<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 JUNE 30, 2002

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

         FOR THE TRANSITION PERIOD FROM TO

                          COMMISSION FILE NO. 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 Identification No.)
 incorporation or organization)


                           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, 2002 was 33,317,299.

================================================================================
<PAGE>



                                      INDEX

                                                                            PAGE

PART I        FINANCIAL INFORMATION

Item 1.       Financial Statements.........................................  3

              Condensed Balance Sheets.....................................  3

              Condensed Statements of Operations...........................  4

              Condensed Statements of Cash Flows...........................  5

              Notes to Condensed 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.......... 24

Item 5.       Other Information............................................ 24

Item 6.       Exhibits and Reports on Form 8-K............................. 24

Signature.................................................................. 26


                                       2

<PAGE>



                            WINK COMMUNICATIONS, INC.

                            CONDENSED BALANCE SHEETS
           (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                    JUNE 30,        DECEMBER 31,
                                                                                      2002              2001
                                                                                      ----              ----
                                                                                  (UNAUDITED)
<S>                                                                               <C>               <C>
                                                       ASSETS
Current Assets:
   Cash and cash equivalents ...............................................      $     20,198      $      20,513
   Short-term investments ..................................................            33,394             57,434
   Accounts receivable - related parties, net ..............................             1,635              2,527
   Accounts receivable - third parties, net ................................               619                670
   Prepaid expenses - related parties ......................................             2,778                615
   Prepaid expenses and other current assets ...............................               474                965
                                                                                  ------------      -------------
      Total current assets .................................................            59,098             82,724
Property and equipment, net ................................................             1,790              2,090
Deferred charges and other assets - related parties, net ...................             3,043                287
Other assets ...............................................................             1,614              1,292
                                                                                  ------------      -------------
                                                                                  $     65,545      $      86,393
                                                                                  ============      =============

                                        LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable ........................................................      $      1,180      $       1,237
   Accrued liabilities .....................................................             1,913              3,080
   Due to related parties ..................................................             5,208             14,081
   Deferred fees - related parties .........................................             3,796              1,273
   Deferred revenue - related parties ......................................               403                519
   Deferred revenue - third parties ........................................               453                679
                                                                                  ------------      -------------
      Total current liabilities ............................................            12,953             20,869
                                                                                  ------------      -------------
Stockholders' Equity:
   Common Stock, $0.001 par value; 100,000 shares authorized;
      33,317 and 31,205 shares issued and outstanding ......................                34                 31
   Additional paid-in capital ..............................................           269,719            267,022
   Stockholders' notes receivable ..........................................            (1,295)            (1,291)
   Unearned compensation ...................................................            (2,195)            (3,064)
   Accumulated deficit .....................................................          (213,618)          (197,327)
   Accumulated other comprehensive (loss) income ...........................               (53)               153
                                                                                  ------------      -------------
      Total stockholders' equity ...........................................            52,592             65,524
                                                                                  ------------      -------------
                                                                                  $     65,545      $      86,393
                                                                                  ============      =============
</TABLE>


            See accompanying notes to condensed financial statements.


                                       3

<PAGE>



                            WINK COMMUNICATIONS, INC.

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

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED              SIX MONTHS ENDED
                                                                      JUNE 30,                       JUNE 30,
                                                                      --------                       ---------
                                                                2002            2001              2002          2001
                                                                ----            ----              ----          ----
<S>                                                       <C>              <C>             <C>             <C>

Revenues:
    Licenses - related parties.......................     $         361    $         13    $         537   $          59
    Licenses - third parties ........................               210             237              425             624
    Services - related parties ......................                18             100              300             151
    Services - third parties ........................               422             457              796             484
                                                          -------------    ------------    -------------   -------------
       Total revenues ...............................             1,011             807            2,058           1,318
                                                          -------------    ------------    -------------   -------------

Costs and expenses:
    Revenue sharing and launch fees - related
       parties.......................................             3,303           4,045            6,132          10,427
    Revenue sharing and launch fees - third parties..                36           2,858              356           3,236
    Sales and marketing .............................             1,348           2,632            2,714           4,706
    Operating........................................             1,794           2,395            3,838           5,197
    Product development..............................             1,933           2,451            3,921           4,874
    General and administrative ......................             1,356           1,449            2,375           2,797
                                                          -------------    ------------    -------------   -------------
       Total costs and expenses .....................             9,770          15,830           19,336          31,237
                                                          -------------    ------------    -------------   -------------
Loss from operations ................................            (8,759)        (15,023)         (17,278)        (29,919)
Interest income and other, net.......................               290             589              987           2,863
                                                          -------------    ------------    -------------   -------------
Net loss ............................................     $      (8,469)   $    (14,434)   $     (16,291)  $     (27,056)
                                                          =============    ============    =============   =============

Net loss per share:
    Basic and diluted................................     $       (0.25)   $      (0.46)   $       (0.50)   $      (0.87)
    Weighted average shares used in computing
       both basic and diluted net loss per share.....            33,282          31,136           32,534          31,096
</TABLE>




            See accompanying notes to condensed financial statements.

                                       4

<PAGE>



                            WINK COMMUNICATIONS, INC.

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

<TABLE>
<CAPTION>
                                                                                            SIX MONTHS ENDED
                                                                                                JUNE 30,
                                                                                                --------
                                                                                            2002         2001
                                                                                            ----         ----
<S>                                                                                     <C>           <C>
Cash flows from operating activities:
   Net loss ........................................................................    $  (16,291)   $   (27,056)
   Adjustments to reconcile net loss to net cash used in operating activities:
      Depreciation and amortization of property and equipment ......................           547          1,164
      Amortization of deferred charges and other assets ............................            28          4,768
      Stock-based compensation expense .............................................         1,282          6,773
      Loss on equity investment ....................................................            --          1,221
      Allowance for doubtful accounts...............................................           280             --
      Changes in assets and liabilities:
         Accounts receivable - related parties .....................................           632          2,556
         Accounts receivable - third parties .......................................            31            (93)
         Prepaid expenses - related parties ........................................        (2,163)            --
         Prepaid expenses and other current assets .................................           491            902
         Deferred charges and other assets - related parties .......................          (658)        (7,231)
         Other assets ..............................................................          (322)        (2,899)
         Accounts payable ..........................................................           (57)          (197)
         Accrued liabilities .......................................................        (1,167)          (725)
         Due to related parties ....................................................        (8,873)           377
         Deferred fees - related parties ...........................................         2,523           (828)
         Deferred revenue - related parties ........................................          (116)            20
         Deferred revenue - third parties ..........................................          (226)          (280)
                                                                                        -----------   -----------
Net cash used in operating activities ..............................................       (24,059)       (21,528)
                                                                                        ----------    -----------
Cash flows from investing activities:
   Net proceeds from sales of short-term investments ...............................        23,834         25,977
   Purchase of property and equipment ..............................................          (247)        (1,350)
                                                                                        ----------    -----------
Net cash provided by investing activities ..........................................        23,587         24,627
                                                                                        ----------    -----------
Cash flows from financing activities:
   Proceeds from issuance of Common Stock ..........................................           157            430
                                                                                        ----------    -----------
Net cash provided by financing activities ..........................................           157            430
                                                                                        ----------    -----------
Net (decrease) increase in cash and cash equivalents ...............................          (315)         3,529
Cash and cash equivalents at beginning of period ...................................        20,513         22,093
                                                                                        ----------    -----------
Cash and cash equivalents at end of period .........................................    $   20,198    $    25,622
                                                                                        ==========    ===========

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
                                                                                        ==========    ===========
Common Stock issued to related party distribution partners .........................    $    2,540    $        --
                                                                                        ==========    ===========
</TABLE>



            See accompanying notes to condensed financial statements.


                                       5


<PAGE>



                            WINK COMMUNICATIONS, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                  JUNE 30, 2002
                                   (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 unaudited condensed 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, 2001 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 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, 2001. The results of operations for the interim period ended
June 30, 2002, are not necessarily indicative of results to be expected for the
full year or any other period.

         The Company and Liberty Broadband Interactive Television, Inc. ("LBIT")
announced on June 24, 2002, the execution of a definitive merger agreement
whereby LBIT will acquire all of the outstanding common stock of the Company.
Under the terms of the agreement, Company stockholders will receive $3.00 in
cash for each share of Company common stock. The Company filed a proxy statement
relating to this transaction with the Securities and Exchange Commission on July
19, 2002 and mailed that proxy statement to its stockholders on July 22,
2002.The special shareholder meeting to vote on adoption of the merger agreement
is scheduled for August 19, 2002. The Company anticipates that the merger will
be completed before September 30, 2002.

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.


                                       6

<PAGE>



                            WINK COMMUNICATIONS, INC.

              NOTES TO CONDENSED 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                    SIX MONTHS ENDED
                                                                 JUNE 30,                             JUNE 30,
                                                                 --------                             --------
                                                           2002             2001                2002            2001
                                                           ----             ----                ----            ----
<S>                                                     <C>            <C>                 <C>             <C>
Numerator:
    Net loss.........................................   $    (8,469)   $      (14,434)     $     (16,291)  $     (27,056)
                                                        ===========    ==============      =============   =============
Denominator:
    Weighted average shares..........................        33,282            31,140             32,534          31,102
    Weighted average unvested common
       shares subject to repurchase..................            --                (4)                --              (6)
                                                        -----------    --------------      -------------   -------------
Denominator for basic and diluted....................        33,282            31,136             32,534          31,096
                                                        ===========    ==============      =============   =============
Net loss per share:
    Basic and diluted................................   $     (0.25)   $        (0.46)     $       (0.50)  $       (0.87)
                                                        ===========    ==============      =============   =============
</TABLE>




         Outstanding potential shares excluded from the determination of diluted
net loss per share as their effect is anti-dilutive, are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                              SIX MONTHS ENDED
                                                                   JUNE 30,
                                                                   --------
                                                           2002             2001
                                                           ----             ----
<S>                                                     <C>             <C>

Common Stock options.................................         2,460        5,847
Common Stock warrants................................         5,946        6,048
Common Stock subject to repurchase...................            --            5
                                                          ---------    ---------
         Total.......................................         8,406       11,900
                                                          =========    =========
</TABLE>


NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS

         In April 2001, the Financial Accounting Standards Board's ("FASB")
Emerging Issues Task Force ("EITF") 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"). In November 2001, the EITF reached
consensus on Issue No. 01-9, "Accounting for Consideration Given by a Vendor to
a Customer or a Reseller of the Vendor's Products" ("EITF 01-9"). EITF 00-25 and
EITF 01-9 require that consideration, including equity instruments, given to a
customer should be classified in the vendor's income statement as a reduction of
revenue unless the consideration relates to a separable identifiable benefit
received from the customer and the fair value of such benefit can be reasonably
estimated. The Company typically gives to its distributors various incentives
including revenue guarantees, launch funds and warrants. The Company adopted
EITF 00-25 and EITF 01-9 in the first quarter of fiscal year 2002. In accordance
with the transition guidance, financial statements for prior periods presented
for comparative purposes were reclassified to comply with the new income
statement presentation requirement which resulted in a reclassification from
revenue to revenue sharing and launch fees expense of approximately $1.4 million
and $2.6 million for the three and six months ended June 30, 2001, respectively.
The adoption of EITF 00-25 and EITF 01-9 had no impact on the Company's
operating loss, net loss or net loss per share.


                                       7

<PAGE>
                            WINK COMMUNICATIONS, INC.

              NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)



         In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS 144 supercedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and amends Accounting Principles Board Opinion No. 30,
"Reporting Results of Operations Reporting the Effects of Disposal of a Segment
of a Business". The Company adopted SFAS 144 in the quarter ended March 31,
2002. The adoption of SFAS 144 did not have a significant impact on its
financial statements.

         In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS 146). This Statement
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force (EITF) Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)." This Statement requires that a liability for costs associated
with an exit or disposal activity be recognized and measured initially at fair
value only when the liability is incurred. The provisions of this Statement are
effective for exit or disposal activities that are initiated after December 31,
2002. The Company is currently assessing the impact of SFAS 146 on its financial
statements.

NOTE 4 - DEFERRED FEES - RELATED PARTIES

         Deferred fees - related parties represent billings to related party
customers for the purchase of our products and/or services derived from
arrangements which are required to be accounted for under the guidance of EITF
00-25 and EITF 01-9. Accordingly, such billings are being amortized as a
contra-expense over the remaining life of the contract.

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 or losses on
available-for-sale securities. Comprehensive loss for the three and six months
ended June 30, 2002 was $8.0 million and $16.5 million, respectively, as
compared to a reported net loss of $8.5 million and $16.3 million. Comprehensive
loss for the three and six months ended June 30, 2001 was $15.7 million and
$28.8 million, respectively, as compared to a reported net loss of $14.4 million
and $27.1 million.

NOTE 6 - RELATED PARTY TRANSACTIONS

         In June 2002, the Company amended the agreement with one of its related
party distribution partners. Based on the terms of the amendment, the Company
eliminated its obligation related to launch fees. As a result of the amendment,
the Company waived certain rights to future advertising, which was prepaid, and
provided for payment of future marketing development funds.

NOTE 7 - CONCENTRATION

         At June 30, 2002, two related party customers accounted for 44% and 12%
of the net accounts receivable balance, respectively. During the three and six
months ended June 30, 2002, transactions with a related party accounted for 25%
and 33% of the Company's total revenues, respectively.


                                       8


<PAGE>



                            WINK COMMUNICATIONS, INC.

              NOTES TO CONDENSED FINANCIAL STATEMENTS--(CONTINUED)

NOTE 8 - STOCK OPTION EXCHANGE PROGRAM

         In December 2001, the Company offered the Offer to Exchange Certain
Outstanding Options for New Options (the "New Offer Program"). The New Offer
Program offered current Company employees with stock options granted under
either the 1994 or 1999 Plan the opportunity to tender certain granted options,
with an exercise price of at least $4.25 per share, in exchange for the
Company's promise to grant replacement options at an exercise price equal to the
closing price of the Company's Common Stock on the Nasdaq National Market on
July 31, 2002. Generally, for every three options that an employee tendered to
the Company, he or she received a promise from the Company to grant two options
on or about July 31, 2002; the share ratio could vary depending on the grant
date of the tendered option. The New Offer Program, which expired on January 28,
2002, resulted in the cancellation of 3,092,000 options at a weighted average
exercise price of $11.50 per share and the grant of 1,781,000 options at $2.96
per share. The new options have terms and conditions that are substantially the
same as those of the cancelled options. The New Offer Program did not result in
any additional compensation charges or variable plan accounting.


                                       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 the date of the filing of this Form 10-Q only and
involve risks 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, the fact that there is
no certainty that the proposed merger with LBIT will be consummated, 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, 2001 (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
primarily consisted of:

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

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

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

         o        developing the Wink Response Network for collecting and
                  managing responses to the Wink Service;

         o        marketing the concept of the Wink Service and promoting the
                  Wink icon; and

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

         Recent Developments. We and Liberty Broadband Interactive Television,
Inc. ("LBIT") announced on June 24, 2002, the execution of a definitive merger
agreement whereby LBIT will acquire all of our outstanding Common Stock. Under
the terms of the agreement, our stockholders will receive $3.00 in cash for each
share of our Common Stock. We filed a proxy statement relating to this
transaction with the Securities and Exchange Commission on July 19, 2002 and
mailed that proxy statement to our stockholders on July 22, 2002. The special
shareholder meeting to vote on adoption of the merger agreement is scheduled for
August 19, 2002. We anticipate that the merger will be completed before
September 30, 2002, after which we would operate as a wholly-owned subsidiary of
LBIT. The merger is subject to approval by our stockholders and other customary
closing conditions. Investors and security holders may obtain more detailed
information regarding the proposed merger by reading the proxy statement
referred to above.

         Sources of Revenue and Business Plan. Through June 30, 2002, our
revenues have been primarily derived from license fees for the use of the Wink
software and non-recurring and consulting engineering and installation services
under agreements to integrate the Wink technology with various set-top boxes.
Our business plan is to derive the primary portion of our future revenues from
the Wink Response Network by charging transaction fees to advertisers,


                                       10

<PAGE>


merchants and broadcast network and cable programmers 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. For the six months ended June 30, 2002, 30% of our
total revenues were derived from interactive advertising using the Wink Response
Network, in the form of transactions, reports and sponsorship fees. However, the
majority of the revenues we have earned from advertisers and merchants utilizing
the Wink Response Network prior to the six months ended June 30, 2002 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 advertising agreement, generally one year. We have also entered into
agreements with advertisers and merchants that will pay fees on a transaction
fee and report basis, and we expect to enter into more of these agreements in
the future. We also launched dedicated interactive and virtual channels in 2001
and have begun to derive revenue from sales of products on these channels. The
revenue earned from these channels was insignificant for the six months ended
June 30, 2002.

         Due to the downturn in the economy, specifically in the advertising
industry, we have not experienced the significant increase in transaction and
reporting fees we had expected. In addition, we do not currently have
substantial commitments from advertisers. To date, a significant portion of our
revenue has been derived from non-recurring consulting engineering and
installation services in addition to license fees. Non-recurring consulting
engineering projects are a result of specific customer requests and therefore
there is no assurance we will obtain revenue-producing engineering projects in
the future. See "Risk Factors".

         Revenue Sharing and Launch Fees. Revenue sharing and launch fees
include the distribution costs related to our agreements with cable and
satellite system operators, broadcast network and cable programmers and other
market participants to deploy the Wink Service to their subscribers and viewers.
Because the revenue guarantees and marketing and launch funds are contingent
upon households deployed with the Wink Service or the commercial launch of the
Wink Service by a distributor, where applicable, we are obligated to pay the
revenue guarantees and marketing and launch funds regardless of whether any
revenue is earned from transaction fees or data analysis and reporting services.
See "Liquidity and Capital Resources" and "Risk Factors" below. While we believe
that the number of Wink-enabled households will continue to increase in the
future, we do not believe revenue sharing and launch fees expenses will
increase, because we amended three of our significant distribution partner
agreements to decrease future payments of revenue guarantees and marketing
deployment funds in the first half of 2002. See "Liquidity and Capital
Resources" section below. We have also significantly decreased future
amortization of deferred charges and unearned compensation related to warrants
as a result of the impairment charge taken in the fourth quarter of 2001.

         Sales and Marketing. Sales and marketing expense includes salaries,
non-cash charges for employee stock-based compensation, consulting fees,
travel-related costs, allocated facilities-related expenses, 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, allocated facilities-related expenses and costs of
operating the Wink Response Network, including processing and telecommunication
costs and payments to third-party consultants and customer service
representatives. While we expect significant growth in deployments, we
anticipate operating expense related to deployments to remain relatively
constant due to sizable decreases in telecommunications rates. We also expect a
significant decrease in depreciation expense due to smaller equipment
expenditures as a result of a change in our customer contracts, which now
provide that equipment is generally the responsibility of the customer, and from
the decrease in the carrying value of deployment equipment due to the impairment
charge of $2.3 million recorded in the fourth quarter of 2001.

         Product Development. Product development expense includes costs
associated with our engineering and business development departments, including
personnel costs, allocated facilities-related expenses, non-cash charges for


                                       11

<PAGE>

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, allocated facilities and
information technology charges, legal expenses for general corporate and
intellectual property purposes, investor relations costs associated with 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 remain relatively constant.

         We have incurred net losses since inception and, at June 30, 2002, had
an accumulated deficit of $213.6 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 the Wink Service. Accordingly, our historical results of operations
may not be indicative of and should not be relied upon as an indicator of future
performance.

THREE MONTHS ENDED JUNE 30, 2002 AND 2001

REVENUES

         Total revenues increased 25% to $1.0 million for the three months ended
June 30, 2002, compared to $807,000 for the three months ended June 30, 2001.
The increase resulted primarily from an increase in license revenue of $321,000.
During the three months ended June 30, 2002, transactions with a related party
accounted for 25% of our total revenues.

COSTS AND EXPENSES

         Total costs and expenses decreased 38% to $9.8 million for the three
months ended June 30, 2002, compared to $15.8 million for the three months ended
June 30, 2001. The $6.0 million decrease was primarily a result of a reduction
in the amortization of deferred charges and unamortized compensation for
warrants related to distribution agreements as a result of the impairment charge
recorded in the fourth quarter of 2001, expense management and decreased revenue
guarantees and launch fees due to the amendment of three distribution partner
agreements.

         Costs and expenses include non-cash charges for stock-based
compensation and warrant amortization as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                            THREE MONTHS ENDED
                                                                                                 JUNE 30,
                                                                                                 --------
                                                                                           2002             2001
                                                                                           ----             ----
<S>                                                                                  <C>                  <C>
Revenue sharing and launch fees - related parties................................    $        414         $      2,848
Sales and marketing..............................................................             198                  263
Product development..............................................................             118                  121
General and administrative.......................................................             118                  121
                                                                                     ------------         ------------
                                                                                     $        848         $      3,353
                                                                                     ============         ============
</TABLE>


                                       12

<PAGE>

         Revenue Sharing and Launch Fees. Total revenue sharing and launch fees
decreased 52% to $3.3 million for the three months ended June 30, 2002, from
$6.9 million for the three months ended June 30, 2001. The decrease was
primarily due to a $2.4 million decrease in the amortization of unearned
compensation related to warrants as a result of the impairment charge recorded
in the fourth quarter of 2001 and decreased revenue guarantees and launch fees
due to the amendment of three distribution partner agreements.

         Sales and Marketing. Sales and marketing expense decreased 49% to $1.3
million for the three months ended June 30, 2002, from $2.6 million for the
three months ended June 30, 2001. The decrease was primarily due to decreases in
advertising costs related to launching the Wink Service, decreases in consulting
expenses as part of our expense management efforts and decreases in
personnel-related costs.

         Operating. Operating expense decreased 25% to $1.8 million for the
three months ended June 30, 2002, from $2.4 million for the three months ended
June 30, 2001. The decrease was primarily due to a decrease in depreciation
expense as a result of the impairment charge recorded in the fourth quarter of
2001, as well as decreases in personnel-related costs as part of our expense
management efforts.

         Product Development. Product development expense decreased 21% to $1.9
million for the three months ended June 30, 2002, from $2.5 million for the
three months ended June 30, 2001. The decrease was due to decreased engineering
and product development personnel costs and the use of fewer consultants and
temporary employees for product development and testing to enhance and support
the Wink Service compared to the second quarter of 2001.

         General and Administrative. General and administrative expense was
relatively flat with a decrease of 6% or $93,000 to $1.4 million for the three
months ended June 30, 2002. The small decrease was primarily related to
decreases in personnel-related costs as part of our expense management efforts,
offset by an increase in our allowance for doubtful accounts of $280,000,
primarily due to the bankruptcy filing of Adelphia Communications Corporation,
one of our distribution partners.

         Interest Income and Other, Net. Interest income and other, net,
decreased 51% to $290,000 for the three months ended June 30, 2002, from
$589,000 for the three months ended June 30, 2001. This decrease was primarily
due to a $1.5 million decrease in interest income due to lower interest rates
and lower average cash and short-term investment balances for the three months
ended June 30, 2002, offset by the write-off of an equity investment in a
private technology company totaling $1.2 million in the three months ended June
30, 2001.

SIX MONTHS ENDED JUNE 30, 2002 AND 2001

REVENUES

         Total revenues increased 56% to $2.1 million for the six months ended
June 30, 2002, compared to $1.3 million for the six months ended June 30, 2001.
The increase in 2002 resulted primarily from an increase in service revenue of
$461,000, or 73%. The increase in service revenue was primarily due to
engineering consulting and Wink Response Network related services provided to
third parties totaling $796,000 for the six months ended June 30, 2002, a
$312,000 increase over the $484,000 recognized for similar services provided in
the six months ended June 30, 2001. Related party service revenues, which is
comprised of engineering consulting and installation services, increased
$149,000 over the same period last year. During the six months ended June 30,
2002, license revenues increased by a total of $279,000, or 41%, compared to the
same period in the prior year primarily due to an increase in Wink Server
license fees earned in 2002. During the six months ended June 30, 2002,
transactions with a related party accounted for 33% of our total revenues.

COSTS AND EXPENSES

         Total costs and expenses decreased 38% to $19.3 million for the six
months ended June 30, 2002, compared to $31.2 million for the six months ended
June 30, 2001. The $11.9 million decrease was primarily a result of a $7.2


                                       13

<PAGE>

million dollar decrease in revenue sharing and launch fees, due to a reduction
in the amortization of deferred charges and unamortized compensation for
warrants related to distribution agreements as a result of the impairment charge
recorded in the fourth quarter of 2001, expense management and a decrease in
revenue sharing and launch fees, due to the amendment of three distribution
partner agreements.

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

<TABLE>
<CAPTION>
                                                                                             SIX MONTHS ENDED
                                                                                                 JUNE 30,
                                                                                                 --------
                                                                                          2002               2001
                                                                                          ----               ----
<S>                                                                                <C>                  <C>
Revenue sharing and launch fees - related parties...............................   $             414    $     5,835
Sales and marketing ............................................................                 396            474
Product development.............................................................                 236            242
General and administrative......................................................                 236            222
                                                                                   -----------------    -----------
                                                                                   $           1,282    $     6,773
                                                                                   =================    ===========
</TABLE>


         Revenue Sharing and Launch Fees. Revenue sharing and launch fees
decreased $7.2 million to $6.5 million for the six months ended June 30, 2002,
from $13.7 million for the six months ended June 30, 2001. The decrease is
primarily due to a $5.4 million decrease in the amortization of unearned
compensation related to warrants as a result of the impairment charge recorded
in the fourth quarter of 2001 and decreased revenue guarantees and launch fees
due to the amendment of three distribution partner agreements.

         Sales and Marketing. Sales and marketing expense decreased 42% to $2.7
million for the six months ended June 30, 2002 from $4.7 million for the six
months ended June 30, 2001. The decrease was primarily due to decreases in
advertising costs related to launching the Wink Service, decreases in consulting
expenses as part of our expense management efforts and decreases in
personnel-related costs.

         Operating. Operating expense decreased 26% to $3.8 million for the six
months ended June 30, 2002, from $5.2 million for the six months ended June 30,
2001. The decrease was primarily due to a decrease in depreciation expense as a
result of the impairment charge recorded in the fourth quarter of 2001, as well
as decreases in personnel-related costs as part of our expense management
efforts.

         Product Development. Product development expense decreased 20% to $3.9
million for the six months ended June 30, 2002, from $4.9 million for the six
months ended June 30, 2001. The decrease was due to decreased engineering and
product development personnel costs and the use of fewer consultants and
temporary employees for product development and testing to enhance and support
the Wink Service compared to the second half of 2001.

         General and Administrative. General and administrative expense
decreased 15% to $2.4 million for the six months ended June 30, 2002, from $2.8
million for the six months ended June 30, 2001. The decrease was primarily
related to a lower personnel-related costs as a result of our expense management
efforts.

         Interest and Other Income, Net. Interest and other income, net
decreased 66% to $987,000 for the six months ended June 30, 2002, from $2.9
million for the six months ended June 30, 2001. This decrease was primarily due
to a $3.2 million decrease in interest income due to lower interest rates and
lower average cash and short-term investment balances for the three months ended
June 30, 2002, offset by the write-off of an equity investment in a private
technology company totaling $1.2 million in the six months ended June 30, 2001.


                                       14


<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

         Since inception, we have financed our activities largely through the
sale of equity securities. Prior to the initial public offering, we raised an
aggregate of $104.5 million through various sales of Preferred Stock. In August
1999, we raised net proceeds of approximately $77.3 million from our initial
public offering of Common Stock. We had $53.6 million of cash, cash equivalents
and short-term investments at June 30, 2002.

         Net cash used in operating activities totaled $24.0 million and $21.5
million for the six months ended June 30, 2002 and 2001, respectively, primarily
as a result of our net losses and prepaid distribution costs, offset in part by
non-cash charges for stock-based compensation and depreciation in both quarters.

         Net cash provided by investing activities totaled $23.6 million for the
six months ended June 30, 2002 and was attributable to the net proceeds from
sales of short-term investments totaling $23.8 million, offset by the
acquisition of $247,000 of property and equipment. Net cash provided in
investing activities totaled $24.6 million for the six months ended June 30,
2001, and was attributable to the net proceeds from sales of short-term
investments totaling $26.0 million, offset by the purchase of $1.4 million of
property and equipment.

         Net cash provided by financing activities for the six months ended June
30, 2002 and 2001 was $157,000 and $430,000, respectively, and was due to
proceeds from issuance of Common Stock under our employee stock option and
purchase plans.

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

         For certain cable and direct broadcast satellite system operators and
cable programmers, including related parties, we have also provided minimum
revenue guarantees. If the Wink Service fails to generate sufficient revenue to
meet the revenue guarantees, 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 which we estimate to range from $7.5
million to $8.5 million in 2002. We have also agreed to provide marketing and
launch funds to a number of cable and direct broadcast satellite system
operators, contingent upon the commercial launch of the Wink Service or the
number of households deployed, including in some cases a per household fee, of
up to $1.00. We expect the aggregate amount that we will pay for launch and
marketing funds to be between $3.5 million to $4.0 million in 2002.

         In six months ended June 30, 2002, we amended agreements with three
related party distribution partners. Based on the terms of the amendments, we
have decreased our obligations related to revenue guarantees and system and
launch fees. Based on management's estimates of the future obligations that were
set forth in the agreements before the amendments, we expect these amendments to
save us approximately $26.0 million in cash payments in 2002 and 2003.

         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 our merger with LBIT is not
successfully completed, and 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.


                                       15

<PAGE>


RECENT ACCOUNTING PRONOUNCEMENTS

         In April 2001, the Financial Accounting Standards Board's ("FASB")
Emerging Issues Task Force ("EITF") 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"). In November 2001, the EITF reached
consensus on Issue No. 01-9, "Accounting for Consideration Given by a Vendor to
a Customer or a Reseller of the Vendor's Products" ("EITF 01-9"). EITF 00-25 and
EITF 01-9 require that consideration, including equity instruments, given to a
customer should be classified in the vendor's income statement as a reduction of
revenue unless the consideration relates to a separable identifiable benefit
received from the customer and the fair value of such benefit can be reasonably
estimated. We typically give to our distributors various incentives including
revenue guarantees, launch funds and warrants. We adopted EITF 00-25 and EITF
01-9 in the first quarter of fiscal year 2002. In accordance with the transition
guidance, financial statements for prior periods presented for comparative
purposes were reclassified to comply with the new income statement presentation
requirement which resulted in a reclassification from revenue to revenue sharing
and launch fees expense of approximately $1.4 million and $2.6 million for the
quarter and six months ended June 30, 2001. The adoption of EITF 00-25 and EITF
01-9 had no impact on the Company's operating loss, net loss or net loss per
share.

         In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS 144 supercedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" and amends Accounting Principles Board Opinion No. 30,
"Reporting Results of Operations Reporting the Effects of Disposal of a Segment
of a Business". We adopted SFAS 144 in the quarter ended March 31, 2002. The
adoption of SFAS 144 did not have a significant impact on its financial
statements.

         In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" (SFAS 146). This Statement
addresses financial accounting and reporting for costs associated with exit or
disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." This Statement requires
that a liability for costs associated with an exit or disposal activity be
recognized and measured initially at fair value only when the liability is
incurred. The provisions of this Statement are effective for exit or disposal
activities that are initiated after December 31, 2002. We are currently
assessing the impact of SFAS 146 on our financial statements.


                                       16

<PAGE>

                                  RISK FACTORS

         THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY RISKS WE
FACE. ADDITIONAL RISKS AND UNCERTAINTIES NOT CURRENTLY KNOWN TO US OR THAT WE
CURRENTLY BELIEVE ARE IMMATERIAL COULD ALSO IMPAIR OUR BUSINESS OPERATIONS.

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, 2002, had an accumulated deficit of $213.6 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, estimated transaction processing and general activities. Also,
we have entered into agreements with three cable and direct broadcast satellite
system operators and three cable programmers in which we provide minimum revenue
guarantees, which we estimate to range from $7.5 million to $8.5 million in
2002. We expect that our total operating expenses, excluding stock compensation
charges, for the year ending December 31, 2002 will be $40 million to $45
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 significant revenue sharing
and launch fees and product development expenses and increasing sales and
marketing expenses. In addition, a significant amount of our revenues have been
derived from software license fees, installation and non-recurring 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 fees, reporting 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 the Wink Service 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 the Wink Service for a variety of reasons. Our success will depend
heavily upon broad acceptance of the Wink Service 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 the Wink Service. Viewers may not react favorably to Wink Service
for various reasons. For example, they may feel it is too complex, or they may
be concerned about security or privacy issues.

         We do not currently have substantial commitments for advertising. If we
are unable to successfully negotiate favorable agreements with our advertisers,
our business will suffer.


                                       17

<PAGE>

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 the Wink Service. For three cable and direct broadcast satellite system
operators, we have provided a minimum revenue guarantee. These guarantees range
from $1 to $2.50 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 the Wink
Service 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. We expect the aggregate
amount that we will pay under these revenue guarantee arrangements to be between
$7.5 million to $8.5 million in 2002.

         We have also agreed to provide launch and marketing funds to a number
of cable and direct broadcast satellite system operators and other market
participants, contingent upon the commercial launch of the Wink Service, of up
to $1 per household. We expect the aggregate amount that we will pay for launch
and marketing funds to be between $3.5 million to $4.0 million in 2002.

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 the Wink Service, 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 30 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, three 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 us to motivate viewers to interact with Wink-enhanced
programming and advertising, creators of programming and advertising must
develop and integrate high-quality Wink-enhanced 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 six months ended June 30, 2002, our three
largest customers accounted for 45% of our revenues, and one customer, a related
party, accounted for 33% by itself. In the six months ended June 30, 2001, our
largest customer, accounted for approximately 10% 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

                                       18

<PAGE>

period, or if a large customer purchases fewer of our products or services or
terminates its relationship with us, our revenues could decline significantly.

WE HAVE DEPENDED ON ARRANGEMENTS WITH RELATED PARTIES.

         Revenue sharing and launch fees to related parties were $6.1 million
and $10.4 million or 32% and 33% of total Costs and Expenses for the six months
ended June 30, 2002 and 2001, respectively.

         Although we have negotiated each of our distribution agreements with
these related party distribution partners 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 or have been granted
warrants to purchase 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 effect 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 COMMON STOCK AND
WARRANTS.

         In March 2002, we renegotiated agreements with two related party
distribution partners whereby we agreed to issue an aggregate of two million
shares of Common Stock in exchange for the reduction of certain future revenue
sharing and launch fee liabilities. The value of the Common Stock will be
amortized over the estimated economic life of the arrangements with the
distribution partners.

         In 2000 and 2001, we entered into agreements with several distribution
partners whereby we agreed to issue warrants to purchase up to an aggregate of
1.8 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. Currently, none of the performance milestones
have been met, and therefore, these warrants are not currently exercisable.

         If the warrants become exercisable, we could be required to record
significant non-cash accounting expenses. As a result, we could incur net losses
or increased net losses for a given period, which 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,
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 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 any given quarter of
2002 or for the entire year. These conditions would seriously harm our operating
results and stock price.


                                       19


<PAGE>

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:

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

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

        o         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 or report
                  arrangement; and

        o         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:

         o        consistently execute viewer response transactions;

         o        maintain satisfactory levels of customer service; and

         o        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, OpenTV and Canal
Plus. OpenTV and Canal Plus already offer certain products with features

                                       20

<PAGE>

similar to the Wink Service. 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 the Wink Service. 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 Worldgate
Communications, AOL TV, ACTV and MetaTV. In addition, one or more of these
entities or smaller companies might choose to pursue hardware-independent,
cross-platform opportunities directly competitive with the Wink Service. If we
are not able to compete successfully against current or future competitors, our
business, operating results and financial condition will be materially adversely
effected.

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
the Wink Service, 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 the Wink Service 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 the Wink Service. 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. For example, we recently settled a
suit filed against us by Fort Myers Broadcasting Company. 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.

         Also, many of the agreements with our customers contain an
indemnification obligation, which could be triggered in the event that a
customer is named in an infringement suit involving any of our products that are
incorporated in our customer's products or service. For example, 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. 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.


                                       21


<PAGE>
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 certain 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 FACE RISKS IN CONNECTION WITH THE PROPOSED TRANSACTION WITH LIBERTY BROADBAND
INTERACTIVE TELEVISION

         On June 23, 2002, we entered into an Agreement and Plan of Merger with
Liberty Broadband Interactive Television, Inc. ("LBIT"). Completion of the
merger is subject to risks and uncertainties. We must obtain shareholder
approval to complete the merger.

     If the merger is not completed, we could be subject to a number of risks
that may adversely affect our business and stock price, including: the market
price of shares of our common stock may decline to the extent that the current
market price of those shares reflects a market assumption that the merger will
be completed; we will have to pay the costs related to the merger, such as
legal, accounting, and some financial advisory fees; and under specified
circumstances, we may be required to pay LBIT a termination fee of $3.5 million
in connection with the termination of the merger agreement and enter into a
licensing agreement for our software and service where certain specific terms
are as favorable as those granted to our other customers.


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, 2002 or December 31, 2001. 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.

         The fair value of our investments 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 100 basis points
from levels as of June 30, 2002, we believe the fair value of the portfolio
would decline by an immaterial amount. If interest rates were to fall by 100
basis points, our interest income would fluctuate by an immaterial amount.

         Foreign Currency Exchange Risk. The principal portion of business is in
the United States. Additionally, contracts we have entered into with companies
headquartered in foreign countries have primarily been denominated in U.S.
dollars. We may be subject to exposure in the future from our Canadian
distribution partners because certain Canadian contracts are denominated in
Canadian dollars. To date, we have not received significant revenues or incurred
significant expenses with our Canadian distribution partners.


                                       22

<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 and Philips
Electronics North America, Inc., are willfully infringing certain claims of
seven U.S. Patents assigned to or licensed by PMC. Though we are not a defendant
in the suit, PMC may allege certain of our products, in combination with the
products provided by the defendants, 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 we are obligated to defend any
defendant in this matter, our business and financial performance may be
adversely affected. If it is determined that our products infringe any of the
asserted claims, our business and financial performance may be adversely
affected.

         On November 26, 2001, a class action complaint was filed in the United
States District Court for the Southern District of New York by Collegeware USA,
Inc., on behalf of itself and all others similarly situated ("Collegware")
alleging that Wink, certain of its officers and directors, along with other
defendants, committed certain wrongful acts in connection with its IPO,
including violating certain SEC & NASD rules and regulations. This litigation,
referred to as a "laddering' case, is similar to hundreds of other laddering
cases filed against other newly public companies by other class action
defendants in the same Court. Our agreements with certain of the defendants may
include indemnification rights and obligations that may be triggered by this
litigation. If it is determined that we are obligated to defend any defendant in
this matter, our business and financial performance may be adversely affected.
If this litigation proceeds and we are determined to be liable for the alleged
violations, our business and financial performance may be adversely affected.

         We believe we have meritorious defenses and plan to vigorously defend
ourselves in the matters filed against us, and while the results of such
litigation and claims cannot be predicted with certainty, we believe that the
resolution of each matter will not have a material adverse effect on our
financial position, results of operations or on our cash flows.

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.

         As of June 30, 2002, we had approximately $53.6 million in cash, cash
equivalents and short-term investments. We have used, and continue to expect to
use, the proceeds from the offering for general corporate purposes, including
working capital. We have invested all remaining proceeds of the IPO in
interest-bearing securities that management considers to be credit worthy.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

         None.

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<PAGE>

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

         The following matters were submitted to the stockholders in our Annual
Meeting of Stockholders held on May 9, 2002. Each of the matters was approved by
the requisite vote.

(a) The following individuals were re-elected to the Board of Directors for
three-year terms as Class III directors:

<TABLE>
<CAPTION>
                                                                   VOTES FOR             VOTES WITHHELD
                                                                   ---------             --------------
<S>                                                               <C>                    <C>

          Jeffrey H. Coats......................................  21,906,898                 117,273
          F. Philip Handy.......................................  21,903,083                 121,088
          Terri Dial............................................  21,903,148                 121,023
</TABLE>


Our Board of Directors is currently comprised of nine members that are divided
into three classes with overlapping three-year terms. The term for our Class I
directors, Brian P. Dougherty, Bruce W. Dunlevie, Lawton Fitt and Donald
Ohlmeyer, will expire at the Annual Meeting of Stockholders in 2003. The term
for our Class II directors, Mary Agnes Wilderotter and Michael Fuchs, will
expire at the Annual Meeting of Stockholders in 2004.

(b)      The following proposals were also approved at our Annual Meeting:

<TABLE>
<CAPTION>
                                                AFFIRMATIVE      NEGATIVE                    BROKER NON-
                                                   VOTES           VOTES        ABSTAIN        VOTES
                                                -----------      --------       -------      -----------
<S>                                             <C>              <C>            <C>          <C>
   Amendment to the 1999 Director Option
   Plan to increase the number of shares
   of Common Stock reserved for issuance
   thereunder by 100,000 shares................ 21,372,063        588,897        63,211            --
   Ratification the appointment of
   PriceWaterhouseCoopers, LLP as
   independent auditors for the fiscal year
   ending December 31, 2002.................... 21,897,552         13,935       112,684            --
</TABLE>

ITEM 5. OTHER INFORMATION

         None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a) EXHIBITS

Exhibits                                    Description
--------                                    -----------

10.56   Seventh Amendment to Master Affiliation Agreement with DirecTV, March 8,
        2002.(+)
99.1    Certification of Chief Executive Officer
99.2    Certification of Executive Vice President and Principal Financial and
        Accounting Officer

        (+) Confidential treatment has been requested for these exhibits.


                                       24

<PAGE>




         (b) REPORTS ON FORM 8-K

         The Registrant filed a Current Report on Form 8-K dated June 25, 2002
         to report, under Item 5, that the Registrant entered into an Agreement
         and Plan of Merger with Liberty Broadband Interactive Television, Inc.,
         Wink Interactive, Inc., Walnut Merger Corp. and, for purposes of
         Section 6.11 of the agreement only, Liberty Media Corporation.


                                       25

<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.


                                      By: /s/   TIMOTHY TRAVAILLE
                                                -------------------------
                                                Timothy Travaille
                                                Executive Vice President
                                                (Duly Authorized Officer and
                                                Principal Financial and
                                                Accounting Officer)

Date: August 14, 2002



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