Financial Condition
As of the conclusion of the third quarter of its 2001 fiscal year on June 30, 2001, the current liabilities of NetObjects, totaling $7.8 million, exceeded its current assets, totaling $6.6 million. Its cash and cash equivalents totaled $4.4 million. While management has taken steps to decrease expenses, NetObjects does not have sufficient cash to continue operation through the end of its fiscal year on September 30, 2001.

As previously reported, NetObjects has retained Broadview International LLC to explore strategic alternatives, including the sale of NetObjects or a significant investment by a third party. While that effort continues, based on the company's limited amount of cash, management and the Board of Directors have determined that it is necessary to consider other extraordinary measures to preserve corporate assets.

NetObjects is filing its quarterly report with the SEC on Form 10-Q today.

Results of Operations
The company reported revenues from continuing operations for the third quarter of fiscal 2001 of $1.1 million compared to revenues of $7.9 million for the same period last year. Excluding non-cash charges for amortization of goodwill, stock based compensation, the cost from termination of prepaid service offerings, the loss on impaired assets and terminated investments, the loss from operations of the discontinued Enterprise division and the write-down of leasehold improvements, the net loss for the third quarter of fiscal 2001 was $5.8 million or $(0.18) per share, compared to a net loss of $4.9 million or $(0.16) per share for the same period last year.

Including charges for amortization of goodwill, stock based compensation, the cost from termination of prepaid service offerings, the loss on impaired assets and terminated investments, the loss from operations of the discontinued Enterprise division and the write-down of leasehold improvements, net loss for the third quarter of fiscal 2001 was $9.2 million or $(0.29) per share, compared to a net loss of $7.4 million or $(0.24) per share for the same period last year.

Nasdaq Listing
As previously announced, NetObjects received a Nasdaq Staff Determination on June 13, 2001, indicating that the Company's bid price no longer complied with Nasdaq's $1.00 per share minimum bid price requirement for continued listing, and that its securities were subject to delisting from The Nasdaq National Market. NetObjects appealed the staff's determination to the Nasdaq Listings Qualifications Panel and the Panel held a hearing on July 26, 2001. Nasdaq is currently evaluating the merits of the Company's appeal and its decision is pending.

Product Highlights
NetObjects launched its new online services platform NetObjects Matrix and signed deals with IBM Global Services and Telecom Italia. The total number of copies of NetObjects Fusion licenses sold exceeded 10 million, and the number of Web sites built using NetObjects products and services exceeded 5 million. NetObjects Fusion MX won several awards, including ZDNet’s Best Buy, PC Answers’ Platinum Award, PC Plus’ Best Value Award, Computer Buyer’s “Recommended” and WinPlanet’s 5 Stars rating.

(2) The loss for the three-month ended June 30, 2001 on impaired assets and terminated investments includes $13 thousand for investment advisory fees; the loss for the nine-month period ending June 30, 2001 includes the cost of writing-off $1.5 million notes receivable due to uncertain collectibility and expenses associated with terminated investments of $1.2 million; the periods ended June 30, 2000, include no such charges.

(3) This adjustment reflects the net effect of removing the associated revenue and expenses of the Enterprise division pursuant to the sale of this division to Merant on February 18, 2001.

(4) Net gain from sale of Enterprise division to Merant on February 18, 2001.

(5) Net loss for the three-month period ended June 30, 2001, excluding the cost from termination of prepaid service offerings of $923 thousand, the loss on impaired assets and terminated investments of $13 thousand, amortization of goodwill of $2.4 million, stock-based compensation of $68 thousand, writedown of leasehold improvements of $114 thousand, gain from operations of the Enterprise division of $91 thousand; the three-month period ended June 30, 2000, excludes amortization of goodwill of $2.0 million, stock-based compensation of $2 thousand, and the loss from operations of the Enterprise division of $473 thousand.

(6) Net loss for the nine-month period ended June 30, 2001, excludes the cost from termination of prepaid service offerings of $923 thousand, the loss on impaired assets and terminated investments of $2.7 million, amortization of goodwill of $7.1 million, stock-based compensation of $277 thousand, restructuring costs of $170 thousand, loss from operations of the Enterprise division of $2.7 million, and the gain from the sale of the Enterprise division of $15.1 million; the nine-month period ended June 30, 2000, excludes amortization of goodwill of $6.0 million, stock-based compensation of $352 thousand, and the loss from operations of the Enterprise division of $2.4 million.

Forward Looking Statements
This press release may contain forward-looking statements within the meaning of the federal securities laws. Such statements can be identified by the words "believes", "anticipates", "plans", "expects", and similar expressions. These forward-looking statements include, without limitation, statements about the market opportunities for Web site building software and services, our strategy, and competition. These forward looking statements do not constitute assurances regarding our future operating results, including the operations of our online services business, cash flows, and financial condition. The market for online Web-based small business services is new and extremely competitive. Our success in this business will depend on many factors, including our ability, or the ability of our distribution partners, to attract substantial numbers of paying subscribers for these services. We cannot be assured of generating a significant amount of revenue or earning a profit from the sale or license of these services. Our actual results could differ materially from those expressed or implied by these forward-looking statements due to various factors, including the risk factors described in our Form 10-K, Form 10-Q and other periodic reports filed with the SEC pursuant to the Securities Exchange Act of 1934. We undertake no obligation to update publicly any of these forward-looking statements.