<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

              |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001

                                       OR

             |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                       FOR THE TRANSITION PERIOD FROM TO

                        COMMISSION FILE NUMBER 000-26655

                           WINK COMMUNICATIONS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                     94-3212322
   (State or other jurisdiction of                      (I.R.S. Employer
   incorporation or organization)                      Identification No.)

                          1001 MARINA VILLAGE PARKWAY
                           ALAMEDA, CALIFORNIA 94501
                                 (510) 337-2950
                                  WWW.WINK.COM

         Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past (90) days. Yes [X] No [ ]

         The number of shares of the Registrant's Common Stock outstanding as of
July 31, 2001 was 31,220,000.


<PAGE>   2


                                      INDEX
<Table>
<Caption>

                                                                                                               PAGE
<S>          <C>                                                                                               <C>
             PART I FINANCIAL INFORMATION
Item 1.      Financial Statements
             Condensed Consolidated Balance Sheets...........................................................    3
             Condensed Consolidated Statements of Operations.................................................    4
             Condensed Consolidated Statements of Cash Flows.................................................    5
             Notes to Condensed Consolidated Financial Statements............................................    6
Item 2.      Management's Discussion and Analysis of Financial
             Condition and Results of Operations.............................................................    8
             Risk Factors....................................................................................   16
Item 3.      Quantitative and Qualitative Disclosures about Market Risk......................................   21

             PART II OTHER INFORMATION
Item 1.      Legal Proceedings...............................................................................   21
Item 2.      Changes in Securities...........................................................................   21
Item 3.      Defaults Upon Senior Securities.................................................................   22
Item 4.      Submission of Matters to a Vote of Security Holders.............................................   22
Item 5.      Other Information...............................................................................   22
Item 6.      Exhibits and Reports on Form 8-K................................................................   22
Signature-   ................................................................................................   23
</Table>



                                       2
<PAGE>   3

                            WINK COMMUNICATIONS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
           (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<Table>
<Caption>
                                  ASSETS                                                     JUNE 30,      DECEMBER 31,
                                                                                               2001            2000
                                                                                               ----            ----
                                                                                            (UNAUDITED)
<S>                                                                                      <C>              <C>
Current Assets:
   Cash and cash equivalents........................................................     $      25,622    $      22,093
   Short-term investments...........................................................            71,229           98,907
   Accounts receivable - related parties, net.......................................               797            3,253
   Accounts receivable - third parties, net.........................................               715              722
   Prepaid expenses and other current assets........................................             1,459            2,361
                                                                                         -------------    -------------
      Total current assets .........................................................            99,822          127,336
Property and equipment, net.........................................................             4,824            4,638
Deferred charges and other assets - related parties, net............................            10,415            7,473
Deferred charges and other assets - third parties, net..............................             8,214            7,013
                                                                                         -------------    -------------
                                                                                         $     123,275    $     146,460
                                                                                         =============    =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable.................................................................     $       1,303    $       1,500
   Accrued expenses.................................................................             3,414            4,139
   Due to related parties...........................................................            10,437           10,060
   Deferred revenue - related parties...............................................             1,052            1,832
   Deferred revenue - third parties.................................................             1,071            1,379
                                                                                         -------------    -------------
      Total current liabilities.....................................................            17,277           18,910
                                                                                         -------------    -------------
Stockholders' Equity:
   Common Stock, $0.001 par value; 100,000 shares authorized;
      31,145 and 31,102 shares issued and outstanding...............................                31               31
   Additional paid-in capital.......................................................           267,511          263,439
   Stockholders' notes receivable...................................................            (1,291)          (2,499)
   Unearned compensation............................................................           (50,381)         (52,306)
   Accumulated deficit..............................................................          (109,844)         (82,788)
   Accumulated other comprehensive (loss) income....................................               (28)           1,673
                                                                                         --------------   -------------
      Total stockholders' equity....................................................           105,998          127,550
                                                                                         -------------    -------------
                                                                                         $     123,275    $     146,460
                                                                                         =============    =============
</Table>


     See accompanying notes to condensed consolidated financial statements.



                                       3
<PAGE>   4
                           WINK COMMUNICATIONS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
<Table>
<Caption>

                                                                    THREE MONTHS ENDED         SIX MONTHS ENDED
                                                                         JUNE 30,                  JUNE 30,
                                                                 -----------------------    ----------------------
                                                                     2001         2000         2001        2000
                                                                     ----         ----         ----        ----
<S>                                                                  <C>         <C>         <C>          <C>
Revenues:
     Licenses - related parties ..................................   $    13     $   120     $     59     $    243
     Licenses - third parties ....................................       237         233          627          507
     Services - related parties ..................................     1,216         283        2,457          412
     Services - third parties ....................................       742           -          769            -
                                                                     -------     -------     --------     --------
         Total revenues ..........................................     2,208         636        3,912        1,162
                                                                     -------     -------     --------     --------
Costs and expenses:
     Revenue sharing and launch fees - related parties............     5,234         152        9,741          416
     Revenue sharing and launch fees - third parties..............     2,858         396        6,080          445
     Sales and marketing .........................................     2,744       2,000        4,959        3,774
     Operating....................................................     2,234       2,020        4,900        4,299
     Product development .........................................     2,276       2,632        4,523        4,578
     General and administrative ..................................     1,885       1,721        3,628        3,082
                                                                     -------     -------     --------     --------
         Total costs and expenses ................................    17,231       8,921       33,831       16,594
                                                                     -------     -------     --------     --------
Loss from operations .............................................   (15,023)    (8,285)     (29,919)     (15,432)
Interest income and other, net....................................       589       1,953        2,863        3,626
                                                                     -------     -------     --------     --------
Net loss .........................................................$  (14,434)    $(6,332)    $(27,056)    $(11,806)
                                                                  ===========    ========    =========    =========
Net loss per share:
     Basic and diluted ...........................................   $(0.46)     $(0.21)     $ (0.87)     $ (0.39)
     Weighted average shares used in computing both basic
         and diluted net loss per share...........................    31,136      30,482       31,096       30,153
</Table>



     See accompanying notes to condensed consolidated financial statements.




                                       4
<PAGE>   5
                            WINK COMMUNICATIONS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED
<Table>
<Caption>
                                                                       SIX MONTHS ENDED
                                                                            JUNE 30,
                                                                     ---------------------
                                                                       2001        2000
                                                                     ---------   ---------
<S>                                                                    <C>        <C>
Cash flows from operating activities:
     Net loss ....................................................   $(27,056)   $(11,806)
     Adjustments to reconcile net loss to net
       cash used in operating activities:
         Depreciation and amortization of property and equipment..      1,164         735
         Amortization of deferred launch fees.....................      4,768          --
         Stock-based costs and expenses ..........................      6,773       1,596
         Net loss on equity investment ...........................      1,221          44
         Changes in assets and liabilities:
              Accounts receivable - related parties...............      2,456        (558)
              Accounts receivable - third parties.................          7         223
              Prepaid expenses & other current assets.............        902         232
              Deferred charges and other assets - related parties.     (7,231)         --
              Deferred charges and other assets - third parties...     (2,899)        (41)
              Accounts payable ...................................       (197)       (600)
              Accrued expenses ...................................       (725)        781
              Due to related parties..............................        377          (6)
              Deferred revenues - related parties.................       (780)         --
              Deferred revenues - third parties...................       (308)        (96)
                                                                      --------    --------
Net cash used in operating activities.............................    (21,528)     (9,496)
                                                                      --------    --------
Cash flows from investing activities:
     Net proceeds from sale of short-term investments.........         25,977       3,063
     Purchase of private equity securities........................         --      (4,271)
     Property and equipment purchases.............................     (1,350)     (1,847)
                                                                      --------    --------
Net cash provided by (used in) investing activities...............     24,627      (3,055)
                                                                      -------     --------
Cash flows from financing activities:
     Proceeds from Common Stock issuances.........................        430       2,466
     Proceeds from stockholders' notes receivable.................         --         250
     Principal payments on capital lease obligations..............         --        (225)
                                                                      -------     --------
Net cash provided by financing activities.........................        430       2,491
                                                                      -------     -------
Net increase (decrease) in cash and cash equivalents..............      3,529     (10,060)
Cash and cash equivalents at beginning of period..................     22,093      58,032
                                                                      -------     -------

Cash and cash equivalents at end of period........................    $25,622     $47,972
                                                                      =======     =======

Schedule of supplemental non-cash investing and financing activities:
Repurchase of Common Stock and cancellation
   of related stockholder note receivable.........................    $ 1,208     $    --
                                                                      =======     =======
Common Stock issued for services..................................    $   585     $    --
                                                                      =======     =======
</Table>

     See accompanying notes to condensed consolidated financial statements.


                                       5
<PAGE>   6
                           WINK COMMUNICATIONS, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 JUNE 30, 2001
                                  (UNAUDITED)

NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION

Wink Communications, Inc. (the "Company") was incorporated in California on
October 7, 1994 and reincorporated in Delaware on August 12, 1999. The Company
offers an enhanced television broadcasting system that adds interactivity and
electronic commerce opportunities to traditional television programming and
advertising.

The accompanying condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary, Wink Japan, Inc. All
intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with the rules of the Securities and
Exchange Commission. In the opinion of management they reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of such information. The condensed balance sheet data as of
December 31, 2000 is derived from the audited financial statements as of and for
the year then ended and does not include all notes and disclosures required by
accounting principles generally accepted in the United States of America for
complete financial statements. Accordingly, these financial statements should be
read in conjunction with the consolidated financial statements, accompanying
notes and Management's Discussion and Analysis of Financial Condition and
Results of Operations included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2000, as amended. The results of operations
for the interim period ended June 30, 2001, are not necessarily indicative of
results to be expected for the full year or any other period.

RECLASSIFICATIONS

Certain prior period balances have been reclassified to conform to the current
period presentation.

NOTE 2 - NET LOSS PER SHARE

Basic net loss per share is computed using the weighted average number of common
shares outstanding. Diluted net loss per share is computed using the weighted
average number of common and potential common shares outstanding. Potential
common shares consist of unvested restricted common shares and common shares
issuable upon the exercise of stock options and warrants (using the treasury
stock method). Potential common shares are excluded from the computation if
their effect is anti-dilutive. Total potential common shares at June 30, 2001
and 2000 were 11,900,000 and 8,552,000, respectively.



                                       6
<PAGE>   7

The following table sets forth the computation of basic and diluted net loss per
share for the periods indicated (in thousands, except per share amounts):
<Table>
<Caption>
                                                                     THREE MONTHS ENDED        SIX MONTHS ENDED
                                                                          JUNE 30,                 JUNE 30,
                                                                          --------                 --------
                                                                      2001        2000         2001        2000
                                                                      ----        ----         ----        ----
<S>                                                                  <C>         <C>         <C>          <C>
Numerator:
     Net Loss ...................................................    $(14,434)   $(6,332)    $(27,056)    $(11,806)
Denominator:
     Weighted average shares ....................................     31,140      30,796       31,102       30,557
     Weighted average unvested Common
       shares subject to repurchase .............................        (4)       (314)          (6)        (404)
                                                                     -------     -------     --------     --------
Denominator for basic and diluted ...............................     31,136      30,482       31,096       30,153
                                                                     =======     =======     ========     ========
Net loss per share:
     Basic and diluted...........................................    $(0.46)     $(0.21)     $ (0.87)     $ (0.39)
                                                                     =======     =======     ========     ========
</Table>

NOTE 3 - RELATED PARTY TRANSACTIONS

In June 2001, the Company entered into a three year Cable Affiliation Agreement
(the "Agreement") with a cable system operator to develop, deliver, and promote
interactive content and Wink's viewer response services for the cable operator's
subscribers. The cable system operator's controlling stockholder is a
stockholder of the Company. Pursuant to the Agreement, the Company is committed
to provide revenue guarantees of up to $5.00 per year for each Wink-enabled
household during the first 12 months of deployment and $2.50 per year
thereafter. For agreeing to deploy the Wink service as a standard feature to its
digital subscribers, the Company will also make two $1.0 million dollar launch
fee payments to the cable system operator in January 2002 and January 2003, plus
a contingent launch bonus in 2002 of up to $1.00 per Wink-enabled household
deployed if certain deployment criteria are met.

In conjunction with the Agreement, the Company granted the cable system operator
a fully vested, immediately exercisable warrant. The warrant enables the holder
to purchase 1,000,000 shares of Common Stock at $4.40 per share and expires in
June 2011. The fair value of the warrant on the measurement date totaled
$4,264,000. During the period ended June 30, 2001, warrant amortization
recognized as revenue sharing and launch fee expense totaled $118,000. The
remaining $4,146,000 will be recognized as revenue sharing and launch fee
expense ratably over the remainder of the three year term of the Agreement. At
June 30, 2001 the warrant had not been exercised.

NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business
Combinations." SFAS No. 141 requires the purchase method of accounting for
business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. The Company believes that the adoption of SFAS No.
141 will not have a significant impact on its consolidated financial statements.

In July 2001, the FASB issued Statement of Financial Accounting Standards No.
142 ("SFAS No. 142"), "Goodwill and Other Intangible Assets", which is effective
for fiscal years beginning after March 15, 2001. SFAS No. 142 requires, among
other things, the discontinuance of goodwill amortization and the testing for
impairment of goodwill at least annually. The Company currently does not carry
intangible assets or goodwill in its balance sheet and therefore anticipates
that the adoption of SFAS No. 142 will not have a material impact on the
Company's consolidated financial position and results of operations.

In April 2001, the FASB's Emerging Issues Task Force reached consensus on Issue
No. 00-25, "Vendor Income Statement Characterization of Consideration Paid to a
Reseller of the Vendor's Products" ("EITF 00-25"). EITF 00-25 requires that
consideration from a vendor to a retailer should be classified in the vendor's
income statement as a reduction of revenue except when there is sufficient
evidence of the fair value of the separate benefits received from the retailer.
EITF 00-25 will be effective for annual or interim financial statements for
periods beginning after December 15, 2001. Upon application of the provisions of
EITF 00-25, financial statements for prior periods presented for comparative
purposes should be





                                       7
<PAGE>   8
reclassified to comply with these provisions. The Company is currently
evaluating, but has not yet determined, the impact of EITF 00-25 on its
consolidated financial position and results of operations.


NOTE 5 - COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) includes all changes in equity during a period from
non-owner sources. The primary differences between net loss and comprehensive
loss is due to the unrealized gains on available-for-sale securities.
Comprehensive loss for the three months and six months ended June 30, 2001 was
$15,695,000 and $28,757,000 as compared to a reported net loss of $14,434,000
and $27,056,000, respectively. Comprehensive loss for the three months and six
months ended June 30, 2000 was $5,895,000 and $11,381,000 as compared to a
reported net loss of $6,332,000 and $11,806,000, respectively.


ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

         The discussion in this Report on Form 10-Q contains certain trend
analysis and other forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Act of 1934, as
amended. Words such as "anticipate," "believe," "plan," "estimate," "expect,"
"seek," and "intend," and words of similar importance are intended to identify
such forward-looking statements. These forward-looking statements are based on
current expectations as of today only and involve risk and uncertainties. Due to
economic and advertising market variables, the rate in which Wink Enhanced
Broadcasting is deployed and acceptance of Wink Enhanced Broadcasting by
consumers, among other factors, actual results may differ materially from those
expressed or forecasted in the forward-looking statements, including, but not
limited to, those set forth in this discussion under "Risk Factors" and other
risks detailed from time to time in reports filed with the Securities and
Exchange Commission. In addition, factors that could cause or contribute to such
differences include, but are not limited to, those discussed in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2000, as amended (the
"Form 10-K").

         Our operating performance each quarter is subject to various risks and
uncertainties as discussed in our Form 10-K. The following discussion should be
read in conjunction with the section entitled "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Form 10-K. In particular, the factors set forth below in "Risk Factors" could
affect our operating results and financial condition.

OVERVIEW

         Wink Communications was founded in 1994, and our activities to date
have consisted of:

         -       developing  and adapting our technology for operation in
                 televisions  and advanced  analog and digital  set-top boxes;

         -       licensing our Wink Studio authoring tool software to major
                 broadcast and cable networks, third-party developers and
                 advertisers to enable them to develop Wink Enhanced
                 Broadcasting;

         -       licensing our Wink Server software to broadcast and cable
                 networks and cable system operators to incorporate Wink
                 enhancements into their television programming;

         -       developing the Wink Response Network for collecting and
                 managing responses to Wink Enhanced Broadcasting;

         -       marketing the concept of Wink Enhanced Broadcasting and
                 establishing the Wink brand; and

         -       establishing relationships with and licensing our technology to
                 key television industry participants.

         Sources of Revenue. Through June 30, 2001, our revenues have been
primarily derived from non-recurring and consulting engineering services under
agreements to integrate Wink technology to various televisions and set-top
boxes, license






                                       8
<PAGE>   9
fees relating to the Wink Engine, Wink Studio, and Wink Broadcast Server
software, charter advertising fees and service fees relating to software
installation and post-installation customer support. Non-recurring engineering
services have been recognized using the percentage-of-completion method, using
labor hours as a measure of progress towards completion. Engineering consulting
revenues have been recognized on a "time and materials" basis. Fees from
installation services and post-installation customer support are recognized
ratably over the term of the agreement. We recognize software license revenues
relating to the Wink Engine on a "sell-through" basis upon notification of
shipment of Wink-enabled set-top boxes or televisions by the original equipment
manufacturer. License fees from Wink Studio and Wink Broadcast Server software
are recognized ratably over the term of the subscription license agreement. Fees
invoiced in advance of revenue recognition are included on the balance sheet as
deferred revenue.

         Business Plan. Our business plan is to derive the primary portion of
our future revenues from the Wink Response Network by charging transaction fees
to advertisers and merchants for each information request or purchase order
obtained from viewers who respond to Wink Enhanced Broadcasting and to provide
data services related to those responses. The Wink Response Network was
activated on a limited basis in the second half of 1998. However, no significant
transaction fee revenue has been recognized to date. Substantially all the
revenues earned from advertisers and merchants utilizing the Wink Response
Network as of June 30, 2001 have been related to charter advertising agreements
that provide for a flat fee to be paid in lieu of transaction fees. These fees
have been recognized ratably over the life of the agreement, generally one year.
Over the next few quarters, we intend to transition some of these advertiser
agreements from a flat fee payment structure to a transaction and data provider
fee basis. We have also entered into several agreements with advertisers and
merchants that will pay fees on a transaction basis, and we intend to enter into
more of these agreements in the future. The revenues recognized under these
agreements were insignificant for the three and six months ended June 30, 2001.
We may also derive revenue in the future from sales of products by us through
our dedicated interactive and virtual channels. To date, the majority of our
revenue has been derived from non-recurring and consulting engineering and
installation services.

         The statements regarding our business plan and future sources of
revenue are forward-looking, and actual results may differ materially. Factors
that could cause future sources of revenue to differ include, but are not
limited to: (1) the response of advertisers and merchants to a system that would
charge them transaction fees for viewers' information requests or purchase
orders; (2) the desire of viewers to purchase merchandise through the Wink
Response Network; and (3) the response of creators of programming or advertising
who will need to create high-quality content that appeals and motivates viewers.

         Revenue Sharing and Launch Fees. Revenue sharing and launch fees
include costs related to our agreements with cable and satellite system
operators to deploy the Wink service to their subscribers. Such costs include:
amortization of warrants issued to the operators, revenue shares and guarantees,
marketing funds, amortization of launch funds and equipment subsidies provided
to the operators. In future periods, revenue sharing and launch fees are
expected to increase significantly and to include the portion of transaction
fees shared with and guaranteed to certain television industry participants, as
well as costs of sales performance incentives to various consumer electronics
retailers to encourage them to register their customers as Wink users.

         Sales and Marketing. Sales and marketing expense includes salaries,
non-cash charges for employee stock-based compensation, consulting fees,
travel-related costs and advertising expenses associated with our sales and
consumer marketing departments. Sales and marketing expense also includes costs
related to marketing materials, commercial spots and training for the launch of
Wink Enhanced Broadcasting in new cable systems. We expect sales and marketing
expense to increase in the future as additional personnel are hired and
additional advertising costs are incurred to support anticipated growth.

         Operating. Operating expense includes costs associated with our
operations departments, including personnel costs, expenses related to the
Company's internal information systems and costs of operating the Wink Response
Network, including processing and telecommunication costs and payments to
third-party consultants and customer service representatives. We expect
operating expense to increase in the future as additional third-party
consultants are used, additional telecommunications costs are incurred and
additional depreciation expense is generated on larger equipment balances to
support anticipated growth.

         Product Development. Product development expense includes costs
associated with our engineering and business development departments, including
personnel costs, non-cash charges for employee stock-based compensation and fees
to third-party consultants. Costs of developing the Wink technology to be
incorporated in several different set-top box platforms for both our cable and
direct broadcast satellite system operators and continued work on enhancing our
proprietary automated Wink Response Network comprise a significant portion of
product development expenses. We expect product development expense to





                                       9
<PAGE>   10
increase in the future as additional personnel are hired and additional
third-party consultants are used to support anticipated growth.

         General and Administrative. General and administrative expense includes
administrative and executive personnel costs, rent, facilities, legal expenses
for general corporate and intellectual property purposes, investor relations
costs associated with being a public company and non-cash stock-based
compensation charges. We believe that as operations continue to increase in size
and scope, general and administrative expenses will continue to increase,
although at a lower percentage than in past periods.

         We have incurred net losses since inception and, at June 30, 2001, had
an accumulated deficit of $109.8 million. We may never achieve favorable
operating results or profitability. See "Risk Factors --We have a history of
losses and expect future losses."

RESULTS OF OPERATIONS

         Since inception, we have been engaged primarily in the development and
licensing of Wink Enhanced Broadcasting. Accordingly, our historical results of
operations are not indicative of and should not be relied upon as an indicator
of future performance.

THREE MONTHS ENDED JUNE 30, 2001 AND 2000

REVENUES

         Total revenues increased 246% to $2.2 million for the three months
ended June 30, 2001, compared to $636,000 for the three months ended June 30,
2000. The increase in 2001 resulted primarily from a significant increase in
service revenue of $1.7 million, or 592%. The increase in service revenue was
primarily due to engineering consulting and installation services provided to
related parties totaling $1.2 million for the three months ended June 30, 2001,
whereas $283,000 was recognized for the three months ended June 30, 2000. Third
party service revenues, comprising of engineering consulting and Wink Response
Network related services, increased $742,000, or 100% over the same period last
year. During the three months ended June 30, 2001, license revenues decreased by
a total of $103,000, or 29%, compared to the same period in the prior year due
to a decrease in royalty revenue from set-top box manufacturers. During the
three months ended June 30, 2001, transactions with a related party and a third
party accounted for 44% and 13% of our total revenues, respectively.

COSTS AND EXPENSES

         Total costs and expenses increased 93% to $17.2 million for the three
months ended June 30, 2001, compared to $8.9 million for the three months ended
June 30, 2000. The $8.3 million increase was primarily a result of increased
revenue sharing and launch fees, including significant increases in equipment
subsidies and other launch funds provided to our affiliated cable and satellite
operators. A substantial increase in non-cash charges for warrant amortization
and additional operating costs associated with the development, testing and
deployment of Wink Enhanced Broadcasting also contributed to this increase of
costs and expenses. We believe that continued expansion of our operations and
our sales and marketing efforts is critical to the achievement of our goals.
Therefore, we believe that costs and expenses will continue to increase.

         Costs and expenses include non-cash charges for stock compensation and
warrant amortization as follows:

                                                        THREE MONTHS ENDED
                                                             JUNE 30,
                                                       2001           2000
                                                       ----           ----

Revenue sharing and launch fees..............   $   2,848,000    $     414,000
Sales and marketing .........................         263,000          208,000
Product development .........................         121,000          129,000
General and administrative...................         121,000          192,000
                                                -------------    -------------
                                                $   3,353,000    $     943,000
                                                =============    =============



                                       10
<PAGE>   11
          Revenue sharing and launch fees. Revenue sharing and launch fees
increased $7.6 million to $8.1 million for the three months ended June 30, 2001,
from $548,000 for the three months ended June 30, 2000. The increase was
primarily due to a $5.0 million increase in various costs related to the
development and launch of Wink Enhanced Broadcasting with our affiliated cable
and direct satellite system operators, including revenue guarantees, which were
insignificant in 2000, and launch funds and equipment subsidies that were not
incurred during the three months ended June 30, 2000 because the Wink service
had not been deployed with a significant distribution partner as of June 30,
2000. The increase was also due to a $2.4 million increase in non-cash charges
for stock warrant amortization. The increase in stock warrant amortization from
the same period in the prior year is primarily related to amortization of
warrants that were issued, mostly in the second half of 2000, in connection with
new distribution agreements with certain cable and satellite system operators.
As of June 30, 2001, there were approximately four million households deployed
with the Wink service. We believe that the number of Wink-enabled households
will continue to increase in the future.

          In June 2001, we entered into a three-year Cable Affiliation Agreement
(the "Agreement") with a cable system operator to develop, deliver, and promote
interactive content and Wink's viewer response services for the cable operator's
subscribers.  The cable system operator's controlling stockholder is a
stockholder of Wink. Pursuant to the Agreement, we are committed to provide
revenue guarantees of up to $5.00 per year for each Wink-enabled household
during the first 12 months of deployment and $2.50 per year thereafter. For
agreeing to deploy the Wink service as a standard feature to its digital
subscribers, we will also make two $1.0 million dollar launch fee payments to
the cable system operator in January 2002 and January 2003, plus a contingent
launch bonus in 2002 of up to $1.00 per Wink-enabled household deployed if
certain deployment criteria are met.

          In conjunction with the Agreement, we granted the cable system
operator a fully vested, immediately exercisable warrant. The warrant enables
the holder to purchase 1,000,000 shares of common stock at $4.40 per share and
expires in June 2011. The fair value of the warrant on the measurement date
totaled $4,264,000. During the period ending June 30, 2001, amortization
recognized as revenue sharing and launch fee expense totaled $118,000. The
remaining $4,146,000 will be recognized as revenue sharing and launch fee
expense ratably over the remainder of the three year term of the Agreement. At
June 30, 2001 the warrant had not been exercised.

                                       11
<PAGE>   12

         Sales and Marketing. Sales and marketing expense increased 35% to $2.7
million for the three months ended June 30, 2001, from $2.0 million for the
three months ended June 30, 2000. The increase was due to increases in personnel
and advertising costs to support our expanded activities.

         Operating. Operating expense increased 10% to $2.2 million for the
three months ended June 30, 2001, from $2.0 million for the three months ended
June 30, 2000. The increase was primarily due to additional telecommunications
costs incurred to operate the Wink Response Network and increased depreciation
expense for internal and deployment equipment purchased, both of which were
incurred to support increased Wink technology deployment activities and our
expanded operations.

         Product Development. Product development expense decreased 12% to $2.3
million for the three months ended June 30, 2001, from $2.6 million for the
three months ended June 30, 2000, as decreased engineering and product
development personnel costs were incurred due to decreases in headcount.

         General and Administrative. General and administrative expense
increased 12% to $1.9 million for the three months ended June 30, 2001, from
$1.7 million for the three months ended June 30, 2000. The increase was related
to the hiring of administrative and executive personnel to support anticipated
future growth and increased facilities expense, offset by a decrease in legal
fees related to the settlement of a patent infringement case in 2000.

         Interest and Other Income, Net. Interest and other income, net
decreased 71% to $589,000 for the three months ended June 30, 2001, from $2.0
million for the three months ended June 30, 2000. This decrease was primarily
due to the write-off of an equity investment in a private technology company
totaling $1.2 million. The decrease also included a $200,000 decrease in
interest income due to lower average cash and short-term investment balances for
the three months ended June 30, 2001.

         Income Taxes. We have not generated taxable income since inception and,
as a result, the provision for income taxes consists solely of the Delaware and
California minimum franchise taxes that are included in general and
administrative expenses. At June 30, 2001, we had federal net operating loss
carryforwards of approximately $87 million available to reduce future taxable
income. Under the Tax Reform Act of 1986, the amount of benefit from net
operating loss carryforwards may be impaired or limited, as we have incurred a
cumulative ownership change of more than 50%, as defined, over a three-year
period. Based on a number of factors, including the lack of a history of
profits, management believes that there is sufficient uncertainty regarding the
realization of deferred tax assets such that a full valuation allowance has been
established.

SIX MONTHS ENDED JUNE 30, 2001 AND 2000

REVENUES

         Total revenues increased 225% to $3.9 million for the six months ended
June 30, 2001, compared to $1.2 million for the six months ended June 30, 2000.
The increase in 2001 resulted primarily from a significant increase in service
revenue of $2.8 million, or 683%. The increase in service revenue was primarily
due to engineering consulting and installation services provided to related
parties totaling $2.5 million for the six months ended June 30, 2001, a $2.0
million increase over the




                                       12
<PAGE>   13
$412,000 recognized for similar services provided in the six months ended June
30, 2000. Third party service revenues, which is comprised of engineering
consulting and Wink Response Network related services, increased $769,000 over
the same period last year. During the six months ended June 30, 2001, license
revenues decreased by a total of $64,000, or 9%, compared to the same period in
the prior year due to a decrease in royalty revenue from set-top box
manufacturers, offset by Wink Studio and Wink Server license fees earned in
2001. During the six months ended June 30, 2001, transactions with a related
party accounted for 53% of our total revenues.

COSTS AND EXPENSES

         Total costs and expenses increased 104% to $33.8 million for the six
months ended June 30, 2001, compared to $16.6 million for the six months ended
June 30, 2000. The $17.2 million increase was primarily a result of a $9.9
million dollar increase in revenue sharing and launch fees, including
significant increases in equipment subsidies and other launch funds provided to
our affiliated cable and satellite operators. A substantial increase from prior
year in non-cash charges for stock and warrant amortization totaling $5.2
million and additional operating costs associated with the development, testing
and deployment of Wink Enhanced Broadcasting also contributed to this increase
of costs and expenses. We believe that continued expansion of our operations and
our sales and marketing efforts is critical to the achievement of our goals.
Therefore, we believe that costs and expenses will continue to increase.

         Costs and expenses include non-cash charges for stock compensation and
warrant amortization as follows:

                                                         SIX MONTHS ENDED
                                                             JUNE 30,
                                                             --------
                                                       2001           2000
                                                       ----           ----

Revenue sharing and launch fees...............  $   5,835,000    $     617,000
Sales and marketing ..........................        474,000          337,000
Product development ..........................        242,000          258,000
General and administrative....................        222,000          384,000
                                                -------------    -------------
                                                $   6,773,000    $   1,596,000
                                                =============    =============

         Revenue sharing and launch fees. Revenue sharing and launch fees
increased $14.9 million to $15.8 million for the six months ended June 30, 2001,
from $861,000 for the six months ended June 30, 2000. The increase is primarily
due to a $9.9 million rise in costs related to the development and launch of
Wink Enhanced Broadcasting with our affiliated cable and satellite system
operators, including revenue guarantees, which were insignificant in 2000,
launch funds and equipment subsidies that were not incurred during the six
months ended June 30, 2000, because the Wink service had not been deployed with
a significant distribution partner as of June 30, 2000. There was also a $5.2
million increase in non-cash charges for stock warrant amortization. The
increase in stock warrant amortization from the same period in the prior year is
primarily related to amortization of warrants that were issued in the second
half of 2000, in connection with new distribution agreements with certain cable
and satellite system operators. As of June 30, 2001, there were approximately
four million households deployed with the Wink service. We believe that the
number of Wink-enabled households will continue to increase in the future.

         Sales and Marketing. Sales and marketing expense increased 32% to $5.0
million for the six months ended June 30, 2001, from $3.8 million for the six
months ended June 30, 2000. The increase was due to increases in personnel and
advertising costs to support our expanded activities.

         Operating. Operating expense increased 14% to $4.9 million for the six
months ended June 30, 2001, from $4.3 million for the six months ended June 30,
2000. The increase was primarily due to additional telecommunications costs
incurred to operate the Wink Response Network and increased depreciation expense
for internal and deployment equipment purchased, both of which were incurred to
support increased Wink technology deployment activities and our expanded
operations

         Product Development. Product development expense was relatively flat
with a decrease of 2% to $4.5 million for the six months ended June 30, 2001,
from $4.6 million for the six months ended June 30, 2000. The decrease was due
to a decline in facilities related expenses, offset by slightly higher personnel
costs in 2001.

         General and Administrative. General and administrative expense
increased 16% to $3.6 million for the six months ended June 30, 2001, from $3.1
million for the six months ended June 30, 2000. The increase was related to the
hiring of



                                       13
<PAGE>   14
administrative and executive personnel to support anticipated future growth and
increased facilities expense, offset by a decrease in legal fees related to the
settlement of a patent infringement case in 2000.

         Interest and Other Income, Net. Interest and other income, net
decreased 19% to $2.9 million for the six months ended June 30, 2001, from $3.6
million for the six months ended June 30, 2000. This decrease was primarily due
to the write-off of an equity investment in a private technology company
totaling $1.2 million, offset by an increase in interest revenue due to
significant appreciation earned on fixed income short-term investments.

         Income Taxes. We have not generated taxable income since inception and,
as a result, the provision for income taxes consists solely of the Delaware and
California minimum franchise taxes that are included in general and
administrative expenses. At June 30, 2001, we had federal net operating loss
carryforwards of approximately $87 million available to reduce future taxable
income. Under the Tax Reform Act of 1986, the amount of benefit from net
operating loss carryforwards may be impaired or limited, as we have incurred a
cumulative ownership change of more than 50%, as defined, over a three-year
period. Based on a number of factors, including the lack of a history of
profits, management believes that there is sufficient uncertainty regarding the
realization of deferred tax assets such that a full valuation allowance has been
established.

LIQUIDITY AND CAPITAL RESOURCES

         Since inception, we have financed our activities largely through the
sale of equity securities and through proceeds from capital lease financing. As
of June 30, 2001, we have raised $104.5 million through the sale of our
Convertible Preferred Stock. In August 1999, we raised net proceeds of $77.3
million from the initial public offering of Common Stock. We had $96.9 million
of cash, cash equivalents and short-term investments at June 30, 2001.

         Net cash used in operating activities totaled $21.5 million and $9.5
million for the six months ended June 30, 2001 and 2000, respectively, primarily
as a result of our net losses.

         Net cash provided by investing activities totaled $24.6 million for the
six months ended June 30, 2001 and was attributable to the net proceeds from
liquidating short-term investments totaling $26.0 million, offset by the
acquisition of $1.4 million of property and equipment. Net cash used in
investing activities totaled $3.1 million for the six months ended June 30,
2000, and was attributable to the purchase of private equity securities totaling
$4.3 million and the acquisition of $1.8 million of property and equipment,
offset by net proceeds of short-term investments of $3.1 million.

         Net cash provided by financing activities for the six months ended June
30, 2001 was $430,000 and was due to proceeds from issuance of Common Stock
under our employee stock option and purchase plans. For the six months ended
June 30, 2000, net cash provided by financing activities was $2.5 million,
consisting principally of proceeds from issuance of Common Stock under our
employee stock option and purchase plans and the repayment of a stockholder note
balance of $250,000. These proceeds were partially offset by capital lease
obligation principal payments of $225,000.

         We have entered into agreements with Microsoft, cable and direct
broadcast satellite system operators and other television industry participants
who support Wink-enhanced programming, some of whom are also related parties, to
share with these entities a portion of revenues, if any, we generate from viewer
responses to Wink Enhanced Broadcasting. These revenue sharing commitments are
based upon the level of the commitment the particular participant has made to
support Wink Enhanced Broadcasting. To date, insignificant transaction fee
revenue has been recognized. To the extent that future transaction fee revenue
is generated, we will record the revenue sharing as a charge to revenue sharing
and launch fees in the period the revenue is recognized.

         For Microsoft and certain cable and direct broadcast satellite system
operators, some of whom are also related parties, we have also provided minimum
revenue guarantees. If Wink Enhanced Broadcasting fails to generate sufficient
revenue to meet the guaranteed amount per Wink subscriber, we are obligated to
pay the difference between the guaranteed amount and the amount actually earned.
Such revenue guarantees will be recognized in the period incurred. We have also
agreed to provide marketing and launch funds to a number of cable and direct
broadcast satellite system operators, some of which are contingent upon the
commercial launch of Wink Enhanced Broadcasting. Revenue guarantees range from
$1.00 to $5.00 per Wink-enabled household per year. Launch fees range from $0.50
to $5.00 per Wink-enabled household. As of June 30, 2001, there were
approximately four million households deployed with the Wink service. We believe
that the number of Wink-enabled households will continue to increase in the
future.




                                       14
<PAGE>   15
         We believe that our existing cash, cash equivalents and short-term
investments will be sufficient to meet our currently anticipated business
requirements, including capital expenditures and strategic operating programs,
for at least the next 12 months. Thereafter, if necessary, we may need to sell
additional equity or debt securities or obtain additional credit facilities. The
sale of additional equity or convertible debt securities may result in
additional dilution to our stockholders. We may not be able to raise any such
capital on terms acceptable to us, or at all.

RECENT ACCOUNTING PRONOUNCEMENTS

         In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business
Combinations." SFAS No. 141 requires the purchase method of accounting for
business combinations initiated after June 30, 2001 and eliminates the
pooling-of-interests method. We believe that the adoption of SFAS No. 141 will
not have a significant impact on our consolidated financial statements.

         In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 142 ("SFAS No. 142"), "Goodwill and Other Intangible Assets",
which is effective for fiscal years beginning after March 15, 2001. SFAS No. 142
requires, among other things, the discontinuance of goodwill amortization and
the testing for impairment of goodwill at least annually. We currently do not
carry intangible assets or goodwill on our balance sheet and therefore
anticipate that the adoption of SFAS No. 142 will not have a material impact on
our consolidated financial position and results of operations.

         In April 2001, the FASB's Emerging Issues Task Force reached consensus
on Issue No. 00-25, "Vendor Income Statement Characterization of Consideration
Paid to a Reseller of the Vendor's Products" ("EITF 00-25"). EITF 00-25 requires
that consideration from a vendor to a retailer should be classified in the
vendor's income statement as a reduction of revenue except when there is
sufficient evidence of the fair value of the separate benefits received from the
retailer. EITF 00-25 will be effective for annual or interim financial
statements for periods beginning after December 15, 2001. Upon application of
the provisions of EITF 00-25, financial statements for prior periods presented
for comparative purposes should be reclassified to comply with these provisions.
We are currently evaluating, but have not yet determined, the impact of EITF
00-25 on our consolidated financial position and results of operations.



                                       15
<PAGE>   16
RISK FACTORS

WE EXPECT TO INCUR SUBSTANTIAL OPERATING AND NET LOSSES.

         We have a limited operating history, which makes the prediction of
future results difficult. We have incurred significant net losses since
inception and, at June 30, 2001, had an accumulated deficit of $109.8 million.
To date, we have recognized minimal revenue, and our ability to generate revenue
is subject to substantial uncertainty. In addition, we currently intend to incur
substantial operating expenses to fund additional technological development,
sales, marketing, transaction processing and general activities. We expect that
our total operating expenses, excluding stock compensation charges, for the year
ending December 31, 2001 will be $65 to $70 million.

OUR LIMITED OPERATING HISTORY AND THE EMERGING MARKET FOR INTERACTIVE TELEVISION
MAKE OUR FUTURE FINANCIAL RESULTS UNPREDICTABLE.

         Since our inception, we have not had a profitable quarter and may never
achieve or sustain profitability. Although our revenues increased for each of
the last three years, we may not be able to sustain our historical revenue
growth rates. We also expect to continue to incur increasing revenue sharing and
launch fees, product development, operations, sales and marketing and general
and administrative expenses. In addition, a significant amount of our revenues
have been derived from services provided by us and not from transaction fees
paid by advertisers, merchants and network and cable programmers in conjunction
with Wink-enhanced advertising and in-show commerce opportunities. If we are to
achieve profitability given our planned expenditure levels, we will need to
generate and sustain substantially increased transaction fee, data service fees
and license and royalty revenues; however, our future revenue prospects,
particularly those derived from viewer response activities, are subject to a
high degree of uncertainty. As a result, we expect to incur significant and
increasing losses and negative cash flows for the foreseeable future.

OUR BUSINESS IS DEPENDENT UPON CONTENT PROVIDERS, DISTRIBUTORS, ADVERTISERS AND
CONSUMERS EMBRACING THE WINK TECHNOLOGY.

         Since our business plan is premised upon the expectation that we will
eventually receive the primary portion of our revenue directly from advertisers
and merchants, our business will suffer if advertisers and merchants do not
create and use Wink-enhanced advertising. Additionally, if Wink Enhanced
Broadcasting is not broadly accepted and promoted by cable and direct broadcast
satellite system operators, our business plan will not succeed. These operators
may choose not to implement Wink Enhanced Broadcasting for a variety of reasons.
Our success will depend heavily upon broad acceptance of Wink Enhanced
Broadcasting by television viewers. If significant numbers of viewers do not
request information or purchase goods and services in response to Wink-enhanced
programming and advertising, advertisers and merchants are likely to terminate
their use of Wink-enhanced advertising or never adopt Wink Enhanced
Broadcasting. Viewers may not react favorably to Wink Enhanced Broadcasting for
various reasons, such as they may feel it is too complex or they may be
concerned about security or privacy issues.

IF BROADCAST AND CABLE NETWORKS DO NOT AIR WINK-ENHANCED ADVERTISEMENTS, WE WILL
NOT GENERATE REVENUES FROM ADVERTISERS AND MERCHANTS

         Because Wink enhancements are only available to viewers of networks
that have adopted Wink Enhanced Broadcasting, we must rely upon networks to air
Wink-enhanced advertising and programming in order to execute our business plan.
While we have entered into agreements with 27 cable networks and four broadcast
networks, these agreements generally commit the networks to use only reasonable
efforts to air a specified amount of Wink-enhanced programming and do not
require a Wink programming enhancement to be available at all times during this
programming. In addition, some of the cable and broadcast networks agreements to
air Wink-enhanced programming have expired, although most continue to air such
programming. Moreover, our agreements allow the networks to select the
programming to be enhanced at their discretion, and do not require the networks
to employ enhanced broadcasting for all types of programming. Our agreements
with networks are short-term (generally one to eight years) and generally can be
terminated after one year. Some networks can also terminate their agreements
with us early upon the occurrence of certain events, including our failure to
achieve specific performance requirements. The termination of one or more of
these agreements, or our failure to enter into additional agreements and to
increase programming commitments substantially, may prevent us from generating
sufficient revenues to conduct our business.



                                       16
<PAGE>   17
IF ADVERTISERS AND MERCHANTS DO NOT CREATE AND USE WINK-ENHANCED ADVERTISING, WE
WILL NOT GENERATE REVENUES SUFFICIENT TO CONDUCT OUR BUSINESS.

         Since our business plan is premised upon receiving the primary portion
of our revenue directly from advertisers and merchants, our business will suffer
if advertisers and merchants do not create and use Wink-enhanced advertising. In
addition, if advertisers and merchants are unwilling to pay on a
fee-per-transaction basis and use our data service, we will not be able to
execute our business plan, as it currently exists.

         Under our "Charter Advertiser" program, our charter advertisers have
agreed to use only reasonable efforts to add Wink enhancements to a specified
number of their advertisements through various dates in 2001. We do not
currently have substantial commitments for advertising beyond 2001. If we are
unable to successfully negotiate favorable agreements with our charter
advertisers and additional advertisers for periods beyond 2001, our business
will suffer.

OUR ABILITY TO GENERATE REVENUES WILL SUFFER IF CREATORS OF PROGRAMMING OR
ADVERTISING DO NOT CREATE HIGH-QUALITY CONTENT

         In order for Wink to motivate viewers to interact with Wink-enhanced
programming and advertising, creators of programming and advertising must
develop and integrate high-quality Wink Enhanced Broadcasting content. If they
fail to do so, viewers may not respond to Wink-enhanced programming, which would
impair our ability to generate revenue.

WE WILL INCUR SUBSTANTIAL LIABILITY IF WINK ENHANCED BROADCASTING FAILS TO
GENERATE SUFFICIENT REVENUE TO MEET OUR REVENUE GUARANTEES AND OTHER
OBLIGATIONS.

         We have entered into agreements with Microsoft, cable and direct
broadcast satellite system operators and other market participants to share with
these entities a portion of revenues, if any, we generate from viewer responses
to Wink Enhanced Broadcasting. For certain cable and direct broadcast satellite
system operators, we have provided a minimum revenue guarantee. These guarantees
range from $1 to $5 per year per Wink-enabled home. In addition, we have given
minimum revenue guarantees to Microsoft ranging from $2 to $4 per year per
Wink-enabled device in which Microsoft controls the operating system,
application environment and content and data services, in exchange for certain
rights to process viewer responses to enhanced television offers. If Wink
Enhanced Broadcasting fails to generate sufficient revenue to meet these minimum
revenue guarantees, we will have to pay the difference between the guaranteed
amount and the amount actually earned by the operator or Microsoft. These
liabilities may be substantial.

         We have also agreed to provide launch and marketing funds to a number
of cable and direct broadcast satellite system operators, contingent upon the
commercial launch of Wink Enhanced Broadcasting, of up to $5.00 per household.

WE HAVE RELIED UPON A LIMITED NUMBER OF CUSTOMERS FOR A SIGNIFICANT PORTION OF
OUR REVENUES.

         We currently derive a significant portion of our revenues from a
limited number of customers. In the six months ended June 30, 2001, our four
largest customers accounted for 67% of our revenues, and one customer, a related
party, accounted for 53% by itself. In the year ended December 31, 2000, our
five largest customers, accounted for approximately 73% of our revenues. We do
not expect that we will continue to be dependent upon a limited number of
customers for a significant portion of our revenues in future periods since our
business plan is premised upon receiving the primary portion of our revenue
directly from several advertisers and merchants. As a result, if we fail to
successfully execute our business plan, as it currently exists, sell our
products and services to one or more customers in any particular period, or if a
large customer purchases fewer of our products or services or terminates its
relationship with us, our revenues could decline significantly.



                                       17
<PAGE>   18
WE HAVE DEPENDED ON ARRANGEMENTS WITH RELATED PARTIES.

         Revenues related to software licenses, engineering and installation
services provided to customers who are also holders of our Common Stock
represented $2,516,000 and $655,000 or 64% and 56% of our total revenues for the
six months ended June 30, 2001 and 2000, respectively. Additionally, revenue
sharing and launch fees paid to related parties were $9,741,000 or 29% of total
costs for the six months ended June 30, 2001. Related party costs were minor in
the six months ended June 30, 2000.

         Although we have negotiated each of our distribution agreements with
these stockholders at "arms length", it is possible that future agreements or
negotiations with these parties, if any, could be affected by the fact that they
own shares of our common stock. For example, specific terms of our agreements,
such as pricing, may be higher or lower than the prices that may be charged by,
or to, unrelated parties for similar services. Moreover, if our relationships
with these related parties were to change adversely, we could experience a
decline in revenues, which could have a material adverse affect on the price of
our common stock.

WE MAY INCUR NET LOSSES OR INCREASED NET LOSSES WHEN WE ARE REQUIRED TO RECORD A
SIGNIFICANT ACCOUNTING EXPENSE RELATED TO THE ISSUANCE OF WARRANTS.

         In 2000 and in the six months ended June 30, 2001, we entered into
agreements with several distribution partners whereby we agreed to issue
warrants to purchase up to an aggregate of 1.1 million shares of Common Stock
which are exercisable if those distribution partners satisfy certain milestones.
The value of the warrants will be estimated using the Black-Scholes model when
it becomes probable that the warrants will be earned and will be remeasured
until performance is complete. The value of the warrants will be amortized over
the estimated economic life of the arrangements with the distribution partners.
As of this filing, no warrants to purchase our common stock per these milestones
were earned by these distribution partners.

         If the warrants are earned, we could be required to record significant
non-cash accounting expenses related to these warrants. As a result, we could
incur net losses or increased net losses for a given period and this could
seriously harm our operating results and stock price.

THE EMERGING NATURE OF THE MARKET FOR INTERACTIVE TELEVISION MAY CREATE
SIGNIFICANT FLUCTUATIONS IN OUR QUARTERLY OPERATING RESULTS, WHICH COULD RESULT
IN A DECLINE IN THE TRADING PRICE OF OUR COMMON STOCK.

         Our future quarterly operating results may fluctuate significantly due
to a number of factors related to the emerging market including:

         -       the amount of transaction-processing activity through the Wink
                 Response Network;

         -       the timing and success of infrastructure upgrades necessary to
                 support deployment by industry participants;

         -       the timing of the change,  if any, in the basis of our
                 relationships  with  advertisers  and  merchants  from a fixed
                 flat fee arrangement to a fee-per-transaction arrangement; and

         -       the effect of stock-based incentives provided to various
                 industry participants.

         Due to these factors, it is possible that our operating results in one
or more future quarters will fail to meet or exceed the expectations of
securities analysts or investors. In such event, the trading price of our common
stock would likely decline.



                                       18
<PAGE>   19
THE FAILURE OF THE WINK RESPONSE NETWORK TO PERFORM EFFECTIVELY AND RELIABLY
WILL AFFECT OUR ABILITY TO EARN TRANSACTION FEE REVENUES.

         An essential part of our strategy is the generation of high volumes of
commercial transaction traffic through the Wink Response Network, in conjunction
with related information systems at broadcast and cable networks, cable and
direct broadcast satellite system operators, advertisers and merchants.
Consequently, the inability by us or our strategic partners, to operate and
maintain the required transaction-processing systems and associated
infrastructure for the Wink Response Network or the subsequent occurrence of
significant system interruptions or errors, would affect our ability to:

         -       consistently execute viewer response transactions;

         -       maintain satisfactory levels of customer service; and

         -       attract and retain strategic relationships in the television
                 industry.

         Upon the launch of DIRECTV in October 2000, we have begun capturing and
routing large numbers of transaction responses through the Wink Response Network
but we may not be able to accurately predict and prepare for significant
increases in response transactions, if any, or to effectively implement any
necessary system changes, expansion and upgrades in a timely manner. We may also
be required to change or upgrade the Wink Response Network in order to respond
to changes in the information systems used by advertisers, merchants, networks
or cable or direct broadcast satellite system operators.

WE FACE COMPETITION FROM A NUMBER OF COMPANIES.

         Current and potential competitors in one or more aspects of our
business include television and other system software companies, interactive
television system providers and multimedia authoring tool providers. We also
face competition from other providers and companies operating in the direct
marketing business, especially operators of toll-free response call centers.
Many of these companies may have significantly greater financial, technical,
manufacturing and marketing resources than us and may be in a better position to
compete in the industry.

         A number of companies are developing system software for the general
interactive television market, including Liberate Technologies, Sun
Microsystems, OpenTV and Canal Plus. OpenTV and Canal Plus already offer certain
products with features similar to Wink Enhanced Broadcasting. Many of these
competitors have the support of, or relationships with, industry participants
with which we also have relationships, which could adversely affect the extent
of support these market participants give to Wink Enhanced Broadcasting. In
addition, there also are a number of interactive system providers that have
developed proprietary software and hardware for adding interactivity to existing
television technologies, including Gemstar International Group, Worldgate
Communications, Source Media, ACTV, RespondTV and Commerce TV. In addition, one
or more of these entities or smaller companies might choose to pursue
hardware-independent, cross-platform opportunities directly competitive with
Wink Enhanced Broadcasting. If we are not able to compete successfully against
current or future competitors, our business, operating results and financial
condition will be materially adversely affected.

WE NEED TO ADAPT TO TECHNOLOGICAL CHANGE IN A MARKET THAT MAY NEVER FULLY
DEVELOP OR MAY DEVELOP WITH STANDARDS THAT ARE NOT COMPATIBLE WITH OUR
TECHNOLOGY.

         The emerging and unsettled market for interactive television will
require that we continually improve the performance, features and reliability of
Wink Enhanced Broadcasting, particularly in response to competitive offerings.
We may not be successful in responding quickly, cost-effectively and adequately
to these developments. The introduction of new technologies or standards for
enhanced broadcasting could render Wink Enhanced Broadcasting obsolete or
unmarketable. In addition, the widespread adoption of new television
technologies or standards, cable-based or otherwise, could require us to make
substantial expenditures to modify or adapt our technology, products, services,
network or business model.



                                       19
<PAGE>   20
GOVERNMENT REGULATIONS MAY ADVERSELY AFFECT OUR ABILITY TO BROADLY TRANSMIT WINK
ENHANCED BROADCASTING AND CAPTURE MARKETING DATA

     Governmental regulation of the telecommunications, media, broadcast and
cable television industries may adversely affect the ability of Wink and other
market participants to transmit Wink Enhanced Broadcasting. In addition, future
legislation or regulatory requirements regarding privacy issues could be enacted
to require notification to users that captured data may be used by marketing
entities to target product promotion and advertising to that user.

INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS MAY BE ASSERTED AGAINST US, WHICH
COULD DISRUPT OUR BUSINESS.

     If third parties assert claims of infringement of their proprietary
rights against us, we will incur significant costs and a diversion of resources
with respect to the defense of these claims. If any claims or actions are
asserted against us, we may seek to obtain a license under a third party's
intellectual property rights. However, a license under such circumstances may
not be available on reasonable terms, if at all.

     On September 15, 1999, a suit was filed in the United States District
Court for the Middle District of Florida, Fort Myers Division by Fort Myers
Broadcasting Company alleging federal trademark infringement, unfair competition
and dilution as well as injury to business reputation, unfair competition and
dilution in the state of Florida. If we fail to defend this allegation
successfully or settle the matter, our business and financial performance may be
adversely affected.

THE LOSS OF ANY OF OUR KEY PERSONNEL WOULD HARM OUR COMPETITIVENESS.

     We believe that our success will depend on the continued employment of
our senior management team and key technical personnel, none of whom, except
Maggie Wilderotter, our President and Chief Executive Officer, has an employment
agreement with us. If one or more members of our senior management team or key
technical personnel were unable or unwilling to continue in their present
positions, these individuals would be very difficult to replace and our ability
to manage day to day operations, develop and deliver new technologies, attract
and retain customers, attract and retain other employees and generate revenues,
would be seriously harmed.

WE RELY ON CONTINUOUS POWER SUPPLY TO CONDUCT OUR OPERATIONS, AND CALIFORNIA'S
CURRENT ENERGY CRISIS COULD DISRUPT OUR OPERATIONS AND INCREASE OUR EXPENSES.

     California is in the midst of an energy crisis that could disrupt our
operations and increase our expenses. In the event of an acute power shortage,
that is, when power reserves for the State of California fall below 1.5%,
California has on some occasions implements, and may in the future continue to
implement, rolling blackouts throughout the state. If blackouts interrupt our
power supply, we may be temporarily unable to operate. Any such interruption in
our ability to continue operations could delay the development of our products.
Future interruptions could damage our reputation, harm our ability to promote
the use of Wink-enhanced programming and advertising and could result in lost
revenue, any of which could substantially harm our business and results of
operations.

     Furthermore, the deregulation of the energy industry instituted in 1996
by the California government and shortages in wholesale electricity supplies
have caused power prices to increase dramatically, and these prices will likely
continue to increase for the foreseeable future. If wholesale prices continue to
increase, our operating expenses will likely increase, as our headquarters and
most of our employees are based in California. In addition, we do not carry
sufficient business interruption insurance to compensate us for losses that may
occur, and any losses or damages incurred by us could have a material adverse
effect on our business.



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ITEM 3.          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Interest Rate Sensitivity. Our exposure to market risk for interest
rate changes relates primarily to our short-term investment portfolio. We had no
derivative financial instruments as of June 30, 2001 or December 31, 2000. We
invest our marketable securities in accordance with our investment policy and
maintain our portfolio in the form of managed investment accounts comprised of
money market accounts, corporate bonds and government bonds and notes. We
consider all highly liquid investments with an original maturity of three months
or less when purchased to be cash equivalents. The primary objective of our
portfolio is to maintain proper liquidity to meet the operating needs of the
business. Our policy specifies credit quality standards for the investments and
limits the amount of credit exposure to any single issue, issuer or type of
investment. The weighted average maximum maturity of the portfolio is based on
the Lehman 1-3 index.

         Our holdings are subject to interest rate risk and will fall in value
in the event market interest rates increase. If market interest rates were to
increase immediately and uniformly by 50 basis points from levels as of June 30,
2001, we believe the fair value of the portfolio would decline by an immaterial
amount.

         Foreign Currency Exchange Risk. We conduct all of our transactions,
including those with foreign suppliers and customers, in U.S. dollars. We are
therefore not directly subject to the risks of foreign currency fluctuations and
do not hedge or otherwise deal in currency instruments in an attempt to minimize
such risks. Of course, demand from foreign customers and the ability or
willingness of foreign suppliers to perform their obligations to us may be
affected by the relative change in value of such customer or supplier's domestic
currency to the value of the U.S. dollar. Furthermore, changes in the relative
value of the U.S. dollar may change the price of our prices of our foreign
competitors. We may be subject to exposure in the future from our Japanese
subsidiary, which to date has not recognized any revenues or expenses.

PART II
OTHER INFORMATION

ITEM 1.          LEGAL PROCEEDINGS

         None

ITEM 2.          CHANGES IN SECURITIES

         On August 18, 1999, we commenced an initial public offering ("IPO") of
5,462,500 shares of common stock (including 200,000 shares sold by existing
stockholders and an underwriters' over-allotment option of 712,500 shares) at
$16.00 per share pursuant to a registration statement (No. 333-80221) (the
"Initial Registration Statement") and a related registration statement
(333-85531) filed pursuant to Rule 462(b) of the Securities Act. The Initial
Registration Statement was declared effective by the Securities and Exchange
Commission. The offering was completed on August 24, 1999, and all shares have
been sold. The aggregate gross proceeds from the offering were $84.2 million for
the shares sold by us and $3.2 million for the shares sold by the selling
stockholders.

         We have used, and continue to expect to use, the proceeds from the
offering for general corporate purposes, including working capital. A portion of
the proceeds may also be used for the acquisition of businesses that are
complementary to ours. Pending such uses, we have invested the net proceeds of
the IPO in interest-bearing securities that management considers to be credit
worthy.



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ITEM 3.          DEFAULTS UPON SENIOR SECURITIES

         None.

ITEM 4.          SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

ITEM 5.          OTHER INFORMATION

         None.

ITEM 6.          EXHIBITS AND REPORTS ON FORM 8-K

         None.



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                                    SIGNATURE

         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.



                            WINK COMMUNICATIONS, INC.
                            (Registrant)

                            By: /s/ JONATHAN W. SPATZ
                                -----------------------------------------------
                            Chief Financial Officer and Executive Vice President
                            (Principal Financial and Accounting Officer)

Date: August 13, 2001




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