<SUBMISSION>
<ACCESSION-NUMBER>0001125282-02-002517
<TYPE>10-Q
<PUBLIC-DOCUMENT-COUNT>4
<PERIOD>20020630
<FILING-DATE>20020814
<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>02735888
</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>b319690_10q.htm
<DESCRIPTION>QUARTERLY REPORT
<TEXT>
<!doctype html public "actv">


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   <title>ACTV, Inc. &#151; 10-Q &#151; Converted by St Ives Burrups</title>
    <meta name="HandheldFriendly" content="true">
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<p>&nbsp; </p>
<p align="center">
<b><font size=4>UNITED STATES</font></b><br>
<b><font size=4>SECURITIES AND EXCHANGE COMMISSION</font></b><br>
<b><font size=3>Washington, D.C. 20549</font></b></p>
<hr align="center" width="25%" noshade>
<p align="center"> <b><font size=4>FORM 10-Q</font></b></p>
<hr align="center" width="25%" noshade>
<br>
<table width=80% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr valign="top">
    <td width="6%"><img src="tickedbox.gif" title="checked box"></td>
    <td align="left"><b><font size=2>QUARTERLY REPORT PURSUANT TO
      SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF&nbsp;1934</font></b></td>
  </tr>
</table>
<p align="center"> <b><font size=2>For the quarterly period ended June 30, 2002</font></b></p>
<hr align="center" width="25%" noshade>
<p align="center"> <b><u><font size=3>ACTV, Inc.</font></u></b><br>
  <font size=2>(Exact name of registrant as specified in its charter)</font></p>
<hr align="center" width="25%" noshade>
<br>
<table width=80% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr align="center" valign="bottom">
    <td width="50%"><b><font size=2><u>Delaware</u></font></b></td>
    <td width="50%"><b><font size=2><u>94-2907258</u></font></b></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><font size=2>(State or other jurisdiction of</font></td>
    <td><font size=2>(I.R.S. Employer</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><font size=2>incorporation or organization)</font></td>
    <td><font size=2>Identification No.)</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><b><font size=2>233 Park Avenue South</font></b></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><b><font size=2><u>New York, New York</u></font></b></td>
    <td><b><font size=2><u>10003</u></font></b></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><font size=2>(Address of principal executive offices)</font></td>
    <td><font size=2>(Zip Code)</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td><font size="2">&nbsp;</font></td>
    <td><font size="2">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="bottom">
    <td colspan="2"><b><font size=2><u>(212) 497-7000</u></font></b></td>
  </tr>
  <tr align="center" valign="bottom">
    <td colspan=2><font size=2>(Registrant&#146;s telephone number, including
      area code)</font></td>
  </tr>
</table>
<div style="text-indent: 3%">
<p>
<font size=2>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&nbsp;<img src="tickedbox.gif" title="checked box"> No&nbsp;<img src="emptybox.gif" title="empty box"></font></p>
  <p> <font size=2>As of August 12, 2002, there were 55,931,181 shares of the
    registrant&#146;s common stock outstanding.</font></p>
</div>
<p>&nbsp;</p>
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<hr noshade align="center" width="100%" size=2>

<page>
<a name="p2"></a>

<p>
<b><font size=2>Item 1.&nbsp;&nbsp;Financial Statements</font></b></p>
<p align="center"><b><font size=2>ACTV, INC. AND SUBSIDIARIES<br>
CONSOLIDATED BALANCE SHEETS</font></b></p>
<table width=80% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>June&nbsp;30,&nbsp;2002</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>December&nbsp;31,&nbsp;2001</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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">
    <td align="center"><b><font size=2>ASSETS</font></b></td>
    <td colspan="2" align="center"><b><font size=1>(Unaudited)</font></b></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Current assets:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Cash and cash equivalents</font></div></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size=2>46,623,473</font></td>
    <td width="2%" bgcolor="#eeeeee">&nbsp;</td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size=2>69,035,707</font></td>
    <td width="1%" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Short-term investments</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>17,632,019</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>8,951,695</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Accounts receivable-net</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>1,208,149</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>1,319,805</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Other</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,818,373</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,696,617</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 9%; text-indent: -3%"><font size=2>Total current assets</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>67,282,014</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>81,003,824</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Property and equipment-net</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>5,272,041</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>6,344,631</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Other assets:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Restricted cash</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>484,913</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>484,913</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Investment in warrant</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>6,975,148</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>16,255,355</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Investments-other</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>7,426,414</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>7,397,776</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Patents and patents pending</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>8,496,520</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>8,425,889</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Software development costs</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>5,652,852</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>5,310,100</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Goodwill</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>12,935,701</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>12,935,701</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Other</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>1,308,343</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>1,429,132</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Total other assets</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>43,279,891</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>52,238,866</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 12%; text-indent: -3%"><font size=2>Total assets</font></div></td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>115,833,946</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>139,587,321</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td align="center"><b><font size=2>LIABILITIES AND STOCKHOLDERS&#146; EQUITY</font></b></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Current liabilities:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Accounts payable and accrued expenses</font></div></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>3,489,051</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>5,664,088</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Deferred revenue</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>3,653,444</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>4,068,450</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Total current liabilities</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>7,142,495</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>9,732,538</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Deferred revenue</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>65,156,732</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>66,966,638</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Minority interest</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,509,252</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>3,215,652</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>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">
    <td bgcolor="#eeeeee"><div style="margin-left: 3%; text-indent: -3%"><font size=2>Common stock, $0.10 par value, 200,000,000 shares authorized:
      issued and outstanding 55,929,560 at June&nbsp;30, 2002 and 55,881,938 at December&nbsp;31,
      2001</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>5,592,956</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>5,588,194</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Additional paid-in capital</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>311,468,567</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>317,496,700</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Stockholder loans</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(204,499</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(339,035</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Accumulated deficit</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(274,831,557</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(263,073,366</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 9%; text-indent: -3%"><font size=2>Total stockholders&#146; equity</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>42,025,467</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>59,672,493</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td><div style="margin-left: 12%; text-indent: -3%"><font size=2>Total liabilities and stockholders&#146; equity</font></div></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>115,833,946</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>139,587,321</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
</table>
<p align="center">
<i><font size=2>See notes to consolidated financial statements.</font></i></p>
<p align="center">
<font size=2>2</font></p>

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

<page>
<a name="p3"></a>

<p align="center"><font size=2><b>ACTV, INC. AND SUBSIDIARIES<br>
  CONSOLIDATED STATEMENTS OF OPERATIONS<br>
  (Unaudited)</b></font></p>
<table width=100% border=0 cellspacing=0 cellpadding=0>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=5 align="center"><b><font size=1>For the Three Months Ended June&nbsp;30,</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=5 align="center"><b><font size=1>For the Six Months Ended June&nbsp;30,</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></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><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>2002</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>2001</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>2002</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>2001</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Revenues</font></td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="10%" align="right"><font size=2>3,233,518</font></td>
    <td width="2%">&nbsp;</td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="10%" align="right"><font size=2>4,226,452</font></td>
    <td width="2%">&nbsp;</td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="10%" align="right"><font size=2>6,419,939</font></td>
    <td width="2%">&nbsp;</td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="10%" align="right"><font size=2>7,499,894</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Costs and expenses:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Selling, general
        and administrative</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>8,553,363</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>12,657,243</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>14,603,779</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>26,746,378</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Depreciation
        and amortization</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,399,491</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,466,813</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,704,952</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,886,335</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Amortization
        of goodwill</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,042,308</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,460,806</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Stock-based
        compensation reduction</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(4,121,649</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(6,002,831</font></td>
    <td><font size=2>)</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(2,819,155</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Total costs
        and expenses</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>9,952,854</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>11,044,715</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>11,305,900</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>28,274,364</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Loss from operations</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(6,719,336</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(6,818,263</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(4,885,961</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(20,774,470</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Interest income</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>413,037</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,171,229</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>701,577</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,791,638</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Other (expense)/income</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(6,820,334</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>12,955,697</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(9,280,207</font></td>
    <td><font size=2>)</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>4,220,285</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 3%; text-indent: -3%"><font size=2>(Loss)/income
        before minority interest and cumulative effect of accounting change</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(13,126,633</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>7,308,663</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(13,464,591</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(13,762,547</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Minority interest - subsidiaries</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>917,584</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>819,157</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>1,706,400</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>1,513,771</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom">
    <td><div style="margin-left: 3%; text-indent: -3%"><font size=2>(Loss)/income
        before cumulative effect of accounting change</font></div></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(12,209,049</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>8,127,820</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(11,758,191</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(12,248,776</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 3%; text-indent: -3%"><font size=2>Cumulative
        transition effect of adopting SFAS No. 133</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>&#151;</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>&#151;</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>&#151;</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(58,732,197</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Net (loss)/income</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(12,209,049</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>8,127,820</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$ </font></td>
    <td align="right"><font size=2>(11,758,191</font></td>
    <td><font size=2>)</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(70,980,973</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td colspan=2><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Net (loss)/income per share:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Basic</font></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Before cumulative
        effect of accounting change</font></div></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(0.22</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>0.15</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>$ </font></td>
    <td align="right"><font size=2>(0.21</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(0.23</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Cumulative
        transition effect of adopting SFAS No. 133</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(1.08</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Basic net
        (loss)/income per share</font></div></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(0.22</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>0.15</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$ </font></td>
    <td align="right"><font size=2>(0.21</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(1.31</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td colspan=2><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Diluted</font></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Before cumulative
        effect of accounting change</font></div></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(0.22</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>0.14</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$ </font></td>
    <td align="right"><font size=2>(0.21 </font></td>
    <td><font size=2>)</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(0.23</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Cumulative
        transition effect of adopting SFAS No. 133</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(1.08</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Diluted net (loss)/income per share</font></div></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(0.22</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>0.14</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$ </font></td>
    <td align="right"><font size=2>(0.21</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(1.31</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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>
    <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>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Shares used in basic calculations</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>55,936,341</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>55,916,619</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>55,910,282</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>54,147,428</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Shares used in diluted calculations</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>55,936,341</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>60,107,307</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>55,910,282</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>54,147,428</font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="center">
<i><font size=2>See notes to consolidated financial statements.</font></i></p>
<p align="center">
<font size=2>3</font></p>

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

<page>
<a name="p4"></a>

<p align="center">
<b><font size=2>ACTV, INC. AND SUBSIDIARIES<br>CONSOLIDATED STATEMENTS OF CASH FLOWS<br>(Unaudited)</font></b></p>
<table width=80% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=5 align="center"><b><font size=1>For the Six Months Ended June
      30,</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=5 align="center"><hr size="1" noshade></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>2002</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>2001</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td><font size=2>Cash flows from operating activities:</font></td>
    <td width="2%">&nbsp;</td>
    <td width="11%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td width="11%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Net loss</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="11%" align="right" bgcolor="#eeeeee"><font size=2>(11,758,191</font></td>
    <td width="2%" bgcolor="#eeeeee"><font size=2>)</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="11%" align="right" bgcolor="#eeeeee"><font size=2>(70,980,973</font></td>
    <td width="1%" bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Adjustments
        to reconcile net loss to net cash used in operations:</font></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Cumulative
        transition effect of adopting SFAS No. 133</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>58,732,197</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Change
        in fair value of warrant</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>9,280,207</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(4,220,285</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Depreciation
        and amortization</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,704,952</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>4,347,141</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Deferred
        compensation - other</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>&#151;</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>75,000</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Stock-based
        compensation</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(6,002,831</font></td>
    <td><font size=2>)</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(2,819,155</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Amortization
        of deferred revenue</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(1,809,906</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(1,809,906</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Common stock
        issued in lieu of cash payment</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>89,156</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,767,275</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Deferred
        revenue</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(415,006</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>138,304</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Minority interest</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(1,706,400</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(1,513,771</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>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 valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Accounts
        receivable</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>111,656</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(1,528,965</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Other assets</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(106,676</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(2,097,101</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Accounts
        payable and accrued expenses</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(2,175,037</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(957,675</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Net cash used
        in operating activities</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(11,788,076</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(20,867,914</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>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 valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Investment
        in short-term investments</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(8,680,324</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>&#151;</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Investment
        in patents</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(399,687</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(567,499</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Investment
        in property and equipment</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(831,599</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(5,892,035</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Investment
        in software development costs</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(708,750</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(2,192,252</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Strategic
        investments</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(28,638</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(5,217,349</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Net cash used
        in investing activities</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(10,648,998</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(13,869,135</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>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 valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Transfer to
        restricted cash</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(1,066,278</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Net proceeds
        from equity financings</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>6,089</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>106,320</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Repayment
        of stockholders loans</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>18,751</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>35,910</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Net cash provided
        by/(used in) financing activities</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>24,840</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(924,048</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Net decrease in cash and cash equivalents</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(22,412,234</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(35,661,097</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Cash and cash
        equivalents, beginning of period</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>69,035,707</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>122,488,041</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Cash
        and cash equivalents, end of period</font></div></td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>46,623,473</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>86,826,944</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
</table>
<p>
<b><font size=2>Supplemental Disclosure to the Consolidated Statements of Cash Flows</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>The following schedule provides additional information concerning retirement of common stock and acquisitions:</font></p>
</div>
<table width=80% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=5><b><font size=1>For the Six Months Ended June&nbsp;30,</font></b></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=5><hr size="1" noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="center" colspan=2><b><font size=1>2002</font></b></td>
    <td>&nbsp;</td>
    <td align="center" colspan=2><b><font size=1>2001</font></b></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td align="right"><hr size="1" noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td bgcolor="#eeeeee"><font size=2>Retirement of Common Stock:</font></td>
    <td width="2%" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size=2>115,786</font></td>
    <td width="2%" bgcolor="#eeeeee">&nbsp;</td>
    <td width="2%" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size=2>1,520,000</font></td>
    <td width="1%" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr>
    <td><font size=2>Purchase Acquisitions:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Assets acquired
      (excluding cash)</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,089,071</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr bgcolor="#eeeeee">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Liabilities
      assumed</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,695,524</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Market value
      of shares issued</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>27,475,090</font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="center">
<i><font size=2>See notes to consolidated financial statements.</font></i></p>
<p align="center">
<font size=2>4</font></p>

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

<page>
<a name="p5"></a>

<p align="center">
<b><font size=2>ACTV, INC. AND SUBSIDIARIES<br>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS&#146; EQUITY<br>
(Unaudited)</font></b></p>
<table width=100% border=0 cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td rowspan="3" valign="bottom">&nbsp;</td>
    <td colspan=4 align="center" valign="bottom"><b><font size=1>Common Stock</font></b></td>
    <td rowspan="3" valign="bottom">&nbsp;</td>
    <td colspan=2 rowspan="3" align="center" valign="bottom"><b><font size=1>Stockholder<br>
      Loans</font></b></td>
    <td rowspan="3" align="center" valign="bottom">&nbsp;</td>
    <td colspan=2 rowspan="3" align="center" valign="bottom"><b><font size=1>Additional
      Paid in<br>
      Capital</font></b></td>
    <td rowspan="3" valign="bottom">&nbsp;</td>
    <td colspan=2 rowspan="3" align="center" valign="bottom"><b><font size=1>Accumulated<br>
      Deficit</font></b></td>
    <td rowspan="3" align="center" valign="bottom">&nbsp;</td>
    <td colspan="2" rowspan="3" align="center" valign="bottom"><b><font size=1>Total</font></b></td>
    <td rowspan="3" align="center">&nbsp;</td>
  </tr>
  <tr>
    <td colspan=4 valign="bottom"><hr noshade size=1></td>
  </tr>
  <tr>
    <td align="center" valign="bottom"><b><font size=1>Shares</font></b></td>
    <td align="center" valign="bottom">&nbsp;</td>
    <td colspan=2 align="center" valign="bottom"><b><font size=1>Amount</font></b></td>
  </tr>
  <tr valign="bottom">
    <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="#eeeeee">
    <td><font size=2>Balance at December 31, 2001</font></td>
    <td width="10%" align="right"><font size=2>55,881,938</font></td>
    <td width="2%">&nbsp;</td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="8%" align="right"><font size=2>5,588,194</font></td>
    <td width="2%">&nbsp;</td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="8%" align="right"><font size=2>(339,035</font></td>
    <td width="2%"><font size=2> )</font></td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="8%" align="right"><font size=2>317,496,700</font></td>
    <td width="2%">&nbsp;</td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="8%" align="right"><font size=2>(263,073,366</font></td>
    <td width="2%"><font size=2> ) </font></td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="8%" align="right"><font size=2>59,672,493</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 3%; text-indent: -3%"><font size=2>Issuance of
        shares in connection with exercise of stock options and warrants</font></div></td>
    <td align="right"><font size=2>25,374</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,537</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>3,552</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>6,089</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 3%; text-indent: -3%"><font size=2>Adjustment to deferred stock compensation</font></div></td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(6,002,831</font></td>
    <td><font size=2>)</font></td>
    <td align="center">&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(6,002,831</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 3%; text-indent: -3%"><font size=2>Issuance of common stock for 401k plan</font></div></td>
    <td align="right"><font size=2>67,141</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>6,714</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>82,442</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>89,156</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 3%; text-indent: -3%"><font size=2>Retirement of common stock</font></div></td>
    <td align="right"><font size=2>(44,893</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(4,489</font></td>
    <td><font size=2>)</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(111,296</font></td>
    <td><font size=2>)</font></td>
    <td align="center">&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(115,785</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 3%; text-indent: -3%"><font size=2>Rescission/repayment of shareholder loans</font></div></td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>134,536</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>134,536</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Net loss</font></td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(11,758,191</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(11,758,191</font></td>
    <td><font size=2> )</font></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><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>
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 3%; text-indent: -3%"><font size=2>Balance at June&nbsp;30, 2002</font></div></td>
    <td align="right"><font size=2>55,929,560</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>5,592,956</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(204,499</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>311,468,567</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(274,831,557</font></td>
    <td><font size=2> ) </font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>42,025,467</font></td>
    <td>&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><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>
    <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>
</table>
<p align="center">
<i><font size=2>See notes to consolidated financial statements.</font></i></p>
<p align="center">
<font size=2>5</font></p>

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

<page>
<a name="p6"></a>

<p align="center">
<b><font size=2>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<br>
THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001</font></b></p>
<p> <b><font size=2>1.</font></b>&nbsp;&nbsp;<b><font size=2>Basis of Presentation</font></b><font size=2></font></p>
<div style="text-indent: 3%">
<p>
<font size=2>The results of operations for the three months ended June 30, 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>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>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>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>Certain reclassifications have been made to the prior years&#146; financial statements to conform to the 2002 presentation.</font></p>
</div>
<p> <b><font size=2>2.</font></b>&nbsp;&nbsp;<b><font size=2>Recent Accounting
  Pronouncements</font></b><font size=2></font></p>
<div style="text-indent: 3%">
  <p> <font size=2>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 completed the transitional goodwill impairment
    test as required by SFAS 142 using a measurement date of January 1, 2002.
    Based on the results of the transitional impairment test, we were not required
    to recognize an impairment of goodwill. We will continue to perform future
    impairment tests as required by SFAS 142. There can be no assurance that future
    impairment tests will not result in a charge to earnings.</font></p>
<p>
<font size=2>The following pro forma information for the three and six months ended June 30, 2001 presents net income/loss and income/loss per common share adjusted to exclude goodwill amortization expense of $1,042,308
and $1,460,806 recognized respectively during the periods.</font></p>
</div>
<table width=80% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td><font size="1">&nbsp;</font><font size="1">&nbsp;</font></td>
    <td colspan=2 align="center"><div align="center"><b><font size=1>Three&nbsp;Months&nbsp;Ended<br>
        June&nbsp;30, 2001</font></b></div></td>
    <td><div align="center"><font size="1">&nbsp;</font><font size="1">&nbsp;</font></div></td>
    <td colspan=2 align="center"><div align="center"><b><font size=1>Six&nbsp;Months&nbsp;Ended<br>
        June&nbsp;30, 2001</font></b></div></td>
    <td align="center"><font size="1">&nbsp;</font><font size="1">&nbsp;</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan="2"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td colspan="2"><hr size="1" noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Net income/(loss):</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>As reported</font></td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="15%" align="right"><font size=2>8,127,820</font></td>
    <td width="2%">&nbsp;</td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="15%" align="right"><font size=2>(70,980,973</font></td>
    <td width="2%"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Pro forma</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>9,170,128</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(69,520,167</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Income/(loss) per common share&#151;Basic:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>As reported</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>0.15</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(1.31</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Pro forma</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>0.16</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(1.28</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Income/(loss) per common share&#151;Diluted:</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>As reported</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>0.14</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(1.31</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Pro forma</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>0.15</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(1.28</font></td>
    <td><font size=2> )</font></td>
  </tr>
</table>
<p align="center">
<font size=2>6</font></p>

<hr noshade align="center" width="100%" size=2>
<page> <a name="p7"></a>
<p> <b><font size=2>3.</font></b>&nbsp;&nbsp;<b><font size=2>Intangible Assets
  and Goodwill</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>Goodwill totaled $12.9 million at June 30, 2002 and December 31, 2001. Our other intangible assets consist of patents, which as of June 30, 2002 and December 31, 2001 were as follows:</font></p>
</div>
<table width=80% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr align="center" valign="bottom">
    <td>&nbsp;</td>
    <td colspan="2"><b><font size=1>Gross<br>
      Intangible<br>
      Assets</font></b></td>
    <td>&nbsp;</td>
    <td colspan="2"><b><font size=1>Accumulated<br>
      Amortization</font></b></td>
    <td>&nbsp;</td>
    <td colspan="2"><b><font size=1>Net&nbsp;Intangible<br>
      Assets</font></b></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan="2"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td colspan="2"><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td colspan="2"><hr size="1" noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>June 30, 2002</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Patents</font></td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="10%" align="right"><font size=2>10,432,846</font></td>
    <td width="2%">&nbsp;</td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="10%" align="right"><font size=2>(1,936,326</font></td>
    <td width="2%"><font size=2> )</font></td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="10%" align="right"><font size=2>8,496,520</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>December 31, 2001</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Patents</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>10,033,157</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(1,607,268</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>8,425,889</font></td>
    <td>&nbsp;</td>
  </tr>
</table>
<div style="text-indent: 3%">
<p>
<font size=2>Amortization expense related to patents totaled $329,057 and $302,819 during the six months ended June 30, 2002 and 2001. The estimated aggregate future amortization expense for intangible assets remaining
as of June 30, 2002 is as follows:</font></p>
</div>
<table width=60% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Remainder of 2002</font></td>
    <td width="2%" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size=2>341,184</font></td>
    <td width="1%" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>2003</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>682,368</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>2004</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>682,368</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>2005</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>682,368</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>2006</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>682,368</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Thereafter</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>5,425,864</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Total</font></div></td>
    <td bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>8,496,520</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr size="2" noshade></td>
    <td align="right"><hr size="2" noshade></td>
    <td>&nbsp;</td>
  </tr>
</table>
<p> <b><font size=2>4.</font></b>&nbsp;&nbsp;<b><font size=2>Financial Instruments</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>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>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>
</div>
<p> <b><font size=2>5.</font></b>&nbsp;&nbsp;<b><font size=2>Acquisition of Intellocity</font></b></p>
<div style="text-indent: 3%">
<p> <font size=2>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. 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>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 assessed the realizability of the goodwill value attributed
to Intellocity at December 31, 2001. As a result of this assessment, we</font></p>
</div>
<p align="center">
<font size=2>7</font></p>
<hr noshade align="center" width="100%" size=2>

<page>
<a name="p8"></a>
<p>
<font size=2>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 $12.0 million.</font></p>
<div style="text-indent: 3%">
<p>
<font size=2>The results of Intellocity's operations are included in our consolidated results from the date of acquisition.</font></p>
<p>
<font size=2>The following table presents the pro forma results of operations had the acquisition of Intellocity been completed as of January 1, 2001. The pro forma results are shown for illustrative purposes only and
do not purport to be indicative of the results that would have been reported if the business combination had occurred on the date indicated or that may occur in the future. These pro forma amounts include estimates and assumptions that we believe
are reasonable.</font></p>
</div>
<table width=80% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan="2" align="center"><b><font size=1>For the Six<br>
      Months<br>Ended<br>
      June&nbsp;30, 2001</font></b></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Revenues</font></td>
    <td width="2%"><font size=2>$</font></td>
    <td width="10%" align="right"><font size=2>8,698,313</font></td>
    <td width="1%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 3%; text-indent: -3%"><font size=2>Loss before
        minority interest and cumulative effect of accounting change</font></div></td>
    <td align="left"><font size=2>$ </font></td>
    <td align="right"><font size=2>(14,610,251</font></td>
    <td><font size=2>)</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 3%; text-indent: -3%"><font size=2>Loss before cumulative effect of accounting change</font></div></td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>(13,096,480</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Net loss</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(71,828,677</font></td>
    <td><font size=2>)</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Basic and diluted</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 3%; text-indent: -3%"><font size=2>Loss per share before cumulative effect of accounting change</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(0.24</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Cumulative effect of accounting change</font></td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>(1.04</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Basic and diluted loss per share</font></td>
    <td align="left"><font size=2>$ </font></td>
    <td align="right"><font size=2>(1.28</font></td>
    <td><font size=2>)</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=2><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
</table>
<p> <b><font size=2>6.</font></b>&nbsp;&nbsp;<b><font size=2>Minority Interest</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>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. 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. OpenTV 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>For the three months ended June 30, 2002 and 2001, we allocated
    losses in the amount of $794,172 and $685,905, respectively, and for the six
    months ended June 30, 2002 and 2001, we allocated losses in the amount of
    $1,479,731 and $1,380,520, respectively, from Digital ADCO to its minority
    shareholders.</font></p>
  <p><font size=2>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 June 30, 2002 and 2001, we allocated losses in the amount of
    $123,412 and $133,251, respectively, and for the six months ended June 30,
    2002 and 2001, we allocated losses in the amount of $226,669 and $133,251,
    respectively, to the minority shareholders of this subsidiary.</font></p>
  <p>
<font size=2>The minority interest entry on our balance sheet at December 31, 2001, reflects a decrease of $6.9 million as compared to that recorded in previously reported financial statements. This decrease is the
result of a correction in the calculation of our minority interest liability and does not affect the minority interest benefit reported on our past statements of operations.</font></p>
</div>
<p align="center">
<font size=2>8</font></p>
<hr noshade align="center" width="100%" size=2>
<page> <a name="p9"></a>
<p> <b><font size=2>7.</font></b>&nbsp;<b><font size=2>Segment Information</font></b><font size=2></font></p>
<div style="text-indent: 3%">
<p>
<font size=2>We have two principal business segments, which are delineated by their respective markets: Digital Television and Enhanced Media. Information concerning these business segments for the three and six months
ending June 30, 2002 and 2001 is as follows:</font></p>
</div>
<table width=80% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=5 align="center"><b><font size=1>For the Three Months Ended June&nbsp;30,</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=5 align="center"><b><font size=1>For the Six Months Ended June&nbsp;30,</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=5 align="center"><hr size="1" noshade></td>
    <td align="center">&nbsp;</td>
    <td colspan=5 align="center"><hr size="1" noshade></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>2002</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>2001</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>2002</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>2001</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
    <td><hr size="1" noshade></td>
    <td><hr size="1" noshade></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><b><font size=2>Revenues</font></b></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Digital Television</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="12%" align="right" bgcolor="#eeeeee"><font size=2>849,385</font></td>
    <td width="2%" bgcolor="#eeeeee">&nbsp;</td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="12%" align="right" bgcolor="#eeeeee"><font size=2>1,820,097</font></td>
    <td width="2%" bgcolor="#eeeeee">&nbsp;</td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="12%" align="right" bgcolor="#eeeeee"><font size=2>1,705,494</font></td>
    <td width="2%" bgcolor="#eeeeee">&nbsp;</td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="12%" align="right" bgcolor="#eeeeee"><font size=2>2,549,413</font></td>
    <td width="1%" bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Enhanced Media</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,384,133</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,406,355</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>4,714,445</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>4,950,481</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Total</font></td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>3,233,518</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>4,226,452</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>6,419,939</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>7,499,894</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 3%; text-indent: -3%"><b><font size=2>Depreciation
        &amp; Amortization</font></b></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Digital Television</font></td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>813,131</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>688,244</font></td>
    <td>&nbsp;</td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>1,557,628</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>1,377,245</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Enhanced Media</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>321,107</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>405,597</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>627,637</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>824,312</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Unallocated Corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>265,253</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,415,280</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>519,687</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,145,584</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Total</font></td>
    <td bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>1,399,491</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>2,509,121</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>2,704,952</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>4,347,141</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><b><font size=2>Interest Income</font></b></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Digital Television</font></td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>12,231</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>73,787</font></td>
    <td>&nbsp;</td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>23,883</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>187,945</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Enhanced Media</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>12,276</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>490</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>21,395</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>3,298</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Unallocated Corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>388,530</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,096,952</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>656,299</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,600,395</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Total</font></td>
    <td bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>413,037</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>1,171,229</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>701,577</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>2,791,638</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><b><font size=2>Net (Loss)/Income</font></b></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Digital Television</font></td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>(3,312,790</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(1,667,007</font></td>
    <td><font size=2> )</font></td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>(4,851,444</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(3,499,440</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Enhanced Media</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(6,331,000</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(2,212,320</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(8,251,366</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(4,948,693</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Unallocated Corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(2,565,259</font></td>
    <td><font size=2> )</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>12,007,147</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,344,619</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(62,532,840</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Total</font></td>
    <td align="left"><font size=2>$ </font></td>
    <td align="right"><font size=2>(12,209,049</font></td>
    <td><font size=2>)</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>8,127,820</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$ </font></td>
    <td align="right"><font size=2>(11,758,191 </font></td>
    <td><font size=2>)</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(70,980,973</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><b><font size=2>Capital Expenditures</font></b></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Digital Television</font></td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>551,989</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>320,095</font></td>
    <td>&nbsp;</td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>734,487</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>4,517,605</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Enhanced Media</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>1,847</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>692,798</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>1,847</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>85,274</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Unallocated Corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>12,664</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>2,209,195</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>95,265</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>1,289,156</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Total</font></td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>566,500</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>3,222,088</font></td>
    <td>&nbsp;</td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>831,599</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>5,892,035</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
    <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>
</table>
<table width=80% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr>
    <td colspan="7">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td colspan="7"><b><font size=2>Balance Sheet Accounts</font></b></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>June&nbsp;30,&nbsp;2002</font></b></td>
    <td width="2%">&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>December&nbsp;31,&nbsp;2001</font></b></td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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">
    <td><b><font size=2>Current Assets</font></b></td>
    <td width="2%">&nbsp;</td>
    <td width="11%">&nbsp;</td>
    <td>&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td width="11%">&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Digital Television</font></td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="11%" align="right"><font size=2>3,567,639</font></td>
    <td width="2%">&nbsp;</td>
    <td width="2%" align="left"><font size=2>$</font></td>
    <td width="11%" align="right"><font size=2>4,061,843</font></td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Enhanced Media</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>6,283,656</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>4,735,475</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Unallocated Corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>57,430,719</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>72,206,506</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td><font size=2>Total</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>67,282,014</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>81,003,824</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><b><font size=2>Total Assets</font></b></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><font size=2>Digital Television</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>11,076,491</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>12,022,462</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Enhanced Media</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>16,339,066</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>24,471,782</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><font size=2>Unallocated Corporate</font></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>88,418,389</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>103,093,077</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Total</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>115,833,946</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>139,587,321</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
</table>
<p align="center">
<font size=2>9</font></p>

<hr noshade align="center" width="100%" size=2>
<page> <a name="p10"></a>
<p> <b><font size=2>8.</font></b>&nbsp;&nbsp;<b><font size=2>Executive Incentive
  Compensation</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>We incurred executive incentive compensation expense related to an executive bonus of $2,300,000 for the six months ended June 30, 2001. This expense related to incentive compensation awarded in the 2000
fiscal year but paid in a series of quarterly installments, which were subject to forfeiture under certain conditions. The contractual provision that gave rise to this bonus, which was based on changes in the market value of our common stock and
paid in unregistered securities, was cancelled during the second quarter of 2001.</font></p>
</div>
<p> <b><font size=2>9.</font></b>&nbsp;&nbsp;<b><font size=2>Investment in Warrant</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>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>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 are amortizing the deferred revenue into income over a period of 21 years, the contractual term of the joint marketing agreement.</font></p>
<p>
<font size=2>The estimated fair value of the warrants at June 30, 2002 was approximately $7.0 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>
</div>
<p>
<b><font size=2>10.&nbsp;&nbsp;Net (Loss)/Income Per Share</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>The following table sets forth the computation of basic and diluted (loss)/income per share:</font></p>
</div>
<table width=80% border=0 align="center" cellpadding=0 cellspacing=0>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=5 align="center"><b><font size=1>Three Months Ended</font></b></td>
    <td>&nbsp;</td>
    <td colspan=5 align="center"><b><font size=1>Six Months Ended</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=5 align="center"><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td colspan=5 align="center"><hr noshade size=1></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>June 30, 2002</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>June 30, 2001</font></b></td>
    <td>&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>June 30, 2002</font></b></td>
    <td align="center">&nbsp;</td>
    <td colspan=2 align="center"><b><font size=1>June 30, 2001</font></b></td>
    <td align="center">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom">
    <td><font size=2>Numerator</font></td>
    <td width="2%">&nbsp;</td>
    <td width="11%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td width="10%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td width="11%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
    <td width="11%">&nbsp;</td>
    <td width="2%">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>(Loss)/income
        before cumulative effect of accounting change</font></div></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$ </font></td>
    <td width="11%" align="right" bgcolor="#eeeeee"><font size=2>(12,209,049</font></td>
    <td bgcolor="#eeeeee"><font size=2>)</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="10%" align="right" bgcolor="#eeeeee"><font size=2>8,127,820</font></td>
    <td width="2%" bgcolor="#eeeeee">&nbsp;</td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$ </font></td>
    <td width="11%" align="right" bgcolor="#eeeeee"><font size=2>(11,758,191</font></td>
    <td width="2%" bgcolor="#eeeeee"><font size=2>)</font></td>
    <td width="2%" align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td width="11%" align="right" bgcolor="#eeeeee"><font size=2>(12,248,776</font></td>
    <td width="1%" bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Cumulative
        transition effect of adopting SFAS No. 133</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(58,732,197</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 9%; text-indent: -3%"><font size=2>Net (loss)/income</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(12,209,049</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>8,127,820</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(11,758,191</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(70,980,973</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Denominator</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Basic weighted-average
        shares outstanding</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>55,936,341</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>55,916,619</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>55,910,282</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>54,147,428</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Weighted-average
        options outstanding</font></div></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>&#151;</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>4,190,688</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>&#151;</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td align="right" bgcolor="#eeeeee"><font size=2>&#151;</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom">
    <td><div style="margin-left: 9%; text-indent: -3%"><font size=2>Diluted weighted
        average shares outstanding</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>55,936,341</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>60,107,307</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>55,910,282</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>54,147,428</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <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>
    <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 valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Net (loss)/income per share</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Basic</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td bgcolor="#eeeeee"><div style="margin-left: 6%; text-indent: -3%"><font size=2>Before cumulative
        effect of accounting change</font></div></td>
    <td bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(0.22</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>0.15</font></td>
    <td bgcolor="#eeeeee">&nbsp;</td>
    <td bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(0.21</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
    <td align="left" bgcolor="#eeeeee"><font size=2>$</font></td>
    <td align="right" bgcolor="#eeeeee"><font size=2>(0.23</font></td>
    <td bgcolor="#eeeeee"><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Cumulative
        transition effect of adopting SFAS No. 133</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(1.08</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Basic net
        (loss)/income per share</font></div></td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>(0.22</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>0.15</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$ </font></td>
    <td align="right"><font size=2>(0.21</font></td>
    <td><font size=2>)</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(1.31</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td colspan=2><hr noshade size=2></td>
    <td>&nbsp;</td>
    <td><hr noshade size=2></td>
    <td><hr noshade size=2></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><font size=2>Diluted</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Before cumulative
        effect of accounting change</font></div></td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>(0.22</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>0.14</font></td>
    <td>&nbsp;</td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>(0.21</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(0.23</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Cumulative
        transition effect of adopting SFAS No. 133</font></div></td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>&#151;</font></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font size=2>(1.08</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
    <td><hr noshade size=1></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom">
    <td><div style="margin-left: 6%; text-indent: -3%"><font size=2>Diluted net
        (loss)/income per share</font></div></td>
    <td><font size=2>$</font></td>
    <td align="right"><font size=2>(0.22</font></td>
    <td><font size=2> )</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>0.14</font></td>
    <td>&nbsp;</td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2> (0.21</font></td>
    <td><font size=2>)</font></td>
    <td align="left"><font size=2>$</font></td>
    <td align="right"><font size=2>(1.31</font></td>
    <td><font size=2> )</font></td>
  </tr>
  <tr valign="bottom">
    <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>
    <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> <b><font size=2>11.&nbsp;&nbsp;Corporate Restructuring</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>During the third and fourth quarter of 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. We had paid out all accrued restructuring charges by June 30, 2002.</font></p>

</div>
<p align="center">
<font size=2>10</font></p>
<hr noshade align="center" width="100%" size=2>
<page> <a name="p11"></a>
<p> <b><font size=2>12.&nbsp;&nbsp;Agreement with iN DEMAND</font></b></p>
<div style="text-indent: 3%">
  <p> <font size=2>In April 2002, we signed a multi-year agreement with iN DEMAND,
    pursuant to which iN DEMAND will use our digital video technology to offer
    digital cable customers Nascar In-Car on iN DEMAND. Nascar In-Car is a multi-channel
    television package that uses a mix of digital compression technology, real-time
    telemetry data and superior graphics to give subscribers an enhanced, interactive
    viewing experience. iN DEMAND, is distributing the package on a pay-per-view
    basis through certain digital cable systems in the US. Our agreement with
    iN DEMAND, which covers a total of approximately 90 races through 2004, obligates
    us to </font><font color="#1b1b1b" size=2></font><font size=2>incur certain
    production costs, which we estimate will average $170,000 per race. In turn,
    we receive a percentage of gross receipts from the sale of pay-per-view subscriptions.</font></p>
<p>
<font size=2>We cannot be certain that subscription sales will produce more than negligible revenues for us, given that Nascar In-Car is the first such programming ever sold in the U.S. Because commercialization of the
subscription package began in late June 2002, we do not yet have comprehensive data from the cable operators responsible for sales, billing and collection of the Nascar In-Car package fees. Accordingly, our reported revenues for the three and six
months ended June 30, 2002 reflect no revenue from Nascar In-Car.</font></p>
</div>
<p>
<b><font size=2>13.&nbsp;&nbsp;Supplemental Disclosure of Cash and Non-Cash Activities</font></b></p>
<div style="text-indent: 3%">
  <p> <font size=2>We recorded no reduction in non-cash stock-based compensation
    expense for the three months ended June 30, 2002 and a reduction in non-cash
    stock-based compensation expense in the amount of $6,002,831 for the six months
    ended June 30, 2002. We recorded a reduction of non-cash, stock-based compensation
    expense in connection with vested variable options of $4,121,649 and $2,819,155
    for the three and six months ended June 30, 2001, respectively. 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>During both the three months ended June 30, 2002 and June 30, 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>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. All
    the grantees were employees whose salary compensation had been reduced in
    conjunction with the Company's restructuring efforts in the second half of
    2001. However, the executive officers whose salary compensation was reduced
    were not eligible to participate.</font></p>
<p>
<font size=2>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 multiplied by 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>
<font size=2>Our June 30, 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 June 30, 2002 was less than the option
exercise price of $2.00 per share.</font></p>
</div>
<p> <b><font size=2>14. &nbsp;&nbsp;Agreement with Liberty Media Corporation Regarding
  Possible Acquisition of ACTV, Inc.</font></b></p>
<div style="text-indent: 3%">
  <p> <font size=2>In May 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. We entered into a 65-day
    exclusive negotiating period with Liberty with respect to the possible transaction,
    during which Liberty conducted due diligence. In July 2002, we executed an
    amended agreement with Liberty that extended the exclusive negotiating period
    to August 15, 2002 and reduced the consideration to be paid for ACTV shares
    to $1.65 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. On August 14, 2002, we agreed with Liberty
    to an extension of the amended agreement through September&nbsp;15, 2002.
    The proposed acquisition terms remained unchanged. 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>
</div>
<p align="center">
<font size=2>11</font></p>
<hr noshade align="center" width="100%" size=2>

<page>
<p><a name="p12"></a> </p>
<table width="100%" border=0 cellspacing=0 cellpadding=0>
  <tr valign="top">
    <td width="10%"><b><font size=2>ITEM 2.&nbsp;</font></b></td>
    <td colspan="2"><b><font size=2>MANAGEMENT&#146;S DISCUSSION
      AND ANALYSIS</font></b> <b><font size=2>OF FINANCIAL CONDITION AND RESULTS
      OF OPERATIONS</font></b><font size=2>&nbsp;</font></td>
  </tr>
</table>
<p><b><font size=2>Overview</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>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>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>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>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>We have received strategic investments from Liberty Media Corporation, our largest shareholder, and Motorola Broadband Communications Sector.</font></p>
</div>
<p>
<b><font size=2>Results of Operations</font></b></p>
<p>
<b><u><font size=2>Comparison of Three-Month Periods Ended June 30, 2002 and June 30, 2001</font></u></b><font size=2></font></p>
<div style="text-indent: 3%">
<p>
<i><font size=2>Revenues.</font></i><font size=2>&nbsp;During the three-month period ended June 30, 2002, our revenues decreased 24%, to $3.2 million, compared with $4.2 million in the three-month period ended June 30, 2001.
The decrease was principally the result of a decline in technical and professional service revenue from our Digital Television segment.</font></p>
  <p> <i><font size=2>Total Selling, General and Administrative Expenses.</font></i><font size=2>&nbsp;Total
    selling, general and administrative expenses decreased approximately 32% in
    the second quarter of 2002, to $8.6 million, from $12.7 million in the second
    quarter of 2001. The decrease reflects significantly reduced personnel, occupancy
    and related expenses in the more recent quarter, which more than compensated
    for increased costs related to our Nascar In-Car project, launched in the
    second quarter of 2002.</font></p>
  <p> <i><font size=2>Stock-Based Compensation</font></i><font size=2>.&nbsp;We
    recorded no increase or decrease in stock-based compensation expense for the
    three months ended June 30, 2002, as compared to a credit of stock-based compensation
    expense of $4.1 million for the three months ended June 30, 2001. We had recorded
    a charge or credit to stock-based compensation expense based on increases
    in the market value of our common stock in excess of the exercise price of
    certain employee options, which 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 the options in question. Although we have other currently outstanding options
    subject to variable option accounting treatment, the exercise price of these
    options was greater than the market price on each reporting date since their
    issuance in January 2002. Accordingly, we recognized no stock-based compensation
    expense related to such options.</font></p>
<p> <i><font size=2>Depreciation and Amortization</font></i><font size=2>.&nbsp;Depreciation
  and amortization expense decreased 44%, to $1.4 million in the three months
  ended June 30, 2002, versus $2.5 million during the same period in 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
  June 30, 2002. Depreciation expense for our Digital Television segment showed
  a marginal increase, from $0.7 million in the second quarter of 2001 to $0.8
  million in the more recent quarter, as the result of capital equipment purchases
  in 2002 related to the Nascar In-Car project.</font></p>
  <p> <i><font size=2>Interest Income</font></i><font size=2>.&nbsp;Interest income
    in second quarter of 2002 was $0.4 million, compared with $1.2 million in
    the second 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 second quarter of 2002
    or 2001.</font></p>
<p> <i><font size=2>Other (Expense)/Income.&nbsp;</font></i><font size=2>Other
  (expense)income 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 June 30,</font></p>
</div>
<p align="center">
<font size=2>12</font></p>
<hr noshade align="center" width="100%" size=2>

<page>
<a name="p13"></a>

<p> <font size=2>2002, we recorded a decrease in the value of the warrants of
  $6.8 million, compared with an increase of $13.0 million for the three months
  ended June 30, 2001.</font></p>
<div style="text-indent: 3%">
<p>
<i><font size=2>Net (Loss)/Income</font></i><font size=2>.&nbsp;For the three months ended June 30, 2002, our net loss was $12.2 million, or $0.22 per basic and diluted share, compared to net income of $8.1 million, or $0.15
per basic share and $0.14 per diluted share, for the three months ended June 30, 2001.</font></p>
</div>
<p>
<b><u><font size=2>Comparison of Six-Month Periods Ended June 30, 2002 and June 30, 2001</font></u></b><font size=2></font></p>
<div style="text-indent: 3%">
<p>
<i><font size=2>Revenues.</font></i><font size=2>&nbsp;During the six-month period ended June 30, 2002, our revenues decreased 15%, to $6.4 million, compared with $7.5 million in the six-month period ended June 30, 2001. The
decrease was principally due to a decline in technical and professional service revenue from our Digital Television segment. The revenue decline was even greater on a fully comparable basis, given that the 2001 six-month period included only four
months of results of Intellocity, which we acquired in March of that year.</font></p>
<p> <i><font size=2>Total Selling, General and Administrative Expenses.&nbsp;</font></i><font size=2>Total
  selling, general and administrative expenses decreased approximately 45% in
  the first half of 2002, to $14.6 million, from $26.7 million in the first half
  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.</font></p>
  <p> <i><font size=2>Stock-Based Compensation.</font></i><font size=2>&nbsp;Stock-based
    compensation expense was credited $6.0 million for the six months ended June
    30, 2002, and credited $2.8 million for the six months ended June 30, 2001.
    We had recorded a charge or credit to stock-based compensation expense based
    on increases in the market value of our common stock in excess of the exercise
    price of certain employee options, which 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 the options in question. Although we have other currently outstanding options
    subject to variable options accounting treatment, the exercise price of these
    options was greater than the market price on each reporting date since their
    issuance in January 2002. Accordingly, we recognized no stock-based compensation
    expense related to such options.</font></p>
<p> <i><font size=2>Depreciation and Amortization</font></i><font size=2>.&nbsp;Depreciation
  and amortization expense decreased 37%, to $2.7 million in the six-month period
  ended June 30, 2002, from $4.3 million in the six-month period ended June 30,
  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 six months
  ended June 30, 2002.</font></p>
<p> <i><font size=2>Interest Income</font></i><font size=2>.&nbsp;Interest income
  in first half of 2002 was $0.7 million, compared with $2.8 million in the first
  half of 2001. The decrease was the result of lower average cash balances during
  the six months ended June 30, 2001. The decrease was the result of significantly
  reduced prevailing interest rates and lower average cash balances during the
  more period. We incurred no interest expense in the first half of 2002 or 2001.</font></p>
<p> <i><font size=2>Other (Expense)/Income.&nbsp;</font></i><font size=2>Other
  (expense)income 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 six months ended June 30, 2002, we recorded a decrease
  in the value of the warrants of $9.3 million, compared with an increase of $4.2
  million for the six months ended June 30, 2001.</font></p>
<p>
<i><font size=2>Cumulative Transition Effect of Change in Accounting Principle.</font></i><font size=2>&nbsp;Effective January 1, 2001, ACTV adopted FASB Statement No. 133, &#147;Accounting for Derivative Instruments and Hedging
Activities&#148;, as amended by SFAS 137 and 138(&#147;SFAS 133&#148;). SFAS 133 requires that all derivative financial instruments be recorded in the balance sheet at fair value. The provisions of SFAS 133 affected the accounting for our investment of 2.5
million restricted warrants for Liberty Livewire Corporation(&#147;Livewire&#148;). Prior to the adoption of SFAS 133, these warrants were carried at cost. With the adoption of SFAS 133, the Livewire investment is recorded at fair value. This resulted
recording a cumulative effect transition adjustment loss of $58.7 million at January 1, 2001. There may be periods with significant non-cash increases or decreases to our net income/loss pertaining to the Livewire investment.</font></p>
<p> <i><font size=2>Net Loss</font></i><font size=2>.&nbsp;For the six months
  ended June 30, 2002, our net loss was $11.8 million, or $0.21 per basic and
  diluted share, compared to the net loss of $71.0 million, or $1.31 per basic
  and diluted share, for the six months ended June 30, 2001.</font></p>
</div>
<p>
<b><u><font size=2>Liquidity and Capital Resources</font></u></b><font size=2></font></p>
<div style="text-indent: 3%">
  <p> <font size=2>Since our inception, we have not generated revenues sufficient
    to fund our operations and have incurred operating losses. Through June 30,
    2002, we had an accumulated deficit of $274.8 million. Our cash position on
    June 30, 2002 (including short-term investments) was $64.3 million, compared
    with $78.0 million on December 31, 2001.</font></p>
<p>
<i><font size=2>Net Cash Used In Operating Activities.</font></i><font size=2>&nbsp;During the six month period ended June 30, 2002, we used cash of $11.8 million for operations, compared with $20.9 million for the six
months ended June 30, 2001. The decrease in net cash used by operating activities principally relates to lower operating losses and decreased working capital uses.</font></p>
  <p> <i><font size=2>Net Cash Used In Investing Activities and Capital Expenditures.</font></i><font size=2>&nbsp;With
    regard to investing activities, in the six months ended June 30, 2002, we
    used cash of $10.6 million, compared to $13.9 million in the six months ended
    June 30, 2001. Approximately $8.7 million of the more recent period&#146;s
    total related to investments in short-term financial instruments, compared
    to $0 of such investments in the</font></p>
</div>
<p align="center">
<font size=2>13</font></p>
<hr noshade align="center" width="100%" size=2>

<page>
<a name="p14"></a>

<p> <font size=2>2001 quarter. The large decrease in cash used in other investing
  activities is due principally to a significant reduction in capital expenditures
  and strategic investments. </font></p>
<div style="text-indent: 3%">
  <p><font size=2>In April 2001, we provided $5 million in financing to Playboy.com,
    Inc. in the form of an 8% convertible promissory note. The note was automatically
    converted on August 13, 2001 into shares of Series A Convertible Preferred
    Stock of Playboy.com. The Series A Convertible Preferred
    Stock is convertible into common stock of Playboy.com on a one-to-one basis,
    and may be redeemed at the holder&#146;s option, after five years, and has
    customary anti-dilution provisions. Holders of the Series A Convertible Preferred
    Stock will receive a non-cumulative 8% per annum dividend. If Playboy.com is unable to pay the redemption price for the Series A Convertible Preferred Stock, a holder can require payment by Playboy Enterprises, Inc. In this event, Playboy Enterprises, Inc. has the
option of making such payment in cash or in shares of its common stock.</font></p>
  <p> <i><font size=2>Net Cash Provided By (Used In) Financing Activities.</font></i><font size=2>&nbsp;We
    had no significant cash provided by or used in financing activities for either
    the six-month periods ended June 30, 2002 or June 30, 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
    a 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>
</div><p>
<b><font size=2>Critical Accounting Policies</font></b></p>
<div style="text-indent: 3%">
  <p> <font size=2>The cost of patents, which represents 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
    15 years), which is less than the statutory life of each patent.</font></p>
  <p> <font size=2>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>We record a charge or a credit to stock-based compensation
    expense for increases or decreases in the market value of our common stock
    in excess of the exercise price of certain employee options that are subject
    to variable option accounting treatment. Our financial results for the three-month
    period in 2001 and the six-month periods in both 2002 and 2001 reflect credits
    in stock-based compensation pursuant to certain employee options. These credits
    are the result of market price declines of our common stock during these periods.
    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 therefore no charges were recorded in the second quarter of 2002.</font></p>

  <p> <font size=2>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.
    All the grantees were employees whose salary compensation had been reduced
    in conjunction with the Company's restructuring efforts in the second half
    of 2001. However, the executive officers whose salary compensation was reduced
    were not eligible to participate. 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>
<font size=2>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>
</div>
<p>
<b><font size=2>Impact of Inflation</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>Inflation has not had any significant effect on our operating costs.</font></p>
</div>
<p>
<b><font size=2>Item 3.&nbsp;&nbsp;Quantitative and Qualitative Disclosures About Market Risk</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>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>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. 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>
</div>
<p align="center">
<font size=2>14</font></p>
<hr noshade align="center" width="100%" size=2>

<page>
<a name="p15"></a>

<div style="text-indent: 3%">
  <p> <font size=2>We record stock-based compensation expense based on increases
    and decreases in the market price of our common stock above the exercise price
    of employee options that are subject to variable option accounting treatment.
    To the extent that we have a stock-based compensation obligation at the beginning
    of a given reporting period, we recognize 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 will increase as the market price for our common stock increases
    at the end of a reporting period.</font></p>

  <p> <font size=2>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.
    All the grantees were employees whose salary compensation had been reduced
    in conjunction with the Company&#146;s restructuring efforts in the second
    half of 2001. However, the executive officers whose salary compensation was
    reduced were not eligible to participate. 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>
</div>
<p align="center"> <b><font size=2>PART II. OTHER INFORMATION</font></b></p>
<p><b><font size=2>Item 1.&nbsp;&nbsp;Legal Proceedings</font></b></p>
<div style="text-indent: 3%">
  <p> <font size=2>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</font> <i><font size=2>Sunday Night</font></i><font size=2>
    and ABC</font> <i><font size=2>Monday Night Football</font></i><font size=2>
    telecasts has infringed and is continuing to infringe certain of the plaintiffs'
    patents. In May 2002, the United States District Court for the Southern District
    of New York granted summary judgment in favor of the defendants. Without addressing
    the validity and enforceability of the three patents in suit, the Court reached
    summary judgment on non-infringement alone. On July 3, 2002, the Company appealed
    the District Court&#146;s decision to the U.S. Court of Appeals for the Federal Circuit in Washington, D.C.</font></p>
</div>
<p><b><font size=2>Item 2.&nbsp;&nbsp;Changes in Securities</font></b></p>
<div style="text-indent: 3%">
  <p> <font size=2>Not applicable.</font></p>
</div>
<p><b><font size=2>Item 3.&nbsp;&nbsp;Defaults Upon Senior Securities</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>Not applicable.</font></p>
</div>
<p><b><font size=2>Item 4.&nbsp;&nbsp;Submission of Matters to a Vote of Stockholders</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>None.</font></p>
</div>
<p><b><font size=2>Item 5.&nbsp;&nbsp;Other Information</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>None.</font></p>
</div>
<p><b><font size=2>Item 6.&nbsp;&nbsp;Exhibits and Reports on Form 8-K</font></b></p>
<table width="100%" border=0 cellpadding=0 cellspacing=0>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size=2>(a)&nbsp;&nbsp;</font></td>
    <td valign="top" colspan="6"><font size=2>Exhibits</font></td>
  </tr>
  <tr>
    <td width="3%" valign="top">&nbsp;</td>
    <td width="3%" valign="top">&nbsp;</td>
    <td width="3%" valign="top">&nbsp;</td>
    <td width="3%" valign="top">&nbsp;</td>
    <td width="3%" valign="top">&nbsp;</td>
    <td width="3%" valign="top">&nbsp;</td>
    <td width="12%" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size=2>11</font></td>
    <td colspan="5" valign="top"><font size=2>Computation of net (loss)/income
      per share &#151; See Note 10.</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td colspan="5" valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size=2>99.1&nbsp;&nbsp;</font></td>
    <td colspan="5" valign="top"><font size=2>Certification.</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td valign="top" colspan="6">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top"><font size=2>(b)&nbsp;&nbsp;</font></td>
    <td valign="top" colspan="6"><font size=2>Reports on Form 8-K:</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td colspan="4" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td colspan="4" valign="top"><font size="2"><b>Date<br>
      <u>Filed</u></b></font></td>
    <td valign="top"><font size="2"><b>Item<br>
      <u>Reported</u></b></font></td>
    <td valign="top"><font size="2"><b><br>
      <u>Event</u></b></font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td colspan="4" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td colspan="4" valign="top"><font size="2">May 10, 2002&nbsp;</font></td>
    <td valign="top"><font size="2">Items 5 and 7.</font></td>
    <td valign="top"><font size="2">Press Release dated May 8, 2002 announcing
      the execution of a Letter Agreement by and between ACTV, Inc. and Liberty
      Media Corporation.</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td colspan="4" valign="top"><font size="2">&nbsp;</font></td>
    <td valign="top"><font size="2">&nbsp;</font></td>
    <td valign="top"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td colspan="4" valign="top"><font size="2">May 30, 2002&nbsp;</font></td>
    <td valign="top"><font size="2">Items 5 and 7.</font></td>
    <td valign="top"><font size="2">Press Release dated May 24, 2002 announcing
      summary judgment in favor of the Walt Disney Co. and certain of its subsidiaries
      (collectively &#147;Walt Disney&#148;) in connection with ACTV, Inc.&#146;s
      patent infringement suit against Walt Disney.</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td colspan="4" valign="top"><font size="2">&nbsp;</font></td>
    <td valign="top"><font size="2">&nbsp;</font></td>
    <td valign="top"><font size="2">&nbsp;</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td colspan="4" valign="top"><font size="2">July 16, 2002</font></td>
    <td valign="top"><font size="2">Items 5 and 7.</font></td>
    <td valign="top"><font size="2">Press Release dated July 9, 2002 announcing
      the execution of an Amendment to the Letter Agreement by and between ACTV,
      Inc. and Liberty Media Corporation.</font></td>
  </tr>
  <tr>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td colspan="4" valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
    <td valign="top">&nbsp;</td>
  </tr>
</table>
<p align="center">
<font size=2>15</font></p>

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

<page>
<a name="p16"></a>

<p align="center"> <b><font size=2>SIGNATURES</font></b></p>
<div style="text-indent: 3%">
<p>
<font size=2>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>
</div>
<table width=100% border=0 cellspacing=0 cellpadding=0>
  <tr>
    <td height="20">&nbsp;</td>
    <td width="40%" align="left" valign="bottom"><b><font size=2>ACTV, Inc.</font></b></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="left" valign="bottom">&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="left" valign="bottom"><font size=2>Registrant</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td><font size=2>Date: August 13, 2002</font></td>
    <td><font size=2>/s/ David Reese</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="left" valign="bottom"><font size=2>David Reese</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="left" valign="bottom"><font size=2>Chairman, Chief Executive Officer
      and Director</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr align="left" valign="bottom">
    <td><font size=2>Date: August 13, 2002</font></td>
    <td><font size=2>/s/ Christopher C. Cline</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><hr noshade size=1></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="left" valign="bottom"><font size=2>Christopher C. Cline</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td align="left" valign="bottom"><font size=2>Chief Financial Officer<br>(Principal Financial and Accounting
      Officer)</font></td>
  </tr>
</table>
<p align="center"> <font size=2>16</font></p>

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

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   <title>ACTV, Inc. &#151; Exhibit 99.1 &#151; Converted by St Ives Burrups</title>
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<a name="page_1"></a>

<p align="right"> <font size=2><b>Exhibit 99.1</b></font></p>
<p align="center"><font size=2><b>Certification</b></font></p>
<p> <font size=2>To the extent required by the Sarbanes-Oxley Act of 2002, each
  of the undersigned officers does hereby certify, that to the best of his knowledge:</font></p>
<table width=100% border=0 cellspacing=0 cellpadding=0>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td width="3%"><font size=2>(a)&nbsp;</font></td>
    <td width="83%"><font size=2>The Quarterly Report on Form&nbsp;10-Q of the
      registrant, to which this certification is attached as an exhibit, fully
      complies with the requirements of Section&nbsp;13(a) of the Securities Exchange
      Act of 1934, as amended; and</font></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td><font size=2>(b)</font></td>
    <td><font size=2>The information contained in the Form&nbsp;10-Q fairly presents,
      in all material respects, the financial condition and results of operations
      of the registrant.</font></td>
  </tr>
</table>
<p>&nbsp; </p>
<p><font size=2><u>/s/ David Reese</u><br>
  David Reese<br>
  Chairman, Chief Executive Officer and Director</font></p>
<p> <font size=2><u>/s/ Christopher C. Cline</u><br>
Christopher C. Cline<br>
Chief Financial Officer<br>
(Principal Financial and Accounting Officer) </font></p>
<p>
<font size=2>August 13, 2002 </font></p>

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