##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-Q
   (Mark One)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    September 30, 2006ORo

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          
    to   Commission File Number:
    001-15473
  OPENTV CORP.
 (Exact name of registrant as
    specified in its charter)
  British Virgin
    Islands

98-0212376(State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization)

Identification No.)275 Sacramento Street, 
    San Francisco, California(Address of principal
    executive offices)

94111(Zip
    Code)   (415) 962-5000
 (Registrants telephone
    number, including area code)
  þ o
  Rule 12b-2
 o þ o
  Rule 12b-2 o þ




---



##### 



Table of
    Contents
  
  PagePart I.
    Financial InformationItem 1.


Financial
    Statements


1Condensed
    Consolidated Balance Sheets at September 30, 2006 and
    December 31, 2005


1Condensed
    Consolidated Statements of Operations for the Three and Nine
    Months Ended September 30, 2006 and 2005


2Condensed
    Consolidated Statements of Cash Flows for the Nine Months Ended
    September 30, 2006 and 2005


3Notes to Condensed
    Consolidated Financial Statements


4Item 2.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


23Item 3.


Quantitative and
    Qualitative Disclosures About Market Risk


39Item 4.


Controls and
    Procedures


40Part II.
    Other InformationItem 1.


Legal
    Proceedings


42Item 1A.


Risk
    Factors


42Item 4.


Submission of
    Matters to a Vote of Security Holders


42Item 6.


Exhibits


43Signature


44Exhibit Index


45EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONS




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##### Table of Contents



Part I.
    Financial Information  Item 1.
    Financial
    Statements  OPENTV
    CORP.
 CONDENSED
    CONSOLIDATED BALANCE SHEETS  September 30,


December 31,2006


2005*(Unaudited)(In thousands, except share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
53,673


$
47,229Short-term marketable debt
    securities


5,660



9,030Accounts receivable, net of
    allowance for doubtful accounts of $329 and $305 at
    September 30, 2006 and December 31, 2005, respectively


17,245



16,873Prepaid expenses and other current
    assets


3,851



4,638Total current assets


80,429



77,770Long-term marketable debt securities


8,336



8,213Property and equipment, net


6,256



5,863Goodwill


97,700



80,124Intangible assets, net


21,870



27,150Other assets


4,711



2,945Total assets

$
219,302


$
202,065LIABILITIES, MINORITY INTEREST
    AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable

$
2,914


$
4,361Accrued liabilities


19,016



18,568Accrued restructuring


1,560



1,931Due to Liberty Media


702



182Current portion of deferred revenue


9,561



14,193Total current liabilities


33,753



39,235Long-term liabilities:Deferred rent


1,259



1,404Deferred revenue


14,743



8,391Total long-term liabilities


16,002



9,795Total liabilities


49,755



49,030Commitments and contingencies
    (Note 10)Minority interest


495



523Shareholders equity:Class A ordinary shares, no
    par value, 500,000,000 shares authorized; 107,113,169 and
    98,105,119 shares issued and outstanding, including
    treasury shares, at September 30, 2006 and
    December 31, 2005, respectively


2,233,837



2,230,398Class B ordinary shares, no
    par value, 200,000,000 shares authorized;
    30,631,746 shares issued and outstanding


35,953



35,953Additional paid-in capital


491,094



470,596Treasury shares at cost,
    76,327 shares


(38
)


(38
)Deferred share-based compensation






(2
)Accumulated other comprehensive loss


(262
)


(265
)Accumulated deficit


(2,591,532
)


(2,584,130
)Total shareholders equity


169,052



152,512Total liabilities, minority
    interest and shareholders equity

$
219,302


$
202,065     *
    
    The consolidated balance sheet at December 31, 2005 has
    been derived from the companys audited consolidated
    financial statements at that date, but does not include all of
    the information and notes required by accounting principles
    generally accepted in the United States of America.   1




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##### Table of Contents



OPENTV
    CORP.
 CONDENSED
    CONSOLIDATED STATEMENTS OF OPERATIONS  Three Months Ended September 30,

Nine Months Ended September 30,2006

2005

2006

2005(Unaudited)(In thousands, except share and per share amounts)Revenues:Royalties and licenses

$
17,327


$
12,285


$
48,441


$
40,207Services and other


9,226



7,193



26,729



22,974Total revenues


26,553



19,478



75,170



63,181Cost of revenues:Royalties and licenses


1,974



1,457



5,469



4,831Services and other(1)


9,666



7,065



28,109



19,990Total cost of revenues


11,640



8,522



33,578



24,821Gross profit


14,913



10,956



41,592



38,360Operating expenses:Research and development(1)


8,249



7,786



24,266



24,629Sales and marketing(1)


3,188



2,777



9,138



9,358General and administrative(1)


4,694



3,508



14,308



11,766Restructuring and impairment costs






368



20



2,545Amortization of intangible assets


515



426



1,574



1,216Total operating expenses


16,646



14,865



49,306



49,514Loss from operations


(1,733
)


(3,909
)


(7,714
)


(11,154
)Interest income


827



439



2,275



1,163Other income/(expense), net


37



(65
)


(161
)


297Minority interest


9



9



28



53Loss before income taxes


(860
)


(3,526
)


(5,572
)


(9,641
)Income tax expense


(923
)


(525
)


(1,830
)


(1,736
)Net loss

$
(1,783
)

$
(4,051
)

$
(7,402
)

$
(11,377
)Net loss per share, basic and
    diluted:

$
(0.01
)

$
(0.03
)

$
(0.05
)

$
(0.09
)Shares used in per share
    calculation, basic and diluted


137,648,870



124,751,421



137,005,835



123,530,419(1) Includes the following
    share-based compensation expense primarily due to the adoption
    of FAS 123(R):Cost of services and other

$
135


$
2


$
474


$
6Research and development


158







554



Sales and marketing


130







452



General and administrative


377







1,374



Total share-based compensation
    expense

$
800


$
2


$
2,854


$
6    2




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##### Table of Contents



OPENTV
    CORP.
 CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS  Nine Months Ended September 30,2006


2005(Unaudited)(In thousands)Cash flows from operating
    activities:Net loss

$
(7,402
)

$
(11,377
)Adjustments to reconcile net loss
    to net cash from operating activities:Depreciation and amortization of
    property and equipment


2,365



3,008Amortization of intangible assets


5,280



3,994Amortization of share-based
    compensation


2,854



6Non-cash employee compensation


55



126Provision for doubtful accounts


24



11Non-cash impairment costs






602Loss on disposal of fixed assets


24



Minority interest


(28
)


(53
)Changes in operating assets and
    liabilities:Accounts receivable


(396
)


4,521Prepaid expenses and other current
    assets


787



(137
)Other assets


(1,766
)


(1,249
)Accounts payable


(1,447
)


(1,564
)Accrued liabilities and deferred
    rent


2,961



(3,768
)Accrued restructuring


(371
)


840Due to Liberty Media


520



(65
)Deferred revenue


1,720



4,034Net cash provided by/(used in)
    operating activities


5,180



(1,071
)Cash flows from investing
    activities:Purchase of property and equipment


(2,724
)


(2,140
)Cash used in acquisition of CAM
    Systems, net of cash acquired (Note 4)






(4,261
)Proceeds from sale of marketable
    debt securities


10,466



36,545Purchase of marketable debt
    securities


(7,175
)


(29,533
)Private equity investments






(300
)Net cash provided by investing
    activities


567



311Cash flows from financing
    activities:Proceeds from issuance of ordinary
    shares


796



181Net cash provided by financing
    activities


796



181Effect of exchange rate changes on
    cash and cash equivalents


(99
)


(410
)Net increase/(decrease) in cash
    and cash equivalents


6,444



(989
)Cash and cash equivalents,
    beginning of period


47,229



35,660Cash and cash equivalents, end of
    period

$
53,673


$
34,671Supplemental disclosure of cash
    flow information:Cash paid for income taxes

$
(1,198
)

$
(881
)Non-cash investing and
    financing activities:Conversion of exchangeable shares

$
17,576


$
26Value of bonus shares issued to
    employees

$
2,658


$
3,180Value of shares issued in
    connection with acquisition of CAM Systems (Note 4)

$



$
13,050    3




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##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 SEPTEMBER 30, 2006
 (Unaudited)
  Note 1.
    Basis of
    Presentation  Form 10-K
      Note 2.
    Summary
    of Significant Accounting Policies  Share-Based
    Compensation
  Share-Based Payment Accounting for Stock Issued to Employees fair-value-based
    Accounting for Share-based Compensation 
    Transition and Disclosure,
 4




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##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Recent
    Accounting Pronouncements
  Accounting for
    Uncertainty in Income Taxes Accounting for
    Income Taxes
    Fair Value Measures
  Considering the Effects of Prior Year Misstatements
    when Quantifying Misstatements in Current Year Financial
    Statements
 5




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##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 3.
    Net Loss
    Per Share    Three Months Ended September 30,


Nine Months Ended September 30,2006


2005


2006


2005Class A ordinary shares
    issuable upon exercise of stock options


10,991,876



10,351,229



10,484,967



9,978,485Class 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)


715,185



744,428



727,534



747,178Class B ordinary shares
    issuable for shares of OpenTV, Inc. Class B common stock






7,594,796



112,515



7,594,796     Note 4.
    CAM
    Systems Acquisition      PurchasePriceTangible net assets acquired

$
0.3Intangible assets acquired


7.8Goodwill


9.4$
17.5     Note 5.
    Goodwill  one-for-one
 6




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##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Note 6.
    Intangible
    Assets, Net    September 30, 2006


December 31, 2005Useful


Gross





Net


Netlife in


Carrying


Accumulated


Carrying


Carryingyears


Amount


Amortization


Amount


AmountIntangible assets:Patents


5-13


$
20.7


$
(7.6
)

$
13.1


$
14.7Developed technologies


3-5



11.3



(6.5
)


4.8



6.9Contracts and relationships


5



9.8



(6.0
)


3.8



5.3Trademarks


4



0.3



(0.1
)


0.2



0.3Purchased technologies


5



0.4



(0.4
)






$
42.5


$
(20.6
)

$
21.9


$
27.2       AmortizationYear Ending December 31,

Expense2006 (Remaining three months)

$
1.82007


6.02008


3.52009


2.02010


1.7Thereafter


6.9$
21.9   Note 7.
    Restructuring
    and Impairment Costs  Accounting for
    Costs Associated with Exit or Disposal Activities
 7




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##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
            EmployeeSeverance


Excessand Benefits


Facilities


TotalBalance, December 31, 2005

$
0.2


$
1.7


$
1.9Cash payments






(0.1
)


(0.1
)Balance, March 31, 2006


0.2



1.6



1.8Cash payments






(0.1
)


(0.1
)Balance, June 30, 2006


0.2



1.5



1.7Cash payments


(0.1
)


(0.1
)


(0.2
)Balance, September 30, 2006

$
0.1


$
1.4


$
1.5     Note 8.
    Employee
    Bonus   8




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##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Note 9.
    Comprehensive
    Loss    Three Months Ended September 30,


Nine Months Ended September 30,2006


2005


2006


2005Net loss

$
(1.8
)

$
(4.1
)

$
(7.4
)

$
(11.4
)Other comprehensive loss:Foreign currency translation
    adjustment


0.1



(0.2
)






(0.5
)Unrealized gains on investments,
    net of income taxes


0.1











Comprehensive loss

$
(1.6
)

$
(4.3
)

$
(7.4
)

$
(11.9
)   Note 10.
    Commitments
    and Contingencies  Operating
    Leases
      MinimumYear Ending December 31,

Commitments2006 (remaining three months)

$
1.32007


4.92008


4.62009


4.12010


0.9Thereafter


0.5$
16.3    9




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##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Other
    Commitments
      Contingencies
  OpenTV, Inc. v. Liberate Technologies,
    Inc.
      Initial Public Offering Securities
    Litigation. Brody v. OpenTV
    Corp., et al. In re
    OpenTV Corp. Initial Public Offering Securities Litigation.
 10




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##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  In re Initial Public Offering Securities Litigation
  In re Wink Communications, Inc.
    Initial Public Offering Securities Litigation. In
    re Initial Public Offering Securities Litigation.
  Litigation Relating to the Acquisition of ACTV,
    Inc.
 11




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##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Broadcast Innovation Matter. and/or
  Personalized Media Communications, LLC. and/or
 12




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##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Indemnifications
      Note 11.
    Related
    Party Transactions        Note 12.
    Segment
    Information  Disclosure
    about Segments of an Enterprise and Related
    Information.
 13




---



##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       14




---



##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2006


2005


2006


2005Revenues:Middleware and integrated
    technologiesRoyalties and licenses

$
15.2


$
12.2


$
44.6


$
40.0Services and other


4.1



3.2



12.5



10.6Subtotal  Middleware
    and integrated technologies


19.3



15.4



57.1



50.6ApplicationsRoyalties and licenses


0.9



0.1



2.6



0.2Services and other


3.7



3.1



11.1



9.3Subtotal  Applications


4.6



3.2



13.7



9.5BettingCorpRoyalties and licenses


1.3







1.3



Services and other


1.4



0.9



3.1



3.1Subtotal  BettingCorp


2.7



0.9



4.4



3.1Total Revenue

$
26.6


$
19.5


$
75.2


$
63.2Contribution margin:Middleware and integrated
    technologies

$
6.7


$
5.4


$
20.7


$
21.4Applications


(0.6
)


(1.1
)


(1.2
)


(3.9
)BettingCorp


1.1



(1.2
)


(0.6
)


(3.5
)Total contribution margin


7.2



3.1



18.9



14.0Unallocated corporate overhead


(5.6
)


(4.4
)


(16.1
)


(15.6
)Restructuring and impairment costs






(0.4
)






(2.6
)Depreciation and amortization


(0.8
)


(0.8
)


(2.3
)


(3.0
)Amortization of intangible assets


(1.7
)


(1.4
)


(5.3
)


(4.0
)Amortization of share-based
    compensation


(0.8
)






(2.9
)


Interest income


0.8



0.4



2.3



1.1Other (expense)/income, net






(0.1
)


(0.2
)


0.3Minority interest














0.1Loss before income taxes


(0.9
)


(3.6
)


(5.6
)


(9.7
)Income tax expense


(0.9
)


(0.5
)


(1.8
)


(1.7
)Net loss

$
(1.8
)

$
(4.1
)

$
(7.4
)

$
(11.4
)  15




---



##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months Ended September 30


Nine Months Ended September 30,% of





% of





% of





% of2006


Revenues


2005


Revenues


2006


Revenues


2005


RevenuesEurope, Africa and Middle EastUnited Kingdom

$
6.1



23
%

$
4.8



25
%

$
19.7



26
%

$
16.2



26
%Italy


1.5



6
%


1.2



6
%


4.6



6
%


8.4



13
%Other countries


4.4



16
%


3.9



20
%


12.9



17
%


9.7



15
%Subtotal


12.0



45
%


9.9



51
%


37.2



49
%


34.3



54
%AmericasUnited States


7.1



27
%


5.7



29
%


20.9



28
%


17.2



27
%Other countries


1.0



4
%


1.3



7
%


3.9



5
%


3.0



5
%Subtotal


8.1



31
%


7.0



36
%


24.8



33
%


20.2



32
%Asia Pacific


6.5



24
%


2.6



13
%


13.2



18
%


8.7



14
%$
26.6



100
%

$
19.5



100
%

$
75.2



100
%

$
63.2



100
%     Three Months

Nine MonthsEnded

EndedSeptember 30,

September 30,2006

2005

2006

2005Sky Italia


6
%


6
%


6
%


13
%Echostar


13
%


18
%


15
%


17
%         Three Months Ended September 30,


Nine Months Ended September 30,Capital Expenditures, Net:

2006


2005


2006


2005United States

$
0.7


$
0.3


$
2.0


$
1.1Other countries


0.3



0.3



0.7



1.0$
1.0


$
0.6


$
2.7


$
2.1   September 30,


December 31,Long-Lived Assets: (*)

2006


2005United States

$
8.0


$
6.0Other countries


3.0



2.8$
11.0


$
8.8  _
    _
   16




---



##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 13.
    Share-based
    Compensation Plans  Employee
    Stock Purchase Plan
    Option
    Plans
         17




---



##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
              Impact
    of the Adoption of SFAS 123(R)
   18




---



##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2006


2006Cost of revenues 
    services and other

$
135


$
472Research and development


158



554Sales and marketing


130



452General and administrative


377



1,374$
800


$
2,852     Valuation
    Assumptions
    Three Months Ended September 30,

Nine months Ended September 30,2006

2005

2006

2005Risk-free interest rates

4.51% - 5.19%

3.89% - 4.18%

4.28% - 5.22%

3.71% - 4.42%Average expected lives (months)

63

75

63

75Dividend yield







Expected volatility

79%

100-102%

79-85%

100-104%    19




---



##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Share-based
    Payment Award Activity
    Shares


Number ofAvailable for


Shares





Weighted AverageGrant


Outstanding


Exercise Price


Exercise PriceBalance, December 31, 2005


5,997,000



10,325,710






$
5.42Options granted


(37,900
)


37,900


$
2.27 - $2.88


$
2.54Options exercised






(29,022
)

$
1.05 - $2.10


$
1.21Options forfeited






(62,913
)

$
1.63 - $3.77


$
2.80Options expired






(428,847
)

$
1.63 - $54.25


$
9.89Balance, March 31, 2006


5,959,100



9,842,828






$
5.24Options granted


(1,309,950
)


1,309,950


$
2.29 - $4.00


$
2.95Options exercised






(385,548
)

$
0.33 - $2.99


$
1.89Options forfeited


24,600



(106,470
)

$
1.63 - $3.61


$
2.93Options expired






(37,404
)

$
1.63 - $54.25


$
13.05Balance, June 30, 2006


4,673,750



10,623,356






$
5.08Options granted


(768,400
)


768,400


$
2.73 - $3.94


$
2.94Options exercised






(6,158
)

$
2.70 - $2.99


$
2.72Options forfeited


94,700



(360,491
)

$
1.63 - $3.23


$
2.70Options expired






(30,195
)

$
2.42 - $94.56


$
25.06Balance, September 30, 2006


4,000,050



10,994,912






$
4.95     Options Outstanding


Options Currently ExercisableWeightedAverage


Weighted





WeightedNumber


Remaining


Average


Number


AverageExercise Price

Outstanding


Contractual Life


Exercise Price


Exercisable


Exercise Price$ 0.33 - $ 2.18


1,746,966



2.88


$
1.70



1,481,911


$
1.68$ 2.21 - $ 2.69


337,400



8.22


$
2.42



86,161


$
2.33$ 2.70 - $ 2.70


1,429,045



8.39


$
2.70



614,418


$
2.70$ 2.72 - $ 2.82


385,480



8.69


$
2.77



116,649


$
2.77$ 2.84 - $ 2.84


2,046,339



9.17


$
2.84



345,568


$
2.84$ 2.85 - $ 2.98


173,400



8.71


$
2.91



37,716


$
2.90$ 2.99 - $ 2.99


2,154,900



7.52


$
2.99



966,172


$
2.99$ 3.00 - $ 4.20


1,120,264



6.60


$
3.50



427,687


$
3.35$ 4.59 - $15.03


1,110,958



4.47


$
8.62



1,022,208


$
8.95$17.63 - $88.00


490,160



3.82


$
39.71



490,160


$
39.7110,994,912



6.72


$
4.95



5,588,650


$
6.93    20




---



##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
              Pro
    forma Information for Periods Prior to the Adoption of
    SFAS 123(R)
      Three Months


Nine MonthsEnded


EndedSeptember 30,


September 30,2005


2005Net loss, as reported

$
(4.1
)

$
(11.4
)Deduct: Share-based employee
    compensation expense determined under fair value-based method
    for all awards, net of related tax effects


(1.2
)


(3.3
)Pro-forma net loss

$
(5.3
)

$
(14.7
)Net loss per share, basic and
    diluted:As reported

$
(0.03
)

$
(0.09
)Pro-forma

$
(0.04
)

$
(0.12
)  21




---



##### Table of Contents



OPENTV
    CORP.
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Note 14.
    Subsequent
    Events        90-day
 22




---



##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  This Quarterly Report on
    Form 10-Q
    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, 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 Quarterly
    Report on
    Form 10-Q.
    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 contained in Item 1A of our Annual
    Report on
    Form 10-K
    for the fiscal year ended December 31, 2005, as such
    section may be updated in our subsequent Quarterly Reports on
    Form 10-Q.
    We urge you to review and consider the various disclosures made
    by us 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.
  The following discussion should be read together with the
    unaudited condensed consolidated financial statements and the
    notes thereto included elsewhere in this Quarterly Report on
    Form 10-Q
    and with our audited financial statements, the notes thereto and
    the section titled Managements Discussion and
    Analysis of Financial Condition and Results of Operations
    included in our Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005, as filed with
    the Securities and Exchange Commission.
  Overview
      Recent
    Events
     23




---



##### Table of Contents



Form 10-Q,
   90-day
  Critical
    Accounting Policies and Estimates
      Revenue
    Recognition
  Software Revenue Recognition (SOP 97-2), SOP 81-1, Accounting for Performance of Construction-Type and
    Certain Production-Type Contracts (SOP 81-1) Revenue
    Recognition.
 24




---



##### Table of Contents



SOP 97-2
  SOP 81-1.
      Valuation
    Allowances
      Impairment
    of Goodwill and Long-lived Assets
   25




---



##### Table of Contents



Restructuring
    Costs
    Share-Based
    Compensation
           26




---



##### Table of Contents



Interaction Between FASB
    Statement No. 123(R), and Certain SEC Rules and Regulations
    Regarding the Valuation of Share-based Payment Arrangement for
    Public Companies
    Recent
    Accounting Pronouncements
  Accounting for
    Uncertainty in Income Taxes Accounting for Income Taxes
    Fair Value Measures
  Considering the Effects of Prior Year Misstatements
    when Quantifying Misstatements in Current Year Financial
    Statements
 27




---



##### Table of Contents



Three and
    Nine Months Ended September 30, 2006 and 2005
  Revenues
    Three Months Ended September 30,


Nine Months Ended September 30,% of





% of





% of





% of2006


Revenues


2005


Revenues


2006


Revenues


2005


RevenuesRoyalties and licenses

$
17.4



65
%

$
12.3



63
%

$
48.5



64
%

$
40.2



64
%Services and other


9.2



35
%


7.2



37
%


26.7



36
%


23.0



36
%Total revenues


26.6



100
%


19.5



100
%


75.2



100
%


63.2



100
%   Royalties and licenses. SOP 97-2
     28




---



##### Table of Contents



29




---



##### Table of Contents



Services and Other.
          Operating
    Expenses
   30




---



##### Table of Contents



Three Months Ended September 30,

Nine Months Ended September 30,% of



% of



% of



% of2006

Revenues

2005

Revenues

2006

Revenues

2005

RevenuesCost of royalties and licenses

$
2.0



7
%

$
1.4



7
%

$
5.5



7
%

$
4.8



7
%Cost of services and other(1)


9.6



36
%


7.1



37
%


28.1



38
%


20.0



32
%Total cost of revenues


11.6



43
%


8.5



44
%


33.6



45
%


24.8



39
%Research and development(1)


8.3



31
%


7.8



40
%


24.3



32
%


24.6



39
%Sales and marketing(1)


3.2



12
%


2.8



14
%


9.1



12
%


9.4



15
%General and administrative(1)


4.7



18
%


3.5



18
%


14.3



19
%


11.8



19
%Restructuring and impairment costs







%


0.4



2
%







%


2.5



4
%Amortization of intangible assets


0.5



2
%


0.4



2
%


1.6



2
%


1.2



2
%Total operating expenses

$
28.3



106
%

$
23.4



120
%

$
82.9



110
%

$
74.3



118
%(1) Includes the following
    share-based compensation expense primarily due to the adoption
    of FAS 123(R):Cost of services and other

$
0.1






$







$
0.5






$
Research and development


0.2















0.6







Sales and marketing


0.1















0.4







General and administrative


0.4















1.4







Total share-based compensation
    expense

$
0.8






$







$
2.9






$
   Cost of Royalties and Licenses.
      Cost of Services and Other.
 31




---



##### Table of Contents



Research and Development.
        Sales and Marketing.
     32




---



##### Table of Contents



General and Administrative.
      Restructuring and Impairment Costs.
  Amortization of Intangible Assets.
      Interest
    Income, Other Expense and Minority Interest
    Income
    Taxes
   33




---



##### Table of Contents







Business
    Segment Results




Disclosure
    about Segments of an Enterprise and Related
    Information














34



---



##### Table of Contents



Three Months Ended September 30,


Nine Months Ended September 30,% of





% of





% of





% ofSegment





Segment





Segment





Segment2006


Revenue


2005


Revenue


2006


Revenue


2005


RevenueRevenues:Middleware and integrated
    technologiesRoyalties and licenses

$
15.2



79
%

$
12.2



79
%

$
44.6



78
%

$
40.0



79
%Services and other


4.1



21
%


3.2



21
%


12.5



22
%


10.6



21
%Subtotal  Middleware and
    integrated technologies


19.3



100
%


15.4



100
%


57.1



100
%


50.6



100
%ApplicationsRoyalties and licenses

$
0.9



20
%

$
0.1



3
%

$
2.6



19
%

$
0.2



2
%Services and other


3.7



80
%


3.1



97
%


11.1



81
%


9.3



98
%Subtotal  Applications


4.6



100
%


3.2



100
%


13.7



100
%


9.5



100
%BettingCorpRoyalties and licenses

$
1.3



48
%

$





%

$
1.3



30
%

$





%Services and other


1.4



52
%


0.9



100
%


3.1



70
%


3.1



100
%Subtotal  BettingCorp


2.7



100
%


0.9



100
%


4.4



100
%


3.1



100
%Total Revenue


26.6







19.5







75.2







63.2Contribution margin:Middleware and integrated
    technologies


6.7







5.4







20.7







21.4Applications


(0.6
)






(1.1
)






(1.2
)






(3.9
)BettingCorp


1.1







(1.2
)






(0.6
)






(3.5
)Total contribution margin


7.2







3.1







18.9







14.0Unallocated corporate overhead


(5.6
)






(4.4
)






(16.1
)






(15.6
)Restructuring and impairment costs










(0.4
)














(2.6
)Depreciation and amortization


(0.8
)






(0.8
)






(2.3
)






(3.0
)Amortization of intangible assets


(1.7
)






(1.4
)






(5.3
)






(4.0
)Amortization of share-based
    compensation


(0.8
)














(2.9
)






Interest income


0.8







0.4







2.3







1.1Other expense










(0.1
)






(0.2
)






0.3Minority interest


























0.1Loss before income taxes


(0.9
)






(3.6
)






(5.6
)






(9.7
)Income tax expense


(0.9
)






(0.5
)






(1.8
)






(1.7
)Net loss

$
(1.8
)





$
(4.1
)





$
(7.4
)





$
(11.4
)   Middleware
    and integrated technologies
   35




---



##### Table of Contents



Applications
          BettingCorp
     36




---



##### Table of Contents



Deferred
    Revenue
  SOP 97-2, SOP 81-1
          Expected RecognitionYear Ending December 31,

of Unearned Revenue(In millions)2006 (Remaining three months)

$
1.32007

$
4.0Thereafter


13.3$
18.6    37




---



##### Table of Contents



Liquidity
    and Capital Resources
                 38




---



##### Table of Contents



Commitments
    and Contractual Obligations
    Due in


Due in


Due in


Due in 2011Total


2006


2007-2008


2009-2010


or AfterOperating leases obligations

$
16.3


$
1.3


$
9.5


$
5.0


$
0.5Noncancellable purchase obligations


0.8



0.6



0.2







Total contractual obligations

$
17.1


$
1.9


$
9.7


$
5.0


$
0.5         Indemnifications
      Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk    Fixed
    Income Investment Risk
  available-for-sale. Available-for-sale
 39




---



##### Table of Contents



Valuation of


Valuation of


Valuation of


Valuation ofFair Value as


Securities if


Securities if


Securities if


Securities ifof September 30


Interest Rates


Interest Rates


Interest Rates


Interest Rates2006


Decrease 1%


Increase 1%


Decrease 2%


Increase 2%Marketable debt securities

$
13,996


$
14,105


$
13,887


$
14,214


$
13,778     Item 4.
    Controls
    and Procedures  Rules 13a-15(f) 15d-15(f)
  Form 10-K Form 10-K:
   40




---



##### Table of Contents



Remediation
    of Material Weakness Related to Certain Ineffective Account
    Analysis in Financial Reporting Process
      Remediation
    of Material Weakness Related to Insufficient Personnel with
    Technical Expertise
      Evaluation
    of Disclosure Controls and Procedures
  Rules 13a-15(e) 15d-15(e) Form 10-Q,
    Rule 13a-15(b) 15d-15(b)
   41




---



##### Table of Contents



Form 10-Q,
 Part II.
    Other Information  Item 1.
    Legal
    Proceedings  The information set forth in this Section has been included
    only to the extent that it reflects a significant update of
    information previously set forth in our Quarterly Reports on
    Form 10-Q
    for the quarters ended March 31, 2006 and June 30,
    2006. To the extent that we do not have any significant changes
    in contingencies referred to in such Quarterly Reports, we have
    not restated the description of those contingencies. That
    determination not to so restate those contingencies should not
    be taken as a representation that we have resolved the
    contingency or that it is no longer a contingency. In addition,
    any update of the contingencies referred to below does not
    necessarily mean that the information contained in the update is
    material; rather, we have determined that the updated
    information is relevant to a fair assessment of the contingency
    and is intended to provide our investors with a reasonable
    understanding of the nature of the contingency as we understand
    it on the date of this Quarterly Report.
  OpenTV, Inc. v. Liberate Technologies,
    Inc.
  Other Matters.
    Item 1A.
    Risk
    Factors  Form 10-Q, Form 10-K
  Item 4.
    Submission
    of Matters to a Vote of Security Holders    Nominee

Votes For


Votes WithheldRobert R. Bennett


374,888,499



12,630,571J. Timothy Bryan


386,169,152



1,349,918James A. Chiddix


374,849,636



12,669,434Jerry Machovina


387,352,983



166,087J. David Wargo


386,178,496



1,340,574Anthony G. Werner


376,059,215



11,459,855Michael Zeisser


374,831,756



12,687,314  42




---



##### Table of Contents



Votes For


Votes Against


Votes AbstainedRatification of the appointment of
    KPMG LLP as independent auditors for OpenTV Corp. for the year
    ending December 31, 2006


387,015,813



454,015



49,241       Item 6.
    Exhibits  Exhibit

Description31
.1

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200231
.2

Certification of Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200232
.1

Certifications of Chief Executive
    Officer and Chief Financial Officer pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002  43




---



##### Table of Contents



Signature    OpenTV Corp.
  By:
    /s/  Shum
    Mukherjee




---



##### Table of Contents



Exhibit Index  ExhibitNumber

Description31
.1

Certification of Chief Executive
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200231
.2

Certification of Chief Financial
    Officer pursuant to Section 302 of the Sarbanes-Oxley Act
    of 200232
.1

Certifications of Chief Executive
    Officer and Chief Financial Officer pursuant to Section 906
    of the Sarbanes-Oxley Act of 2002