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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                         ------------------------------

                                   FORM 10-K
                         ------------------------------
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

[X]

                  For the Fiscal Year ended December 31, 2001
               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

[ ]

             For the Transition Period From to ________ to ________

                       Commission File Number: 000-26655
                           WINK COMMUNICATIONS, INC.

<Table>
<S>                          <C>                          <C>
         DELAWARE                       7372                      94-3212322
      (STATE OR OTHER             (PRIMARY STANDARD            (I.R.S. EMPLOYER
      JURISDICTION OF         INDUSTRIAL CLASSIFICATION       IDENTIFICATION NO.)
     INCORPORATION OR               CODE NUMBER)
       ORGANIZATION)
</Table>

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

        Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001
                                   par value

     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 period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.     Yes [X]      No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K.     [ ]

     The number of outstanding shares of the Registrant's Common Stock on
February 28, 2002 was 31,270,000. The aggregate market value of such shares held
by non-affiliates of the Registrant (based upon the closing sale price of such
shares on the NASDAQ National Market on February 28, 2002) was approximately
$29,276,000. Shares of the Registrant's Common Stock held by each executive
officer and director and by each entity that owns 5% or more of the Registrant's
outstanding Common Stock have been excluded in that such persons may be deemed
to be affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the definitive Proxy Statement to be delivered to stockholders
in connection with the Annual Meeting of Stockholders to be held May 7, 2002 are
incorporated by reference into Part III.
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                               TABLE OF CONTENTS

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<S>            <C>                                                          <C>
                                          PART I
ITEM 1.        BUSINESS....................................................       3
               RISK FACTORS................................................      13
ITEM 2.        PROPERTIES..................................................      17
ITEM 3.        LEGAL PROCEEDINGS...........................................      17
ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........      18
               EXECUTIVE OFFICERS OF THE REGISTRANT........................      18
                                         PART II
ITEM           MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
  5.....       MATTERS.....................................................      20
ITEM 6.        SELECTED FINANCIAL DATA.....................................      21
ITEM           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
  7.....       AND RESULTS OF OPERATIONS OVERVIEWS.........................      23
ITEM           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
  7A....       RISK........................................................      32
ITEM 8.        FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................      33
ITEM 9.        CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
               AND FINANCIAL DISCLOSURE....................................      61
                                         PART III
ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.............      61
ITEM 11.       EXECUTIVE COMPENSATION......................................      61
ITEM           SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
  12....       MANAGEMENT..................................................      61
ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............      61
                                         PART IV
ITEM           EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
  14....       8-K.........................................................      61
SIGNATURES.................................................................      64
</Table>

                                        2
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                           FORWARD LOOKING STATEMENTS

THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS THAT HAVE
BEEN MADE PURSUANT TO THE PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS,
ESTIMATES AND PROJECTIONS ABOUT OUR INDUSTRY, MANAGEMENT'S BELIEFS, AND
ASSUMPTIONS MADE BY MANAGEMENT. WORDS SUCH AS "ANTICIPATES," "EXPECTS,"
"INTENDS," "PLANS," "BELIEVES," "SEEKS," "ESTIMATES," VARIATIONS OF SUCH WORDS
AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING
STATEMENTS. THESE STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND ARE
SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS THAT ARE DIFFICULT TO
PREDICT; THEREFORE, ACTUAL RESULTS AND OUTCOMES MAY DIFFER MATERIALLY FROM WHAT
IS EXPRESSED OR FORECASTED IN ANY SUCH FORWARD-LOOKING STATEMENTS. SUCH RISKS
AND UNCERTAINTIES INCLUDE THOSE SET FORTH HEREIN UNDER "RISK FACTORS" ON PAGES
14 THROUGH 18. PARTICULAR ATTENTION SHOULD BE PAID TO THE CAUTIONARY LANGUAGE IN
RISK FACTORS "-- WE EXPECT TO INCUR SUBSTANTIAL OPERATING AND NET LOSSES," "--
OUR LIMITED OPERATING HISTORY AND THE EMERGING MARKET FOR INTERACTIVE TELEVISION
MAKE OUR FUTURE FINANCIAL RESULTS UNPREDICTABLE," AND "-- WE WILL INCUR
SUBSTANTIAL LIABILITY IF THE WINK SERVICE FAILS TO GENERATE SUFFICIENT REVENUE
TO MEET OUR REVENUE GUARANTEES AND OTHER OBLIGATIONS." UNLESS REQUIRED BY LAW,
WE UNDERTAKE NO OBLIGATION TO UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS,
WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE.

                                     PART I

ITEM 1.  BUSINESS

     We provide a complete end-to-end system for low-cost electronic commerce on
television. Our system, the Wink Service, allows advertisers, merchants and
broadcast and cable networks to create interactive enhancements to traditional
television advertisements and programs. With a click of their remote control
during an enhanced program or advertisement, viewers can purchase merchandise or
request product samples, coupons or catalogues. Similarly, viewers can use Wink
to access program-related information such as news, sports and weather and
participate in votes and polls.

     Our business plan is to derive the primary portion of our future revenues
from impression, transaction and reporting fees charged to advertisers and
merchants for each purchase order and request for information and to provide
data analysis and reporting services related to impressions and these television
viewer responses. As a result, we expect our principal customers to be
advertisers, merchants and networks. In order for advertisers, merchants and
networks to use Wink, many participants in the television industry must license
our technology and work with us to make the Wink Service available. We believe
that wide acceptance of Wink by major television industry participants is
essential for us to attract merchants and advertisers.

     We have established relationships with, and licensed our technology to,
over 185 key industry participants from many segments of the television
industry. For example:

     -  31 broadcast and cable networks and virtual channel owners broadcast
        Wink-enhanced programming and advertising;

     -  some of the largest cable operators in the United States and Canada,
        including Charter Communications, Adelphia Communications and Comcast
        Cable Communications, distribute Wink-enhanced programming and
        advertising nationally, and AT&T Broadband, Time Warner Cable and Rogers
        Cable Inc. of Canada distribute Wink-enhanced programming and
        advertising in some of their local markets;

     -  the largest direct broadcast satellite operators in the United States,
        DIRECTV and Echostar, and the largest direct broadcast satellite
        operator in Canada, BellExpressVu, have agreed to distribute
        Wink-enhanced programming and advertising nationwide and, although we do
        not expect Echostar and BellExpressVu to launch Wink-enhanced services
        until the second half of 2002, DIRECTV has successfully launched Wink in
        more than three million homes on multiple set-top box platforms. DIRECTV
        and Echostar, combined, expect to have the Wink Service available in
        approximately seven million homes by January 2003;

     -  Microsoft Corporation has agreed to develop, market and distribute
        Wink-enhanced programming and advertising on Microsoft's television
        platforms;

                                        3
<PAGE>

     -  several of the leading set-top box and television manufacturers,
        including Motorola, Scientific Atlanta, Pioneer, Toshiba, Matsushita,
        Thomson Consumer Electronics, Hughes Network Systems, Sony Electronics
        and Phillips Electronics incorporate Wink's technology into their
        products;

     -  several of the leading set-top box operating system and "middleware"
        software developers, including Microsoft, Liberate Technologies, PowerTV
        and OpenTV, integrate with or have agreed to integrate with our
        technology; and

     -  Several national advertisers, including AT&T, Johnson & Johnson and
        DaimlerChrysler, have created Wink-enhanced advertisements, which have
        been aired by several cable and broadcast satellite operators.

     There are many factors that may prevent us from achieving significant
future revenues from transaction fees charged to advertisers and merchants for
purchase orders and other information requests. For example, advertisers and
merchants must adopt Wink-enhanced advertising, cable and direct broadcast
satellite system operators must accept and promote the Wink Service and viewers
must request information and purchase goods and services in response to
Wink-enhanced programming and advertising. For further discussion of these and
other risks that we face, see "Risk Factors" beginning on page 14.

     We began the roll-out of our service in the United States in June 1998. In
October 2000 DIRECTV began providing the Wink Service to direct broadcast
satellite operator viewers. At this time, we serve viewers in select cable
markets in Alabama, California, Connecticut, Delaware, Florida, Illinois,
Maryland, Massachusetts, Michigan, Missouri, Ohio, New York, Pennsylvania, South
Carolina, Tennessee, Texas, Vermont, Virginia, West Virginia and Ontario,
Canada. In addition, the Wink Service has been offered by our licensees in Japan
since October 1996.

MARKET OPPORTUNITY

     Television is one of the most pervasive communications media in society
today. According to Nielsen Media Research, there were approximately 105.5
million television households in the United States as of January 1, 2002. On
average, those households watch an estimated seven hours of television
programming per day. With recent advances in technology, new televisions and
advanced analog and digital set-top boxes can provide a platform for interactive
television. The Yankee Group, a leading research and strategic consulting firm,
estimates over 19.9 million digital cable subscriptions by year-end 2002. By
2006, the Yankee Group expects that the number of digital cable subscriptions
will reach 36.8 million.

     Television advertising is considered to be one of the most effective
methods of building brand recognition and general consumer awareness of products
and services. Despite the fact that traditional television broadcasting, cable
and direct broadcast satellite television systems do not provide an integrated
means for viewers to respond to programs and advertisements, the Direct
Marketing Association predicts that approximately $178.9 billion of goods and
services will be purchased through direct response television programming and
advertising by 2005. In addition, we believe that electronic commerce conducted
through television viewing devices will benefit from the growth in internet
online shopping, as consumers become more accustomed to purchasing goods and
services electronically. We believe that an opportunity exists for a simple,
inexpensive and automated method of responding to direct response advertising on
television.

     In addition, many advertisers are using television advertisements to
generate requests for product information, which in turn serve as sales leads
for their products and services. Today, most direct response television
purchases and requests for information require a telephone call, which typically
cause advertisers to incur a significant cost per transaction. We believe that
television viewers, advertisers and merchants will respond favorably to a
simple, inexpensive and automated method for them to participate in sales lead
generation on television.

THE WINK EXPERIENCE

     Our service is free to viewers and easy-to-use, which we believe will
encourage broad and frequent usage. Viewers can receive the Wink Service through
Wink-enabled televisions and new and existing advanced analog and digital
set-top boxes. Many existing set-top boxes already installed in consumers' homes
can be activated to receive the Wink Service through a remote cable and direct
broadcast satellite operator download.

                                        4
<PAGE>

To access a Wink enhancement, a television viewer simply clicks the remote
control when the Wink icon appears on the screen. For example, with a few clicks
of the remote control, Wink allows viewers to:

     -  access additional information about a specific news story from CNN
        Headline News;

     -  respond to an offer for information about financial services offered by
        Ameritrade or TD Waterhouse;

     -  access the local weather forecast instantly from The Weather Channel or
        find weather forecasts for other cities;

     -  obtain coupons and product samples from GlaxoSmithKline or a new car
        brochure from Ford;

     -  purchase a subscription to a magazine or enter a contest to win a house
        while watching Home & Garden Television;

     -  access real-time game scores on demand or search for statistics relating
        to a specific sporting event while watching ESPN or TBS; or

     -  purchase music compact discs by an artist featured on the Music Choice
        dedicated digital music channels or a book offered on the Barrnes &
        Noble virtual channel, both featured on DIRECTV.

WINK AND THE TELEVISION INDUSTRY

     The Wink Service is designed to benefit the following participants in the
television industry:

     -  Viewers.  The Wink Service offers viewers an easy-to-use, enhanced
        television viewing experience. To date, the Wink Service has been
        offered to viewers for free in all markets in which it has been
        launched. The Wink Service allows viewers to obtain a variety of
        additional content related to the programming they watch and to request
        information about or purchase advertised products. The viewer controls
        access to these broadcast enhancements or electronic commerce
        opportunities through the viewer's existing remote control.

     -  Advertisers and Merchants.  The Wink Service is designed to allow
        advertisers and merchants to provide additional information to viewers,
        generate sales leads, sell products directly to viewers and collect
        detailed market information. In addition, advertisers and merchants can
        promote their brands by sponsoring Wink programming enhancements. We
        believe that the use of the Wink Service will provide advertisers and
        merchants a lower-cost alternative for capturing sales leads and orders
        than traditional telemarketing methods.

     -  Broadcast and Cable Networks.  We believe that the Wink Service offers
        networks a new approach to increasing the number of viewers, viewer
        loyalty and viewer involvement. As a result, the value of network
        advertising space may be increased, allowing networks to charge
        advertisers and merchants premiums for airing Wink-enhanced commercials.
        The Wink enhancements may also provide opportunities for selling
        additional advertising space. In addition, networks can use the Wink
        Service to offer merchandise to viewers and to promote other programming
        on their existing video channels or a Wink developed virtual channel,
        which requires little bandwith. Moreover, information obtained through
        the Wink Response Network can be used by networks to offer advertisers
        targeted audience information.

     -  Cable and Direct Broadcast Satellite System Operators.  The Wink Service
        is designed to offer cable and direct broadcast satellite system
        operators an expanded menu of services to provide to their subscribers,
        thus helping to attract new subscribers, maintain current subscribers
        and encourage all subscribers to upgrade to premium services and
        purchase pay-per-view programming. In addition, in order to encourage
        cable and direct broadcast satellite system operators to offer the Wink
        Service, we have offered to share a portion of the revenues generated
        from subscribers' responses to Wink-enhanced programming, advertising
        and dedicated interactive channels. We also guarantee a certain amount
        of minimum revenue to certain partners, and we provide marketing
        development funds for promotion to certain partners.

     -  Set-top Box and Television Set Manufacturers.  The Wink Service is
        designed to offer set-top box and television set manufacturers an
        opportunity to enhance their products with increased functionality and
        to extend their product lines at a relatively low incremental cost.

                                        5
<PAGE>

BUSINESS STRATEGY

     Our objective is to capitalize on the pervasiveness and popularity of
television to create a mass market interactive television system for sales lead
generation and electronic commerce. Our strategy to achieve this objective
includes the following key elements:

     -  Increase the Presence of the Wink Service in Television Households.  We
        intend to promote deployment of Wink-enabled set-top boxes and the
        launch of the Wink Service through these devices. We have entered into
        and will continue to target licensing relationships with leading
        manufacturers of set-top boxes and television sets. We are working with
        certain large cable and digital broadcasting satellite system operators
        to encourage both the downloading of the Wink Engine software to Wink-
        capable set-top boxes already installed in consumer homes and the
        deployment of new Wink-capable set-top boxes. We are also working with
        Microsoft to enable Microsoft television platforms to generate and
        capture Wink viewer responses.

     -  Promote Use by Viewers.  We believe that increased development and
        broadcasting of Wink-enhanced advertising and programming and other
        on-demand information and entertainment services are critical to
        attracting viewers to use the Wink Service. Consequently, we actively
        encourage the broadcast and cable networks with whom we have strategic
        relationships to air Wink enhancements that offer viewers an
        easy-to-use, entertaining and informative interactive television
        experience. We also intend to actively encourage usage of the Wink
        Service through advertising, direct mail and promotions in collaboration
        with cable and direct broadcast satellite operators, equipment
        manufacturers and broadcast and cable networks.

     -  Expand Use of Wink-Enhanced Direct Response Offers.  We believe that the
        simplicity and convenience of the Wink transaction response mechanism
        encourages viewers to respond to Wink-enhanced advertising and
        promotions. We work with our broadcast and cable network partners to
        encourage advertisers to add Wink enhancements to their television
        advertisements. We believe that the low cost of response collection and
        the ease with which viewers can respond to Wink-enhanced advertising
        will encourage advertisers to complement their television advertisements
        with direct response offers. In addition, we believe that existing
        direct response television advertisers will utilize Wink to increase
        their chances of capturing an order. We have launched interactive
        shopping services featuring a targeted selection of products suitable
        for electronic commerce via television from Barnes & Noble, Music Choice
        and ShopNBC. To this end, we plan to enter into several more
        relationships with merchants to create dedicated interactive channels
        that offer viewers the ability to request product information, coupons,
        samples and other offers and to purchase products and services.

     -  Benefit Multiple Participants in the Television Industry.  We believe
        that generating economic value for broadcast and cable networks, cable
        and direct broadcast satellite system operators, set-top box and
        television manufacturers, advertisers and merchants is critical to the
        success of the Wink Service. Our business model has been designed to
        deliver value directly to these industry participants. In addition,
        since Wink enhancements are integrated with existing programming and
        advertising and are under the control of the broadcast or cable
        networks, we believe the Wink Service will not threaten the existing
        revenue streams and customer relationships of these industry
        participants.

     -  Leverage Industry Relationships.  We have formed strategic relationships
        with key participants in the television industry. We believe that our
        relationships with broadcast and satellite system operators will assist
        us in attracting interest from advertisers. Conversely, we believe our
        relationships with national advertisers reinforce both the broadcast and
        cable networks' and the cable and direct broadcast satellite operators'
        interest in launching the Wink Service. We also believe our
        relationships with the leading cable set-top box and satellite set-top
        box manufacturers will encourage cable and direct broadcast satellite
        operators to adopt the Wink Service. We intend to seek additional
        relationships and believe that increasing the breadth and depth of our
        existing relationships will help facilitate these efforts.

     -  Promote the Wink On-TV attract Icon.  Our goal is to make the Wink icon
        synonymous with interactive enhanced programming and advertising that is
        appealing to viewers and easy to use. In addition to encouraging content
        providers, broadcast and cable networks and advertisers to produce
        compelling Wink-enhanced programming and advertising, we intend to build
        recognition and to increase the visibility of the Wink icon through a
        variety of marketing and promotional activities,

                                        6
<PAGE>

       including targeted pre-deployment televised advertising campaigns, to
       generate a high level of initial interest, cooperative promotional
       programming with cable operators, and advertising campaigns following
       deployment in selected regions across a variety of media, including
       through Wink-enhanced programming itself.

STRATEGIC RELATIONSHIPS

     We believe that development of strategic relationships with television
industry participants is critical to the acceptance of the Wink Service and
ultimately the success of our business model. We are currently focused on
developing strategic relationships in each sector of the television industry. We
have initially targeted larger, established participants in each of the
following sectors:

     -  Advertisers and Merchants.  We encourage advertisers to utilize the Wink
        Service through the advertising sales efforts of our broadcast and cable
        network partners. To facilitate this process, we sell directly to
        national advertisers to reinforce to our network partners the viability
        of the Wink Service and the high advertiser interest in using this
        service. In 2002, we expect to add more advertisers through our own
        sales efforts and those of our broadcast and cable network partners. We
        have signed numerous agreements with advertisers on a
        fee-per-transaction and service basis. We have also entered into
        agreements with several advertising agencies that represent national
        advertisers and expect to build relationships with national advertisers
        through these agencies. We expect that a substantial portion of our
        future advertising arrangements will be short term and will not include
        commitments to air a specific number of Wink-enhanced advertisements. We
        also anticipate that we will continue to offer products from several
        merchants for sale through Wink dedicated interactive and virtual
        channels, including products by Barnes & Noble, Music Choice and
        ShopNBC.

     -  Broadcast and Cable Networks.  We have entered into license agreements
        with all four of the major broadcast networks and 27 cable networks,
        which collectively offer a variety of programming types, including prime
        time entertainment, news, sports, weather, movies, shopping, contests
        and music programming. These license agreements generally range in
        length from one to eight years and provide that the networks will air a
        specific number of hours of Wink-enhanced programming per week.

     -  Cable and Direct Broadcast Satellite System Operators.  We focus on
        establishing relationships with national cable and direct broadcast
        satellite system operators and with local cable operators in order to
        transmit the Wink Service signal to viewers. The cable and direct
        broadcast satellite system operators with which we have entered into
        strategic relationships include DIRECTV, AT&T, Time Warner Cable,
        Comcast Cable Communications, Charter Communications, Echostar
        Satellite, Rogers Cable, Adelphia Communications and BellExpressVu.
        While several of the aforementioned agreements do not contain
        commitments for minimum deployment levels, under our current agreements
        with our cable and direct satellite broadcast partners, we expect to
        deploy approximately 15 million Wink-enabled households by January 1,
        2004.

     -  Portal Services.  The Wink Service has been selected by digeo as the
        platform for their cable television portal offer. Currently, Charter
        Communications is deploying the digeo portal service in their digital
        cable systems. A portal service includes a TV "Home Page" for easy
        navigation of many interactive services and a set of full screen virtual
        channels that can be local in nature. We license our software platform
        to digeo and expect to collect revenue on a per household basis as digeo
        is deployed in Charter cable digital systems and when other cable
        operations adopt this service.

     -  Cable and Direct Broadcast Satellite Set-Top Box Manufacturers.  We have
        licensed the Wink software to Motorola, Pioneer and Scientific-Atlanta,
        three of the leading U.S. cable set-top box manufacturers. While we
        intend to license our software to other cable equipment manufacturers,
        we believe our relationships with these three companies are critical to
        our success in the cable business. Motorola and Scientific-Atlanta have
        licensed Wink technology for incorporation into certain of their
        advanced analog and digital set-top boxes, and have each shipped certain
        Wink-capable advanced analog and digital set-top boxes. In addition,
        Pioneer has shipped Wink-enabled digital cable set-top boxes. The
        agreement with DIRECTV calls for DIRECTV to launch the Wink Service to
        Wink-enabled DIRECTV-compatible set-top boxes and, accordingly, we have
        entered into license agreements with Thomson Consumer Electronics,
        Hughes Network Systems, Phillips Electronics B.V., Sony Electronics,
        Panasonic and Samsung, the six largest suppliers of DIRECTV-compatible
        set-top boxes, to incorporate the Wink software into certain of their
        set-top boxes.
                                        7
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     -  Television Manufacturers.  We have developed strategic relationships
        with leading worldwide television manufacturers, including Toshiba,
        Matsushita and Zenith Electronics. Toshiba recently introduced the first
        high definition television models incorporating Wink technology in
        Japan. In addition, Matsushita and Toshiba have incorporated Wink
        technology software in analog televisions marketed in Japan.

     -  Set-top Box Operating System Software Developers.  We have developed
        strategic relationships with leading set-top box operating system and
        "middleware" software developers, including Microsoft (see below),
        Liberate Technologies, PowerTV, Source Media and OpenTV. These
        agreements typically require us and the third party to make sure our
        functionality works with the third party's operating system or software
        platform, as applicable.

     Strategic Relationship with Microsoft.  Our relationship with Microsoft
focuses on three areas: development, distribution and marketing.

     -  Microsoft's operating system and other software for set-top boxes and
        televisions that comply with the Advanced Television Enhancement Forum's
        proposed Internet-based standard for enhanced television will be
        modified to capture viewer responses for processing by the Wink Response
        Network. We have modified components of the Wink Service to support this
        standard and these Microsoft television platforms.

     -  Microsoft has agreed to enable its operating system for set-top boxes
        and televisions to use the Wink Response Network to collect, aggregate
        and process viewer responses to applications complying with
        Internet-based standards delivered as part of video programming and
        advertising for set-top boxes and televisions. We will be the exclusive
        provider in these devices where Microsoft exclusively controls the
        operating system, application environment and content and data services.
        Microsoft has also agreed to use efforts to make other set-top boxes and
        televisions that use a Microsoft operating system capable for the Wink
        Response Network service. Microsoft is not obligated to use the Wink
        Response Network for responses other than purchases and requests for
        information or when viewers respond by connecting directly to an
        advertiser's website, via e-mail or other similar mechanisms. We have
        agreed to make Microsoft the exclusive licensor of the Wink Engine,
        except for rights previously granted to other customers and with respect
        to platforms for which the Wink Engine is already available, under
        development or does not support Microsoft's technology. As part of our
        agreement with Microsoft, we have agreed to share a portion of the
        revenues we generate from viewer responses and to provide minimum
        revenue guarantees.

     -  We have agreed to work with Microsoft to promote the Wink Response
        Network to current and prospective customers for set-top boxes and
        televisions which utilize Microsoft software. We have also agreed to
        work together to promote Microsoft's technology for set-top boxes and
        televisions, and to promote products, services and content that comply
        with Internet-based standards.

     Strategic Relationships for Japan.  As of December 31, 2001, approximately
250,000 Wink-enabled television sets and tuners have been shipped for
distribution in Japan under the brand names of Toshiba and Panasonic. Toshiba
also implemented and has shipped the Wink Engine in all of its high definition
televisions since September 2000. We utilize Toshiba's broadcast equipment sales
team to sell Wink server and authoring tool products to Japanese networks and
direct broadcast satellite system operators. We have server development and
royalty agreements directly with Toshiba for these products.

     The Wink Service was launched October 1, 1996 in collaboration with the
ITVision Promotion Consortium, a consortium that has been formed to establish
interactive television in Japan. The Consortium includes companies such as
Toshiba, Matsushita, Sony, Pioneer, NTT and Dentsu, Japan's largest advertising
agency. Four Japanese broadcasters, TV-Tokyo, TV-Osaka, TV-Achi, and TV-Kyushu,
are currently using Wink technology to enhance their programming.

     Mitsui, Toshiba, Matsushita, NTT, Dentsu, Sony and other companies
established MediaServe in 1996, a data center that collects responses from
Wink-enabled televisions through the Japanese public phone system. Viewers have
used the Wink Service to purchase books, women's apparel and many other products
and to order groceries for delivery to handicapped people, to take part in quiz
programs for prizes, to respond to interactive advertisements so that customer's
preferences can be communicated to the advertiser and to rate movie programs. We
also have produced and licensed versions of our software localized for Japan.
The Wink programming enhancements currently airing in Japan are similar to those
being aired in the United States.
                                        8
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Because we were not a participant in the MediaServe data center in 1999 and
prior, we did not receive any transaction fee revenue from responses to the Wink
Service in Japan. In April 2000, we invested $2.9 million in MediaServe as part
of MediaServe's private financing round. With our purchase of approximately 8.9%
of MediaServe's outstanding capital stock, we are the third largest shareholder
of MediaServe after Toshiba and Mitsui. We currently own 8.6% of the outstanding
capital. MediaServe launched data-only satellite broadcasting on December 1,
2000, in order to expand its business scope and response business base.

COMPONENTS OF THE WINK SERVICE

     The Wink Service provides an end-to-end solution for sending interactive
applications along with broadcast video to viewers' televisions. This system is
composed of core, proprietary technologies developed by us as well as
off-the-shelf electronic commerce and database solutions. The Wink Service
consists of:

     -  the Wink Studio and Wink Server Studio authoring tools and associated
        templates that allow networks, advertisers and cable operators to design
        interactive Wink applications;

     -  the Wink Broadcast Server and extensions that manage the timing and
        delivery of those applications;

     -  the Wink Client software that enables the generation and capture of
        viewer responses to Wink applications; and

     -  the Wink Response Server and Wink Response Network that are designed to
        efficiently process viewer responses to applications and forward them to
        advertisers or merchants.

WINK STUDIO AND WINK SERVER STUDIO

     Wink Studio is a high-level authoring tool that allows non-technical
designers to create interactive programming and advertising applications. Wink
Studio is Windows-based and graphically oriented, and enables the creation of
simple interactive applications. A designer simply drags objects from an object
palette onto forms to create enhancements. More complex applications can be
created by fully utilizing the Wink Basic scripting language to control the
behavior of objects and forms. In addition, Wink Server Modules provide live
data updates to Wink applications. In particular, Wink Server Modules are
designed to make it easy to incorporate or transpose data from web sites and
databases for broadcast updates.

WINK BROADCAST SERVER

     The Wink Broadcast Server manages the scheduling and insertion of
applications designed with Wink Studio into television programming for Wink's
proprietary interactive application communications protocol (ICAP) and
applications conforming to the Advanced Television Enhancement Forum's web
browser-based standard for enhanced television (ATVEF). The Wink Broadcast
Server is designed to integrate with station management equipment such as
commercial insertion systems, when available, to enable broadcast and cable
networks to automate the delivery of interactive enhancements to programs and
advertisements. Local network affiliates and cable operators can also add
interactivity on a local level using the Wink Broadcast Server.

WINK CLIENT SOFTWARE

     We offer two versions of the Wink Client software. In web browser enabled
set-top boxes and televisions, the Wink Client software will enable the
generation of Wink viewer responses from broadcast Internet-like applications.
In other set top boxes and televisions, the Wink Client software, in this case
known as the Wink Engine, displays the Wink applications and enables the
generation of viewer responses. Wink Client software can be installed in
Wink-capable televisions and most new advanced analog and digital set-top boxes
at the factory or downloaded through cable systems, satellite systems or
telephone modems into certain set-top boxes already installed in a viewer's
household.

WINK RESPONSE SERVER

     The Wink Response Server collects viewer response data, or response
packets, which are generated by Wink applications. These response packets are
retrieved directly from televisions and satellite set-top boxes through phone
dial-up and from cable set-top boxes through cable head-end systems. The Wink
Response Server aggregates response packets and delivers them to the Wink
Response Network.

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WINK RESPONSE NETWORK

     The Wink Response Network is designed to enable the collection, aggregation
and reporting of viewer responses, requests for information and purchase orders
for transmission to and use by advertisers, merchants, broadcast and cable
networks, and cable and direct broadcast satellite system operators. The Wink
Response Network includes two databases: one database correlates device serial
numbers to customer address and billing information, while the second correlates
an unique code for each interactive application to routing instruction and
product information. When a consumer responds to a Wink application and orders a
product, a response packet is generated by the Wink Engine in the set-top box or
television. A response packet includes the device serial number, the unique
application code and application specific data. These response packets are
collected, aggregated, converted into full electronic orders (name, address, and
credit information, if appropriate), and delivered to the advertiser or network.

     In the case of set-top boxes, the customer database is maintained by the
satellite or cable operator's billing system, and we link to this database. The
Wink Response Network was activated in August 1998 following our first launch of
the Wink Service in Kingsport, Tennessee, and is currently being used to route
viewers' responses to interactive advertisements and programming to the
appropriate advertisers and/or fulfillment companies.

     In addition to aggregating and delivering responses, we can provide
industry participants with additional reporting. For example, participating
networks are receiving aggregated information regarding all Wink applications
that run on their networks. Cable and direct broadcast satellite system
operators can obtain information regarding all applications that run on their
systems. Advertisers can obtain information regarding how their ads perform
across all networks by show, event or daypart. The Wink Response Network
combines custom data processing solutions developed by us with off-the-shelf
electronic commerce systems to provide a complete end-to-end solution for our
customers.

EMERGING STANDARDS

     We believe that the most important aspects of our business relate to
capturing, aggregating and routing TV-viewer responses to interactive
programming and advertising. In contrast, we believe it is less important which
protocol or "language" is used to design interactive applications. Several
formal and informal industry groups have proposed competing standards for the
language in which interactive programming and advertising should be written.
While we may support other proposed standards in the future, we became an early
adopter of the Advanced Television Enhancement Forum's proposal for an
Internet-based standard for enhanced television in the summer of 1998. In
conjunction with our agreements with Microsoft, Liberate Technologies and
PowerTV, we have developed a version of the Wink Broadcast Server that is
compatible with this standard and a means of capturing and generating Wink
response packets from broadcast applications that are compatible with this
standard. The founders of the Advanced Television Enhancement Forum include
Microsoft Corporation, Intel Corporation, Liberate Technologies, Sony, DIRECTV,
Cable Labs, NBC, The Walt Disney Company and Discovery Communications. We are
also monitoring the standardization efforts of the Advanced Television Systems
Committee as well as the OpenCable recommendations.

TECHNICAL SUPPORT AND CUSTOMER SERVICE

     We believe that comprehensive, high-quality support is an essential element
of our business approach. We provide users of our software with installation
services, training, documentation, technical and network support, and system
maintenance for all Wink server and authoring software. Upon request and for an
additional fee, we will provide customized technical consulting and support for
applications and server module development. We provide telephone technical
support for our products 24 hours a day, seven days a week, providing services
that include system monitoring, problem resolution and preventive
troubleshooting. Whenever possible, we seek to connect viewers directly with
advertisers and merchants to lower customer service costs.

COMPETITION

     We face competition from a number of companies, many of which have
significantly greater financial, technical, manufacturing and marketing
resources than us and may be in a better position to compete in the industry.
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.
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We also face competition from other providers and companies operating in the
direct marketing business, especially operators of toll-free response call
centers.

     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 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, Microsoft has been active in a variety of
aspects of the interactive television market.

     There also are a number of interactive system providers that have developed
or have indicated plans to develop proprietary software and hardware for adding
interactivity to existing television technologies, including Worldgate
Communications, AOL TV, 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 affected.

     We compete on the basis of certain factors, including:

     -  the quality and breadth of product and service offerings

     -  the ease and speed with which a product can be integrated into existing
        set-top boxes, satellite and cable system operators and broadcast
        networks and cable programmer systems and deployed to customers

     -  the efficiency with which software platforms operate with various
        consumer devices

     -  the effectiveness of sales and marketing efforts to advertisers and
        merchants

     -  the efficient management of available bandwidth in the deployed networks

     -  the possession of patents relating to important technologies

     -  the adequacy of financial resources

     -  the competitiveness of product pricing

     -  the length of time to market, and

     -  the effectiveness of sales and marketing efforts.

     We believe that we presently compete favorably with our competitors in many
of these areas. However, the market for consumer devices is evolving, and we
cannot be certain that we will compete successfully in the future. See "Risk
Factors -- We face competition from a number of companies."

INTELLECTUAL PROPERTY

     Our ability to compete is dependent in part upon our internally developed,
proprietary intellectual property. We rely on patent, trademark, trade secret
and copyright law, as well as confidentiality procedures and licensing
arrangements to establish and protect our rights in our technology. Others may
develop technologies that are similar or superior to our technology. We
typically enter into confidentiality or license agreements with our employees,
consultants, customers, strategic partners and vendors, and typically control
access to and distribution of our software, documentation and other proprietary
information. Despite these precautions, it may be possible for a third party to
copy or otherwise obtain and use our products or technology without
authorization, or to develop similar technology independently through reverse
engineering or other means. Policing unauthorized use of our products is
difficult. The steps we take may not prevent misappropriation of our technology
or such agreements may not be enforceable. In addition, effective patent,
copyright and trade secret protection may be unavailable or limited in certain
foreign countries. Litigation may be necessary in the future to enforce our
intellectual property rights, to protect our trade secrets, or to determine the
validity and scope of the proprietary rights of others. Such litigation could
result in substantial costs and diversion of resources and could materially
adversely affect our business. See "Risk Factors -- Intellectual property
infringement claims may be asserted against us, which could disrupt our
business."

     On September 15, 1999, Fort Myers Broadcasting Company filed suit against
us in the United States District Court for the Middle District of Florida,
alleging federal trademark infringement, unfair competition
                                        11
<PAGE>

and dilution as well as injury to business reputation, unfair competition and
dilution in the state of Florida. In the fourth quarter of 2001, the parties
entered into a settlement agreement and on December 14, 2001, this case was
dismissed. On approximately January 14, 2002 the case was automatically
dismissed with prejudice.

     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 Corp., Thomson Consumer Electronics and Philips Electronics North
America, Inc. are willfully infringing certain claims of seven U.S. patents
assigned or licensed to PMC. Though the Company is not a defendant in the suit,
PMC may allege that certain of our products, in combination with products
provided by defendants, infringe PMC's patents. Our agreements with each of the
defendants include indemnification 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 it is determined that our products infringe any of the asserted claims, our
business and financial performance may be adversely affected.

     From time to time, we receive notices of claims of infringement of other
parties' proprietary rights or claims for indemnification resulting from
infringement claims. Irrespective of the validity or the successful assertion of
such claims, we may incur significant costs and diversion of resources with
respect to the defense of any claims brought, which could materially adversely
affect our business. In addition, the assertion of such infringement claims
could result in injunctions preventing us from distributing certain products or
services, which could materially adversely affect our operating results and
financial condition. 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.

     The Wink Response Network is designed to collect and utilize data derived
from viewer responses to Wink-enhanced programming. This data can be used for
several purposes, including product inquiry and order fulfillment, advertising
impact research and polling. Although we believe we have a right to use and
compile such data, copyright, trade secret or other protection may not be
available for such data and information or others may claim rights to it. We are
also obligated to keep certain information regarding networks' and cable
systems' programming services and system technology confidential.

     We have licensed in the past and expect that we may license in the future
elements of our technology and trademarks to third parties in the United States,
Japan and other countries. We attempt to ensure that the quality of our brand is
maintained by such business partners. However, such partners may take actions
that could adversely affect the value of our proprietary rights or the
reputation of our technologies.

     Wink is a registered trademark of Wink Communications, Inc. In addition,
"Wink Communications, Inc." stylized "i", and the mark "Smarter Way To Watch
Television" are also registered trademarks of Wink Communications, Inc. The
marks Wink Engine, Wink Broadcast Server, Wink Response Server, Wink Server
Studio, Wink Response Network, Wink Data Center, Wink Interactive, Wink Wallet,
stylized "i" Wink and the Wink Service are all trademarks of Wink
Communications, Inc.

EMPLOYEES

     As of December 31, 2001, we employed 132 full-time equivalents, excluding
temporary personnel and consultants. Of the total number, 49 full-time
equivalents were involved in product development, 29 in sales, marketing and
customer service, 13 in accounting, finance and administration and 41 in
operations. We are not subject to any collective bargaining agreements and
believe our relationship with our employees is good.

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<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 December 31, 2001, had an accumulated deficit of $197.3 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 and estimated transaction processing and general activities.
Also, we have entered into agreements with four 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. If sufficient revenue is not generated under these
arrangements, we will have to pay the minimum revenue guarantees from our
available cash. 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 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, data service fees and license and royalty revenues;
however, our future revenue prospects, particularly those derived from viewer
response activities, are subject to a high degree of uncertainty. As a result,
we expect to incur significant and increasing losses and negative cash flows for
the foreseeable future.

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

     Since our business plan is premised upon the expectation that we will
eventually receive the primary portion of our revenue directly from advertisers
and merchants, our business will suffer if advertisers and merchants do not
create and use Wink-enhanced advertising. Additionally, if 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 the 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 charter
advertisers and additional advertisers, our business will suffer.

WE WILL INCUR SUBSTANTIAL LIABILITY IF THE WINK SERVICE 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 four cable and direct broadcast satellite system operators, we
have provided a minimum revenue guarantee. These guarantees range from $1.00 to
$3.50 per year per
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Wink-enabled home. In addition, we have given minimum revenue guarantees to
Microsoft ranging from $2.00 to $4.00 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 $5.00 per household. We expect the aggregate amount that we will pay for
launch and marketing funds to be between $8 million to $8.5 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 27 cable networks and four broadcast networks,
these agreements generally commit the networks to use only reasonable efforts to
air a specified amount of Wink-enhanced programming and do not require a Wink
programming enhancement to be available at all times during this programming. In
addition, three of the cable and broadcast networks' agreements to air
Wink-enhanced programming have expired, although most of these networks continue
to air such programming. Moreover, our agreements allow the networks to select
the programming to be enhanced at their discretion, and do not require the
networks to employ enhanced broadcasting for all types of programming. Our
agreements with networks are short-term and generally can be terminated after
one year. Some networks can also terminate their agreements with us early upon
the occurrence of certain events, including our failure to achieve specific
performance requirements. The termination of one or more of these agreements, or
our failure to enter into additional agreements and to increase programming
commitments substantially, may prevent us from generating sufficient revenues to
conduct our business.

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

     In order for Wink to motivate viewers to interact with Wink-enhanced
programming and advertising, creators of programming and advertising must
develop and integrate high-quality Wink-enhanced 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 year ended December 31, 2001, our five largest
customers accounted for 70% of our revenues, and one customer, a related party,
accounted for 55% by itself. In the year ended December 31, 2000, our five
largest customers, accounted for approximately 73% of our revenues. We do not
expect that we will continue to be dependent upon a limited number of customers
for a significant portion of our revenues in future periods since our business
plan is premised upon receiving the primary portion of our revenue directly from
several advertisers and merchants. As a result, if we fail to successfully
execute our business plan, as it currently exists, sell our products and
services to one or more customers in any particular period, or if a large
customer purchases fewer of our products or services or terminates its
relationship with us, our revenues could decline significantly.

WE HAVE DEPENDED ON ARRANGEMENTS WITH RELATED PARTIES.

     Revenues related to software licenses, non-recurring engineering and
installation services provided to customers, who are also holders of our Common
Stock, represented $4.9 million and $3.3 million or 71% and 75% of our total
revenues for the year ended December 31, 2001 and 2000, respectively.
Additionally, revenue sharing and launch fees with related parties were $34.7
million and $9 million or 27% and 20% of total costs for the years ended
December 31, 2001 and 2000, respectively.

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<PAGE>

     Although we have negotiated each of our distribution agreements with these
stockholders and warrant holders 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 affect on
the price of our Common Stock.

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

     In 2001 and 2000 we entered into agreements with several distribution
partners whereby we issued performance-based warrants to purchase up to an
aggregate of 1.8 million shares of Common Stock, which are exercisable if those
distribution partners satisfy certain performance milestones. The value of the
warrants will be estimated using the Black-Scholes model when and if 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, the
current state of the economy has worsened and companies in many industries are
delaying or reducing technology purchases. We experienced the impact of the
September 11 events 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 a continuing decline in spending for advertising and media placement,
or the suspension of national advertising by major television networks, as
occurred during the two weeks following September 11, our business and results
of operations could be materially and adversely affected. If the current
economic conditions in the United States continue or worsen, or if a wider or
global economic slowdown occurs, we may fall short of our revenue expectations
for any given quarter of 2002 or for the entire year. These conditions would
seriously harm our operating results and stock price.

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

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

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

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

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

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

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

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

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

     -  consistently execute viewer response transactions;

     -  maintain satisfactory levels of customer service; and

     -  attract and retain strategic relationships in the television industry.

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

WE FACE COMPETITION FROM A NUMBER OF COMPANIES.

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

     A number of companies are developing system software for the general
interactive television market, including Liberate Technologies, OpenTV and Canal
Plus. OpenTV and Canal Plus already offer certain products with features 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
affected.

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

     The emerging and unsettled market for interactive television will require
that we continually improve the performance, features and reliability of 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.

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GOVERNMENT REGULATIONS MAY ADVERSELY AFFECT OUR ABILITY TO BROADLY TRANSMIT THE
WINK SERVICE 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 a
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 Corp., Thomson Consumer
Electronics and Philips Electronics North America, Inc. are willfully infringing
certain claims of seven U.S. patents assigned or licensed to PMC. Although we
are not a defendant in the suit, PMC may allege that certain of our products, in
combination with products provided by defendants, infringe PMC's patents. 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.

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.

ITEM 2.  PROPERTIES

     As of December 31, 2001, our principal administrative, marketing and
product development facilities were located in approximately 48,000 square feet
of office space in Alameda, California under a sublease that expires in
September 2004. We believe that our existing facilities are adequate to meet our
needs for the immediate future and that future growth can be accommodated by
leasing additional or alternative space near our current facilities.

ITEM 3.  LEGAL PROCEEDINGS

     On September 15, 1999, Fort Myers Broadcasting Company filed suit against
us in the United States District Court for the Middle District of Florida,
alleging federal trademark infringement, unfair competition and dilution as well
as injury to business reputation, unfair competition and dilution in the state
of Florida. In the fourth quarter of 2001, the parties entered into a settlement
agreement and on December 14, 2001, this case was dismissed. On approximately
January 14, 2002 the case was automatically dismissed with prejudice.

     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 Corp., Thomson Consumer Electronics and Philips Electronics North
America, Inc. are willfully infringing certain claims of seven U.S. patents
assigned or licensed to PMC. Though the Company is not a defendant in the suit,
PMC may allege that certain of our products, in combination with products
provided by defendants, infringe PMC's patents. Our agreements with each of the

                                        17
<PAGE>

defendants include indemnification 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 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
litigations and claims cannot be predicted with certainty, we believe that the
resolution of each matter will not have a material adverse effect on our
consolidated financial position, results of operations or on our cash flows.

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

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no submissions of matters to a vote of security holders during
the quarter ended December 31, 2001.

EXECUTIVE OFFICERS

     The following table sets forth certain information regarding our executive
officers as of December 31, 2001:

<Table>
<Caption>
                NAME                     AGE                          POSITION(S)
                ----                     ---                          -----------
<S>                                      <C>    <C>
EXECUTIVE OFFICERS OF THE REGISTRANT
Mary Agnes Wilderotter...............    47     Chief Executive Officer, President and Director
Jonathan W. Spatz*...................    46     Chief Financial Officer and Executive Vice President*
Timothy V. Travaille.................    44     Chief Technical Officer and Executive Vice President,
                                                Business Development and Finance
Katherine Sullivan...................    46     Executive Vice President, Marketing and People
                                                Development
Charles McCullough...................    50     Executive Vice President, Engineering and Operations
Melinda White........................    42     Executive Vice President, National Accounts for
                                                Distribution and Programming
</Table>

-------------------------

  *  Mr. Spatz went on long-term disability in January 2002, therefore he no
     longer serves in the role as Chief Financial Officer and Executive Vice
     President.

     Mary Agnes Wilderotter has served as our President and Chief Executive
Officer and a director since January 1997. From August 1995 to January 1997, Ms.
Wilderotter was the Executive Vice President of National Operations and Chief
Executive Officer of the Aviation Communications Division of AT&T Wireless
Services, Inc., a provider of wireless communications services in the United
States and a wholly owned subsidiary of AT&T Corporation. Prior to her tenure at
AT&T Wireless, Ms. Wilderotter was Senior Vice President of McCaw Cellular
Communications, Inc. from October 1991 to August 1995 and Regional President of
the California/Nevada/Hawaii Region. McCaw became AT&T Wireless upon AT&T's
acquisition of McCaw. Prior to joining McCaw, Ms. Wilderotter spent over 12
years in the cable industry. Ms. Wilderotter serves as a director on the boards
of Airborne Freight Corporation, Anixter International, Gaylord Entertainment
Co., American Tower Corp., Electric Lightwave, The McClatchy Company, California
Cable Television Association, and National Cable Television Association. Ms.
Wilderotter is also a member of the Board of Trustees of the College of the Holy
Cross and the Dean's Advisory Board at U.C. Davis. Ms. Wilderotter received a
B.A. degree in Economics and Business Administration from the College of the
Holy Cross.

                                        18
<PAGE>

     Jonathan W. Spatz served as our Executive Vice President and Chief
Financial Officer from December 2000 to January 2002. From January 2000 to
November 2000, he was Executive Vice President and Chief Financial Officer of
Eve.com, Inc., an internet retailer. Prior to joining Eve, Mr. Spatz was
Executive Vice President, Chief Operating Officer and Chief Financial Officer
for Factory 2-U Stores, Inc., an off-price apparel retailer, from June 1997.
From July 1994 to June 1997, he served as Senior Vice President and Chief
Operating and Financial Officer of Strouds, Inc., a specialty retailer of bed
and bath linens. Mr. Spatz received a B.S. degree in Business Administration
from the University of Nebraska.

     Timothy V. Travaille has served as our Executive Vice President, Business
Development and Finance since March 2002. From February 2000 to February 2002 he
served as Executive Vice President, Product Marketing and Business Development,
Chief Technical Officer since August 2000, Senior Vice President, Operations and
Deployments from February 1997 to March 1998 and Vice President, Operations and
Deployments from March 1997 to March 1998. From March 1994 to March 1997, Mr.
Travaille was employed by AT&T Wireless as Vice President, Chief Information
Officer. From December 1986 to February 1994, Mr. Travaille was employed by
Lamonts Apparel Inc., most recently as Vice President of Information Systems and
Merchandise Information Office. Mr. Travaille received B.S. degrees in
Accounting and Computer Science and an M.B.A. degree from the University of
Washington.

     Katherine Sullivan has served as our Executive Vice President, Marketing
and People Development since October 2000, Senior Vice President, Marketing and
People Development from June 1999 to September 2000 and Vice President, Consumer
Marketing and Marketing Communications from September 1997 to June 1999. From
June 1992 until September 1997, Ms. Sullivan was employed by McCaw Cellular
Communications/AT&T Wireless Communications, serving in several roles directing
Western Region retail sales and distribution. Ms. Sullivan received a B.A.
degree in Economics from The University of South Carolina.

     Charles McCullough has served as our Executive Vice President, Engineering
and Operations since October 2000, Senior Vice President of Engineering from
March 2000 to October 2000 and Vice President of Engineering from August 1998 to
March 2000. He is responsible for delivering our first digital platform. Prior
to joining Wink, Mr. McCullough was Vice President, Engineering, for Compact
Devices, Inc., from September 1997 to August 1998, where his engineering team
was responsible for the delivery of quality embedded system products. He worked
as a Consultant and Site Director for SCO directing UnixWare and OpenServer
engineering activities from 1995 to 1996. He also worked as an Engineering
Director for Unisys Corporation from 1992 to 1995, with responsibility for
delivering a range of server products. Mr. McCullough earned a Bachelor of
Science in Computer Software from the University of the State of New York,
Albany, New York.

     Melinda White has served as our Executive Vice President of National
Accounts since December 2000 and as Vice President of US TV Sales from May 1997
to November 2000. Ms. White held Sales, Marketing, and Business Development
roles with Cox Cable Communications over an eight year period in their Lubbock
TX, New Orleans, LA, and San Diego, CA Operating Areas from August 1985 to
February 1993 and on a consulting basis from January 1996 to May 1997. She was
also the General Manager of Cellular One's Monterey County properties, and Vice
President of Strategic Marketing for Telemac Cellular Corporation from October
1994 to January 1996. Ms. White earned a Master of Business Administration from
A.B. Freeman School of Business at Tulane University in New Orleans and a
Bachelor of Business Administration from Howard Payne University in Brownwood,
TX.

                                        19
<PAGE>

                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

PRICE RANGE OF COMMON STOCK

     Our Common Stock has traded on the Nasdaq National Market under the symbol
"WINK" since August 19, 1999. The following table sets forth the high and low
sales prices of our Common Stock for the periods indicated, and as reported on
the Nasdaq National Market:

<Table>
<Caption>
                                                                 HIGH      LOW
                                                                ------    ------
<S>                                                             <C>       <C>
YEAR ENDED DECEMBER 31, 2001
First Quarter...............................................    $ 9.75    $ 4.16
Second Quarter..............................................    $ 6.20    $ 2.56
Third Quarter...............................................    $ 3.75    $ 0.63
Fourth Quarter..............................................    $ 1.70    $ 0.70
YEAR ENDED DECEMBER 31, 2000
First Quarter...............................................    $75.00    $31.13
Second Quarter..............................................    $34.63    $14.50
Third Quarter...............................................    $31.69    $10.88
Fourth Quarter..............................................    $15.00    $ 4.88
</Table>

     As of February 28, 2002, there were approximately 261 stockholders of
record of our Common Stock. Because many of our shares of Common Stock are held
by brokers and other institutions on behalf of stockholders, we are unable to
estimate the total number of stockholders. The price for the Common Stock as of
the close of business on February 28, 2002 was $1.26 per share.

DIVIDEND POLICY

     We have never paid cash dividends on our Common Stock.

USE OF PROCEEDS OF INITIAL PUBLIC OFFERING

     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 (No.
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 IPO was completed on August 24, 1999, and all shares have been
sold. The aggregate gross proceeds from the IPO were $84.2 million for the
shares sold by us and $3.2 million for the shares sold by the selling
stockholders.

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

WARRANTS

     In November 2001, we entered into an agreement with a broadcast network
company to develop and air Wink-enhanced programming over a four-year period. In
connection with the agreement, we are obligated to issue to the broadcast
network partner warrants to purchase up to a maximum of 800,000 shares of Common
Stock upon the achievement of certain advertising broadcasting milestones. In
the event the warrants are issued, the exercise price for the warrants will be
$1.25 and the warrants will expire in November 2006.

                                        20
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

     The selected consolidated financial data set forth below with respect to
our consolidated statements of operations for each of the years ended December
31, 1999, 2000 and 2001 and with respect to our consolidated balance sheets as
of December 31, 2000 and 2001 have been derived from our audited financial
statements, which are included elsewhere herein. The selected consolidated
financial data set forth with respect to our consolidated statements of
operations for each of the periods ended December 31, 1997 and 1998 and with
respect to our consolidated balance sheets as of December 31, 1997, 1998 and
1999 are derived from our audited financial statements, which are not included
herein. Certain prior year balances have been reclassified to conform with the
current year presentation. The selected consolidated financial data set forth
below is qualified in its entirety by, and should be read in conjunction with,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and the notes to those
statements included elsewhere herein.

<Table>
<Caption>
                                                        YEARS ENDED DECEMBER 31,
                                          ----------------------------------------------------
                                           1997       1998       1999       2000       2001
                                          -------   --------   --------   --------   ---------
                                                 (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                       <C>       <C>        <C>        <C>        <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
  Licenses -- related parties..........   $   384   $    174   $    488   $    445   $     143
  Licenses -- third parties............        --        224        602      1,090         987
  Services -- related parties..........       148         --        356      2,805       4,747
  Services -- third parties............        87        119        155          4       1,037
                                          -------   --------   --------   --------   ---------
          Total revenues...............       619        517      1,601      4,344       6,914
                                          -------   --------   --------   --------   ---------
Costs and expenses(a):
  Revenue sharing and launch fees --
     related parties...................       240        641      2,146      8,963      34,698
  Revenue sharing and launch fees --
     third parties.....................        --         75      1,259        345         890
  Sales and marketing -- related
     parties...........................        --         --         --      1,750       2,070
  Sales and marketing -- third
     parties...........................     3,270      4,862      5,648      8,352       8,088
  Operating............................       817      2,733      6,146      8,752      10,087
  Product development..................     4,105      4,329      5,317     11,098       8,783
  General and administrative...........     1,843      2,572      4,657      6,534       5,283
  Impairment charge -- related
     parties...........................        --         --         --         --      52,494
  Impairment charge -- third parties...        --         --         --         --       2,801
                                          -------   --------   --------   --------   ---------
          Total costs and expenses.....    10,275     15,212     25,173     45,794     125,194
                                          -------   --------   --------   --------   ---------
Loss from operations...................    (9,656)   (14,695)   (23,572)   (41,450)   (118,280)
Interest and other income..............       684        813      5,435      8,167       3,741
Interest expense.......................      (194)      (154)       (87)       (22)         --
                                          -------   --------   --------   --------   ---------
Net loss...............................   $(9,166)  $(14,036)  $(18,224)  $(33,305)  $(114,539)
                                          =======   ========   ========   ========   =========
Net loss per share(b):
  Basic and diluted....................   $ (1.25)  $  (1.57)  $  (1.06)  $  (1.09)  $   (3.68)
                                          =======   ========   ========   ========   =========
  Weighted average shares used in
     computing both basic and diluted
     net loss per share................     7,337      8,954     17,150     30,425      31,147
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents..............   $ 8,530   $ 16,892   $ 58,032   $ 22,093   $  20,513
Short-term investments.................     5,452      4,441     91,167     98,907      57,434
Working capital........................    11,367     17,443    145,211    108,426      61,855
Total assets...........................    15,629     23,920    155,809    146,460      86,393
Long-term obligations, less current
  portion..............................       767        365         --         --          --
Stockholders' equity...................    11,925     19,125    149,419    127,550      65,524
</Table>

-------------------------

(a) Costs and expenses include non-cash charges for stock compensation and
    warrant amortization totaling $455,000, $1,256,000, $5,018,000, $6,538,000
    and $13,859,000 for years ended December 31, 1997, 1998, 1999, 2000 and
    2001, respectively. See Notes 1, 9 and 10 of Notes to Consolidated Financial
    Statements.

(b) See Note 1 of Notes to Consolidated Financial Statements for a discussion of
    the computation of historical basic and diluted net loss per share and
    weighted average shares outstanding.

                                        21
<PAGE>

                        QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth certain unaudited consolidated quarterly
statements of operations data for the eight quarters ended December 31, 2001.
This information is unaudited but, in the opinion of management has been
prepared substantially on the same basis as the audited consolidated financial
statements appearing elsewhere in this Form 10-K, and all necessary adjustments,
consisting only of normal recurring adjustments, have been included in the
amounts stated below to present fairly the unaudited consolidated quarterly
results of operations. The consolidated quarterly data should be read in
conjunction with our audited consolidated financial statements and the notes to
such statements appearing elsewhere in this report. The results of operations
for any quarter are not necessarily indicative of the results of operations for
the full year or for any future period.

<Table>
<Caption>
                                                                    QUARTER
                                                  --------------------------------------------
                                                   FIRST       SECOND      THIRD       FOURTH
                                                  --------    --------    --------    --------
                                                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                               <C>         <C>         <C>         <C>
YEAR ENDED DECEMBER 31, 2001
Net revenues....................................  $  1,704    $  2,208    $  1,755    $  1,247
Loss from operations............................   (14,896)    (15,023)    (15,686)    (72,675)*
Net loss........................................   (12,622)    (14,434)    (14,571)    (72,912)
Net loss per share, basic and diluted...........  $  (0.41)   $  (0.46)   $  (0.47)   $  (2.34)
YEAR ENDED DECEMBER 31, 2000
Net revenues....................................  $    526    $    636    $  1,439    $  1,743
Loss from operations............................    (7,147)     (8,285)     (9,200)    (16,818)
Net loss........................................    (5,474)     (6,332)     (6,888)    (14,611)
Net loss per share, basic and diluted...........  $  (0.18)   $  (0.21)   $  (0.22)   $  (0.47)
</Table>

-------------------------

  *  Includes a $55.3 million impairment charge.

                                        22
<PAGE>

     ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
     RESULTS OF OPERATIONS OVERVIEW

     OVERVIEW

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

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

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

     -  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;

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

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

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

     Through December 31, 2001, we derived revenues primarily from non-recurring
consulting engineering and installation services under agreements to port the
Wink Engine software to various televisions and set-top boxes. Our business plan
for the future is to derive the primary portion of our future revenues from the
Wink Response Network by charging transaction fees to advertisers, 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. However, transaction fee revenue through December 31, 2001 has not been
significant. The majority of the revenues we have earned from advertisers and
merchants utilizing the Wink Response Network as of December 31, 2001 have been
related to charter advertising agreements that provide for a flat fee to be paid
in lieu of transaction fees. These fees have been recognized ratably over the
life of the 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. The revenues recognized under these advertising agreements were not
significant for the year ended December 31, 2001. We have also launched
dedicated interactive and virtual channels in 2001 and have begun to derive
revenue from sales of products on these channels, and while the revenue earned
from these channels was insignificant in 2001, we expect to see growth in this
revenue in future years.

     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, the majority of our revenue
has been derived from non-recurring consulting engineering and installation
services. 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."

CRITICAL ACCOUNTING POLICIES

     Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires that we
make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets
and liabilities. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions. We believe the following critical accounting policies
affect our more significant judgments and estimates used in the preparation of
our consolidated financial statements:

     Distribution Costs. We have entered into a number of distribution
agreements with cable and satellite system operators and broadcast and cable
network programmers and certain other market participants, some of which are
related parties (see Notes to the Consolidated Financial Statements), pursuant
to which we have
                                        23
<PAGE>

agreed to pay certain cash and equity consideration in connection with the
deployment of the Wink Service by these parties. Such consideration is typically
earned by the distribution partner upon signing of the agreement, upon launch of
the Wink Service, or based on the number of Wink-enabled devices or subscribers
deployed by that operator or based upon the volume of airings of Wink-enhanced
content by the programmer. Such consideration is generally recognized in revenue
sharing and launch fees expense and may include one or several of the following:

     -  Revenue sharing and guarantees -- Revenue sharing is earned by the
        distributor and accrued by us when transaction fee revenue relating to
        television viewers' response data is recognized and generally paid
        quarterly. For certain distribution agreements, we have also provided
        minimum revenue guarantees. Revenue guarantees are generally accrued and
        expensed monthly and paid annually, in arrears.

     -  Marketing development and system funds -- Marketing development and
        system funds are used for promotion of the Wink Service and are
        generally earned by the distributor on a one-time, per household or
        device basis and paid quarterly. Marketing development and system funds
        are expensed as incurred.

     -  Equipment subsidies -- Equipment subsidies are one-time fees for
        integrating the Wink Engine into a certain set-top box, generally on a
        per set-top box basis. These fees are capitalized as a deferred charge
        and amortized over the useful life of the set-top box, generally 18
        months, and generally paid quarterly. The equipment subsidies also
        include one-time fees to distribution partners to offset their costs of
        capital equipment and are paid according to the terms of the respective
        agreement. These fees are capitalized as a deferred charge and amortized
        over the remaining life of the agreement or period of benefit, which
        ever is shorter.

     -  Standard feature launch fees -- Standard feature launch fees are
        consideration paid to the cable distributor for including the Wink
        Service as a standard feature on all of its digital set-top boxes. These
        fees are generally lump-sum payments, paid per a specified schedule in
        the respective agreement and are capitalized and amortized over the
        shorter of the remaining life of the agreement or the expected period of
        benefit.

     -  Other launch fees -- Other launch fees are any other launch support fees
        per the distribution contracts. These fees are generally specified
        amounts per the contract, but may be one-time payments up to $5.00 per
        household. These fees may be paid per specified dates in the agreement
        or on a quarterly basis. These fees are capitalized as deferred charges
        and amortized over the shorter of the remaining life of the agreement or
        the expected period of benefit.

     -  Warrant and Common Stock amortization -- Warrants or our Common Stock
        were issued as consideration in connection with certain of our
        distribution agreements. The fair value of warrants or Common Stock
        issued to distributors is generally amortized over the life of the
        distribution agreement.

     Valuation of long-lived and intangible assets.  We assess the impairment of
long-lived assets and identifiable intangibles whenever events or changes in
circumstances indicate that the carrying value may not be recoverable. Factors
we consider important that could trigger an impairment review include the
following:

     -  Significant underperformance relative to expected historical or
        projected future operating results;

     -  Significant changes in the manner of our use of the acquired assets or
        the strategy for our overall business;

     -  Significant negative industry or economic trends; or

     -  Significant decline in our market capitalization relative to net book
        value for a sustained period.

     When we determine that the carrying value may not be recovered based upon
the existence of one or more of the above indicators, we measure any impairment
based on a projected discounted cash flow method using a discount rate
determined by our management to be commensurate with the risk inherent in our
current business model.

     Accounting for income taxes.  As part of the process of preparing our
consolidated financial statements, we are required to estimate our income taxes
in each of the jurisdictions in which we operate. This process

                                        24
<PAGE>

involves us estimating our actual current tax exposure together with assessing
the temporary differences resulting from differing treatment of items, such as
deferred revenue or deductibility of certain intangible assets, for tax and
accounting purposes. These differences result in deferred tax assets and
liabilities, which should be included within our consolidated balance sheet. We
have assessed the likelihood that our deferred tax assets will be recovered from
future taxable income in the near future. Because we believe the recovery is not
likely in the near future, we have established a valuation allowance for the
entire net deferred tax asset.

RESULTS OF OPERATIONS

     We have incurred net losses since inception and, at December 31, 2001, had
an accumulated deficit of approximately $197.3 million. We may never achieve
favorable operating results or profitability. See "Risk Factors -- We have a
history of losses and expect future losses."

     Revenues.  Through December 31, 2001, our revenues were derived from
non-recurring consulting engineering services under agreements to port the Wink
Engine software to various televisions and set-top boxes, license fees relating
to the Wink Engine, Wink Studio, and Wink Broadcast Server software, development
of customized interactive applications, transaction fees from television viewer
responses, charter advertising fees and service fees relating to software
installation and post-installation customer support. Non-recurring engineering
consulting services have been recognized using the percentage-of-completion
method, using labor hours as a measure of progress towards completion. We
recognize software license revenues relating to the Wink Engine on a
"sell-through" basis upon notification of shipment of Wink-enabled products by
the original equipment manufacturer. License fees from Wink Studio and Wink
Broadcast Server software are recognized ratably over the term of the
subscription license agreement. Revenue from development of customized
interactive applications for television programs and virtual channels is
generally recognized over the life of the contract. Transaction fees from viewer
responses is recognized at the time television viewers' response data is routed
to the customer. The charter advertiser agreements provided for a flat fee to be
paid up front and that revenue was recognized ratably over the life of the
agreement, generally six to 12 months. Fees from installation services and
post-installation customer support are recognized ratably over the term of the
agreement. Fees received in advance of revenue recognition are included on the
balance sheet as deferred revenue.

     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" below and "Risk Factors". 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 expense will increase because we amended
three of our significant distribution partner agreements to decrease future
payments of revenue guarantees and marketing development funds in March 2002.
See Liquidity and Capital Resources discussion on page 30. We have also
significantly decreased future amortization of deferred charges and unearned
compensation related to warrants due to the impairment charge. See Impairment
Charge discussion on page 28.

     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 costs, and advertising
expenses associated with our sales and consumer marketing departments. Sales and
marketing expense also includes costs related to marketing materials, commercial
spots and training for the launch of Wink Enhanced Broadcasting in new cable
systems. We expect sales and marketing expense to increase in the future as
additional marketing and advertising costs are incurred to support anticipated
growth.

     Operating.  Operating expense includes costs associated with our operations
departments, including personnel costs, expenses related to our internal
information systems, 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 sizeable 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

                                        25
<PAGE>

that equipment is generally the responsibility of the customer, and from the
substantial decrease in the carrying value of deployment equipment due to the
impairment charge of $2.3 million. See Impairment Charge discussion on page 28.

     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 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 increase in size and scope, general and
administrative expenses will remain relatively constant.

     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.

YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999

REVENUES

     Total revenues were $6.9 million, $4.3 million and $1.6 million for the
years ended December 31, 2001, 2000 and 1999, respectively. The increase of 60%
from 2000 to 2001 resulted primarily from a significant increase in services
revenue of $3.0 million, or 107%. The increase in services revenues is primarily
due to an increase in non-recurring engineering consulting services and
installation services from related parties. Services revenue also included an
increase in transaction fee and related application development fees totaling
$755,000. During 2001, one related party accounted for 55% of our revenue. The
increase of 169% from 1999 to 2000 resulted primarily from a significant
increase in services revenue of $2.3 million, or 450%. The increase in services
revenue was primarily due to non-recurring engineering consulting and
installation services with related parties totaling $2.7 million in 2000,
whereas no such revenue was recognized in 1999. During the year ended December
31, 2000, license revenues also increased by a total of $445,000, or 41%, due to
additional charter advertisers and programmers' license fees. During the year
ended December 31, 2000, three customers, all related parties, accounted for
24%, 21% and 17% of total revenues, respectively. During 1999, transactions with
two customers, both related parties, accounted for 25% and 16% of our total
revenue, respectively.

COSTS AND EXPENSES

     Total costs and expenses were $125.2 million, $45.8 million and $25.2
million for the years ended December 31, 2001, 2000 and 1999, respectively. The
increase of 173% from 2000 to 2001 was primarily a result of the $55.3 million
impairment charge included in costs and expenses. See "Impairment Charge"
discussion on page 28. The increase was also a result of a $26.3 million
increase in revenue sharing and launch fees expense, which included significant
increases in revenue sharing and guarantees, equipment subsidies and other
launch funds provided to our affiliated cable and satellite system operators and
broadcast network and cable programmers, including a $7.7 million increase in
non-cash warrant amortization related to warrants issued to our distribution
partners. The increase of 82% from 1999 to 2000 was primarily a result of
additional operating costs associated with the development, testing and
deployment of the Wink Service, a rise in revenue sharing and launch fees
expense, which included significant increases in revenue sharing and guarantees,
equipment subsidies and other launch funds provided to our affiliated cable and
satellite operators, as well as a substantial rise in sales and marketing
expenses. We believe that continued expansion of our distribution, operations
and our sales and marketing efforts is critical to our business plan. Therefore,
we believe that costs and expenses will continue to increase.

                                        26
<PAGE>

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

<Table>
<Caption>
                                                                  YEAR ENDED DECEMBER 31,
                                                                ---------------------------
                                                                 2001       2000      1999
                                                                -------    ------    ------
<S>                                                             <C>        <C>       <C>
Revenue sharing and launch fees -- related parties..........    $12,003    $4,275    $1,967
Revenue sharing and launch fees -- third parties............         --        --     1,220
Sales and marketing.........................................        485       517       372
Product development.........................................        906       979       944
General and administrative..................................        465       767       515
                                                                -------    ------    ------
                                                                $13,859    $6,538    $5,018
                                                                =======    ======    ======
</Table>

     In connection with the grant of stock options and restricted Common Stock
to employees and non-employee directors during fiscal 1999 and 1998, we recorded
aggregate unearned compensation of $6.6 million and $600,000, respectively,
representing the difference between the deemed fair value of our Common Stock at
the date of grant and the exercise price of such options. Unearned compensation
is presented as a reduction of stockholders' equity and is amortized over the
vesting period of the applicable option and is allocated by expense category in
our consolidated statements of operations. Amortization of unearned compensation
related to employee stock options and restricted stock totaled $1.4 million,
$1.8 million and $1.8 million for the years ended December 31, 2001, 2000 and
1999, respectively. We expect to amortize approximately $1.4 million and $0.6
million of unearned stock-based compensation in fiscal 2002 and 2003,
respectively.

     The value of equity instruments issued to non-employees is recorded at the
fair market value of the consideration received or the fair value of the equity
instruments issued, whichever is more reliably determinable, at the measurement
date, which is the earlier of the date on which there first exists a firm
commitment for performance by the provider of goods or services, or on the date
performance is complete. The related stock compensation is allocated by expense
category. For certain equity instruments, at each reporting date, we re-value
the stock-based compensation. As a result, the stock-based compensation expense
could fluctuate as the fair market value of our Common Stock fluctuates.
Non-employee stock based compensation was primarily attributable to warrants
issued to cable and direct broadcast satellite system operators in connection
with agreements to deploy the Wink Service, in which case the fair value of the
warrant is usually amortized to revenue sharing and launch fees expense over the
life of the distribution agreement. In addition, warrants were issued in
connection with sales and marketing services received and the related fair value
was amortized to sales and marketing expense. In connection with the grant of
warrants, we recorded stock-based compensation expense of $12.3 million, $4.7
million and $3.2 million in the years ended December 31, 2001, 2000 and 1999,
respectively. During the quarter ended December 31, 2001, we performed an
impairment analysis of the deferred charges associated with our distribution
agreements, including the unamortized unearned compensation related to warrants
and Common Stock issued to our distribution partners. As a result of the review,
$39.6 million related to warrant and Common Stock unearned compensation was
included in the impairment charge. See "Impairment Charge" on page 28.
Accordingly, the amortization of the fair value of equity instruments already
issued to non-employees for the years 2002 and thereafter will not be
significant, but we are committed under certain distribution agreements to
issuing additional warrants if certain performance criteria are met. We expect
to record additional stock-based compensation if these warrants are issued.

     Revenue Sharing and Launch Fees.  Total revenue sharing and launch fees
were $35.6 million, $9.3 million and $3.4 million for the years ended December
31, 2001, 2000 and 1999, respectively. Revenue sharing and launch fees from
related parties accounted for $34.7 million, $9.0 million and $2.1 million of
the total revenue sharing and launch fees in 2001, 2000 and 1999, respectively.

     Total revenue sharing and launch fees increased $26.3 million in 2001 from
2000 as the result of a significant increase in costs related to the development
and launch of the Wink Service with our affiliated cable and satellite system
operators and broadcast network and cable programmers. Most of the total revenue
sharing and launch fees increase consisted of three components: (i) a $7.7
million increase in non-cash charges for warrant amortization for warrants to
purchase our Common Stock, which we issued to these operators and broadcasters
in 2000 and 2001, (ii) a $7.4 million increase in non-cash charges for
amortization

                                        27
<PAGE>

of equipment subsidies that we provided to these customers and (iii) a $6.3
million increase in payments for revenue sharing and guarantees.

     The increase in total revenue sharing and launch fees in 2001 from 2000 was
primarily due to the fact that the Wink Service was not deployed with a
significant distribution partner until October 2000. As a result, most of the
revenue sharing and guarantees and other distribution costs associated with the
deployment of the Wink Service did not occur until 2001 following the launch of
the Wink Service and the resulting increase in the number of Wink-enabled
households. Also, the increase in non-cash charges for warrant amortization in
2001 stemmed from the fact that we issued the relevant warrants in the last six
months of 2000, and therefore, most of the amortization for these warrants
occurred in 2001.

     Total revenue sharing and launch fees increased $5.9 million in 2000 from
1999 as the result of a significant increase in costs related to the development
and launch of the Wink Service with one significant partner in October 2000 and
related revenue sharing and guarantees for the development and launch of the
Wink Service. These costs accounted for $4.1 million of the total increase in
2000. In addition, $1.1 million of the increase was attributable to non-cash
charges for warrant amortization for warrants to purchase our Common Stock,
which we issued to these operators and broadcasters in 2000.

     Sales and Marketing.  Sales and marketing expenses were $10.2 million,
$10.1 million and $5.6 million for the years ended December 31, 2001, 2000 and
1999, respectively. Sales and marketing expenses from related parties accounted
for $2.1 million and $1.8 million of the total sales and marketing expenses in
the years ended December 31, 2001 and 2000, respectively. Sales and marketing
expenses only increased $0.1 million or 1% from 2000 to 2001 as a result of
advertising costs related to launches in 2001. Sales and marketing expenses
increased $4.5 million or 80% from 1999 to 2000 primarily as a result of
increases in advertising costs related to launches in 2000, headcount increases
in our sales department and travel-related costs.

     Operating.  Operating expenses were $10.1 million, $8.8 million and $6.1
million for the years ended December 31, 2001, 2000 and 1999, respectively.
Operating expenses increased $1.3 million or 15% from 2000 to 2001 as a result
of increases in the telecommunications costs incurred to operate the Wink
Response Network, increases in personnel-related costs and increased
depreciation expense for the purchase of internal and deployment equipment, both
of which were incurred to support increased Wink technology deployment
activities and our expanded operations, offset by costs related to outside
services, most of which were related to the use of temporary employees in 2000.
Operating expenses increased $2.7 million or 44% from 1999 to 2000 as a result
of increases in costs related to outside services, mostly related to temporary
employees, increases in the telecommunications costs incurred to operate the
Wink Response Network, increases in personnel-related costs from headcount
additions and increased depreciation expense.

     Product Development.  Product development expenses were $8.8 million, $11.1
million and $5.3 million for the years ended December 31, 2001, 2000 and 1999,
respectively. Product development expenses decreased $2.3 million or 21% from
2000 to 2001 primarily as a result of decreases in fees related to outside
services, temporary employees and contract engineers, and decreases in
personnel-related costs due to headcount reductions. Product development
expenses increased $5.8 million or 109% from 1999 to 2000 as a result of
increases in personnel-related costs and outside services as engineering and
product development personnel costs were incurred due to increases in employee
headcount and the use of more consultants and temporary employees for the
product development and testing required for a significant launch of the Wink
Service early in the fourth quarter of 2000.

     General and Administrative.  General and administrative expenses were $5.3
million, $6.5 million and $4.7 million for the years ended December 31, 2001,
2000 and 1999, respectively. General and administrative expenses decreased $1.2
million or 18% from 2000 to 2001 primarily as a result of a decrease in legal
fees and settlement costs related to a patent infringement case that we settled
in 2000. General and administrative expenses increased $1.8 million or 38% from
1999 to 2000 primarily as a result of legal fees and settlement costs related to
the patent infringement case, the hiring of administrative and executive
personnel to support anticipated future growth, and increased non-cash charges
for stock compensation amortization attributable to employees categorized within
general and administrative.

     Impairment Charge.  During the quarter ended December 31, 2001, we
performed an impairment assessment of the deferred charges and unamortized
compensation for warrants related to our distribution agreements with cable and
satellite system operators and certain property and equipment deployed at the
cable

                                        28
<PAGE>

and satellite system operators and broadcast network and cable programmers. The
assessment was performed primarily due to the significant decline in the price
of our Common Stock since the date that we valued the consideration and warrants
issued to each cable and satellite system operators and our lower projected
operating results. As a result of the review, we recorded an impairment charge
to certain assets. The components of the charge are as follows (in millions):

<Table>
<S>                                                             <C>
Deferred charges -- related parties.........................    $12.9
Deferred charges -- third parties...........................      0.3
Unamortized compensation for warrants.......................     39.6
Property, equipment and intellectual property...............      2.5
                                                                -----
                                                                $55.3
                                                                =====
</Table>

     The charge was determined based upon our estimated discounted cash flows
using a discount rate of 25%. The assumptions supporting our future cash flows,
including the discount rate, were determined using management's best estimates.
The remaining property and equipment net balance of approximately $2.1 million
will be amortized over the remaining useful life of three to five years, which
we consider appropriate.

     Interest and Other Income, Net of Interest and Other Expense.  Interest and
other income, net, was $3.7 million, $8.1 million and $5.3 million for the years
ended December 31, 2001, 2000 and 1999, respectively. Interest and other income
decreased $4.4 million or 54% from 2000 to 2001 primarily due to the impairment
of two investments in private equity securities. The first investment was deemed
impaired in the quarter ended June 30, 2001 and resulted in a charge of $1.2
million. The second investment was deemed impaired in the quarter ended December
31, 2001 and resulted in a charge of $1.7 million. Both investments' impairment
was triggered by the private company's lack of revenue growth, lack of
acceptance of its products and decreasing cash balances. Interest income also
decreased $1.5 million from 2000 to 2001 due to decreases in the average cash
and investment balances. Interest and other income, net, increased $2.8 million
or 52% from 1999 to 2000 primarily due to interest earned on increased average
cash and investment balances as a result of the receipt of the proceeds from
sales of our Common Stock and Preferred Stock. Interest and other income in 1999
also included the recognition of other income totaling $1.0 million resulting
from a termination agreement with a third party customer for cancellation of a
development and license agreement. Under this termination agreement, the third
party paid us $1.1 million. Of this amount, $1.0 million was included in other
income. The remaining amount related to a non-recurring engineering agreement
and was included in services-third parties during the year ended December 31,
1999. We have no material remaining obligations under this agreement.

     Income Taxes.  We have not generated taxable income since inception and, as
a result, the provision for income taxes consists solely of the Delaware and
California minimum franchise taxes of $127,000, $155,000 and $10,000 in 2001,
2000 and 1999, respectively, which are included in general and administrative
expenses. At December 31, 2001, we had federal and state net operating loss
carryforwards of approximately $140.0 million and $61.0 million, respectively,
available to reduce future taxable income. Of these amounts, $33.0 million
relates to employee stock options and the benefit will be credited to equity
when and if it is realized. Under the Tax Reform Act of 1986, the amount of
benefit from net operating loss carryforwards may be impaired or limited, as we
have incurred a cumulative ownership change of more than 50%, as defined, over a
three-year period. Based on a number of factors, including the lack of a history
of profits, management believes that there is sufficient uncertainty regarding
the realization of deferred tax assets such that a full valuation allowance has
been provided.

     Net Loss.  We have incurred net losses since inception, including net
losses of $114.5 million, $33.3 million and $18.2 million for the years ended
December 31, 2001, 2000 and 1999, respectively. The year-to-year increases in
net losses were due primarily to significant increases in expenses as a result
of additional business activities, stock-based compensation expenses and the
impairment charge, as described above.

TRANSACTIONS WITH RELATED PARTIES

     We have entered into several multi-year agreements with certain
stockholders and warrant holders, who are satellite and cable distribution
companies, software developers, broadcast network and cable programmers and
other industry participants. These agreements, ranging from one year to 12
years, some of which have renewal clauses, cover various activities relating to
the deployment of the Wink Service for consumer

                                        29
<PAGE>

distribution and include installation and engineering services provided to these
partners. We have recognized expenses totaling $89.3 million, $10.7 million and
$2.1 million in expenses in connection with these agreements for the years ended
December 31, 2001, 2000 and 1999, respectively. For the year ended December 31,
2001, the amount includes $52.5 million related to the impairment charge. See
Impairment Charge discussion on page 28.

     We have entered into several agreements with related parties in which we
granted software licenses and provided certain non-recurring engineering
consulting and other services. We recognized $4.9 million, $3.3 million and
$844,000 in revenue from related parties for licenses and services for the years
ended December 31, 2001, 2000 and 1999, respectively.

LIQUIDITY AND CAPITAL RESOURCES

     Since inception, we have financed our activities largely through the sale
of equity securities. Prior to our initial public offering, we raised an
aggregate $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 $77.9 million of cash, cash equivalents
and short-term investments at December 31, 2001.

     Net cash used in operating activities totaled $39.9 million, $24.6 million
and $13.5 million, for the years ended December 31, 2001, 2000 and 1999,
respectively, primarily as a result of our net losses, offset in part by
non-cash charges for stock-based compensation and depreciation in all three
years and the impairment charge in the year ended December 31, 2001.

     Net cash provided by investing activities totaled $37.8 million for the
year ended December 31, 2001 and was attributable to the net proceeds from the
sale of short-term investments totaling $40.0 million, offset by $2.2 million in
purchases of property and equipment. Net cash used in investing activities
totaled $14.6 million for the year ended December 31, 2000 and was attributable
to net purchases of short-term investments totaling $6.5 million, the purchase
of non-public equity securities of $4.3 million and the acquisition of $3.8
million of property and equipment. Net cash used in investing activities totaled
$88.0 million for the year ended December 31, 1999 and was attributable to net
purchases of short-term investments totaling $86.2 million and the acquisition
of $1.8 million of property and equipment.

     Net cash provided by financing activities for the year ended December 31,
2001 was $546,000 and consisted of proceeds from Common Stock issued in
connection with our employee option and purchase plans. Net cash provided by
financing activities for the year ended December 31, 2000 was $3.3 million and
consisted of proceeds of $3.4 million from Common Stock issued in connection
with our employee option and purchase plans and $250,000 from a stockholder note
principal payment, offset by $355,000 in principal payments made on capital
lease obligations. Net cash provided by financing activities for the year ended
December 31, 1999 was $142.6 million, consisting primarily of proceeds from our
initial public offering of Common Stock of $77.3 million, $44.3 million from the
sale of Preferred Stock and proceeds totaling $15.1 million from the issuance of
a convertible promissory note to a related party. In July 1999, the related
party exercised its right to exchange the convertible promissory note for
1,260,000 shares of our Preferred Stock.

     We have entered into agreements with cable and direct broadcast satellite
system operators and other television industry participants, some of whom are
also related parties, who support Wink-enhanced programming to share with these
entities a portion of revenues, if any, we generate from viewer responses to the
Wink Service. These revenue sharing commitments are based upon the level of the
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 insignificant
transaction fee revenue has been recognized therefore revenue sharing expense
has been minor.

     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. 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 $5.00. See Note 4 and Note 8 of the Notes to Consolidated Financial
Statements for a further discussion of these and other commitments.
                                        30
<PAGE>

     In February and March 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 $22 million in cash payments in 2002 and 2003.

     Based on the subscribers deployed at December 31, 2001 and the amendments
consummated as of March 2002, the following schedule approximates the
distribution costs that will be payable under our contracts:

<Table>
<Caption>
                                                                            TWO TO        FOUR TO
                                                   TOTAL     ONE YEAR*    THREE YEARS    FIVE YEARS
                                                  -------    ---------    -----------    ----------
                                                                   (IN THOUSANDS)
<S>                                               <C>        <C>          <C>            <C>
Revenue sharing and guarantees................    $13,500     $11,000       $2,000         $  500
Other launch fees and advertising.............     13,000       8,000        4,500            500
                                                  -------     -------       ------         ------
          Total...............................    $26,500     $19,000       $6,500         $1,000
                                                  =======     =======       ======         ======
</Table>

-------------------------

  *  Includes amounts accrued at December 31, 2001 of $9.1 million.

     The following schedule approximates distribution costs and advertising buys
that would be payable under our contracts reflecting a significant increase in
the subscribers deployed during the respective years from the estimates in the
schedule above. The increase is based on the subscriber deployments that our
distribution partners have committed to, assuming a certain ramp in the
subscriber counts and assuming that certain deployment milestones per our
contracts are met, including the release of certain software upgrades:

<Table>
<Caption>
                                                                            TWO TO        FOUR TO
                                                   TOTAL     ONE YEAR*    THREE YEARS    FIVE YEARS
                                                  -------    ---------    -----------    ----------
                                                                   (IN THOUSANDS)
<S>                                               <C>        <C>          <C>            <C>
Revenue sharing and guarantees................    $22,250     $12,750       $ 5,500        $4,000
Other launch fees and advertising.............     29,000      14,500        13,500         1,000
                                                  -------     -------       -------        ------
          Total...............................    $51,250     $27,250       $19,000        $5,000
                                                  =======     =======       =======        ======
</Table>

-------------------------

  *  Includes amounts accrued at December 31, 2001 of $9.1 million.

     In addition, we have minimum lease commitments of $1.1 million in 2002 and
2003 and $885,000 in 2004 for our main office facilities.

     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. We also believe that we will be able to work
with our distribution partners to decrease certain committed distribution costs
in the future. Thereafter, if necessary, we may need to sell additional equity
or debt securities or obtain additional credit facilities. The sale of
additional equity or convertible debt securities may result in additional
dilution to our stockholders. We may not be able to raise any such capital on
terms acceptable to us, or at all.

RECENT ACCOUNTING PRONOUNCEMENTS

     In 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 will adopt EITF 00-25 and
EITF 01-9 in the first quarter of fiscal year 2002. Upon adoption of EITF 00-25
and EITF 01-9, and in accordance with the transition guidance, financial
statements for prior periods presented for comparative purposes will be
reclassified to comply with the new income statement presentation requirement.
We currently anticipate that the adoption of EITF 00-25 and EITF 01-9 will
result in a reclassification from revenue to revenue sharing and launch fees
expense of approximately $4.7 million, $2.9 million, and $250,000 for fiscal
years ended

                                        31
<PAGE>

December 31, 2001, 2000, and 1999, respectively. The adoption of EITF 00-25 and
EITF 01-9 will have no impact on our operating loss, net loss and 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 will adopt SFAS 144 in fiscal year 2002 and currently do not
expect the adoption of SFAS 144 to have a significant impact on our financial
statements.

     In November 2001, the Emerging Issues Task Force (EITF) reached a consensus
on Issue 1(a) of EITF Issue 00-18, "Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees" that
an asset acquired in exchange for the issuance of fully vested, non-forfeitable
equity instruments should be displayed in the balance sheet of the grantor as an
asset rather than as a reduction of stockholders' equity. No transition guidance
has yet been provided in connection with this consensus. To date, fully vested
warrants issued in connection with distribution agreements have been recorded as
a reduction of stockholders' equity. As of December 31, 2001, we booked an
impairment charge of $39 million to fully write down the remaining unamortized
portion of these warrants. Upon adoption of the consensus, fully vested warrants
to be issued in the future to distributors and other strategic partners will be
recorded as an asset.

ITEM 7A.  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 December 31, 2001 or December 31, 2000.
We invest our marketable securities in accordance with our investment policy and
maintain our portfolio in the form of managed investment accounts comprised of
money market accounts, corporate bonds and government bonds and notes. We
consider all highly liquid investments with an original maturity of three months
or less, when purchased, to be cash equivalents. The primary objective of our
portfolio is to maintain proper liquidity to meet the operating needs of the
business. Our policy specifies credit quality standards for the investments and
limits the amount of credit exposure to any single issue, issuer or type of
investment. The weighted average maximum maturity of the portfolio is based on
the Lehman 1-3 index.

     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 December 31, 2000, 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 our business is
in the United States. Additionally, contracts we have entered into with
companies headquartered in foreign countries have primarily been denominated in
US dollars. Accordingly, we are not subject to exposure from adverse movements
in foreign currency exchange rates. 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.

                                        32
<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<Table>
<S>                                                          <C>
Report of Independent Accountants...........................      34
Consolidated Balance Sheets as of December 31, 2001 and
  2000......................................................      35
Consolidated Statements of Operations for the years ended
  December 31, 2001, 2000 and 1999..........................      36
Consolidated Statements of Stockholders' Equity &
  Comprehensive Income (Loss) for the years ended December
  31, 2001, 2000 and 1999...................................      37
Consolidated Statements of Cash Flows for the years ended
  December 31, 2001, 2000 and 1999..........................      38
Notes to Consolidated Financial Statements..................      39
</Table>

                                        33
<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
  WINK COMMUNICATIONS, INC.

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, of stockholders' equity and
comprehensive loss and of cash flows present fairly, in all material respects,
the financial position of Wink Communications, Inc. and its subsidiary (the
"Company") at December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001 in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
San Jose, California
March 8, 2002

                                        34
<PAGE>

                           WINK COMMUNICATIONS, INC.

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                    DECEMBER 31,
                                                                ---------------------
                                                                  2001         2000
                                                                ---------    --------
                                                                (IN THOUSANDS, EXCEPT
                                                                 PER SHARE AMOUNTS)
<S>                                                             <C>          <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................    $  20,513    $ 22,093
  Short-term investments....................................       57,434      98,907
  Accounts receivable -- related parties, net...............        2,220       3,353
  Accounts receivable -- third parties, net.................          413         622
  Prepaid expenses and other current assets.................        2,144       2,361
                                                                ---------    --------
          Total current assets..............................       82,724     127,336
Property and equipment, net.................................        2,090       4,638
Deferred charges and other assets -- related parties........          287       9,973
Deferred charges and other assets -- third parties..........        1,292       4,513
                                                                ---------    --------
                                                                $  86,393    $146,460
                                                                =========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................    $   1,237    $  1,500
  Accrued liabilities.......................................        4,353       4,139
  Due to related parties....................................       14,081      10,060
  Deferred revenue -- related parties.......................          519       2,065
  Deferred revenue -- third parties.........................          679       1,146
                                                                ---------    --------
          Total current liabilities.........................       20,869      18,910
                                                                ---------    --------
Commitments and contingencies (Notes 4 and 8)
Stockholders' equity:
  Preferred Stock, $0.001 par value; 5,000 shares
     authorized; no shares issued and outstanding...........           --          --
  Common Stock, $0.001 par value; 100,000 shares authorized;
     31,205 and 31,102 shares issued and outstanding........           31          31
  Additional paid-in capital................................      267,022     263,439
  Stockholder notes receivable..............................       (1,291)     (2,499)
  Unearned compensation.....................................       (3,064)    (52,306)
  Accumulated deficit.......................................     (197,327)    (82,788)
  Accumulated other comprehensive income....................          153       1,673
                                                                ---------    --------
          Total stockholders' equity........................       65,524     127,550
                                                                ---------    --------
                                                                $  86,393    $146,460
                                                                =========    ========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        35
<PAGE>

                           WINK COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                                 YEAR ENDED DECEMBER 31,
                                                            ---------------------------------
                                                              2001         2000        1999
                                                            ---------    --------    --------
                                                             (IN THOUSANDS, EXCEPT PER SHARE
                                                                        AMOUNTS)
<S>                                                         <C>          <C>         <C>
REVENUES:
  Licenses -- related parties...........................    $     143    $    445    $    488
  Licenses -- third parties.............................          987       1,090         602
  Services -- related parties...........................        4,747       2,805         356
  Services -- third parties.............................        1,037           4         155
                                                            ---------    --------    --------
          Total revenues................................        6,914       4,344       1,601
                                                            ---------    --------    --------
Costs and expenses:
  Revenue sharing and launch fees -- related parties....       34,698       8,963       2,146
  Revenue sharing and launch fees -- third parties......          890         345       1,259
  Sales and marketing -- related parties................        2,070       1,750          --
  Sales and marketing -- third parties..................        8,088       8,352       5,648
  Operating.............................................       10,087       8,752       6,146
  Product development...................................        8,783      11,098       5,317
  General and administrative............................        5,283       6,534       4,657
  Impairment charge -- related parties..................       52,494          --          --
  Impairment charge -- third parties....................        2,801          --          --
                                                            ---------    --------    --------
          Total costs and expenses......................      125,194      45,794      25,173
                                                            ---------    --------    --------
Loss from operations....................................     (118,280)    (41,450)    (23,572)
Interest and other income, net..........................        3,741       8,167       5,435
Interest expense........................................           --         (22)        (87)
                                                            ---------    --------    --------
Net loss................................................    $(114,539)   $(33,305)   $(18,224)
Net loss per share:
  Basic and diluted.....................................    $   (3.68)   $  (1.09)   $  (1.06)
                                                            =========    ========    ========
  Weighted average shares used in computing both basic
     and diluted net loss per share.....................       31,147      30,425      17,150
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        36
<PAGE>

                           WINK COMMUNICATIONS, INC.

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             AND COMPREHENSIVE LOSS
<Table>
<Caption>
                                       CONVERTIBLE
                                     PREFERRED STOCK     COMMON STOCK     ADDITIONAL   STOCKHOLDER
                                     ----------------   ---------------    PAID-IN        NOTES        UNEARNED     ACCUMULATED
                                     SHARES    AMOUNT   SHARES   AMOUNT    CAPITAL     RECEIVABLE    COMPENSATION     DEFICIT
                                     -------   ------   ------   ------   ----------   -----------   ------------   -----------
                                                                           (IN THOUSANDS)
<S>                                  <C>       <C>      <C>      <C>      <C>          <C>           <C>            <C>
BALANCE AT DECEMBER 31, 1998.......    7,806    $  8    10,517    $11      $ 51,890      $(1,046)      $   (479)     $ (31,259)
Issuance of Series D Convertible
 Preferred Stock, net..............    3,698       4        --     --        44,318           --             --             --
Issuance of Series D Convertible
 Preferred Stock upon conversion of
 note payable......................    1,260       1        --     --        15,119           --             --             --
Issuance of Common Stock in initial
 public offering, net of issuance
 costs of $1,049...................       --      --     5,263      5        77,252           --             --             --
Conversion of Series A, Series B,
 Series C, and Series D Convertible
 Preferred Stock in conjunction
 with the initial public
 offering..........................  (12,764)    (13)   12,764     13            --           --             --             --
Issuance of Common Stock under
 stock option plan.................       --      --       466     --           618           --             --             --
Issuance of warrants for
 services..........................       --      --        --     --         6,763           --         (4,050)            --
Exercise of Common Stock
 warrants..........................       --      --       879      1         5,652           --             --             --
Repurchase of Common Stock and
 cancellation of related
 stockholder note receivable.......       --      --      (122)    --          (245)         245             --             --
Issuance of Common Stock for
 stockholder note receivable.......       --      --       250     --         2,000       (2,000)            --             --
Contribution of Company Common
 Stock by a principal
 stockholder.......................       --      --       (50)    --            --           --             --             --
Issuance of Common Stock for
 employee bonuses..................       --      --        50     --           600           --             --             --
Repayment of stockholder note
 receivable........................       --      --        --     --            --           52             --             --
Unearned compensation..............       --      --        --     --         6,634           --         (6,634)            --
Amortization of unearned
 compensation......................       --      --        --     --            --           --          1,705             --
Net loss...........................       --      --        --     --            --           --             --        (18,224)
Unrealized gain on short-term
 investments.......................       --      --        --     --            --           --             --             --
                                     -------    ----    ------    ---      --------      -------       --------      ---------
BALANCE AT DECEMBER 31, 1999.......       --      --    30,017     30       210,601       (2,749)        (9,458)       (49,483)
Issuance of Common Stock under
 stock option and purchase plans...       --      --     1,083      1         3,430           --             --             --
Issuance of warrants for
 services..........................       --      --        --     --        49,386           --        (49,164)            --
Issuance of Common Stock for
 services..........................       --      --         2     --            22           --             --             --
Repayment of stockholder note
 receivable........................       --      --        --     --            --          250             --             --
Amortization of unearned
 compensation......................       --      --        --     --            --           --          6,316             --
Net loss...........................       --      --        --     --            --           --             --        (33,305)
Unrealized gain on short-term
 investments.......................       --      --        --     --            --           --             --             --
                                     -------    ----    ------    ---      --------      -------       --------      ---------
BALANCE AT DECEMBER 31, 2000.......       --      --    31,102     31       263,439       (2,499)       (52,306)       (82,788)
Issuance of Common Stock under
 stock option and purchase plans...       --      --       184     --           546           --             --             --
Issuance of warrants for
 services..........................       --      --        --     --         4,264           --         (4,264)            --
Issuance of Common Stock for
 services..........................       --      --        70     --           585           --           (585)            --
Repurchase of Common Stock and
 cancellation of related
 stockholder note receivable.......       --      --      (151)    --        (1,812)       1,208            604             --
Amortization of unearned
 compensation......................       --      --        --     --            --           --         13,859             --
Impairment related to warrants to
 distribution partners.............       --      --        --     --            --           --         39,628             --
Net loss...........................       --      --        --     --            --           --             --       (114,539)
Unrealized loss on short-term
 investments.......................       --      --        --     --            --           --             --             --
                                     -------    ----    ------    ---      --------      -------       --------      ---------
BALANCE AT DECEMBER 31, 2001.......       --    $ --    31,205    $31      $267,022      $(1,291)      $ (3,064)     $(197,327)
                                     =======    ====    ======    ===      ========      =======       ========      =========

<Caption>
                                      ACCUMULATED
                                         OTHER          TOTAL
                                     COMPREHENSIVE   SHAREHOLDERS   COMPREHENSIVE
                                        INCOME          EQUITY          LOSS
                                     -------------   ------------   -------------
                                                    (IN THOUSANDS)
<S>                                  <C>             <C>            <C>
BALANCE AT DECEMBER 31, 1998.......     $   --         $ 19,125       $ (14,036)
                                                                      =========
Issuance of Series D Convertible
 Preferred Stock, net..............         --           44,322              --
Issuance of Series D Convertible
 Preferred Stock upon conversion of
 note payable......................         --           15,120              --
Issuance of Common Stock in initial
 public offering, net of issuance
 costs of $1,049...................         --           77,257              --
Conversion of Series A, Series B,
 Series C, and Series D Convertible
 Preferred Stock in conjunction
 with the initial public
 offering..........................         --               --              --
Issuance of Common Stock under
 stock option plan.................         --              618              --
Issuance of warrants for
 services..........................         --            2,713              --
Exercise of Common Stock
 warrants..........................         --            5,653              --
Repurchase of Common Stock and
 cancellation of related
 stockholder note receivable.......         --               --              --
Issuance of Common Stock for
 stockholder note receivable.......         --               --              --
Contribution of Company Common
 Stock by a principal
 stockholder.......................         --               --              --
Issuance of Common Stock for
 employee bonuses..................         --              600              --
Repayment of stockholder note
 receivable........................         --               52              --
Unearned compensation..............         --               --              --
Amortization of unearned
 compensation......................         --            1,705              --
Net loss...........................         --          (18,224)        (18,224)
Unrealized gain on short-term
 investments.......................        478              478             478
                                        ------         --------       ---------
BALANCE AT DECEMBER 31, 1999.......        478          149,419       $ (17,746)
                                                                      =========
Issuance of Common Stock under
 stock option and purchase plans...         --            3,431              --
Issuance of warrants for
 services..........................         --              222              --
Issuance of Common Stock for
 services..........................         --               22              --
Repayment of stockholder note
 receivable........................         --              250              --
Amortization of unearned
 compensation......................         --            6,316              --
Net loss...........................         --          (33,305)        (33,305)
Unrealized gain on short-term
 investments.......................      1,195            1,195           1,195
                                        ------         --------       ---------
BALANCE AT DECEMBER 31, 2000.......      1,673          127,550       $ (32,110)
                                                                      =========
Issuance of Common Stock under
 stock option and purchase plans...         --              546              --
Issuance of warrants for
 services..........................         --               --              --
Issuance of Common Stock for
 services..........................         --               --              --
Repurchase of Common Stock and
 cancellation of related
 stockholder note receivable.......         --               --              --
Amortization of unearned
 compensation......................         --           13,859              --
Impairment related to warrants to
 distribution partners.............         --           39,628              --
Net loss...........................         --         (114,539)       (114,539)
Unrealized loss on short-term
 investments.......................     (1,520)          (1,520)         (1,520)
                                        ------         --------       ---------
BALANCE AT DECEMBER 31, 2001.......     $  153         $ 65,524       $(116,059)
                                        ======         ========       =========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                        37
<PAGE>

                           WINK COMMUNICATIONS, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                   YEAR ENDED DECEMBER 31,
                                                              ---------------------------------
                                                                2001        2000        1999
                                                              ---------   ---------   ---------
                                                                       (IN THOUSANDS)
<S>                                                           <C>         <C>         <C>
Cash flows from operating activities:
  Net loss..................................................  $(114,539)  $ (33,305)  $ (18,224)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
    Depreciation and amortization of property and
       equipment............................................      2,351       1,741       1,004
    Amortization of launch fees.............................      7,877       1,114          --
    Stock-based compensation expense........................     13,859       6,538       5,018
    Allowance for (recovery of) doubtful accounts...........        (50)        100          30
    Impairment charge.......................................     55,295          --          --
    Loss on equity investment...............................      2,892         179          --
    Changes in assets and liabilities:
       Accounts receivable -- related parties...............      1,213      (3,372)         (9)
       Accounts receivable -- third parties.................        179        (213)       (272)
       Prepaid expenses and other current assets............        217        (449)     (1,611)
       Deferred charges and other assets -- related
         parties............................................     (5,986)     (9,587)     (1,386)
       Deferred charges and other assets -- third parties...     (5,189)       (251)          1
       Accounts payable.....................................       (263)       (570)      1,075
       Accrued liabilities..................................        214       1,904         992
       Due to related parties...............................      4,021       9,659         401
       Deferred revenue -- related parties..................     (1,546)      1,865        (471)
       Deferred revenue -- third parties....................       (467)         27          --
                                                              ---------   ---------   ---------
Net cash used in operating activities.......................    (39,922)    (24,620)    (13,452)
                                                              ---------   ---------   ---------
Cash flows from investing activities:
  Sales (purchases) of short-term investments...............     39,953      (6,532)    (86,248)
  Purchases of private equity securities....................         --      (4,271)         --
  Purchases of property and equipment.......................     (2,157)     (3,841)     (1,780)
                                                              ---------   ---------   ---------
Net cash provided by (used in) investing activities.........     37,796     (14,644)    (88,028)
                                                              ---------   ---------   ---------
Cash flows from financing activities:
  Proceeds from Preferred Stock issuance, net...............         --          --      44,322
  Proceeds from sales of Common Stock.......................         --          --      77,257
  Repayment of stockholder note receivable..................         --         250          52
  Proceeds from issuance of convertible promissory note --
    related party...........................................         --          --      15,120
  Proceeds from issuance of Common Stock under purchase plan
    and exercise of warrants and options....................        546       3,430       6,271
  Principal payments on capital lease obligations...........         --        (355)       (402)
                                                              ---------   ---------   ---------
Net cash provided by financing activities...................        546       3,325     142,620
                                                              ---------   ---------   ---------
Net increase (decrease) in cash and cash equivalents........     (1,580)    (35,939)     41,140
Cash and cash equivalents at beginning of year..............     22,093      58,032      16,892
                                                              ---------   ---------   ---------
Cash and cash equivalents at end of year....................  $  20,513   $  22,093   $  58,032
                                                              =========   =========   =========
Supplemental cash flow information:
  Cash paid for interest....................................  $      --   $      22   $      87
                                                              =========   =========   =========
Supplemental non-cash investing and financing activities:
  Common Stock issued for stockholder note receivable.......  $      --   $      --   $   2,000
                                                              =========   =========   =========
  Conversion of convertible promissory note to Convertible
    Preferred Stock.........................................  $      --   $      --   $  15,120
                                                              =========   =========   =========
  Conversion of Convertible Preferred Stock to Common
    Stock...................................................  $      --   $      --   $ 105,012
  Repurchase of Common Stock and cancellation of related
    stockholder note receivable.............................  $   1,208   $      --   $     245
                                                              =========   =========   =========
Issuance of warrants for services...........................  $   4,264   $  49,386   $   6,763
                                                              =========   =========   =========
Common Stock issued for services............................  $     585   $      22   $      --
                                                              =========   =========   =========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.
                                        38
<PAGE>

                           WINK COMMUNICATIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 -- THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

     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 Company has determined that it operates in only one geographic area,
the United States, and one operating segment by which the chief operating
decision-maker evaluates performance and allocates resources.

     The Company has incurred losses from operations since inception and has an
accumulated deficit of $197.3 million. However, the Company believes that, with
the decrease in obligations to certain distribution partners (see Note 11 --
Subsequent Events), the existing cash, cash equivalents and short-term
investments are sufficient to meet its anticipated business requirements.

PRINCIPLES OF CONSOLIDATION

     The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, Wink Japan, Inc. All intercompany
transactions and balances have been eliminated in consolidation. The assets,
liabilities, revenues and expenses of Wink Japan, Inc. are immaterial to the
consolidated financial statements.

USE OF ESTIMATES

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

RECLASSIFICATIONS

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

CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

     Cash and cash equivalents represent cash and highly liquid investments with
an original maturity of three months or less at the date of purchase.

     The Company classifies its investments in marketable securities as
available-for-sale. Accordingly, these investments are carried at fair value,
with the unrealized gains and losses, net of tax, reported as a separate
component of stockholders' equity. The Company recognizes gains and losses when
securities are sold using the specific identification method. For the years
ended December 31, 2001, 2000 and 1999, the Company did not recognize any
material realized gains or losses upon the sale of securities.

                                        39
<PAGE>

     At December 31, 2001, cash, cash equivalents and short-term investments
consist of the following (in thousands):

<Table>
<Caption>
                                                                         UNREALIZED    ESTIMATED
                                                               COST         GAIN       FAIR VALUE
                                                              -------    ----------    ----------
<S>                                                           <C>        <C>           <C>
Cash and cash equivalents:
Cash......................................................    $ 3,092      $   --       $ 3,092
Money market funds........................................     12,435          --        12,435
Corporate debt securities.................................      4,986          --         4,986
                                                              -------      ------       -------
                                                              $20,513      $   --       $20,513
                                                              =======      ======       =======
Short-term investments:
Government bonds and notes................................    $53,371      $   90       $53,461
Corporate debt securities.................................      3,910          63         3,973
                                                              -------      ------       -------
                                                              $57,281      $  153       $57,434
                                                              =======      ======       =======
</Table>

     At December 31, 2000, cash, cash equivalents and short-term investments
consist of the following (in thousands):

<Table>
<Caption>
                                                                         UNREALIZED    ESTIMATED
                                                               COST         GAIN       FAIR VALUE
                                                              -------    ----------    ----------
<S>                                                           <C>        <C>           <C>
Cash and cash equivalents:
Cash......................................................    $ 1,274      $   --       $ 1,274
Money market funds........................................      1,856          --         1,856
Corporate debt securities.................................     18,806         157        18,963
                                                              -------      ------       -------
                                                              $21,936      $  157       $22,093
                                                              =======      ======       =======
Short-term investments:
Government bonds and notes................................    $46,132      $  396       $46,528
Corporate debt securities.................................     51,259       1,120        52,379
                                                              -------      ------       -------
                                                              $97,391      $1,516       $98,907
                                                              =======      ======       =======
</Table>

PROPERTY AND EQUIPMENT

     Property and equipment and leasehold improvements are stated at cost less
accumulated depreciation and amortization. Depreciation is provided on a
straight-line basis over the estimated useful lives of the assets, which range
from three to five years. Amortization of leasehold improvements is computed
using the straight-line method over the shorter of the remaining lease term or
the estimated useful life of the related asset, typically three years. Purchased
internal-use software consists primarily of amounts paid to third parties for
software applications that support the Wink Response Network and the Company's
information systems. Purchased internal-use software is depreciated over its
useful life, generally three years.

IMPAIRMENT OF LONG-LIVED ASSETS

     The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying value may not be
recoverable. Factors the Company considers important that could trigger an
impairment review include, but are not limited to, significant underperformance
relative to expected historical or projected future operating results,
significant changes in the manner of use of the acquired assets or the strategy
for the overall business, significant negative industry or economic trends, a
significant decline in the Company's stock price for a sustained period, and the
Company's market capitalization relative to net book value. Recoverability of an
asset is measured by comparison of its net book value to the future undiscounted
cash flows that the asset is expected to generate. Any impairment to be
recognized is measured by the amount by which the carrying amount of the asset
exceeds its fair market value or the present value of

                                        40
<PAGE>

projected net cash flows using a discount rate commensurate with the risk
inherent in the Company's current business model.

REVENUE RECOGNITION

     License revenue is derived from the Wink Engine software, Wink Studio
software and Wink Broadcast Server software. The Company recognizes software
license revenues relating to the Wink Engine on a "sell-through" basis upon
notification of shipment of Wink-enabled products by the original equipment
manufacturer. License fees from Wink Studio and Wink Broadcast Server software
are recognized over the term of the agreement with the programmer or the cable
or satellite system operator, ranging from one to five years, based upon the
applicable monthly subscription fee.

     During 2000 and 1999, most of the agreements with advertisers provided for
a flat fee to be paid up front in exchange for the right to receive the Wink
Studio software license, a limited number of customized interactive applications
and response transaction reports during a limited period of time. These fees
were recognized ratably over the life of the agreement, generally six to twelve
months. Beginning in 2000, the Company has entered into numerous agreements with
advertisers, merchants and cable programmers that provide for a fee based on
response transactions generated by television viewers. Revenue under such
agreements is recognized at the time TV viewers' response data is routed to the
customer. Through December 31, 2001, transaction fee revenue has been
insignificant.

     Revenue from development of customized interactive applications for
television programs and virtual channels is generally recognized over the life
of the contract when the contract includes an ongoing obligation to process
response transactions and provide other service.

     Service revenue is derived from non-recurring and consulting engineering
services under agreements to port the Wink Engine software to various
televisions and set-top terminals, and service fees relating to software
installation and post-contract customer support. Non-recurring and consulting
engineering services are recognized using the percentage-of-completion method,
using labor hours as a measure of progress towards completion. Fees from
installation services and post-contract customer support fees are recognized
ratably over the term of the software license agreement.

SALES TO SIGNIFICANT CUSTOMERS

     During the years ended December 31, 2001, 2000 and 1999, sales to customers
comprising 10 percent or more of the Company's total revenues for the periods
indicated were as follows:

<Table>
<Caption>
                                                                     YEAR ENDED
                                                                    DECEMBER 31,
                                                                --------------------
                                                                2001    2000    1999
CUSTOMER                                                        ----    ----    ----
<S>                                                             <C>     <C>     <C>
A -- related party..........................................     55%     24%     --
B -- related party..........................................     --      21%     --
C -- related party..........................................     --      17%     --
D -- related party..........................................     --      --      25%
E -- related party..........................................     --      --      16%
</Table>

FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company's financial instruments, including accounts receivable and
accounts payable but excluding cash and cash equivalents, are carried at cost,
which approximates their fair value because of the short-term maturity of these
instruments.

CONCENTRATIONS OF CREDIT RISK

     Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist primarily of cash and cash equivalents,
short-term investments and trade accounts receivable, which

                                        41
<PAGE>

are not collateralized. The Company limits its exposure to credit loss by
placing its cash and cash equivalents with financial institutions that
management believes are credit worthy and by placing its short-term investments
in corporate commercial paper issues, government and agency treasuries, and
short-term asset-backed obligations of various entities. Concentrations of
credit risk with respect to trade accounts receivable are considered to be
limited due to the assessed credit quality of the customers comprising the
Company's customer base. The Company performs ongoing credit evaluations of its
customers' financial condition to determine the need for an allowance for
doubtful accounts. The Company has not experienced significant credit losses to
date. At December 31, 2001, one related party customer accounted for 17% of the
accounts receivable balance. At December 31, 2001 and 2000, one related party
customer accounted for 48% and 70% of the accounts receivable balance,
respectively.

SOFTWARE DEVELOPMENT COSTS

     Costs incurred in the research and development of new products and
enhancements to existing products are charged to expense as incurred until the
technological feasibility of the product or enhancement has been established
through the development of a working model. After establishing technological
feasibility, additional development costs incurred through the date the product
is available for general release would be capitalized and amortized over the
estimated product life. No costs have been capitalized to date, as the effect on
the financial statements for all periods presented is immaterial.

ADVERTISING COSTS

     Advertising costs are expensed as incurred. Advertising expense for the
years ended December 31, 2001, 2000 and 1999 totaled $3,061,000, $3,360,000 and
$996,000, respectively (see also Note 4 -- Related Party Transactions).

DISTRIBUTION COSTS

     The Company has entered into a number of distribution agreements with cable
and satellite system operators, broadcast network and cable programmers and
certain other market participants, some of which are related parties (see Note 4
-- Related Party Transactions), pursuant to which the Company has agreed to pay
certain cash and equity consideration in connection with the deployment of the
Wink Service by these parties. Such consideration is typically earned by the
other party upon signing the agreement, upon launch of the Wink Service, based
on the number of Wink-enabled devices or subscribers deployed by that operator
or based upon the volume of airings of Wink-enhanced content by the programmer.
Such consideration is generally recognized in revenue sharing and launch fees
expense and may include one or several of the following:

     -  Revenue sharing and guarantees -- Revenue sharing is earned by the
        distributor and accrued by the Company when transaction fee revenue
        relating to television viewers' response data is recognized and is
        generally paid quarterly. For certain distribution agreements, we have
        also provided minimum revenue guarantees. Revenue guarantees are
        generally accrued and expensed monthly, paid annually, in arrears, and
        to date have ranged from $1.00 to $5.00 per household per year. In March
        2002, certain contracts were amended (see Note 11 -- Subsequent Events)
        to reduce the amount of revenue guarantees for 2002 and thereafter to
        $1.00 to $4.00 per household per year.

     -  Marketing development and system funds -- The marketing development and
        system funds are used for promotion of the Wink Service and are
        generally earned by the distributor on a one-time, per household or
        device basis and paid quarterly. Marketing development and system funds
        range from $0.50 to $1.00 per household. Marketing development and
        system funds are expensed as incurred.

     -  Equipment subsidies -- The equipment subsidies are one-time fees for
        integrating the Wink Engine into a certain set-top box, generally on a
        per set-top box basis. These fees are capitalized as a deferred charge
        and amortized over the useful life of the set-top box, generally 18
        months, and generally paid quarterly. The equipment subsidies also
        include one-time fees to distribution partners to offset their costs of
        capital equipment and are paid according to the terms of the respective
        agreement. These fees

                                        42
<PAGE>

       are capitalized as a deferred charge and amortized over the remaining
       life of the agreement or period of benefit, which ever is shorter.

     -  Standard feature launch fees -- The standard feature launch fees are
        fees paid to the cable distributor for including the Wink Service as a
        standard feature on all of its digital set-top boxes. These fees are
        generally lump-sum payments, paid per a specified schedule in the
        respective agreement and will be capitalized and amortized over the
        shorter of the remaining life of the agreement or the expected period of
        benefit.

     -  Other launch fees -- The other launch fees are any other launch support
        fees per the distribution contracts. These fees are generally specified
        amounts described in the relevant contract, but typically consist of a
        one-time payment, up to a maximum of $5.00 per household. These fees may
        be paid per specified dates in the agreement or on a quarterly basis.
        These fees are capitalized as deferred charges and amortized over the
        shorter of the remaining life of the agreement or the expected period of
        benefit.

     -  Warrant and Common Stock amortization -- The Company issued warrants or
        Common Stock as consideration in connection with certain distribution
        agreements. The fair value of the warrants or Common Stock issued to
        distributors is generally amortized over the life of the distribution
        agreement.

STOCK-BASED COMPENSATION & WARRANT AMORTIZATION

     The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB No. 25"), as interpreted by
FASB Interpretation No. 44, "Accounting for certain transactions involving stock
compensation, an interpretation of APB Opinion No. 25" ("FIN 44"), and complies
with the disclosure provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123").
Accordingly, compensation cost is recognized based on the difference, if any, on
the date of grant between the fair value of the Company's stock and the amount
an employee must pay to acquire the stock.

     The Company accounts for equity instruments issued in exchange for the
receipt of goods or services from other than employees in accordance with SFAS
No. 123 and the consensus reached by the Emerging Issues Task Force in Issue No.
96-18, "Accounting for Equity Instruments That Are Issued to Other Than
Employees for Acquiring, or in conjunction with Selling, Goods or Services."
Such equity instruments are measured at the fair market value of the
consideration received or the fair value of the equity instruments issued,
whichever is more reliably determinable. The fair value of equity instruments
issued is determined on the earlier of the date on which there first exists a
firm commitment for performance by the provider of goods or services or on the
date performance is complete, using the Black-Scholes pricing model.

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

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                              ---------------------------
                                                               2001       2000      1999
                                                              -------    ------    ------
<S>                                                           <C>        <C>       <C>
Revenue sharing and launch fees -- related parties..........  $12,003    $4,275    $1,967
Revenue sharing and launch fees -- third parties............       --        --     1,220
Sales and marketing.........................................      906       979       944
Product development.........................................      485       517       372
General and administrative..................................      465       767       515
                                                              -------    ------    ------
                                                              $13,859    $6,538    $5,018
                                                              =======    ======    ======
</Table>

                                        43
<PAGE>

INCOME TAXES

     Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current year and
deferred tax liabilities and assets for the future tax consequences of events
that have been recognized in the Company's financial statements or tax returns.
The measurement of current and deferred tax liabilities and assets are based on
provisions of the enacted tax law; the effects of future changes in tax laws or
rates are not anticipated. The measurement of deferred tax assets is reduced, if
necessary, by the amount of any tax benefits that, based on available evidence,
are not expected to be realized.

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, 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.

     The following table sets forth the computation of basic and diluted net
loss per share for the periods indicated (in thousands, except for per share
amounts):

<Table>
<Caption>
                                                                 YEAR ENDED DECEMBER 31,
                                                            ---------------------------------
                                                              2001         2000        1999
                                                            ---------    --------    --------
<S>                                                         <C>          <C>         <C>
Numerator:
  Net loss..............................................    $(114,539)   $(33,305)   $(18,224)
                                                            =========    ========    ========
Denominator:
  Weighted average shares...............................       31,151      30,787      17,839
  Weighted average unvested common shares subject to
     repurchase.........................................           (4)       (362)       (689)
                                                            ---------    --------    --------
  Denominator for basic and diluted.....................       31,147      30,425      17,150
                                                            =========    ========    ========
Net loss per share:
  Basic and diluted.....................................    $   (3.68)   $  (1.09)   $  (1.06)
                                                            =========    ========    ========
</Table>

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

<Table>
<Caption>
                                                                      DECEMBER 31,
                                                                -------------------------
                                                                 2001      2000     1999
                                                                ------    ------    -----
<S>                                                             <C>       <C>       <C>
Common Stock options........................................     5,774     5,872    4,077
Common Stock warrants.......................................     5,946     4,893    1,675
Common Stock subject to repurchase..........................        --       158      461
                                                                ------    ------    -----
                                                                11,720    10,923    6,213
                                                                ======    ======    =====
</Table>

COMPREHENSIVE INCOME (LOSS)

     Comprehensive income (loss) includes all changes in equity during a period
from non-owner sources. The primary difference between net loss and
comprehensive loss is due to the unrealized gains and losses on
available-for-sale securities.

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 Considera-

                                        44
<PAGE>

tion 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 will adopt EITF 00-25 and EITF 01-9 in
the first quarter of fiscal year 2002. Upon adoption of EITF 00-25 and EITF
01-9, and in accordance with the transition guidance, financial statements for
prior periods presented for comparative purposes will be reclassified to comply
with the new income statement presentation requirement. The Company currently
anticipates that the adoption of EITF 00-25 and EITF 01-9 will result in a
reclassification from revenue to revenue sharing and launch fees expense of
approximately $4,675,000, $2,862,000, and $250,000 for fiscal years ended
December 31, 2001, 2000, and 1999, respectively. The adoption of EITF 00-25 and
EITF 01-9 will have 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". The Company will adopt SFAS 144 in fiscal year 2002 and
currently does not expect the adoption of SFAS 144 to have a significant impact
on its financial statements.

     In November 2001, the Emerging Issues Task Force (EITF) reached a consensus
on Issue 1(a) of EITF Issue 00-18, "Accounting Recognition for Certain
Transactions Involving Equity Instruments Granted to Other Than Employees" that
an asset acquired in exchange for the issuance of fully vested, non-forfeitable
equity instruments should be displayed in the balance sheet of the grantor as an
asset rather than as a reduction of stockholders' equity. No transition guidance
has yet been provided in connection with this consensus. To date, fully vested
warrants issued in connection with distribution agreements have been recorded as
a reduction of stockholders' equity. As of December 31, 2001, the Company
recorded an impairment charge of $39 million to fully write down the remaining
unamortized portion of these warrants. Upon adoption of the consensus, fully
vested warrants to be issued in the future to distributors and other strategic
partners will be recorded as an asset.

NOTE 2 -- IMPAIRMENT CHARGE

     During the fourth quarter ended December 31, 2001, the Company performed an
impairment assessment of the deferred charges and unamortized compensation for
warrants related to the distribution agreements with cable and satellite system
operators and certain property and equipment deployed at the cable and satellite
system operators and broadcast networks and cable programmers. The assessment
was performed primarily due to the significant decline in the stock price since
the date the consideration and warrants issued to each cable and satellite
system operators were valued and the Company's lower projected operating
results. As a result of the review, the Company recorded an impairment charge on
certain long-lived assets. The components of the charge are as follows (in
thousands):

<Table>
<S>                                                             <C>
Deferred charges -- related parties.........................    $12,866
Deferred charges -- third parties...........................        255
Unamortized compensation for warrants.......................     39,628
Property, equipment and intellectual property...............      2,546
                                                                -------
                                                                $55,295
                                                                =======
</Table>

     The charge was determined based upon the Company's estimated discounted
cash flows using a discount rate of 25%. The assumptions supporting the
Company's future cash flows, including the discount rate, were determined using
management's best estimates. The remaining property and equipment balance of
approxi-

                                        45
<PAGE>

mately $2,090,000 will be amortized over the remaining useful life of 3 to 5
years, which the Company considers appropriate.

NOTE 3 -- INVESTMENTS

     In February 2000, the Company entered into a development agreement with a
private company to create certain software products for personal computers that
use the Company's technology. Contemporaneously with the execution of the
development agreement, Wink and the private company executed a stock purchase
agreement pursuant to which the Company purchased $1,400,000 in non-marketable
securities for a 19.9% interest in the private company and the right to a board
of director's seat. The investment was accounted for using the equity method and
during the year ended December 31, 2000, the Company recorded a loss on equity
investment of $179,000. In the quarter ended March 31, 2001, the Company
recorded a loss on equity investment of $28,000. In the second quarter of 2001,
the Company performed an impairment assessment of the investment. The assessment
was performed primarily due to the private company's lack of revenue growth and
the inability to raise additional funds. As a result of the review, the Company
recorded a $1,193,000 charge to other income (expense), net, to write off the
investment.

     In April 2000, the Company invested $2,900,000 for a 8.9% interest in a
Japanese company that provides electronic commerce and response routing services
for interactive television platforms. The investment was accounted for using the
cost method. During the quarter ended December 31, 2001, the Company performed
an impairment assessment of the investment. The Company concluded that due to
the slow acceptance of the Japanese company's technology, slow revenue growth
and decreasing cash balance, the investment was impaired and accordingly reduced
the carrying value by $1,671,000 through a charge to other income (expense),
net.

NOTE 4 -- RELATED PARTY TRANSACTIONS

     The Company has entered into several multi-year agreements with certain
stockholders and warrant holders of the Company who are satellite and cable
system operators, software developers, broadcast network and cable programmers,
set-top box manufacturers and television manufacturers. These agreements,
ranging from 1 year to 12 years, some of which have renewal clauses, cover
various activities relating to the deployment of the Wink technology for
consumer distribution and include installation and engineering services provided
to these partners. The Company has agreed to pay certain distribution costs and
to issue warrants or Common Stock to these partners (see Note 1 -- The Company
and Summary of Significant Accounting Policies, Distribution Costs and Note 9 --
Stockholders' Equity).

Significant Related Party Distribution Agreements and Commitments

     The Company has entered into several distribution agreements with cable and
satellite system operators and the significant distribution agreements are
discussed below. The Company will share a percentage of the revenue derived from
transaction fees with all the distribution partners listed below. The exact
amount of revenue that the Company will share with the distribution partner will
depend on the volume and type of transaction that generates the revenue. For
national transactions that are considered "requests for information" ("RFI's"),
the range of the revenue share is generally 5% to 35%. For national purchase
transactions, the range of the revenue share is generally 5% to 50%. The Company
is also obligated to share revenue with its distribution partners if and when
local enhancements are aired.

Related Party Distribution Partner 1

     In 1997, the Company entered into a 4-year affiliation agreement with a
distribution partner (the 1997 agreement). In connection with the 1997
agreement, the Company issued a performance-based warrant in 1998 to purchase up
to 250,000 shares of its Common Stock; the distribution partner earned 61,000
shares, with a fair market value at the final measurement date of $392,000. In
2001, the Company entered into a new 3-year affiliation agreement, as amended,
with the same distribution partner and issued a warrant to purchase up to
1,000,000 shares of its Common Stock with a fair value at the time of issuance
of $4,264,000. Based on a

                                        46
<PAGE>

March 2002 amendment to the 2001 agreement (see Note 11 -- Subsequent Events),
the Company is also committed to paying a standard feature launch fee, which
will be included in revenue sharing and launch fees expense. The launch fees
consist of $1,000,000 payable by the Company in both January 2002 and 2003. The
Company paid the first installment of $1,000,000 in the quarter ending March 31,
2002. The standard feature launch fee also includes a bonus of up to $1,000,000
if certain deployment milestones are achieved by April 2002. As of December 31,
2001, it was not probable that any of the bonus would be earned by the
distribution partner.

     During the year ended December 31, 2000, the 1997 agreement was amended and
pursuant to this amendment, the Company provided the distribution partner with
non-recurring installation and integration services and other engineering
services for a fee. For the years ended December 31, 2001 and 2000, the Company
recognized $3,770,000 and $1,043,000 as services revenue or 55% and 24% of total
revenue, respectively.

     The Company recorded $1,700,000 and $1,500,000 in sales and marketing
expense for the years ended December 31, 2001 and 2000, respectively, for
television advertising provided by the distribution partner. In addition, the
Company prepaid $500,000 in December 2001 for television advertising to be aired
in 2002 by the distribution partner. The Company is also committed to purchase
an additional $1,250,000 of television advertising from the distribution partner
in each of the years ended December 31, 2002 and 2003.

Related Party Distribution Partner 2

     In 1998, the Company entered into a 5-year master affiliation agreement, as
amended, with a distribution partner. Based on a March 2002 amendment (see Note
11 -- Subsequent Events), the Company is committed to paying various types of
costs, which are included in revenue sharing and launch fees expense, as
follows:

     -  Revenue guarantees -- The Company has committed to a minimum revenue
        guarantee of $2.00 per Wink-enabled household per year. At December 31,
        2001, approximately 2,900,000 Wink-enabled households deployed with this
        distribution partner were subject to this revenue guarantee.

     -  System funds -- The Company currently pays the distribution partner
        $1.00 for each set-top box that the distribution partner deploys.
        Beginning in April 2002, the system funds will decrease to $0.50 per
        device.

     -  Equipment subsidies -- The Company paid a subsidy of $3.50 per set-top
        box deployed by the distribution partner, capped at a maximum of
        $15,000,000 or approximately 4.3 million set-top boxes. During 2001, the
        Company exceeded the maximum number of set-top boxes subject to the
        subsidy; therefore the Company has no further obligation for this
        subsidy. The Company also paid approximately $1,000,000 in other
        equipment subsidies in 1999.

     During the year ended December 31, 2000, the Company entered into an
agreement with the distribution partner to provide certain non-recurring
engineering consulting services. The Company recognized $750,000 in revenue for
these services in the year ended December 31, 2000.

Related Party Distribution Partner 3

     In 2000, the Company entered into a 7-year master affiliation agreement
with a distribution partner and issued a warrant to purchase up to 1,300,000
shares of its Common Stock with a fair value at the time of issuance of
$24,098,000. The Wink Service had not been deployed by this distribution partner
as of December 31, 2001. The Company is also committed to paying $0.50 per
household in marketing and development funds once the distribution partner has
deployed the Wink Service to 1 million households. The marketing and development
funds will be included in revenue sharing and launch fees expense.

                                        47
<PAGE>

Related Party Distribution Partner 4

     In 2000, the Company entered into a 3-year affiliation agreement with a
distribution partner and issued a warrant to purchase up to 100,000 shares of
its Common Stock with a fair value at the time of issuance of $1,024,000. The
Company has committed to a minimum revenue guarantee of $2.50 per Wink-enabled
household per year. The revenue guarantee will be recorded as a revenue sharing
and launch fee expense as incurred. At December 31, 2001, approximately 245,000
Wink-enabled households deployed with this distribution partner were subject to
this revenue guarantee.

     During the year ended December 31, 2001, the Company entered into an
agreement with the distribution partner in which the Company provided certain
non-recurring consulting services. The Company recognized $150,000 in revenue
for these services in the year ended December 31, 2001.

Related Party Distribution Partner 5

     In 2000, the Company entered into a 3-year affiliation agreement with a
distribution partner and issued two warrants to purchase up to an aggregate of
1,450,000 shares of its Common Stock with a fair value at the time of issuance
of $18,761,000. The Company is also committed to paying the distribution partner
$1.00 for each household in which the Wink Service is deployed for marketing
development funds, which are included in revenue sharing and launch fees
expense.

     During the year ended December 31, 2001, the Company entered into an
agreement with the distribution partner in which the Company provided to the
distribution partner non-recurring engineering consulting services. The Company
recognized $250,000 in revenue for these services in the year ended December 31,
2001.

Related Party Distribution Partner 6

     In 2000, the Company entered into a 5-year affiliation agreement with a
distribution partner and issued a warrant to purchase up to 500,000 shares of
its Common Stock with a fair value at the time of issuance of $3,310,000. Based
on a February 2002 amendment to the agreement (see Note 11 -- Subsequent
Events), the Company is also committed to paying the following costs, which are
included in revenue sharing and launch fees expense:

     -  Revenue guarantees -- The Company has committed to a minimum revenue
        guarantee of $1.00 per Wink-enabled household per year. At December 31,
        2001, approximately 95,000 Wink-enabled households deployed with this
        distribution partner were subject to this revenue guarantee.

     -  Launch support fees -- The Company provided launch support fees to the
        distribution partner. The launch support fees consisted of $2,500,000
        payable by the Company in both 2000 and 2001. In addition, the Company
        pays a $5.00 launch fee per Wink-enabled household deployed.

     During the year ended December 31, 2001, the Company entered into an
agreement with the distribution partner in which the Company provided
non-recurring engineering consulting services for a fee. The Company recognized
$266,000 as services revenue in the year ended December 31, 2001 and $45,000 was
recorded in deferred revenue at December 31, 2001. In connection with this
agreement, the Company committed to buy an equivalent amount of advertising from
the distribution partner in 2002.

Related Party Distribution Partner 7

     In 1999, the Company entered into a 10-year software distribution agreement
with a software developer (Developer) to modify some of this Developer's set-top
boxes to capture viewer responses for processing by the Wink Response Network
and issued a warrant to the Developer to purchase up to 500,000 shares of the
Company's Common Stock with a fair value at the time of issuance of $4,050,000.
The Company will share 10% to 15% of the revenue derived from transaction fees
captured by these modified set-top boxes with the Developer. The exact
percentage of revenue that the Company will share with the Developer will depend
on the volume and type of transaction that generates the revenue. At December
31, 2001, approximately 472,000

                                        48
<PAGE>

households have received Developer-controlled Wink-enabled devices that were
launched by a division of the Developer and will become subject to the revenue
sharing arrangement once they have been upgraded to the new version of the Wink
technology contemplated in the software distribution agreement. The Company has
committed to a minimum revenue guarantee of $2.00 to $4.00 per Wink-enabled
household that contains a Developer-controlled device per year. The exact amount
that the Company will pay the Developer for each relevant Wink-enabled household
will depend on deployment of the upgraded version of the Wink technology.

     During the year ended December 31, 2000, the Company entered into an
agreement with a division of the Developer to provide non-recurring engineering
consulting services. The Company recognized revenue of $69,000 and $870,000 for
the services performed in the years ended December 31, 2001 and 2000,
respectively. The Company also entered into an advertising agreement with the
Developer in the year ended December 31, 2000 to capture viewer responses to the
Developer's advertisements by the Wink Response Network, pursuant to which
$50,000 in revenue was recognized.

     Distribution costs recognized in connection with these agreements are as
follows (in thousands):

<Table>
<Caption>
                                                                  YEAR ENDED DECEMBER 31,
                                                                ---------------------------
                                                                 2001       2000      1999
                                                                -------    ------    ------
<S>                                                             <C>        <C>       <C>
Revenue sharing and launch fees expense:
  Amortization of equipment subsidies.......................    $ 8,468    $1,030    $   --
  Launch and system support fees............................      6,654     2,397       112
  Revenue sharing and guarantees............................      7,573     1,261        67
  Amortization of warrant value.............................     12,003     4,275     1,967
                                                                -------    ------    ------
          Total.............................................    $34,698    $8,963    $2,146
                                                                =======    ======    ======
Sales and marketing expense:
  Advertising and marketing.................................    $   265    $   26    $   --
  Television advertising....................................      1,700     1,500        --
  Amortization of warrant value.............................        105       224        --
                                                                -------    ------    ------
          Total.............................................    $ 2,070    $1,750    $   --
                                                                =======    ======    ======
Impairment charge (see Note 2, Impairment Charge):
  Impairment charge -- deferred charges.....................    $12,866    $   --    $   --
  Impairment charge -- unamortized compensation for
     warrants...............................................     39,628        --        --
                                                                -------    ------    ------
          Total.............................................    $52,494    $   --    $   --
                                                                =======    ======    ======
</Table>

Stockholder Notes

     At December 31, 2001 and 2000, the Company held notes receivable from
officers totaling $1,291,000 and $2,499,000, respectively, representing amounts
owed to the Company from the purchase of restricted Common Stock subject to
repurchase rights held by the Company. These full recourse notes bear interest
at a rate of 6.4% per annum. Interest and the principal are due ten years from
the execution of the notes, which is between December 2006 and 2009.

                                        49
<PAGE>

NOTE 5 -- BALANCE SHEET COMPONENTS

<Table>
<Caption>
                                                                   DECEMBER 31,
                                                                ------------------
                                                                 2001       2000
                                                                -------    -------
                                                                  (IN THOUSANDS)
<S>                                                             <C>        <C>
Accounts receivable -- related parties, net:
     Accounts receivable -- related parties.................    $ 2,220    $ 3,433
     Less allowance for doubtful accounts...................         --        (80)
                                                                -------    -------
                                                                $ 2,220    $ 3,353
                                                                =======    =======
Accounts receivable -- third parties, net:
     Accounts receivable -- third parties...................    $   493    $   672
     Less allowance for doubtful accounts...................        (80)       (50)
                                                                -------    -------
                                                                $   413    $   622
                                                                =======    =======
Prepaid expenses and other current assets:
     Interest receivable from short-term investments........    $   455    $ 1,945
     Prepaid advertising -- related parties.................        500         --
     Other..................................................      1,189        416
                                                                -------    -------
                                                                $ 2,144    $ 2,361
                                                                =======    =======
Property and equipment, net:
     Computer equipment.....................................    $ 2,853    $ 6,580
     Office furniture and equipment.........................        716        787
     Leasehold improvements.................................        404        384
     Purchased internal-use software........................      1,407      1,333
                                                                -------    -------
                                                                  5,380      9,084
     Less accumulated depreciation and amortization.........     (3,290)    (4,446)
                                                                -------    -------
                                                                $ 2,090    $ 4,638
                                                                =======    =======
</Table>

     As part of the impairment review completed during the quarter ended
December 31, 2001, (see Note 2 -- Impairment Charge), the Company wrote off
computer equipment with a cost of $4,466,000 and related accumulated
depreciation of $2,112,000. The computer equipment was deployed at certain
distributor and broadcast network and cable programmer partners. The Company
also wrote off $1,396,000 of fully-depreciated assets that were no longer in use
during 2001.

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                                ----------------
                                                                 2001      2000
                                                                ------    ------
                                                                 (IN THOUSANDS)
<S>                                                             <C>       <C>
Deferred charges and other assets -- related parties:
  Equipment subsidy contributions to distributors...........    $   --    $6,220
  Distribution costs........................................        --     3,423
  Interest receivable, stockholder notes receivable.........       287       330
                                                                ------    ------
                                                                $  287    $9,973
                                                                ======    ======
Deferred charges and other assets -- third parties:
  Investments in private equity securities..................    $1,200    $4,092
  Distribution costs........................................        --       243
  Other.....................................................        92       178
                                                                ------    ------
                                                                $1,292    $4,513
                                                                ======    ======
</Table>

     As part of the impairment review completed during the quarter ended
December 31, 2001 (see Note 2 -- Impairment Charge), the Company wrote off the
unamortized balances of certain launch fees that were included in deferred
charges -- related parties and deferred charge -- third parties of $12,866,000
and

                                        50
<PAGE>

$255,000, respectively, and $192,000 of intellectual property, which was
included in deferred charges and other assets -- third parties.

<Table>
<Caption>
                                                                   DECEMBER 31,
                                                                ------------------
                                                                 2001       2000
                                                                -------    -------
                                                                  (IN THOUSANDS)
<S>                                                             <C>        <C>
Accrued liabilities:
     Compensation and benefits..............................    $ 2,255    $ 3,462
     Other..................................................      2,098        677
                                                                -------    -------
                                                                $ 4,353    $ 4,139
                                                                =======    =======
  Due to related parties:
     Equipment subsidy payable..............................    $ 3,750    $ 6,300
     Revenue guarantees.....................................      3,357      1,260
     Marketing and launch funds payable.....................      5,009      1,000
     Advertising payable....................................      1,965      1,500
                                                                -------    -------
                                                                $14,081    $10,060
                                                                =======    =======
</Table>

NOTE 6 -- CONTRACT TERMINATION AGREEMENT

     In May 1999, the Company and a third party executed an agreement that
terminated a development and license agreement dated April 1998. Under this
termination agreement, the third party paid the Company $1,112,000. Of this
amount, $1,000,000 was included in other income in the year ended December 31,
1999. The remaining $112,000 related to a non-recurring engineering agreement
and was included in services revenues from third parties during the year ended
December 31, 1999. The Company has no remaining obligations under these
agreements.

NOTE 7 -- INCOME TAXES

     No current provision or benefit for federal or state income taxes has been
recorded for the years ended December 31, 2001, 2000 and 1999, as the Company
has incurred net operating losses since inception and has no carryback
potential.

     At December 31, 2001, the Company had federal and state net operating loss
carryforwards of approximately $140.0 million and $61.0 million available to
reduce future taxable income, which will begin to expire in 2012 for federal and
2002 for state tax purposes, respectively. Of these amounts, $33.0 million
relate to employee stock option exercises and the benefit will be credited to
equity when and if it is realized. Under the Tax Reform Act of 1986, the amount
of benefit from net operating loss carryforwards may be impaired or limited as
the Company has experienced a cumulative ownership change of more than 50%, as
defined, over a three-year period. Net deferred tax assets are composed of the
following:

<Table>
<Caption>
                                                                    DECEMBER 31,
                                                                --------------------
                                                                  2001        2000
                                                                --------    --------
                                                                   (IN THOUSANDS)
<S>                                                             <C>         <C>
Net operating loss carryforwards............................    $ 51,180    $ 24,403
Reserves and accruals not currently deductible..............       1,357       1,401
Depreciation and amortization...............................       8,427         676
Tax credits carryforwards...................................       2,548       1,753
Other.......................................................       1,645         219
                                                                --------    --------
Gross deferred tax assets...................................      65,157      28,452
Deferred tax asset valuation allowance......................     (65,157)    (28,452)
                                                                --------    --------
Net deferred tax assets.....................................    $     --    $     --
                                                                ========    ========
</Table>

                                        51
<PAGE>

     Based on a number of factors, including the lack of a history of
profitability, management believes that there is sufficient uncertainty
regarding the realization of deferred tax assets such that a full valuation
allowance has been provided. The valuation allowance increased by $36.7 million
from December 31, 2000 to December 31, 2001, $11.1 million from December 31,
1999 to December 31, 2000 and $5.9 million from December 31, 1998 to December
31, 1999.

NOTE 8 -- COMMITMENTS AND CONTINGENCIES

LEASES

     The Company leases its main office facilities under a noncancelable
operating sublease that expires in September 2004. Under the terms of the
sublease, the Company is required to pay property taxes, insurance and normal
maintenance costs. The Company also leases certain equipment under operating
lease obligations. Rent expense on noncancelable operating leases for the years
ended December 31, 2001, 2000 and 1999, totaled $1,156,000, $1,023,000 and
$758,000, respectively.

     Future minimum lease payments under noncancelable operating leases are as
follows at December 31, 2001:

<Table>
<Caption>
                                                                  OPERATING
YEAR ENDING DECEMBER 31,                                            LEASES
------------------------                                        --------------
                                                                (IN THOUSANDS)
<S>                                                             <C>
2002........................................................        $1,131
2003........................................................         1,153
2004........................................................           885
                                                                    ------
                                                                    $3,169
                                                                    ======
</Table>

REVENUE SHARING, GUARANTEES AND OTHER COMMITMENTS TO THIRD PARTIES

     The Company has entered into an agreement with a cable system operator and
certain other market participants to share with these entities a portion of
revenues, if any, the Company generates from viewer responses to the Wink
Service gathered by the Wink Response Network. For a cable system operator, the
Company shares revenue, ranging from 5% to 10% of transaction fees, depending on
the volume and type of transactions, with a minimum revenue guarantee, ranging
from $2.50 to $3.50 per year per household receiving Wink-enhanced services, for
up to three years. At December 31, 2001, approximately 76,000 Wink-enabled
households deployed with this cable system operator were subject to this revenue
guarantee. For a satellite system operator, the Company shares revenue, ranging
from 8% to 23% of transaction fees, depending on the volume and type of
transactions, with a minimum revenue guarantee of $50,000 per month when certain
household deployment milestones are met, for up to four years. At December 31,
2001, the Wink Service had not been launched with this satellite system
operator. For certain broadcast network and cable programmer partners, the
revenue guarantee is fixed on an annual basis and the minimum revenue guarantee
payments per the outstanding contracts at December 31, 2001 will be $475,000,
$588,000, $513,000 and $413,000 for the years ended December 31, 2002, 2003,
2004 and 2005, respectively.

     The Company has also agreed to provide marketing development funds and
other launch support fees to certain cable and other market participants. The
Company has agreed to provide marketing development funds at rates ranging from
$0.25 to $2.00 per subscriber. The Company committed to pay integration and
incentive payments to certain broadcast network and cable programmer partners.
If certain milestones described in these contracts are met, these payments could
total $850,000, $800,000, $850,000 and $1,000,000 for the years ended December
31, 2002, 2003, 2004 and 2005, respectively. The Company has also committed to
purchasing a minimum of $750,000 of advertising in 2003 and 2004 from a certain
cable programmer partner.

                                        52
<PAGE>

LEGAL PROCEEDINGS

     On September 15, 1999, Fort Myers Broadcasting Company filed suit against
us in the United States District Court for the Middle District of Florida,
alleging federal trademark infringement, unfair competition and dilution as well
as injury to business reputation, unfair competition and dilution in the state
of Florida. In the fourth quarter of 2001, the parties entered into a settlement
agreement and on December 14, 2001, this case was dismissed. On approximately
January 14, 2002 the case was automatically dismissed with prejudice.

     On November 26, 2001, a class action complaint was filed in the United
States District Court for the Southern District of New York ("Court") 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 the Company is determined liable for the alleged
violations, our business and financial performance may be adversely affected.

     On December 4, 2000, a suit was filed in the United States District Court
for the District of Delaware by Pegasus Development Corporation and Personalized
Media Communications, LLC ("PMC") alleging that DIRECTV, Inc., Hughes
Electronics Corp., Thomson Consumer Electronics and Philips Electronics North
America, Inc. are willfully infringing certain claims of seven U.S. patents
assigned or licensed to PMC. Though the Company is not a defendant in the suit,
PMC may allege that certain of our products, in combination with products
provided by defendants, infringe PMC's patents. Our agreements with each of the
defendants include indemnification 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 it is determined that our products infringe any of the asserted claims, our
business and financial performance may be adversely affected.

     The Company believes that it has meritorious defenses and plans to
vigorously defend itself in the matters filed against it, and while the results
of such litigations and claims cannot be predicted with certainty, it believes
that the resolution of each matter will not have a material adverse effect on
its consolidated financial position, results of operations or on its cash flows.

NOTE 9 -- STOCKHOLDERS' EQUITY

PREFERRED STOCK

     The Company is authorized, subject to limitations prescribed by Delaware
law, to provide for the issuance of Preferred Stock in one or more series, to
establish from time to time the number of shares included within each series, to
fix the rights, preferences and privileges of the shares of each wholly unissued
series and any qualifications, limitations or restrictions thereon, and to
increase or decrease the number of shares of any such series (but not below the
number of shares of such series then outstanding) without any further vote or
action by the stockholders. At December 31, 2001 and 2000, there were 5,000,000
shares of Preferred Stock authorized for issuance and no shares issued or
outstanding.

CONVERTIBLE PREFERRED STOCK

     In May 1999, the Company issued a convertible promissory note to a
development and distribution partner in exchange for cash totaling $15,120,000.
The convertible promissory note was convertible, at the discretion of the
holder, into 1,260,000 shares of the Company's Series D Convertible Preferred
Stock at $12.00 per share. The convertible promissory note accrued interest at
10 percent, per annum. In July 1999, the development and distribution partner
exercised its right to exchange the convertible promissory note for 1,260,000
shares of the Company's Series D Convertible Preferred Stock.

                                        53
<PAGE>

COMMON STOCK

Initial Public Offering

     On August 24, 1999, the Company completed its initial public offering of
5,262,500 shares of its Common Stock at $16.00 per share, the net proceeds of
which aggregated approximately $77.3 million. At the closing of the offering,
all issued and outstanding shares of the Company's Convertible Preferred Stock
were converted into an aggregate of 12,764,333 shares of Common Stock.

Repurchase Rights

     In May 1999, the Company entered into an employment agreement with an
executive officer. In connection with this employment agreement, the Company
sold to the officer 250,000 shares of Common Stock at a price of $8.00 per share
in exchange for a full-recourse, ten-year $2,000,000 promissory note. The note
bears interest at a rate of 6.40% per annum. The Company had the right to
repurchase the shares at the original issuance cost of $8.00 per share. These
repurchase rights lapse progressively over a four-year period. In connection
with the sale of these shares, the Company recognized unearned compensation
totaling $1,000,000, which was being amortized over the four-year vesting
period. In December 2000, this executive officer's employment terminated and in
January 2001, the Company repurchased 151,000 unvested shares of Common Stock
from this former executive officer by canceling $1,208,000 of the note
receivable from the stockholder. The associated accrued interest receivable of
$126,000 was forgiven and recognized as general and administrative expense and
the related unearned compensation totaling $604,000 was reversed against
additional paid-in-capital. The remaining outstanding principal balance of
$792,000 on the note receivable will continue to accrue interest at 6.4% until
paid in full.

Stock Issued for Services Rendered

     In June 1999, the Company issued an aggregate of 50,000 shares of Common
Stock to employees as incentive bonuses. The fair value of these shares of
Common Stock on the issuance date totaled $600,000 and was recognized as sales
and marketing expense, as there were no remaining performance obligations.

     In September 2000, the Company granted unrestricted Common Stock to a
marketing consulting company for market research, analysis and strategy services
rendered. The Company issued 1,778 shares of Common Stock and the fair value of
the Common Stock on the date of issuance totaled $22,000. The fair value was
recognized as a sales and marketing expense in the year ended December 31, 2000
as there was no remaining performance obligation.

     In January 2001, the Company entered into an integration agreement with a
developer of software and support systems relating to the provision of
interactive program guides ("IPG") to incorporate the Wink Service with current
and future releases of the IPG for specified set-top boxes and to promote the
use of the Wink service. Wink concurrently entered into a Common Stock and
Warrant Issuance Agreement with the IPG developer pursuant to which the Company
issued to the developer 50,000 shares of Common Stock. The fair value of the
Common Stock on the date it was issued totaled $480,000. This amount was being
amortized to revenue sharing and launch fees -- related parties, ratably over
the life of the integration agreement. The Company recognized $37,000 as expense
for the year ended December 31, 2001. During the quarter ended December 31,
2001, the Company completed an impairment review (see Note 2, Impairment Charge)
and the unamortized balance totaling $443,000 was written off. The Company is
also obligated to issue an additional 50,000 shares of Common Stock to the IPG
developer or its designee upon the first commercial launch and activation of the
Wink service through the specified set-top boxes. As of December 31, 2001, the
specified set-top boxes that will incorporate the Wink service have not been
launched.

     In March 2001, the Company granted unrestricted Common Stock to a sales and
marketing consultant, a related party. The Company issued 20,000 shares of
Common Stock and the fair value of the Common Stock on the date of issuance
totaled $105,000. The fair value was recognized as a sales and marketing expense
in the year ended December 31, 2001 as there was no remaining performance
obligation.

                                        54
<PAGE>

Reserved Shares

     At December 31, 2001, the Company had reserved 8,826,000, 8,035,000 and
264,000 shares of Common Stock for future issuance for the exercise of options
under the Company's stock option plans, exercise of warrants outstanding or
issuable under certain distribution agreements, and issuance of shares under the
employee stock purchase plan, respectively.

WARRANTS

     During the years ended December 31, 2001, 2000 and 1999, the Company
granted both fully exercisable and performance-based warrants to broadcast
network partners, service providers and cable and satellite system operators as
incentives to enter into agreements or for services rendered (see Note 4
-Related Party Transactions). The fair market value of the warrants was
calculated on the measurement date using the Black-Scholes pricing model and is
generally amortized ratably over the term of the respective agreement or service
period, which ever is shorter.

     The following table summarizes information about warrant transactions
during 2001, 2000 and 1999 and the total number of fully exercisable and vested
warrants outstanding at December 31, 2001 (in thousands, except for per share
amounts):

<Table>
<Caption>
                                                               FAIR MARKET
                                                                VALUE AT
                                      EXPIRATION     PRICE     MEASUREMENT   SHARES
WARRANTHOLDER            GRANT DATE      DATE      PER SHARE      DATE       GRANTED   EXERCISED   EXPIRED   OUTSTANDING
-------------            ----------   ----------   ---------   -----------   -------   ---------   -------   -----------
<S>                      <C>          <C>          <C>         <C>           <C>       <C>         <C>       <C>
Preferred
  stockholder..........    Jun-97       Jun-09      $ 8.00       $   142        525        --         --          525
Broadcast network
  partner..............    Jun-97       Jun-09        8.00           746        375        --         --          375
Preferred
  stockholder..........    Jan-98       Jan-08        0.80           226         50       (50)        --           --
Preferred
  stockholder..........    Aug-98       Aug-03        8.00           135         25        --         --           25
Distribution partner...    Dec-98       Jan-04       12.00            32        125        --       (117)           8
Distribution partner...    Dec-98       Jan-05       16.00           360        125        --        (72)          53
Broadcast network
  partner..............    Feb-99       Aug-99       12.00         1,220        200        --       (200)          --
Broadcast network
  partner..............    Mar-99       Aug-99       12.00           760        125      (125)        --           --
Distribution partner...    May-99       May-04       12.00         4,050        500        --         --          500
Broadcast network
  partner..............    Jul-99       Aug-99       12.00           734         75       (75)        --           --
Service provider.......    Apr-00       Apr-05       33.38         1,579        100        --         --          100
Distribution partner...    May-00       May-05       21.75        24,098      1,300        --         --        1,300
Service provider.......    Jul-00       Jul-03       28.75           222         10        --         --           10
Distribution partner...    Sep-00       Sep-05       14.36         1,024        100        --         --          100
Distribution partner...    Oct-00       Oct-10       25.00         2,556        200        --         --          200
Distribution partner...    Oct-00       Oct-10       12.21        16,205      1,250        --         --        1,250
Distribution partner...    Nov-00       Dec-05        7.63         3,310        500        --         --          500
Distribution partner...    Jun-01       Jun-11        4.40         4,264      1,000        --         --        1,000
                                                                              -----      ----       ----       ------
                                                                              6,585      (250)      (389)       5,946
Weighted average
  exercice price.......                                                                                        $12.81
</Table>

     During the years ended December 31, 2001, 2000 and 1999, total stock
compensation related to warrants recognized as revenue sharing and launch fees
expense was $11,966,000, $4,275,000 and $3,187,000, respectively.

     During the years ended December 31, 2001, 2000 and 1999, total stock
compensation related to warrants recognized as sales and marketing expense was
$315,000, $461,000 and zero, respectively.
                                        55
<PAGE>

PERFORMANCE-BASED WARRANTS

     In December 1998, the Company granted warrants to purchase Common Stock to
a cable operator, a related party, as consideration for the future deployment of
Wink-enabled technology to at least 200,000 households, under a cable
affiliation agreement. The warrants enabled the holder to purchase up to 250,000
shares of Common Stock at either $12.00 or $16.00 per share, contingent upon the
number of units deployed, the timing of deployment and a minimum duration of
service. In the event the $12.00 exercise price is earned, the warrant will
expire in January 2004. In the event the $16.00 exercise price is earned, the
warrant will expire in January 2005. In the year ended December 31, 2000, the
cable operator achieved the 200,000 Wink-enabled household minimum deployment
criteria, and the Company recognized the fair value of the warrants associated
with the number of units deployed. The fair value of the warrants, as remeasured
at December 31, 2000, totaled $266,000. On January 30, 2001, the warrant
agreement was amended to remove any further performance requirements. The fair
value was determined to be $392,000 on January 30, 2001. The fair value has been
recognized as revenue sharing and launch fee expense ratably over the remainder
of the cable affiliation agreement.

     In September 2000, the Company entered into a warrant issuance agreement
with a cable operator, a related party, for the future deployment of
Wink-enabled technology to its subscribers. In the warrant issuance agreement,
the Company agreed to issue the cable operator warrants to purchase up to 75,000
shares in 2001 and up to 75,000 shares in 2002, provided that the cable operator
completes deployments of the Wink service to at least 250,000 and 350,000
households, respectively. The cable system operator did not reach the 2001
milestone. The exercise price for the remaining warrants shall be equal to 90%
of the average closing sale price of the Common Stock as reported on the Nasdaq
for the ten business days prior to December 31, 2002. In the event the warrants
are issued, the warrants will have a term of five years from the date of
issuance.

     In November 2000, the Company entered into a warrant issuance agreement
with a cable system operator, a related party, in which the cable system
operator is entitled to purchase up to 750,000 shares of Common Stock provided
that the cable operator completes a certain amount of deployments before
November 2003. The number of shares earned by the cable operator shall be based
on the volume and timing of deployment. The exercise price for the warrants will
be $7.63. In the event the warrants are issued, the warrants will have a term of
five years from the date of issuance.

     In January 2001, the Company entered into an integration agreement with an
interactive program guide ("IPG") developer, a related party, to incorporate the
Wink Service with current and future releases of the IPG for specified set-top
boxes and to promote the use of the Wink service. Wink concurrently entered into
a Common Stock and Warrant Issuance Agreement with the IPG developer pursuant to
which the Company agreed to issue to the IPG developer warrants to purchase up
to a maximum of 150,000 shares of Common Stock upon the achievement of certain
deployment milestones over four years following the anniversary of the launch of
the specified set-top boxes integrating the IPG and Wink technology. In the
event the warrants are issued, the exercise price for the warrants will be equal
to 80% of the average closing sale price of the Common Stock as reported on the
Nasdaq National Market for the 20 trading days prior to the date on which such
warrant is issued or required to be issued. The warrants will have a term of ten
years from the date of issuance.

     In November 2001, the Company entered into an interactive television
agreement with a broadcast network company to develop and air Wink-enhanced
programming over a four-year period. In connection with the agreement, Wink
issued a performance-based warrant in which the Company is obligated to issue to
the broadcast network partner warrants to purchase up to a maximum of 800,000
shares of Common Stock upon the achievement of certain advertising broadcasting
milestones. In the event the warrants are issued, the exercise price for the
warrants will be $1.25 and will expire in November 2006.

     When and if it becomes probable that the performance criteria will be
achieved by any of the above warrants, the Company will record the then fair
value associated with the number of warrants issued. The fair value will be
remeasured until performance is complete and all conditions are known and will
be recognized as a charge to revenue sharing and launch fees over the remainder
of the term of the related agreement.

                                        56
<PAGE>

OTHER

     As of December 31, 2001, no dividends on the Convertible Preferred,
Preferred or Common Stock have been declared by the Board of Directors.

NOTE 10 -- EMPLOYEE BENEFIT PLANS

STOCK OPTION PLANS

     The 1994 Stock Plan (the "1994 Plan"), as amended, provides for the
issuance of up to 7,000,000 shares of Common Stock in connection with incentive
stock option awards granted to employees and directors and nonstatutory stock
option awards granted to employees, directors and consultants to the Company.
Stock purchase rights may also be granted under the 1994 Plan. In June 1999, the
Board of Directors adopted and in August 1999 the Company's stockholders
approved, the 1999 Stock Plan (the "1999 Plan"). The 1999 Plan became effective
on the date of the initial public offering. The 1999 Plan provides for the grant
to employees of incentive stock options within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, and for grants to employees,
directors and consultants of nonstatutory stock options and stock purchase
rights. Unless terminated sooner, the 1999 Plan will terminate automatically in
2009. A total of 4,500,000 shares of Common Stock have been reserved for
issuance pursuant to the 1999 Plan. Through 2001, the amount of Common Stock
reserved under the 1999 Plan automatically increased at the end of each year by
the lesser of (1) 1,000,000 shares, (2) 4% of outstanding shares on such date or
(3) a lesser amount determined by the Board of Directors. In 2001 the
stockholders approved an increase to the automatic annual increase to take
effect on the first day of the Company's fiscal year beginning on January 1,
2002. As a result, the amount of Common Stock reserved under the 1999 Plan
automatically increase at the beginning of each year by the lesser of (1)
1,500,000 shares, (2) 5% of outstanding shares on such date or (3) a lesser
amount determined by the Board of Directors.

     Under the 1994 Plan and 1999 Plan (collectively "the Option Plans"),
options must be issued at prices not less than 100 percent and 85 percent of the
estimated fair value of the Common Stock on the date of grant for incentive and
non-statutory options, respectively, and are exercisable for periods not
exceeding ten years from the date of grant. Options granted to stockholders who
own greater than 10 percent of the outstanding stock at the time of grant are
exercisable for periods not exceeding five years from the date of grant and must
be issued at prices not less than 110 percent of the estimated fair value at the
date of grant. Options granted under the Option Plans generally vest ratably
over four years following the date of grant, although the Board of Directors may
issue options that vest over a period up to five years.

     In June 1999, the 1999 Director Option Plan (the "Director Plan") was
adopted by the Board of Directors and became effective on the date of the
initial public offering. The Director Plan provides for the automatic grant of a
nonstatutory option to purchase 40,000 shares of Common Stock to each new
non-employee director who becomes a director after the date of the initial
public offering on the date that such person becomes a director. Each current
and future non-employee director will automatically be granted an additional
nonstatutory option to purchase 40,000 shares on the fourth anniversary of the
date of grant of his or her last option if he or she served on the Board of
Directors continuously during such period. A total of 250,000 shares of Common
Stock have been reserved for issuance pursuant to the Director Plan.

     During the years ended December 31, 1999 and 1998, the Company recognized
unearned compensation totaling $6,600,000 and $600,000, respectively, with
respect to certain stock option grants and sales of restricted stock to
employees. No unearned compensation with respect to stock option grants to
employees was recognized in the years ended December 31, 2001 or 2000. These
expenses are generally being amortized over the respective four-year vesting
periods. Amortization of unearned compensation related to employees totaled
$1,436,000, $1,803,000 and $1,831,000 for the years ended December 31, 2001,
2000 and 1999, respectively, and has been allocated to operating costs and
expenses based upon the primary activity of the applicable employees or services
performed.

                                        57
<PAGE>

     The weighted average estimated grant date fair value, as defined by SFAS
123, for options granted during 2001, 2000 and 1999 was $3.86, $24.98 and $8.12
per option, respectively. Under SFAS No. 123, the fair value of each option
grant is estimated on the grant date using the Black-Scholes option pricing
model. This model requires highly subjective assumptions, including future stock
price volatility and expected time until exercise, which greatly affect the
calculated grant date fair value. The following weighted average assumptions are
included in the estimated grant date fair value calculations for the Company's
stock option awards:

<Table>
<Caption>
                                                                YEAR ENDED DECEMBER 31,
                                                                -----------------------
                                                                2001     2000     1999
                                                                -----    -----    -----
<S>                                                             <C>      <C>      <C>
Expected lives, in years....................................       5        5        5
Risk free interest rates....................................    4.56%    6.16%    5.40%
Dividend yield..............................................    0.00%    0.00%    0.00%
Expected volatility.........................................     135%     127%      14%
</Table>

     The following table summarizes information about stock option transactions
under the Plans:

<Table>
<Caption>
                                                        YEAR ENDED DECEMBER 31,
                                     --------------------------------------------------------------
                                            2001                  2000                  1999
                                     ------------------    ------------------    ------------------
                                               WEIGHTED              WEIGHTED              WEIGHTED
                                               AVERAGE               AVERAGE               AVERAGE
                                               EXERCISE              EXERCISE              EXERCISE
                                     SHARES     PRICE      SHARES     PRICE      SHARES     PRICE
                                     ------    --------    ------    --------    ------    --------
                                                (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                  <C>       <C>         <C>       <C>         <C>       <C>
Outstanding at beginning of
  period.........................     5,872     $19.12      4,077     $7.74      2,813      $2.90
Granted..........................     2,254       4.37      3,527     27.94      2,264      11.87
Exercised........................       (86)      1.07     (1,047)     2.66       (461)      1.23
Canceled.........................    (2,266)     23.82       (685)    21.45       (539)      5.72
                                     ------     ------     ------     -----      -----      -----
Outstanding at end of period.....     5,774      11.78      5,872     19.12      4,077       7.74
                                     ------     ------     ------     -----      -----      -----
Options vested at end of
  period.........................     2,436                 1,360                1,211
                                     ------                ------                -----
</Table>

     The following table summarizes information about stock options outstanding
at December 31, 2001:

<Table>
<Caption>
                                  OPTIONS OUTSTANDING                    OPTIONS VESTED
                  ---------------------------------------------------   -----------------
                                                 WEIGHTED
                                                 AVERAGE          WEIGHTED               WEIGHTED
                                                REMAINING          AVERAGE               AVERAGE
RANGE OF                       NUMBER          CONTRACTUAL        EXERCISE      NUMBER   EXERCISE
EXERCISE PRICES             OUTSTANDING            LIFE             PRICE       VESTED    PRICE
---------------           ----------------   ----------------   -------------   ------   --------
                        (IN THOUSANDS, EXCEPT YEARS AND PER SHARE AMOUNTS)
<S>                       <C>                <C>                <C>             <C>      <C>
$  0.40 -- $ 1.61                699            9.40 years          $1.44         187     $1.45
   1.76 --   4.20                685                  7.51           3.44         383      3.69
   4.53 --   6.00                606                  8.38           5.61         215      5.92
   6.06 --   7.93                854                  9.02           6.83          88      7.93
      8.00                     1,302                  7.26           8.00         870      8.00
  8.94 -- 12.00                  601                  8.43          10.59         228     11.13
 16.62 -- 52.75                  943                  8.22          35.60         429     36.72
 58.00 -- 58.25                   39                  8.09          58.22          24     58.23
     59.50                         5                  8.00          59.50           2     59.50
     63.13                        40                  8.07          63.13          10     63.13
                               -----                                            -----
                               5,774                  8.22          11.78       2,436     12.77
                               =====                                            =====
</Table>

STOCK OPTION CANCELLATION AND REGRANT PROGRAMS

     In February 2001, the Company offered the Stock Option Cancellation and
Regrant Program (the "Program"). The Program offered current Company employees
with stock options granted under the 1999

                                        58
<PAGE>

Plan the opportunity to tender certain unexercised options, with an exercise
price greater than or equal to $24.50 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 August 17,
2001 with a share exchange ratio ranging from one (1) to one point five (1.5)
cancelled option for each replacement option. The new options will have terms
and conditions that are substantially the same as those of the cancelled
options. The program, which expired on February 15, 2001, resulted in the
cancellation of 589,000 options at a weighted average exercise price of $37.02
per share and the grant of 425,000 options at $1.61 per share.

     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 a exercise price equal to the
closing price of the Company's Common Stock on the Nasdaq National Market on or
about 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 promise to grant
2,085,000 options. The new options will have terms and conditions that are
substantially the same as those of the cancelled options. The New Offer Program
is not expected to result in any additional compensation charges or variable
plan accounting.

1999 EMPLOYEE STOCK PURCHASE PLAN

     In June 1999, the 1999 Employee Stock Purchase Plan (the "Purchase Plan")
was adopted by the Board of Directors. The Purchase Plan became effective on the
date of the initial public offering. The Purchase Plan permits participants to
purchase Common Stock through payroll deductions of up to 15% of the
participant's compensation, up to a maximum aggregate deduction of $21,250 for
all offering periods ending in any calendar year. Each purchase period is six
months in duration and begins on February 1 and August 1. The price at which the
Common Stock is purchased under the Purchase Plan is 85% of the lesser of the
fair market value of the Company's Common Stock on the first day of the
applicable offering period or on the last day of that purchase period. A total
of 400,000 shares of Common Stock have been reserved for issuance pursuant to
the Purchase Plan. The amount reserved under the Plan will automatically
increase at the end of each year by the lesser of (1) 75,000 shares, (2) 0.3% of
outstanding shares on such date or (3) a lesser amount determined by the Board
of Directors. The Purchase Plan will terminate after a period of ten years
unless terminated earlier as permitted by the Purchase Plan. During the years
ended December 31, 2001 and 2000, a total of 98,000 and 39,000 shares have been
issued under the Purchase Plan, for an aggregate price of $454,000 and $645,000,
respectively. No shares were issued in 1999.

     Compensation cost (included in pro forma net loss and net loss per share
amounts) for the grant date fair value of the purchase rights granted under the
Purchase Plan was calculated using the Black-Scholes model. No shares were
granted in 1999. The following weighted average assumptions for 2001 and 2000
are included in the estimated grant date fair value calculations for rights to
purchase stock under the Company's Purchase Plan:

<Table>
<S>                                                             <C>
Expected lives, in years....................................     0.5
Risk free interest rates....................................    6.04%
Dividend yield..............................................    0.00%
Expected volatility.........................................     121%
</Table>

     The weighted average estimated grant date fair value, as defined by SFAS
No. 123, of rights to purchase stock under the Purchase Plan granted in 2001 and
2000 was $5.14 and $12.16 per share, respectively.

                                        59
<PAGE>

     Prior to the Company's initial public offering, the fair value of each
option grant was determined using the minimum value method prescribed by SFAS
No. 123. Subsequent to the offering, the fair value was determined using the
Black-Scholes model stipulated by SFAS No. 123. The effect of compensation cost
on net loss and net loss per share for the years ended December 31, 2001, 2000
and 1999 for the Option and Purchase Plans is as follows, (in thousands, except
per share amounts):

<Table>
<Caption>
                                                                 YEAR ENDED DECEMBER 31,
                                                            ---------------------------------
                                                              2001         2000        1999
                                                            ---------    --------    --------
<S>                                                         <C>          <C>         <C>
Net loss:
  As reported...........................................    $(114,539)   $(33,305)   $(18,224)
  Pro forma.............................................    $(130,726)   $(52,630)   $(18,772)
Basic and diluted net loss per share:
  As reported...........................................    $   (3.68)   $  (1.09)   $  (1.06)
  Pro forma.............................................    $   (4.20)   $  (1.73)   $  (1.09)
</Table>

401(K) PLAN

     Effective July 1996, the Company adopted the Wink Communications, Inc.
401(k) Profit Sharing Plan (the "401(k) Plan"), which qualifies as a deferred
salary arrangement under Section 401 of the Internal Revenue Service Code. Under
the 401(k) Plan, participating employees may defer a portion of their pretax
earnings not to exceed 15% of their total compensation. The Company, at its
discretion, may make contributions for the benefit of eligible employees. The
Company made no contributions through December 31, 2001.

NOTE 11 -- SUBSEQUENT EVENTS

     In February and March 2002, the Company amended agreements with three
related party distribution partners (see Note 4 -- Related Party Transactions).
Based on the terms of the amendments, the Company has decreased its obligation
related to revenue guarantees and system and launch fees. One distribution
partner will pay a net of $1,800,000 for certain software licenses and the
Company has committed to purchase $1,250,000 of advertising from the same
distribution partner in each of the years ending December 31, 2002 and 2003 (see
Note 4 -- Related Party Transactions). In connection with the amendments with
two of the distribution partners, the Company issued an aggregate of 2,000,000
shares of the Company's Common Stock. The fair value of the Common Stock, which
is $2,280,000, will be amortized to revenue sharing and launch fees ratably over
the remaining term of the respective agreements.

                                        60
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

     None

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this item concerning our directors is
incorporated by reference to the information set forth in the sections titled
"Election of Directors", "Directors' Compensation" and "Section 16(a) Beneficial
Ownership Compliance" in our proxy statement for the 2002 Annual Meeting of
Stockholders (the "Proxy Statement") to be filed with the Commission within 120
days after the end of our fiscal year ended December 31, 2001. Information with
respect to Executive Officers is included under the heading "Executive Officers
of the Registrant" in Part I herein after Item 4.

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this item is included under the captions
"Executive Officer Compensation" and "Report of the Compensation Committee of
the Board of Directors" in the Proxy Statement and is incorporated herein by
reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is included under the caption
"Beneficial Security Ownership of Stockholders, Directors, and Management and
Certain Beneficial Owners" in the Proxy Statement and is incorporated herein by
reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is included under the caption
"Certain Relationships and Related Transactions" in the Proxy Statement and is
incorporated herein by reference.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) Financial Statements and Schedules

     The financial statements as set forth under Item 8 of this report on Form
10-K are incorporated herein. Financial statement schedules have been omitted
since they are either not required, not applicable, or the information is
otherwise included.

     (b) Reports on Form 8-K

     No reports on Form 8-K were filed during the last quarter of fiscal 2001.

     (c) Exhibit Listing

<Table>
<Caption>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
 3.1      Second Amended and Restated Certificate of Incorporation of
          the Company.(1)
 3.2      Bylaws of the Company.(2)
 4.2      Fourth Investor Rights Agreement dated as of June 30, 1999
          between the Company and the individuals and entities listed
          in the exhibit thereto.(3)
 4.3      Consent and Amendment of Investor Rights Agreement and
          Co-Sale Agreement.
 4.4      Consent and Amendment of Investor Rights Agreement and
          Co-Sale Agreement.
 4.5      Consent and Amendment of Investor Rights Agreement and
          Co-Sale Agreement.
</Table>

                                        61
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
 4.6      Consent and Amendment of Investor Rights Agreement.
10.1*     Form of Indemnification Agreement between the Company and
          each of its officers and directors.(4)
10.2*     1994 Stock Plan and form of agreement hereunder.(4)
10.3*     1999 Stock Plan and form of agreement thereunder.(3)
10.4*     1999 Director Stock Option Plan and form of agreement
          thereunder.(3)
10.5*     1999 Employee Stock Purchase Plan and form of agreement
          thereunder.(3)
10.8      Equity Side Letter dated March 23, 1999 between the Company
          and CBS Corporation and warrant issued to CBS Corporation
          dated March 23, 1999.(4)
10.9      Letter Agreement dated June 3, 1997 between the Company and
          NBC Multimedia, Inc. dba NBC Interactive Media.(4)(+)
10.10     Cable Affiliation Agreement dated October 8, 1997 between
          the Company and Charter Communications, Inc., as amended on
          March 16, 1998 and March 12, 1999.(5)(+)
10.13     Master Affiliation Agreement dated December 22, 1998 between
          the Company and DIRECTV, Inc., as amended on December 22,
          1998.(5)(+)
10.14     Master Cable Affiliation Agreement dated September 23, 1998
          between the Company and Time Warner Cable.(5)(+)
10.16     Development and License Agreement dated January 15, 1996
          between the Company and Scientific-Atlanta, Inc., as amended
          on January 27, 1998.(4)
10.21     Development and License Agreement dated May 17, 1999 between
          the Company and Thomson Consumer Electronics, Inc.(4)
10.23     Letter Agreement dated September 10, 1998 between Company
          and General Electric Capital Corporation.(4)
10.24     Agreement dated January 1, 1999 between Company and
          Satellite Services, Inc.(4)
10.25     Master Service Agreement dated June 8, 1998 between the
          Company and Softbank Services Group.(4)
10.29     Agreement dated May 25, 1999 between the Company and
          Microsoft Corporation.(5)(+)
10.30     Sublease by and between Computer Associates International,
          Inc. and the Company dated November 28, 1995, as amended on
          March 21, 1996.(4)
10.32     Warrant issued to GE Capital Corporation dated June 18,
          1997.(4)
10.33     Amended and Restated Warrant issued to NBC Multimedia, Inc.
          dated June 18, 1997.(4)
10.35     Warrant issued to GE Capital Corporation dated August 27,
          1998.(4)
10.36     Warrant Issuance Agreement dated November 30, 1998 between
          the Company and Vulcan Ventures Incorporated and warrants
          issued to Vulcan Ventures Incorporated.(3)
10.38*    Restricted Stock Purchase Agreement dated December 2, 1996
          between the Company and Mary Agnes Wilderotter.(4)
10.39*    Restricted Stock Purchase Agreement dated January 15, 1998
          between the Company and Mary Agnes Wilderotter.(4)
10.41     Employment Letter from the Company to Mary Agnes Wilderotter
          dated October 21, 1996.*(4)
10.43     Second Amendment to Master Affiliation Agreement dated June
          28, 1999 between Company and DIRECTV, Inc.(3)(+)
10.44     Warrant issued to Microsoft Corporation dated May 30,
          1999.(3)
10.45     Information Services Agreement effective May 1, 1998 between
          the Company and GE Information Services, Inc.(5)(+)
10.47     Master Agreement with Echostar Satellite Corporation, May
          26, 2000.(+)
10.48     Common Stock Purchase Warrant.
10.49     Third Amendment to the Master Affiliation Agreement with
          DirecTV, July 24, 2000.(6)(+)
10.50     Fourth Amendment to the Master Affiliation Agreement with
          DirecTV, September 11, 2000.(6)(+)
10.51     Common Stock Purchase Warrant
10.52     Common Stock Purchase Warrant
</Table>

                                        62
<PAGE>

<Table>
<Caption>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<S>       <C>
10.53     Fifth Amendment to the Master Affiliation Agreement with
          DirecTV, December 22, 2000.(6)(+)
10.54     Sixth Amendment to the Master Affiliation Agreement with
          DirectTV, March 1, 2001.(6)(+)
10.55     Common Stock and Warrant Issuance Agreement.
21.1      List of Subsidiaries.
23.1      Consent of PricewaterhouseCoopers LLP.
</Table>

-------------------------

(1) Incorporated by reference to Exhibit 3.4 to the Company's Registration
    Statement No. 333-80221 on Form S-1/A dated July 29, 1999.

(2) Incorporated by reference to Exhibit 3.5 to the Company's Registration
    Statement No. 333-80221 on Form S-1/A dated July 29, 1999.

(3) Incorporated by reference to the Company's Registration Statement No.
    333-80221 on Form S-1/A dated July 29, 1999.

(4) Incorporated by reference to the Company's Registration Statement No.
    333-80221 on Form S-1 dated June 6, 1999.

(5) Incorporated by reference to the Company's Registration Statement No.
    333-80221 on Form S-1/A dated August 17, 1999.

(6) Incorporated by reference to the Company's Annual Report on Form 10-K for
    the fiscal year ended December 31, 2000, filed April 2, 2001, as amended
    April 5, 2001.

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

                                        63
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Form 10-K to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Alameda, State of California, on this 28 day of March 2002.

                                          WINK COMMUNICATIONS, INC.

                                              /s/ MARY AGNES WILDEROTTER
                                          By:
                                          --------------------------------------

                                                Name: Mary Agnes Wilderotter
                                            Title: President and Chief Executive
                                                           Officer

                               POWER OF ATTORNEY

     KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Mary Agnes Wilderotter and Timothy
Travaille, her or his attorneys-in-fact, with full power of substitution, for
him or her in any and all capacities, to sign any and all amendments to this
Form 10-K, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that said attorneys-in-fact or their substitute or
substitutes, may do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 28, 2002:

<Table>
<Caption>
                  SIGNATURE                                            TITLE
                  ---------                                            -----
<C>                                            <S>
         /s/ MARY AGNES WILDEROTTER            President and Chief Executive Officer; Director
---------------------------------------------  (principal executive officer)
           Mary Agnes Wilderotter

            /s/ TIMOTHY TRAVAILLE              Executive Vice President (principal accounting officer
---------------------------------------------  and principal financial officer)
              Timothy Travaille

           /s/ BRIAN P. DOUGHERTY              Chairman of the Board of Directors
---------------------------------------------
             Brian P. Dougherty

              /s/ JEFFREY COATS                Director
---------------------------------------------
                Jeffrey Coats

               /s/ TERRI DIAL                  Director
---------------------------------------------
                 Terri Dial

            /s/ BRUCE W. DUNLEVIE              Director
---------------------------------------------
              Bruce W. Dunlevie

               /s/ LAWTON FITT                 Director
---------------------------------------------
                 Lawton Fitt
</Table>

                                        64
<PAGE>

<Table>
<Caption>
                  SIGNATURE                                            TITLE
                  ---------                                            -----

<C>                                            <S>
              /s/ MICHAEL FUCHS                Director
---------------------------------------------
                Michael Fuchs

             /s/ F. PHILIP HANDY               Director
---------------------------------------------
               F. Philip Handy

             /s/ DONALD OHLMEYER               Director
---------------------------------------------
               Donald Ohlmeyer
</Table>

                                        65