Net Perceptions, Inc. Announces Third Quarter 2005 Results

Net Perceptions, Inc. (OTC: NETP) today announced financial results for the quarter ended September 30, 2005. Net Perceptions reported $17,000 in royalty revenues for the third quarter of 2005 compared to service revenues of $25,000 during the same period of 2004. Total revenues for the nine-month period ended September 30, 2005 was $60,000 compared to $897,000 for the same period of 2004. Net income for the third quarter of 2005 was $18,000 or $0.00 per diluted share compared to a net loss of $93,000 or $0.00 per diluted share during the same period of 2004. Net income for the nine-month period ended September 30, 2005 was $338,000 or $0.01 per share compared to net income of $295,000 or $0.01 per share for the same period in 2004. As of September 30, 2005, Net Perceptions' cash and cash equivalents and marketable securities were $14.8 million (or $0.51 gross cash per share) compared to $14.4 million as of December 31, 2004. Gross cash per share at September 30, 2005 equals cash and cash equivalents and marketable securities of $14.8 million divided by 28.9 million common shares outstanding. Net Perceptions has provided this non-GAAP measure because it believes that it is useful to investors assessing the extent of Net Perceptions' assets available for redeployment. Net Perceptions is unaware of any comparable GAAP measure. Net Perceptions estimates that it has available federal net operating loss carry-forwards of approximately $120.9 million and research and development credit carry-forwards of approximately $151,000 which expire in varying amounts beginning in the year 2011, to the extent not limited under Section 382 of the Internal Revenue Code. Nigel Ekern, Net Perceptions' Chief Administrative Officer stated, "We continue our efforts to identify and evaluate suitable acquisition and merger opportunities as part of our strategy to redeploy our cash and utilize our NOLs, to the extent available." Net Perceptions does not currently intend to hold conference calls to discuss quarterly earnings releases unless and until it consummates an acquisition in connection with its redeployment strategy. At such time, management plans to resume holding quarterly conference calls to review earnings and Net Perceptions' operating performance. Net Perceptions, formerly a provider of software business solutions, is seeking to redeploy its assets and use its cash and cash equivalents and marketable securities to enhance stockholder value. This press release contains forward-looking statements within the meaning of the Securities Act of 1933 and the Exchange Act of 1934. Information in this release includes Net Perceptions' beliefs, expectations, intentions and strategies regarding Net Perceptions, its future and its products and services. Assumptions relating to the forward-looking statements involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Actual results could differ materially from those projected in the forward-looking statements as a result of certain risks including our inability to execute successfully our planned effort to redeploy our assets to enhance stockholder value and the unavailability of our net operating loss carry-forwards. Net Perceptions cannot guarantee its future performance. All forward-looking statements contained in this press release are based on information available to Net Perceptions as of the date of this press release and Net Perceptions assumes no obligation to update the forward-looking statements contained herein. For further information regarding the risks and uncertainties in connection with Net Perceptions' business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Factors That May Affect Our Future Results" sections of Net Perceptions' filings with the Securities and Exchange Commission, including but not limited to, its most recent annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained at our web site at http://www.netperceptions.com or the SEC's web site at http://www.sec.gov. NET PERCEPTIONS, INC. CONSOLIDATED BALANCE SHEETS(in thousands) September 30, December 31, 2005 2004 (Unaudited) Assets Current assets: Cash and cash equivalents$ 3,349 $ 14,444 Marketable securities 11,429 -- Prepaid expenses and other current assets 94 40 Total current assets 14,872 14,484 Other assets 218 239 Total assets $ 15,090 $ 14,723 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued liabilities$136 $178 Total current liabilities 136 178 Note payable 2,5332,517 Total liabilities2,6692,695 Commitments and contingencies Stockholders' equity: Common stock 2 2 Additional paid-in capital 234,400 234,350 Unearned stock compensation (128)(135) Accumulated other comprehensive loss (2) -- Accumulated deficit (221,851) (222,189) Total stockholders' equity12,421 12,028 Total liabilities and stockholders' equity $ 15,090 $ 14,723 NET PERCEPTIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except per share amounts) Three Months Ended Nine Months Ende eptember 30, September 30, 2005 20042005 2004 Revenues: Product$ -- $ -- $ -- $ 405 Service, maintenance an oyalties 1725 60 492 Total revenues1725 60 897 Cost of revenues: Service and maintenance --11 -- 216 Total cost of revenues --11 -- 216 Gross margin 1714 60 681 Operating expenses: Research and development ---- -- 250 General and administrative 108 170 277 2,096 Gain on sale of patents ---- -- (1,800)(Gain) loss on litigation settlement5--(224) -- Restructuring related charges ---- --(7) Total operating expenses 113 170 53 539 Operating income (loss) (96) (156) 7 142 Other income (expense): Interest income12548 312 106 Interest expense (13) (26)(55) (48) Other income (expense), net241 7495 Total other income (expense), net 11463 331 153 Net income (loss) $ 18 $ (93) $ 338 $ 295 Net income (loss) per share: Basic $ 0.00 $ 0.00 $ 0.01 $ 0.01 Diluted$ 0.00 $ 0.00 $ 0.01 $ 0.01 Shares used in computing basic and diluted net income (loss) per share: Basic 28,918 28,669 28,918 28,460 Diluted34,894 28,669 32,987 28,863 NET PERCEPTIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands) Nine Months Ende eptember 30, 20052004 Cash flows from operating activities: Net income (loss) $ 338 $ 295 Reconciliation of net income to net cash provided by (used in) operating activities: Gain on sale of patents-- (1,800) Provision for (recovery of) doubtful accounts -- (28) Restructuring related charges (reversals) -- (15) Amortization of debt issuance costs 21 13 Amortization of discount on debt 16 26 Stock-based compensation 57 43 Amortization of discounts on securities (64) -- Changes in assets and liabilities: Accounts receivable -- 358 Prepaid expenses and other assets (54)363 Accounts payable and accrued liabilities(42) (482) Deferred revenue--(377) Net cash provided by (used in) operating activities 272 (1,604) Cash flows from investing activities: Proceeds from sale of patents -- 1,800 Purchase of marketable securities (11,367) -- Net cash provided by (used in) investing activities (11,367) 1,800 Cash flows from financing activities: Proceeds from issuance of convertibl ubordinated note, net of offering costs of $288 -- 2,245 Proceeds from exercise of stock options,net of stock repurchases-- 153 Net cash provided by financing activities -- 2,398 Net increase (decrease) in cash and cash equivalents(11,095) 2,594 Cash and cash equivalents at beginning of period14,444 11,932 Cash and cash equivalents at end of period $ 3,349 $ 14,526

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