<SUBMISSION>
<ACCESSION-NUMBER>0001125282-02-001667
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>3
<PERIOD>20020331
<FILING-DATE>20020515
<FILER>
<COMPANY-DATA>
<CONFORMED-NAME>ACTV INC /DE/
<CIK>0000854152
<ASSIGNED-SIC>3663
<IRS-NUMBER>942907258
<STATE-OF-INCORPORATION>DE
<FISCAL-YEAR-END>1231
</COMPANY-DATA>
<FILING-VALUES>
<FORM-TYPE>10-Q
<ACT>34
<FILE-NUMBER>001-10377
<FILM-NUMBER>02649142
</FILING-VALUES>
<BUSINESS-ADDRESS>
<STREET1>1270 AVE OF THE AMERICAS
<CITY>NEW YORK
<STATE>NY
<ZIP>10020
<PHONE>2122622571
</BUSINESS-ADDRESS>
<MAIL-ADDRESS>
<STREET1>12270 AVE OF THE AMERICAS #2401
<STREET2>12270 AVE OF THE AMERICAS #2401
<CITY>NEW YORK
<STATE>NY
<ZIP>10020
</MAIL-ADDRESS>
</FILER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>b318429_10q.htm
<DESCRIPTION>QUARTERLY REPORT
<TEXT>
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<body bgcolor="#ffffff">
<p align="center">&nbsp;</p>
<hr size="2" noshade>
<p align="center"><b><font size=5 face="Times-Bold,Times New Roman,Times,serif">UNITED
  STATES</font></b><br>
  <b><font size=5 face="Times-Bold,Times New Roman,Times,serif">SECURITIES AND
  EXCHANGE COMMISSION<br>
  </font></b><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">WASHINGTON,
  D.C. 20549</font></b></p>
<hr noshade width="160">
<p align="center"> <b><font size=5 face="Times-Bold,Times New Roman,Times,serif">FORM
  10-Q</font></b></p>
<table width=100% border=0 cellspacing=0 cellpadding=0>
  <tr valign="bottom">
    <td width="5%" align="left" valign="top"> <font size=2 face="Times-Roman,Times New Roman,Times,serif"><img src="tickedbox.gif"></font><b><font face="Times-Bold,Times New Roman,Times,serif">
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></b>
    <td align="center" width="95%">
<div align="left"><b><font face="Times-Bold,Times New Roman,Times,serif"> QUARTERLY
        REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT
        OF 1934 </font></b></div> </tr>
</table>
<blockquote>
  <blockquote>
    <blockquote>
      <p align="center"> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">FOR
        THE QUARTERLY PERIOD ENDED MARCH 31, 2002 </font></b> </p>
    </blockquote>
  </blockquote>
</blockquote>
<p align="center"> <b><font size=5 face="Times-Bold,Times New Roman,Times,serif">ACTV,
  INC.<br>
  </font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">(Exact
  name of registrant as specified in its charter)</font> </p>
<table width=100% border=0 cellspacing=0 cellpadding=0 height="100">
  <tr valign="bottom">
    <td align="center" height="49" width="50%">
      <div align="center"><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">DELAWARE<br>
        </font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">(State
        or other jurisdiction of</font><font size=2 face="Times-Roman,Times New Roman,Times,serif"><br>
        incorporation or organization)</font></div>
    </td>
    <td align="center" height="49" width="50%">
      <div align="center"><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">94-2907258</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif"><br>
        (I.R.S. Employer<br>
        </font><font size=2 face="Times-Roman,Times New Roman,Times,serif">Identification
        No.)</font></div>
    </td>
  </tr>
  <tr valign="bottom">
    <td width="50%">
      <div align="center">&nbsp;</div>
    </td>
    <td width="50%">
      <div align="center"></div>
    </td>
  </tr>
  <tr valign="bottom" align="center">
    <td height="48" width="50%">
      <p align="center"><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">233
        PARK AVENUE SOUTH<br>
        </font></b><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">NEW
        YORK, NEW YORK<br>
        </font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">(Address
        of principal executive offices)</font></p>
    </td>
    <td height="48" width="50%">
      <div align="center"><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">10003<br>
        </font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">(Zip
        Code)</font></div>
    </td>
  </tr>
</table>
<p align="center"><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">(212)
  497-7000<br>
  </font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">(Registrant&#146;s
  telephone number, including area code)</font></p>
<p align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">Indicate
  by check mark whether the registrant (1) has filed all reports required to be
  filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during
  the preceding 12 months (or for such shorter period that the registrant was
  required to file such reports), and (2) has been subject to such filing requirements
  for the past 90 days. Yes <img src="tickedbox.gif" width="12" height="12">&nbsp;&nbsp;</font><font size=2
face="Times-Roman,Times New Roman,Times,serif"> No <img src="emptybox.gif"></font>
</p>
<p align="left"> <font size=2 face="Times-Roman,Times New Roman,Times,serif">
  As of May 8, 2002, there were 55,949,958 shares of the registrant&#146;s common
  stock outstanding. </font> </p>
<p>&nbsp;
<p>
<hr size="2" noshade>
<br>
<br>
<br>

<hr noshade align="center" width="100%" size=2>
<PAGE> <a name="page_2"></a>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ITEM 1.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;FINANCIAL
  STATEMENTS</font></b></p>
<p align="center"><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ACTV,
  INC. AND SUBSIDIARIES<br>
  CONSOLIDATED BALANCE SHEETS</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<table width="650" border=0 align="center" cellpadding=0 cellspacing=0>
  <tr>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2> <div align="center" width=12><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">MARCH
        31,</font></b></div>
      <div align="center"><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">2002</font></b></div></td>
    <td align="center"> <div align="center"></div>
      <div align="center"></div></td>
    <td align="center" colspan=2> <div align="center"><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">DECEMBER
        31,</font></b></div>
      <div align="center"><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">2001</font></b></div></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=2> <hr noshade size=1 align="center"> </td>
    <td> <div align="center"></div></td>
    <td colspan=2> <hr noshade size=1 align="center"> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <div align="center"><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">(Unaudited)</font></b></div></td>
    <td> <div align="center"></div></td>
    <td> <div align="center"></div></td>
    <td> <div align="center"></div></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td><div align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">ASSETS</font></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Current assets:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Cash
      and cash equivalents</font></td>
    <td width="2%" align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="10%" align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">54,082,513</font></td>
    <td width="4%">&nbsp;</td>
    <td width="2%" align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="10%" align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">69,035,707</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Short-term
      investments</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">17,414,676</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">8,951,695</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Accounts
      receivable-net</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,695,099</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,319,805</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Other</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,327,195</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,696,617</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Total
      current assets</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">74,519,483</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">81,003,824</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Property and equipment-net</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">5,701,763</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">6,344,631</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Other assets:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Restricted
      cash</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">484,913</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">484,913</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Investment
      in warrant</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">13,795,482</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">16,255,355</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Investments&#151;other</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">7,397,776</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">7,397,776</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Patents
      and patents pending</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">8,335,063</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">8,425,889</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Software
      development costs</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">5,637,524</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">5,310,100</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Goodwill</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">12,935,701</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">12,935,701</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Other</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,359,156</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,429,132</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Total
      other assets</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">49,945,615</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">52,238,866</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Total
      assets</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">130,166,861</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">139,587,321</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><div align="center">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">LIABILITIES
        AND STOCKHOLDERS&#146; EQUITY</font></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Current liabilities:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Accounts
      payable and accrued expenses</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">3,650,704</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">5,664,088</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Deferred
      revenue</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">3,886,755</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">4,068,450</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Total
      current liabilities</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">7,537,459</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">9,732,538</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Deferred revenue</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">66,061,685</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">66,966,638</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Minority interest</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">9,311,838</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">10,100,654</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Stockholders&#146;
      equity:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" align="left">
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Common
      stock, $0.10 par value, 200,000,000 shares authorized: issued</font> <font size=2 face="Times-Roman,Times New Roman,Times,serif">and
      </font><br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">outstanding
      55,886,982 at March 31, 2002, and 55,881,938 at</font><br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">December
      31, 2001</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">5,588,698</font></td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">5,588,194</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Additional
      paid-in capital</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">304,594,970</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">310,611,698</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Stockholder
      loans</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(305,281</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(339,035</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Accumulated
      deficit</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(262,622,508</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(263,073,366</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Total
      stockholders&#146; equity</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">47,255,879</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">52,787,491</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Total
      liabilities and stockholders&#146; equity</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">130,166,861</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">139,587,321</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="center">
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.</font></b>
</p>
<p align="center">
<font size=2 face="Times-Roman,Times New Roman,Times,serif">1</font>
</p>

<hr noshade align="center" width="100%" size=2>
<PAGE> <a name="page_3"></a>
<p align="center"> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ACTV,
  INC. AND SUBSIDIARIES<br>
  </font></b><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">CONSOLIDATED
  STATEMENTS OF OPERATIONS<br>
  </font></b><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">(UNAUDITED)</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<table width="650" border=0 align="center" cellpadding=0 cellspacing=0>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=5><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">THREE
      MONTHS</font></b><b><font size=1 face="Times-Bold,Times New Roman,Times,serif"><br>
      ENDED MARCH 31,</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=5> <hr noshade size=1> </td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">2002</font></b></td>
    <td align="center" width="2%">&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">2001</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=2><hr size="1" noshade></td>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2><hr size="1" noshade></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#C6FFE2"><font size=2 face="Times-Roman,Times New Roman,Times,serif">Revenues</font></td>
    <td width="2%" align="center" bgcolor="#C6FFE2"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="10%" align="right" bgcolor="#C6FFE2"><font size=2 face="Times-Roman,Times New Roman,Times,serif">3,186,421</font></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
    <td width="2%" align="center" bgcolor="#C6FFE2"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="10%" align="right" bgcolor="#C6FFE2"><font size=2 face="Times-Roman,Times New Roman,Times,serif">3,273,442</font></td>
    <td width="2%" bgcolor="#C6FFE2">&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Costs and
      expenses:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Selling,
      general and administrative expenses</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">6,050,416</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">14,089,135</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Stock-based
      compensation (income)/expense</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(6,002,831</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,302,494</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Depreciation
      and amortization</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,305,461</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,419,522</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Amortization
      of goodwill</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">418,498</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp; </td>
    <td colspan="2">
      <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Total
      costs and expenses</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,353,046</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">17,229,649</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2">
      <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
<td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Income/(loss)
      from operations</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,833,375</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(13,956,207</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Interest income</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">288,540</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,620,408</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Other expense</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">2,459,873</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">8,735,412</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Loss before
      minority interest and cumulative effect of accounting change</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(337,958</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(21,071,211</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Minority interest-subsidiaries</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">788,816</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">694,615</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Income/(loss)
      before cumulative effect of accounting change</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">450,858</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(20,376,596</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Cumulative
      transition effect of adopting SFAS No. 133</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(58,732,197</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Net income/(loss)</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">450,858</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(79,108,793</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Net income/(loss)
      per share</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Basic</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Before
      cumulative effect of accounting change</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">0.01</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(0.39</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Cumulative
      transition effect of adopting SFAS No. 133</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.12</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Basic
      net income/(loss) per share</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">0.01</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.51</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Diluted</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Before
      cumulative effect of accounting change</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">0.01</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(0.39</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Cumulative
      transition effect of adopting SFAS No. 133</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.12</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Diluted
      net income/(loss) per share</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">0.01</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.51</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#FFFFFF">
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Shares used
      in basic calculations</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">55,883,934</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">52,358,579</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Shares used
      in diluted calculations</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">56,862,945</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">52,358,579</font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="center">
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.</font></b>
</p>
<p align="center">
<font size=2 face="Times-Roman,Times New Roman,Times,serif">2 </font>
</p>

<hr noshade align="center" width="100%" size=2>
<PAGE> <a name="page_4"></a>
<p align="center"> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ACTV,
  INC. AND SUBSIDIARIES<br>
  </font></b><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">CONSOLIDATED
  STATEMENTS OF CASH FLOWS</font></b><br>
  <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">(UNAUDITED)</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<table width="650" border=0 align="center" cellpadding=0 cellspacing=0>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=5><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">THREE
      MONTHS</font></b><b><font size=1 face="Times-Bold,Times New Roman,Times,serif"><br>
      ENDED MARCH 31,</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=5><hr size="1" noshade></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">2002</font></b></td>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">2001</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=2><hr size="1" noshade></td>
    <td align="center">&nbsp;</td>
    <td colspan=2 align="center" noshade="NOSHADE"><hr size="1" noshade></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Cash flows
      from operating activities:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Net income/(loss)</font></td>
    <td width="2%" align="center"><div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td width="10%" align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">450,858</font></td>
    <td width="2%">&nbsp;</td>
    <td width="2%" align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="10%" align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">
      (79,108,793 </font></td>
    <td width="1%"><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Adjustments
      to reconcile net loss to net cash used in operations:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Cumulative
      transition effect of adopting SFAS No. 133</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">58,732,197</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Change
      in fair value of warrant</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">2,459,873</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">8,735,412</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Depreciation
      and amortization</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,305,461</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,838,019</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Amortization
      of deferred revenue</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(904,953</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(904,953</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Deferred
      revenue</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(181,695</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(147,334</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Stock-based
      compensation</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(6,002,831</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,302,494</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Common
      stock issued in lieu of cash payment</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,767,275</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Minority
      interest</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(788,816</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(694,615</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Changes in
      assets and liabilities:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Accounts
      receivable</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(375,294</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1,152,241</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Other
      assets</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">386,543</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(995,571</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Accounts
      payable and accrued expenses</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(2,013,383</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(4,914,100</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Net
      cash used in operating activities</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(5,664,237</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(15,542,210</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Cash flows
      from investing activities:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Investment
      in short-term investments</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(8,462,981</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Investment
      in patents</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(71,689</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(182,357</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Investment
      in property and equipment</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(265,099</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(3,804,775</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Investment
      in software development costs</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(509,549</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(747,446</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Strategic
      investments</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(118,460</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Net
      cash used in investing activities</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(9,309,318</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(4,853,038</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Cash flows
      from financing activities:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Transfer
      to restricted cash</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1,157,030</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Net
      proceeds from equity financings</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,611</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">74,972</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Repayment
      of stockholder loans</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">18,750</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">35,910</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Net
      cash provided by/(used) financing activities</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">20,361</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1,046,148</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td> <hr noshade size=1> </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Net decrease
      in cash and cash equivalents</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(14,953,194</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(21,441,396</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Cash
      and cash equivalents, beginning of period</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">69,035,707</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">122,488,041</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Cash
      and cash equivalents, end of period</font></td>
    <td align="center">
      <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">54,082,513</font></td>
    <td>&nbsp;</td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">101,046,645</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="center"> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">SUPPLEMENTAL
  DISCLOSURE TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS</font></b></p>
<p><font size="2" face="Times-Roman,Times New Roman,Times,serif">The following
  schedule provides additional information concerning acquisitions: </font> </p>
<table width="650" border=0 align="center" cellpadding=0 cellspacing=0>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=5><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">FOR
      THE THREE MONTHS ENDED MARCH 31,</font></b> <b></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=5><hr size="1" noshade> </td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=2><b><font size="1" face="Times-Roman,Times New Roman,Times,serif">2002</font></b></td>
    <td><b><font size="1"></font></b></td>
    <td align="center" colspan=2><b><font size="1" face="Times-Roman,Times New Roman,Times,serif">2001</font></b></td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td colspan="2"><hr size="1" noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Retirement
      of common stock</font></td>
    <td width="2%">
      <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td width="11%" align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">15,004</font></td>
    <td width="6%">&nbsp;</td>
    <td width="2%">
      <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td width="11%" align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Purchase acquisitions:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Assets
      acquired (excluding cash)</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td colspan=2 align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,948,392</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Liabilities
      assumed</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td align="right" colspan=2><font size=2 face="Times-Roman,Times New Roman,Times,serif">2,744,148</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
<td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Market
      value of shares issued</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td colspan=2 align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">27,475,090</font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="center">
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.</font></b>
</p>
<p align="center">
<font size=2 face="Times-Roman,Times New Roman,Times,serif">3 </font>
</p>

<hr noshade align="center" width="100%" size=2>


<PAGE><a name="page_5"></a>

<p align="center"> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ACTV,
  INC. AND SUBSIDIARIES <br>
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; EQUITY <br>
  (UNAUDITED)</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<table width="650" border=0 align="center" cellpadding=0 cellspacing=0>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=4><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">COMMON
      STOCK</font></b></td>
    <td align="center" width="2%">&nbsp;</td>
    <td align="center" colspan=2>&nbsp;</td>
    <td align="center" width="2%">&nbsp;</td>
    <td align="center" colspan=2><b></b></td>
    <td align="center" width="2%">&nbsp;</td>
    <td align="center" colspan=2>&nbsp;</td>
    <td align="center" width="2%">&nbsp;</td>
    <td align="center" colspan=2>&nbsp;</td>
    <td align="center" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=4> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan=2>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">ADDITIONAL</font></b></td>
    <td>&nbsp;</td>
    <td colspan=2>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan=2>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" width="9%">&nbsp;</td>
    <td align="center" width="2%">&nbsp;</td>
    <td align="center" colspan=2>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">STOCKHOLDER</font></b></td>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">PAID
      IN</font></b></td>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">ACCUMULATED</font></b></td>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2>&nbsp;</td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center"><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">SHARES</font></b></td>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">AMOUNT</font></b></td>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">LOAN</font></b></td>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">CAPITAL</font></b></td>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">DEFICIT</font></b></td>
    <td align="center">&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">TOTAL</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan=2> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan=2> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan=2> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan=2> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan=2> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#C6FFE2">
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif">December 31,
      2001</font></td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">55,881,938</font></td>
    <td>&nbsp;</td>
    <td width="1%" align="center"><font size=1 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="8%" align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">5,588,194</font></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
    <td width="1%"><font size=1 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="7%" align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">(339,035</font></td>
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td width="1%" align="center"><font size=1 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="10%" align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">310,611,698</font></td>
    <td>&nbsp;</td>
    <td width="1%"><font size=1 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="11%" align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">(263,073,366</font></td>
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td width="1%" align="center"><font size=1 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="9%" align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">52,787,491</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif">Issuance of
      shares in connection with<br>
      &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;exercise of stock options &amp; warrants</font></td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">6,711</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">671</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">940</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">1,611</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#C6FFE2">
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif">Adjustment
      in deferred stock</font>&nbsp;<font size=1 face="Times-Roman,Times New Roman,Times,serif">compensation</font></td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">(6,002,831</font></td>
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">(6,002,831</font></td>
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif">Rescission/repayment
      of shareholder loans</font></td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">33,754</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">33,754</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#C6FFE2">
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif">Retirement
      of stock</font></td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">(1,667</font></td>
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">(167</font></td>
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">(14,837</font></td>
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">(15,004</font></td>
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size=1 face="Times-Roman,Times New Roman,Times,serif">Net income</font></td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">450,858</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">450,858</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan=2> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan=2> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#C6FFE2">
    <td bgcolor="#C6FFE2"><font size=1 face="Times-Roman,Times New Roman,Times,serif">Balance
      at March 31, 2002</font></td>
    <td align="right" bgcolor="#C6FFE2"><font size=1 face="Times-Roman,Times New Roman,Times,serif">55,886,982</font></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
    <td align="center" bgcolor="#C6FFE2"><font size=1 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right" bgcolor="#C6FFE2"><font size=1 face="Times-Roman,Times New Roman,Times,serif">5,588,698</font></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
    <td align="right" bgcolor="#C6FFE2"><div align="left"><font size=1 face="Times-Roman,Times New Roman,Times,serif">$
        </font></div></td>
    <td align="right" bgcolor="#C6FFE2"><font size=1 face="Times-Roman,Times New Roman,Times,serif">(305,281</font></td>
    <td bgcolor="#C6FFE2"><font size=1 face="Times-Roman,Times New Roman,Times,serif">
      )</font></td>
    <td align="center" bgcolor="#C6FFE2"><div align="left"><font size=1 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td align="right" bgcolor="#C6FFE2"><font size=1 face="Times-Roman,Times New Roman,Times,serif">304,594,970</font></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
    <td align="right" bgcolor="#C6FFE2"><div align="left"><font size=1 face="Times-Roman,Times New Roman,Times,serif">$
        </font></div></td>
    <td align="right" bgcolor="#C6FFE2"><font size=1 face="Times-Roman,Times New Roman,Times,serif">(262,622,508</font></td>
    <td bgcolor="#C6FFE2"><font size=1 face="Times-Roman,Times New Roman,Times,serif">
      )</font></td>
    <td align="center" bgcolor="#C6FFE2"><div align="left"><font size=1 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td align="right" bgcolor="#C6FFE2"><font size=1 face="Times-Roman,Times New Roman,Times,serif">47,255,879</font></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td><hr noshade size=2> </td>
    <td> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan=2> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td><hr noshade size=2> </td>
    <td> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan=2> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td><hr noshade size=2> </td>
    <td> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="center">
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.</font></b>
</p>
<p align="center">
<font size=2 face="Times-Roman,Times New Roman,Times,serif">4 </font>
</p>

<hr noshade align="center" width="100%" size=2>

<PAGE> <a name="page_6"></a>

<p align="center">
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">NOTES TO CONSOLIDATED FINANCIAL STATEMENTS <br>
THREE MONTHS ENDED MARCH 31, 2002 AND 2001</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font>
</p>
<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">1.</font></b>&nbsp;<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">BASIS OF PRESENTATION</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The results of operations for the three months ended March 31, 2002 and 2001 are not necessarily indicative of a full year&#146;s operations. In the opinion of management, the
accompanying consolidated financial statements include all adjustments of a normal recurring nature, which are necessary to present fairly such financial statements. </font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All significant intercompany balances and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting principles have been condensed or omitted. </font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These unaudited consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in our annual report on Form 10-K for the
year ended December 31, 2001. </font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We consider all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. </font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain reclassifications have been made to the prior years&#146; financial statements to conform to the 2002 presentation. </font>
</p>
<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">2.</font></b>&nbsp;<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">RECENT ACCOUNTING PRONOUNCEMENTS </font></b>
</p>
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">In July 2001, the FASB issued Statement of Financial Accounting Standard No. 142 (&#147;SFAS 142&#148;), Goodwill and Other Intangible Assets, effective for
fiscal years beginning after December 15, 2001. Under SFAS 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests. Other intangible assets will continue to be
amortized over their useful lives. We adopted SFAS 142 beginning on January 1, 2002. We will perform the first of the required impairment tests of goodwill using the methodology prescribed by SFAS 142 by June 30, 2002. We have not yet determined the
final expected effect the adoption of SFAS 142 will have on our statement of financial condition, but do not believe it will be material. </font>
</p>
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">The following pro forma information for the three months ended March 31, 2001 presents net loss and loss per common share adjusted to exclude goodwill
amortization expense of $418,498 recognized during the period. </font>
</p>
<table width=400 border=0 cellspacing=0 cellpadding=0>
<tr>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Net loss:</font></td>
   <td width="1%">&nbsp;</td>
   <td width="1%">&nbsp;</td>
   <td width="5%">&nbsp;</td>
   <td width="2%">&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">As reported</font></td>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
   <td align="right" colspan=2><font size=2 face="Times-Roman,Times New Roman,Times,serif">(79,108,793</font></td>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
</tr>
<tr>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Pro forma</font></td>
   <td>&nbsp;</td>
   <td align="right" colspan=2><font size=2 face="Times-Roman,Times New Roman,Times,serif">(78,690,295</font></td>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
</tr>
<tr>
   <td colspan=3><font size=2 face="Times-Roman,Times New Roman,Times,serif">Loss per common share&#151;Basic and Diluted:</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">As reported</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td> <td>&nbsp;</td>
   <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.51</font></td>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
</tr>
<tr>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Pro forma</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.50</font></td>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
</tr>
</table>


<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">3.</font></b>&nbsp;<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">INTANGIBLE ASSETS AND GOODWILL </font></b>
</p>
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Goodwill totaled $12.9 million at March 31, 2002 and December 31, 2001. Our other intangible assets consist of patents, which as of March 31, 2002 and December
31, 2001 were as follows: </font>
</p>
<table width="650"border=0 cellspacing=0 cellpadding=0>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="center">
      <p><font size=2 face="Times-Roman,Times New Roman,Times,serif"><b>Gross</b></font><font size=2 face="Times-Roman,Times New Roman,Times,serif"><b><br>
        Intangible</b></font><br>
        <font size=2 face="Times-Roman,Times New Roman,Times,serif"><b>Assets</b></font></p>
    </td>
    <td>&nbsp;</td>
    <td colspan="2" align="center" valign="bottom"><font size=2 face="Times-Roman,Times New Roman,Times,serif"><b>Accumulated</b></font><font size=2 face="Times-Roman,Times New Roman,Times,serif"><b><br>
      Amortization</b></font></td>
    <td>&nbsp;</td>
    <td colspan="2" align="center" valign="bottom"><font size=2 face="Times-Roman,Times New Roman,Times,serif"><b>Net
      Intangible<br>
      </b></font><font size=2 face="Times-Roman,Times New Roman,Times,serif"><b>Assets</b></font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=2>
      <hr noshade size=2>
    </td>
    <td>&nbsp;</td>
    <td colspan=2>
      <hr noshade size=2>
    </td>
    <td>&nbsp;</td>
    <td colspan=2>
      <hr noshade size=2>
    </td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">March 31,
      2002</font></td>
    <td width="2%">&nbsp;</td>
    <td align="center" width="12%">&nbsp;</td>
    <td width="6%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td align="center" width="15%">&nbsp;</td>
    <td width="6%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td align="center" width="15%">&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Patents</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">10,104,845</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1,769,782</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">8,335,063</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">December 31,
      2001</font></td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Patents</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">10,033,157</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1,607,268</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">8,425,889</font></td>
  </tr>
</table>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Amortization expense related to patents totaled $162,515 and $149,240 million during the three months ended March 31, 2002 and 2001. The estimated aggregate future amortization expense for
intangible assets remaining as of March 31, 2002 is as follows: </font>
</p>
<table width=400 border=0 cellspacing=0 cellpadding=0>
<tr>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Remainder of 2002</font></td>
   <td width="2%">&nbsp;</td>
   <td width="1%">&nbsp;</td>
   <td width="1%"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
   <td align="right" width="7%"><font size=2 face="Times-Roman,Times New Roman,Times,serif">502,442</font></td>
   <td width="2%">&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">2003</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right" colspan=2><font size=2 face="Times-Roman,Times New Roman,Times,serif">667,378</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">2004</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right" colspan=2><font size=2 face="Times-Roman,Times New Roman,Times,serif">667,378</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">2005</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right" colspan=2><font size=2 face="Times-Roman,Times New Roman,Times,serif">667,378</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">2006</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right" colspan=2><font size=2 face="Times-Roman,Times New Roman,Times,serif">667,378</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Thereafter</font></td>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td align="right" colspan=2><font size=2 face="Times-Roman,Times New Roman,Times,serif">5,163,109</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td colspan=3>
      <hr noshade size=1>
    </td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Total</font></td>
   <td>&nbsp;</td>
   <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
   <td align="right" colspan=2><font size=2 face="Times-Roman,Times New Roman,Times,serif">8,335,063</font></td>
   <td>&nbsp;</td>
</tr>
<tr>
   <td>&nbsp;</td>
   <td>&nbsp;</td>
   <td colspan=3><hr noshade size=2></td>
   <td>&nbsp;</td>
</tr>
</table>
<p align="center">
<font size=2 face="Times-Roman,Times New Roman,Times,serif">5 </font>
</p>

<hr noshade align="center" width="100%" size=2>

<PAGE> <a name="page_9"></a>
<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">4.</font></b>&nbsp;<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">FINANCIAL INSTRUMENTS </font></b>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif"> 	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective January 1, 2001, we adopted Statement of Financial Accounting Standards (&#147;SFAS&#148;) No. 133, &#147;Accounting for Derivative Instruments and Hedging Activities&#148;
(&#147;SFAS 133&#148;), as amended by SFAS 137 and 138. SFAS 133 requires that all derivative financial instruments be recorded on the balance sheet at fair value. The provisions of SFAS 133 affected accounting for 2.5 million restricted warrants of
Liberty Livewire Corporation held by us. Prior to the adoption of SFAS 133, we carried the warrants at cost. With the adoption of SFAS 133, we now record the warrants at fair value. The adoption of SFAS 133 resulted in our recording a cumulative
effect transition adjustment loss of $58.7 million at January 1, 2001. Beginning in the first quarter of 2001, we have recorded subsequent changes in the fair value of the warrants in our statements of operations. </font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif"> 	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;There may be periods with significant non-cash increases or decreases to our net income/loss related to the changes in the fair value of the Livewire investment. The carrying value of our
derivative instrument approximates fair value. We determine the fair value of the Livewire warrants by reference to underlying market values of Liberty Livewire&#146;s common stock as reported by Nasdaq, and on estimates using the Black-Scholes
valuation model. </font>
</p>
<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">5.</font></b>&nbsp;<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">MERGER AND ACQUISITION ACTIVITY</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
</font>
</p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ACQUISITION</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif"> 	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In March 2001, we acquired all of the assets and business of Intellocity, Inc., a technology and engineering solutions provider focusing on the interactive television market. The
aggregate purchase price of $27.5 million consisted of 4,007,890 shares of our common stock, aggregating $23.2 million, and options to purchase 762,665 shares of our common stock, valued at $4.3 million. The purchase agreement provided for a future
payment by us of up to 1.5 million shares and options that was contingent upon Intellocity&#146;s achieving certain performance targets for the year ended December 31, 2001. Intellocity failed to meet those targets, thereby releasing us from this
additional payment obligation. Intellocity shareholders are subject to provisions restricting the sale of the ACTV stock; these restrictions range over 4 years. The acquisition was accounted for in the first quarter of 2001 under the purchase method of accounting. </font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif"> 	&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The fair value of assets acquired and liabilities assumed in the acquisition of Intellocity amounted to approximately $1.5 million. We calculated goodwill, representing the excess cost
over the fair value of net assets acquired, to be $26.4 million. Through December 31, 2001, we were amortizing this amount over a seven-year period. In connection with our year-end review of 2001 results, we conducted a study of the realizability of
the goodwill value attributed to Intellocity at December 31, 2001. As a result of this study, we recorded an impairment charge to goodwill of $11.2 million during the fourth quarter of 2001, adjusting the asset value of such goodwill from $23.2
million to $12.0 million.</font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We adopted SFAS 142 as of January 1, 2002 and accordingly recorded no amortization of goodwill for the quarter ended March 31, 2002 (See Note 2). The results
of Intellocity's operations are included in our consolidated results from the date of acquisition. </font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table presents the pro forma results of operations had the acquisition of Intellocity been completed as of January 1, 2001. The pro forma results are shown for illustrative
purposes only and do not purport to be indicative of the results that would have been reported if the business combination had occurred on the date indicated or that may occur in the future. These pro forma amounts include estimates and assumptions
that we believe are reasonable. </font>
</p>
<table width="650" border=0 cellspacing=0 cellpadding=0>
  <tr>
    <td>&nbsp;</td>
    <td align="right" colspan=4 rowspan="3"><div align="center"><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">For
        the Three Months</font></b><b><font size=1 face="Times-Bold,Times New Roman,Times,serif"><br>
        Ended</font></b><b><font size=1 face="Times-Bold,Times New Roman,Times,serif"><br>
        March 31, 2001</font></b></div></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=4> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td bgcolor="#C6FFE2"><font size=2 face="Times-Roman,Times New Roman,Times,serif">Revenues</font></td>
    <td colspan="2"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td colspan=2 align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">4,489,730</font></td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="4"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Loss before
      minority interest and cumulative effect of</font></td>
    <td colspan="4">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">accounting
      change</font></td>
    <td align="center"><div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td align="right" colspan=3><font size=2 face="Times-Roman,Times New Roman,Times,serif">(21,918,915</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="4"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Loss before
      cumulative effect of accounting change</font></td>
    <td align="center"> <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td colspan=3 align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(21,224,300</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="4"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Net loss</font></td>
    <td align="center"><div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td align="right" colspan=3><font size=2 face="Times-Roman,Times New Roman,Times,serif">(79,956,497</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="4"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Basic and
      diluted</font></td>
    <td>&nbsp;</td>
    <td colspan="3">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Loss per share
      before cumulative effect of accounting change</font></td>
    <td>&nbsp;</td>
    <td colspan="3"><div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(0.25</font></div></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Cumulative
      effect of accounting change</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td colspan="3"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.11</font></div></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="4"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Basic and
      diluted loss per share</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td colspan="3"><div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.36</font></div></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp; </td>
    <td colspan="4"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
</table>
<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">6.</font></b>&nbsp;<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">MINORITY INTEREST</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font>
</p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
  record a minority interest benefit resulting from Digital ADCO, in which third
  parties hold a minority equity position. Digital ADCO was formed in November
  1999 by co-founders ACTV, Inc. and Motorola Broadband. Digital ADCO develops
  applications for the delivery of addressable advertising. Under the terms of
  our agreement with Motorola Broadband, we licensed five of our patents to Digital
  ADCO and Motorola Broadband licensed six of its patents and made a capital commitment
  to Digital ADCO. During August 2000, OpenTV made a capital contribution and
  contributed patents on a non-exclusive basis to Digital ADCO. </font><font size=2 face="Times-Roman,Times New Roman,Times,serif">Additionally,
  we formed Digital ADCO International to license and distribute products and
  services outside of North America and other western hemisphere countries. Digital
  ADCO, Inc.&#146;s issued and outstanding shares of capital stock presently consist
  of Class A common stock, having one vote per share, and Class B common stock,
  having 25 votes per share. Open TV currently owns all of the issued and outstanding
  Class A common shares. Motorola Broadband and we together own all of the issued
  and outstanding Class B common shares. We currently exercise voting control
  of the venture. </font> </p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the three months ended March 31, 2002 and 2001, we allocated losses in the amount of $685,559 and $694,615, respectively, from Digital ADCO to its minority shareholders. </font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also record a minority interest benefit from one other subsidiary, Advision LLC, in which we currently hold 51% equity ownership. For the three months ended March 31, 2002, we
allocated losses in the amount of $103,257 to the minority shareholders of this subsidiary. </font>
</p>
<p align="center"> <font size=2 face="Times-Roman,Times New Roman,Times,serif">6</font>
</p>

<hr noshade align="center" width="100%" size=2>

<PAGE> <a name="page_9"></a>

<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">7.</font></b>&nbsp;<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">SEGMENT INFORMATION</font></b>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have two principal business segments, the Digital Television segment and the Enhanced Media segment. </font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Information concerning our business segments for the three months ending March 31, 2002 and 2001 are as follows: </font>
</p>
<table width=650 border=0 cellspacing=0 cellpadding=0>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=5><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">For
      the Three Months Ended March 31,</font></b></td>
    <td align="center" width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=5><b></b> <hr size="1" noshade> <b></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">2002</font></b></td>
    <td align="center" width="2%">&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">2001</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td colspan="2"><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Revenues</font></td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp;</td>
    <td>&nbsp;</td>
    <td width="1%">&nbsp;</td>
    <td width="12%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Digital Television</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">856,109</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">723,316</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Enhanced Media</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">2,330,312</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">2,550,126</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Total</font></td>
    <td width="1%" align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="12%" align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">3,186,421</font></td>
    <td width="2%">&nbsp;</td>
    <td width="1%" align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="12%" align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">3,273,442</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Depreciation
      &amp; Amortization</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Digital Television</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">744,497</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">689,001</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Enhanced Media</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">306,530</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">418,715</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Unallocated
      Corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">254,434</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">730,304</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Total</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,305,461</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,838,020</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Interest Income</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Digital Television</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">11,652</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">114,158</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Enhanced Media</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">9,119</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">2,807</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Unallocated
      Corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">267,769</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,503,443</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Total</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">288,540</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,620,408</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Net Income/(Loss)</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Digital Television</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1,538,746</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1,832,434</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Enhanced Media</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1,920,274</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(2,736,374</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Unallocated
      Corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">3,909,878</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(74,539,985</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Total</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">450,858</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(79,108,793</font></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td> <hr noshade size=2> </td>
    <td> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td> <hr noshade size=2> </td>
    <td> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Capital Expenditures</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Digital Television</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">182,498</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">1,541,673</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Enhanced Media</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">54,176</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Unallocated
      Corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">82,601</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">2,208,926</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Total</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">265,099</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">3,804,775</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width=650 border=0 cellspacing=0 cellpadding=0>
  <tr>
    <td align="left">&nbsp;</td>
    <td align="center" colspan=2>&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td align="center" colspan=2>&nbsp;</td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td align="left"><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">Balance
      Sheet Accounts as of</font></b></td>
    <td align="center" colspan=2><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">March
      31, 2002</font></b></td>
    <td width="2%">&nbsp;</td>
    <td align="center" colspan=2><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">December
      31, 2001</font></b></td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan=2><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td colspan=2 noshade="NOSHADE"><hr size="1" noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Current Assets</font></td>
    <td width="2%">&nbsp;</td>
    <td width="15%">&nbsp;</td>
    <td>&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td width="15%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Digital Television</font></td>
    <td width="2%" align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="15%" align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">4,407,139</font></td>
    <td>&nbsp;</td>
    <td width="2%" align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td width="15%" align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">4,061,843</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Enhanced Media</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">5,431,673</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">4,735,475</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Unallocated
      corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">64,680,671</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">72,206,506</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td bgcolor="C6FFE2"><font size=2 face="Times-Roman,Times New Roman,Times,serif">Total</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right" bgcolor="C6FFE2"><font size=2 face="Times-Roman,Times New Roman,Times,serif">74,519,483</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">81,003,824</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="C6FFE2">&nbsp;</td>
    <td bgcolor="C6FFE2">&nbsp;</td>
    <td bgcolor="C6FFE2">&nbsp;</td>
    <td bgcolor="C6FFE2">&nbsp;</td>
    <td bgcolor="C6FFE2">&nbsp;</td>
    <td bgcolor="C6FFE2">&nbsp;</td>
    <td bgcolor="C6FFE2">&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Total Assets</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Digital Television</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">12,148,495</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">12,022,462</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Enhanced Media</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">22,424,077</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">24,471,782</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Unallocated
      corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">95,594,289</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">103,093,077</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=1> </td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Total</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">130,166,861</font></td>
    <td>&nbsp;</td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></td>
    <td align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">139,587,321</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
    <td colspan="2"> <hr noshade size=2> </td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="center"> <font size=2 face="Times-Roman,Times New Roman,Times,serif">7</font>
</p>

<hr noshade align="center" width="100%" size=2>

<PAGE> <a name="page_10"></a>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">8.</font></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">EXECUTIVE
  INCENTIVE COMPENSATION</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
  incurred executive incentive compensation expense related to an executive bonus
  of $2,300,000 for the three months ended March 31, 2001. This expense, which
  related to an executive incentive compensation provision that subsequently was
  cancelled in the second quarter of 2001, was based on changes in the market
  value of our common stock and paid in unregistered securities. The compensation
  recognized was contingent on continued employment of the executive and subject
  to forfeiture. </font> </p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">9.</font></b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><font size=2 face="Times-Bold,Times New Roman,Times,serif"></font></b><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">INVESTMENT
  IN WARRANT</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ACTV
  and Liberty Livewire LLC, a unit of Livewire (formerly known as Todd AO Corporation),
  entered into a joint marketing venture &#147;HyperTV(R) with Livewire&#148;
  in April 2000. HyperTV with Livewire has the right to use our patented HyperTV
  convergence technology in providing to advertisers, TV programmers, studios
  and networks such services as application hosting, web authoring, data management,
  and e-commerce. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  connection with our entering into the joint marketing agreement, we received
  warrants to acquire 2,500,000 shares of Livewire at $30 per share. The warrants,
  which become exercisable at the rate of 500,000 shares per year, beginning April
  13, 2001, include certain registration rights and may be exercised until March
  31, 2015. With certain exceptions, the warrants are not transferable. We previously
  recorded an investment and corresponding deferred revenue in the amount of $76,016,175,
  the estimated value of the warrants as of April 2000. We amortize the deferred
  revenue into income over a period of 21 years, the contractual term of the joint
  marketing agreement.</font></p>
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">The estimated fair value of the warrants at March 31, 2002 was $13.8 million. We perform fair value estimates of the warrants using Black-Scholes pricing
model. Currently, we account for the warrants under SFAS No. 133 (See Note 4).</font></p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">10. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><font size=2 face="Times-Bold,Times New Roman,Times,serif"></font></b>NET
  INCOME/(LOSS) PER SHARE </font></b> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  following table sets forth the computation of basic and diluted loss per share:
  </font> </p>
<table width="650" border=0 cellspacing=0 cellpadding=0>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=6><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">Three
      Months Ended March 31,</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=6><hr align="right" size=1 noshade></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=2><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">2002</font></b></td>
    <td>&nbsp;</td>
    <td align="center" colspan=3><b><font size=1 face="Times-Bold,Times New Roman,Times,serif">2001</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><hr align="right" size=1 noshade></td>
    <td>&nbsp;</td>
    <td colspan="3"><hr align="right" size=1 noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#C6FFE2"><font size=2 face="Times-Roman,Times New Roman,Times,serif">Numerator:</font></td>
    <td width="2%" bgcolor="#C6FFE2">&nbsp;</td>
    <td width="10%" bgcolor="#C6FFE2"> <div align="right"></div></td>
    <td width="2%" bgcolor="#C6FFE2">&nbsp;</td>
    <td width="2%" bgcolor="#C6FFE2"> <div align="left"></div></td>
    <td colspan="2" bgcolor="#C6FFE2"> <div align="right"></div></td>
    <td width="2%" bgcolor="#C6FFE2">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Income/(loss)
      before cumulative effect of accounting change</font></td>
    <td align="center"><div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td><div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">450,858</font></div></td>
    <td>&nbsp;</td>
    <td align="center" colspan=2><div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td align="center"><div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">
        (20,376,596</font></div></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td bgcolor="#C6FFE2">&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Cumulative
      transition effect of adopting SFAS No. 133</font></td>
    <td bgcolor="#C6FFE2"> <div align="left"></div></td>
    <td bgcolor="#C6FFE2"> <div align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></div></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
    <td bgcolor="#C6FFE2"> <div align="left"></div></td>
    <td colspan="2" bgcolor="#C6FFE2"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(58,732,197</font></div></td>
    <td bgcolor="#C6FFE2"><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><div align="left"></div>
      <hr align="right" size=1 noshade></td>
    <td>&nbsp;</td>
    <td colspan="3"><div align="left"></div>
      <hr align="right" size=1 noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Net
      income/(loss)</font></td>
    <td align="center"><div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td><div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">450,858</font></div></td>
    <td>&nbsp;</td>
    <td align="right" colspan=2><div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$
        </font></div></td>
    <td align="right"><div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(79,108,793</font></div></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr align="left" size=2 noshade></td>
    <td> <hr align="right" size=2 noshade></td>
    <td>&nbsp;</td>
    <td colspan=3><hr align="left" size=2 noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#C6FFE2">&nbsp;</td>
    <td bgcolor="#C6FFE2"> <div align="left"></div></td>
    <td bgcolor="#C6FFE2"> <div align="right"></div></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
    <td bgcolor="#C6FFE2"> <div align="left"></div></td>
    <td colspan="2" bgcolor="#C6FFE2"> <div align="right"></div></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Denominator:</font></td>
    <td><div align="left"></div></td>
    <td><div align="right"></div></td>
    <td>&nbsp;</td>
    <td><div align="left"></div></td>
    <td colspan="2"><div align="right"></div></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#C6FFE2">&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Basic
      weighted-average shares outstanding</font></td>
    <td bgcolor="#C6FFE2"> <div align="left"></div></td>
    <td bgcolor="#C6FFE2"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">55,883,934</font></div></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
    <td bgcolor="#C6FFE2"> <div align="left"></div></td>
    <td colspan="2" bgcolor="#C6FFE2"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">52,358,579</font></div></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Weighted-average
      options outstanding</font></td>
    <td>&nbsp;</td>
    <td><div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">979,011</font></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td colspan="2"><div align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></div></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><hr align="right" size=2 noshade></td>
    <td>&nbsp;</td>
    <td colspan="3"><hr align="right" size=2 noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td bgcolor="#C6FFE2">&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Diluted
      weighted-average shares outstanding</font></td>
    <td bgcolor="#C6FFE2"> <div align="left"></div></td>
    <td bgcolor="#C6FFE2"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">56,862,945</font></div></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
    <td bgcolor="#C6FFE2"> <div align="left"></div></td>
    <td colspan="2" bgcolor="#C6FFE2"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">52,358,579</font></div></td>
    <td bgcolor="#C6FFE2">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><div align="left"></div>
      <hr align="right" size=2 noshade></td>
    <td>&nbsp;</td>
    <td colspan="3"><div align="left"></div>
      <hr align="right" size=2 noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Net income/(loss)
      per share</font></td>
    <td> <div align="left"></div></td>
    <td> <div align="right"></div></td>
    <td>&nbsp;</td>
    <td> <div align="left"></div></td>
    <td colspan="2"> <div align="right"></div></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Basic</font></td>
    <td> <div align="left"></div></td>
    <td> <div align="right"></div></td>
    <td>&nbsp;</td>
    <td> <div align="left"></div></td>
    <td colspan="2"> <div align="right"></div></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Before
      cumulative effect of accounting change</font></td>
    <td align="center"> <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">0.01</font></div></td>
    <td>&nbsp;</td>
    <td> <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td colspan="2"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(0.39</font></div></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Cumulative
      transition effect of adopting SFAS No. 133</font></td>
    <td> <div align="left"></div></td>
    <td> <div align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></div></td>
    <td>&nbsp;</td>
    <td> <div align="left"></div></td>
    <td colspan="2"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.12</font></div></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><div align="left"></div>
      <hr align="right" size=1 noshade></td>
    <td>&nbsp;</td>
    <td colspan="3"><div align="left"></div>
      <hr align="right" size=1 noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Basic
      net income/(loss) per share</font></td>
    <td align="center"> <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">0.01</font></div></td>
    <td>&nbsp;</td>
    <td> <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td colspan="2"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.51</font></div></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr align="left" size=2 noshade></td>
    <td> <hr align="right" size=2 noshade></td>
    <td>&nbsp;</td>
    <td><hr align="left" size=2 noshade></td>
    <td colspan="2"><hr align="right" size=2 noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><div align="left"></div></td>
    <td><div align="right"></div></td>
    <td>&nbsp;</td>
    <td><div align="left"></div></td>
    <td colspan="2"><div align="right"></div></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Diluted</font></td>
    <td> <div align="left"></div></td>
    <td> <div align="right"></div></td>
    <td>&nbsp;</td>
    <td> <div align="left"></div></td>
    <td colspan="2"> <div align="right"></div></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Before
      cumulative effect of accounting change</font></td>
    <td align="center"> <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">0.01</font></div></td>
    <td>&nbsp;</td>
    <td> <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td colspan="2"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(0.39</font></div></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr bgcolor="#C6FFE2">
    <td>&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Cumulative
      transition effect of adopting SFAS No. 133</font></td>
    <td> <div align="left"></div></td>
    <td> <div align="right"><font size=1 face="Times-Roman,Times New Roman,Times,serif">&#151;</font></div></td>
    <td>&nbsp;</td>
    <td> <div align="left"></div></td>
    <td colspan="2"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.12</font></div></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif"> )</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td colspan="2"><div align="left"></div>
      <hr align="right" size=1 noshade></td>
    <td>&nbsp;</td>
    <td colspan="3"><div align="left"></div>
      <hr align="right" size=1 noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Diluted
      net income/(loss) per share</font></td>
    <td align="center"> <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">0.01</font></div></td>
    <td>&nbsp;</td>
    <td> <div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">$</font></div></td>
    <td colspan="2"> <div align="right"><font size=2 face="Times-Roman,Times New Roman,Times,serif">(1.51</font></div></td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">)</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr align="left" size=2 noshade></td>
    <td> <hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr align="left" size=2 noshade></td>
    <td colspan="2"><hr noshade size=2></td>
    <td>&nbsp;</td>
  </tr>
</table>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">11. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CORPORATE
  RESTRUCTURING </font></b> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
  the third and fourth quarter 2001, we completed certain restructuring initiatives.
  The restructuring charges totaled $6.6 million and related to the surrender
  of real estate leases and employee severance expenses. At March 31, 2002, we
  had $0.1 million remaining in accrued restructuring charges to be paid out during
  the second quarter of 2002. </font> </p>

<p align="center"> <font size=2 face="Times-Roman,Times New Roman,Times,serif">8</font>
</p>

<hr noshade align="center" width="100%" size=2>

<PAGE> <a name="page_10"></a>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">12. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUPPLEMENTAL
  DISCLOSURE OF CASH AND NON-CASH ACTIVITIES</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
  recorded a reduction in stock-based compensation expense in the amount of $6,002,831
  for the three months ended March 31, 2002, and recorded non-cash, stock-based
  compensation expense in connection with vested variable options of $1,302,494 for the three months ended March 31, 2001. In the first quarter of 2002, we rescinded the applicable option exercise provisions that resulted in the variable option accounting treatment for
such options in our financial statements. </font>
</p>
<p>
<font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During both the quarter ended March 31, 2002 and the quarter ended March 31, 2001, we recorded revenue of $904,954 from amortization of the deferred revenue recognized in connection with
the Liberty Livewire warrants (See Note 9).</font>
</p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In
  January 2002, we canceled outstanding options totaling 2,093,334 shares at exercise
  prices of $6.50 to $13.50 and, in their place, granted new options totaling
  1,046,667 shares at an exercise price of $2.00 per share, which was above the
  market value of such shares at the time of grant. The grantees are all present
  or former employees of ours.</font> </p>
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">The newly granted options will be subject to variable option accounting treatment. That is, if the closing market price of our common stock is greater than
$2.00 per share at any reporting date, we will recognize a non-cash compensation expense equal to the difference between such market price and $2.00 times the number of outstanding option shares subject to variable accounting treatment. To the
extent that we are carrying an accrued expense of this type at any given reporting date and there is a decline in the market price of our stock at the end of the subsequent reporting period, we will recognize a reduction in expense for the
subsequent period. </font>
</p>
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">Our March 31, 2002 consolidated financial statements reflect no expense related to the 1,046,667 variable options, since the closing market price of our common
stock at March 31, 2002 was less than the option exercise price of $2.00 per share. </font>
</p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">13. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUBSEQUENT
  EVENT </font></b> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As
  of May 3, 2002, we signed a letter agreement with Liberty Media Corporation
  regarding a possible acquisition of all outstanding shares of ACTV common stock.
  Under the terms of the letter agreement, Liberty, which currently owns approximately
  16% of our outstanding shares, would purchase all remaining shares at a price
  of $2.00 per share. Such purchase price would be payable in either cash, shares
  of Liberty Series A common stock, or the publicly traded common stock of a Liberty
  subsidiary or affiliate. We have entered into a 65-day exclusive negotiating
  period with Liberty with respect to the possible transaction, during which Liberty
  will conduct due diligence and negotiate definitive terms with us. Should the
  exclusive period end without either a signed definitive agreement between the
  parties, or a decision by either party not to proceed with the possible transaction,
  Liberty may elect, for a period of one day following the end of the exclusive
  period, to acquire the remaining outstanding shares of our common stock at a
  price of $2.00 per share. Neither Liberty nor we can provide any assurances
  that a definitive agreement will be reached, or that a transaction ultimately
  will be consummated. Any potential transaction calling for the acquisition of
  all outstanding shares of our common stock would require the board approval
  of Liberty Media and ACTV as well as our shareholder approval. </font> </p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ITEM 2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;MANAGEMENT&#146;S
  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">OVERVIEW</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font>
</p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You
  should read the following discussion together with our consolidated financial
  statements and related notes included elsewhere. The results discussed below
  are not necessarily indicative of the results to be expected in any future periods.
  To the extent that the information presented in this discussion addresses financial
  projections, information or expectations about our products or markets or otherwise
  makes statements about future events, such statements are forward-looking and
  are subject to a number of risks and uncertainties that could cause actual results
  to differ materially from the statements made. For further information about
  forward-looking statements, see &#147;Special Note Regarding Forward-Looking
  Statements&#148; in our annual report on Form 10-K for the year ended December
  31, 2001. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
  are a digital media company that provides proprietary technologies, tools, and
  technical and creative services for interactive TV advertising, programming,
  and enhanced media applications. We have two operating business segments, which
  we call Digital TV and Enhanced Media. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
  believe that our Digital TV technologies are unique in providing targeting,
  interactivity and accountability for television commercials, and in giving viewers
  the ability to instantly customize their viewing experiences for a wide variety
  of programming applications. Our Enhanced Media technologies allow both for
  the enhancement of video and audio content, including standard TV programming,
  with Web-based information and interactivity. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
  believe the expansion of digital TV transmission systems and the emergence of
  platforms providing the simultaneous delivery of video and Internet content
  (convergence programming), will allow television distributors, advertisers and
  programmers to bring interactivity to a mass audience. We believe that our proprietary
  technologies, tools, and expertise in providing technical and creative services
  position us to capitalize on this growth. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
  have received strategic investments from Liberty Media Corporation, our largest
  shareholder, and Motorola Broadband Communications Sector. </font> </p>
<p align="center"> <font size=2 face="Times-Roman,Times New Roman,Times,serif">9</font>
</p>

<hr noshade align="center" width="100%" size=2>

<PAGE> <a name="page_10"></a>
<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">RESULTS OF OPERATIONS</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font>
</p>
<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">COMPARISON OF THREE-MONTH PERIODS ENDED MARCH 31, 2002 AND MARCH 31, 2001</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font>
</p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font><i><font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2 face="Times-Italic,Times New Roman,Times,serif">Revenues</font></i><font size=2 face="Times-Roman,Times New Roman,Times,serif">.
  During the three-month period ended March 31, 2002, our revenues decreased 3%,
  to $3,186,421, compared with $3,273,442 in the three-month period ended March
  31, 2001. The decrease was the result of a decline in revenues of our Enhanced
  Media business. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font><i><font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2 face="Times-Italic,Times New Roman,Times,serif">Total
  Selling, General, and Administrative Expenses</font></i><font size=2 face="Times-Roman,Times New
Roman,Times,serif">. Total selling, general and administrative expenses decreased
  approximately 57% in the first quarter of 2002, to $6,050,416, from $14,089,135
  in the first quarter of 2001. The decrease reflects significantly reduced personnel,
  occupancy and related expenses in the more recent quarter as a result of our
  corporate restructuring implemented in the second half of 2001 (See Note 12).
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font><i><font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2 face="Times-Italic,Times New Roman,Times,serif">Stock-Based
  Compensation</font></i><font size=2 face="Times-Roman,Times New Roman,Times,serif">.
  We realized a reduction of stock-based compensation expense of $6.0 million
  for the three months ended March 31, 2002, compared with a stock-based compensation
  expense of $1.3 million for the three months ended March 31, 2001. We had been
  recording a charge to or reduction of stock-based compensation expense in relation
  to increases and decreases in the market value of the our common stock above
  the exercise price of certain employee options. These options were subject to
  variable option accounting treatment. In the first quarter of 2002, we rescinded
  the applicable option exercise provisions that resulted in the variable option
  accounting treatment of such options and, as a consequence, reversed the accrued
  stock-based compensation expense at December 31, 2001, of approximately $6.0
  million. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font><i><font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2 face="Times-Italic,Times New Roman,Times,serif">Depreciation
  and Amortization. </font></i><font size=2 face="Times-Roman,Times New Roman,Times,serif">Depreciation
  and amortization expense decreased 29% in the first quarter of 2002, to $1,305,461,
  from $1,838,020 in the first quarter of 2001. The decrease is due principally
  to our adoption of SFAS 142 as of January 1, 2002, resulting in no amortization
  expense for goodwill in the three months ended March 31, 2002. </font> </p>
<p> <i><font size=2 face="Times-Italic,Times New Roman,Times,serif"> </font><font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2 face="Times-Italic,Times New Roman,Times,serif">Other
  Expense.</font></i><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  Other expense comprises the change in fair value of warrants held by us, which
  we currently account for as a derivative instrument, pursuant to the requirements
  of SFAS No. 133. For the three months ended March 31, 2002, we recorded a decrease
  in the value of the warrants of $2.5 million, compared with a decrease of $8.7
  million for the three months ended March 31, 2001. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font><i><font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2 face="Times-Italic,Times New Roman,Times,serif">Interest
  Income. </font></i><font size=2 face="Times-Roman,Times New Roman,Times,serif">Interest
  income in first quarter of 2002 was $288,540, compared with $1,620,408 in the
  first quarter of 2001. The decrease was the result of significantly reduced
  prevailing interest rates and lower average cash balances during the more recent
  quarter. We incurred no interest expense in the first quarter of 2002 or 2001.
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font><i><font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2 face="Times-Italic,Times New Roman,Times,serif">Cumulative
  Transition Effect of Change in Accounting Principle. </font></i><font size=2 face="Times-Roman,Times New
Roman,Times,serif">January 1, 2001, we adopted Statement of Financial Accounting
  Standards (&#147;SFAS&#148;) No. 133, &#147;Accounting for Derivative Instruments
  and Hedging Activities&#148; (&#147;SFAS 133&#148;), as amended by SFAS 137
  and 138. SFAS 133 requires that all derivative financial instruments be recorded
  on the balance sheet at fair value. The provisions of SFAS 133 affected accounting
  for 2.5 million restricted warrants of Liberty Livewire Corporation held by
  us. Prior to the adoption of SFAS 133, we carried the warrants at cost. With
  the adoption of SFAS 133, we now record the warrants at fair value. The adoption
  of SFAS 133 resulted in our recording a cumulative effect transition adjustment
  loss of $58.7 million at January 1, 2001. Beginning in the first quarter of
  2001, we have recorded subsequent changes in the fair value of the warrants
  in our statements of operations. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font><i><font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font><font size=2 face="Times-Italic,Times New Roman,Times,serif">Net
  Income/(Loss). </font></i><font size=2 face="Times-Roman,Times New Roman,Times,serif">For
  the three months ended March 31, 2002, our net income was $450,858 or $0.01
  per basic and diluted share, compared to a net loss of $79,108,793 or $1.51
  per basic and diluted share for the three months ended March 31, 2001. </font>
</p>
<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">LIQUIDITY AND CAPITAL RESOURCES </font></b>
</p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since
  our inception, we have not generated revenues sufficient to fund our operations
  and have incurred operating losses. Through March 31, 2002, we had an accumulated
  deficit of $262.6 million. Our cash position on March 31, 2002 (including short-term
  investments) was $71.4 million, compared with $77.9 million on December 31,
  2001. </font> </p>
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i><font size=2 face="Times-Italic,Times New Roman,Times,serif">Net Cash Used In Operating Activities. </font></i><font size=2 face="Times-Roman,Times New Roman,Times,serif">During the three month period March 31, 2002,
we used cash of $5.7 million for operations, compared with $15.5 million for the three months ended March 31, 2001. The decrease in net cash used by operating activities principally relates to lower operating losses and decreased working capital
uses. </font>
</p>
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i><font size=2 face="Times-Italic,Times New Roman,Times,serif">Net Cash Used In Investing Activities and Capital Expenditures. </font></i><font size=2 face="Times-Roman,Times New Roman,Times,serif">For the three month
period ended March 31, 2002, we used cash for investing activities of $9.3 million, compared with $4.9 million, for the three months ended March 31, 2001. The increase in cash used in investing activities is due to an increase in our short-term
investments. </font>
</p>
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i><font size=2 face="Times-Italic,Times New Roman,Times,serif">Net Cash Provided By (Used In) Financing Activities. </font></i><font size=2 face="Times-Roman,Times New Roman,Times,serif">We had no significant cash used
or provided by financing activities for either the first three months of 2002 or 2001. We have and continue to fund our cash requirements from the net proceeds of a public, follow-on offering completed in February 2000. Through a group of
underwriters, we sold total of $4.6 million common shares, resulting in net proceeds of $129.4 million. In addition, on March 27, 2000, Liberty Digital, Inc. invested an additional $20 million in us by exercising a warrant granted in March 1999, and
OpenTV invested $10 million in our Digital ADCO subsidiary.</font>
</p>
<p align="center"> <font size=2 face="Times-Roman,Times New Roman,Times,serif">10</font>
</p>

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<PAGE> <a name="page_10"></a>
<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">CRITICAL ACCOUNTING POLICIES </font></b>
</p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  cost of patents which represent patent acquisition costs and legal costs relating
  to patents pending, is being amortized on a straight-line basis over the estimated
  economic lives of the respective patents (averaging 10 years), which is less
  than the statutory life of each patent. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
  capitalize costs incurred for the development of software products when economic
  and technological feasibility of such products has been established. Capitalized
  software costs are amortized on a straight-line basis over the estimated useful
  lives of the respective products </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
  recorded a charge or a credit to stock-based compensation expense for increases
  or decreases, in the market value of the our common stock in excess of the exercise
  price of certain employee options, which were subject to variable option accounting
  treatment. We recorded a credit in stock-based compensation for the quarter
  ended March 31, 2002 as the market price of our common stock declined in the
  first quarter 2002 as compared to its value as of December 31, 2001. We recorded
  an increase in stock-based compensation expense for the quarter ended March 31, 2001
  as the market price of our common stock declined in first quarter 2001 as compared to
  its value as of December 31, 2000.
</font>
</p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
  preparation of financial statements in conformity with generally accepted accounting
  principles requires us to make estimates and assumptions that affect the reported
  amount of assets and liabilities and disclosures of contingent assets and liabilities
  at the date of the financial statements and the reported amounts of revenues
  and expenses during the reporting period. Our actual results could differ from
  these estimates. </font> </p>
<p>
<b><font size=2 face="Times-Bold,Times New Roman,Times,serif">IMPACT OF INFLATION</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif"> </font>
</p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inflation
  has not had any significant effect on the Company&#146;s operating costs. </font>
</p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ITEM 3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;QUANTITATIVE
  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our
  interest income is affected by changes in the general level of U.S. interest
  rates. Changes in U.S. interest rates could affect the interest earned on our
  cash equivalents and investments. Currently, changes in U.S. interest rates
  would not have a material effect on the interest earned on our cash equivalents
  and investments. A majority of these cash equivalents and investments earn a
  fixed rate of interest while the remaining portion earns interest at a variable
  rate. We do not anticipate that exposure to interest rate market risk will have
  a material impact on us due to the nature of our investments. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During
  April 2000, we received a warrant to acquire 2,500,000 shares of Livewire, a
  publicly traded company. The warrant becomes exercisable at the rate of 500,000
  shares per year, commencing on April 13, 2001, includes certain registration
  rights and may be exercised until March 31, 2015. The warrant is not transferable,
  except in certain circumstances. We estimated the value of the warrant to be
  $76,016,175 at the date it was received, using the Black-Scholes pricing model,
  with a risk free rate of 6.5%, a volatility of 80% and assuming no cash dividends.
  The estimated value of the warrant at December 31, 2000 was $17.3 million, using
  the same assumptions. As of January 1, 2001, changes in fair value in the investment
  in warrant were recorded to the statement of operations as we adopted SFAS No.
  133. We expect the value of the warrant to fluctuate based on the underlying
  stock price of Livewire. We do not currently expect to exercise or register
  shares in the coming year. </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
  recorded stock-based compensation expense based on increases and decreases in
  the market price of our common stock above the exercise price of certain employee
  options, which were subject to variable option accounting treatment. To the
  extent that we had a stock-based compensation obligation at the beginning of
  a given reporting period, we recognized a reduction in stock-based compensation
  expense related to unexercised variable options for that period based on a reduction
  of the market price for our stock at the end of the period. The obligation would
  increase as the market price for our common stock increases at the end of a
  reporting period. </font> </p>
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">In January 2002, we canceled outstanding options totaling 2,093,334 shares at exercise prices of $6.50 to $13.50 and, in their place, granted new options
totaling 1,046,667 shares at an exercise price of $2.00 per share. The grantees are all present or former employees of ours. The newly granted options will be subject to variable option accounting treatment. That is, if the closing market price of
our common stock is greater than $2.00 per share at any reporting date, we will recognize a non-cash compensation expense equal to the difference between such market price and $2.00 times the number of outstanding option shares subject to variable
accounting treatment. To the extent that we are carrying an accrued expense of this type at any given reporting date and there is a decline in the market price of our stock at the end of the subsequent reporting period, we will recognize a reduction
in expense for the subsequent period. </font>
</p>
<p align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">11</font>
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<PAGE>
<a name="page_15"></a>

<p align="center"> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">PART
  II. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OTHER INFORMATION</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ITEM 1. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;LEGAL
  PROCEEDINGS</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif"> 	ACTV, Inc. and its wholly-owned subsidiary HyperTV Networks, Inc. are co-plaintiffs in a civil action filed against The Walt Disney Co., ABC, Inc. and ESPN,
Inc. in December, 2000, which action alleges that the defendants&#146; &#147;Enhanced TV&#148; system synchronizing a web site application to, amongst others, ESPN Sunday Night and ABC Monday Night Football telecasts, has infringed and is continuing
to infringe certain of the plaintiffs&#146; patents. That action is continuing in the U.S. District Court, Southern District of New York. </font>
</p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ITEM 2. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;CHANGES
  IN SECURITIES</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable </font> </p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ITEM 3. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;DEFAULTS
  UPON SENIOR SECURITIES</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not
  applicable. </font> </p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ITEM 4. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SUBMISSION
  OF MATTERS TO A VOTE OF STOCKHOLDERS</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
  </font> </p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ITEM 5. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;OTHER
  INFORMATION</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;None.
  </font> </p>
<p> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ITEM 6. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;EXHIBITS
  AND REPORTS ON FORM 8-K</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Exhibits</font>
</p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  &nbsp;&nbsp;11&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Computation
  of Net (loss)/income per share - See Note 11</font></p>
<p><font size=2 face="Times-Roman,Times New Roman,Times,serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)
  &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Reports on Form 8-K: &nbsp;&nbsp;&nbsp;None.</font></p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">12
  </font> </p>
<hr noshade align="center" width="100%" size=2>
<p align="center">


<PAGE>
<a name="page_17"></a>

<p align="center"> <b><font size=2 face="Times-Bold,Times New Roman,Times,serif">SIGNATURES</font></b><font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font> </p>
<p> <font size=2 face="Times-Roman,Times New Roman,Times,serif"> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font size=2 face="Times-Roman,Times New Roman,Times,serif">
  </font>Pursuant to the requirements of the Securities Exchange Act of 1934,
  the registrant has duly caused this report to be signed on its behalf by the
  undersigned thereunto duly authorized. </font> </p>
<table width="650" border=0 cellspacing=0 cellpadding=0>
  <tr>
    <td width="10%">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="center"> <div align="left"><b><font size=2 face="Times-Bold,Times New Roman,Times,serif">ACTV,
        INC.</font></b></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Registrant</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Date:</font></td>
    <td width="20%" align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">May
      15, 2002</font></td>
    <td width="10%" align="center">&nbsp;</td>
    <td align="center"><div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">/s/
        David Reese</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">David Reese</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Chairman,
      Chief Executive Officer</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">and Director</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Date:</font></td>
    <td align="center"><font size=2 face="Times-Roman,Times New Roman,Times,serif">May
      15, 2002</font></td>
    <td align="center">&nbsp;</td>
    <td align="center"><div align="left"><font size=2 face="Times-Roman,Times New Roman,Times,serif">/s/
        Christopher C. Cline</font></div></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Christopher
      C. Cline</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">Chief Financial
      Officer</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font size=2 face="Times-Roman,Times New Roman,Times,serif">(principal
      financial and accounting officer)</font></td>
  </tr>
</table>
<p align="center"> <font size=2 face="Times-Roman,Times New Roman,Times,serif">13</font>
</p>

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