**UNITED STATESSECURITIES AND EXCHANGE COMMISSION****WASHINGTON, D.C. 20549**

** **

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**FORM 10-Q/A**

**AMENDMENT NO. 1 TO**

 

 

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

 

**FOR THEQUARTERLY PERIOD ENDED MARCH 31, 2001**

 

 

**ACTV, INC.**(Exact name ofregistrant as specified in its charter)

 

 
| **DELAWARE**                              |   | **94-2907258**      |
|-------------------------------------------|--------|---------------------|
| (State or other  jurisdiction of          |   | (I.R.S. Employer    |
| incorporation or  organization)           |   | Identification No.) |
|                                      |   |                |
| **225  PARK AVENUE SOUTH**                |   |                |
| **NEW  YORK, NEW YORK**                   |   | **10003**           |
| (Address of principal  executive offices) |   | (Zip Code)          |

 

 

**(212)497-7000**(Registrant’stelephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reportsrequired to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of1934 during the preceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes ýNo o

 

                As of May 9, 2001, there were 56,126,581 shares ofthe registrant’s common stock outstanding.

 

 

The amendment No. 1 toForm 10-Q is being filed to give effect to the restatement of the Company'sconsolidated financial statements as discussed in Note 11 to the consolidatedfinancial statements.

**ITEM 1.  FINANCIAL STATEMENTS**

 

** **

**ACTV,INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS****(As Restated — See Note 11)**

 
|                                                                                                                                                     |   | **MARCH 31,  2001  (UNAUDITED)** |        | **DECEMBER 31,  2000** |       |
|----------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|-------------|------------------------|------------|
|                                                                                                                                                     |   |                             |        |                   |       |
| ASSETS                                                                                                                                                   |   |                             | ** **  |                   | ** ** |
|                                                                                                                                                     |   |                             | ** **  |                   | ** ** |
| Current assets:                                                                                                                                          |   |                             |        |                   |       |
| Cash and cash equivalents                                                                                                                                |   | $                                | 101,046,645 |                   | $          | 122,488,041 |   |
| Accounts receivable-net                                                                                                                                  |   | 3,550,704                        |        | 1,182,376              |       |
| Other                                                                                                                                                    |   | 2,687,322                        |        | 3,758,935              |       |
| Total current assets                                                                                                                                     |   | 107,284,671                      |        | 127,429,352            |       |
|                                                                                                                                                     |   |                             |        |                   |       |
| Property and equipment-net                                                                                                                               |   | 16,061,176                       |        | 12,628,232             |       |
|                                                                                                                                                     |   |                             |        |                   |       |
| Other assets:                                                                                                                                            |   |                             |        |                   |       |
| Restricted cash                                                                                                                                          |   | 4,322,400                        |        | 3,165,368              |       |
| Investment in warrant                                                                                                                                    |   | 8,548,566                        |        | 76,016,175             |       |
| Investments—other                                                                                                                                   |   | 3,250,000                        |        | 3,250,000              |       |
| Patents and patents pending                                                                                                                              |   | 8,086,759                        |        | 8,053,642              |       |
| Software development costs                                                                                                                               |   | 3,872,217                        |        | 3,328,101              |       |
| Goodwill                                                                                                                                                 |   | 27,143,580                       |        | 1,362,072              |       |
| Other                                                                                                                                                    |   | 1,000,686                        |        | 275,638                |       |
| Total other assets                                                                                                                                       |   | 56,224,208                       |        | 95,450,996             |       |
| Total assets                                                                                                                                             |   | $                                | 179,570,055 |                   | $          | 235,508,580 |   |
|                                                                                                                                                     |   |                             |        |                   |       |
| LIABILITIES AND  STOCKHOLDERS’ EQUITY                                                                                                               |   |                             |        |                   |       |
|                                                                                                                                                     |   |                             |        |                   |       |
| Current liabilities:                                                                                                                                     |   |                             |        |                   |       |
| Accounts payable and accrued expenses                                                                                                                    |   | $                                | 3,494,281   |                   | $          | 7,712,857 |   |
| Deferred revenue                                                                                                                                         |   | 3,885,442                        |        | 4,032,776              |       |
| Total current liabilities                                                                                                                                |   | 7,379,723                        |        | 11,745,633             |       |
|                                                                                                                                                     |   |                             |        |                   |       |
| Deferred revenue                                                                                                                                         |   | 69,681,497                       |        | 70,586,450             |       |
| Minority interest                                                                                                                                        |   | 12,612,521                       |        | 13,307,131             |       |
|                                                                                                                                                     |   |                             |        |                   |       |
| Stockholders’ equity:                                                                                                                               |   |                             |        |                   |       |
| Common stock, $0.10 par value, 200,000,000 shares authorized: issued  and outstanding 56,056,836 at March 31, 2001, and 51,228,154 at December 31,  2000 |   | 5,605,684                        |        | 5,122,816              |       |
| Additional paid-in capital                                                                                                                               |   | 325,690,676                      |        | 297,073,713            |       |
| Stockholder loans                                                                                                                                        |   | (607,696                         | )           | (643,606               | )          |
| Accumulated deficit                                                                                                                                      |   | (240,792,350                     | )           | (161,683,557           | )          |
| Total stockholders’ equity                                                                                                                          |   | 89,896,314                       |        | 139,869,366            |       |
| Total liabilities and stockholders’ equity                                                                                                          |   | $                                | 179,570,055 |                   | $          | 235,508,580 |   |

** **

** **

**SEENOTES TO CONSOLIDATED FINANCIAL STATEMENTS.**

 

1

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**ACTV,INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)**

**(As Restated—Note 11)**

 
|                                                                               |   | **THREE MONTHS  ENDED MARCH 31,** |        |
|------------------------------------------------------------------------------------|--------|-----------------------------------|-------------|
|                                                                               |   |                              |
|                                                                               |   | **2001**                          |        | **2000** |   |
|                                                                               |   |                              |        |   |   |   |   |
| Revenues                                                                           |   | $                                 | 3,273,442   |   | $ | 1,393,037 |   |
|                                                                               |   |                              |        |   |   |
|                                                                               |   |                              |        |   |   |
| Costs and expenses:                                                                |   |                              |        |   |   |
| Selling, general and administrative expenses                                       |   | 14,089,135                        |        | 6,888,181 |   |
| Stock-based  compensation expense/(income)                                         |   | 1,302,494                         |        | (39,582,207 | ) |
| Depreciation  and amortization                                                     |   | 1,419,522                         |        | 711,537 |   |
| Amortization  of goodwill                                                          |   | 418,498                           |        | 106,593 |   |
| Total  costs and expenses/(income)                                                 |   | 17,229,649                        |        | (31,875,896 | ) |
|                                                                               |   |                              |        |   |   |
| (Loss)  income from operations                                                     |   | (13,956,207                       | )           | 33,268,933 |   |
|                                                                               |   |                              |        |   |   |
| Interest  income                                                                   |   | 1,620,408                         |        | 1,167,879 |   |
| Interest  expense                                                                  |   | —                            |        | (261,305 | ) |
| Interest-net                                                                       |   | 1,620,408                         |        | 906,574 |   |
|                                                                               |   |                              |        |   |   |
| Other  expense                                                                     |   | 8,735,412                         |        | — |   |
|                                                                               |   |                              |        |   |   |
| (Loss)/income  before minority interest and cumulative effect of accounting change |   | (21,071,211                       | )           | 34,175,507 |   |
|                                                                               |   |                              |        |   |   |
| Minority  interest-subsidiaries                                                    |   | 694,615                           |        | 170,450 |   |
|                                                                               |   |                              |        |   |   |
| (Loss)/income  before cumulative effect of accounting change                       |   |                              | (20,376,596 | ) |   | 34,345,957 |   |
|                                                                               |   |                              |        |   |   |
| Cumulative  transition effect of adopting SFAS No. 133                             |   | (58,732,197                       | )           | — |   |
|                                                                               |   |                              |        |   |   |
| Net  (loss)/income                                                                 |   | $                                 | (79,108,793 | ) | $ | 34,345,957 |   |
|                                                                               |   |                              |        |   |   |   |   |
| Net  (loss)/income per share                                                       |   |                              |        |   |   |
| Basic                                                                              |   |                              |        |   |   |   |   |
| Before  cumulative effect of accounting change                                     |   | $                                 |  (0.39 | ) | $ | 0.76 |   |
| Cumulative  transition effect of adopting SFAS No. 133                             |   | (1.12                             | )           | — |   |
| Basic  net (loss)/income per share                                                 |   | $                                 |  (1.51 | ) | $ |  0.76 |   |
|                                                                               |   |                              |        |   |   |
| Diluted                                                                            |   |                              |        |   |   |
| Before  cumulative effect of accounting change                                     |   | $                                 |  (0.39 | ) | $ |  0.58 |   |
| Cumulative  transition effect of adopting SFAS No. 133                             |   | (1.12                             | )           | — |   |
| Diluted  net (loss)/income per share                                               |   | $                                 |  (1.51 | ) | $ |  0.58 |   |
|                                                                               |   |                              |        |   |   |
| Shares  used in basic calculations                                                 |   | 52,358,579                        |        | 45,215,172 |   |
|                                                                               |   |                              |        |   |   |
| Shares  used in diluted calculations                                               |   | 52,358,579                        |        | 58,913,757 |   |

 

**SEENOTES TO CONSOLIDATED FINANCIAL STATEMENTS.**

 

2

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**ACTV,INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)**

**(AsRestated—Note 11)**

 

 
|                                                                         |   | **THREE  MONTHS  ENDED MARCH 31,** |        |
|------------------------------------------------------------------------------|--------|------------------------------------|-------------|
|                                                                         |   | **2001**                           |        | **2000** | ** ** |
|                                                                         |   |                               |        |   |   |
| Cash flows from operating activities:                                        |   |                               |        |   |   |
| Net (loss)/income                                                            |   | $                                  | (79,108,793 | ) | $ | 34,345,957 |   |
| Adjustments to reconcile net (loss) /income  to net cash used in operations: |   |                               |        |   |   |
| Cumulative transition effect of adopting  SFAS No. 133                       |   | 58,732,197                         |        | — |   |
| Change in fair value of warrant                                              |   | 8,735,412                          |        |   |   |
| Depreciation and amortization                                                |   | 1,838,019                          |        | 818,130 |   |
| Amortization of deferred expenses related  to debt financing                 |   | —                             |        | 246,757 |   |
| Amortization of deferred revenue                                             |   | (904,953                           | )           | — |   |
| Deferred revenue                                                             |   | (147,334                           | )           | (70,150 | ) |
| Stock-based compensation                                                     |   | 1,302,494                          |        | (39,582,207 | ) |
| Common stock issued in lieu of cash payment                                  |   | 1,767,275                          |        | 68,219 |   |
| Minority interest                                                            |   | (694,615                           | )           | (170,450 | ) |
|                                                                         |   |                               | ** **  |   | ** ** |
| Changes in assets and liabilities:                                           |   |                               |        |   |   |
| Accounts receivable                                                          |   | (1,152,241                         | )           | (131,158 | ) |
| Other assets                                                                 |   | (995,571                           | )           | (729,066 | ) |
| Accounts payable and accrued expenses                                        |   | (4,914,100                         | )           | (417,374 | ) |
| Net cash used in operating activities                                        |   | (15,542,210                        | )           | (5,621,342 | ) |
|                                                                         |   |                               |        |   |   |
| Cash flows from investing activities:                                        |   |                               |        |   |   |
| Investment in patents                                                        |   | (182,357                           | )           | (68,268 | ) |
| Investment in property and equipment                                         |   | (3,804,775                         | )           | (560,422 | ) |
| Investment in software development costs                                     |   | (747,446                           | )           | (270,688 | ) |
| Strategic investments                                                        |   | (118,460                           | )      | — |   |
| Net cash used in investing activities                                        |   | (4,853,038                         | )           | (899,378 | ) |
|                                                                         |   |                               |        |   |   |
| Cash flows from financing activities:                                        |   |                               |        |   |   |
| Transfer to restricted cash                                                  |   | (1,157,030                         | )           | — |   |
| Net proceeds from equity financings                                          |   | 74,972                             |        | 150,256,379 |   |
| Repayment of stockholder loans                                               |   | 35,910                             |        | — |   |
| Net cash (used)/provided by financing activities                             |   | (1,046,148                         | )           | 150,256,379 |   |
|                                                                         |   |                               |        |   |   |
| Net (decrease) increase in cash and cash equivalents                         |   | (21,441,396                        | )           | 143,735,659 |   |
| Cash and cash equivalents, beginning of period                               |   | 122,488,041                        |        | 9,413,169 |   |
| Cash and cash equivalents, end of period                                     |   | $                                  | 101,046,645 |   | $ | 153,148,828 |   |

 

 

**SUPPLEMENTALDISCLOSURE TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS**

 

The following scheduleprovides additional information concerning acquisitions:

 
|                             |   | **FOR THE THREE  MONTHS ENDED  MARCH 31,2001** |
|----------------------------------|--------|------------------------------------------------|
| Purchase Acquisitions:           |   |                                           |
| Assets acquired (excluding cash) |   | $                                              | 2,089,608 |
| Liabilities assumed              |   | 2,695,524                                      |
| Market value of shares issued    |   | 27,475,090                                     |

** **

** **

**SEENOTES TO CONSOLIDATED FINANCIAL STATEMENTS.**

 

3

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**ACTV, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**

**(UNAUDITED)(As Restated—Note 11)**

 

 
|                                                                            |   | **COMMON  STOCK** |       | **STOCKHOLDER  LOAN** |            | **ADDITIONAL  PAID IN CAPITAL** |       | **ACCUMULATED  DEFICIT** |       | **TOTAL**   |              |
|---------------------------------------------------------------------------------|--------|-------------------|------------|-----------------------|-----------------|---------------------------------|------------|--------------------------|------------|-------------|-------------------|
| **SHARES**                                                                      |   | **AMOUNT**        |
| December 31, 2000                                                               |   | 51,228,154        |       | $                     | 5,122,816       |                            | $          | (643,606                 | )          | $           | 297,073,713       |   | $ | (161,683,557 | ) | $ | 139,869,366 |   |
|                                                                            |   |              |       |                  |            |                            |       |                     |       |        |              |   |   |
| Issuance of shares  in connection with exercise of stock options & warrants |   | 727,833           |       | 72,783                |            |                            |       | 2,189                    |       | —      |              | 74,972 |   |
|                                                                            |   |              |       |                  |            |                            |       |                     |       |        |              |   |   |
| Adjustment in  deferred stock compensation                                      |   |              | ** ** |                  | ** **      |                            |       | 1,302,494                | ** ** |        |              | 1,302,494 |   |
|                                                                            |   |              |       |                  |            |                            |       |                     |       |        |              |   |   |
| Issuance of shares for services                                                 |   | 92,960            |       | 9,296                 |            |                            |       | 237,979                  |       | —      |              | 247,275 |   |
|                                                                            |   |              |       |                  |            |                            |       |                     |       |        |              |   |   |
| Issuance of shares  in connection with acquisition                              |   | 4,007,889         |       | 400,789               | ** **      |                            |       | 27,074,301               |       | —      |              | 27,475,090 |   |
|                                                                            |   |              |       |                  |            |                            |       |                     |       |        |              |   |   |
| Repayment of  shareholder loans                                                 |   |              | ** ** |                  |            | 35,910                          | ** ** |                     | ** ** |        |              | 35,910 |   |
|                                                                            |   |              |       |                  |            |                            |       |                     |       |        |              |   |   |
| Net loss                                                                        |   | —            |       | —                | ** **      |                            |       | —                   |       | (79,108,793 | )                 | (79,108,793 | ) |
| Balance at March 31, 2001                                                       |   | 56,056,836        |       | $                     |  5,605,684 |                            | $          |  (607,696           | )          | $           |  325,690,676 |   | $ |  (240,792,350 | ) | $ |  89,896,314 |   |

 

 

**SEENOTES TO CONSOLIDATED FINANCIAL STATEMENTS.**

 

4

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**NOTESTO CONSOLIDATED FINANCIAL STATEMENTSTHREE MONTHS ENDED MARCH 31, 2001 AND 2000****(As Restated—Note 11)**

** **

**1.             BASIS OF PRESENTATION**

 

                The results of operations for the three months endedMarch 31, 2001 and 2000 are not necessarily indicative of a full year’soperations. In the opinion of management, the accompanying consolidatedfinancial statements include all adjustments of a normal recurring nature,which are necessary to present fairly such financial statements.

 

                All significant intercompany balances andtransactions have been eliminated in consolidation. Certain information andfootnote disclosures normally included in the financial statements prepared inaccordance with generally accepted accounting principles have been condensed oromitted.

 

                These consolidated financial statements should beread in conjunction with the audited financial statements and notes theretoincluded in our annual report on Form 10-K/A for the year ended December 31,2000.

 

                We consider all highly liquid debt instrumentspurchased with an original maturity of three months or less to be cashequivalents.

 

                Certain reclassifications have been made to the prioryears’ financial statements to conform to the 2001 presentation.

 

**2.             FINANCIAL INSTRUMENTS**

 

                Effective January 1, 2001, ACTVadopted Statement of Financial Accounting Standards No. 133, (“SFAS”)“Accounting for Derivative Instruments and Hedging Activities” (“SFAS 133”) asamended by SFAS 137 and 138. SFAS 133 requires that all derivative financialinstruments be recorded in the balance sheet at fair value. The provisions ofSFAS 133 affected the Company's accounting for its investment of 2.5 millionrestricted warrants for Liberty Livewire Corporation (“Livewire”). Prior to theadoption of SFAS 133, these warrants were carried at cost. With the adoption ofSFAS 133, the Livewire investment is recorded at fair value. This resulted inthe Company recording a cumulative effect transition adjustment loss of $58.7million at January 1, 2001. Beginning in the first quarter of 2001, the Companyrecords subsequent changes in the fair value of this investment in thestatement of operations.

 

                There may be periods withsignificant non-cash increases or decreases to the Company's net income/lossrelated to the changes in the fair value of the Livewire investment. Thecarrying value of the Company's derivative instrument approximates fair value.The fair value of the Livewire investment is determined by reference tounderlying market values resulting from trading of Livewire on a nationalsecurities exchange and on estimates using the Black-Scholes valuation model.

 

**3.             FINANCING ACTIVITIES**

 

                On February 3, 2000, the Company completed afollow-on offering of 4.6 million common shares, including 0.6 million commonshares to cover the over-allotments of our underwriters, Credit Suisse FirstBoston, Bear Stearns & Co. Inc., Lehman Brothers, and Salomon Smith Barney.The 4.6 million total common shares were priced to the public at $30 per share,for total gross proceeds of $138 million. We paid underwriting discounts andcommissions of $1.80 per share or $8.28 million, resulting in net proceeds of$28.20 per share, or $129.4 million.

 

                On March 27, 2000 Liberty Digital, Inc. invested anadditional $20 million in the Company, increasing its investment to 16% byexercising a warrant granted in March 1999.

 

**4.             MERGER AND ACQUISITION ACTIVITY**

 

**                ACQUISITION**

 

                On March 7, 2001, the Company acquired all of theassets and business of Intellocity, Inc., (“Intellocity”) a technology andengineering solutions provider focusing on the interactive television market.The Company acquired Intellocity for 4,007,890 shares of the Company’s commonstock, aggregating $23.2 million, and issued options to purchase 762,665 sharesof the Company’s common stock valued at $4.3 million, for an aggregate purchaseprice of $27.5 million. The Company could make an additional payment of up to1.5 million shares and options contingent upon Intellocity’s achieving certainperformance targets for the year ended December 31, 2001. Intellocityshareholders are subject to provisions restricting the sale of the ACTV stock;these restrictions, range over 4 years. The acquisition was accounted for underthe purchase method of accounting in the first quarter of 2001.

 

                The preliminary estimated fair value of assetsacquired and liabilities assumed at the transaction date, amounted to $0.6million. Goodwill representing the excess cost over the fair value of netassets acquired, was calculated to be $26.2 million and will be amortized over7 years. The Company is presently completing the review and determination ofsuch fair values. Accordingly, the allocation of the purchase price and the amount of goodwill are subject torevision, which if any, is not expected to be material.

 

                The following table presents thepro forma results of operations had the acquisition of Intellocity beencompleted as of January 1, 2000.  Thepro forma results are shown for illustrative purposes only and do not purportto be indicative of the results which would have been reported if the businesscombination had occurred on the date indicated or which may occur in thefuture.  These pro forma amounts includeestimates and assumptions that management believes  are reasonable.

 
|                                                                               |   | **For the  Three Months Ended** |   |
|------------------------------------------------------------------------------------|--------|---------------------------------|--------|
|                                                                               |   | **March 31,**                   |   |
|                                                                               |   | **2001**                        |   | **2000** |   |
| Revenues                                                                           |   | $4,489,730                      |   | $2,668,408 |   |
|                                                                               |   |                            |   |   |   |
| (Loss)/income before minority interest and  cumulative effect of accounting change |   | $(21,918,915                    | )      | $34,637,111 |   |
|                                                                               |   |                            |   |   |   |
| (Loss)/income before cumulative effect of  accounting change                       |   | $(21,224,300                    | )      | $34,807,561 |   |
|                                                                               |   |                            |   |   |   |
| Net(loss)/income                                                                   |   | $(79,956,497                    | )      | $34,807,561 |   |
|                                                                               |   |                            |   |   |   |
| Basic                                                                              |   |                            |   |   |   |
| (Loss)/income per share before cumulative  effect of accounting change             |   | (0.25                           | )      | 0.72 |   |
| Cumulative effect of accounting change                                             |   | $                               | (1.11  | ) | $ | — |   |
| Basic (loss)/income per share                                                      |   | $                               | (1.36  | ) | $ | 0.72 |   |
|                                                                               |   |                            |   |   |   |
| Diluted                                                                            |   |                            |   |   |   |
| (Loss)/income per share before cumulative  effect of accounting change             |   | (0.25                           | )      | 0.72 |   |
| Cumulative effect of accounting change                                             |   | $                               | (1.11  | ) | — |   |
| Diluted (loss)/income per share                                                    |   | $                               | (1.36  | ) | $ | 0.72 |   |

 

 

                On August 17, 2000, the Company acquired all of theoutstanding capital stock of Bottle Rocket, Inc. (“Bottle Rocket”) in exchangefor 272,035 shares of the Company’s common stock. Bottle Rocket creates onlineentertainment based on proprietary technology engines for trivia, prediction,simulation, arcade-style, and multi-player games. The acquisition of BottleRocket has been accounted for under the pooling of interests method ofaccounting and, accordingly, the Company’s historical consolidated financialstatements have been restated to include the accounts and results of operationsof Bottle Rocket.

 

5

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                The following table sets forth the certain combinedamounts of the previously reported separate results of the companies.

 

 

 
|                                                                               |   | **For the  Three Months Ended March 31, 2000** |   |
|------------------------------------------------------------------------------------|--------|------------------------------------------------|--------|
|                                                                               |   | **ACTV**                                       |   | **Bottle  Rocket** |   | **Combined** |   |
| Revenues                                                                           |   | 840,237                                        |   | 552,800 |   | 1,393,037 |   |
| Income/(loss)  before minority interest and cumulative effect of accounting change |   | 34,749,397                                     |   | (573,890 | ) | 34,175,507 |   |
|                                                                               |   |                                           |   |   |   |   |   |
| Net  income/(loss)                                                                 |   | 34,919,847                                     |   | (573,890 | ) | 34,345,957 |   |

 

 

**5.             MINORITY INTEREST**

 

                We record minority interest resulting from DigitalADCO. Digital ADCO was formed in November 1999 and co-founded by ACTV, Inc. andMotorola Broadband.  Digital ADCOdevelops applications for the delivery of addressable advertising.  Under the terms of our agreement withMotorola Broadband, we licensed five of our patents to Digital ADCO andMotorola Broadband licensed six of its patents and made a capital commitment toDigital ADCO. During August 2000, OpenTV made a capital contribution andcontributed patents on a non-exclusive basis to Digital ADCO. Additionally,Digital ADCO International is being formed to license and distribute productsand services outside of North America and other western hemisphere countries.Digital Adco, Inc.’s issued and outstanding shares of capital stock presentlyconsist of Class A common stock, having one vote per share, and Class B commonstock, having 25 votes per share. All of Digital Adco’s issued and outstandingshares are presently held by three investors. Open TV currently owns the issuedand outstanding Class A common shares. ACTV, Inc. and Motorola Broadband, theco-founders of Digital Adco, own the issued and outstanding Class B commonshares. ACTV, Inc. currently owns 45.9% of Digital ADCO, and exercise votingcontrol of the venture.

 

                For the three months ended March 31, 2001 and 2000,we allocated losses in the amount of $694,615 and $170,450, respectively fromDigital ADCO to Motorola Broadband and OpenTV.

 

6

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6**.             SEGMENT INFORMATION (As Restated—See Note 11)**

 

                We have two principal business segments, the DigitalTelevision segment and the Enhanced Media segment.

 

                Information concerning our business segments for thethree months ending March 31, 2001 and 2000 are as follows:

 
|                            |   | **FOR THE  THREE MONTHS  ENDED MARCH 31,** |        |
|---------------------------------|--------|--------------------------------------------|-------------|
|                            |   |                                       |
|                            |   | **2001**                                   | ** **  | **2000** | ** ** |
| REVENUES                        |   |                                       |        |   |   |
| Digital Television              |   | $                                          | 723,316     |   | $ | — |   |
| Enhanced Media                  |   | 2,550,126                                  |        | 1,393,037 |   |
| Total                           |   | $                                          | 3,273,442   |   | $ | 1,393,037 |   |
|                            |   |                                       |        |   |   |
| DEPRECIATION & AMORTIZATION |   |                                       |        |   |   |
| Digital Television              |   | $                                          | 689,001     |   | $ | 424,377 |   |
| Enhanced Media                  |   | 418,715                                    |        | 248,678 |   |
| Unallocated Corporate           |   | 730,304                                    |        | 145,075 |   |
| Total                           |   | $                                          | 1,838,020   |   | $ | 818,130 |   |
|                            |   |                                       |        |   |   |
| INTEREST INCOME (EXPENSE)       |   |                                       |        |   |   |
| Digital Television              |   | $                                          | 114,158     |   | $ | (249,882 | ) |
| Enhanced Media                  |   | 2,807                                      |        | 5,141 |   |
| Unallocated corporate           |   | 1,503,443                                  |        | 1,151,315 |   |
| Total                           |   | $                                          | 1,620,408   |   | $ | 906,574 |   |
|                            |   |                                       |        |   |   |
| NET (LOSS)/INCOME               |   |                                       |        |   |   |
| Digital Television              |   | $                                          | (1,832,434  | ) | $ | (1,784,361 | ) |
| Enhanced Media                  |   | (2,736,374                                 | )           | (2,582,901 | ) |
| Unallocated corporate           |   | (74,539,985                                | )           | 38,713,219 |   |
| Total                           |   | $                                          | (79,108,793 | ) | $ | 34,345,957 |   |
|                            |   |                                       |        |   |   |
| CAPITAL EXPENDITURES            |   |                                       |        |   |   |
| Digital Television              |   | $                                          | 1,882,375   |   | $ | 315,565 |   |
| Enhanced Media                  |   | 256,515                                    |        | 564,390 |   |
| Unallocated corporate           |   | 2,595,688                                  |        | 19,423 |   |
| Total                           |   | $                                          | 4,734,578   |   | $ | 899,378 |   |

 

 

 
| **BALANCE SHEET ACCOUNTS AS OF** |   | **MARCH  31,2001** |        | **DECEMBER  31, 2000** |       |
|----------------------------------|--------|--------------------|-------------|------------------------|------------|
| CURRENT ASSETS                   |   |               |        |                   |       |
| Digital Television               |   | $                  | 9,297,065   |                   | $          | 7,787,543 |   |
| Enhanced Media                   |   | 2,687,800          |        | 2,287,617              |       |
| Unallocated corporate            |   | 95,299,806         |        | 117,354,192            |       |
| Total                            |   | $                  | 107,284,671 |                   | $          | 127,429,352 |   |
|                             |   |               |        |                   |       |
|                             |   |               |        |                   |       |
| TOTAL ASSETS                     |   |               |        |                   |       |
| Digital Television               |   | 17,265,491         |        | $                      | 12,158,284 |   |
| Enhanced Media                   |   | 83,255,378         |        | 6,358,607              |       |
| Unallocated corporate            |   | 79,049,186         |        | 216*,*991,689          |       |
| Total                            |   | $                  | 179,570,055 |                   | $          | 235,508,580 |   |

 

7

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**7.             EXECUTIVE COMPENSATION**

 

                For the three months ended March 31, 2001 we incurredexecutive incentive compensation expense of $2,300,000. For the three monthsended March 31, 2000, we incurred no executive incentive compensation. Thisexpense is related to an executive incentive compensation provision, which isbased on changes in the market value of our common stock and is paid inunregistered securities. The future compensation to be recognized is contingenton continued employment of the executive and subject to forfeiture.

 

** **

**8.             INVESTMENT IN WARRANT**

 

                The Company and Liberty Livewire LLC, a unit ofLiberty Livewire Corporation (“Livewire”) (formerly known as Todd AOCorporation), entered into a joint marketing venture “HyperTV(R) with Livewire”on April 13, 2000. HyperTV with Livewire uses ACTV’s patented HyperTVconvergence technology to combine the emotive power of television with theinteractivity of the Internet, and provides turnkey convergence services,including application hosting, web authoring services, data management,e-commerce and other value-added services for advertisers, televisionprogrammers, studios and networks.

 

                The Company received a warrant (“Livewire Warrant”) toacquire 2,500,000 shares of Livewire at $30 per share in connection withentering into the joint marketing agreement. The warrant becomes exercisable atthe rate of 500,000 shares per year, commencing on April 13, 2001, includescertain registration rights, and may be exercised until March 31, 2015. Withcertain exceptions, the warrant is not transferable. The Company previously hasrecorded an investment and deferred revenue in the amount of $76,016,175, theestimated value of the warrant at April 13, 2000. The estimated fair value ofthe warrant was $8.6 million at March 31, 2001. The Company estimated the fairvalue of the warrant using the Black-Scholes pricing model with a risk freerate of 5.5%, a volatility of 139% and assuming no cash dividends. Theinvestment is now accounted for under SFAS No. 133 (See Note 2). The deferredincome recorded by the Company is being amortized into income over a period of21 years, the contractual term of the joint marketing venture.

 

**9.             NET (LOSS)/INCOME PER SHARE**

 

The following table sets forth thecomputation of basic and diluted (loss)/income per share:

 
|                                                         |   | **Three  Months Ended** |        |
|--------------------------------------------------------------|--------|-------------------------|-------------|
|                                                         |   | **March 31, 2001**      |        | **March 31, 2000** |   |
| Numerator:                                                   |   |                    |        |   |   |
| (Loss)/income before cumulative  effect of accounting change |   | $                       | (20,376,596 | ) | $ | 34,345,957 |   |
| Cumulative transition effect of  adopting SFAS No. 133       |   | (58,732,197             | )           | — |   |
| Net (loss)/income                                            |   | $                       | (79,108,793 | ) | $ | 34,345,957 |   |
|                                                         |   |                    |        |   |   |
| Denominator:                                                 |   |                    |        |   |   |
| Basic weighted-average shares  outstanding                   |   | 52,358,579              |        | 45,215,172 |   |
| Weighted-average options outstanding                         |   | —                  |        | 13,698,585 |   |
| Diluted weighted average shares  outstanding                 |   | 52,358,579              |        | 58,913,757 |   |
|                                                         |   |                    |        |   |   |
| Net (loss)/income per share                                  |   |                    |        |   |   |   |   |
| Basic                                                        |   |                    |        |   |   |
| Before cumulative effect of  accounting change               |   | $                       | (0.39       | ) | $ | 0.76 |   |
| Cumulative transition effect of  adopting SFAS No. 133       |   | (1.12                   | )           | — |   |
| Basic net (loss)/income per share                            |   | $                       | (1.51       | ) | $ | 0.76 |   |
| Diluted                                                      |   |                    |        |   |   |   |   |
| Before cumulative effect of  accounting change               |   | $                       | (0.39       | ) | $ | 0.58 |   |
| Cumulative transition effect of  adopting SFAS No. 133       |   | (1.12                   | )           | — |   |
| Diluted net (loss)/income per share                          |   | $                       | (1.51       | ) | $ | 0.58 |   |

 

**10.          SUPPLEMENTAL DISCLOSURE OF CASH ANDNON-CASH ACTIVITIES**

 

                For the three months ended March 30, 2000 we recordeda deferred expense of $1,520,000 for stock-based compensation.

 

                The Company recorded non-cash stock-based compensationexpense in connection with vested variable options of $1,302,494 for the threemonths ended March 31, 2001 and a reduction in stock-based compensation expensein the amount of $39,582,207 for the three months ended March 31, 2000.

 

                We also recorded revenue of $904,954 during thequarter ended March 31, 2001 relating to amortization of the deferred revenuerecorded in connection with the Liberty Livewire warrant (See Note 8).

 

8

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**11****.          Restatement**

 

**               **Subsequent to theissuance of the Company's 2000 consolidated financial statements, the Companydetermined that stock options granted to certain employees should be accountedfor as variable plan stock options.  Accordingly,the Company has restated its financial statements to reflect the application ofvariable stock option accounting to the affected stock option awards.  The changes resulted in the recording ofstock-based compensation expense of $1.3 million for the three months endedMarch 31, 2001 and a credit of $39.6 million of stock-based compensation forthe period ended March 31, 2000.

 

                In addition, subsequent to theissuance of the Company's 2001 first quarter 10-Q, the Company determined thatthe investment in Livewire qualified as a derivative under SFAS No. 133.Accordingly, the Company has restated its financial statements to reflect theadoption of SFAS No. 133 to the Livewire investment. The adoption resulted inthe recording of a cumulative transition adjustment of $58.7 million in the firstquarter of 2001 and additional expense of $8.7 million related to the change infair value of the underlying investment for the three month period ended March31, 2001. 

 

Asummary of the significant effects of the restatement is as follows:

 
|                                                             |   | **As  of March 31, 2001**                 |            |                 |       |
|------------------------------------------------------------------|--------|-------------------------------------------|-----------------|----------------------|------------|
|                                                             |   | **As  Previously  Reported**              |            | **As**Restated       |       |   |   |   |   |
| **Other  current assets**                                        |   | **$**                                     | **3,295,218**   | ** **           | **$**      | **2,687,322** | ** ** |   |   |   |   |   |   |
| **Investment  in warrant**                                       |   |                                      | **76,016,175**  |                 |       | **8,548,566** |   |   |   |   |   |   |   |
| **Stockholder  loans**                                           |   | **—**                                | ** **      | **(607,696**         | **)**      |   |   |   |   |
| **Additional  paid-in-capital**                                  |   | **300,920,042**                           | ** **      | **325,690,676**      | ** ** |   |   |   |   |
| **Accumulated  deficit**                                         |   | **(148,554,107**                          | **)**           | **(240,792,350**     | **)**      |   |   |   |   |
|                                                             |   |                                      | ** **      |                 | ** ** |   | ** ** |   | ** ** |
|                                                             |   | **For  the Three Months Ended March 31,** | ** **      |
|                                                             |   | **2001**                                  |            | **2000**             | ** ** |
|                                                             |   | **As Previously  Reported**               |            | **As**

**Restated** |       | **As Previously  Reported** |   | **As  Restated** |   |
| **Stock-based compensation**expense/(income)                     |   | **$**                                     | **—**      | ** **           | **$**      | **1,302,494** |   | **$** | **—** | ** ** | **$** | **(39,582,207** | **)** |
|                                                             |   |                                      |            |                 |       |   |   |   |   |
| **(Loss)/income  from operations**                               |   | **(12,653,713**                           | **)**           | **(13,956,207**      | **)**      | **(6,313,274** | **)** | **33,268,933** | ** ** |
| **Other income (expense)**                                       |   | **—**                                |            | **(8,735,412**       | **)**      | **—** |   | **—** |   |
| **(Loss)/income  before cumulative effect of accounting change** |   | **(10,338,690**                           | **)**           | **(20,376,596**      | **)**      | **(5,236,250** | **)** | **34,345,957** | ** ** |
| **Cumulative  transition effect of adopting SFAS No. 133**       |   | **—**                                |            | **(58,732,197**      | **)**      | **—** |   | **—** |   |
| **Net  (loss)income**                                            |   | **$**                                     | **(10,338,690** | **)**                | **$**      | **(79,108,793** | **)** | **$** | **`(5,236,250** | **)** | **$** | **34,345,957** | ** ** |
|                                                             |   |                                      |            |                 |       |   |   |   |   |
|                                                             |   |                                      |            |                 |       |   |   |   |   |
| **Net  (loss)/income per share:**                                |   |                                      |            |                 |       |   |   |   |   |
|                                                             |   |                                      |            |                 |       |   |   |   |   |
| **Basic**                                                        |   |                                      |            |                 |       |   |   |   |   |
| **Before  cumulative effect of accounting change**               |   | **$**                                     | **(0.20**       | **)**                | **$**      | **(0.39** | **)** | **$** | **(0.12** | **)** | **$** | **0.76** |   |
| **Cumulative  effect of adopting SFAS No. 133**             |   | **—**                                |            | **(1.12**            | **)**      | **—** |   | **—** |   |
| **Basic  net (loss)/income per share**                           |   | **$**                                     | **(0.20**       | **)**                | **$**      | **(1.51** | **)** | **$** | **(0.12** | **)** | **$** | **0.76** |   |
| **Diluted**                                                      |   |                                      |            |                 |       |   |   |   |   |
| **Before  cumulative effect of accounting change**               |   | **$**                                     | **(0.20**       | **)**                | **$**      | **(0.39** | **)** | **$** | **(0.12** | **)** | **$** | **0.58** |   |
| **Cumulative  effect of adopting SFAS No. 133**             |   | **—**                                |            | **(1.12**            | **)**      | **—** |   | **—** |   |
| **Diluted  net (loss)/income per share**                         |   | **$**                                     | **(0.20**       | **)**                | **$**      | **(1.51** | **)** | **$** | **(0.12** | **)** | **$** | **0.58** |   |

 

9

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**ITEM 2.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS**

 

**OVERVIEW**

 

                You should read the followingdiscussion together with our consolidated financial statements and relatednotes included elsewhere. The results discussed below are not necessarilyindicative of the results to be expected in any future periods. To the extentthat the information presented in this discussion addresses financialprojections, information or expectations about our products or markets orotherwise makes statements about future events, such statements are forward–lookingand are subject to a number of risks and uncertainties that could cause actualresults to differ materially from the statements made. See “Special NoteRegarding Forward–Looking Statements” for further information aboutforward–looking statements. Management’s Discussion and Analysis ofFinanicial Condition and Results of Operations presented gives effect to therestatement of our previously reported results of operations for theseperiods.  See Note 11 to theconsolidated financial statements for a discussion of this matter.

 

We are a digitalmedia company that provides technical and creative services, tools andproprietary applications for digital television and enhanced media. We have twooperating business segments, which we call Digital TV and Enhanced Media.

 

                We have developed a range of services, products andproprietary technologies for each of these business segments. ACTV’s Digital TVsegment provides applications and technical and creative services to televisiondistributors, advertisers, programmers and digital TV infrastructure companies,as they move from analog to digital systems. In addition, our Digital TV technologiesenable television programmers and advertisers to create individualizedprogramming for digital television transmission systems. We believe that thesetechnologies are unique in providing targeting, interactivity andaccountability for television commercials, and in giving viewers the ability toinstantly customize their viewing experiences for a wide variety of programmingapplications. Our Enhanced Media technologies allow both for the enhancement ofvideo and audio content, including standard TV programming, with Web-basedinformation and interactivity, and for the delivery of games through theInternet. For the Enhanced Media market, we provide technology and services forsynchronizing the delivery of television programming and Internet content.

 

We believe that the newapplications enabled by the expansion of digital TV transmission systems andTV/Internet convergence platforms will revolutionize television as we know itby turning passive viewing into an interactive experience. Digital and convergencetechnology will allow television distributors, advertisers and programmers tobring interactivity to a mass audience. We believe that our proprietarytechnologies, tools, applications, and ability to deliver technical andcreative services uniquely position us to capitalize on this anticipateddigital television revolution.

 

**RESULTSOF OPERATIONS**

 

**COMPARISONOF THREE-MONTH PERIODS ENDED MARCH 31, 2001 AND MARCH 31, 2000**

 

                *REVENUES*.During the three-month period ended March 31, 2001, our revenues increased135%, to $3,273,442, compared with $1,393,037 in the three-month period endedMarch 31. The increase is the result of higher sales of Enhanced Media softwareand services and sales of Digital TV software and technical and creativeservices. All of our revenues in the first quarter of 2000 were derived fromsales of Enhanced Media software and services.

 

                *TOTAL SELLING,GENERAL AND ADMINISTRATIVE EXPENSES*. Total selling, general andadministrative expenses increased approximately 10.5% in the first quarter of2001, to $14,089,135, from $6,888,181 in the first quarter of 2000. Theincrease was principally the result of increased sales, marketing, productdevelopment, staffing and facilities expense during the more recent quarter, aswe built the infrastructure to become a full-service digital media company.

 

                *STOCK-BASEDCOMPENSATION*.  Stock-basedcompensation expense was $1.3 million for the three months ended March 31, 2001compared with a credit to stock-based compensation expense of $39.6 million forthe three months ended March 31, 2000. The Company records a charge or credit to stock-based compensationexpense based on increases and decreases in the market value of the Company'scommon stock in excess of the exercise price of certain employee options, whichare subject to variable option accounting treatment.

 

10

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                *DEPRECIATION ANDAMORTIZATION.*Depreciation and amortization expense increased 125%in the first quarter of 2001, to $1,838,020, from $818,130 in the first quarterof 2000. The increase was due to higher amortization expense related to ourinvestment in software development, additional goodwill amortization arisingfrom the purchase of Intellocity and higher depreciation expense related to a largerbase of capital equipment and leasehold improvements.

 

*                OTHER INCOME/(EXPENSE).* Other income/(expense) is the change infair value of an investment in warrant which is now accounted for as aderivative instrument after adoption of SFAS No. 133 and the application of itsrequirements. For the three months ended March 31, 2001, the Company recorded adecrease in the value of the warrant of $8.7 million.

 

                *INTEREST(EXPENSE)/INCOME - NET.*Interest income in first quarter of 2001 was$1,620,408, compared with $1,167,879 in the first quarter of 2000. The increasewas the result of higher average cash balances during the more recent quarter.In February 2000, we raised approximately $129.4 million in net proceeds from apublic follow-on offering. We incurred no interest expense in the first quarterof 2001, compared to interest expense of $261,305 inthe first quarter of 2000. The interest expense forthe 2000 quarter relates to a $5 million original face value note redeemed inMay 2000, which was issued by a subsidiary of ours in January 1998.

 

                *CUMULATIVETRANSITION EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE*. EffectiveJanuary 1, 2001, ACTV adopted SFAS Statement No. 133, “Accounting forDerivative Instruments and Hedging Activities” (“SFAS 133”), as amended by SFAS137 and 138. SFAS 133 requires that all derivative financial instruments berecorded in the balance sheet at fair value. The  provisions of SFAS 133 affected the Company's accounting for itsinvestment of 2.5 million restricted warrants for Liberty Livewire Corporation(“Livewire”). Prior to the adoption of SFAS 133, these warrants were carried atcost. With the adoption of SFAS 133, the Livewire investment is recorded atfair value. This resulted in the Company recording a cumulative effect transitionadjustment loss of $58.7 million at January 1, 2001. There may be periods withsignificant non-cash increases or decreases to the Company's net income/loss asa result of the changes in fair value of the Livewire investment.

 

                *NET (LOSS)/INCOMEAPPLICABLE TO COMMON STOCKHOLDERS.*For the three months ended March31, 2001, our net loss applicable to common stockholders was $79,108,793 or$1.51 per basic and $1.51 per diluted share, compared to net income of$34,345,957 or $0.76 per basic and $0.58 per diluted share for the three monthsended March 31, 2000.

 

**LIQUIDITYAND CAPITAL RESOURCES**

** **

                Since our inception, we have notgenerated revenues sufficient to fund our operations, and have incurredoperating losses.  Through March 31,2001, we had an accumulated deficit of $240.8 million.  Our cash position on March 31, 2001 was$101.0 million, compared with $122.5 million on December 31, 2000.

 

*Net Cash Used In Operating Activities. *During the three monthperiod March 31, 2001, we used cash of $15.5 million for operations, comparedwith $5.6 million for the three months ended March 31, 2000.  The increase in net cash used by operatingactivities principally relates to higher operating losses and increased workingcapital uses.

 

*Net cash Used In Investing Activities and CapitalExpenditures.*  For thethree month period ended March 31, 2001, we used cash for investing activitiesof $4.9 million, compared with $0.9 million, for the three months ended March31, 2000.  The increase in cash used ininvesting activities is due in part to acquisitions of $3.8 million in propertyand equipment and increased capital expenditures for the development ofinteractive TV products.

 

*Net Cash (used in) Provided By Financing Activities.*  We have and continue to fund our cashrequirements from the net proceeds of a public, follow-on offering completed onFebruary 3, 2000.  Through a group ofunderwriters, we sold total of $4.6 million common shares, resulting in netproceeds of $129.4 million.  Inaddition, on March 27, 2000, Liberty Digital, Inc. invested an additional $20million in us by exercising a warrant granted in March 1999, and OpenTVinvested $10 million in our digital ADCO subsidiary.

** **

**IMPACTOF INFLATION**

 

                Inflation has not had any significant effect on theCompany’s operating costs.

 

**ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK**

 

                The Company's interest income is affected by changesin the general level of U.S. interest rates. Changes in U.S. interest rates could affect the interest earned on theCompany's cash equivalents and investments. Currently, changes in U.S. interest rates would not have a materialeffect on the interest earned on the Company's cash equivalents andinvestments.  A majority of these cashequivalents and investments earn a fixed rate of interest while the remainingportion earns interest at a variable rate. The Company does not anticipate that exposure to interest rate marketrisk will have a material impact on the Company due to the nature of theCompany's investments.

 

                During April 2000, the Company received a warrant toacquire 2,500,000 shares of Liberty Livewire Corporation("Livewire"), a publicly traded company.  The warrant becomes exercisable at the rate of 500,000 shares peryear, commencing on April 13, 2001, includes certain registration rights andmay be exercised until March 31, 2015. The warrant is not transferable, except in certain circumstances.  The Company previously estimated the valueof the warrant to be $76,016,175 at the date it was received, using the Black-Scholespricing model, with a risk free rate of 6.5%, a volatility of 80% and assumingno cash dividends.  The estimated fairvalue of the warrant at March 31, 2001 was approximately $8.5 million, usingsimilar assumptions.  As of January 1,2001 the change in fair value in the investment in warrant was recorded to thestatement of operations as the Company adopted SFAS No. 133.  The Company expects the value of the warrantto fluctuate based on the underlying stock price of Livewire.  The Company does not currently expect toexercise or register shares in the coming year.

 

                The Company records stock-based compensation expensebased on increases and decreases in the market price of the Company's commonstock above the exercise price of certain employee options, which are subjectto variable option accounting treatment. To the extent that the Company has a stock-based compensation obligationat the beginning of a given reporting period, the Company will recognize areduction in stock-based compensation expense related to unexercised variableoptions for that period based on a reduction of the market price for theCompany's stock at the end of the period. The obligation will increase as the market price for the Company'scommon stock increases at the end of a reporting period.  

 

** **

**PARTII. OTHER INFORMATION**

 

**ITEM1.                  LEGAL PROCEEDINGS**

 

                ACTV, Inc. and its wholly-owned subsidiary HyperTVNetworks, Inc. are co-plaintiffs in a civil action filed against The WaltDisney Co., ABC, Inc. and ESPN, Inc. in December, 2000, which action allegesthat the defendants' "Enhanced TV" system synchronizing a web siteapplication to ESPN *Sunday Night*and ABC *Monday Night Football*telecasts has infringed and is continuing to infringe certain of theplaintiffs' patents and that the defendants should be held liable to theplaintiffs for treble damages on account thereof as well as for plaintiffs'expenses and reasonable attorneys' fees. That action is continuing in the U.S. District Court, Southern Districtof New York.

 

**ITEM2.                  CHANGES IN SECURITIES**

 

                Not applicable

 

**ITEM3.                  DEFAULTS UPON SENIORSECURITIES**

 

                Not applicable.

 

**ITEM4.                  SUBMISSION OF MATTERSTO A VOTE OF STOCKHOLDERS**

 

                None.

 

**ITEM5.                  OTHER INFORMATION**

 

                None.

 

**ITEM6.                  EXHIBITS AND REPORTSON FORM 8-K**

 
| (a)    |   | Exhibits                                                                                                                      |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                          |
|   |   | 11            Computation of Net (loss)/income  per share - See Note 9 |
|   |   |                                                                                                                          |
| (b)    |   | Reports on Form  8-K:  None.                                                                                             |

 

11

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**SIGNATURES**

 

                Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 

**ACTV,INC.**Registrant

 

 

 
| Date:  | April 10, 2002 | /s/ David Reese                               |
|--------|----------------|-----------------------------------------------|
|   |           | David Reese                                   |
|   |           | Chairman, Chief  Executive Officer            |
|   |           | and Director                                  |
|   |           |                                          |
| Date:  | April 10, 2002 | /s/ Christopher C.  Cline                     |
|   |           | Christopher C. Cline                          |
|   |           | Chief Financial Officer                       |
|   |           | (principal financial  and accounting officer) |

 

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