<PAGE>


                                  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 SEPTEMBER 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
October 31, 2001 was 31,223,000.



<PAGE>
                                      INDEX


                                                                            PAGE
                                                                            ----
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.................................   10

                 Risk Factors..............................................   17

Item 3.          Quantitative and Qualitative Disclosures
                 about Market Risk.........................................   22

PART II OTHER INFORMATION

Item 1.          Legal Proceedings.........................................   23

Item 2.          Changes in Securities.....................................   23

Item 3.          Defaults Upon Senior Securities...........................   23

Item 4.          Submission of Matters to a Vote of Security Holders.......   23

Item 5.          Other Information.........................................   23

Item 6.          Exhibits and Reports on Form 8-K..........................   23

Signature-       ..........................................................   24

                                       2
<PAGE>


                            WINK COMMUNICATIONS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
           (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                SEPTEMBER 30,    DECEMBER 31,
                                                                                    2001             2000
                                                                                    ----             ----
                             ASSETS
<S>                                                                                <C>          <C>
Current Assets:
   Cash and cash equivalents ...................................................   $  13,799    $  22,093
   Short-term investments ......................................................      73,918       98,907
   Accounts receivable - related parties, net ..................................       1,499        3,253
   Accounts receivable - third parties, net ....................................       1,129          722
   Prepaid expenses and other current assets ...................................       1,491        2,361
                                                                                   ---------    ---------
      Total current assets .....................................................      91,836      127,336
Property and equipment, net ....................................................       4,812        4,638
Deferred charges and other assets - related parties, net .......................      10,609        7,473
Deferred charges and other assets - third parties, net .........................       7,896        7,013
                                                                                   ---------    ---------
                                                                                   $ 115,153    $ 146,460
                                                                                   =========    =========

                            LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable ............................................................   $   1,199    $   1,500
   Accrued expenses ............................................................       4,015        4,139
   Due to related parties ......................................................      12,155       10,060
   Deferred revenue - related parties ..........................................         534        1,832
   Deferred revenue - third parties ............................................       1,054        1,379
                                                                                   ---------    ---------
      Total current liabilities ................................................      18,957       18,910
                                                                                   ---------    ---------
Stockholders' Equity:
   Common Stock, $0.001 par value; 100,000 shares authorized;
      31,205 and 31,102 shares issued and outstanding ..........................          31           31
   Additional paid-in capital ..................................................     267,625      263,439
   Stockholders' notes receivable ..............................................      (1,291)      (2,499)
   Unearned compensation .......................................................     (46,823)     (52,306)
   Accumulated deficit .........................................................    (124,415)     (82,788)
   Accumulated other comprehensive income ......................................       1,069        1,673
                                                                                   ---------    ---------
      Total stockholders' equity ...............................................      96,196      127,550
                                                                                   ---------    ---------
                                                                                   $ 115,153    $ 146,460
                                                                                   =========    =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>


                            WINK COMMUNICATIONS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                         THREE MONTHS ENDED       NINE MONTHS ENDED
                                                             SEPTEMBER 30,           SEPTEMBER 30,
                                                             -------------          -------------
                                                          2001        2000        2001        2000
                                                          ----        ----        ----        ----
<S>                                                     <C>         <C>         <C>         <C>
Revenues:
    Licenses - related parties ......................   $     23    $    132    $     82    $    375
    Licenses - third parties ........................        191         211         818         718
    Services - related parties ......................      1,177       1,096       3,634       1,508
    Services - third parties ........................        364        --         1,133        --
                                                        --------    --------    --------    --------
       Total revenues ...............................      1,755       1,439       5,667       2,601
                                                        --------    --------    --------    --------

Costs and expenses:
    Revenue sharing and launch fees - related parties      5,913         569      15,654         985
    Revenue sharing and launch fees - third parties .      3,050         832       9,130       1,277
    Sales and marketing .............................      2,365       2,209       7,324       5,983
    Operating .......................................      2,464       1,857       7,364       6,156
    Product development .............................      1,957       3,547       6,480       8,125
    General and administrative ......................      1,692       1,625       5,320       4,707
                                                        --------    --------    --------    --------
       Total costs and expenses .....................     17,441      10,639      51,272      27,233
                                                        --------    --------    --------    --------
Loss from operations ................................    (15,686)     (9,200)    (45,605)    (24,632)
Interest income and other, net ......................      1,115       2,312       3,978       5,938
                                                        --------    --------    --------    --------
Net loss ............................................   $(14,571)   $ (6,888)   $(41,627)   $(18,694)
                                                        ========    ========    ========    ========

Net loss per share:
    Basic and diluted ...............................   $  (0.47)   $  (0.22)   $  (1.34)   $  (0.62)
    Weighted average shares used in computing
       both basic and diluted net loss per share ....     31,181      30,718      31,126      30,255
</TABLE>
    See accompanying notes to condensed consolidated financial statements.

                                       4

<PAGE>


                            WINK COMMUNICATIONS, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                   NINE MONTHS ENDED
                                                                                     SEPTEMBER 30,
                                                                                   2001          2000
                                                                                   ----          ----
<S>                                                                               <C>         <C>
Cash flows from operating activities:
    Net loss ..................................................................   $(41,627)   $(18,694)
    Adjustments to reconcile net loss to net cash used in operating activities:
       Depreciation and amortization of property and equipment ................      1,743       1,210
       Amortization of deferred launch fees ...................................      7,877        --
       Stock-based costs and expenses .........................................     10,332       3,319
       Net loss on equity investment ..........................................      1,221          99
       Changes in assets and liabilities:
         Accounts receivable - related parties ................................      1,754      (1,214)
         Accounts receivable - third parties ..................................       (407)        170
         Prepaid expenses & other current assets ..............................        870        (738)
         Deferred charges and other assets - related parties ..................    (10,242)       (333)
         Deferred charges and other assets - third parties ....................     (2,875)        252
         Accounts payable .....................................................       (301)       (595)
         Accrued expenses .....................................................       (124)        584
         Due to related parties ...............................................      2,095         410
         Deferred revenues - related parties ..................................     (1,298)        (68)
         Deferred revenues - third parties ....................................       (325)       (186)
                                                                                  --------    --------
Net cash used in operating activities .........................................    (31,307)    (15,784)
                                                                                  --------    --------

Cash flows from investing activities:
    Net proceeds from (purchases of) short-term investments ...................     24,385      (6,143)
    Purchase of private equity securities .....................................       --        (4,271)
    Property and equipment purchases ..........................................     (1,917)     (2,707)
                                                                                  --------    --------
Net cash provided by (used in) investing activities ...........................     22,468     (13,121)
                                                                                  --------    --------

Cash flows from financing activities:
    Proceeds from Common Stock issuances ......................................        545       3,275
    Proceeds from stockholders' notes receivable ..............................       --           250
    Principal payments on capital lease obligations ...........................       --          (365)
                                                                                  --------    --------
Net cash provided by financing activities .....................................        545       3,160
                                                                                  --------    --------
Net decrease in cash and cash equivalents .....................................     (8,294)    (25,745)
Cash and cash equivalents at beginning of period ..............................     22,093      58,032
                                                                                  --------    --------
Cash and cash equivalents at end of period ....................................   $ 13,799    $ 32,287
                                                                                  ========    ========

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>

                            WINK COMMUNICATIONS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 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 and regulations 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 year ended December 31, 2000, as amended. The results of operations for the
interim period ended September 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 September 30,
2001 and 2000 were 11,783,000 and 8,452,000, respectively.

                                       6

<PAGE>


                            WINK COMMUNICATIONS, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


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      NINE MONTHS ENDED
                                           SEPTEMBER 30,          SEPTEMBER 30,
                                           -------------          -------------
                                          2001        2000       2001        2000
                                          ----        ----       ----        ----
<S>                                    <C>         <C>        <C>          <C>
Numerator:
    Net Loss .......................   $(14,571)   $ (6,888)   $(41,627)   $(18,694)
                                       ========    ========    ========    ========
Denominator:
    Weighted average shares ........     31,184      31,017      31,131      30,694
    Weighted average unvested Common
       shares subject to repurchase          (3)       (299)         (5)       (439)
                                       --------    --------    --------    --------
Denominator for basic and diluted ..     31,181      30,718      31,126      30,255
                                       ========    ========    ========    ========
Net loss per share:
    Basic and diluted ..............   $  (0.47)   $  (0.22)   $  (1.34)   $  (0.62)
                                       ========    ========    ========    ========
</TABLE>



NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

In April 2001, the Financial Accounting Standards Board's ("FASB") 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
reseller 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 reseller. 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. 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.

In July 2001, the 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 SFAS No. 142, "Goodwill and Other Intangible
Assets", which is effective for fiscal years beginning after December 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.

                                       7


<PAGE>


                            WINK COMMUNICATIONS, INC.

        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)


In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets", which is required to be applied starting with
fiscal years beginning after December 15, 2001. SFAS No. 144 requires the
application of one accounting model for long-lived assets that are impaired or
to be disposed of by sale. The Company is currently evaluating, but has not yet
determined, the impact of SFAS No. 144 on its consolidated financial position
and results of operations.

NOTE 4 - 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 and nine months ended September 30, 2001 was
$13,475,000 and $42,231,000 as compared to a reported net loss of $14,571,000
and $41,627,000, respectively. Comprehensive loss for the three and nine months
ended September 30, 2000 was $6,469,000 and $17,837,000 as compared to a
reported net loss of $6,888,000 and $18,694,000, respectively.

NOTE 5 - RELATED PARTY TRANSACTIONS

In January 2001, the Company entered into an integration agreement with a
developer of software and support systems relating to the provision of
interactive program guides ("IPG") to incorporate the Wink Service with current
and future releases of the IPG for specified set-top boxes and to promote the
use of the Wink service. Wink concurrently entered into a Common Stock and
Warrant Issuance Agreement with the IPG developer pursuant to which the Company
issued to the developer 50,000 shares of Common Stock. The fair value of the
Common Stock on the date it was issued totaled $480,000. This amount is being
amortized to revenue sharing and launch fees-related parties, ratably over the
shorter of the life of the integration agreement or the expected period of
benefit.

The Company is obligated to issue an additional 50,000 shares of Common Stock to
the IPG developer or its designee upon the first commercial launch and
activation of the Wink service through the specified set-top boxes.

The Company is also obligated to issue to the IPG developer warrants to purchase
up to a maximum of 150,000 shares of Common Stock upon the achievement of
certain deployment milestones over four years following the anniversary of the
launch of the specified set-top boxes integrating the IPG and Wink technology.
In the event the warrants are issued, the exercise price for the warrants will
be equal to 80% of the average closing sale price of the Common Stock as
reported on the NASDAQ for the 20 trading days prior to the date on which such
warrant is issued or required to be issued. The warrants will have a term of ten
years from the date of issuance.

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 Wink. 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 launch fee payments totaling
$3.2 million to the cable system operator through January 2003, plus a
contingent launch bonus in 2002 of up to $1,000,000 if certain deployment
criteria are met.

In conjunction with the Agreement, the Company granted the cable system operator
a fully vested, immediately exercisable warrant to purchase 1,000,000 shares of
common stock at $4.40 per share. The warrant expires in June 2011. The fair
value of the warrant on the measurement date totaled $4,264,000 and will be
amortized to revenue sharing and launch fees-related parties over the term of
the agreement or the expected period of benefits, whichever is shorter. During
the nine-month period ending September 30, 2001, amortization recognized as
revenue sharing and launch fee expense totaled $473,000.

                                       8


<PAGE>
At September 30, 2001 the warrant had not been exercised.

During the three and nine months ended September 30, 2001, the Company
recognized expenses associated with revenue guarantees and launch funds provided
to a cable system operator of $961,000 and $2,575,000, respectively. The
controlling stockholder of this operator is also a stockholder of the Company.
During the three and nine months ended September 30, 2001, the Company also
recognized revenue of $1,166,000 and $3,254,000, respectively, for engineering
consulting and installation services provided to this related party.

NOTE 6 - CONCENTRATION

At September 30, 2001, one related party customer and two third-party customers
accounted for 46%, 17% and 12% of the net accounts receivable balance,
respectively. During the three and nine months ended September 30, 2001,
transactions with a related party accounted for 66% and 57% the Company's total
revenues, respectively. During the three and nine months ended September 30,
2001, one satellite system operator, a related party, represented 26% and 24%,
respectively, of total costs & expenses.

                                       9



<PAGE>

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 the federal
securities laws, particularly statements referencing future sources of revenue,
the expected increase in the number of Wink-enabled households and the expected
increase in revenue sharing and launch fees as well as trends in other costs and
expenses. 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. Actual
results may differ materially from those expressed or forecasted in the
forward-looking statements as a result of certain risks and uncertainties,
including, but not limited to, economic and advertising market variables, the
rate in which Wink Enhanced Broadcasting is deployed and acceptance of Wink
Enhanced Broadcasting by consumers, those risks and uncertainties 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"). 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.

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 September 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 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 analysis and reporting services related to those responses. The Wink
Response Network was activated on a limited basis in the second half of 1998.
However, no material

                                       10
<PAGE>
transaction fee revenue has been recognized to date. Substantially all of the
revenues earned from advertisers and merchants utilizing the Wink Response
Network as of September 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. We have also entered into agreements with advertisers and
merchants that will pay fees on a transaction basis, and our business plan is to
enter into more of these agreements in the future. The revenues recognized under
these agreements were not material for the three and nine months ended September
30, 2001. We may also derive revenue in the future from sales of products
through our dedicated interactive and virtual channels. Due to the recent
downturn in the economy, specifically in the advertising industry, we have not
experienced the significant increase in transaction fees we had expected. In
addition, we do not currently have substantial commitments from advertisers
beyond 2001. To date, the majority of our revenue has been derived from
non-recurring and consulting engineering and installation services.
Non-recurring and consulting engineering projects are a result of specific
customer requests and therefore there is no assurance the Company will obtain
revenue-producing engineering projects in the future.

         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, purchase orders
or data regarding responses collected; (2) the desire of viewers to purchase
merchandise through the Wink Response Network; (3) the response of creators of
programming or advertising who will need to create high-quality content that
appeals and motivates viewers; and (4) the additional risk factors set forth
below in "Risk Factors."

         Revenue Sharing and Launch Fees. Revenue sharing and launch fees
include costs related to our agreements with cable and satellite system
operators and network broadcast and cable programmers 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. Because the
revenue guarantees and marketing and launch funds are contingent upon households
deployed with the Wink Service or the commercial launch of Wink Enhanced
Broadcasting by a distributor, where applicable, we are obligated to pay the
revenue guarantees and marketing and launch funds regardless of whether there is
any revenue earned from transaction fees or data analysis and reporting
services. As of September 30, 2001, we have deployed approximately five million
households with the Wink Service. We believe that the number of Wink-enabled
households will continue to increase in the future therefore revenue sharing and
launch fees are expected to increase significantly (see "Liquidity and Capital
Resources" and "Risk Factors" below).


         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 marketing and advertising costs
are incurred to support anticipated growth.

         Operating. Operating expense includes costs associated with our
operations departments, including personnel costs, expenses related to our
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 remain
relatively constant but we may need to expend additional resources to meet
certain product launch targets.

         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

                                       11
<PAGE>

being a public company and non-cash charges for employee stock-based
compensation. We believe that as operations continue to increase in size and
scope, general and administrative expenses will continue to increase, although
at a lower rate than in past periods.

         We have incurred net losses since inception and, at September 30, 2001,
had an accumulated deficit of $124.4 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 SEPTEMBER 30, 2001 AND 2000

REVENUES

         Total revenues increased 29% to $1.8 million for the three months ended
September 30, 2001, compared to $1.4 million for the three months ended
September 30, 2000. The increase resulted primarily from a significant increase
in service revenue of $445,000, or 41%. The increase in service revenue was
primarily attributable to engineering consulting and installation services and
transaction fee revenues from third parties totaling $364,000 for the three
months ended September 30, 2001, whereas nothing was recognized for the three
months ended September 30, 2000. During the three months ended September 30,
2001, transactions with a related party accounted for 66% of our total revenues.

COSTS AND EXPENSES

         Total costs and expenses increased 64% to $17.4 million for the three
months ended September 30, 2001, compared to $10.6 million for the three months
ended September 30, 2000. The $6.8 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 in costs and expenses. We believe that continued expansion of our
distribution, operations and 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-based
compensation and warrant amortization as follows:

                                                        THREE MONTHS ENDED
                                                           SEPTEMBER 30,
                                                           -------------
                                                         2001           2000
                                                         ----           ----
Revenue sharing and launch fees.....................   $3,084,000    $  969,000
Sales and marketing.................................      233,000       433,000
Product development.................................      121,000       129,000
General and administrative..........................      121,000       192,000
                                                       ----------    ----------
                                                       $3,559,000    $1,723,000
                                                       ==========    ==========

         Revenue Sharing and Launch Fees. Revenue sharing and launch fees
increased $7.6 million to $9.0 million for the three months ended September 30,
2001, from $1.4 million for the three months ended September 30, 2000. The
increase was primarily due to a $5.4 million increase in various costs related
to the development and launch of Wink Enhanced Broadcasting with our affiliated
cable and direct satellite system operators and network and cable programmers,
including revenue guarantees, which were insignificant in 2000, and launch funds
and equipment subsidies that were not incurred during the three months ended
September 30, 2000 because the Wink service had not been deployed with a
significant distribution partner as of September 30, 2000. The increase was also
due to a $2.1 million increase in non-cash charges for warrant amortization. The
increase in warrant amortization from the same period in the prior year is
primarily related to amortization of warrants that were issued, mostly in the

                                       12
<PAGE>

second half of 2000, in connection with new distribution agreements with certain
cable and satellite system operators. As of September 30, 2001, there were
approximately five million households deployed with the Wink service. We believe
that the number of Wink-enabled households will continue to increase in the
future, and therefore our revenue sharing and launch fees expenses will continue
to increase.


         Sales and Marketing. Sales and marketing expense increased 9% to $2.4
million for the three months ended September 30, 2001, from $2.2 million for the
three months ended September 30, 2000. The increase was due to increases in
advertising costs to support our expanded activities.

         Operating. Operating expense increased 32% to $2.5 million for the
three months ended September 30, 2001, from $1.9 million for the three months
ended September 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 43% to $2.0
million for the three months ended September 30, 2001, from $3.5 million for the
three months ended September 30, 2000, as decreased engineering and product
development personnel costs were incurred due to decreases in employee headcount
and the use of fewer consultants and temporary employees due to the product
development and testing required for a significant launch of the Wink service
early in the fourth quarter of 2000.

         General and Administrative. General and administrative expense
increased 6% to $1.7 million for the three months ended September 30, 2001, from
$1.6 million for the three months ended September 30, 2000. The increase was
related to increased facilities expense, offset by a decrease in legal fees as a
result of the settlement of a patent infringement case in 2000.

         Interest Income and Other, Net. Interest and other income, net,
decreased 52% to $1.1 million for the three months ended September 30, 2001,
from $2.3 million for the three months ended September 30, 2000. This decrease
was primarily due to a $1.3 million decrease in interest income due to lower
interest rates and lower average cash and short-term investment balances for the
three months ended September 30, 2001.

                                       13
<PAGE>

NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000

REVENUES

         Total revenues increased 119% to $5.7 million for the nine months ended
September 30, 2001, compared to $2.6 million for the nine months ended September
30, 2000. The increase in 2001 resulted primarily from a significant increase in
service revenue of $3.3 million, or 216%. The increase in service revenue was
primarily due to engineering consulting and installation services provided to
related parties totaling $3.6 million for the nine months ended September 30,
2001, a $2.1 million increase over the $1.5 million recognized for similar
services provided in the nine months ended September 30, 2000. Third party
service revenues, which is comprised of engineering consulting and Wink Response
Network related services, increased $1.1 million over the same period last year.
During the nine months ended September 30, 2001, license revenues decreased by a
total of $193,000, or 18%, compared to the same period in the prior year
primarily due to a decrease in royalty revenue from set-top box manufacturers.
During the nine months ended September 30, 2001, transactions with a related
party accounted for 57% of our total revenues.

COSTS AND EXPENSES

         Total costs and expenses increased 88% to $51.3 million for the nine
months ended September 30, 2001, compared to $27.2 million for the nine months
ended September 30, 2000. The $24.1 million increase was primarily a result of a
$15.2 million 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-based and warrant amortization totaling $7.0
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 distribution,
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-based
compensation and warrant amortization as follows:

                                                          NINE MONTHS ENDED
                                                             SEPTEMBER 30,
                                                       2001               2000
                                                       ----               ----
Revenue sharing and launch fees....................   $ 8,919,000   $ 1,586,000
Sales and marketing ...............................       707,000       770,000
Product development ...............................       363,000       387,000
General and administrative ........................       343,000       576,000
                                                      -----------   -----------
                                                      $10,332,000   $ 3,319,000
                                                      ===========   ===========

         Revenue Sharing and Launch Fees. Revenue sharing and launch fees
increased $22.4 million to $24.8 million for the nine months ended September 30,
2001, from $2.4 million for the nine months ended September 30, 2000. The
increase is primarily due to a $15.2 million rise in costs related to the
development and launch of Wink Enhanced Broadcasting with our affiliated cable
and satellite system operators and network and cable programmers, including
revenue guarantees, which were insignificant in 2000, launch funds and equipment
subsidies that were not incurred during the nine months ended September 30,
2000, because the Wink service had not been deployed with a significant
distribution partner as of September 30, 2000. There was also a $7.3 million
increase in non-cash charges for warrant amortization. The increase in stock
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 September 30, 2001, there were approximately five
million households deployed with the Wink service. We believe that the number of
Wink-enabled households will continue to increase in the future, and therefore
our revenue sharing and launch fees expenses will continue to increase.

         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

                                       14
<PAGE>

per year thereafter. For agreeing to deploy the Wink service as a standard
feature to its digital subscribers, we will also make launch fee payments
totaling $3.2 million to the cable system operator through January 2003, plus a
contingent launch bonus in 2002 of up to $1,000,000 if certain deployment
criteria are met.

         In conjunction with the Agreement, we granted the cable system operator
a fully vested, immediately exercisable warrant to purchase 1,000,000 shares of
common stock at $4.40 per share. The warrant expires in June 2011. The fair
value of the warrant on the measurement date totaled $4,264,000 and will be
amortized to revenue sharing and launch fees-related parties over the term of
the agreement or the expected period of benefits, whichever is shorter. During
the period ending September 30, 2001, amortization recognized as revenue sharing
and launch fee expense totaled $473,000. At September 30, 2001 the warrant had
not been exercised.

         Sales and Marketing. Sales and marketing expense increased 22% to $7.3
million for the nine months ended September 30, 2001, from $6.0 million for the
nine months ended September 30, 2000. The increase was due to increases in
personnel costs during the first half of the year and advertising costs to
support our expanded activities.

         Operating. Operating expense increased 19% to $7.4 million for the nine
months ended September 30, 2001, from $6.2 million for the nine months ended
September 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 20% to $6.5
million for the nine months ended September 30, 2001, from $8.1 million for the
nine months ended September 30, 2000. The decrease was primarily due to a
decline in fees related to outside consultants and temporary employees due to
the significant launch of the Wink service early in the fourth quarter of 2000,
offset by slightly higher internal personnel costs in the first two quarters of
2001.

         General and Administrative. General and administrative expense
increased 13% to $5.3 million for the nine months ended September 30, 2001, from
$4.7 million for the nine months ended September 30, 2000. The increase was
related to the rise in administrative and executive personnel costs, offset by a
decrease in legal fees as a result of the settlement of a patent infringement
case in 2000.

         Interest Income and Other, Net. Interest and other income, net,
decreased 32% to $4.0 million for the nine months ended September 30, 2001, from
$5.9 million for the nine months ended September 30, 2000. This decrease was
primarily due to the write-off of an equity investment in a private technology
company totaling $1.2 million and a decrease in interest income due to lower
interest rates and lower average cash and short-term investment balances for the
nine months ended September 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 September 30, 2001, we had federal net operating
loss carryforwards of approximately $100 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 primarily through the
sale of equity securities. Prior to the initial public offering, we 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 $87.7 million of cash, cash equivalents and short-term
investments at September 30, 2001.

         Net cash used in operating activities totaled $31.3 million and $15.8
million for the nine months ended September 30, 2001 and 2000, respectively,
primarily as a result of our net losses and prepaid distribution costs.


                                       15
<PAGE>


         Net cash provided by investing activities totaled $22.5 million for the
nine months ended September 30, 2001 and was attributable to the net proceeds
from liquidating short-term investments totaling $24.4 million, offset by the
acquisition of $1.9 million of property and equipment. Net cash used in
investing activities totaled $13.1 million for the nine months ended September
30, 2000, and was attributable to the net purchase of short-term investments
totaling $6.1 million, the purchase of private equity securities totaling $4.3
million and the acquisition of $2.7 million of property and equipment.

         Net cash provided by financing activities for the nine months ended
September 30, 2001 was $546,000 and was due to proceeds from issuance of Common
Stock under our employee stock option and purchase plans. For the nine months
ended September 30, 2000, net cash provided by financing activities was $3.2
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 $365,000.

         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, immaterial 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. Several of the contracts we have with these
distribution partners have contract years measured as of the end of the third
and fourth quarters of the calendar year. As a result, significant payments
related to these obligations will be made during the fourth quarter of 2001 and
the first quarter of 2002. As of September 30, 2001, there were approximately
five million households deployed with the Wink service. We believe that the
number of Wink-enabled households will continue to increase in the future.

         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, or
may elect to do so earlier, 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.


                                       16
<PAGE>


                                  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 September 30, 2001, had an accumulated deficit of $124.4
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 $60 to $65
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 installation and engineering consulting 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.

         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.

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.


                                       17
<PAGE>

         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.

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 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.

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 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 nine months ended September 30, 2001, our
five largest customers accounted for 71% of our revenues, and one customer, a
related party, accounted for 57% by itself. In the year ended December 31, 2000,
our five largest customers, accounted for approximately 74% 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.


                                       18
<PAGE>


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 $3.7 million and $1.9 million or 66% and 72% of our total revenues
for the nine months ended September 30, 2001 and 2000, respectively.
Additionally, revenue sharing and launch fees paid to related parties were $15.7
or 31% of total costs for the nine months ended September 30, 2001. Related
party costs were minor in the nine months ended September 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 nine months ended September 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.

GENERAL ECONOMIC AND POLITICAL CONDITIONS MAY REDUCE OUR REVENUES AND HARM OUR
BUSINESS.

         We are subject to the risks arising from adverse changes in domestic
and global economic and political conditions. Because of the recent economic
slowdown in the United States and the terrorist events of September 11, consumer
confidence in the state of the economy has worsened, and companies in many
industries are delaying or reducing technology purchases. We experienced the
impact of the September 11 events in the third quarter and the economic slowdown
in the past few quarters with reductions in television advertising activity and
the postponement of the advertising campaigns from some of our advertisers. The
continued threat of terrorism within the United States, the escalation of
military action and heightened security measures in response to such threats may
cause significant disruption to commerce throughout the world. To the extent
that such disruptions result in the further deterioration of consumer
confidence, a continuing decline in spending for advertising and media
placement, or the suspension of national advertising by major television
networks, as occurred during the two weeks following September 11, our business
and results of operations could be materially and adversely affected. If the
current economic conditions in the United States continue or worsen, or if a
wider or global economic slowdown occurs, we may fall short of our revenue
expectations for the fourth quarter of 2001 and any given quarter of 2002 or for
the entire year. These conditions would negatively affect our business and
results of operations.


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;

                                       19
<PAGE>


         -   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.

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.


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<PAGE>

         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.

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.

         On December 4, 2000, a suit was filed in the United States District
Court for the District of Delaware by Pegasus Development Corporation and
Personalized Media Communications, LLC ("PMC") alleging that DirecTV, Inc.,
Hughes Electronics Corporation, Thomson Consumer Electronics, Philips
Electronics North America, Inc., are willfully infringing certain claims of
seven United States Patents owned by PMC. Though we are not a defendant in the
suit, PMC is currently alleging certain of our products, in combination with the
defendants' products infringe PMC's patents. Our agreements with each of the
defendants include indemnification obligations that may be triggered by the
litigation. If it is determined that our products infringe any of the asserted
claims, our business and financial performance may be adversely affected. If it
is determined that we are obligated to indemnify any of the defendants in this
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. 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, could 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 implemented, 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


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<PAGE>

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 may 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.

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 September 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
September 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.


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<PAGE>

                                     PART II
                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On December 4, 2000, a suit was filed in the United States District
Court for the District of Delaware by Pegasus Development Corporation and
Personalized Media Communications, LLC ("PMC") alleging that DirecTV, Inc.,
Hughes Electronics Corporation, Thomson Consumer Electronics, Philips
Electronics North America, Inc., are willfully infringing certain claims of
seven United States Patents owned by PMC. Though we are not a defendant in the
suit, PMC is currently alleging certain of our products, in combination with the
defendants' products infringe PMC's patents. Our agreements with each of the
defendants include indemnification obligations that may be triggered by the
litigation. If it is determined that our products infringe any of the asserted
claims, our business and financial performance may be adversely affected. If it
is determined that we are obligated to indemnify any of the defendants in this
matter, our business and financial performance may be adversely affected.



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.

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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<PAGE>


                                    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
                               -------------------------------------------------
                            Executive Vice President and Chief Financial Officer
                            (Principal Financial and Accounting Officer)

Date: November 14, 2001

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