Liberate Announces Financial Results for Quarter Ended August 31, 2004 Conference Call October 12, 2004, at 2:00 p.m. Pacific Time SAN MATEO, Calif., Oct. 12 /PRNewswire-FirstCall/ -- Liberate Technologies (Pink Sheets: LBRT), a leading provider of software for digital cable systems, announced financial results for its first fiscal quarter ended August 31, 2004. Liberate's revenues for its first fiscal quarter were $1.1 million, compared to $1.5 million for the same quarter of the prior fiscal year. The net loss for the quarter was $12.3 million, or $0.12 per share, compared to a loss of $12.6 million, or $0.12 per share, for the same quarter of the prior fiscal year. The loss in the current year includes a charge of $4.4 million for excess facilities related to the Company's former headquarters in San Carlos, California. As of August 31, 2004, Liberate had cash and cash equivalents of $210.0 million, a decrease of $5.9 million during the quarter. In addition to cash and cash equivalents, the Company had $10.9 million in restricted cash held as security for office leases. "We continue to push ahead with our goals of restructuring the Company and growing revenues," said David Lockwood, Chairman and CEO of Liberate. "We are pleased with the commitments to our technology that have been made by Cox, NTL and Telewest. While we are disappointed with the dismissal of our bankruptcy case and have appealed the ruling, we are making progress on our restructuring efforts. We are delighted that the SEC staff has completed its investigation into the events that led to the restatement of our financial statements and has recommended no enforcement action against the Company. In addition, during the quarter, we made progress toward resolving the shareholder class-action litigation." Condensed Consolidated Financial Statements - Basis of Presentation Because the Chapter 11 bankruptcy case was still pending as of August 31, 2004, we have prepared the attached unaudited condensed consolidated financial statements in accordance with the provisions of Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code" ("SOP 90-7"), which does not significantly change the application of accounting principles generally accepted in the United States. However, it does require that the financial statements for periods including and subsequent to filing the Chapter 11 petition distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Please see our report on Form 10-Q for the quarter ended August 31, 2004 for additional information regarding the application of SOP 90-7 to Liberate's unaudited condensed consolidated financial statements. Conference Call Liberate has scheduled a conference call on October 12, 2004, at 2:00 p.m. Pacific Time. The call-in number is 800-266-1825. A replay of the call will be available until October 19, 2004 on either 402-977-9140 or 800-633-8284, reservation code 21210335. The conference call can also be accessed via live webcast at Liberate's website (http://www.liberate.com/) and will remain available for replay. About Liberate Technologies Liberate Technologies is a leading provider of software for digital cable systems. Based on industry standards, Liberate's software enables cable operators to run multiple services -- including High-Definition Television, Video on Demand, and Personal Video Recorders -- on multiple platforms. Headquartered in San Mateo, California, Liberate has offices in Ontario, Canada, and the United Kingdom. NOTE: Liberate and the Liberate design are registered trademarks of Liberate Technologies. Other product names used in association with these registered trademarks are trademarks of Liberate Technologies. "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 Those statements above that involve expectations or intentions (such as those related to the SEC staff's stated intention to recommend no enforcement action against Liberate, future business or financial performance, the outcome of pending litigation and the Chapter 11 appeal, or anticipated corporate or commercial activities) are forward-looking statements and are not guarantees of future performance. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, the following: future decisions by the SEC or other governmental or regulatory bodies; uncertainty in the market for interactive television services and dependence on a limited number of cable network operators; business disruption resulting from Liberate's restatement and related litigation; necessary adjustments related to recent restructuring; and other uncertainties related to litigation and the Chapter 11 appeal, and other risks outlined in Liberate's filings with the Securities and Exchange Commission. Liberate disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. CONTACT: Greg Wood Chief Financial Officer Liberate Technologies 650-645-4003 LIBERATE TECHNOLOGIES (DEBTOR-IN-POSSESSION) CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) Unaudited August 31, May 31, 2004 2004 Assets Current assets: Cash and cash equivalents $209,971 $215,877 Accounts receivable, net 3,958 3,143 Prepaid expenses and other current assets 1,696 1,817 Total current assets 215,625 220,837 Property and equipment, net 1,776 1,851 Deferred costs related to warrants 2,687 3,583 Restricted cash 10,866 10,869 Other assets 147 268 Total assets $231,101 $237,408 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $1,649 $686 Accrued liabilities 4,459 3,234 Accrued payroll and related expenses 379 370 Short-term borrowing from bank -- 608 Deferred revenues 6,489 6,137 Total current liabilities 12,976 11,035 Long-term excess facilities charges 401 631 Total liabilities not subject to compromise 13,377 11,666 Liabilities subject to compromise 40,571 36,806 Total liabilities 53,948 48,472 Stockholders' equity: Common stock 1,057 1,055 Contributed and paid-in-capital 1,502,992 1,503,113 Deferred stock-based compensation (7,946) (8,453) Accumulated other comprehensive loss (1,954) (2,112) Accumulated deficit (1,316,996) (1,304,667) Total stockholders' equity 177,153 188,936 Total liabilities and stockholders' equity $231,101 $237,408 LIBERATE TECHNOLOGIES (DEBTOR-IN-POSSESSION) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Unaudited Three months ended August 31, 2004 2003 Revenues: License and royalty $219 $(924) Service 929 2,469 Total revenues 1,148 1,545 Cost of revenues: License and royalty 16 151 Service 1,379 1,443 Total cost of revenues 1,395 1,594 Gross margin (247) (49) Operating expenses: Research and development 3,842 3,667 Sales and marketing 601 1,429 General and administrative 1,949 4,181 Amortization of deferred costs related to warrants -- 804 Restructuring costs -- 480 Amortization and impairment of intangible assets -- 22 Amortization of deferred stock-based compensation -- 10 Excess facilities charges and related asset impairment 4,416 -- Total operating expenses 10,808 10,593 Loss from operations (11,055) (10,642) Reorganization items, net (1,731) -- Interest income, net 476 617 Other expense, net (61) (375) Loss from continuing operations before income tax provision (12,371) (10,400) Income tax provision 38 103 Loss from continuing operations (12,409) (10,503) Loss from discontinued operations -- (2,083) Gain on sale of discontinued operations 80 -- Net loss $(12,329) $(12,586) Basic and diluted loss per share: Continuing operations $(0.12) $(0.10) Discontinued operations -- $(0.02) Basic and diluted net loss per share $(0.12) $(0.12) Shares used in computing basic and diluted net loss per share 105,623 104,006 LIBERATE TECHNOLOGIES (DEBTOR IN POSSESSION) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Unaudited Three months ended Aug. 31, May 31, Feb. 29, Nov. 30, 2004 2004 2004 2003 Revenues: License and royalty $219 $1,412 $(54) $(697) Service 929 2,765 1,756 1,885 Total revenues 1,148 4,177 1,702 1,188 Cost of revenues: License and royalty 16 32 206 208 Service 1,379 957 1,549 1,368 Total cost of revenues 1,395 989 1,755 1,576 Gross margin (247) 3,188 (53) (388) Operating expenses: Research and development 3,842 3,989 5,022 3,647 Sales and marketing 601 (129) 703 1,004 General and administrative 1,949 939 3,667 4,479 Amortization of deferred costs related to warrants -- -- -- 1,027 Restructuring costs -- (41) 86 881 Impairment of warrants -- -- -- 4,969 Excess facilities charges and related asset impairment 4,416 3,429 -- 593 Total operating expenses 10,808 8,187 9,478 16,600 Loss from operations (11,055) (4,999) (9,531) (16,988) Reorganization items, net (1,731) (304) -- -- Interest income, net 476 513 504 573 Other income (expense), net (61) (106) 1,184 (173) Loss from continuing operations before income tax provision (12,371) (4,896) (7,843) (16,588) Income tax provision (benefit) 38 157 (122) -- Loss from continuing operations (12,409) (5,053) (7,721) (16,588) Loss from discontinued operations -- -- -- (992) Gain on sale of discontinued operations 80 252 249 9,037 Net loss $(12,329) $(4,801) $(7,472) $(8,543) Basic and diluted income (loss) per share: Continuing operations $(0.12) $(0.05) $ (0.07) $(0.16) Discontinued operations, basic $-- $-- $-- $0.08 Discontinued operations, diluted $-- $-- $-- $0.07 Basic and diluted net loss per share $(0.12) $(0.05) $ (0.07) $(0.08) Shares used in computing basic net loss per share 105,623 105,495 105,204 104,515 DATASOURCE: Liberate Technologies CONTACT: Greg Wood, Chief Financial Officer of Liberate Technologies, +1-650-645-4003, or Web site: http://www.liberate.com/

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