##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
   þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 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
    
    98-0212376(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)275 Sacramento Street
    
    94111San Francisco, California
    
    (Zip Code)(Address of principal executive offices)
 (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

24Item 3. Quantitative and Qualitative Disclosures About Market Risk

36Item 4. Controls and Procedures

37Part II. Other Information

38Item 1. Legal Proceedings

38Item 1A. Risk Factors

38Item 6. Exhibits

39Exhibit Index

41EX-31.1: CERTIFICATION

42EX-31.2: CERTIFICATION

43EX-32: CERTIFICATIONS

44  OpenTV, the OpenTV logo and our product and service names are trademarks, service marks or
registered trademarks or service marks of OpenTV Corp. or its subsidiaries in the United States and
other countries. Other product and service names mentioned herein may be trademarks, service marks
or registered trademarks or service marks 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
 September 30,
    
    
    December 31,2007
    
    
    2006 *(In thousands, except share amounts)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    46,167
    
    
    $
    48,309Short-term marketable debt securities
    
    
    22,159
    
    
    
    8,681Accounts receivable, net of allowance for doubtful accounts of $713 and
$348 at September 30, 2007 and December 31, 2006, respectively
    
    
    20,722
    
    
    
    18,684Prepaid expenses and other current assets
    
    
    6,008
    
    
    
    5,477Current assets of discontinued operations
    
    
    2,095
    
    
    
    2,505Total current assets
    
    
    97,151
    
    
    
    83,656Long-term marketable debt securities
    
    
    2,966
    
    
    
    7,928Property and equipment, net
    
    
    6,566
    
    
    
    7,016Goodwill
    
    
    95,061
    
    
    
    95,019Intangible assets, net
    
    
    13,614
    
    
    
    18,477Other assets
    
    
    4,584
    
    
    
    4,827Non-current assets of discontinued operations
    
    
    85
    
    
    
    3,841Total assets
    
    $
    220,027
    
    
    $
    220,764LIABILITIES, MINORITY INTEREST AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    2,245
    
    
    $
    3,879Accrued liabilities
    
    
    16,775
    
    
    
    15,816Accrued restructuring
    
    
    709
    
    
    
    416Deferred revenue
    
    
    25,784
    
    
    
    12,614Current liabilities of discontinued operations
    
    
    1,349
    
    
    
    1,660Total current liabilities
    
    
    46,862
    
    
    
    34,385Accrued liabilities, net of current portion
    
    
    2,703
    
    
    
    3,121Accrued restructuring, net of current portion
    
    
    1,054
    
    
    
    1,954Deferred revenue, net of current portion
    
    
    8,720
    
    
    
    12,987Total liabilities
    
    
    59,339
    
    
    
    52,447Commitments and contingencies (Note 13)Minority interest
    
    
    460
    
    
    
    486Shareholders equity:Class A ordinary shares, no par value, 500,000,000 shares authorized;
109,656,188 and 107,906,960 shares issued and outstanding, including
treasury shares, at September 30, 2007 and December 31, 2006, respectively
    
    
    2,235,905
    
    
    
    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 September 30, 2007 and December 31, 2006, respectively
    
    
    35,953
    
    
    
    35,953Additional paid-in capital
    
    
    499,608
    
    
    
    491,630Treasury shares at cost, 76,327 shares
    
    
    (38
    )
    
    
    (38
    )Accumulated other comprehensive loss
    
    
    (83
    )
    
    
    (261
    )Accumulated deficit
    
    
    (2,611,117
    )
    
    
    (2,594,948
    )Total shareholders equity
    
    
    160,228
    
    
    
    167,831Total liabilities, minority interest and shareholders equity
    
    $
    220,027
    
    
    $
    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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OPENTV CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(In thousands, except share and per share amounts)Revenues:Royalties and licenses
    
    $
    16,188
    
    
    $
    17,327
    
    
    $
    48,115
    
    
    $
    48,441Services and other
    
    
    7,486
    
    
    
    7,644
    
    
    
    23,630
    
    
    
    21,678Total revenues
    
    
    23,674
    
    
    
    24,971
    
    
    
    71,745
    
    
    
    70,119Cost of revenues:Royalties and licenses
    
    
    1,390
    
    
    
    2,010
    
    
    
    5,091
    
    
    
    5,697Services and other
    
    
    9,884
    
    
    
    8,221
    
    
    
    29,084
    
    
    
    23,222Total cost of revenues
    
    
    11,274
    
    
    
    10,231
    
    
    
    34,175
    
    
    
    28,919Gross profit
    
    
    12,400
    
    
    
    14,740
    
    
    
    37,570
    
    
    
    41,200Operating expenses:Research and development
    
    
    8,704
    
    
    
    7,883
    
    
    
    25,011
    
    
    
    23,124Sales and marketing
    
    
    2,801
    
    
    
    3,151
    
    
    
    8,690
    
    
    
    8,977General and administrative
    
    
    6,629
    
    
    
    4,562
    
    
    
    16,750
    
    
    
    13,952Restructuring and impairment costs
    
    
    
    
    
    
    
    
    
    
    (28
    )
    
    
    20Amortization of intangible assets
    
    
    412
    
    
    
    515
    
    
    
    1,432
    
    
    
    1,574Total operating expenses
    
    
    18,546
    
    
    
    16,111
    
    
    
    51,855
    
    
    
    47,647Loss from operations
    
    
    (6,146
    )
    
    
    (1,371
    )
    
    
    (14,285
    )
    
    
    (6,447
    )Interest income
    
    
    1,161
    
    
    
    825
    
    
    
    2,407
    
    
    
    2,270Other income / (expenses)
    
    
    715
    
    
    
    37
    
    
    
    665
    
    
    
    (161
    )Minority interest
    
    
    9
    
    
    
    9
    
    
    
    26
    
    
    
    28Loss before income taxes
    
    
    (4,261
    )
    
    
    (500
    )
    
    
    (11,187
    )
    
    
    (4,310
    )Income tax expense
    
    
    486
    
    
    
    1,098
    
    
    
    1,325
    
    
    
    2,195Net loss from continuing operations
    
    
    (4,747
    )
    
    
    (1,598
    )
    
    
    (12,512
    )
    
    
    (6,505
    )Discontinued operations:Income / (loss) from discontinued operations, net of tax
    
    
    238
    
    
    
    (185
    )
    
    
    (5
    )
    
    
    (897
    )Impairment of assets of discontinued operations, net of tax

    
    (3,652
    )
    
    
    
    
    
    
    (3,652
    )
    
    
    Net loss from discontinued operations
    
    
    (3,414
    )
    
    
    (185
    )
    
    
    (3,657
    )
    
    
    (897
    )Net loss
    
    $
    (8,161
    )
    
    $
    (1,783
    )
    
    $
    (16,169
    )
    
    $
    (7,402
    )Net loss per share from continuing operations, basic and diluted
    
    $
    (0.03
    )
    
    $
    (0.01
    )
    
    $
    (0.09
    )
    
    $
    (0.04
    )Net loss per share from discontinued operations, basic and diluted

    
    (0.03
    )
    
    
    
    
    
    
    (0.03
    )
    
    
    (0.01
    )Net loss per share, basic and diluted
    
    $
    (0.06
    )
    
    $
    (0.01
    )
    
    $
    (0.12
    )
    
    $
    (0.05
    )Shares used in per share calculation, basic and diluted
    
    
    139,052,035
    
    
    
    137,648,870
    
    
    
    138,734,827
    
    
    
    137,005,835
  4




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OPENTV CORP.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine Months Ended September 30,2007
    
    
    2006(In thousands)Cash flows from operating activities:Net loss
    
    $
    (16,169
    )
    
    $
    (7,402
    )Less: Loss from discontinued operations
    
    
    (3,657
    )
    
    
    (897
    )Net loss from continuing operations
    
    
    (12,512
    )
    
    
    (6,505
    )Adjustments to reconcile net loss to net cash provided by
operating activities:Depreciation and amortization of property and equipment
    
    
    2,844
    
    
    
    2,220Amortization of intangible assets
    
    
    4,863
    
    
    
    5,280Share-based compensation
    
    
    2,741
    
    
    
    2,772Non-cash employee compensation
    
    
    82
    
    
    
    95Provision for doubtful accounts
    
    
    456
    
    
    
    24Write-off of accounts receivable
    
    
    (91
    )
    
    
    (Gain) loss
on disposal of property and equipment
    
    
    (3
    )
    
    
    24Minority interest
    
    
    (26
    )
    
    
    (28
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    (2,403
    )
    
    
    (2,067
    )Prepaid expenses and other current assets
    
    
    (531
    )
    
    
    883Other assets
    
    
    243
    
    
    
    (1,766
    )Accounts payable
    
    
    (1,634
    )
    
    
    141Accrued liabilities
    
    
    541
    
    
    
    3,038Accrued restructuring
    
    
    (607
    )
    
    
    (371
    )Deferred revenue
    
    
    8,903
    
    
    
    1,720Net cash provided by operating activities of continuing
operations
    
    
    2,866
    
    
    
    5,460Net cash provided by (used in) operating activities of
discontinued operations
    
    
    182
    
    
    
    (280
    )Total net cash provided by operating activities
    
    
    3,048
    
    
    
    5,180Cash flows from investing activities:Purchase of property and equipment
    
    
    (2,325
    )
    
    
    (2,707
    )Proceeds from disposal of property and equipment
    
    
    27
    
    
    
    Proceeds from sale of marketable debt securities
    
    
    11,481
    
    
    
    10,466Purchase of marketable debt securities
    
    
    (19,984
    )
    
    
    (7,175
    )Net cash (used in) provided by investing activities of
continuing operations
    
    
    (10,801
    )
    
    
    584Net cash used in investing activities of discontinued
operations
    
    
    (20
    )
    
    
    (17
    )Total net cash (used in) provided by investing activities
    
    
    (10,821
    )
    
    
    567Cash flows from financing activities:Repurchase of employee stock options
    
    
    (167
    )
    
    
    Capital contribution from the controlling shareholder
    
    
    5,395
    
    
    
    Proceeds from issuance of ordinary shares
    
    
    269
    
    
    
    796Net cash provided by financing activities of continuing
operations
    
    
    5,497
    
    
    
    796Effect of exchange rate changes on cash and cash equivalents of
continuing operations
    
    
    296
    
    
    
    216Effect of exchange rate changes on cash and cash equivalents of
discontinuing operations
    
    
    (214
    )
    
    
    (315
    )Total effect of exchange rate changes on cash and cash
equivalents
    
    
    82
    
    
    
    (99
    )Net (decrease) increase in cash and cash equivalents of
continuing operations
    
    
    (2,142
    )
    
    
    7,056Net decrease in cash and cash equivalents of discontinued
operations
    
    
    (52
    )
    
    
    (612
    )Net (decrease) increase in cash and cash equivalents
    
    
    (2,194
    )
    
    
    6,444Cash and cash equivalents, beginning of period, of continuing
operations
    
    
    48,309
    
    
    
    46,267Cash and cash equivalents, beginning of period, of discontinued
operations
    
    
    307
    
    
    
    962Cash and cash equivalents, beginning of period
    
    
    48,616
    
    
    
    47,229Cash and cash equivalents, end of period, of continuing operations
    
    
    46,167
    
    
    
    53,323Cash and cash equivalents, end of period, of discontinued
operations
    
    
    255
    
    
    
    350Cash and cash equivalents, end of period
    
    $
    46,422
    
    
    $
    53,673Supplemental disclosure of cash flow information:Cash paid for income taxes
    
    $
    (1,205
    )
    
    $
    (1,178
    )Non-cash investing and financing activities:Conversion of exchangeable shares
    
    $
    42
    
    
    $
    17,576Value of bonus shares issued to employees
    
    $
    
    
    
    $
    2,658
  5




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OPENTV CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Note 1. Basis of Presentation
  Principles of Consolidation
 Accounting for Uncertainty in Income Taxes Accounting
for Income Taxes.
 Use of Estimates
  Discontinued Operations
 Accounting for the Impairment or Disposal of Long Lived Assets
 Note 2. Summary of Significant Accounting Policies
 Income Taxes
  Recent Accounting Pronouncements
 Fair Value Measures
 6




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The Fair Value Option for Financial Assets
and Financial Liabilities  Including an Amendment of FASB Statement No. 115
 Note 3. Net Loss Per Share
  Three Months Ended September 30,

    
    
    
Nine Months Ended September 30,2007
    
    2006
    
    
    
    2007
    
    2006Class A ordinary
shares issuable
upon exercise of
stock options
    
    
    6,704,061
    
    10,991,876
    
    
    
    8,106,386
    
    10,484,967Class 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)
    
    
    670,066
    
    715,185
    
    
    
    674,714
    
    727,534Class B ordinary shares issuable for
shares of OpenTV, Inc.Class B common
stock
    
    
    
    
    
    
    
    
    
    
    112,515
  Note 4. Discontinued Operations
  Goodwill and Other Intangible
Assets
 7




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September 30,
    
    
    December 31,2007
    
    
    2006Cash and cash equivalents
    
    $
    255
    
    
    $
    307Accounts receivable
    
    
    1,709
    
    
    
    1,876Prepaid expenses and other current assets
    
    
    131
    
    
    
    322Total current assets of discontinued operations
    
    $
    2,095
    
    
    $
    2,505Goodwill
    
    $
    
    
    
    $
    3,626Property and equipment, net
    
    
    85
    
    
    
    215Total non-current assets of discontinued operations
    
    $
    85
    
    
    $
    3,841Accounts payable
    
    $
    194
    
    
    $
    456Accrued liabilities
    
    
    1,155
    
    
    
    1,204Total current liabilities of discontinued operations
    
    $
    1,349
    
    
    $
    1,660
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues -
services and other
    
    $
    1,278
    
    
    $
    1,582
    
    
    $
    3,879
    
    
    $
    5,051Cost of
revenues - services and other
    
    
    874
    
    
    
    1,409
    
    
    
    3,095
    
    
    
    4,659Gross profit
    
    
    404
    
    
    
    173
    
    
    
    784
    
    
    
    392Research and development
    
    
    205
    
    
    
    366
    
    
    
    761
    
    
    
    1,142Sales and marketing
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    161General and administrative
    
    
    101
    
    
    
    132
    
    
    
    271
    
    
    
    356Impairment of goodwill
    
    
    3,626
    
    
    
    
    
    
    
    3,626
    
    
    
    Impairment of property and equipment
    
    
    26
    
    
    
    
    
    
    
    26
    
    
    
    Loss from operations
    
    
    (3,554
    )
    
    
    (362
    )
    
    
    (3,900
    )
    
    
    (1,267
    )Interest income
    
    
    5
    
    
    
    2
    
    
    
    11
    
    
    
    5Loss from discontinued operations before income taxes
    
    
    (3,549
    )
    
    
    (360
    )
    
    
    (3,889
    )
    
    
    (1,262
    )Income tax benefit
    
    
    (135
    )
    
    
    (175
    )
    
    
    (232
    )
    
    
    (365
    )Net loss from discontinued operations
    
    $
    (3,414
    )
    
    $
    (185
    )
    
    $
    (3,657
    )
    
    $
    (897
    )
   8




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Note 5. Balance Sheet Components (in thousands)
 September 30,
    
    
    December 31,2007
    
    
    2006Prepaid expenses and other current assets:Value added tax
    
    $
    297
    
    
    $
    606Current deferred tax asset
    
    
    233
    
    
    
    274Deferred contract costs
    
    
    2,786
    
    
    
    650Other
    
    
    2,692
    
    
    
    3,947$
    6,008
    
    
    $
    5,477Property and equipment:Computers and equipment
    
    $
    14,938
    
    
    $
    15,093Software
    
    
    5,370
    
    
    
    5,233Furniture and fixtures
    
    
    1,419
    
    
    
    2,632Leasehold improvements
    
    
    2,930
    
    
    
    2,64524,657
    
    
    
    25,603Less accumulated depreciation and amortization
    
    
    (18,091
    )
    
    
    (18,587
    )$
    6,566
    
    
    $
    7,016Other assets:Deposits
    
    $
    810
    
    
    $
    820Deferred contract costs
    
    
    3,322
    
    
    
    3,136Other
    
    
    452
    
    
    
    871$
    4,584
    
    
    $
    4,827Accrued liabilities (current and non-current):Accrued payroll and related liabilities
    
    $
    9,828
    
    
    $
    8,323Accrued professional fees
    
    
    962
    
    
    
    1,222Accrued marketing
    
    
    1,139
    
    
    
    1,457Accrued income taxes
    
    
    3,214
    
    
    
    3,611Deferred rent
    
    
    1,570
    
    
    
    1,569Other
    
    
    2,765
    
    
    
    2,755$
    19,478
    
    
    $
    18,937
  Note 6. Goodwill
    9




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Note 7. Intangible Assets
  September 30, 2007
    
    
    December 31, 2006Useful
    
    
    Gross
    
    
    
    
    
    
    Net
    
    
    NetLife in
    
    
    Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    CarryingYears
    
    
    Amount
    
    
    Amortization
    
    
    Amount
    
    
    AmountIntangible assets:Patents
    
    
    5-13
    
    
    $
    14,102
    
    
    $
    (4,611
    )
    
    $
    9,491
    
    
    $
    10,872Developed technologies
    
    
    3-5
    
    
    
    8,600
    
    
    
    (6,547
    )
    
    
    2,053
    
    
    
    4,103Contracts and
relationships
    
    
    5
    
    
    
    3,300
    
    
    
    (1,374
    )
    
    
    1,926
    
    
    
    3,302Trademarks
    
    
    4
    
    
    
    300
    
    
    
    (156
    )
    
    
    144
    
    
    
    200$
    26,302
    
    
    $
    (12,688
    )
    
    $
    13,614
    
    
    $
    18,477
   AmortizationYear Ending December 31,
    
    Expense2007 (remaining three months)
    
    $
    1,0242008
    
    
    3,3032009
    
    
    1,7962010
    
    
    1,5262011
    
    
    1,0852012
    
    
    1,085Thereafter
    
    
    3,795$
    13,614
 Note 8. Restructuring and Impairment Costs
 Accounting for Costs Associated with Exit or Disposal Activities
  EmployeeSeverance
    
    
    Excessand Benefits
    
    
    Facilities
    
    
    TotalAccrued
restructuring as of December 31, 2006, current and non-current
    
    $
    1,001
    
    
    $
    1,369
    
    
    $
    2,370Cash payments
    
    
    (488
    )
    
    
    (125
    )
    
    
    (613
    )Reclassification to lease expenses
    
    
    
    
    
    
    34
    
    
    
    34Adjustment of original estimate
    
    
    (28
    )
    
    
    
    
    
    
    (28
    )Accrued
restructuring as of September 30, 2007, current and non-current
    
    $
    485
    
    
    $
    1,278
    
    
    $
    1,763
 10




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##### Table of Contents



Note 9. Employee Bonus
    Note 10. Other Comprehensive Loss
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Reported net loss
    
    $
    (8,161
    )
    
    $
    (1,783
    )
    
    $
    (16,169
    )
    
    $
    (7,402
    )Other comprehensive gains (losses):Foreign currency translation gains (losses)
    
    
    131
    
    
    
    61
    
    
    
    165
    
    
    
    (41
    )Unrealized gains (losses) on
available-for-sale investments, net of
income taxes
    
    
    (6
    )
    
    
    72
    
    
    
    13
    
    
    
    44Total comprehensive loss
    
    $
    (8,036
    )
    
    $
    (1,650
    )
    
    $
    (15,991
    )
    
    $
    (7,399
    )
  Note 11. Share-based Compensation Plans
 Employee Stock Purchase Plan
  Option Plans
  11




---



##### Table of Contents



2005
Plan.
 1999 Plan.
 1998 Plan.
 2001 Plan.
 2003 Plan.
 Assumed Plans.
 12




---



##### Table of Contents



Restricted Shares Issued to Former Chief Executive Officer (CEO)
  2007 Management Bonus and Equity Issuance Plan
  
    
    2007 bonus awards for certain senior management of OpenTV, other than the former CEO
(Alan A. Guggenheim), shall be based upon achievement of our profitability targets;
    
    the profitability targets are based upon our cumulative net income measured over any
four consecutive fiscal quarters during the period commencing April 1, 2007 and ending
December 31, 2009 (Cumulative Net Income), where Cumulative Net Income is based on net
income as publicly reported in our financial statements, subject to certain exclusions;
    
    subject to achievement of the profitability targets, bonus awards will be comprised of a
cash amount and a grant of restricted Class A ordinary shares issued pursuant to the 2005
Plan; and
    
    the restricted shares will vest, and the cash will become payable, in each case on a pro
rata basis, based on the following schedule:
 
    
    (i) 62.5% upon OpenTV achieving Cumulative Net Income equal to or
greater than zero,
    
    (ii) 12.5% upon OpenTV achieving Cumulative Net Income equal to
$4,000,000, and
    
    (iii) 25% upon OpenTV achieving Cumulative Net Income equal to
$6,000,000.
 Share-based Payment,
  13




---



##### Table of Contents



Impact of the Adoption of SFAS 123(R)
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Stock options and 2007 Plan:Cost of revenues  services and other
    
    $
    120
    
    
    $
    120
    
    
    $
    369
    
    
    $
    420Research and development
    
    
    168
    
    
    
    155
    
    
    
    511
    
    
    
    564Sales and marketing
    
    
    75
    
    
    
    130
    
    
    
    338
    
    
    
    452General and administrative
    
    
    147
    
    
    
    339
    
    
    
    1,274
    
    
    
    1,336510
    
    
    
    744
    
    
    
    2,492
    
    
    
    2,772CEO restricted shares:General and administrative
    
    
    (39
    )
    
    
    
    
    
    
    249
    
    
    
    $
    471
    
    
    $
    744
    
    
    $
    2,741
    
    
    $
    2,772
  Valuation Assumptions
  Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Risk-free interest rates
    
    
    4.21% - 5.02
    %
    
    
    4.51% - 5.19
    %
    
    
    4.21% - 5.10
    %
    
    
    4.28% - 5.22
    %Average expected lives (months)
    
    
    65
    
    
    
    63
    
    
    
    65
    
    
    
    63Dividend yield
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected volatility
    
    
    67
    %
    
    
    79
    %
    
    
    67% - 74
    %
    
    
    79% - 85
    %
   14




---



##### Table of Contents



Option Award Activity
  Number ofOptions
    
    
    
    
    
    Weighted AverageOutstanding
    
    Exercise Price
    
    Exercise PriceBalance, December 31, 2006
    
    
    9,680,385
    
    
    
    
    
    
    $
    5.04Options granted
    
    
    112,300
    
    
    $
    2.34          -       $2.72
    
    
    $
    2.51Restricted shares granted
    
    
    
    
    
    
    $2.65
    
    
    $
    2.65Options exercised
    
    
    (109,000
    )
    
    $
    1.05          -       $1.78
    
    
    $
    1.75Options forfeited
    
    
    (349,137
    )
    
    $
    1.51          -       $4.00
    
    
    $
    3.32Options expired
    
    
    (307,677
    )
    
    $
    1.63          -      $54.25
    
    
    $
    4.35Balance, March 31, 2007
    
    
    9,026,871
    
    
    
    
    
    
    $
    5.14Options granted
    
    
    254,400
    
    
    $
    2.12          -       $2.56
    
    
    $
    2.27Options exercised
    
    
    (15,052
    )
    
    $
    1.51          -       $2.29
    
    
    $
    1.77Options forfeited
    
    
    (738,633
    )
    
    $
    1.51          -       $3.94
    
    
    $
    2.89Options expired
    
    
    (1,645,376
    )
    
    $
    1.63          -      $54.25
    
    
    $
    7.45Balance, June 30, 2007
    
    
    6,882,210
    
    
    
    
    
    
    $
    4.73Options granted
    
    
    100,000
    
    
    $
    1.32          -       $2.11
    
    
    $
    1.64Options exercised
    
    
    (101,854
    )
    
    
    $0.33
    
    
    $
    0.33Options forfeited
    
    
    (128,626
    )
    
    $
    1.63          -       $3.71
    
    
    $
    2.82Options expired
    
    
    (242,356
    )
    
    $
    1.51          -      $54.25
    
    
    $
    3.51Balance, September 30, 2007
    
    
    6,509,374
    
    
    
    
    
    
    $
    4.83
  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
    
    
    
    725,014
    
    
    
    4.44
    
    
    $
    1.48
    
    
    
    477,986
    
    
    $
    1.29$  2.13
    -
    $  2.69
    
    
    
    532,841
    
    
    
    8.14
    
    
    $
    2.43
    
    
    
    159,874
    
    
    $
    2.39$  2.70
    -
    $  2.70
    
    
    
    1,205,599
    
    
    
    6.91
    
    
    $
    2.70
    
    
    
    810,689
    
    
    $
    2.70$  2.72
    -
    $  2.82
    
    
    
    358,300
    
    
    
    7.62
    
    
    $
    2.77
    
    
    
    189,228
    
    
    $
    2.77$  2.84
    -
    $  2.84
    
    
    
    1,613,130
    
    
    
    7.75
    
    
    $
    2.84
    
    
    
    749,210
    
    
    $
    2.84$  2.85
    -
    $  3.05
    
    
    
    700,875
    
    
    
    6.74
    
    
    $
    2.98
    
    
    
    322,479
    
    
    $
    2.99$  3.06
    -
    $  6.00
    
    
    
    728,137
    
    
    
    5.98
    
    
    $
    4.48
    
    
    
    470,485
    
    
    $
    4.92$  6.04
    -
    $81.00
    
    
    
    641,478
    
    
    
    2.83
    
    
    $
    22.73
    
    
    
    641,478
    
    
    $
    22.73$82.06
    -
    $82.06
    
    
    
    3,000
    
    
    
    2.51
    
    
    $
    82.06
    
    
    
    3,000
    
    
    $
    82.06$88.00
    -
    $88.00
    
    
    
    1,000
    
    
    
    2.17
    
    
    $
    88.00
    
    
    
    1,000
    
    
    $
    88.006,509,374
    
    
    
    6.46
    
    
    $
    4.83
    
    
    
    3,825,429
    
    
    $
    6.28
 Intrinsic Value.
  Vested and Unvested Options.
 Exercisable Options.
 15




---



##### Table of Contents



Vested and Expected-to-Vest Options
 Weighted Average Grant-date Fair Value.
 Restricted Shares Activity
  Number of
    
    Weighted Average GrantShares
    
    Date Fair ValueUnvested shares balance, December 31, 2006
    
    
    Former CEO restricted shares granted
    
    
    60,000
    
    
    $
    2.65Former CEO restricted shares vested
    
    
    (60,000
    )
    
    $
    2.65Unvested restricted shares granted
    
    
    1,020,230
    
    
    $
    1.43Unvested shares balance, September 30, 2007
    
    
    1,020,230
    
    
    $
    1.43
 Unrecognized Compensation Expense
   Note 12. Income Taxes
     16




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##### Table of Contents



Note 13. Commitments and Contingencies
 Operating Leases
   MinimumYear ending December 31,
    
    Commitments2007 (remaining three months)
    
    $
    1,3652008
    
    
    5,2352009
    
    
    4,3382010
    
    
    1,1512011
    
    
    596Thereafter
    
    
    181$
    12,866
  Other Commitments
    17




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##### Table of Contents



Contingencies
 OpenTV, Inc. v. Liberate Technologies, Inc.
  Initial Public Offering Securities Litigation. In re Initial Public Offering
Securities Litigation
   18




---



##### Table of Contents



Broadcast Innovation Matter.
  Indemnification
   19




---



##### Table of Contents



Note 14. Related Party Transactions
    Note 15. Segment Information
 Disclosure about Segments of an Enterprise and Related
Information
    20




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##### Table of Contents



21




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##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Middleware and integrated technologiesRoyalties and licenses
    
    $
    14,864
    
    
    $
    15,205
    
    
    $
    44,391
    
    
    $
    44,615Services and other
    
    
    5,592
    
    
    
    4,207
    
    
    
    17,684
    
    
    
    12,990Subtotal  Middleware and integrated technologies
    
    
    20,456
    
    
    
    19,412
    
    
    
    62,075
    
    
    
    57,605ApplicationsRoyalties and licenses
    
    
    1,239
    
    
    
    868
    
    
    
    3,604
    
    
    
    2,572Services and other
    
    
    1,778
    
    
    
    1,995
    
    
    
    5,446
    
    
    
    5,606Subtotal  Applications
    
    
    3,017
    
    
    
    2,863
    
    
    
    9,050
    
    
    
    8,178Betting CorpRoyalties and licenses
    
    
    85
    
    
    
    1,254
    
    
    
    120
    
    
    
    1,254Services and other
    
    
    116
    
    
    
    1,442
    
    
    
    500
    
    
    
    3,082Subtotal  Betting Corp
    
    
    201
    
    
    
    2,696
    
    
    
    620
    
    
    
    4,336Total Revenues
    
    $
    23,674
    
    
    $
    24,971
    
    
    $
    71,745
    
    
    $
    70,119Contribution Margin / (Loss):Middleware and integrated technologies
    
    $
    4,765
    
    
    $
    6,917
    
    
    $
    16,039
    
    
    $
    21,208Applications
    
    
    467
    
    
    
    (507
    )
    
    
    1,157
    
    
    
    (704
    )Betting Corp
    
    
    (764
    )
    
    
    1,162
    
    
    
    (2,458
    )
    
    
    (552
    )Total Contribution Margin
    
    
    4,468
    
    
    
    7,572
    
    
    
    14,738
    
    
    
    19,952Unallocated corporate support
    
    
    (7,727
    )
    
    
    (5,610
    )
    
    
    (18,521
    )
    
    
    (16,012
    )Restructuring and impairment costs
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    (20
    )Depreciation and amortization
    
    
    (949
    )
    
    
    (784
    )
    
    
    (2,844
    )
    
    
    (2,220
    )Amortization of intangible assets
    
    
    (1,461
    )
    
    
    (1,751
    )
    
    
    (4,863
    )
    
    
    (5,280
    )Share-based and non-cash compensation
    
    
    (477
    )
    
    
    (798
    )
    
    
    (2,823
    )
    
    
    (2,867
    )Interest income
    
    
    1,161
    
    
    
    825
    
    
    
    2,407
    
    
    
    2,270Other expenses
    
    
    715
    
    
    
    37
    
    
    
    665
    
    
    
    (161
    )Minority interest
    
    
    9
    
    
    
    9
    
    
    
    26
    
    
    
    28Loss before income taxes
    
    
    (4,261
    )
    
    
    (500
    )
    
    
    (11,187
    )
    
    
    (4,310
    )Income tax expense
    
    
    486
    
    
    
    1,098
    
    
    
    1,325
    
    
    
    2,195Net loss from continuing operations
    
    $
    (4,747
    )
    
    $
    (1,598
    )
    
    $
    (12,512
    )
    
    $
    (6,505
    )Discontinued operations:Income / (loss) from discontinued operations, net of tax
    
    
    238
    
    
    
    (185
    )
    
    
    (5
    )
    
    
    (897
    )Impairment of assets of discontinued operations, net of tax
    
    
    (3,652
    )
    
    
    
    
    
    
    (3,652
    )
    
    
    Net loss from discontinued operations
    
    
    (3,414
    )
    
    
    (185
    )
    
    
    (3,657
    )
    
    
    (897
    )Net loss
    
    $
    (8,161
    )
    
    $
    (1,783
    )
    
    $
    (16,169
    )
    
    $
    (7,402
    )
 22




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##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    2007
    
    
    %
    
    
    2006
    
    
    %Europe, Africa and Middle EastUnited Kingdom
    
    $
    5,377
    
    
    
    23
    %
    
    $
    4,640
    
    
    
    19
    %
    
    $
    14,706
    
    
    
    20
    %
    
    $
    15,202
    
    
    
    22
    %Italy
    
    
    1,065
    
    
    
    4
    %
    
    
    1,532
    
    
    
    6
    %
    
    
    4,224
    
    
    
    6
    %
    
    
    4,666
    
    
    
    7
    %Other Countries
    
    
    4,535
    
    
    
    19
    %
    
    
    4,771
    
    
    
    19
    %
    
    
    13,496
    
    
    
    19
    %
    
    
    13,959
    
    
    
    20
    %Subtotal
    
    
    10,977
    
    
    
    46
    %
    
    
    10,943
    
    
    
    44
    %
    
    
    32,426
    
    
    
    45
    %
    
    
    33,827
    
    
    
    49
    %AmericasUnited States
    
    
    5,184
    
    
    
    22
    %
    
    
    6,634
    
    
    
    26
    %
    
    
    16,375
    
    
    
    23
    %
    
    
    20,060
    
    
    
    28
    %Other Countries
    
    
    1,462
    
    
    
    6
    %
    
    
    1,353
    
    
    
    6
    %
    
    
    4,733
    
    
    
    7
    %
    
    
    4,255
    
    
    
    6
    %Subtotal
    
    
    6,646
    
    
    
    28
    %
    
    
    7,987
    
    
    
    32
    %
    
    
    21,108
    
    
    
    30
    %
    
    
    24,315
    
    
    
    34
    %Asia PacificJapan
    
    
    2,985
    
    
    
    13
    %
    
    
    3,089
    
    
    
    12
    %
    
    
    9,486
    
    
    
    13
    %
    
    
    5,142
    
    
    
    7
    %Other Countries
    
    
    3,066
    
    
    
    13
    %
    
    
    2,952
    
    
    
    12
    %
    
    
    8,725
    
    
    
    12
    %
    
    
    6,835
    
    
    
    10
    %Subtotal
    
    
    6,051
    
    
    
    26
    %
    
    
    6,041
    
    
    
    24
    %
    
    
    18,211
    
    
    
    25
    %
    
    
    11,977
    
    
    
    17
    %$
    23,674
    
    
    
    100
    %
    
    $
    24,971
    
    
    
    100
    %
    
    $
    71,745
    
    
    
    100
    %
    
    $
    70,119
    
    
    
    100
    %
  Three Months Ended September 30,
    
    Nine Months Ended September 30,2007
    
    2006
    
    2007
    
    2006Echostar
    
    
    9
    %
    
    
    13
    %
    
    
    10
    %
    
    
    15
    %Thomson
    
    
    16
    %
    
    
    11
    %
    
    
    15
    %
    
    
    10
    %
    Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006United States
    
    $
    623
    
    
    $
    731
    
    
    $
    1,721
    
    
    $
    1,969Other countries
    
    
    331
    
    
    
    314
    
    
    
    604
    
    
    
    738$
    954
    
    
    $
    1,045
    
    
    $
    2,325
    
    
    $
    2,707
  September 30,
    
    
    December 31,2007
    
    
    2006Property and equipment:United States
    
    $
    4,699
    
    
    $
    5,025Other countries
    
    
    1,867
    
    
    
    1,991$
    6,566
    
    
    $
    7,016Other assetsUnited States
    
    $
    3,761
    
    
    $
    3,997Other countries
    
    
    823
    
    
    
    830$
    4,584
    
    
    $
    4,827
 23




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##### 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. 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 of Our Business
     Recent Events
    Critical Accounting Policies and Estimates
  24




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##### Table of Contents



Managements Discussion and Analysis of Financial
Condition and Results of Operations
 Financial Highlights for the Three and Nine Months Ended September 30, 2007 and 2006
 Revenues
  Three Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    $ Change
    
    
    % ChangeRoyalties and licenses
    
    $
    16.2
    
    
    
    68
    %
    
    $
    17.3
    
    
    
    69
    %
    
    $
    (1.1
    )
    
    
    (6
    %)Services and other
    
    
    7.5
    
    
    
    32
    %
    
    
    7.7
    
    
    
    31
    %
    
    
    (0.2
    )
    
    
    (3
    %)Total revenues
    
    $
    23.7
    
    
    
    100
    %
    
    $
    25.0
    
    
    
    100
    %
    
    $
    (1.3
    )
    
    
    (5
    %)
  Nine Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    $Change
    
    
    % ChangeRoyalties and licenses
    
    $
    48.1
    
    
    
    67
    %
    
    $
    48.4
    
    
    
    69
    %
    
    $
    (0.3
    )
    
    
    (1
    %)Services and other
    
    
    23.6
    
    
    
    33
    %
    
    
    21.7
    
    
    
    31
    %
    
    
    1.9
    
    
    
    9
    %Total revenues
    
    $
    71.7
    
    
    
    100
    %
    
    $
    70.1
    
    
    
    100
    %
    
    $
    1.6
    
    
    
    2
    %
 Royalties and licenses Services
and other
 Royalty revenues.
  25




---



##### Table of Contents



Other license revenues.
 Services and other revenues.
   Three Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    $ Change
    
    
    % ChangeRoyalties and licenses:Americas
    
    $
    4.3
    
    
    
    26
    %
    
    $
    5.5
    
    
    
    32
    %
    
    $
    (1.2
    )
    
    
    (22
    %)Europe, Middle East, and Africa
    
    
    8.4
    
    
    
    52
    %
    
    
    8.0
    
    
    
    46
    %
    
    
    0.4
    
    
    
    5
    %Asia Pacific
    
    
    3.5
    
    
    
    22
    %
    
    
    3.8
    
    
    
    22
    %
    
    
    (0.3
    )
    
    
    (8
    %)Total royalties and licenses
    
    
    16.2
    
    
    
    100
    %
    
    
    17.3
    
    
    
    100
    %
    
    
    (1.1
    )
    
    
    (6
    %)Services and other:Americas
    
    
    2.3
    
    
    
    31
    %
    
    
    2.6
    
    
    
    34
    %
    
    
    (0.3
    )
    
    
    (12
    %)Europe, Middle East, and Africa
    
    
    2.7
    
    
    
    36
    %
    
    
    2.9
    
    
    
    38
    %
    
    
    (0.2
    )
    
    
    (7
    %)Asia Pacific
    
    
    2.5
    
    
    
    33
    %
    
    
    2.2
    
    
    
    28
    %
    
    
    0.3
    
    
    
    14
    %Total services and other
    
    
    7.5
    
    
    
    100
    %
    
    
    7.7
    
    
    
    100
    %
    
    
    (0.2
    )
    
    
    (3
    %)Total revenues
    
    $
    23.7
    
    
    
    
    
    
    $
    25.0
    
    
    
    
    
    
    $
    (1.3
    )
    
    
    (5
    %)
  26




---



##### Table of Contents



Nine Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    $ Change
    
    
    % ChangeRoyalties and licenses:Americas
    
    $
    14.2
    
    
    
    30
    %
    
    $
    17.2
    
    
    
    36
    %
    
    $
    (3.0
    )
    
    
    (17
    %)Europe, Middle East, and Africa
    
    
    23.8
    
    
    
    49
    %
    
    
    23.4
    
    
    
    48
    %
    
    
    0.4
    
    
    
    2
    %Asia Pacific
    
    
    10.1
    
    
    
    21
    %
    
    
    7.8
    
    
    
    16
    %
    
    
    2.3
    
    
    
    29
    %Total royalties and licenses
    
    
    48.1
    
    
    
    100
    %
    
    
    48.4
    
    
    
    100
    %
    
    
    (0.3
    )
    
    
    (1
    %)Services and other:Americas
    
    
    6.9
    
    
    
    29
    %
    
    
    7.1
    
    
    
    33
    %
    
    
    (0.2
    )
    
    
    (3
    %)Europe, Middle East, and Africa
    
    
    8.6
    
    
    
    37
    %
    
    
    10.5
    
    
    
    48
    %
    
    
    (1.9
    )
    
    
    (18
    %)Asia Pacific
    
    
    8.1
    
    
    
    34
    %
    
    
    4.1
    
    
    
    19
    %
    
    
    4.0
    
    
    
    98
    %Total services and other
    
    
    23.6
    
    
    
    100
    %
    
    
    21.7
    
    
    
    100
    %
    
    
    1.9
    
    
    
    9
    %Total revenues
    
    $
    71.7
    
    
    
    
    
    
    $
    70.1
    
    
    
    
    
    
    $
    1.6
    
    
    
    2
    %
 Royalties and license revenues
       27




---



##### Table of Contents



Service and other revenues
    Cost of Revenues
  Three Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    $ Change
    
    
    % ChangeCost of royalties and licenses
    
    $
    1.4
    
    
    
    12
    %
    
    $
    2.0
    
    
    
    20
    %
    
    $
    (0.6
    )
    
    
    (30
    %)Cost of services and other
    
    
    9.9
    
    
    
    88
    %
    
    
    8.2
    
    
    
    80
    %
    
    
    1.7
    
    
    
    21
    %Total cost of revenues
    
    $
    11.3
    
    
    
    100
    %
    
    $
    10.2
    
    
    
    100
    %
    
    $
    1.1
    
    
    
    11
    %
  28




---



##### Table of Contents



Nine Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    $ Change
    
    
    % ChangeCost of royalties and licenses
    
    $
    5.1
    
    
    
    15
    %
    
    $
    5.7
    
    
    
    20
    %
    
    $
    (0.6
    )
    
    
    (11
    %)Cost of services and other
    
    
    29.1
    
    
    
    85
    %
    
    
    23.2
    
    
    
    80
    %
    
    
    5.9
    
    
    
    25
    %Total cost of revenues
    
    $
    34.2
    
    
    
    100
    %
    
    $
    28.9
    
    
    
    100
    %
    
    $
    5.3
    
    
    
    18
    %
 Cost of royalties and licenses.
  Cost of services and other.
  Operating Expenses
  Three Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    $ Change
    
    
    % ChangeResearch and development
    
    $
    8.7
    
    
    
    47
    %
    
    $
    7.8
    
    
    
    48
    %
    
    $
    0.9
    
    
    
    12
    %Sales and marketing
    
    
    2.8
    
    
    
    15
    %
    
    
    3.2
    
    
    
    20
    %
    
    
    (0.4
    )
    
    
    (13
    %)General and administrative
    
    
    6.7
    
    
    
    36
    %
    
    
    4.6
    
    
    
    29
    %
    
    
    2.1
    
    
    
    46
    %Amortization of intangible assets
    
    
    0.4
    
    
    
    2
    %
    
    
    0.5
    
    
    
    3
    %
    
    
    (0.1
    )
    
    
    (20
    %)Total Operating Expenses
    
    $
    18.6
    
    
    
    100
    %
    
    $
    16.1
    
    
    
    100
    %
    
    $
    2.5
    
    
    
    16
    %
  Nine Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    $ Change
    
    
    % ChangeResearch and development
    
    $
    25.0
    
    
    
    48
    %
    
    $
    23.1
    
    
    
    49
    %
    
    $
    1.9
    
    
    
    8
    %Sales and marketing
    
    
    8.7
    
    
    
    17
    %
    
    
    9.0
    
    
    
    19
    %
    
    
    (0.3
    )
    
    
    (3
    %)General and administrative
    
    
    16.8
    
    
    
    32
    %
    
    
    14.0
    
    
    
    29
    %
    
    
    2.8
    
    
    
    20
    %Amortization of intangible assets
    
    
    1.4
    
    
    
    3
    %
    
    
    1.6
    
    
    
    3
    %
    
    
    (0.2
    )
    
    
    (13
    %)Total Operating Expenses
    
    $
    51.9
    
    
    
    100
    %
    
    $
    47.7
    
    
    
    100
    %
    
    $
    4.2
    
    
    
    9
    %
 Research and development.
   29




---



##### Table of Contents



Sales and marketing
  General and administrative
  Amortization of intangible assets.
  Non-Operating Expense Items and Discontinued Operations
 Interest income
 Other income and expenses.
 Income tax expense.
  Discontinued Operations
 30




---



##### Table of Contents



Business Segment Results
        31




---



##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    % Change
    
    
    2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    % ChangeRoyalties and licenses
    
    $
    14.9
    
    
    
    73
    %
    
    $
    15.2
    
    
    
    78
    %
    
    
    (2
    %)
    
    $
    44.4
    
    
    
    71
    %
    
    $
    44.6
    
    
    
    77
    %
    
    
    
    %Services and other
    
    
    5.6
    
    
    
    27
    %
    
    
    4.2
    
    
    
    22
    %
    
    
    33
    %
    
    
    17.7
    
    
    
    29
    %
    
    
    13.0
    
    
    
    23
    %
    
    
    36
    %Total revenues
    
    $
    20.5
    
    
    
    100
    %
    
    $
    19.4
    
    
    
    100
    %
    
    
    6
    %
    
    $
    62.1
    
    
    
    100
    %
    
    $
    57.6
    
    
    
    100
    %
    
    
    8
    %Contribution Margin
    
    $
    4.8
    
    
    
    
    
    
    $
    6.9
    
    
    
    
    
    
    
    (30
    %)
    
    $
    16.0
    
    
    
    
    
    
    $
    21.2
    
    
    
    
    
    
    
    (25
    %)
    Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    % Change
    
    
    2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    % ChangeRoyalties and licenses
    
    $
    1.2
    
    
    
    40
    %
    
    $
    0.9
    
    
    
    31
    %
    
    
    33
    %
    
    $
    3.6
    
    
    
    40
    %
    
    $
    2.6
    
    
    
    32
    %
    
    
    38
    %Services and other
    
    
    1.8
    
    
    
    60
    %
    
    
    2.0
    
    
    
    69
    %
    
    
    (10
    %)
    
    
    5.5
    
    
    
    60
    %
    
    
    5.6
    
    
    
    68
    %
    
    
    (2
    %)Total revenues
    
    $
    3.0
    
    
    
    100
    %
    
    $
    2.9
    
    
    
    100
    %
    
    
    3
    %
    
    $
    9.1
    
    
    
    100
    %
    
    $
    8.2
    
    
    
    100
    %
    
    
    11
    %Contribution Margin (Loss)
    
    $
    0.5
    
    
    
    
    
    
    $
    (0.5
    )
    
    
    
    
    
    
    200
    %
    
    $
    1.2
    
    
    
    
    
    
    $
    (0.7
    )
    
    
    
    
    
    
    271
    %
   32




---



##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    % Change
    
    
    2007
    
    
    %
    
    
    2006
    
    
    %
    
    
    % ChangeRoyalties and licenses
    
    $
    0.1
    
    
    
    50
    %
    
    $
    1.3
    
    
    
    48
    %
    
    
    (92
    %)
    
    $
    0.1
    
    
    
    17
    %
    
    $
    1.2
    
    
    
    28
    %
    
    
    (92
    %)Services and other
    
    
    0.1
    
    
    
    50
    %
    
    
    1.4
    
    
    
    52
    %
    
    
    (93
    %)
    
    
    0.5
    
    
    
    83
    %
    
    
    3.1
    
    
    
    72
    %
    
    
    (84
    %)Total revenues
    
    $
    0.2
    
    
    
    100
    %
    
    $
    2.7
    
    
    
    100
    %
    
    
    (93
    %)
    
    $
    0.6
    
    
    
    100
    %
    
    $
    4.3
    
    
    
    100
    %
    
    
    (86
    %)Contribution Margin (Loss)
    
    $
    (0.8
    )
    
    
    
    
    
    $
    1.2
    
    
    
    
    
    
    
    (167
    %)
    
    $
    (2.5
    )
    
    
    
    
    
    $
    (0.6
    )
    
    
    
    
    
    
    (317
    %)
    Three Months Ended September 30, 2007
    
    
    Nine Months Ended September 30, 20072007
    
    
    2006
    
    
    2007
    
    
    2006Total Contribution Margin
    
    $
    4.5
    
    
    $
    7.6
    
    
    $
    14.7
    
    
    $
    19.9Unallocated corporate overhead
    
    
    (7.7
    )
    
    
    (5.6
    )
    
    
    (18.5
    )
    
    
    (16.0
    )Depreciation and amortization
    
    
    (1.0
    )
    
    
    (0.8
    )
    
    
    (2.8
    )
    
    
    (2.2
    )Intangible asset amortization
    
    
    (1.5
    )
    
    
    (1.7
    )
    
    
    (4.9
    )
    
    
    (5.3
    )Share-based compensation expense
    
    
    (0.5
    )
    
    
    (0.8
    )
    
    
    (2.8
    )
    
    
    (2.9
    )Interest income
    
    
    1.2
    
    
    
    0.8
    
    
    
    2.4
    
    
    
    2.3Other income (expense)
    
    
    0.7
    
    
    
    
    
    
    
    0.7
    
    
    
    (0.1
    )Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss before income taxes
    
    
    (4.3
    )
    
    
    (0.5
    )
    
    
    (11.2
    )
    
    
    (4.3
    )Income tax expense
    
    
    0.5
    
    
    
    1.1
    
    
    
    1.3
    
    
    
    2.2Net loss from continuing operations
    
    
    (4.8
    )
    
    
    (1.6
    )
    
    
    (12.5
    )
    
    
    (6.5
    )Net loss from discontinued operations
    
    
    (3.4
    )
    
    
    (0.2
    )
    
    
    (3.7
    )
    
    
    (0.9
    )Net loss
    
    $
    (8.2
    )
    
    $
    (1.8
    )
    
    $
    (16.2
    )
    
    $
    (7.4
    )
 Liquidity and Capital Resources
  September 30,
    
    
    December 31,2007
    
    
    2006
    
    
    $ Change
    
    
    % ChangeCash and cash equivalents
    
    $
    46.2
    
    
    $
    48.3
    
    
    $
    (2.1
    )
    
    
    (4
    %)Short-term investments
    
    
    22.1
    
    
    
    8.7
    
    
    
    13.4
    
    
    
    154
    %Long-term investments
    
    
    3.0
    
    
    
    7.9
    
    
    
    (4.9
    )
    
    
    62
    %Total cash and cash investments
    
    $
    71.3
    
    
    $
    64.9
    
    
    $
    6.4
    
    
    
    10
    %
   33




---



##### Table of Contents



Nine Months Ended September 30,2007
    
    
    2006Cash provided by operating activities
    
    $
    2.9
    
    
    $
    5.5Cash provided by (used in) investing activities
    
    $
    (10.8
    )
    
    $
    0.6Cash provided by financing activities
    
    $
    5.5
    
    
    $
    0.8
 Cash provided by (used in) operating activities.
 Cash provided by (used in) investing activities.
 Cash provided by (used in) financing activities.
 Deferred Revenue
  
    
    Austar,
    
    Comcast,
    
    EchoStars DISH Network,
    
    Essel Group (which operates the DishTV network in India),
    
    FOXTEL,
    
    Innovative Systems,
    
    Time Warner Cable, and
    
    UnitedGlobalCom (or UGC, a subsidiary of Liberty Global).
  34




---



##### Table of Contents



Expected RecognitionYear Ending December 31,
    
    
    of Deferred Revenue2007 (remaining three months)
    
    $
    12.52008
    
    
    5.8Thereafter
    
    
    6.1$
    24.4
  Commitments and Contractual Obligations
   35




---



##### Table of Contents



Indemnification
   Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
   Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Fixed Income Investment Risk
   36




---



##### 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 Rates2007
    
    Decrease 1%
    
    Increase 1%
    
    Decrease 2%
    
    Increase 2%Marketable debt securities
    
    $
    25,125
    
    
    $
    25,211
    
    
    $
    25,039
    
    
    $
    25,297
    
    
    $
    24,953
  Foreign Currency Exchange Rate Risk
  Accounting for Derivative Instruments and Hedging Activities.
 Item 4. Controls and Procedures
    37




---



##### 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.
  Other Matters.
 Item 1A. Risk Factors
  38




---



##### Table of Contents



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 39




---



##### Table of Contents



Signature
  OpenTV Corp.Date: November 7, 2007
    
    By: /s/ Shum MukherjeeShum MukherjeeExecutive Vice President andChief Financial Officer
 40




---



##### 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
 41