Embarcadero Technologies Provides Update on Filing of 2004 Form 10-K; Announces Preliminary Results for First Quarter 2005.

SAN FRANCISCO -- Embarcadero Technologies, Inc. (Nasdaq:EMBT), a provider of data lifecycle management solutions, today confirmed that it has not yet filed its Annual Report on Form 10-K for the year ended December 31, 2004.

Embarcadero previously filed a Form 12b-25 with the Securities and Exchange Commission to extend the Form 10-K filing deadline to March 31, 2005. The Company filed for the extension in order to enable it to complete the preparation of its financial statements, which were delayed as a result of an ongoing assessment of the financial statement impact of internal control material weaknesses. At the time Embarcadero filed the Form 12b-25, it believed that it could meet the March 31, 2005 extended deadline, but due to the additional work required to complete its financial statements, the Company has not met the extended deadline.

As previously announced, during the course of the Company's year-end audit, certain errors were identified with respect to the calculation of the accounting effects of income taxes principally related to the amortization of stock-based compensation associated with stock options issued prior to the Company's initial public offering. As a result of these errors, the Company will restate its 2000 through 2003 results, as well as its results for the first three quarters of 2004, to reflect adjustments to its calculation of income taxes in those periods. In addition, the Company needs to correct certain errors related to the accounting for the impact of foreign currencies during the same fiscal years. The foreign currency errors relate to both transaction and translation gains (losses). The foreign currency transaction error resulted from foreign currency translation effects related to inter-company balances being recorded as a component of the cumulative translation adjustment within stockholders' equity (and a component of comprehensive income) rather than in the statement of operations. The foreign currency translation error resulted from the Company failing to record certain foreign currency translation adjustments (primarily related to goodwill), which should have been recorded as a component of the cumulative translation adjustment within stockholders' equity (and a component of comprehensive income).

Embarcadero currently expects to complete and file its 2004 Form 10-K for the year ended December 31, 2004, by April 8, 2005.

Preliminary First Quarter 2005 Results

Embarcadero also announced today preliminary estimated financial results for the fiscal quarter ended March 31, 2005. Embarcadero expects to report revenues in the range of $13 million to $13.4 million, as compared to the consensus estimate of $14.4 million. Diluted earnings per share under Generally Accepted Accounting Principles (GAAP) is expected to be below the guidance provided by Embarcadero of approximately $0.05 due to the revenue shortfall and higher accounting and compliance expenses incurred in the quarter. The Company plans to host a conference call following release of its full results for the fiscal quarter ended March 31, 2005.

Nasdaq Appeal Status

As previously announced, the Nasdaq Stock Market notified Embarcadero on November 17, 2004 that its securities were subject to delisting from the Nasdaq National Market due to the failure to timely file a Form 10-Q for the third quarter of 2004. We requested an oral hearing before a Nasdaq Listing Qualifications Panel (the "Nasdaq Panel") to appeal the delisting proceedings and request additional time to file the Form 10-Q. This oral hearing occurred on December 21, 2004. The Nasdaq Panel took no action at that time. We filed the required Form 10-Q for the third quarter of 2004, along with Forms 10-Q/A for the quarters ended March 31, 2004 and June 30, 2004, all on January 18, 2005.

By letter dated January 26, 2005, we received the determination of the Nasdaq Panel granting Embarcadero's request for continued listing in the Nasdaq National market, subject to the condition that we timely file all required periodic reports for all reporting periods ending on or before December 31, 2005. Our failure to timely file our Annual Repot on Form 10-K for the year ended December 31, 2004 places us out of compliance with the Nasdaq Panel's determination and subjects us to the risk of delisting. We have not yet received additional correspondence from the Nasdaq Panel, but we expect we will soon.

About Embarcadero Technologies

Embarcadero Technologies, Inc. (Nasdaq:EMBT) is a provider of data lifecycle management solutions that help leading companies build, optimize, test, and manage their critical data, database, and application infrastructure. Nearly 11,000 customers, including 97 of the Fortune 100, rely on Embarcadero Technologies products to manage the explosive growth in data and ensure optimal performance of their complex, multi-platform applications and systems. Embarcadero Technologies is headquartered in San Francisco, CA. For more information, call 415-834-3131 or visit http://www.embarcadero.com.

Forward-Looking Statements 

The statements in this press release that are not historical facts are forward-looking statements that involve risks and uncertainties, including risks associated with fluctuations in quarterly results, increased costs associated with corporate governance compliance, potential delisting from the Nasdaq Stock Market, and other risks identified in the Company's periodic filings with the Securities and Exchange Commission including, but not limited to, those appearing under the caption "Risk Factors" in the Company's most recent Quarterly Reports on Form 10-Q and the Annual Report on Form 10-K. Actual results, events, and performance may differ materially. Readers are cautioned not to place undue relevance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of anticipated events.

Embarcadero, the Embarcadero Technologies logos and all other Embarcadero Technologies product or service names are trademarks of Embarcadero Technologies, Inc. All other trademarks are property of their respective owners.