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

                                  FORM 10-Q/A2

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

                For the quarterly period ended September 30, 1998

                                    ACTV, Inc
             (Exact name of registrant as specified in its charter)

Delaware                                                        94-2907258
(State or other jurisdiction of                              (I.R.S. Employer 
incorporation or organization)                              Identification No.)


1270 Avenue of the Americas
New York, New York                                                10020
(Address of principal executive offices)                        (Zip Code)


(212) 217-1600 (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class                        Name of exchange on which registered

Common Stock, Par Value $0.10              Boston Stock Exchange

Securities registered pursuant to Section 12 (g) of the Act:

Common Stock, par value $0.10 per share
                                             (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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___


As of November 18, 1998, there were 28,400,282 shares of the registrant's common
stock outstanding.


<PAGE>

Introductory Note

This amendment on Form 10-Q/A2 amends the Registrant's Quarterly Report on Form
10-Q/A filed by the Registrant on November 19, 1998 and is being filed to
reflect the restatement of the Registrant's Consolidated Financial Statements
(the "Restatement"). The Restatement reflects the presentation of Convertible
Preferred Stock of Subsidiary as minority interest outside of Consolidated
Shareholders' Equity (Deficiency), the recording of dividends and accretion of
this Preferred Stock as minority interest and the presentation of the Warrant
issued in January 1998 outside of Consolidated Shareholders' Equity
(Deficiency).


                                       2
<PAGE>

ACTV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
         ASSETS                                              December 31,        September 30,
                                                                     1997                 1998
                                                                                  (as restated)
                                                                                    (unaudited)
-----------------------------------------------------------------------------------------------
<S>                                                             <C>                  <C>         
Current Assets:
     Cash and cash equivalents.........................           $554,077            $7,077,854
     Accounts receivable-net...........................            303,044               578,841
     Education equipment inventory.....................            237,757               176,548
     Other.............................................            308,653               668,166
                                                              --------------        --------------
         Total current assets..........................          1,403,531             8,501,409

                                                              --------------        --------------
Property and equipment-net.............................          2,596,785             2,400,281
                                                              --------------        --------------
Other Assets:
     Patents and patents pending.......................            279,356               792,941
     Software development costs........................            669,852               989,252
     Goodwill..........................................          2,641,188             2,321,409
     Other.............................................            311,206               610,327
                                                              --------------        --------------
         Total other assets............................          3,901,602             4,713,929
                                                              --------------        --------------
              Total ...................................         $7,901,918           $15,615,619
                                                              ==============        ==============

         LIABILITIES AND
         SHAREHOLDERS' EQUITY (DEFICIENCY)

Current Liabilities:
     Accounts payable and accrued expenses..............         $1,882,159             $826,914
     Deferred stock appreciation rights.................                 --              455,251
     Preferred dividends payable........................            603,469              670,503
                                                               --------------       --------------
         Total current liabilities......................          2,485,628            1,952,668
     Long-Term Notes Payable                                             --            4,300,581

     Put warrant                                                                       1,371,624
     Preferred stock of a subsidiary, convertible into
       common shares of the parent, no par value, 436,000
       shares authorized: issued and outstanding  316,944 at
       December 31, 1997, 185,449 at September 30, 1998.          7,029,708            3,742,314
Shareholders' equity (deficiency):
     Preferred stock, $.10 par value, 1,000,000 shares
     authorized, issued and outstanding 86,200 at
     December 31, 1997, 72,600 at September 30, 1998....              8,620                7,260
     Common stock, $.10 par value, 65,000,000 shares
      authorized: issued and outstanding 14,614,611 at
      December 31, 1997, 26,210,003 at September 30, 1998         1,461,461            2,621,000
     Additional paid-in capital.........................         48,140,596           63,584,261
     Loans receivable from stock sales..................           (199,900)          (1,070,872)
     Accumulated deficit................................        (51,024,195)         (60,893,217)
                                                               --------------       --------------
         Total shareholders' equity (deficiency)........         (1,613,418)           4,248,432
                                                               --------------       --------------


                                       3
<PAGE>
<S>                                                             <C>                  <C>         

              Total.....................................         $7,901,918           15,615,619
                                                               ==============       ==============
</TABLE>

See Notes to Consolidated Financial Statements

                                       4
<PAGE>

ACTV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

<TABLE>
<CAPTION>
                                                Nine Month Periods             Three Month Periods
                                                Ended September 30,            Ended September 30,
                                               1997            1998            1997              1998
                                          (as restated)   (as restated)    (as restated)     (as restated)    
                                         --------------  ---------------  ---------------  ---------------
<S>                                         <C>              <C>             <C>              <C>       

Revenues:

   Sales revenues....................       $1,534,295       $1,058,560      $  191,440       $  301,900
                                         --------------  ---------------  ---------------  ---------------
      Total revenues.................        1,534,295        1,058,560         191,440          301,900

   Cost of Sales.....................          434,287          168,934          78,847           45,545
                                         --------------  ---------------  ---------------  ---------------
      Gross profit...................        1,100,008          889,626         112,593          256,355

Expenses:

   Operating expenses................          957,516        1,718,627         246,076          738,000
   Selling and administrative........        4,919,822        6,462,024       1,306,566        2,558,176
   Depreciation and amortization.....          150,210          810,984          51,722          296,721
   Amortization of goodwill..........          319,779          319,779         106,593          106,593
   Stock appreciation rights.........         (346,892)         455,251         (29,651)          58,972
                                         --------------  ---------------  ---------------  ---------------
     Total expense...................        6,000,435        9,766,665       1,681,306        3,758,462

   Interest (income).................         (103,239)        (105,398)        (11,156)         (40,077)
   Interest expense..................               --          718,220             --           254,243
                                         --------------  ---------------  ---------------  ---------------
      Interest expense (income) - net         (103,239)         612,822         (11,156)         214,166

   Minority interest - subsidiary
preferred stock dividends and
accretion............................        2,245,435          379,161         746,041          117,211
                                         --------------  ---------------  ---------------  ---------------
Net loss.............................       $7,042,623       $9,869,022      $2,303,598       $3,833,484
                                         ==============  ===============  ===============  ===============

Basic and diluted loss per common share           $.57             $.51            $.17             $.16
                                                 
Weighted average number of common                                                           
shares outstanding...................       12,338,339       19,309,832      13,171,584       23,422,018
</TABLE>


                              See Notes to Consolidated Financial Statements

                                       5
<PAGE>



ACTV, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>

                                                         Nine Month Periods                 Three Month Periods
                                                         Ended September 30,                 Ended September 30,
                                                       1997              1998              1997              1998
                                                   (as restated)                       (as restated)                    
                                                  ---------------   ---------------   ---------------   ---------------
<S>                                                 <C>               <C>               <C>               <C>         
Cash flows from operating activities:
Net loss.......................................     $(7,042,623)      $(9,869,022)      $(2,303,598)      $(3,833,484)
                                                  ---------------   ---------------   ---------------   ---------------
Adjustments to reconcile net loss to net 
cash used in operations:
     Depreciation and amortization.............         469,989         1,130,763           158,315           403,314
     Stock appreciation rights.................        (701,517)          455,251           (29,651)           58,972
     Amortization of warrants and deferred
       expenses related to debt financing......              --           178,451                --            36,377
     Notes issued in lieu of cash..............              --           494,618                --           175,694
     Common stock issued for services..........         165,000         2,016,023           150,000           870,971
     Common stock issued  or reserved for
     preferred dividends and accretions........       1,970,167            67,034           698,759            10,174
Changes in operating assets and liabilities:
     Accounts receivable.......................        (178,304)         (275,797)          272,641           202,072
     Education equipment inventory.............          (9,168)           61,209           (34,403)           28,171
     Other assets..............................        (185,189)         (327,329)          (38,286)          392,313
     Accounts payable and accrued expenses.....         (51,405)       (1,055,245)          (11,212)         (133,962)
                                                  ---------------   ---------------   ---------------   ---------------
              Net cash (used) in operating
              activities.......................      (5,563,050)       (7,124,044)       (1,137,435)       (1,789,388)
                                                  ---------------   ---------------   ---------------   ---------------
Cash flows from investing activities:
     Investment in patents pending.............              --          (534,561)               --          (307,160)
     Investment in property and equipment......      (1,404,482)         (360,180)       (1,181,215)         (127,494)
     Investment in systems.....................        (531,948)         (573,734)         (132,488)         (356,888)
                                                  ---------------   ---------------   ---------------   ---------------
     Net cash used in investing                                                        
     activities................................      (1,936,430)       (1,468,475)       (1,313,703)         (791,542)
                                                  ---------------   ---------------   ---------------   ---------------
Cash flows from financing activities:
     Net proceeds from debt issuance...........              --         3,318,080                --            11,890
     Net proceeds from Put Warrant ............              --         1,371,624                --                --
     Preferred stock dividends payable.........         275,269           312,137            47,284           107,047
     Redemption of preferred stock.............              --          (565,759)               --                --
     Proceeds from sale of common stock........       2,718,435        10,680,214         2,728,000         7,729,451
                                                  ---------------   ---------------   ---------------   ---------------
Net cash provided by (used in) financing           
activities.....................................       2,993,704        15,116,296         2,775,284         7,848,388
                                                  ---------------   ---------------   ---------------   ---------------
Net increase (decrease) in cash and cash                             
equivalents   .................................      (4,505,776)        6,523,777           324,146         5,267,458
     Cash and cash equivalents,                                                        
     beginning of period.......................       6,520,756           554,077         1,690,834         1,810,396
                                                  ---------------   ---------------   ---------------   ---------------

                                       6
<PAGE>
<S>                                                 <C>               <C>               <C>               <C>         
 
    Cash and cash equivalents,                                                        
     end of period.............................       2,014,980         7,077,854         2,014,980         7,077,854
                                                  ===============   ===============   ===============   ===============
</TABLE>

                                       7
<PAGE>
ACTV, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements for the Nine Months Ended September
30, 1998

1(a)   The consolidated financial statements are unaudited. In the opinion of
management, these consolidated financial statements reflect all normal,
recurring adjustments necessary for a fair presentation of the results for all
periods. The financial results for the interim periods presented are not
necessarily indicative of the results to be expected for either succeeding
quarters or the full fiscal year.

1(b)   Management of the Company believes that its current funds will enable the
Company to finance its operations for at least the next twelve months. Such
belief is based on assumptions that may not materialize, in which case the
Company may require additional capital to finance such operations during this
period. While the Company believes that it has adequate funds to launch its
planned Southwest Regional Network, it (i) may need additional funding to
operate the network at planned levels and (ii) will need additional funding to
launch networks in other regions. While the Company may engage an investment
bank for assistance in securing such financing, the Company has no commitments
from lenders or investors at this time and there is no assurance that it will be
able to raise the necessary capital to effect additional Regional Network
launches or to operate the Southwest Regional Network at planned levels.



2.     For a summary of significant accounting policies and additional financial
information, see the Company's Annual Report on Form 10-K/A2 for the year ended
December 31, 1997. The Company's policy is to capitalize the cost of computer
software production once technological feasibility is established upon
completion of a detailed program design or upon completion of a working model.
The Company's balance sheets at September 30, 1998 and December 31, 1997 reflect
capitalized software production costs of $989,252 and $669,852, respectively,
classified as a component of "Other" non-current assets.



3.     In January 1998, the Company's subsidiaries, ACTV Entertainment, Inc., 
(the "Issuer") and The Texas Individualized Television Network, Inc., a
wholly-owned subsidiary of the Issuer ("Texas Network"), entered into a Note
Purchase Agreement, dated as of January 13, 1998 (the "Agreement") with certain
private investors (the "Purchasers"). Pursuant to the Agreement, the Purchasers
purchased $5.0 million aggregate principal amount notes from the Issuer and
Texas Network. The notes bear interest at a rate of 13.0% per annum, payable
semi-annually, with principal repayment in one installment on June 30, 2003.
During the term of the note, the Issuer may, at its option, pay any four
semi-annual interest payments in kind rather than in cash, with an increase in
the rate applicable to such payments in kind to 13.75% per annum. The Note is
secured by the assets of the Texas Network, and is guaranteed by ACTV, Inc. The
Issuer elected to pay the semi-annual interest payment due September 30, 1998 in
kind rather than in cash.

       In connection with the purchase of such note, the Purchasers received on
January 14, 1998 a warrant (the "Warrant") which allows the holder to purchase
up to 17.5% of the fully-diluted shares of common stock of Texas Network or the
right, through July 14, 1999, to exchange the Warrant for such number of shares
of the Company's Common Stock, at the time of and giving effect to such
exchange, equal to

                                       8
<PAGE>
5.5% of the fully diluted number of shares of Common Stock outstanding, after
giving effect to the exercise or conversion of all then outstanding options,
warrants and other rights to purchase or acquire shares of Common Stock. After
five years from the date of issuance, the holder of the Warrant has the right to
put the Warrant to Texas Network for a value based on a multiple of its
operating income.

       For accounting purposes, the Company has allocated approximately $1.4
million to the value of the Warrant based on a valuation by an investment
banker. The Warrant is included outside of Consolidated Shareholders' Equity
(Deficiency) due to its cash put feature and is being amortized as additional
interest expense over the life of the Note.

4.     During 1996, the Company raised approximately $9.1 million in net 
proceeds from the private placement of 5% exchangeable preferred stock (the
"Exchangeable Preferred Stock") issued by its wholly owned subsidiary and
convertible into shares of the Company. The private placement agreement provided
for the Exchangeable Preferred Stock to be convertible into Common Stock of
ACTV, Inc., beginning January 1, 1997, at varying discounts to the market price
of Common Stock. After September 1, 1997, holders of the Exchangeable Preferred
Stock have been able to use the lesser of (i) the then current market price of
the Company's Common Stock, or (ii) an average market price during the month of
August 1997 as the price to which the discount is applied for conversions. In
addition, the Company has the right to redeem the Exchangeable Preferred Stock
at a price equal to $25 times the number of shares being purchased, plus accrued
and unpaid dividends (the "Redemption Price"). This right may be exercised by
the Company if the closing price of the Company's Common Stock is above $9.00
for thirty consecutive trading days prior to redemption.

     The Exchangeable Preferred Stock is convertible into shares of common
stock at a discounted conversion price. The extent of the beneficial conversion
feature was approximately $4.0 million, representing the maximum difference
between the discounted conversion price and the prevailing market price of the
Common Stock. A preferred stock accretion of $2,245,000 was recorded and
included as minority interest for the nine months ended September 30, 1997.

       In November 1998, the holders of approximately 179,000 of the remaining
approximately 184,000 shares of Exchangeable Preferred Stock surrendered all of
their Exchangeable Preferred shares against receipt of a new ACTV, Inc. Series B
10% Convertible Preferred Stock (the "Series B Preferred") with a face value of
$5,017,000 and shares of Common Stock. In addition, the holders received
warrants to purchase approximately 1.94 million shares of Common Stock at $2.00
per share. Management believes that the total value received in Common Stock and
Series B Preferred by the holders was approximately equal to, but no greater
than, the fair value of the Exchangeable Preferred Shares surrendered by such
holders on the date of the transaction. 


                                       9
<PAGE>

       The Series B Preferred is fully redeemable by the Company at any time at
a 10% premium above face value plus accrued dividends. The holders of Series B
Preferred are prohibited from converting any shares into Common Stock during the
period from the present through November 13, 1999, whether or not the Company
gives a notice of redemption during this period. Unlike the Exchangeable
Preferred Stock, which is exchangeable at varying prices based on market
conditions, the Series B Preferred shares are convertible at a fixed price,
subject to a single adjustment. From November 13, 1999 to February 13, 2000, the
Series B Preferred is convertible at a price of $2.00 per share. If the Series B
Preferred is not redeemed by February 13, 2000, its conversion price will be
adjusted to a fixed price of $1.33 per share for the remainder of its life.

The Company has the right to redeem the warrants in full at a price of $.01 per
warrant share in the event that the Company's Common Stock trades at or above an
average of $4.50 per share during a period of 20 consecutive trading days.

5.     The Company's balance sheets at September 30, 1998 and December 31, 1997
reflect a contra shareholders' equity (deficiency) amount of $1,070,872 and
$199,900, respectively, related to (a) a loan made by the Company to an employee
in August 1995 (September 30, 1998 and December 31, 1997 balance of $199,900)
and (b) loans made to four employees in the first nine months of 1998 (September
30, 1998 balance of $870,972). All of the loans were non-interest bearing and
made to enable the employees to purchase the Company's common stock by
exercising options. The loans have due dates that correspond to the respective
expiration dates of the options exercised. Pursuant to the employment contracts
of the employees to whom the 1998 loans were made, each loan may be forgiven if
the respective employee remains employed by the Company on January 1, 1999.
Therefore, the Company is recognizing compensation expense for the total amount
of each 1998 loan on a pro-rata basis over the employee's service period, which
is from the issuance of the loan to January 1, 1999. Such compensation expense
recorded for the nine months ended September 30, 1998 was $1,474,581.

6.     The consolidated balance sheet at September 30, 1998, reflects non-cash
activity during the six month period ended September 30, 1998, that relates to
the option exercises and resulting non-recourse loan transactions described in
Note 5 above: an increase in notes receivable from stock sales of $870,972 (net
of compensation expense of $1,474,581 and an increase in common stock and
additional paid-in capital of a total of $2,345,553. The Company made no cash
payments of interest or income taxes during the three and nine month periods
ended September 30, 1997, or September 30, 1998.

7.     Subsequent to the issuance of the Company's 1996 and 1997 financial
statements, management determined that the Company's consolidated financial
statements for years 1996 and 1997, should be restated as explained in the
following paragraphs.

                                       10
<PAGE>

The significant effects of the restatement are to present Convertible Preferred
Stock of the Subsidiary as minority interest outside of Consolidated
Shareholders' Equity (Deficiency), to record the dividends and accretion of this
Preferred Stock as minority interest and to present the Warrant issued in
January 1998 (see Note 4) outside of Consolidated Shareholders' Equity
(Deficiency) due to its cash put feature.


                                       11
<PAGE>



<TABLE>
<CAPTION>

                                       Nine Months Ended September 30,
--------------------------------------------------------------------------------------------------------------------------
                                                      1997                                          1998
                                     ----------------------------------------     ----------------------------------------
                                       As Previously                                As Previously
                                       Reported                As Restated          Reported                 As Restated
                                     ----------------        ----------------     -----------------        ---------------
<S>                                    <C>                     <C>                  <C>                      <C>       
Minority Interest - Subsidiary
Preferred stock dividends and
Accretion                              $        -              $2,245,435           $        -               $  379,161
                                     ----------------        ----------------     -----------------        ---------------

Net Loss                               $4,797,188              $7,042,623           $9,489,861               $9,869,022
                                     ----------------        ----------------     -----------------        ---------------


-----------------------------------------------------------
                                         Three Months Ended September 30,
--------------------------------------------------------------------------------------------------------------------------
                                                      1997                                          1998
                                     ----------------------------------------     ----------------------------------------
                                       As Previously                                As Previously
                                       Reported                 As Restated         Reported                 As Restated
                                     ----------------        ----------------     -----------------        ---------------
Minority Interest - Subsidiary
Preferred stock dividends and
Accretion                              $        -              $  746,041           $        -               $  117,211
                                     ----------------        ----------------     -----------------        ---------------

Net Loss                               $1,557,557              $2,303,598           $3,716,273               $3,833,484
                                     ----------------        ----------------     -----------------        ---------------


                                                  September 30,
--------------------------------------------------------------------------------------------------------------------------
                                                      1998
                                     ----------------------------------------
                                       As Previously
                                       Reported                 As Restated
                                     ----------------        ----------------
Convertible preferred stock
of subsidiary                          $        -              $3,742,314
                                     ----------------        ----------------

Put Warrant                            $        -              $1,371,624
                                     ----------------        ----------------

Shareholders' equity
(deficiency)                           $9,362,370              $4,248,432
                                     ----------------        ----------------

The restatement had no effect on revenues, total assets and net loss per basic and diluted common share.
</TABLE>



                                       12
<PAGE>

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

INTRODUCTORY NOTE

       This amendment on Form 10-Q/A2 amends the Registrant's Quarterly Report
on Form 10-Q/A filed by the Registrant on November 19, 1998 and is being filed
to reflect the restatement of the Registrant's Consolidated Financial Statements
(the "Restatement"). The Restatement reflects the presentation of Convertible
Preferred Stock of Subsidiary as minority interest outside of Consolidated
Shareholders' Equity (Deficiency), the recording of dividends and accretion of
this Preferred Stock as minority interest and the presentation of the Warrant
issued in January 1998 outside of Consolidated Shareholders' Equity
(Deficiency).

THE COMPANY

       To the extent that the information presented in this Form 10-Q discusses
financial projections, information or expectations about the Company's products
or markets, or otherwise makes statements about future events, such statements
are forward-looking and are subject to a number of risks and uncertainties that
could cause actual results to differ materially from the statements made. These
include, among others, the successful and timely development and acceptance of
new products and markets and the availability of sufficient funding to effect
such product and/or market development.

       ACTV, Inc., including its two principal wholly-owned subsidiaries, ACTV
Entertainment, Inc. and ACTV Net, Inc. ("the Company") has developed proprietary
technologies for individualized television programming ("Individualized
Programming" or "Individualized Television") and for the Internet. For
television, the Company's products, in general, are tools for the creation of
programming that allows viewer participation. For the Internet, the Company uses
a proprietary software technology, called HyperTV, to create virtual communities
around state-of-the-art educational and entertainment programming. The chief
market presently targeted by the Company for its Individualized Programming is
in-home entertainment, particularly sports programming, while the first market
application of HyperTV is in education, with an emphasis on schools and
universities in the United States.

       The Company's Individualized Programming for television gives the viewer
the ability to make instant and seamless changes within the live or pre-recorded
television programming being viewed. Individualized Programming is a multi-path
broadcast of several elements of programming material, such as instant replay,
isolation cameras, statistical data, or additional features. There is no limit
to the number of viewers who can interact simultaneously with a program enhanced
with the Company's Individualized Programming ("ACTV Program" or "ACTV
Programming").

       HyperTV is a patented Java-based software technology that permits the
simultaneous delivery of streamed video and Web URLs directly to users. (Java is
a programming language developed for the Internet by Sun Microsystems.) HyperTV
enables the practical convergence of video and Web technologies. For education
applications, the Company has developed eSchool Online(TM), which uses HyperTV
technology to create virtual learning communities that seamlessly integrate
streamed


                                       13
<PAGE>

educational video, relevant Web content, and collaboration and assessment
resources for students and educators.

       Since its inception, the Company has incurred operating losses
approximating $60.9 million related directly to the development and marketing of
the Individualized Programming and HyperTV.

       The Company is seeking to exploit the U.S. entertainment market on both a
regional and national basis. The Company is launching regionally based,
Individualized Television networks ("Regional Networks"), with programming
provided through the Company's strategic alliance with FOX Sports Net. The
Company has the rights to license FOX Sports Net programming from each of FOX
Sports Net's regional sports affiliates and to offer enhanced FOX Sports Net
programming to any distributor that carries the corresponding regional FOX
Sports Net channel. The FOX Sports Net agreement extends through June 2003.

       The Company's national Individualized Programming will initially be done
through a joint venture formed in September 1998 with Liberty Media Corporation,
called LMC IATV Events, LLC. ("LMC IATV"). LMC IATV, through an exclusive
license from the Company, has the right to produce and distribute Individualized
Programming consisting of major events. As consideration for granting such a
license, the Company received a fixed one-third equity interest in the joint
venture, with no obligations to make additional capital contributions.

       FOX Sports Net is a service of "National Sports Partners," a joint
venture between Cablevision's Rainbow Media Holdings, Inc. and FOX/Liberty
Networks, which is a 50/50 partnership between News Corp. and
Tele-Communications Inc.'s Liberty Media Corporation. Equally owned by
FOX/Liberty Networks and Cablevision's Rainbow Media Holdings, Inc., the venture
now reaches more than 58 million homes nationwide.

       The Company plans to develop Regional Networks in regions served by Fox
Sports Net, with distribution to be provided by cable operators that are
currently upgrading their service from analog to digital transmission.
Initially, the Regional Networks will feature sports programming The Company
believes that the differentiation afforded by the Company's Individualized
Programming will allow distributors to offer their customers a unique
programming service that will enhance their customer's acceptance of digital
television.

       The Company plans to launch its first Regional Network in 1999 in the
region served by FOX Sports Southwest (the "Southwest Regional Network"). FOX
Sports Southwest distributes programming to more than 5 million households in
Texas, Louisiana, Arkansas, Oklahoma and nine New Mexico counties. The Southwest
Regional Network will feature individualized telecasts of professional
basketball (Houston Rockets, Dallas Mavericks, San Antonio Spurs), hockey
(Dallas Stars), and baseball (Texas Rangers, Houston Astros), along with college
sports events from the Southeastern, Southland and Western Athletic conferences.

       The Company has entered into an agreement with Tele-Communications Inc.
("TCI") under which TCI will distribute and market the Southwest Regional
Network to its digital subscribers in Texas. The agreement also contemplates
potential nationwide distribution by TCI of the Company's regional sports
networks.

                                       14
<PAGE>

       The Company also plans to launch additional individualized networks in
regions served by FOX Sports Net. The planned Regional Networks will feature FOX
Sports Net regional programming enhanced by the Company's Individualized
Programming. The Company will be responsible for the incremental content,
transmission, delivery and master control costs incurred in connection with the
product enhancement of the Individualized Programming to be presented through
its Regional Networks.

       In September 1998, Liberty Media Corporation invested $5 million in
Common Stock of the Company (the "Common Stock"), with an option to invest an
additional $5 million. Simultaneous with this strategic investment, as noted
above, the Company and Liberty Media Corporation created a joint venture, LMC
IATV Events, LLC, to explore national applications of Individualized Programming
for major events.

       In August 1997, General Instrument Corp. ("GI") invested $1 million in
Common Stock and agreed to market, jointly with the Company, Individualized
Programming applications. GI is the leading supplier of digital television
headend systems and digital set-top terminals. The Company and GI had previously
announced that the Company's Individualized Programming would be incorporated
into GI's new MPEG-2 digital set-top cable and wireless terminals.

       It is the Company's belief that it has adequate funding to launch the
Southwest Regional Network in 1999. However, there is no assurance that it will
secure the funding necessary to effect additional launches in other regions, or
that other factors might not delay or prohibit the successful implementation of
the Company's Regional Network strategy.

       The projected Southwest Regional Network, additional network expansion,
and planned activities of LMC IATV Events, LLC are part of the Company's plan to
develop the entertainment division of its business. There can be no assurance
that the Southwest Regional Network, other Regional Networks, if launched, or
LMC IATV Events, LLC will generate significant revenues for the Company.

       The Company's target markets for HyperTV are K-12 classrooms,
universities, distance learning programs, corporate training programs and
consumer homes. eSchool consists of a suite of integrated software products,
including content creation software, student and teacher user software, and
database assessment software. In addition, the Company provides Internet content
development assistance, hosting of eSchool programs on its computer servers, and
consulting to schools and universities.

       To date, nearly all of the Company's revenues have been derived from
sales to the education market. There is no assurance that the Company will be
able to successfully compete in this market, where many of its current and
potential competitors are companies with significantly greater resources than
those of the Company.

                                       15
<PAGE>

RESULTS OF OPERATIONS

Comparison of Nine Month Periods Ended September 30, 1998 and September 30, 1997

       During the nine month period ended September 30, 1998, the Company's
revenues decreased 31% to $1,058,560, from $1,534,295 in the nine month period
ended September 30, 1997. Nearly all of the Company's revenues in the more
recent nine-month period were derived from Internet sales, compared to the
comparable 1997 nine-month period, when the majority of revenues were related to
television-based education hardware and content.

       Cost of sales in the nine months ended September 30, 1998, was $168,934,
a decrease of 61% compared to cost of sales of $434,287 in the nine months ended
September 30, 1997. The Company's gross margin increased to 84% in the more
recent period, from 72% in the corresponding 1997 period. The increase was the
result of the change in the composition of products sold during the nine months
ended September 30, 1998, as noted above, in favor of Internet products and
services, which carry a higher profit margin than the Company's television-based
education revenue sources.

       Total expenses excluding cost of sales, interest expense and minority
interest - preferred stock dividends and accretion in the nine months ended
September 30, 1998, increased 63%, to $9,766,665, from $6,000,435 in the
comparable period in 1997. The increase was due to (i) higher operating and
selling and administrative expenses associated with the Southwest Regional
Network; (ii) higher depreciation and amortization expenses; and (iii) higher
stock appreciation rights expenses, the result of an increase in the market
price of the Company's common stock.

       Depreciation and amortization expense for the nine months ended September
30, 1998, increased 440% to $810,984, from $150,210 for the nine months ended
September 30, 1997. This increase was due principally to higher depreciation
expenses related to the Southwest Regional Network's master control production
facility and to the amortization of software development costs in the more
recent period.

       Interest income in the nine months ended September 30, 1998, was
$105,398, compared with $103,239 in the nine months ended September 30, 1997.
The increase was due to higher average cash balances during the more recent
period. The Company incurred interest expense and accretions of $718,220 in the
nine months ended September 30, 1998, compared to no interest expense during the
comparable 1997 period. Interest expense is related to the $5 million principal
value notes issued in January 1998 by a subsidiary of the Company. The Company
chose to pay the interest due June 30, 1998 in kind rather than in cash.

       For the nine-month periods ending September 30, 1998 and September 30,
1997, the Company accrued $379,161 for dividends and $2,245,435 for dividends
and accretions, respectively, related to its outstanding preferred stock, which
was accounted for as minority interest..

       For the nine months ended September 30, 1998, the Company's net loss was
$9,869,022, or $.51 per basic and diluted share, an increase of 40% over the net
loss of $7,042,623, or $.57 per basic and diluted share, incurred in the prior
year's comparable period. The increase during the more recent nine-month period
was the result of higher 

                                       16
<PAGE>

overall expenses, led by higher stock appreciation rights and depreciation and
amortization expenses, coupled with lower total revenues.

Comparison of Nine Month Periods Ended September 30, 1997 and September 30, 1996

       During the nine month period ended September 30, 1997, the Company's
revenues increased 39% to $1,534,295 from $1,105,816 in the nine-month period
ended September 30, 1996. All revenues in the nine-month period ended September
30, 1997 were derived from the education market, while in the 1996 nine-month
period, the Company's revenues were derived from education sales as well as from
license and executive producer fees. The revenue increase in the more recent
period was the result of significantly higher sales of distance learning
products and services, including the Company's first revenues from its new
Internet software product.

       Cost of sales in the nine months ended September 30, 1997, decreased 10%
to $434,287, compared with cost of sales of $480,321 in the nine months ended
September 30, 1996. The Company's gross profit increased to 72% in the more
recent period, from 57% in the corresponding 1996 period. The increase was due
to a greater proportion of total revenues from higher margin products such as
programs and software fees during the more recent period. In addition, the
Company recorded no executive production fee revenues in the more recent period,
unlike the 1996 period in which these lower margin services were a component of
total revenues.

       Total expenses excluding cost of sales, interest expense and minority
interest - preferred stock dividends and accretion in the nine months ended
September 30, 1997, decreased 8% to $6,000,435, from $6,542,210 in the
comparable period in 1996. The decrease was due to lower operating,
amortization, and stock appreciation rights expenses, which more than offset
moderately higher selling and administrative costs during the 1997 period.

       Depreciation and amortization expense for the nine months ended September
30, 1997, decreased 31% to $469,989, from $682,342 for the nine months ended
September 30, 1996. This decrease was due to the recognition during the 1996
period of amortization expense for certain programming assets that were fully
amortized during 1996.

       Interest income in the nine months ended September 30, 1997, increased
55% to $103,239, compared with $66,403 in the nine months ended September 30,
1996. The increase was due to higher average cash balances during the more
recent period. The Company incurred no interest expense during either nine-month
period.

       For the nine-month periods ending September 30, 1997 and September 30,
1996, the Company accrued $2,245,435 and $528,493, respectively, for dividends
and accretions, related to its outstanding preferred stock, which was accounted
for as minority interest..

       The Company's net loss for the nine months ended September 30, 1997
increased 10% to $7,042,623, or $.57 per basic and diluted share, compared with
the net loss of $6,378,805, or $.54 per basic and diluted share, incurred in the
prior year's comparable period. The increase was the result principally of
significantly higher dividends and accretions related to the Company's preferred
stock in the more recent period, which more than 


                                       17
<PAGE>

offset greater total revenues and higher gross profit during the nine months
ended September 30, 1997.

Comparison of Three Month Periods Ended September 30, 1998 and September 30,
1997

       During the three month period ended September 30, 1998 ("Third Quarter
1998"), the Company's revenues increase approximately 58%, to $301,900, from
$191,440 in the three month period ended September 30, 1997 ("Third Quarter
1997"). In the more recent quarter, all of the Company's revenues derived from
Internet sales, while in Third Quarter 1997 the Company recorded revenues from
both Internet sales and from television-based education hardware and content.

       Cost of sales in Third Quarter 1998 was $45,545, compared to Third
Quarter 1997's cost of sales of $78,847. The Company's gross margin increased to
85% in the more recent quarter, from 59% in the corresponding 1997 quarter. The
Company's Internet products have higher gross margins than those of
television-based education hardware and content.

       Total expenses excluding cost of sales, interest expense and minority
interest - preferred stock dividends and accretion increased approximately 124%
in Third Quarter 1998, to $3,758,462, from $1,681,306 in Third Quarter 1997. The
increase was due principally to higher operating, selling and administrative
expenses and depreciation and amortization expense in the more recent period.
The increase in depreciation, amortization, operating, selling and
administrative expenses was principally attributable to the Company's Southwest
Regional Network.

       Depreciation and amortization expense increased 474% in Third Quarter
1998 to $296,721, from $51,722 in Third Quarter 1997. This increase was due
principally to higher depreciation expenses related to the Southwest Regional
Network's master control production facility and to the amortization of software
development costs in the more recent period.

       Interest income in Third Quarter 1998 was $40,077, compared with $11,156
in Third Quarter 1997. The increase was due to higher average cash balances
during the more recent period. The Company incurred interest expense and
accretions of $254,243 in Third Quarter 1998, compared to no interest expense
during the comparable 1997 period. Interest expense is related to the $5 million
principal value notes issued in January 1998 by a subsidiary of the Company.

       For Third Quarter 1998 and Third Quarter 1997, respectively, the Company
accrued $117,211 for dividends and $746,041 for dividends and accretions,
respectively, related to its outstanding preferred stock, which was accounted
for as minority interest...

       The Company's net loss in Third Quarter 1998 increased approximately 66%,
to $3,833,484, or $.16 per basic and diluted share, from $2,303,598, or $.17 per
basic and diluted share, in Third Quarter 1997, principally due to higher
expenses associated with the Southwest Regional Network, as noted above.

Comparison of Three Month Periods Ended September 30, 1997 and September 30,
1996

                                       18
<PAGE>

       During the three month period ended September 30, 1997 ("Third Quarter
1997"), the Company's revenues decreased approximately 42%, to $191,440, from
$332,220 in the three month period ended September 30, 1996 ("Third Quarter
1996"). In the more recent quarter, all of the Company's revenues derived from
education sales, while in Third Quarter 1996 the Company recorded revenues from
both education sales and from license and executive producer fees. The decline
in sales resulted from the repositioning and upgrade of the Company's education
product line from standalone classroom programs to Internet and other distance
learning software and programming. Management expects the Company's new
state-of-the-art software for individualizing Internet and television distance
learning applications to provide higher revenues, along with increased gross
margins.

       Cost of sales in Third Quarter 1997 decreased 52% to $78,847, compared to
Third Quarter 1996's cost of sales of $165,711. The Company's gross margin
increased to 59% in the more recent quarter, from 50% in the corresponding 1996
quarter. The gross margin increase was due principally to a greater percentage
of higher margin education software sales in the revenue mix for the more recent
quarter.

       Total expenses excluding cost of sales, interest expense and minority
interest - preferred stock dividends and accretion decreased approximately 15%
in Third Quarter 1997, to $1,681,306, from $1,974,335 in Third Quarter 1996. The
decrease was due to lower operating and selling and administrative expenses, and
a difference in stock appreciation rights expenses between the two periods.

       Depreciation and amortization expense in Third Quarter 1997 increased 10%
to $158,315, from $143,920 in Third Quarter 1996. This increase was due to the
retirement during the 1996 quarter of certain programming assets that were fully
amortized.

       Interest income in Third Quarter 1997, increased 6% to $11,156, compared
with $10,533 in Third Quarter 1996. The increase was due to higher average cash
balances during the more recent period. The Company incurred no interest expense
during either quarter.

       For the three month periods ending September 30, 1997 and September 30,
1996, the Company accrued $746,041 and $528,493, respectively, for dividends and
accretions, related to its outstanding preferred stock, which was accounted for
as minority interest...

       The Company's net loss in Third Quarter 1997 decreased slightly, to
$2,303,598, or $.17 per basic and diluted share, from $2,325,786, or $.20 per
basic diluted share, in Third Quarter 1996, principally the result of the noted
difference in operating, selling and administrative, and stock appreciation
rights expense, which more than offset the increase, in the more recent period,
of a higher dividend and accretion expense related to the Company's outstanding
convertible preferred stock.

Liquidity and Capital Resources

         Since its inception, the Company (including its operating subsidiaries)
has not generated revenues sufficient to fund its operations, and has incurred
operating losses. Through September 30, 

                                       19
<PAGE>

1998, the Company had an accumulated deficit of approximately $60.9 million. The
Company's cash position on September 30, 1998 was $7,077,854, compared to
$554,077 on December 31, 1997.

       During the nine month period ended September 30, 1998 the Company used
$6,811,907 in cash for its operations, compared with $5,287,781 in the nine
months ended September 30, 1997.

       With respect to investing activities, during the nine month period ended
September 30, 1998 and 1997 the Company used cash of $1,468,475 and $1,936,430,
respectively. Investing activities, in the more recent nine-month period, were
related to equipment purchases, software development and patents, while such
activities in the 1997 period related to equipment purchases, leasehold
improvements and software development costs.

       The Company met its cash needs in the nine month period ended September
30, 1998 from the proceeds of the $5.0 million principal value note financing,
from private sales of Common Stock to an institutional investor, and from the
private sale of Common Stock to Liberty Media Corporation. The Company met its
cash needs in the nine month period ended September 30, 1997 from the remaining
proceeds from the private sale of exchangeable preferred stock effected in
August 1996.

       During Third Quarter 1998 the Company used $1,682,341 in cash for its
operations, compared with $1,090,151 in Third Quarter 1997.

       With respect to investing activities, in Third Quarter 1998 and 1997 the
Company used cash of $791,542 and $1,313,703, respectively. Investing
activities, in the more recent quarter, were related to patents, software
development, and equipment purchases, while such activities in the 1997 quarter
related were related to master control facility and other equipment purchased,
leasehold improvements, and computer software production costs.

       The Company's balance sheets at September 30, 1998 and December 31, 1997
reflect expense accruals of $455,251 and $0, respectively, related to the
Company's stock appreciation rights plan.

       In January 1998, the Company's subsidiaries, ACTV Entertainment, Inc.,
(the "Issuer") and The Texas Individualized Television Network, Inc., a
wholly-owned subsidiary of the Issuer ("Texas Network"), entered into a Note
Purchase Agreement, dated as of January 13, 1998 (the "Agreement") with certain
private investors (the "Purchasers"). Pursuant to the Agreement, the Purchasers
purchased $5.0 million aggregate principal amount notes from the Issuer and
Texas Network. The notes bear interest at a rate of 13.0% per annum, payable
semi-annually, with principal repayment in one installment on June 30, 2003.
During the term of the note, the Issuer may, at its option, pay any four
semi-annual interest payments in kind rather than in cash, with an increase in
the rate applicable to such payments in kind to 13.75% per annum. The Note is
secured by the assets of the Texas Network, and is guaranteed by ACTV, Inc.

                                       20
<PAGE>

       In connection with the purchase of such note, the Purchasers received on
January 14, 1998 a common stock purchase warrant (the "Warrant") of Texas
Network that grants the Purchasers the right to purchase up to 17.5% of the
fully diluted shares of common stock of Texas Network. The Warrant expires on
June 30, 2003. The Warrant also grants the Purchasers the right, through July
14, 1999, to exchange the Warrant for such number of shares of the Company's
Common Stock, at the time of and giving effect to such exchange, equal to 5.5%
of the fully diluted number of shares of Common Stock outstanding, after giving
effect to the exercise or conversion of all then outstanding options, warrants
and other rights to purchase or acquire shares of Common Stock. After five years
from the date of issuance, the Purchasers have the right to put the warrants to
the Texas Network for a value based on a multiple of its operating income.

       Management of the Company believes that its current funds will enable the
Company to finance its operations for at least the next twelve months. Such
belief is based on assumptions that may not materialize, in which case the
Company may require additional capital to finance such operations during this
period. While the Company believes that it has adequate funds to launch its
planned Southwest Regional Network, it (i) may need additional funding to
operate the network at planned levels and (ii) will need additional funding to
launch networks in other regions. While the Company may engage an investment
bank for assistance in securing such financing, the Company has no commitments
from lenders or investors at this time and there is no assurance that it will be
able to raise the necessary capital to effect additional Regional Network
launches or to operate the Southwest Regional Network at planned levels.

Impact of Inflation

                   Inflation has not had any significant effect on the Company's
operating costs.


                                       21
<PAGE>

PART II                                           OTHER INFORMATION

ITEM 1            LEGAL PROCEEDINGS

There are no pending material legal proceedings to which the Company is a party.

ITEM 2            CHANGES IN SECURITIES     None.

ITEM 3            DEFAULTS UPON SENIOR SECURITIES     Not applicable.

ITEM 4            SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS     None

ITEM 5            OTHER INFORMATION     None.

ITEM 6           EXHIBITS AND REPORTS ON FORM 8-K

                  (a)    Exhibits
                         11  Computation of Loss per Share
                         27  Financial Data Schedule
                  (b)    Reports on Form 8-K:  None.



                                       22
<PAGE>

                                   SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                            ACTV, Inc.
                              
                                            Registrant
                              
                              
Date:     February 10, 1999         /s/ William C. Samuels       
          -----------------         -----------------------------
                                    William C. Samuels
                                    Chairman, Chief Executive Officer
                                    and Director
                              
Date:     February 10, 1999         /s/ Christopher C. Cline     
          -----------------         -----------------------------
                                    Christopher C. Cline
                                    Senior Vice President (principal financial
                                    and accounting officer)
                              




                                       23