | (0.5 | )
|Currency effect            |  |              | 0.2  |            |  |        |     |       |  |   |     |   |  |   | 0.2  |  
|                           |  |              |      |            |  |        |      |       |  |   |      |   |  |   |      |  
|Balance, December 31, 2003 |  | $            | 0.7  |            |  | $      |     |       |  | $ |     |   |  | $ | 0.7  |  
|                           |  |              |      |            |  |        |      |       |  |   |      |   |  |   |      |  

The outstanding accrual for employee severance
and benefits is expected to be paid in 2004.



| |                            
| | ---------------------------
| | Wink and ACTV Restructuring

At December 31, 2003, the outstanding
restructuring accrual for Wink operations was $1.0 million
and for the ACTV operations was $0.3 million. See
Note 3.

F-25



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|        |                     
|------- | --------------------
|Note 9. | Shareholders Equity



| |                         
| | ------------------------
| | Authorized share capital



| |   |                                                     
| | - | ----------------------------------------------------
| |  | 500,000,000 Class A ordinary shares                 
|
| |  | 200,000,000 Class B ordinary shares                 
|
| |  | 500,000,000 preference shares  none
    outstanding



| |       
| | ------
| | Voting

The holders of Class A ordinary shares and
Class B ordinary shares are generally entitled to vote as a
single class on all matters upon which holders of ordinary
shares have a right to vote, subject to the requirements of any
applicable laws. Each Class A ordinary share entitles its
holder to one vote, and each Class B ordinary share
entitles its holder to ten votes. Unless otherwise required by
law, and so long as their rights are not adversely affected, the
holders of Class A ordinary shares and Class B
ordinary shares are not entitled to vote on any amendment to our
Articles of Association and Memorandum of Association that
relates solely to the terms of one or more outstanding series of
preference shares.



| |                                      
| | -------------------------------------
| | Dividends and Other
    Distributions

Subject to the preferential and other dividend
rights of any outstanding series of preference shares, the
holders of Class A ordinary shares and Class B
ordinary shares are entitled to equal dividends per share when,
as and if declared by our board of directors, except that all
dividends payable in ordinary shares will be paid in the form of
Class A ordinary shares to holders of Class A ordinary
shares and in the form of Class B ordinary shares to
holders of Class B ordinary shares. Neither Class A
ordinary shares nor Class B ordinary shares may be split,
divided or combined unless the other class is proportionally
split, divided or combined. In the event we are liquidated, the
holders of our Class A ordinary shares and Class B
ordinary shares will be treated equally on a per share basis and
will be entitled to receive all of our remaining assets
following distribution of the preferential and/or other amounts
to be distributed to the holders of our preference shares.



| |       
| | ------
| | Merger

In the event of a merger, the holders of
Class A ordinary shares and Class B ordinary shares
will be entitled to receive the same per share consideration, if
any, except that if such consideration includes voting
securities (or the right to acquire voting securities or
securities exchangeable for or convertible into voting
securities), we may (but are not required to) provide for the
holders of Class B ordinary shares to receive voting
securities (or rights to acquire voting securities) entitling
them to ten times the number of votes per share as the voting
securities (or rights to acquire voting securities) being
received by holders of Class A ordinary shares.



| |                                          
| | -----------------------------------------
| | Conversion of Class B Ordinary
    Shares

Each Class B ordinary share is convertible,
at the option of the holder thereof, into Class A ordinary
shares on a share-for-share basis and will automatically convert
on a share-for-share basis upon the occurrence of any of the
following:



| |   |                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | upon transfer of Class B ordinary shares to
    a person or entity which is not one of the original beneficial
    owners of Class B ordinary shares or Class A ordinary
    shares who used to be the holder of Convertible Preference
    Shares or an affiliate;
|
| |  | on the date on which the number of Class B
    ordinary shares then outstanding is less than 10% of our then
    outstanding ordinary shares (without regard to voting rights);                                                                                    

F-26



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | at any time when the board of directors and the
    holders of a majority of our outstanding Class B ordinary
    shares approve the conversion of all of the Class B
    ordinary shares into Class A ordinary shares; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | if the board of directors, in its sole
    discretion, elects to effect a conversion after a determination
    that there has been a material adverse change in the liquidity,
    marketability or market value of our Class A ordinary
    shares, considered in the aggregate, due to (i) the
    exclusion of Class A ordinary shares from trading on a
    national securities exchange or the exclusion of Class A
    ordinary shares from quotation on the Nasdaq or any other
    similar market quotation system then in use; or
    (ii) requirements under any applicable law, in each of
    cases (i) and (ii), as a result of the existence of our
    Class B ordinary shares.

In the event of a transaction where Class A
ordinary shares are converted into or exchanged for one or more
other securities, cash or other property (a Class A
Conversion Event), a holder of Class B ordinary
shares thereafter will be entitled to receive, upon the
conversion of such Class B ordinary shares, the amount of
such securities, cash and other property that such holder would
have received if the conversion of such Class B ordinary
shares had occurred immediately prior to the record date or
effective date, as the case may be, of the Class A
Conversion Event.



| |                                    
| | -----------------------------------
| | Exchangeable Share
    Arrangements

Pursuant to our 2000 Exchange Plan and the
Exchange Agreement between us, OpenTV, Inc. and Sun TSI
Subsidiary, Inc. dated October 23, 1999, the minority
shareholders of OpenTV, Inc. have the ability to exchange
their shares of OpenTV, Inc. for shares of us, generally on
a one-for-one basis. As the minority shareholders are not
responsible to fund the losses of OpenTV, Inc., we have
recorded 100% of the loss in excess of the cost basis of the
minority shareholders.

As the shares are exchanged, they are accounted
for at fair value. Exchange rights granted under our 2000
Exchange Plan expire on the fifteenth anniversary of the date of
grant, and the exchange right granted under the Exchange
Agreement with Sun TSI Subsidiary is perpetual.



| |                
| | ---------------
| | Shares Reserved

As of December 31, 2003, the following
Class A ordinary shares were reserved:

|                                                                                                                                                                |       |  |            |            | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----- |  | ---------- | ---------- | 
|Issuable upon conversion of Class B ordinary
    shares                                                                                                         |       |  | 30,631,746 |           
|Issuable upon exchange of shares (including
    shares issuable upon exercise of outstanding options) of
    OpenTV, Inc. common stock under 2000 Exchange Plan |       |  | 777,094    |           
|Stock options outstanding                                                                                                                                       |       |  | 9,011,456  |           
|Stock options reserved for future grant under
    1999 Option Plan                                                                                              |       |  | 3,716,539  |           
|Stock options reserved for future grant under
    2001 Option Plan                                                                                              |       |  | 445,242    |           
|Stock options reserved for future grant under
    2003 Option Plan                                                                                              |       |  | 3,464,447  |           
|Employee stock purchase plan                                                                                                                                    |       |  | 500,000    |           
|                                                                                                                                                                |       |  |            |           
|                                                                                                                                                                | Total |  |            | 48,546,524 | 
|                                                                                                                                                                |       |  |            |           

Pursuant to the Exchange Agreement between us,
OpenTV, Inc. and Sun TSI Subsidiary, Inc., 7,594,796
Class B ordinary shares were reserved for issuance upon
exchange of shares of OpenTV, Inc. Class B common
stock.

F-27



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |         
| | --------
| | Warrants

In 2001, we received $7.7 million from the
exercise of warrants to purchase 1,301,126 Class A ordinary
shares. In October 2001, we issued 148,299 Class A ordinary
shares in exchange for the cashless exercise of warrants to
purchase 450,450 Class A ordinary shares.

In October 1998, General Instrument acquired
warrants to purchase shares of Spyglass. These warrants were
assumed by us in connection with the acquisition of Spyglass and
expired in December 2003.



| |                                                    
| | ---------------------------------------------------
| | Agreements with General Instrument and
    Motorola

In November 2000, we entered into a series of
definitive agreements with General Instrument Corporation and
Motorola, Inc. dedicated to accelerating interactive
television deployments worldwide. One of the agreements provided
for the establishment of a co-owned venture to provide
integration and testing services for cable and satellite
operators. We contributed 370,858 of our Class A ordinary
shares to this venture and these shares were then transferred by
the venture to General Instrument in exchange for a three-year
license of certain General Instrument patents on a royalty-free,
worldwide, non-exclusive basis. This license expired in 2003. At
December 31, 2003 and 2002, the carrying value of
Motorolas minority interest in the venture was
$1.1 million and $1.2 million, respectively.



| |                         
| | ------------------------
| | Share-based Compensation

During 2003 deferred share-based compensation
increased by a nominal amount resulting from the stock options
assumed with the acquisition of ACTV. The share-based
compensation amounts are being amortized in accordance with
FIN 28 over the vesting period of the options. Share-based
compensation expense was $0.2 million, $3.0 million
and $9.6 million in the years ended December 31, 2003,
2002 and 2001, respectively. As of December 31, 2003, we
had a nominal amount of total unamortized deferred share-based
compensation which will be fully amortized in 2008. During the
years ended December 31, 2003, 2002 and 2001, total
deferred compensation was reduced by $0.1 million,
$0.9 million and $3.0 million, respectively, and
additional paid-in capital was credited by a similar amount due
to the termination of certain employees.



|         |             
|-------- | ------------
|Note 10. | Option Plans

Options are currently outstanding under the
following plans: (i) the Amended and Restated OpenTV Corp.
1999 Share Option/ Share Issuance Plan (the 1999
Plan), (ii) the Amended and Restated
OpenTV, Inc. 1998 Option/ Stock Issuance Plan (the
1998 Plan), (iii) the OpenTV Corp. 2001
Nonstatutory Stock Option Plan (the 2001 Plan),
(iv) the OpenTV Corp. 2003 Incentive Plan (the
2003 Plan), (v) option plans relating to
outstanding options assumed in connection with the Spyglass
merger (collectively, the Assumed Spyglass Options),
and (vi) option plans relating to outstanding options
assumed in connection with the ACTV merger (collectively, the
Assumed ACTV Options). Options have been issued to
employees, directors and consultants.

We issue options from the 1999 Plan. The
compensation committee of our board of directors administers the
1999 Plan. The committee has complete discretion to make all
decisions relating to the interpretation, operation and
amendment of the 1999 Plan. The committee has discretion to
determine grant recipients, vesting requirements, exercise
prices and other terms and conditions of award eligibility. The
options may be incentive stock options or non-statutory options.
Consistent with the foregoing, options that have been issued
under the plan have generally been granted at an exercise price
equal to the fair market value on the date of grant and vest 25%
after 12 months of continuous service with us and 1/48th
over each of the next 36 months. The term of the options
generally is 10 years from the date of grant. Unexercised
options generally expire three months after termination of
employment with us. A total of 8,980,000 Class A ordinary
shares have been

F-28



---



##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

reserved for issuance under the 1999 Plan since
its inception, and as of December 31, 2003, options to
purchase 2,137,291 Class A ordinary shares were outstanding
under the 1999 Plan.

Effective as of October 23, 1999, options to
purchase 5,141,114 shares of Class A common stock of
OpenTV, Inc. under the 1998 Plan were assigned to and
assumed by us and these options thereafter represented the right
to purchase under the 1999 Plan an identical number of our
Class A ordinary shares. The remainder of the options then
outstanding under the 1998 Plan were not assigned to and assumed
by us. The 1998 Plan will remain in existence for the sole
purpose of governing those remaining options until such time as
such options have been exercised and the underlying shares have
become transferable by the holders. Options or shares awarded
under the 1998 Plan that are forfeited or cancelled will no
longer be available for issuance under the 1998 Plan. As of
December 31, 2003, options to purchase 62,000 shares
of OpenTV, Inc.s Class A common stock were
outstanding under the 1998 Plan.

We also issue options from the 2001 Plan. Under
the 2001 Plan the compensation committee of our board of
directors has complete discretion to make all decisions relating
to the interpretation, operation and amendment of the 2001 Plan.
Only non-statutory options can be granted. A total of 500,000
Class A ordinary shares has been reserved for issuance
under the 2001 Plan, and as of December 31, 2003, options
to purchase 54,758 Class A ordinary shares were outstanding
under the 2001 Plan.

We also issue options from the 2003 Plan. The
incentive plan committee of our board of directors, a
sub-committee of the compensation committee, administers the
2003 Plan. The incentive plan committee has the discretion to
determine grant recipients, the number and exercise price of
stock options, and the number of stock appreciation rights,
restricted stock or stock units issued under the 2003 Plan. The
options may be incentive stock options or non-statutory stock
options. Consistent with the foregoing, options under the 2003
Plan have generally been granted at an exercise price equal to
the fair market value on the date of grant and vest 25% after
two years from the date of grant and 25% yearly thereafter for
the following three years. The term of the options generally is
10 years from the date of grant. Unexercised options
generally expire ninety days after termination of employment
with us. A total of 5,000,000 Class A ordinary shares have
been reserved for issuance under the 2003 Plan since its
inception, and as of December 31, 2003, options to purchase
1,531,800 Class A ordinary shares were outstanding under
the 2003 Plan.

All of the Assumed Spyglass Options were
converted as a result of the Spyglass acquisition into options
to purchase our Class A ordinary shares. As of
December 31, 2003, there were outstanding Assumed Spyglass
Options to purchase 232,684 Class A ordinary shares.

All of the Assumed ACTV Options were converted as
a result of the ACTV acquisition into options to purchase our
Class A ordinary shares. As of December 31, 2003,
there were outstanding Assumed ACTV Options to purchase
5,054,923 Class A ordinary shares.

Assumed Spyglass Options and Assumed ACTV Options
that are forfeited or cancelled will no longer be available for
issuance, and no new options will be granted under the option
plans relating to the Assumed Spyglass Options and Assumed ACTV
Options.

F-29



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Activity under the Plans was as follows:

|                                           |  |               |            |           |  |                |            |          |  |   |             |  |  |   |       | 
|------------------------------------------ |  | ------------- | ---------- | --------- |  | -------------- | ---------- | -------- |  | - | ----------- |  |  | - | ----- | 
|                                           |  |               |            |           |  |                |            | Weighted
|                                           |  | Shares        |            |           |  |                |            | Average 
|                                           |  | Available for |            | Number of |  |                |            | Exercise
|                                           |  | Grant         |            | Shares    |  | Exercise Price |            | Price   
|                                           |  |               |            |           |  |                |            |         
|Balances, December 31, 2000                |  |               | 2,223,966  |           |  |                | 7,193,191  |          |  |   |             |  |  | $ | 20.08 | 
|Options reserved at inception of 2001 Plan |  |               | 500,000    |           |  |                |           |          |  |   |             |  |  |   |       | 
|Options granted                            |  |               | (3,531,628 | )         |  |                | 3,531,628  |          |  | $ | 4.77$21.50 |  |  | $ | 10.32 | 
|Options exercised                          |  |               |           |           |  |                | (1,069,009 | )        |  | $ | 0.21$18.31 |  |  | $ | 3.14  | 
|Options cancelled                          |  |               | 1,408,883  |           |  |                | (1,759,481 | )        |  | $ | 1.05$94.56 |  |  | $ | 32.26 | 
|                                           |  |               |            |           |  |                |            |          |  |   |             |  |  |   |       | 
|Balances, December 31, 2001                |  |               | 601,221    |           |  |                | 7,896,329  |          |  |   |             |  |  | $ | 15.64 | 
|Options granted                            |  |               | (179,480   | )         |  |                | 179,480    |          |  | $ | 5.55$8.30  |  |  | $ | 5.90  | 
|Options exercised                          |  |               |           |           |  |                | (153,703   | )        |  | $ | 1.05$6.00  |  |  | $ | 2.31  | 
|Options cancelled                          |  |               | 1,979,447  |           |  |                | (2,173,112 | )        |  | $ | 1.05$81.54 |  |  | $ | 14.41 | 
|                                           |  |               |            |           |  |                |            |          |  |   |             |  |  |   |       | 
|Balances, December 31, 2002                |  |               | 2,401,188  |           |  |                | 5,748,994  |          |  |   |             |  |  | $ | 16.35 | 
|Options reserved at inception of 2003 Plan |  |               | 5,000,000  |           |  |                |            |          |  |   |             |  |  |   |       | 
|Options related to ACTV acquisition        |  |               |            |           |  |                | 6,750,103  |          |  | $ | 0.33-$73.83 |  |  | $ | 3.63  | 
|Options granted                            |  |               | (1,607,850 | )         |  |                | 1,607,850  |          |  | $ | 1.51$5.04  |  |  | $ | 2.52  | 
|Options exercised                          |  |               |           |           |  |                | (1,599,969 | )        |  | $ | 0.33$2.73  |  |  | $ | 1.62  | 
|Options cancelled                          |  |               | 1,832,890  |           |  |                | (3,433,522 | )        |  | $ | 0.33$94.56 |  |  | $ | 14.89 | 
|                                           |  |               |            |           |  |                |            |          |  |   |             |  |  |   |       | 
|Balances, December 31, 2003                |  |               | 7,626,228  |           |  |                | 9,073,456  |          |  |   |             |  |  | $ | 6.81  | 
|                                           |  |               |            |           |  |                |            |          |  |   |             |  |  |   |       | 

The above table includes OpenTV, Inc.
options issued pursuant to the 1998 Plan of which
20,000 shares were exercised in 2003 and 3,000 shares
were exercised in 2002.

The following table summarizes information with
respect to options outstanding at December 31, 2003:

|              |  |                     |           |                   |  |          |      |             |  |          |       |  |  |  |           |  |  |   |       | 
|------------- |  | ------------------- | --------- | ----------------- |  | -------- | ---- | ----------- |  | -------- | ----- |  |  |  | --------- |  |  | - | ----- | 
|              |  |                     |           |                  
|              |  | Options Outstanding |           | Options Currently
|              |  |                     |           | Exercisable      
|              |  |                     |           | Weighted          |  |          |      |            
|              |  |                     |           | Average           |  | Weighted |      |             |  | Weighted
|              |  |                     |           | Remaining         |  | Average  |      |             |  | Average 
|Exercise      |  | Number              |           | Contractual       |  | Exercise |      | Number      |  | Exercise
|Price         |  | Outstanding         |           | Life              |  | Price    |      | Exercisable |  | Price   
|              |  |                     |           |                   |  |          |      |             |  |         
|$0.33$1.63   |  |                     | 1,155,936 |                   |  |          | 6.37 |             |  | $        | 0.85  |  |  |  | 874,351   |  |  | $ | 0.63  | 
|$1.75$1.78   |  |                     | 370,000   |                   |  |          | 9.43 |             |  | $        | 1.78  |  |  |  |          |  |  | $ |      | 
|$1.88$2.05   |  |                     | 1,178,977 |                   |  |          | 1.45 |             |  | $        | 2.04  |  |  |  | 1,063,527 |  |  | $ | 2.05  | 
|$2.10$2.18   |  |                     | 2,048,861 |                   |  |          | 1.83 |             |  | $        | 2.18  |  |  |  | 2,048,861 |  |  | $ | 2.18  | 
|$2.21$3.41   |  |                     | 1,203,459 |                   |  |          | 5.47 |             |  | $        | 2.92  |  |  |  | 672,563   |  |  | $ | 3.20  | 
|$3.42$9.55   |  |                     | 1,189,644 |                   |  |          | 5.46 |             |  | $        | 7.28  |  |  |  | 799,097   |  |  | $ | 8.17  | 
|$9.67-$12.27  |  |                     | 928,255   |                   |  |          | 6.10 |             |  | $        | 10.18 |  |  |  | 686,141   |  |  | $ | 10.32 | 
|$12.78-$54.25 |  |                     | 973,324   |                   |  |          | 5.90 |             |  | $        | 30.34 |  |  |  | 848,138   |  |  | $ | 30.20 | 
|$81.00-$88.00 |  |                     | 19,000    |                   |  |          | 6.20 |             |  | $        | 84.05 |  |  |  | 17,934    |  |  | $ | 84.00 | 
|$94.56        |  |                     | 6,000     |                   |  |          | 6.09 |             |  | $        | 94.56 |  |  |  | 5,874     |  |  | $ | 94.56 | 
|              |  |                     |           |                   |  |          |      |             |  |          |       |  |  |  |           |  |  |   |       | 
|              |  |                     | 9,073,456 |                   |  |          |      |             |  |          |       |  |  |  | 7,016,486 |  |  |   |       | 
|              |  |                     |           |                   |  |          |      |             |  |          |       |  |  |  |           |  |  |   |       | 

At December 31, 2003, 2002 and 2001 vested
options to purchase 7,016,486 ordinary shares, 4,037,864
ordinary shares and 3,169,276 ordinary shares, respectively,
were unexercised.

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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |             
|-------- | ------------
|Note 11. | Income Taxes

The components of loss before income taxes and
cumulative effect of accounting change, net of tax, were as
follows (in thousands):

|              |  |                         |         |      |  |      |          |   |  |   |            |  
|------------- |  | ----------------------- | ------- | ---- |  | ---- | -------- | - |  | - | ---------- | -
|              |  |                        
|              |  | Year Ended December 31,
|              |  |                        
|              |  | 2003                    |         | 2002 |  | 2001
|              |  |                         |         |      |  |     
|United States |  | $                       | (49,477 | )    |  | $    | (587,674 | ) |  | $ | (1,296,225 | )
|International |  |                         | (3,354  | )    |  |      | (83,497  | ) |  |   | (13,911    | )
|              |  |                         |         |      |  |      |          |   |  |   |            |  
|              |  | $                       | (52,831 | )    |  | $    | (671,171 | ) |  | $ | (1,310,136 | )
|              |  |                         |         |      |  |      |          |   |  |   |            |  

Income tax expense (benefit) was compromised of
the following (in thousands):

|         |               |                         |       |       |  |      |       |       |  |   |        |        |  
|-------- | ------------- | ----------------------- | ----- | ----- |  | ---- | ----- | ----- |  | - | ------ | ------ | -
|         |               |                        
|         |               | Year Ended December 31,
|         |               |                        
|         |               | 2003                    |       | 2002  |  | 2001
|         |               |                         |       |       |  |     
|Current  |               |                         |       |       |  |      |       |       |  |   |        |       
|         | United States |                         | $     |      |  |      | $     |      |  |   | $      |       |  
|         | International |                         |       | 1,163 |  |      |       | 1,341 |  |   |        | 1,320  |  
|         | State         |                         |       | 100   |  |      |       | 200   |  |   |        | 100    |  
|         |               |                         |       |       |  |      |       |       |  |   |        |       
|         |               |                         | 1,263 |       |  |      | 1,541 |       |  |   | 1,420  |       
|         |               |                         |       |       |  |      |       |       |  |   |        |       
|Deferred |               |                         |       |       |  |      |       |       |  |   |        |       
|         | United States |                         |       |      |  |      |       |      |  |   |        | (7,274 | )
|         |               |                         |       |       |  |      |       |       |  |   |        |       
|         |               | $                       | 1,263 |       |  | $    | 1,541 |       |  | $ | (5,854 | )     
|         |               |                         |       |       |  |      |       |       |  |   |        |       

Income tax expense (benefit) differs from the
amount computed by applying the statutory United States federal
income tax rate to loss before income taxes and cumulative
effect of accounting change, net of tax, as follows (in
thousands):

|                                                              |  |                         |         |      |  |      |          |   |  |   |          |  
|------------------------------------------------------------- |  | ----------------------- | ------- | ---- |  | ---- | -------- | - |  | - | -------- | -
|                                                              |  |                        
|                                                              |  | Year Ended December 31,
|                                                              |  |                        
|                                                              |  | 2003                    |         | 2002 |  | 2001
|                                                              |  |                         |         |      |  |     
|Income tax (benefit) at the federal statutory
    rate of 35% |  | $                       | (18,491 | )    |  | $    | (234,910 | ) |  | $ | (458,548 | )
|Amortization and impairment of goodwill                       |  |                         |        |      |  |      | 180,075  |   |  |   | 423,760  |  
|Amortization of share-based compensation                      |  |                         | 73      |      |  |      | 816      |   |  |   | 3,356    |  
|International losses                                          |  |                         | 1,043   |      |  |      | 23,519   |   |  |   | 4,869    |  
|Change in valuation allowance                                 |  |                         | 15,523  |      |  |      | 29,132   |   |  |   | 20,605   |  
|Other                                                         |  |                         | 3,115   |      |  |      | 2,909    |   |  |   | 104      |  
|                                                              |  |                         |         |      |  |      |          |   |  |   |          |  
|                                                              |  | $                       | 1,263   |      |  | $    | 1,541    |   |  | $ | (5,854   | )
|                                                              |  |                         |         |      |  |      |          |   |  |   |          |  

The components of the net deferred tax assets and
liabilities were as follows (in thousands):

|                                |                                  |                         |   |         |   |      |   |         |   |   |   |        |  
|------------------------------- | -------------------------------- | ----------------------- | - | ------- | - | ---- | - | ------- | - | - | - | ------ | -
|                                |                                  |                        
|                                |                                  | Year Ended December 31,
|                                |                                  |                        
|                                |                                  | 2003                    |   | 2002    |   | 2001
|                                |                                  |                         |   |         |   |     
|Current deferred tax asset, net |                                  |                         |   |         |   |      |   |         |   |   |   |       
|                                | Deferred revenue                 |                         | $ | 4,860   |   |      | $ | 4,912   |   |   | $ | 2,739  |  
|                                | Accrued liabilities and reserves |                         |   | 7,268   |   |      |   | 7,278   |   |   |   | 3,033  |  
|                                | Valuation allowance              |                         |   | (12,128 | ) |      |   | (12,190 | ) |   |   | (5,772 | )
|                                |                                  |                         |   |         |   |      |   |         |   |   |   |       
|                                |                                  | $                       |  |         |   | $    |  |         |   | $ |  |       
|                                |                                  |                         |   |         |   |      |   |         |   |   |   |       

F-31



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|                                              |                                             |                         |   |          |   |      |   |         |   |   |   |         |  
|--------------------------------------------- | ------------------------------------------- | ----------------------- | - | -------- | - | ---- | - | ------- | - | - | - | ------- | -
|                                              |                                             |                        
|                                              |                                             | Year Ended December 31,
|                                              |                                             |                        
|                                              |                                             | 2003                    |   | 2002     |   | 2001
|                                              |                                             |                         |   |          |   |     
|Long-term deferred tax asset (liability), net |                                             |                         |   |          |   |      |   |         |   |   |   |        
|                                              | Share-based compensation                    |                         | $ |         |   |      | $ | 174     |   |   | $ | 2,674   |  
|                                              | Depreciation and amortization               |                         |   | 20,543   |   |      |   | 5,276   |   |   |   | 2,397   |  
|                                              | Acquired intangibles                        |                         |   | (2,817   | ) |      |   | (6,472  | ) |   |   | (4,952  | )
|                                              | Net operating loss and credit carryforwards |                         |   | 107,826  |   |      |   | 85,704  |   |   |   | 42,783  |  
|                                              | Valuation allowance                         |                         |   | (125,552 | ) |      |   | (84,682 | ) |   |   | (42,902 | )
|                                              |                                             |                         |   |          |   |      |   |         |   |   |   |        
|                                              |                                             | $                       |  |          |   | $    |  |         |   | $ |  |        
|                                              |                                             |                         |   |          |   |      |   |         |   |   |   |        

We provided a full valuation allowance on
deferred tax assets in excess of deferred tax liabilities
because of our limited operating history, cumulative losses and
uncertainty regarding the realization of the deferred tax assets.

At December 31, 2003, we had approximately
$300 million and $130 million, respectively, of
federal and state net operating losses. These carryforwards
expire between 2004 and 2023 for federal tax purposes and 2004
and 2013 for state tax purposes, if not utilized. The use of our
net operating losses is subject to certain limitations and may
be subject to further limitations as a result of changes in
ownership as defined by federal and state tax law. In addition,
approximately $50 million of the federal net operating loss
results from deductions attributable to stock option exercises.
The benefit of the use of the net operating loss related to
stock option exercises will be credited to equity when realized.



|         |                              
|-------- | -----------------------------
|Note 12. | Commitments and Contingencies



| |                 
| | ----------------
| | Operating Leases

We lease our facilities from third parties under
operating lease agreements or sublease agreements in the United
States, Europe and Asia Pacific. These leases expire between
January 2004 and March 2016. Total rent expense, net of sublease
amounts, was $5.8 million, $8.5 million and
$8.2 million for the years ended December 31, 2003,
2002 and 2001, respectively. The sublease amounts were
$0.2 million for the year ended December 31, 2001.

Future minimum payments under non-cancelable
operating leases as of December 31, 2003 were as follows
(in millions):

|                         |  |             |      | 
|------------------------ |  | ----------- | ---- | 
|                         |  | Minimum    
|Year Ending December 31, |  | Commitments
|                         |  |            
|2004                     |  | $           | 4.6  | 
|2005                     |  |             | 4.9  | 
|2006                     |  |             | 3.7  | 
|2007                     |  |             | 3.1  | 
|2008                     |  |             | 3.3  | 
|Thereafter               |  |             | 6.5  | 
|                         |  |             |      | 
|                         |  | $           | 26.1 | 
|                         |  |             |      | 

F-32



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                  
| | -----------------
| | Other Commitments

In the ordinary course of business we enter into
various arrangements with vendors and other business partners
for bandwidth, marketing, and other services. Future minimum
commitments under these arrangements as of December 31,
2003 were $3.2 million, $1.5 million and
$0.1 million for the years ending December 31, 2004,
2005, and 2006, respectively. In addition, we have a variable
commitment with a cable provider that is based on households
that receive our ProSync service. Based on current expectations,
we believe that this commitment may aggregate up to
approximately $1.0 million for the year ended
December 31, 2004.

As of December 31, 2003, we had two standby
letters of credit aggregating approximately $2.0 million
that were issued to landlords at two of our leased properties
and we had $10.0 million of marketable debt securities
pledged with a bank for foreign exchange facilities.

In March 1998, we entered into a licensing and
distribution agreement with Sun Microsystems, Inc. under
which Sun Microsystems granted us a non-exclusive,
non-transferable license to develop and distribute products
based upon Sun Microsystemss Java technology. Subsequent
amendments extended our license through December 2006. As
amended, the agreement requires us to make a payment of
$4.0 million to Sun Microsystems in February 2007, less any
amounts previously paid for support and royalty fees, which have
been nominal to date.



| |              
| | -------------
| | Contingencies

OpenTV, Inc. v. Liberate
Technologies, Inc.On
February 7, 2002, OpenTV, Inc., our subsidiary, filed
a lawsuit against Liberate Technologies, Inc. alleging
patent infringement in connection with two patents held by
OpenTV, Inc. relating to interactive technology. The
lawsuit is pending in the United States District Court for the
Northern District of California. On March 21, 2002,
Liberate Technologies filed a counterclaim against
OpenTV, Inc. for alleged infringement of four patents
allegedly owned by Liberate Technologies. Liberate Technologies
has since dismissed its claims of infringement on two of those
patents. In January 2003, the District Court granted two of
OpenTV, Inc.s motions for summary judgment pursuant
to which the court dismissed Liberate Technologies claim
of infringement on one of the remaining patents and dismissed a
defense asserted by Liberate Technologies to
OpenTV, Inc.s infringement claims, resulting in only
one patent of Liberate Technologies remaining in the
counterclaim. The District Court issued a claims construction
ruling for the two OpenTV patents and one Liberate patent
remaining in the suit on December 2, 2003. We believe that
our lawsuit is meritorious, and we intend to vigorously pursue
prosecution of our claims against Liberate Technologies. In
addition, we believe that we have meritorious defenses to the
counterclaims brought against OpenTV, Inc. and will defend
ourselves vigorously. No provision has been made in our
consolidated financial statements for this matter. We are unable
to predict the likelihood of a favorable outcome or estimate our
potential liability, if any.

Initial Public Offering Securities
Litigation.In July 2001, the first of
a series of putative securities class actions, Brody v.
OpenTV Corp., et al., was filed in United States District
Court for the Southern District of New York against certain
investment banks which acted as underwriters for our initial
public offering, us and various of our officers and directors.
These lawsuits were consolidated and are captioned In re
OpenTV Corp. Initial Public Offering Securities Litigation.
The complaints allege undisclosed and improper practices
concerning the allocation of our initial public offering shares,
in violation of the federal securities laws, and seek
unspecified damages on behalf of persons who purchased OpenTV
Class A ordinary shares during the period from
November 23, 1999 through December 6, 2000. A proposal
has been made for the settlement and release of claims against
the issuer defendants, including us, in exchange for a
guaranteed recovery to be paid by the insurance carriers of the
issuer defendants and an assignment of certain claims. We have
approved the settlement proposal and are awaiting definitive
documentation. The settlement is subject to a number of
conditions, including approval of the proposed settling parties
and the Court. If the settlement does not occur,

F-33



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

and the litigation against us continues, we
believe that we have meritorious defenses to the claims asserted
against us and will defend ourselves vigorously. No provision
has been made in our consolidated financial statements for this
matter. We are unable to predict the likelihood of an
unfavorable outcome or estimate our potential liability, if any.

In November 2001, a putative securities class
action was filed in United States District Court for the
Southern District of New York against Wink Communications
and two of its officers and directors and certain investment
banks which acted as underwriters for Wink Communications
initial public offering. We acquired Wink Communications in
October 2002. The lawsuit is now captioned In re Wink
Communications, Inc. Initial Public Offering Securities
Litigation. The operative amended complaint alleges
undisclosed and improper practices concerning the allocation of
Wink Communications initial public offering shares in
violation of the federal securities laws, and seeks unspecified
damages on behalf of persons who purchased Wink
Communications common stock during the period from
August 19, 1999 through December 6, 2000. This action
is among the over 300 lawsuits that have been consolidated for
pretrial purposes as In re Initial Public Offering Securities
Litigation. As described above, a proposal has been made for
the settlement and release of claims against the issuer
defendants. Wink Communications has approved the settlement
proposal and is awaiting definitive documentation. The
settlement is subject to a number of conditions, including
approval of the proposed settling parties and the Court. If the
settlement does not occur, and the litigation against Wink
Communications continues, we believe that Wink Communications
has meritorious defenses to the claims brought against it and
that Wink Communications will defend itself vigorously. No
provision has been made in our consolidated financial statements
for this matter. We are unable to predict the likelihood of an
unfavorable outcome or estimate our potential liability, if any.

Litigation Relating to the Acquisition of
ACTV, Inc.On November 18,
2002, a purported class action complaint was filed in the Court
of Chancery of the State of Delaware in and for the County of
New Castle against ACTV, Inc., its directors and us. The
complaint generally alleges that the directors of ACTV breached
their fiduciary duties to the ACTV shareholders in approving the
ACTV merger agreement pursuant to which we acquired ACTV on
July 1, 2003, and that, in approving the ACTV merger
agreement, ACTVs directors failed to take steps to
maximize the value of ACTV to its shareholders. The complaint
further alleges that we aided and abetted the purported breaches
of fiduciary duties committed by ACTVs directors on the
theory that the merger could not occur without our
participation. No proceedings on the merits have occurred with
respect to this action, and the case is dormant. We believe that
the allegations are without merit and intend to defend against
the complaint vigorously. No provision has been made in our
consolidated financial statements for this matter. We are unable
to predict the likelihood of an unfavorable outcome or estimate
our potential liability, if any.

Broadcast Innovation
Matter.On November 30, 2001, a
suit was filed in the United States District Court for the
District of Colorado by Broadcast Innovation, L.L.C., or BI,
alleging that DIRECTV, Inc., EchoStar Communications
Corporation, Hughes Electronics Corporation, Thomson
Multimedia, Inc., Dotcast, Inc. and Pegasus Satellite
Television, Inc. are infringing certain claims of United
States patent no. 6,076,094, assigned to or licensed by BI.
Though we are not currently a defendant in the suit, BI may
allege that certain of our products, possibly in combination
with the products provided by some of the defendants, infringe
BIs patent. The agreements between
(1) OpenTV, Inc. and EchoStar and (2) Wink
Communications and DIRECTV include indemnification obligations
of OpenTV, Inc. and Wink Communications, respectively, that
may be triggered by the litigation. If liability is found
against EchoStar in this matter, and if such a decision
implicates our technology or products, EchoStar has notified
OpenTV, Inc. of its expectation of indemnification, in
which case our business performance, financial position, results
of operations or cash flows may be adversely affected. Likewise,
if OpenTV, Inc. were to be named as a defendant and it is
determined that the products of OpenTV, Inc. infringe any
of the asserted claims, and/or it is determined that
OpenTV, Inc. is obligated to defend EchoStar in this
matter, our business performance, financial position, results of
operations or cash flows may be adversely affected. Based on
publicly available information, we

F-34



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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

believe that certain of the defendants in the
suit, including DIRECTV, reached agreement with BI to settle the
litigation on July 17, 2003. We are unaware of the specific
terms of that settlement and are unable to assess the
implications of that settlement, if any, on Wink Communications.
No provision has been made in our consolidated financial
statements for these matters. We are unable to estimate our
potential liability, if any.

Personalized Media Communications,
LLC.On December 4, 2000, a suit
was filed in the United States District Court for the District
of Delaware by Pegasus Development Corporation and Personalized
Media Communications, LLC alleging that DIRECTV, Inc.,
Hughes Electronics Corp., Thomson Consumer Electronics and
Philips Electronics North America, Inc. are willfully
infringing certain claims of seven U.S. patents assigned or
licensed to Personalized Media Communications. Based on publicly
available information, we believe that the case has been stayed
in the District Court pending re-examination by the United
States Patent and Trademark Office. Though Wink Communications
is not a defendant in the suit, Personalized Media
Communications may allege that certain products of Wink
Communications, possibly in combination with products provided
by the defendants, infringe Personalized Media
Communications patents. The agreements between Wink
Communications and each of the defendants include
indemnification obligations that may be triggered by this
litigation. If it is determined that Wink Communications is
obligated to defend any defendant in this matter, and/or that
the products of Wink Communications infringe any of the asserted
claims, our business performance, financial position, results of
operations or cash flows may be adversely affected. No provision
has been made in our consolidated financial statements for this
matter. We are unable to estimate our potential liability, if
any.

Other Matters.In
the normal course of our business, we provide indemnification to
customers against claims of intellectual property infringement
made by third parties arising from the use of our products.
Historically, costs related to these indemnification provisions
have not been significant and we are unable to estimate the
maximum potential impact of these indemnification provisions on
our future results of operations, although our liabilities in
those arrangements are customarily limited in various respects,
including monetarily. As permitted under the laws of the British
Virgin Islands, we have agreed to indemnify our officers and
directors for certain events or occurrences while the officer or
director is, or was serving, at our request in such capacity.
The maximum potential amount of future payments we could be
required to make under these indemnification agreements is
unlimited; however, we have director and officer insurance
coverage that limits our exposure and enables us to recover a
portion of any future amounts paid. We believe the estimated
fair value of these indemnification agreements in excess of
applicable insurance coverage is not material.

From time to time in the ordinary course of our
business, we are also party to other legal proceedings or
receive correspondence regarding potential or threatened legal
proceedings. While we currently believe that the ultimate
outcome of these other proceedings, individually and in the
aggregate, will not have a material adverse effect on our
financial position or overall trends in our results of
operations, litigation is subject to inherent uncertainties.
Were an unfavorable ruling to occur, there exists the
possibility of a material adverse impact on the results of
operations of the period in which the ruling occurs. The
estimate of the potential impact on our financial position or
overall results of operations for any of the legal proceedings
described above could change in the future.

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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |                           
|-------- | --------------------------
|Note 13. | Related Party Transactions

The table below reflects transactions involving
the following current and former related parties during the
periods indicated (in thousands). Other than Liberty Media, none
of the parties referred to in the table below held an equity
interest, as of December 31, 2003, in our company that
exceeded five percent.

|                                |  |                                               |  |                         |        |      |  |      |        |   |  |   |        |  
|------------------------------- |  | --------------------------------------------- |  | ----------------------- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                |  |                                               |  |                        
|                                |  |                                               |  | Year Ended December 31,
|                                |  |                                               |  |                        
|Related Party                   |  | Nature of Transaction                         |  | 2003                    |        | 2002 |  | 2001
|                                |  |                                               |  |                         |        |      |  |     
|Shareholders:                   |  |                                               |  |                         |        |      |  |      |        |   |  |   |        |  
|Liberty Broadband               |  | Management fee expense                        |  | $                       | (2,017 | )    |  | $    | (391   | ) |  | $ |       |  
|Liberty Media affiliates        |  | Services and support revenue and license fees |  |                         | 1,107  |      |  |      | 560    |   |  |   |       |  
|Motorola and General Instrument |  | Services and support revenue and license fees |  |                         | 6,406  |      |  |      | 6,772  |   |  |   | 8,556  |  
|                                |  | Equipment purchases                           |  |                         | (138   | )    |  |      | (1,892 | ) |  |   | (2,182 | )
|EchoStar                        |  | Royalties, services and support revenue,      |  |                         |        |      |  |      |        |   |  |   |        |  
|                                |  | revenue shares and license fees               |  |                         | 7,554  |      |  |      | 3,668  |   |  |   | 3,501  |  
|Time Warner                     |  | Services revenue                              |  |                         |       |      |  |      |       |   |  |   | 865    |  
|MIH Limited and its affiliates  |  | Royalties, services and support revenue and   |  |                         | 1,068  |      |  |      | 1,429  |   |  |   | 5,938  |  
|                                |  | license fees                                  |  |                         |        |      |  |      |        |   |  |   |        |  
|                                |  | Indirect royalties*                           |  |                         |       |      |  |      |       |   |  |   | 586    |  
|Sun Microsystems                |  | Software technology license and equipment     |  |                         |        |      |  |      |        |   |  |   |        |  
|                                |  | purchases                                     |  |                         |       |      |  |      | (141   | ) |  |   | (318   | )
|Equity Investments:             |  |                                               |  |                         |        |      |  |      |        |   |  |   |        |  
|WOW TV                          |  | Services revenue                              |  |                         |       |      |  |      | 399    |   |  |   | 893    |  



---



|  |                                                                                                                                                                            
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Two customers sold set-top boxes to affiliates of
    MIHL and paid royalties to us. Effective April 1, 2001, the
    affiliates of MIHL paid all royalties directly to us.

Commencing in August 2002, Liberty Broadband
provided certain management services for us. We reimbursed them
for the services based on the estimated percentage of time that
various individuals employed by Liberty Broadband dedicated to
the performance of services for us. In addition, we also
reimbursed them for an allocated portion of their administrative
costs. Total management charges from Liberty Broadband for
compensation and general administrative costs were
$2.0 million and $0.4 million for the years ended
December 31, 2003 and 2002, respectively. In addition, we
reimbursed Liberty Broadband $0.4 million and
$0.1 million for the years ended December 31, 2003 and
2002, respectively, for certain out-of-pocket costs and expenses
incurred by Liberty Broadband that were directly related to our
business. In February 2004, our management relationship with
Liberty Broadband was terminated.

In April 2002, we entered into agreements with
certain of our executive officers and senior management
personnel that provided for retention payments to be paid in
installments to such persons in the event of certain
transactions involving a change in control. Our obligation to
make these payments was triggered on August 27, 2002 when
Liberty Media acquired MIHLs controlling ownership stake
in us. We recorded compensation expense of $0.5 million and
$2.1 million for the years ended December 31, 2003 and
2002, respectively for the payments made under such agreements.
Pursuant to a reimbursement agreement with MIHL, we were
reimbursed for these retention payments, and these
reimbursements have been reflected as a capital contribution in
the consolidated balance sheets.

In June 2000, we entered into an employment
agreement with James Ackerman, our Chief Executive Officer and a
member of our board of directors, pursuant to which we agreed,
among other things, (a) to provide an interest-free loan of
approximately $2.4 million to be forgiven in annual
installments over a period of four years and (b) to issue
Class A ordinary shares having an aggregate fair market
value of approximately $0.6 million in annual installments
over the same four-year period. In January 2001, 25% of the cash
portion of

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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the loan was forgiven and 14,525 Class A
ordinary shares were issued. In January 2002, another 25% of the
loan amount was forgiven and 17,830 Class A ordinary shares
were issued. Another 25% of the loan amount was forgiven in
January 2003 and 121,402 Class A ordinary shares authorized
to be issued in February 2003 were issued in October 2003. The
amounts forgiven annually were reported as compensation expense.
The annual grants of Class A ordinary shares were reported
as compensation expense.



|         |                    
|-------- | -------------------
|Note 14. | Segment Information

SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information,
requires enterprises to report information about operating
segments in annual consolidated financial statements. It also
establishes standards for related disclosures about products,
geographic areas and major customers. The method for determining
what information to report is based upon the
management approach. Our Chief Executive Officer
reviews revenues by both geography and customer, and we do not
have separately reportable operating segments.

Our revenues by geographic area based on the
location of customers were as follows (in millions):

|                               |  |                         |      |   |  |      |      |   |  |      |      |   |  |  |      |  |  |   |      |  |  |  |      | 
|------------------------------ |  | ----------------------- | ---- | - |  | ---- | ---- | - |  | ---- | ---- | - |  |  | ---- |  |  | - | ---- |  |  |  | ---- | 
|                               |  |                        
|                               |  | Year Ended December 31,
|                               |  |                        
|                               |  | 2003                    |      | % |  | 2002 |      | % |  | 2001 |      | %
|                               |  |                         |      |   |  |      |      |   |  |      |      |  
|Europe, Africa and Middle East |  | $                       | 30.9 |   |  |      | 48%  |   |  | $    | 31.0 |   |  |  | 52%  |  |  | $ | 42.8 |  |  |  | 49%  | 
|Americas                       |  |                         | 24.2 |   |  |      | 38%  |   |  |      | 21.3 |   |  |  | 36%  |  |  |   | 31.2 |  |  |  | 36%  | 
|Asia Pacific                   |  |                         | 9.1  |   |  |      | 14%  |   |  |      | 7.4  |   |  |  | 12%  |  |  |   | 12.9 |  |  |  | 15%  | 
|                               |  |                         |      |   |  |      |      |   |  |      |      |   |  |  |      |  |  |   |      |  |  |  |      | 
|                               |  | $                       | 64.2 |   |  |      | 100% |   |  | $    | 59.7 |   |  |  | 100% |  |  | $ | 86.9 |  |  |  | 100% | 
|                               |  |                         |      |   |  |      |      |   |  |      |      |   |  |  |      |  |  |   |      |  |  |  |      | 

Americas include United States revenue of
$20.2 million, $14.6 million and $30.2 million
for the years ended December 31, 2003, 2002, and 2001,
respectively.

Three major customers accounted for the following
percentages of revenues:

|         |  |              |     |      |  |      |     |  |  |  |    |  
|-------- |  | ------------ | --- | ---- |  | ---- | --- |  |  |  | -- | -
|         |  |             
|         |  | Year Ended  
|         |  | December 31,
|         |  |             
|Customer |  | 2003         |     | 2002 |  | 2001
|         |  |              |     |      |  |     
|A        |  |              | 10% |      |  |      | 11% |  |  |  | 10 | %
|B        |  |              | 12% |      |  |      | 11% |  |  |  |   |  
|C        |  |              | 12% |      |  |      | 6%  |  |  |  |   |  

British Sky Broadcasting (BSkyB)
directly and indirectly accounted for 11% and 9% of total
revenues for the years ended December 31, 2003 and 2002,
respectively, taking into account the royalties which are paid
by five manufacturers who sell set-top boxes to BSkyB. For the
year ended December 31, 2001, total revenues from BSkyB
were negative due to a marketing payment of $8.4 million
which was offset against revenues in accordance with
EITF 01-09.

One customer accounted for 17% of net accounts
receivable as of December 31, 2003. Two customers accounted
for 15% and 17% of net accounts receivable as of
December 31, 2002.

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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Additional summarized information by geographic
area was as follows (in millions):

|                           |  |              |     |      |  |      |     |  |  |   |      | 
|-------------------------- |  | ------------ | --- | ---- |  | ---- | --- |  |  | - | ---- | 
|                           |  |             
|                           |  | Year Ended  
|                           |  | December 31,
|                           |  |             
|Capital expenditures, net: |  | 2003         |     | 2002 |  | 2001
|                           |  |              |     |      |  |     
|United States              |  | $            | 1.5 |      |  | $    | 5.1 |  |  | $ | 11.9 | 
|Other countries            |  |              | 1.4 |      |  |      | 2.6 |  |  |   | 2.3  | 
|                           |  |              |     |      |  |      |     |  |  |   |      | 
|                           |  | $            | 2.9 |      |  | $    | 7.7 |  |  | $ | 14.2 | 
|                           |  |              |     |      |  |      |     |  |  |   |      | 

|                      |  |              |       |      |  |   |      | 
|--------------------- |  | ------------ | ----- | ---- |  | - | ---- | 
|                      |  |             
|                      |  | December 31,
|                      |  |             
|Long-lived assets(1): |  | 2003         |       | 2002
|                      |  |              |       |     
|United States         |  | $            | 112.0 |      |  | $ | 81.9 | 
|Other countries       |  |              | 16.8  |      |  |   | 12.8 | 
|                      |  |              |       |      |  |   |      | 
|                      |  | $            | 128.8 |      |  | $ | 94.7 | 
|                      |  |              |       |      |  |   |      | 



---



| |     |                                                                                                    
| | --- | ---------------------------------------------------------------------------------------------------
| | (1) | Long-lived assets include property and equipment,
    goodwill, intangible assets and other assets.

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##### Table of Contents



OPENTV CORP.


NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |                                                      
|-------- | -----------------------------------------------------
|Note 15. | Quarterly Consolidated Financial Data
    (Unaudited)

The following table presents our operating
results for each of the eight quarters in the period ended
December 31, 2003. The information for each of these
quarters is unaudited and has been prepared on the same basis as
the audited consolidated financial statements. In the opinion of
management, all necessary adjustments (consisting only of normal
recurring adjustments) have been included to present fairly the
unaudited consolidated quarterly results. These operating
results are not necessarily indicative of the results of any
future period. The quarterly information was as follows (in
thousands, except for share and per share amounts):

|                                                             |  |             |             |              |  |         |             |          |  |   |            |   |  |   |            |  
|------------------------------------------------------------ |  | ----------- | ----------- | ------------ |  | ------- | ----------- | -------- |  | - | ---------- | - |  | - | ---------- | -
|2003 Quarter Ended                                           |  | December 31 |             | September 30 |  | June 30 |             | March 31
|                                                             |  |             |             |              |  |         |             |         
|Revenues                                                     |  | $           | 16,040      |              |  | $       | 17,073      |          |  | $ | 15,738     |   |  | $ | 15,346     |  
|Net loss                                                     |  | $           | (12,875     | )            |  | $       | (11,918     | )        |  | $ | (9,236     | ) |  | $ | (20,065    | )
|Net loss per share, basic and diluted                        |  | $           | (0.11       | )            |  | $       | (0.10       | )        |  | $ | (0.13      | ) |  | $ | (0.28      | )
|Shares used in per share calculation 
    basic and diluted |  |             | 118,481,309 |              |  |         | 116,157,971 |          |  |   | 72,358,351 |   |  |   | 72,275,480 |  

|                                                             |                                                    |             |            |              |   |         |            |          |   |   |            |         |   |   |            |          |  
|------------------------------------------------------------ | -------------------------------------------------- | ----------- | ---------- | ------------ | - | ------- | ---------- | -------- | - | - | ---------- | ------- | - | - | ---------- | -------- | -
|2002 Quarter Ended                                           |                                                    | December 31 |            | September 30 |   | June 30 |            | March 31
|                                                             |                                                    |             |            |              |   |         |            |         
|Revenues                                                     |                                                    | $           | 13,166     |              |   | $       | 13,447     |          |   | $ | 14,146     |         |   | $ | 18,927     |         
|Net loss:                                                    |                                                    |             |            |              |   |         |            |          |   |   |            |         |   |   |            |         
|                                                             | Before cumulative effect of accounting change      |             |            | (43,002      | ) |         |            | (567,771 | ) |   |            | (23,960 | ) |   |            | (37,979  | )
|                                                             | Cumulative effect of accounting change, net of tax |             |            |             |   |         |            |         |   |   |            |        |   |   |            | (129,852 | )
|                                                             |                                                    |             |            |              |   |         |            |          |   |   |            |         |   |   |            |         
|                                                             |                                                    | $           | (43,002    | )            |   | $       | (567,771   | )        |   | $ | (23,960    | )       |   | $ | (167,831   | )       
|                                                             |                                                    |             |            |              |   |         |            |          |   |   |            |         |   |   |            |         
|Net loss per share, basic and diluted:                       |                                                    |             |            |              |   |         |            |          |   |   |            |         |   |   |            |         
|                                                             | Before cumulative effect of accounting change      |             | $          | (0.60        | ) |         | $          | (7.88    | ) |   | $          | (0.33   | ) |   | $          | (0.53    | )
|                                                             | Cumulative effect of accounting change, net of tax |             |            |             |   |         |            |         |   |   |            |        |   |   |            | (1.83    | )
|                                                             |                                                    |             |            |              |   |         |            |          |   |   |            |         |   |   |            |         
|                                                             |                                                    | $           | (0.60      | )            |   | $       | (7.88      | )        |   | $ | (0.33      | )       |   | $ | (2.36      | )       
|                                                             |                                                    |             |            |              |   |         |            |          |   |   |            |         |   |   |            |         
|Shares used in per share calculation 
    basic and diluted |                                                    |             | 72,106,061 |              |   |         | 72,089,644 |          |   |   | 71,906,785 |         |   |   | 71,253,916 |         

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##### Table of Contents



OPENTV CORP.

SCHEDULE II


VALUATION AND QUALIFYING ACCOUNTS

|                                 |      |                                                      |   |               |  |            |   |                |  |  |   |       |  |  |   |       | 
|-------------------------------- | ---- | ---------------------------------------------------- | - | ------------- |  | ---------- | - | -------------- |  |  | - | ----- |  |  | - | ----- | 
|                                 |      |                                                     
|                                 |      | For the Years Ended December 31, 2003, 2002 and 2001
|                                 |      |                                                     
|                                 |      |                                                      |   | Deductions,   |  |           
|                                 |      | Balance at                                           |   | Additions and |  | Write-offs |   |               
|                                 |      | Beginning                                            |   | Returns and   |  | Net of     |   | Balance at End
|                                 |      | of Year                                              |   | Provisions    |  | Recoveries |   | of Year       
|                                 |      |                                                      |   |               |  |            |   |               
|                                 |      |                                                     
|                                 |      | (In thousands)                                      
|Allowance for Doubtful Accounts: |      |                                                      |   |               |  |            |   |                |  |  |   |       |  |  |   |      
|                                 | 2003 |                                                      | $ | 1,966         |  |            | $ | 168            |  |  | $ | 1,345 |  |  | $ | 789   | 
|                                 | 2002 |                                                      |   | 1,186         |  |            |   | 1,758          |  |  |   | 978   |  |  |   | 1,966 | 
|                                 | 2001 |                                                      |   | 872           |  |            |   | 1,289          |  |  |   | 975   |  |  |   | 1,186 | 

F-40