##### 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 1934
 For the quarterly period ended June 30, 2007
 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
 OPENTV CORP.
 (Exact name of registrant as specified in its charter)
 British Virgin Islands(State or other jurisdiction of 
incorporation or organization)
    
    98-0212376(I.R.S. Employer
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
  o þ o
 o þ




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##### 



TABLE OF CONTENTS
  Part I. Financial Information

3Item 1. Financial Statements

3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations

20Item 3. Quantitative and Qualitative Disclosures About Market Risk

32Item 4. Controls and Procedures

33Part II. Other Information

34Item 1. Legal Proceedings

34Item 1A. Risk Factors

35Item 4. Submission of Matters to a Vote of Security Holders

35Item 6. Exhibits

36Signature

37Exhibit Index

38EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32: CERTIFICATION  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.
 2




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##### Table of Contents



Part I. Financial Information
 Item 1. Financial Statements
 OPENTV CORP.  UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    December 31,2007
    
    
    2006 *(In thousands, except share amounts)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    45,283
    
    
    $
    48,616Short-term marketable debt securities
    
    
    25,673
    
    
    
    8,681Accounts receivable, net of allowance for doubtful accounts of $593 and
$348 at June 30, 2007 and December 31, 2006, respectively
    
    
    18,551
    
    
    
    20,560Prepaid expenses and other current assets
    
    
    5,985
    
    
    
    5,799Total current assets
    
    
    95,492
    
    
    
    83,656Long-term marketable debt securities
    
    
    3,146
    
    
    
    7,928Property and equipment, net
    
    
    6,675
    
    
    
    7,231Goodwill
    
    
    98,687
    
    
    
    98,645Intangible assets, net
    
    
    15,075
    
    
    
    18,477Other assets
    
    
    3,889
    
    
    
    4,827Total assets
    
    $
    222,964
    
    
    $
    220,764LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    3,210
    
    
    $
    4,335Accrued liabilities
    
    
    13,848
    
    
    
    17,020Current portion of accrued restructuring
    
    
    972
    
    
    
    416Current portion of deferred revenue
    
    
    24,515
    
    
    
    12,614Total current liabilities
    
    
    42,545
    
    
    
    34,385Long-term liabilities:Taxes payable
    
    
    1,767
    
    
    
    1,920Deferred rent
    
    
    1,047
    
    
    
    1,201Accrued restructuring
    
    
    1,097
    
    
    
    1,954Deferred revenue
    
    
    8,294
    
    
    
    12,987Total long-term liabilities
    
    
    12,205
    
    
    
    18,062Total liabilities
    
    
    54,750
    
    
    
    52,447Commitments and contingencies (Note 11)Minority interest
    
    
    469
    
    
    
    486Shareholders equity:Class A ordinary shares, no par value, 500,000,000 shares authorized;
108,534,104 and 107,906,960 shares issued and outstanding, including
treasury shares, at June 30, 2007 and December 31, 2006, respectively
    
    
    2,235,872
    
    
    
    2,235,495Class B ordinary shares, no par value, 200,000,000 shares authorized;
30,206,154 and 30,631,746 shares issued and outstanding
at June 30, 2007 and December 31, 2006, respectively
    
    
    35,953
    
    
    
    35,953Additional paid-in capital
    
    
    499,122
    
    
    
    491,630Treasury shares at cost, 76,327 shares
    
    
    (38
    )
    
    
    (38
    )Accumulated other comprehensive loss
    
    
    (208
    )
    
    
    (261
    )Accumulated deficit
    
    
    (2,602,956
    )
    
    
    (2,594,948
    )Total shareholders equity
    
    
    167,745
    
    
    
    167,831Total liabilities, minority interest and shareholders equity
    
    $
    222,964
    
    
    $
    220,764
 
 *
    
    The condensed consolidated balance sheet at December 31, 2006 has been derived from the companys audited consolidated financial
statements at that date.  3




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##### Table of Contents



OPENTV CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands, except share and per share amounts)Revenues:Royalties and licenses
    
    $
    14,066
    
    
    $
    14,743
    
    
    $
    31,927
    
    
    $
    31,114Services and other
    
    
    10,200
    
    
    
    8,978
    
    
    
    18,745
    
    
    
    17,503Total revenues
    
    
    24,266
    
    
    
    23,721
    
    
    
    50,672
    
    
    
    48,617Cost of revenues:Royalties and licenses
    
    
    1,934
    
    
    
    1,807
    
    
    
    3,701
    
    
    
    3,687Services and other
    
    
    11,063
    
    
    
    9,332
    
    
    
    21,421
    
    
    
    18,251Total cost of revenues
    
    
    12,997
    
    
    
    11,139
    
    
    
    25,122
    
    
    
    21,938Gross profit
    
    
    11,269
    
    
    
    12,582
    
    
    
    25,550
    
    
    
    26,679Operating expenses:Research and development
    
    
    8,000
    
    
    
    7,654
    
    
    
    16,863
    
    
    
    16,017Sales and marketing
    
    
    2,993
    
    
    
    3,297
    
    
    
    5,889
    
    
    
    5,950General and administrative
    
    
    4,777
    
    
    
    4,266
    
    
    
    10,291
    
    
    
    9,614Restructuring and impairment costs
    
    
    (28
    )
    
    
    20
    
    
    
    (28
    )
    
    
    20Amortization of intangible assets
    
    
    510
    
    
    
    530
    
    
    
    1,020
    
    
    
    1,059Total operating expenses
    
    
    16,252
    
    
    
    15,767
    
    
    
    34,035
    
    
    
    32,660Loss from operations
    
    
    (4,983
    )
    
    
    (3,185
    )
    
    
    (8,485
    )
    
    
    (5,981
    )Interest income
    
    
    748
    
    
    
    898
    
    
    
    1,252
    
    
    
    1,448Other expenses
    
    
    (123
    )
    
    
    (201
    )
    
    
    (50
    )
    
    
    (198
    )Minority interest
    
    
    9
    
    
    
    10
    
    
    
    17
    
    
    
    19Loss before income taxes
    
    
    (4,349
    )
    
    
    (2,478
    )
    
    
    (7,266
    )
    
    
    (4,712
    )Income tax expense
    
    
    515
    
    
    
    14
    
    
    
    742
    
    
    
    907Net loss
    
    $
    (4,864
    )
    
    $
    (2,492
    )
    
    $
    (8,008
    )
    
    $
    (5,619
    )Net loss per share, basic and diluted
    
    $
    (0.04
    )
    
    $
    (0.02
    )
    
    $
    (0.06
    )
    
    $
    (0.04
    )Shares used in per share calculation, basic and
diluted
    
    
    138,659,811
    
    
    
    137,392,075
    
    
    
    138,576,223
    
    
    
    136,684,318
  4




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OPENTV CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2007
    
    
    2006(In thousands)Cash flows from operating activities:Net loss
    
    $
    (8,008
    )
    
    $
    (5,619
    )Adjustments to reconcile net loss to net cash provided by operating activities:Depreciation and amortization of property and equipment
    
    
    1,972
    
    
    
    1,539Amortization of intangible assets
    
    
    3,402
    
    
    
    3,529Share-based compensation
    
    
    2,287
    
    
    
    2,052Non-cash employee compensation
    
    
    76
    
    
    
    42Provision for doubtful accounts
    
    
    245
    
    
    
    (18
    )Loss on disposal of fixed assets
    
    
    2
    
    
    
    10Minority interest
    
    
    (17
    )
    
    
    (19
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    1,764
    
    
    
    (573
    )Prepaid expenses and other current assets
    
    
    (186
    )
    
    
    1,594Other assets
    
    
    938
    
    
    
    (1,387
    )Accounts payable
    
    
    (1,125
    )
    
    
    (1,297
    )Accrued liabilities, taxes payable and deferred rent
    
    
    (3,479
    )
    
    
    494Accrued restructuring
    
    
    (301
    )
    
    
    (232
    )Deferred revenue
    
    
    7,208
    
    
    
    1,520Net cash provided by operating activities
    
    
    4,778
    
    
    
    1,635Cash flows from investing activities:Purchase of property and equipment
    
    
    (1,391
    )
    
    
    (1,668
    )Proceeds from sale of marketable debt securities
    
    
    6,995
    
    
    
    6,800Purchase of marketable debt securities
    
    
    (19,186
    )
    
    
    (6,555
    )Net cash used in investing activities
    
    
    (13,582
    )
    
    
    (1,423
    )Cash flows from financing activities:Repurchase of employee stock options
    
    
    (167
    )
    
    
    Capital contribution from the controlling shareholder
    
    
    5,395
    
    
    
    Proceeds from issuance of ordinary shares
    
    
    236
    
    
    
    772Net cash provided by financing activities
    
    
    5,464
    
    
    
    772Effect of exchange rate changes on cash and cash equivalents
    
    
    7
    
    
    
    (214
    )Net increase (decrease) in cash and cash equivalents
    
    
    (3,333
    )
    
    
    770Cash and cash equivalents, beginning of period
    
    
    48,616
    
    
    
    47,229Cash and cash equivalents, end of period
    
    $
    45,283
    
    
    $
    47,999Supplemental disclosure of cash flow information:Cash paid for income taxes
    
    $
    (1,004
    )
    
    $
    (340
    )Non-cash investing and financing activities:Conversion of exchangeable shares
    
    $
    42
    
    
    $
    17,491Value of bonus shares issued to employees
    
    $
    
    
    
    $
    2,658
  5




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##### Table of Contents



OPENTV CORP.
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Basis of Presentation
  Principles of Consolidation
  Use of Estimates
  Note 2. Summary of Significant Accounting Policies
 Income Taxes
 Accounting for Uncertainty in Income Taxes Accounting for Income Taxes.
  Recent Accounting Pronouncements
 Fair Value Measures
 The Fair Value Option for Financial
Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115
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Note 3. Net Loss Per Share
  Three Months Ended June 30,
    
    Six Months Ended June 30,2007
    
    2006
    
    2007
    
    2006Class A ordinary shares issuable upon exercise of stock options
    

    8,323,290
    
    10,604,009
    
    8,807,548
    
    10,226,512Class 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)

    
    671,510
    
    731,865
    
    677,038
    
    733,708Class B ordinary shares issuable for shares of OpenTV, Inc.Class B common stock
    
    
    
    
    
    
    
    168,773
  Note 4. Goodwill
   Note 5. Intangible Assets
  June 30, 2007
    
    
    December 31, 2006Useful
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    Netlife in
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carryingyears
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmountIntangible assets:Patents
    
    
    5-13
    
    
    $
    18,402
    
    
    $
    (8,501
    )
    
    $
    9,901
    
    
    $
    10,872Developed technologies
    
    
    3-5
    
    
    
    11,300
    
    
    
    (8,608
    )
    
    
    2,692
    
    
    
    4,103Contracts and relationships
    
    
    5
    
    
    
    9,800
    
    
    
    (7,479
    )
    
    
    2,321
    
    
    
    3,302Trademarks
    
    
    4
    
    
    
    300
    
    
    
    (139
    )
    
    
    161
    
    
    
    200$
    39,802
    
    
    $
    (24,727
    )
    
    $
    15,075
    
    
    $
    18,477
  7




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AmortizationYear Ending December
31,
    
    Expense2007 (remaining six months)
    
    $
    2,4742008
    
    
    3,3232009
    
    
    1,7962010
    
    
    1,5132011
    
    
    1,0582012
    
    
    1,081Thereafter
    
    
    3,830$
    15,075
 Note 6. Restructuring and Impairment Costs
 Accounting for Costs Associated with Exit or Disposal Activities
  EmployeeSeverance
    
    
    Excessand Benefits
    
    
    Facilities
    
    
    TotalAccrued restructuring as of December 31, 2006
    
    $
    1,001
    
    
    $
    1,369
    
    
    $
    2,370Cash payments
    
    
    (205
    )
    
    
    (28
    )
    
    
    (233
    )Reclassification to lease expenses
    
    
    
    
    
    
    34
    
    
    
    34Accrued restructuring as of March 31, 2007
    
    $
    796
    
    
    $
    1,375
    
    
    $
    2,171Cash payments
    
    
    (46
    )
    
    
    (52
    )
    
    
    (98
    )Interest accretion expense
    
    
    24
    
    
    
    
    
    
    
    24Adjustment of original estimate
    
    
    (28
    )
    
    
    
    
    
    
    (28
    )Accrued restructuring as of June 30, 2007
    
    $
    746
    
    
    $
    1,323
    
    
    $
    2,069
  Note 7. Employee Bonus
   8




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Note 8. Other Comprehensive Loss
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Reported net loss
    
    $
    (4,864
    )
    
    $
    (2,492
    )
    
    $
    (8,008
    )
    
    $
    (5,619
    )Other comprehensive gains / (losses):Foreign currency translation gains / (losses)
    
    
    37
    
    
    
    95
    
    
    
    34
    
    
    
    (102
    )Unrealized gains / (losses) on available-for-sale investments, net of income taxes
    
    
    (2
    )
    
    
    (19
    )
    
    
    19
    
    
    
    (28
    )Total comprehensive loss
    
    $
    (4,829
    )
    
    $
    (2,416
    )
    
    $
    (7,955
    )
    
    $
    (5,749
    )
 Note 9. Share-based Compensation Plans
 Employee Stock Purchase Plan
  Option Plans
   2005 Plan
  9




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##### Table of Contents



1999 Plan
  1998 Plan
  2001 Plan
  2003 Plan
  Assumed Plans
    10




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##### Table of Contents



Restricted Shares
  Impact of the Adoption of SFAS 123(R)
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Stock options:Cost of revenues  services and other
    
    $
    119
    
    
    $
    153
    
    
    $
    260
    
    
    $
    337Research and development
    
    
    154
    
    
    
    179
    
    
    
    349
    
    
    
    395Sales and marketing
    
    
    126
    
    
    
    147
    
    
    
    263
    
    
    
    323General and administrative
    
    
    791
    
    
    
    502
    
    
    
    1,127
    
    
    
    9971,190
    
    
    
    981
    
    
    
    1,999
    
    
    
    2,052Restricted shares:General and administrative
    
    
    (18
    )
    
    
    
    
    
    
    288
    
    
    
    $
    1,172
    
    
    $
    981
    
    
    $
    2,287
    
    
    $
    2,052
  Valuation Assumptions
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Risk-free interest rates
    
    
    4.52% - 5.10
    %
    
    
    4.82% - 5.22
    %
    
    
    4.44% - 5.10
    %
    
    
    4.28% - 5.22
    %Average expected lives (months)
    
    
    65
    
    
    
    63
    
    
    
    65
    
    
    
    63Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected volatility
    
    
    69
    %
    
    
    81% - 84
    %
    
    
    69% - 74
    %
    
    
    81% - 85
    %
  11




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Share-based Payment Award Activity
  Shares
    
    
    Number ofAvailable for
    
    
    Shares
    
    
    
    
    
    
    
    
    
    Weighted AverageGrant
    
    
    Outstanding
    
    
    Exercise Price
    
    Exercise PriceBalance, December 31, 2006
    
    
    3,940,300
    
    
    
    9,680,385
    
    
    
    
    
    
    
    
    
    $
    5.04Options granted
    
    
    (112,300
    )
    
    
    112,300
    
    
    $
    2.34
    
    -
    $
    2.72
    
    $
    2.51Restricted
shares granted
    
    
    (60,000
    )
    
    
    
    
    
    $
    2.65
    
    $
    2.65Options exercised
    
    
    
    
    
    
    (109,000
    )
    
    $
    1.05
    
    -
    $
    1.78
    
    $
    1.75Options forfeited
    
    
    150,886
    
    
    
    (349,137
    )
    
    $
    1.51
    
    -
    $
    4.00
    
    $
    3.32Options expired
    
    
    
    
    
    
    (307,677
    )
    
    $
    1.63
    
    -
    $
    54.25
    
    $
    4.35Balance, March 31, 2007
    
    
    3,918,886
    
    
    
    9,026,871
    
    
    
    
    
    
    
    
    
    $
    5.14Options granted
    
    
    (254,400
    )
    
    
    254,400
    
    
    $
    2.12
    
    -
    $
    2.56
    
    $
    2.27Options exercised
    
    
    
    
    
    
    (15,052
    )
    
    $
    1.51
    
    -
    $
    2.29
    
    $
    1.77Options forfeited
    
    
    128,810
    
    
    
    (738,633
    )
    
    $
    1.51
    
    -
    $
    3.94
    
    $
    2.89Options expired
    
    
    
    
    
    
    (1,645,376
    )
    
    $
    1.63
    
    -
    $
    54.25
    
    $
    7.45Balance, June 30, 2007
    
    
    3,793,296
    
    
    
    6,882,210
    
    
    
    
    
    
    
    
    
    $
    4.73
  Options Outstanding
    
    Options Currently ExercisableWeighted AverageNumber
    
    Remaining
    
    Weighted Average
    
    Number
    
    Weighted AverageExercise Price
    
    Outstanding
    
    Contractual Life
    
    Exercise Price
    
    Exercisable
    
    Exercise Price$
    0.33
    
    
    -
    
    $
    2.12
    
    
    
    773,581
    
    
    
    3.58
    
    
    $
    1.33
    
    
    
    611,290
    
    
    $
    1.15$
    2.13
    
    
    -
    
    $
    2.69
    
    
    
    557,611
    
    
    
    8.21
    
    
    $
    2.42
    
    
    
    129,910
    
    
    $
    2.39$
    2.70
    
    
    -
    
    $
    2.70
    
    
    
    1,258,672
    
    
    
    7.35
    
    
    $
    2.70
    
    
    
    784,606
    
    
    $
    2.70$
    2.72
    
    
    -
    
    $
    2.82
    
    
    
    363,757
    
    
    
    7.99
    
    
    $
    2.77
    
    
    
    169,416
    
    
    $
    2.77$
    2.84
    
    
    -
    
    $
    2.84
    
    
    
    1,728,797
    
    
    
    7.79
    
    
    $
    2.84
    
    
    
    702,953
    
    
    $
    2.84$
    2.85
    
    
    -
    
    $
    2.99
    
    
    
    694,729
    
    
    
    6.67
    
    
    $
    2.97
    
    
    
    306,412
    
    
    $
    2.98$
    3.00
    
    
    -
    
    $
    6.00
    
    
    
    843,721
    
    
    
    6.48
    
    
    $
    4.31
    
    
    
    472,500
    
    
    $
    4.88$
    6.04
    
    
    -
    
    $
    81.00
    
    
    
    657,342
    
    
    
    3.05
    
    
    $
    22.55
    
    
    
    657,342
    
    
    $
    22.55$
    82.06
    
    
    -
    
    $
    82.06
    
    
    
    3,000
    
    
    
    2.76
    
    
    $
    82.06
    
    
    
    3,000
    
    
    $
    82.06$
    88.00
    
    
    -
    
    $
    88.00
    
    
    
    1,000
    
    
    
    2.42
    
    
    $
    88.00
    
    
    
    1,000
    
    
    $
    88.006,882,210
    
    
    
    6.55
    
    
    $
    4.73
    
    
    
    3,838,429
    
    
    $
    6.25
  Vested and Unvested Options
  Exercisable Options
  Vested and Expected-to-Vest Options
   12




---



##### Table of Contents



Intrinsic Value
  Weighted Average Grant-date Fair Value
  Unrecognized Compensation Expense
  Note 10. Income Taxes
     Note 11. Commitments and Contingencies
 Operating Leases
  13




---



##### Table of Contents



MinimumYear ending December 31,
    
    Commitments2007 (remaining six months)
    
    $
    2,8512008
    
    
    5,2352009
    
    
    4,3382010
    
    
    1,1512011
    
    
    596Thereafter
    
    
    181$
    14,352
  Other Commitments
   Contingencies
 OpenTV, Inc. v. Liberate Technologies, Inc.
  14




---



##### Table of Contents



Initial Public Offering Securities Litigation. In re Initial
Public Offering Securities Litigation
   Broadcast Innovation Matter.
 15




---



##### Table of Contents



Indemnification
   Note 12. Related Party Transactions
    16




---



##### Table of Contents



Note 13. Segment Information
 Disclosure about Segments of an Enterprise and Related Information.
    17




---



##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Middleware and integrated technologiesRoyalties and licenses
    
    $
    12,976
    
    
    $
    13,829
    
    
    $
    29,527
    
    
    $
    29,410Services and other
    
    
    6,953
    
    
    
    4,532
    
    
    
    12,076
    
    
    
    8,783Subtotal  Middleware and integrated
technologies
    
    
    19,929
    
    
    
    18,361
    
    
    
    41,603
    
    
    
    38,193ApplicationsRoyalties and licenses
    
    
    1,055
    
    
    
    914
    
    
    
    2,365
    
    
    
    1,704Services and other
    
    
    3,148
    
    
    
    3,783
    
    
    
    6,284
    
    
    
    7,080Subtotal  Applications
    
    
    4,203
    
    
    
    4,697
    
    
    
    8,649
    
    
    
    8,784BettingCorpRoyalties and licenses
    
    
    35
    
    
    
    
    
    
    
    35
    
    
    
    Services and other
    
    
    99
    
    
    
    663
    
    
    
    385
    
    
    
    1,640Subtotal  BettingCorp
    
    
    134
    
    
    
    663
    
    
    
    420
    
    
    
    1,640Total Revenues
    
    $
    24,266
    
    
    $
    23,721
    
    
    $
    50,672
    
    
    $
    48,617Contribution Margin / (Loss):Middleware and integrated technologies
    
    $
    4,570
    
    
    $
    6,633
    
    
    $
    11,274
    
    
    $
    14,291Applications
    
    
    350
    
    
    
    (176
    )
    
    
    438
    
    
    
    (969
    )BettingCorp
    
    
    (827
    )
    
    
    (905
    )
    
    
    (1,694
    )
    
    
    (1,714
    )Total Contribution Margin
    
    
    4,093
    
    
    
    5,552
    
    
    
    10,018
    
    
    
    11,608Unallocated corporate support
    
    
    (5,179
    )
    
    
    (5,167
    )
    
    
    (10,794
    )
    
    
    (10,407
    )Restructuring and impairment costs
    
    
    28
    
    
    
    (20
    )
    
    
    28
    
    
    
    (20
    )Depreciation and amortization
    
    
    (1,002
    )
    
    
    (790
    )
    
    
    (1,972
    )
    
    
    (1,539
    )Amortization of intangible assets
    
    
    (1,701
    )
    
    
    (1,764
    )
    
    
    (3,402
    )
    
    
    (3,529
    )Share-based and non-cash compensation
    
    
    (1,222
    )
    
    
    (996
    )
    
    
    (2,363
    )
    
    
    (2,094
    )Interest income
    
    
    748
    
    
    
    898
    
    
    
    1,252
    
    
    
    1,448Other expenses
    
    
    (123
    )
    
    
    (201
    )
    
    
    (50
    )
    
    
    (198
    )Minority interest
    
    
    9
    
    
    
    10
    
    
    
    17
    
    
    
    19Loss before income taxes
    
    
    (4,349
    )
    
    
    (2,478
    )
    
    
    (7,266
    )
    
    
    (4,712
    )Income tax expense
    
    
    515
    
    
    
    14
    
    
    
    742
    
    
    
    907Net loss
    
    $
    (4,864
    )
    
    $
    (2,492
    )
    
    $
    (8,008
    )
    
    $
    (5,619
    )
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    2007
    
    
    %
    
    
    2006
    
    
    %Europe, Africa and Middle EastUnited Kingdom
    
    $
    5,013
    
    
    
    21
    %
    
    $
    6,153
    
    
    
    26
    %
    
    $
    11,584
    
    
    
    23
    %
    
    $
    13,548
    
    
    
    28
    %Italy
    
    
    1,478
    
    
    
    6
    %
    
    
    1,188
    
    
    
    5
    %
    
    
    3,241
    
    
    
    6
    %
    
    
    3,135
    
    
    
    6
    %Other Countries
    
    
    3,657
    
    
    
    15
    %
    
    
    4,889
    
    
    
    21
    %
    
    
    8,896
    
    
    
    18
    %
    
    
    9,116
    
    
    
    19
    %Subtotal
    
    
    10,148
    
    
    
    42
    %
    
    
    12,230
    
    
    
    52
    %
    
    
    23,721
    
    
    
    47
    %
    
    
    25,799
    
    
    
    53
    %AmericasUnited States
    
    
    5,553
    
    
    
    23
    %
    
    
    7,144
    
    
    
    30
    %
    
    
    11,364
    
    
    
    22
    %
    
    
    13,883
    
    
    
    28
    %Other Countries
    
    
    907
    
    
    
    4
    %
    
    
    995
    
    
    
    4
    %
    
    
    3,271
    
    
    
    7
    %
    
    
    2,249
    
    
    
    5
    %Subtotal
    
    
    6,460
    
    
    
    27
    %
    
    
    8,139
    
    
    
    34
    %
    
    
    14,635
    
    
    
    29
    %
    
    
    16,132
    
    
    
    33
    %Asia PacificJapan
    
    
    4,815
    
    
    
    20
    %
    
    
    717
    
    
    
    3
    %
    
    
    6,501
    
    
    
    13
    %
    
    
    2,055
    
    
    
    4
    %Other Countries
    
    
    2,843
    
    
    
    11
    %
    
    
    2,635
    
    
    
    11
    %
    
    
    5,815
    
    
    
    11
    %
    
    
    4,631
    
    
    
    10
    %Subtotal
    
    
    7,658
    
    
    
    31
    %
    
    
    3,352
    
    
    
    14
    %
    
    
    12,316
    
    
    
    24
    %
    
    
    6,686
    
    
    
    14
    %$
    24,266
    
    
    
    100
    %
    
    $
    23,721
    
    
    
    100
    %
    
    $
    50,672
    
    
    
    100
    %
    
    $
    48,617
    
    
    
    100
    %
 18




---



##### Table of Contents



Three Months Ended June 30,
    

Six Months Ended June 30,2007
    
    2006
    
    2007
    
    2006Echostar
    
    
    11
    %
    
    
    16
    %
    
    
    10
    %
    
    
    16
    %Thomson
    
    
    9
    %
    
    
    9
    %
    
    
    13
    %
    
    
    9
    %Jupiter
    
    
    13
    %
    
    
    
    
    
    
    6
    %
    
    
    
    Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006United States
    
    $
    367
    
    
    $
    733
    
    
    $
    1,098
    
    
    $
    1,238Other countries
    
    
    120
    
    
    
    298
    
    
    
    293
    
    
    
    430$
    487
    
    
    $
    1,031
    
    
    $
    1,391
    
    
    $
    1,668
  June 30,
    
    
    December 31,2007
    
    
    2006United States
    
    $
    7,827
    
    
    $
    9,022Other countries
    
    
    2,737
    
    
    
    3,036$
    10,564
    
    
    $
    12,058
 
  19




---



##### 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 operations; 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 Risk Factors contained in Item 1A of our Annual
Report on Form 10-K for the fiscal year ended December 31, 2006, as such section may be updated in
our subsequent Quarterly Reports on Form 10-Q , and elsewhere. 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, 2006, as filed with the Securities and
Exchange Commission.
 Overview
    Critical Accounting Policies and Estimates
   Managements Discussion and Analysis of Financial
Condition and Results of Operations
 Recent Accounting Pronouncements
 Fair Value Measures
 The Fair Value Option for Financial
Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115
 20




---



##### Table of Contents



Three and Six Months Ended June 30, 2007 and 2006
 Revenues
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of2007
    
    
    Revenue
    
    
    2006
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    2006
    
    
    RevenueRoyalties and licenses
    
    $
    14.1
    
    
    
    58
    %
    
    $
    14.7
    
    
    
    62
    %
    
    $
    32.0
    
    
    
    63
    %
    
    $
    31.1
    
    
    
    64
    %Services and other
    
    
    10.2
    
    
    
    42
    %
    
    
    9.0
    
    
    
    38
    %
    
    
    18.7
    
    
    
    37
    %
    
    
    17.5
    
    
    
    36
    %Total revenues
    
    $
    24.3
    
    
    
    100
    %
    
    $
    23.7
    
    
    
    100
    %
    
    $
    50.7
    
    
    
    100
    %
    
    $
    48.6
    
    
    
    100
    %
 Royalties.
 Licenses.
   21




---



##### Table of Contents



22




---



##### Table of Contents



Services and Other.
    Cost of Revenues
  23




---



##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of2007
    
    
    Revenue
    
    
    2006
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    2006
    
    
    RevenueCost of royalties and licenses
    
    $
    1.9
    
    
    
    8
    %
    
    $
    1.8
    
    
    
    8
    %
    
    $
    3.7
    
    
    
    8
    %
    
    $
    3.7
    
    
    
    8
    %Cost of services and other
    
    
    11.1
    
    
    
    46
    %
    
    
    9.3
    
    
    
    39
    %
    
    
    21.4
    
    
    
    42
    %
    
    
    18.2
    
    
    
    37
    %Total cost of revenues
    
    $
    13.0
    
    
    
    54
    %
    
    $
    11.1
    
    
    
    47
    %
    
    $
    25.1
    
    
    
    50
    %
    
    $
    21.9
    
    
    
    45
    %
 Cost of Royalties and Licenses.
   Cost of Services and Other.
   Operating Expenses
  24




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,% of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of
    
    
    
    
    
    
    % of2007
    
    
    Revenue
    
    
    2006
    
    
    Revenue
    
    
    2007
    
    
    Revenue
    
    
    2006
    
    
    RevenueResearch and development
    
    $
    8.0
    
    
    
    33
    %
    
    $
    7.7
    
    
    
    33
    %
    
    $
    16.9
    
    
    
    33
    %
    
    $
    16.0
    
    
    
    33
    %Sales and marketing
    
    
    3.0
    
    
    
    12
    %
    
    
    3.3
    
    
    
    14
    %
    
    
    5.9
    
    
    
    12
    %
    
    
    6.0
    
    
    
    12
    %General and administrative
    
    
    4.7
    
    
    
    20
    %
    
    
    4.3
    
    
    
    18
    %
    
    
    10.2
    
    
    
    20
    %
    
    
    9.6
    
    
    
    20
    %Amortization of intangible assets
    
    
    0.5
    
    
    
    2
    %
    
    
    0.5
    
    
    
    2
    %
    
    
    1.0
    
    
    
    2
    %
    
    
    1.1
    
    
    
    2
    %Total Operating Expenses
    
    $
    16.2
    
    
    
    67
    %
    
    $
    15.8
    
    
    
    67
    %
    
    $
    34.0
    
    
    
    67
    %
    
    $
    32.7
    
    
    
    67
    %
 Research and Development.
    Sales and Marketing.
   General and Administrative.
   25




---



##### Table of Contents



Amortization of Intangible Assets.
   Interest Income, Other Expense and Minority Interest
  Income Taxes
    Business Segment Results
 Disclosure about Segments of an Enterprise and Related Information.
   26




---



##### Table of Contents



27




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2007
    
    
    % of Segment 
Revenue
    
    
    2006
    
    
    % of Segment 
Revenue
    
    
    2007
    
    
    % of Segment 
Revenue
    
    
    2006
    
    
    % of Segment 
RevenueRevenues:Middleware and integrated technologiesRoyalties and licenses
    
    $
    13.0
    
    
    
    65
    %
    
    $
    13.8
    
    
    
    75
    %
    
    $
    29.6
    
    
    
    71
    %
    
    $
    29.4
    
    
    
    77
    %Services and other
    
    
    7.0
    
    
    
    35
    %
    
    
    4.5
    
    
    
    25
    %
    
    
    12.1
    
    
    
    29
    %
    
    
    8.7
    
    
    
    23
    %Subtotal  Middleware and integrated
technologies
    
    
    20.0
    
    
    
    100
    %
    
    
    18.3
    
    
    
    100
    %
    
    
    41.7
    
    
    
    100
    %
    
    
    38.1
    
    
    
    100
    %ApplicationsRoyalties and licenses
    
    
    1.1
    
    
    
    26
    %
    
    
    0.9
    
    
    
    19
    %
    
    
    2.4
    
    
    
    28
    %
    
    
    1.7
    
    
    
    19
    %Services and other
    
    
    3.1
    
    
    
    74
    %
    
    
    3.8
    
    
    
    81
    %
    
    
    6.2
    
    
    
    72
    %
    
    
    7.1
    
    
    
    81
    %Subtotal  Applications
    
    
    4.2
    
    
    
    100
    %
    
    
    4.7
    
    
    
    100
    %
    
    
    8.6
    
    
    
    100
    %
    
    
    8.8
    
    
    
    100
    %BettingCorpRoyalties and licenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Services and other
    
    
    0.1
    
    
    
    100
    %
    
    
    0.7
    
    
    
    100
    %
    
    
    0.4
    
    
    
    100
    %
    
    
    1.7
    
    
    
    100
    %Subtotal  BettingCorp
    
    
    0.1
    
    
    
    100
    %
    
    
    0.7
    
    
    
    100
    %
    
    
    0.4
    
    
    
    100
    %
    
    
    1.7
    
    
    
    100
    %Total Revenues
    
    $
    24.3
    
    
    
    
    
    
    $
    23.7
    
    
    
    
    
    
    $
    50.7
    
    
    
    
    
    
    $
    48.6Contribution Margin / (Loss):Middleware and integrated technologies
    
    $
    4.6
    
    
    
    
    
    
    $
    6.7
    
    
    
    
    
    
    $
    11.3
    
    
    
    
    
    
    $
    14.3Applications
    
    
    0.3
    
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    0.4
    
    
    
    
    
    
    
    (1.0
    )BettingCorp
    
    
    (0.8
    )
    
    
    
    
    
    
    (0.9
    )
    
    
    
    
    
    
    (1.7
    )
    
    
    
    
    
    
    (1.7
    )Total Contribution Margin
    
    
    4.1
    
    
    
    
    
    
    
    5.6
    
    
    
    
    
    
    
    10.0
    
    
    
    
    
    
    
    11.6Unallocated corporate support
    
    
    (5.2
    )
    
    
    
    
    
    
    (5.2
    )
    
    
    
    
    
    
    (10.8
    )
    
    
    
    
    
    
    (10.4
    )Restructuring and impairment costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Depreciation and amortization
    
    
    (1.0
    )
    
    
    
    
    
    
    (0.8
    )
    
    
    
    
    
    
    (2.0
    )
    
    
    
    
    
    
    (1.5
    )Amortization of intangible assets
    
    
    (1.7
    )
    
    
    
    
    
    
    (1.8
    )
    
    
    
    
    
    
    (3.4
    )
    
    
    
    
    
    
    (3.6
    )Share-based and non-cash compensation
    
    
    (1.2
    )
    
    
    
    
    
    
    (1.0
    )
    
    
    
    
    
    
    (2.3
    )
    
    
    
    
    
    
    (2.1
    )Interest income
    
    
    0.7
    
    
    
    
    
    
    
    0.9
    
    
    
    
    
    
    
    1.2
    
    
    
    
    
    
    
    1.5Other expense
    
    
    (0.1
    )
    
    
    
    
    
    
    (0.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.2
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss before income taxes
    
    
    (4.4
    )
    
    
    
    
    
    
    (2.5
    )
    
    
    
    
    
    
    (7.3
    )
    
    
    
    
    
    
    (4.7
    )Income tax expense
    
    
    0.5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.7
    
    
    
    
    
    
    
    0.9Net loss
    
    $
    (4.9
    )
    
    
    
    
    
    $
    (2.5
    )
    
    
    
    
    
    $
    (8.0
    )
    
    
    
    
    
    $
    (5.6
    )
 Middleware and integrated technologies
    28




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##### Table of Contents



Applications
    BettingCorp
   29




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##### Table of Contents



Deferred Revenue
    Expected RecognitionYear Ending December 31,
    
    of Deferred Revenue2007 (remaining six months)
    
    $
    13.62008
    
    
    4.9Thereafter
    
    
    4.9$
    23.4
  Liquidity and Capital Resources
   30




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##### Table of Contents



Commitments and Contractual Obligations
  31




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##### Table of Contents



Due inremaining six
    
    
    Due in 2008-
    
    
    Due in 2010-
    
    
    Due in 2012 orTotal
    
    

months
of 2007
    
    
    2009
    
    
    2011
    
    
    afterOperating leases obligations
    
    $
    14.4
    
    
    $
    2.9
    
    
    $
    9.6
    
    
    $
    1.7
    
    
    $
    0.2Noncancellable purchase obligations
    
    
    1.1
    
    
    
    0.7
    
    
    
    0.4
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    15.5
    
    
    $
    3.6
    
    
    $
    10.0
    
    
    $
    1.7
    
    
    $
    0.2
    Indemnification
   Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Fixed Income Investment Risk
  32




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##### Table of Contents



Valuation of
    
    
    Valuation of
    
    
    Valuation of
    
    
    Valuation ofFair Value as
    
    
    Securities if
    
    
    Securities if
    
    
    Securities if
    
    
    Securities ifof June 30,
    
    
    Interest Rates
    
    
    Interest Rates
    
    
    Interest Rates
    
    
    Interest Rates2007
    
    
    Decrease 1%
    
    
    Increase 1%
    
    
    Decrease 2%
    
    
    Increase 2%Marketable debt securities
    
    $
    28,819
    
    
    $
    28,926
    
    
    $
    28,712
    
    
    $
    29,033
    
    
    $
    28,605
  Foreign Currency Exchange Rate Risk
  Accounting for Derivative Instruments and Hedging Activities.
 Item 4. Controls and Procedures
  33




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##### Table of Contents



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 Annual Report on Form 10-K
for the year ended December 31, 2006. To the extent that we do not have any significant changes in
the legal proceedings referred to in such Annual Report, we have not restated the description of
those proceedings. That determination not to so restate those descriptions should not be taken as a
representation that we have resolved the matter or that it is no longer a contingency. In addition,
any update to the legal proceedings 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 matter and is intended to provide our
investors with a reasonable understanding of the nature of the legal proceeding as we understand
it on the date of this Quarterly Report.
 OpenTV, Inc. v. Liberate Technologies, Inc.
   34




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##### Table of Contents



Initial Public Offering Securities Litigation. In re Initial
Public Offering Securities Litigation
   Other Matters.
 Item 1A. Risk Factors
  Item 4. Submission of Matters to a Vote of Security Holders
  Nominee
    
    Votes For
    
    
    Votes WithheldJames A. Chiddix
    
    
    367,038,132
    
    
    
    11,670,821Joseph Deiss
    
    
    378,108,008
    
    
    
    600,945Lucien Gani
    
    
    366,787,925
    
    
    
    11,921,028Alan A. Guggenheim
    
    
    367,072,039
    
    
    
    11,636,914
 35




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##### Table of Contents



Nominee
    
    Votes For
    
    
    Votes WithheldAndré Kudelski
    
    
    364,690,165
    
    
    
    14,018,788Jerry Machovina
    
    
    378,078,629
    
    
    
    630,324Mercer Reynolds
    
    
    378,093,350
    
    
    
    615,603Pierre Roy
    
    
    366,787,821
    
    
    
    11,921,132Claude Smadja
    
    
    366,781,112
    
    
    
    11,927,841
  Votes For
    
    
    Votes Against
    
    
    Votes AbstainedRatification of the
appointment of Grant
Thornton LLP as
independent auditors
for OpenTV Corp. for
the year ending
December 31, 2007.
    
    
    378,294,001
    
    
    
    256,515
    
    
    
    158,437
  Item 6. Exhibits
 Exhibits
 31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification*31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification*32
    
    
    Section 1350 Certification*
 
 *
    
    Filed herewith 36




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##### Table of Contents



Signature
  OpenTV Corp.Date: August 2, 2007
    By:
    /s/  Shum MukherjeeShum MukherjeeExecutive Vice President and
Chief Financial Officer 37




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    Description31.1
    
    
    Rule 13a-14(a)/15d-14(a) Certification*31.2
    
    
    Rule 13a-14(a)/15d-14(a) Certification*32
    
    
    Section 1350 Certification*
 
 *
    
    Filed herewith 38