<PAGE>
<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                For the quarterly period ended September 30, 1996

                                   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) 262-2570 (Registrant's telephone number, including area code)
______________

Securities registered pursuant to Section 12 (g) 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 13, 1996, there were 11,787,105 shares of the registrant's common
stock outstanding.


                                                                               1

<PAGE>
<PAGE>


                           ACTV, INC. AND SUBSIDIARIES


PART I         FINANCIAL INFORMATION

ITEM 1         FINANCIAL STATEMENTS



                                                                             

<PAGE>
<PAGE>


ACTV, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
        ASSETS

                                            DECEMBER 31,      SEPTEMBER 30,
                                                   1995               1996
                                                                 (UNAUDITED)
                                           --------------    ---------------
<S>                                   <C>                  <C>
  Current Assets:
    Cash and cash equivalents.........         $3,531,782         $3,021,321
    Restricted cash...................                 --          6,026,294
    Accounts receivable...............            349,291            353,575
    Education equipment inventory.....            112,218            190,113
    Other.............................             61,011            240,263
                                               -----------       -----------
        Total current assets..........          4,054,302          9,831,566
                                               -----------       -----------
    Property and equipment-net........            416,895            758,759
                                               -----------       -----------
   Other Assets:
    Video program inventory-net.......            214,824                 --
    Patents and patents pending-net...            268,980            257,579
    Goodwill-net......................          3,493,932          3,174,153
    Other.............................            102,195            336,106
                                               -----------       -----------
        Total other assets............          4,079,931          3,767,838
                                               -----------       -----------
           Total .....................         $8,551,128        $14,358,163
                                               ===========       ===========

        LIABILITIES AND
        SHAREHOLDERS' EQUITY

Current Liabilities:

    Accounts payable and accrued expenses....  $1,090,392         $1,265,828
    Deferred stock appreciation rights            566,883            404,367
    Preferred stock dividend payable.........          --             28,493
    Escrow funds.............................          --          6,026,294
                                               -----------        -----------
        Total current liabilities............   1,657,275          7,724,982
                                               -----------        -----------
        Total liabilities....................   1,657,275          7,724,982
Shareholders' equity:
    Preferred stock, $.10 par value, 1,000,000
        shares authorized, none issued.......          --                 --
    Convertible preferred stock, no par value,
        436,000 shares authorized: issued and
        outstanding none at December 31, 1995,
        400,000 at September 30, 1996........          --          3,600,601
    Common stock, $.10 par value, 35,000,000
        shares authorized: issued and outstand-
        ing 11,396,419 at December 31, 1995,
        11,787,105 at September 30, 1996......  1,139,642          1,178,711
    Additional paid-in capital................ 36,686,742         38,297,705
    Notes receivable from stock sales.           (567,500)          (200,000)
                                              -----------         -----------
        Total................................  37,258,884         42,877,017
    Accumulated deficit...................... (30,365,031)       (36,243,836)
                                              -----------         -----------
        Total shareholders' equity...........   6,893,853          6,633,181
                                              -----------         -----------
           Total.............................  $8,551,128        $14,358,163
                                              ===========         ============
</TABLE>


                 See Notes to Consolidated Financial Statements




<PAGE>
<PAGE>

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

<TABLE>
<CAPTION>

                                   NINE MONTH PERIODS        THREE MONTH PERIODS
                                   ENDED SEPTEMBER 30,       ENDED SEPTEMBER 30,
                                        1995        1996          1995         1996
                                 ------------ -----------  ------------ ------------
<S>                          <C>            <C>           <C>          <C>
Revenues:

  Sales revenues..............    $1,075,925   $1,093,127      $322,036      $329,612
  License fees from related party        --        12,689            --         2,608
                                  -----------  ------------  ------------  ------------
     Total revenues...........    1,075,925     1,105,816       322,036       332,220

  Cost of Sales...............      318,665       480,321       106,328       165,711
                                  -----------  ------------  ------------  ------------
     Gross profit.............      757,260       625,495       215,708       166,509

Expenses:

  Operating expenses..........      829,781     1,407,558       300,743       401,570
  Selling and administrative..    3,600,124     4,614,826     1,135,076     1,645,944
  Depreciation and amortization     499,261       362,563       187,645        37,327
  Amortization of goodwill....      319,779       319,779       106,593       106,593
  Stock appreciation rights...    1,249,206      (162,516)      800,851      (217,099)
                                  -----------  ------------  ------------  ------------
     Total expense............    6,498,151     6,542,210     2,530,908     1,974,335

Interest (income).............      (83,150)      (66,403)      (26,680)      (10,533)
Interest expense-related parties     93,596            --        20,001            --
                                  -----------  ------------  ------------  ------------
  Interest expense - net......       10,446       (66,403)       (6,679)      (10,533)

                                  -----------  ------------  ------------  ------------
Net loss before extraordinary     5,751,337     5,850,312     2,308,521     1,797,293
gain..........................
Gain on extinguishment of debt       94,117            --            --            --
obligations...................
                                  -----------  ------------  ------------  ------------

Net loss......................    5,657,220     5,850,312     2,308,521     1,797,293
Preferred stock dividend......           --        28,493            --        28,493
Loss applicable to common stock   5,657,220     5,878,805     2,308,521     1,825,786
shareholders..................
                                  ===========  ============  ============  ============
Loss per common share before           $.59          $.50          $.23          $.15
extraordinary gain............

Loss per common share after             $.58         $.50          $.23          $.15
extraordinary gain............

Weighted average number of        9,748,209    11,723,874     9,981,194    11,799,797
common shares outstanding.....
</TABLE>



                 See Notes to Consolidated Financial Statements




                                                                               4

<PAGE>
<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,
                                               1995          1996           1995           1996
                                       ------------   -----------     ----------    -----------
<S>                                    <C>          <C>             <C>          <C>
Cash flows from operating
activities:
    Net loss..........................    $5,657,220    $5,878,805     $2,308,521     $1,825,786
                                         -------------  ------------   ------------  -------------
Adjustments to reconcile net loss to net
cash used in operations:
    Depreciation and amortization.....       926,402       682,341         401,367       143,919
    Stock appreciation rights.........       543,956      (162,516)        256,850      (217,099)
    Gain on extinguishment of debt           (94,717)           --             --             --
    obligations........................
    Common stock issued for services..       563,430       114,047        415,500             --
Changes in operating assets and
liabilities:
    Accounts receivable...............      (138,858)       (4,284)       133,999        114,350
    Other assets......................        56,992      (191,800)        50,126         19,363
    Accounts payable and accrued 
    expenses..........................         3,986       175,436       (138,367)        69,460
    Preferred dividend payable........            --        28,493             --         28,493
    Education equipment inventory.....       (23,327)      (77,895)       (24,996)        30,880
    Interest payable..................        93,333            --         20,001             --
                                         -------------  ------------   ------------  -------------
           Net cash (used) in operating
           activities.................    (3,726,023)    (5,314,983)    (1,194,041)   (1,636,420)
                                         -------------  ------------   ------------  -------------
Cash flows from financing
activities:
    Proceeds from sale of common stock     8,951,859     1,903,485      5,660,984              --
    Proceeds from exercise of options.        68,600            --             --              --
    Proceeds from sale of preferred
    stock.............................            --     3,600,601             --       3,600,601

    Discounted prepayment of note.....      (101,458)           --             --             --
    Repayment of note.................    (2,025,250)           --     (1,500,000)            --
                                         -------------  ------------   ------------  -------------
Net cash provided by (used in)             6,893,751     5,504,086      4,160,984      3,600,601
financing activities..................
Cash flows from investing activities:
   Investment in property and equipment      556,926       699,564         94,182        132,367
                                         -------------  ------------   ------------  -------------
           Net cash used in investing
           activities.................       556,926       699,564         94,182        132,367
                                         -------------  ------------   ------------  -------------
Net increase (decrease) in cash and cash   2,610,802      (510,461)     2,872,761      1,831,814
equivalents...........................
    Cash and cash equivalents,
    beginning of period...............     2,479,840     3,531,782      2,217,881      1,189,507
                                         -------------  ------------   ------------  -------------
    Cash and cash equivalents,
    end of period.....................     5,090,642     3,021,321       5,090,642     3,021,321
                                         =============  ============   ============  =============
</TABLE>


Supplemental  disclosure of noncash investing activity: the consolidated balance
sheet at September 30, 1995,  reflects  decreases in common stock of $10,500 and
additional  paid-in-capital  of $357,000 and a  corresponding  decrease in notes
receivable from stock sales of $367,500.



<PAGE>
<PAGE>


ACTV, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1996

1(a). The consolidated financial statements are unaudited,  except as indicated.
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) In August  1996,  the  Company  raised $10  million  (before  expenses  and
commissions  related to the fund raising) from the issuance by two  wholly-owned
subsidiaries of the Company,  ACTV Holdings,  Inc. and ACTV Financing,  Inc., of
convertible preferred shares to private investors. Pursuant to this transaction,
the subsidiaries issued preferred shares that are convertible into common shares
of ACTV, Inc.  beginning  January 1, 1997. The conversion price of the preferred
shares is at a discount to the market price for the ACTV,  Inc. common shares at
the time of conversion.  The percentage  discount increases as the length of the
holding period prior to conversion increases,  from a base of 14% for conversion
in January  1997 to a maximum of 30.375% for  conversion  in  September  1997 or
thereafter.  The $10 million  financing  consists  of $4 million in  immediately
available funds, with the remaining $6 million paid into an escrow account.  The
escrow  funds  are to  become  available  to the  Company  contingent  upon  the
satisfaction  of certain  conditions  in the  contracts  with the holders of the
preferred stock.

The Company believes that it has sufficient resources to fund its operations for
the next twelve month  period.  However,  if the Company does not gain access to
the  escrowed  funds  and/or  does not obtain  additional  financing,  it may be
required to  severely  reduce  certain  planned  expenditures  in certain of the
markets it is  attempting  to develop.  If  management's  assumptions  regarding
future events prove incorrect, the Company may be unable to fund its operations,
even at a  reduced  level,  for the  next  twelve  months.  The  Company  has no
agreements,  arrangements or understanding to obtain additional financing, other
than as disclosed herein.  There can be no assurance that additional  financing,
if it should be needed,  will be available on terms  satisfactory to the Company
or at all.

2. For a summary of significant  accounting  policies and  additional  financial
information,  see the  Company's  Annual  Report on Form 10-K for the year ended
December 31, 1995.

3. The  consolidated  statements of  operations  for the nine month period ended
September  30,  1995,   reflect  an   extraordinary   gain  of  $94,117  on  the
extinguishment  of an  obligation  to Nolan  Bushnell.  On April 25,  1994,  the
Company   entered  into  a  Settlement   Agreement  (the  "Bushnell   Settlement
Agreement") with Mr. Bushnell under which Mr. Bushnell released the Company from
certain obligations.  Pursuant to the Bushnell Settlement Agreement, ACTV issued
to Mr. Bushnell,  among other consideration,  a promissory note in the principal
amount of $190,000,  payable in two



                                                                               7

<PAGE>
<PAGE>

installments  on June 30, 1995,  and June 30, 1996. In January 1995, the Company
and Mr. Bushnell agreed to a discounting of the note for payment in full at that
time.

4. The cash  position  on the  Company's  balance  sheet at  September  30, 1996
includes $6,000,000 (plus accrued interest) in escrowed funds that are available
to the Company only upon the satisfaction of certain conditions in the contracts
with  the  holders  of  preferred  stock.  Such  conditions  have  not yet  been
satisfied;  if they remain  unsatisfied  through  December 31, 1996, the Company
will forfeit its right to the escrowed  amount.  The Company's  balance sheet at
September 30, 1996 reflects a credit to shareholders'  equity of $55,000 related
to  options  issued but not yet vested at a price  below the  prevailing  market
price on the date of  issuance.  The options  were issued to acquire a patent in
September 1995. The Company's  balance sheets at December 31, 1996 and September
30, 1996 also reflect debits to  shareholders'  equity of $567,500 and $200,000,
respectively,  related  to  non-recourse  loans  made by the  Company to certain
employees in August 1995 to purchase the  Company's  common stock by  exercising
options.  The due dates of the non-recourse loans correspond with the respective
expiration  dates of the  options  exercised.  During  the  three  months  ended
September 20, 1996, two  shareholder  loans totaling  $367,500 were cancelled in
exchange for the  corresponding  cancellation of the shares associated with such
loans.


                                                                               8

<PAGE>
<PAGE>


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

THE COMPANY

ACTV, Inc. (the "Company") was organized to develop and market ACTV  programming
technology,   which   permits   each   viewer   to   simultaneously   experience
individualized  television  programming.  Since its  inception,  the Company has
incurred  operating losses  approximating  $36.2 million related directly to the
development and marketing of the ACTV programming technology.

ACTV's  individualized  programming  is  designed  to work with both  single and
multiple  channels of 6MHz band-width and with different modes of  transmission:
cable, direct broadcast satellite ("DBS"),  multi-microwave distribution systems
("MMDS"),  broadcast  systems,  distance  learning  networks and closed  circuit
televisions  systems.  It is compatible with commonly  available  one-way analog
systems as well as the newer  digital  systems  that have  recently  begun to be
deployed.

ACTV's strategy is to generate  revenues from the sale of ACTV  programming that
it either  owns,  has licensed or that has been created by a third party under a
license from ACTV,  including fees paid by subscribers to premium cable networks
in which the Company has an  ownership  interest.  The  Company's  mission is to
improve the quality of entertainment and education television programming.

The chief  markets  presently  targeted by the Company for the ACTV  programming
technology are in-home  entertainment,  education  (with an emphasis on distance
learning), site-based entertainment and Internet applications. The Company seeks
to  exploit  these  markets,  principally  in the U.S.,  through  licensing  the
programming technology,  by creating joint venture relationships,  and by direct
sales.

In March 1988, the Company formed ACTV Entertainment Inc. ("ACTV Entertainment")
as an equal shareholder with Le Groupe Videotron ("LGV") of Canada.  The Company
granted  to  ACTV  Entertainment  the  exclusive  right  to  use  the  Company's
programming technology in the United States DBS, cable, and broadcast television
markets.

In June 1993, at the Company's request,  LGV withdrew from its ownership in ACTV
Entertainment and the Company became the sole shareholder of ACTV  Entertainment
under the terms of an  agreement  with a  subsidiary  of LGV.  In  exchange  for
gaining full ownership and control of ACTV  Entertainment  in the settlement and
for the  conversion  of LGV's  exclusive  license  for  Canada  and  Europe to a
non-exclusive  license,  the Company  ceased  providing  programming  to LGV and
agreed to give up the license fee revenue it had received from LGV for LGV's use
of the programming technology in Canada and Europe.

In March 1995,  the Company  formed The Los  Angeles  Individualized  Television
Network,  Inc., one of its wholly-owned  subsidiaries,  to operate the Company's
individualized  television  trial  in  Southern  California.  If  the  trial  is
successful, this subsidiary will operate the planned regional


                                                                               9

<PAGE>
<PAGE>

television network targeting approximately 4.8 million sports subscribers in the
region that reaches from Los Angeles to San Diego and Phoenix.

The trial,  which marks the  introduction of the Company's  first U.S.  regional
individualized  network (the "Regional Network"),  began in the Los Angeles area
in May 1995. The trial involves 1,000 cable  subscribers and will run throughout
most of 1996 and may extend into 1997.  The Company  believes  that the Regional
Network is the first  programming  service in the U.S. to both enhance  existing
programming and offer new individualized content.

Programming  for the Regional  Network is being provided to ACTV by Prime Sports
West, a unit of Liberty Media's Liberty Sports division, which has approximately
4.8 million subscribers in the Southwest region of the U.S.; Cable News Network,
Inc. ("CNN");  the Game Show Network, a subsidiary of Sony  Entertainment,  Inc.
("Sony"); and Viacom. Liberty Media is jointly owned by Telecommunications  Inc.
("TCI") and Fox Sports.  The cable  operator for the Regional  Network is TCI of
Ventura County.

The  Company  has  established  five new  wholly-owned  subsidiaries  that would
operate additional regional  individualized networks covering the San Francisco,
Chicago,  New York,  Atlanta  and Texas  regions in the event  that the  Company
decides to expand and provide similar  services to those of the Regional Network
in other regions across the U.S. To date, the five new wholly-owned subsidiaries
have not  engaged in any  business  activities,  nor does the  Company  have any
present  intention to launch their  activities.  The Regional  Network,  and any
expansion  plans related  thereto,  is part of the Company's plan to develop the
entertainment  division of its business  which,  to date,  does not generate any
revenue for the Company.

In July 1992,  the Company  entered into an agreement  with a subsidiary  of the
Washington  Post  Company  (the  "Post  Company")  to form ACTV  Interactive,  a
partnership  organized  for the  purpose  of  marketing  products  and  services
incorporating  the  programming  technology  to the education  marketplace.  The
subsidiary of the Post Company owned a 51% share.

On March 11, 1994 the Company  purchased the Post Company's full 51% interest in
ACTV Interactive for  consideration of $4.5 million,  consisting of $2.5 million
in cash at closing and a $2 million 8% note due December 31, 1996 (the  "Note").
Subsequently,  all operations by the Company's subsidiaries  associated with the
education market have been consolidated with the results of the Company.  During
1995, the Note, including accrued interest, was paid in full.

In  January  1995,  the  Company  granted  an  exclusive  license  to  Greenwich
Entertainment  Group  ("The  Greenwich  Group")  for the use of its  programming
technology in the theater  environment,  specifically in shopping malls, museums
and  entertainment  centers.  The Company's  agreement with The Greenwich  Group
stipulates  the payment of a license fee of 8% to 10% of annual ticket sales per
theater,  dependent  upon each  theater's  volume.  The agreement also calls for
minimum  annual  payments of $200,000 in 1996,  $500,000 in 1997,  $1,000,000 in
1998, $1,250,000 in 1999 and $1,500,000 in the year 2000 and thereafter.  If the
minimum payments are not paid, the Company has the right to cancel the license.



                                                                              10

<PAGE>
<PAGE>

Additionally,  the Company has made equity investments in The Greenwich Group of
$24,325 in March 1996 and $250,000 in April 1996.

In July 1995,  the Company  formed 3D Virtual,  Inc., a wholly owned  subsidiary
engaged in the  development of three  dimensional  applications of the Company's
programming technology.

In  August  1996,  the  Company  formed  two  wholly-owned  subsidiaries,   ACTV
Financing,  Inc. and ACTV Holding, Inc. to facilitate a fundraising  transaction
in which the Company raised $10 million (before expenses and commissions related
to the fund raising).  Pursuant to this  transaction,  the  subsidiaries  issued
preferred shares that are convertible into common shares of ACTV, Inc. beginning
January 1, 1997. The conversion  price of the preferred  shares is at a discount
to the market price for the ACTV,  Inc. common shares at the time of conversion.
The percentage  discount  increases as the length of the holding period prior to
conversion  increases,  from a base of 14% for  conversion  in January 1997 to a
maximum of 30.375% for  conversion  in  September  1997 or  thereafter.  The $10
million  financing  consists of $4 million in immediately  available funds, with
the  remaining $6 million paid into an escrow  account.  The escrow funds are to
become  available to the Company  contingent  upon the  satisfaction  of certain
conditions in the contracts with the holders of the preferred stock.


                                                                              11

<PAGE>
<PAGE>


RESULTS OF OPERATIONS

COMPARISON OF NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995

During the nine month period ended  September 30, 1996,  the Company's  revenues
increased  3% to  $1,105,816,  from  $1,075,925  in the nine month  period ended
September 30, 1995. In the more recent period,  the Company's  revenues  derived
from  education  sales,  as well as from  license and  executive  producer  fees
related to its  agreement  with The  Greenwich  Group.  All revenues in the nine
month period ended September 30, 1995 were derived from the education market.

Cost of sales in the nine months ended  September  30, 1996,  was  $480,321,  an
increase  of 51% over  cost of  sales  of  $318,655  in the  nine  months  ended
September  30, 1995.  The  Company's  gross  margin  declined to 57% in the more
recent period, from 70% in the corresponding 1995 period. The decline was due to
the  inclusion in the more recent  period of executive  production  fees,  which
carry a lower profit margin than the Company's other revenue  sources,  and from
proportionately  lesser revenues from education  programs,  when compared to the
nine months ended  September  30, 1995.  Education  programs have a higher gross
margin than other education products sold by the Company.

Total expenses  excluding cost of sales and interest  expense in the nine months
ended  September 30, 1996,  increased 1%, to $6,542,210,  from $6,498,151 in the
comparable   period  in  1995.   While   operating   expenses  and  selling  and
administrative  expenses  increased by approximately  $1.6 million due to higher
research and development  expenses,  and to higher expenses  associated with the
Company's interactive television network trial in California, stock appreciation
rights expense  decreased by approximately  $1.4 million.  This decrease was due
principally to a lower market price for the Company's  common stock at September
30, 1996.

Depreciation  and  amortization  expense for the nine months ended September 30,
1996,  decreased  27% to  $362,563,  from  $499,261  for the nine  months  ended
September 30, 1995.  This decrease was due  primarily to the  relatively  higher
depreciation  expense  related to set-top  cable  converters  purchased  for the
California trial that was incurred the 1995 period.

The Company incurred no interest expense for the nine months ended September 30,
1996,  compared to interest  expense of $93,596 in the prior  year's  comparable
period.  During 1995,  the Company  paid in full all of its short and  long-term
interest bearing obligations. Interest income in the nine months ended September
30, 1996,  decreased  20% to $66,403,  compared  with $83,150 in the nine months
ended  September 30, 1995.  The decrease was the result of lower  available cash
balances in the more recent period.

For the nine months ended  September 30, 1996,  the Company's net loss increased
2%,  to  $5,878,805,  or  $.50  per  share,  compared  to the  net  loss  before
extraordinary gain of $5,751,327, or $.59 per share incurred in the prior year's
comparable  period. The Company recorded an extraordinary gain of $94,117 in the
nine months ended September 30, 1995, the result of the  extinguishment  of debt
obligations  for value that was less than the amounts  recorded on the


                                                                              12

<PAGE>
<PAGE>



Company's books for such obligations.  Net loss after extraordinary gain for the
nine months ended September 30, 1995, was $5,657,210, or $.58 per share.

COMPARISON OF NINE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994

During the nine month period ended  September 30, 1995,  the Company's  revenues
increased  40%, to  $1,075,925,  from  $768,739 in the nine month  period  ended
September 30, 1994. The increase was the result of higher sales to the education
market,  including  revenues  relating to the  Company's  new distance  learning
product.  The increase was also  partially due to the inclusion of the Company's
education  sales for the entire nine month  period of 1995 versus only a portion
of the  comparable  period in 1994.  From  January 1, 1994,  to March 11,  1994,
education  sales were reported  separately by the Company's 49% subsidiary  ACTV
Interactive,  which was acquired in full by ACTV, Inc. on March 11, 1994.  Prior
to this purchase,  the results of ACTV  Interactive were accounted for under the
equity method of accounting.

Cost of sales in the nine months ended  September  30, 1995,  was  $318,665,  an
increase  of 36% over  cost of  sales  of  $233,661  in the  nine  months  ended
September 30, 1994. The Company's cost of sales as a percentage of sales revenue
on a year to year basis  remained  stable at 30.4% in 1994 and 29.6% in the 1995
period.

Total expenses  excluding cost of sales and interest  expense in the nine months
ended September 30, 1995,  increased 55%, to $6,498,151,  from $4,182,060 in the
comparable  period  in 1994.  This  increase  was  partially  the  result of the
Company's  recognition in the more recent  period,  as explained  above,  of the
expenses  of ACTV  Interactive,  which for a  portion  of the 1994  period  were
reported separately. The increase was due also to significantly greater expenses
related to the Company's SAR plan, higher research and development expenses, and
to greater general and  administrative  costs  associated with the launch in May
1995 of the Company's interactive television network trial in California.

Depreciation  and  amortization  expense for the nine months ended September 30,
1995,  increased  43% to  $819,040,  from  $571,133  for the nine  months  ended
September  30, 1994.  This  increase was  partially  the result of the Company's
amortization  for the entire  nine month  period of 1995 versus a portion of the
same  period in 1994 of goodwill  arising  from the  purchase of the  Washington
Post's  interest in ACTV  Interactive.  In  addition,  for the nine months ended
September 30, 1995, the Company recorded increased  depreciation expense related
to equipment purchased for the California trial referred to above.

The  Company's  interest  expense for the nine months ended  September 30, 1995,
decreased 49%, to $93,596,  compared to $184,186 in the prior year's  comparable
period.  The decrease was due in part to the  elimination of expense  related to
original  issue  discount on the $1.5  million  convertible  note payable to the
Washington Post Company. The full principal value of this note, plus all accrued
interest,  was converted by the Post Company into common shares of ACTV, Inc. in
March 1994.  Interest  expense  declined also due to a decrease in notes payable
during  the  more  recent  period.  Interest  income  in the nine  months  ended
September 30, 1995, was $83,150, compared with $37,995



                                                                              13

<PAGE>
<PAGE>


in the nine months ended  September 30, 1994. The increase  resulted from higher
available  cash balances and higher  prevailing  market rates of interest in the
more recent period.

For the nine months ended  September  30, 1995,  the  Company's  net loss before
extraordinary  items was  $5,751,337 or $.59 per share,  an increase of 46% over
the net loss  before  extraordinary  items  of  $3,929,537,  or $.51 per  share,
incurred  in  the  prior  year's   comparable   period.   The  Company  recorded
extraordinary  gains of $94,117 in the nine months ended  September 30, 1995 and
$521,803  in the nine  months  ended  September  30,  1994,  the  result  of the
extinguishment  of certain  obligations for value that was less than the amounts
recorded  on  the  Company's  books  for  such   obligations.   Net  loss  after
extraordinary gain for the nine months ended September 30, 1995, was $5,657,220,
or $.58 per share, an increase of 66% over the net loss after extraordinary gain
for the comparable period of 1994 of $3,407,554, or $.44 per share.

COMPARISON OF THREE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30,
1995

During the three month period ended  September 30, 1996 ("Third  Quarter 1996"),
the Company's revenues increased approximately 3%, to $332,220, from $322,036 in
the three month period ended September 30, 1995 ("Third  Quarter 1995").  In the
more recent quarter,  the Company's  revenues  derived from education  sales, as
well as from license and executive  producer fees related to its agreement  with
The  Greenwich  Group.  All revenues in Third Quarter 1995 were derived from the
education market.

Cost of sales in Third  Quarter 1996 was  $165,711,  a 56% increase  compared to
Third  Quarter  1995's cost of sales of  $106,328.  The  Company's  gross margin
decreased to 50% in the more recent quarter,  from 67% in the corresponding 1995
quarter.  The gross margin decrease was due to a significantly  lower percentage
of education  program sales in the revenue mix for the more recent  quarter,  as
well as to the  inclusion  in  Third  Quarter  1996 of  lower-margin  production
revenues.  Education  programs  have a higher gross margin than other  education
products sold by the Company.

Total  expenses   excluding  cost  of  sales  and  interest  expense   decreased
approximately 22% in Third Quarter 1996, to $1,974,335, from $2,530,908 in Third
Quarter  1995.  The  decrease  was due  principally  to a gain of  approximately
$217,000 related to stock  appreciation  rights in Third Quarter 1996,  versus a
corresponding  expense of  approximately  $801,000 in Third Quarter  1995.  This
difference  more than offset  higher  operating  and selling and  administrative
expenses  associated with the Company's operation of its California trial during
the more recent quarter.

Depreciation  and  amortization  expense  decreased  in  Third  Quarter  1996 to
$37,327,  from $187,645 in Third Quarter  1995.  The decrease  resulted from the
full  depreciation  prior to Third  Quarter  1996 of  set-top  cable  converters
purchased for the California trial.

The Company  incurred no interest  expense in Third  Quarter  1996,  compared to
interest expense of $20,001 in Third Quarter 1995. During 1995, the Company paid
in full all of its short and long-term  interest bearing  obligations.  Interest
income in Third Quarter 1996 was $10,533, a decrease of 61%




                                                                              14

<PAGE>
<PAGE>

compared with $26,680 in Third Quarter  1995.  The decrease  resulted from lower
available cash balances in the more recent period.

The  Company's net loss in Third Quarter 1996  decreased  approximately  21%, to
$1,825,786,  or $.15 per share,  from  $2,308,521,  or $.23 per share,  in Third
Quarter 1995, principally the result of lower stock appreciation rights expense,
which more than offset greater operating,  selling and  administrative  expenses
related to the California trial.

COMPARISON OF THREE MONTH PERIODS ENDED SEPTEMBER 30, 1995 AND
SEPTEMBER 30, 1994

During the three month  period  ended  September  30,  1995 (the "Third  Quarter
1995"), the Company's revenues increased 6% to $322,036, compared to revenues of
$304,261 for the three month period ended September 30, 1994 (the "Third Quarter
1994").  The  increase  was the  result of  higher  education  sales,  including
revenues related to the Company's new distance learning product.

Cost of sales in the Third  Quarter 1995 was  $106,328,  an increase of 12% from
cost of sales of $95,215 in the Third  Quarter  1994.  The  increase  was due to
higher sales levels in the Third  Quarter 1995 as compared to the Third  Quarter
1994.  The Company's cost of sales as a percentage of sales revenue on a quarter
to quarter basis remained  relatively  stable at 31% in 1994 and 33% in the 1995
period.

Total expenses excluding cost of sales and interest expense increased 64% in the
Third Quarter 1995, to  $2,530,908,  from  $1,542,070 in the Third Quarter 1994.
This  increase  resulted  from  significantly  greater  expenses  related to the
Company's SAR plan, higher research and development expenses, higher general and
administrative  costs  associated  with the launch in May 1995 of the  Company's
interactive   television   network  trial  in   California,   and  to  increased
depreciation and amortization expenses in the more recent period.

Depreciation and amortization expense increased 35% in the Third Quarter 1995 to
$294,238,  from $217,691 in the Third Quarter 1994,  due to higher  depreciation
expense related to equipment purchased for the California trial.

Interest  expense  declined  54% in the Third  Quarter  1995,  to $20,001,  from
$43,057 in the Third Quarter 1994, due to decreased note payable  obligations in
the more recent quarter.  Interest income in the Third Quarter 1995 was $26,680,
compared  with $7,358 in the Third  Quarter  1994.  The increase  resulted  from
higher available cash balances and higher prevailing market rates of interest in
the more recent period.

The  Company's  net loss for the Third  Quarter 1995 was  $2,301,521 or $.23 per
share, an increase of 70% compared to the net loss before  extraordinary item of
$1,361,407  or $.17 per  share  incurred  in Third  Quarter  1994.  The  Company
recorded an extraordinary gain of $289,958 in the Third Quarter 1994, the result
of the  extinguishment  of certain  obligations for value that was less than the
amounts recorded on the Company's books for such obligations. Net loss after the
extraordinary gain for the Third Quarter 1994 was $1,071,449 or $.13 per share.



                                                                              15

<PAGE>
<PAGE>


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, 1996, the Company had an accumulated  deficit of
approximately  $36.2 million.  The Company's cash position on September 30, 1996
was  $3,021,321,  compared to $3,531,782 on December 31, 1995. An additional six
million dollars (plus accrued  interest) is being held in escrow and will become
available to the Company only upon the occurrence of certain events (see below).

During  Third  Quarter  1996  the  Company  used  $1,636,420  in  cash  for  its
operations,  compared with  $1,194,041  in Third  Quarter 1995.  The increase in
Third Quarter 1996 was due principally to comparatively  lower non-cash expenses
(depreciation/amortization  and stock  appreciation  rights) in the more  recent
period,  as well as to changes in accounts  payable and  accrued  expenses.  The
Company  met its cash needs in Third  Quarter  1996 from  sales of common  stock
totaling $1.9 million that were  concluded  during the first quarter of 1996 and
from sales of  convertible  preferred  stock totaling $10 million ($6 million of
which is currently  held in escrow) in August 1996 (see below).  The Company met
its cash needs in Third  Quarter 1995 from the proceeds of sales of common stock
to private  investors  completed in the last quarter of 1994 and the first three
quarters of 1995.

With respect to investing activities, in Third Quarter 1996 and 1995 the Company
used cash of $132,367 and $94,182, respectively. Investment activities for Third
Quarter 1996 and Third Quarter 1995 related  principally to office  improvements
and equipment  purchases for the California trial,  respectively.  The Company's
operating  subsidiaries are dependent on advances from the Company to meet their
obligations.

The Company's balance sheets at September 30, 1996 and December 31, 1995 reflect
expense  accruals  of  $566,883  and  $404,367,  respectively,  related  to  the
Company's stock appreciation rights plan.

In August 1996, the Company raised $10 million (before  expenses and commissions
related to the fund raising) from the issuance by two wholly-owned  subsidiaries
of the Company,  ACTV Holdings,  Inc. and ACTV  Financing,  Inc., of convertible
preferred  shares  to  private  investors.  Pursuant  to this  transaction,  the
subsidiaries  issued preferred shares that are convertible into common shares of
ACTV,  Inc.  beginning  January 1, 1997. The  conversion  price of the preferred
shares is at a discount to the market price for the ACTV,  Inc. common shares at
the time of conversion.  The percentage  discount increases as the length of the
holding period prior to conversion increases,  from a base of 14% for conversion
in January  1997 to a maximum of 30.375% for  conversion  in  September  1997 or
thereafter.  The $10 million  financing  consists  of $4 million in  immediately
available funds, with the remaining $6 million paid into an escrow account.  The
escrow  funds  are to  become  available  to the  Company  contingent  upon  the
satisfaction  of certain  conditions  in the  contracts  with the holders of the
preferred stock.

                                                                              16

<PAGE>
<PAGE>

In the first quarter of 1996, the Company raised approximately $1.9 million from
the private sale of shares of the Company's common stock.

The Company believes that it has sufficient resources to fund its operations for
the next twelve  month  period.  However,  if the  Company  does not receive the
escrowed funds and/or does not obtain additional  financing,  it may be required
to  reduce  certain  planned  expenditures  in  certain  of  the  markets  it is
attempting to develop. If management's assumptions regarding future events prove
incorrect,  the Company may be unable to fund its operations,  even at a reduced
level, for the next twelve months.  The Company has no agreements,  arrangements
or understanding to obtain additional financing, other than as disclosed herein.
There can be no assurance  that  additional  financing,  if it should be needed,
will be available on terms satisfactory to the Company or at all.

The Company believes that it may be required to expend approximately $500,000 in
the  remainder  of 1996 and the  first  six  months  of 1997 to  facilitate  the
completion of current research and development  projects,  relating primarily to
the development of software to implement the Company's programming technology in
digital set-top terminals.

The  Company  does not have any  material  contractual  commitments  for capital
expenditures.

IMPACT OF INFLATION

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

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

         On July 17, 1996 the Company held an Annual Meeting of Shareholders for
which it solicited votes by proxy.  The following is a brief  description of the
matters  voted upon at the meeting  and a statement  of the number of votes cast
for and against, and the number of abstentions as to each matter.


                                                                              17

<PAGE>
<PAGE>



1.  To approve an amendment to the Company's By-Laws to provide for the election
of directors to staggered terms.

          For             Against           Abstain
       6,142,468          339,897           96,700


                                                                              18

<PAGE>
<PAGE>


2.    Election of directors:

                                 For         Withheld

      William C. Samuels      10,970,518       92,385
      William A. Frank        10,976,918       85,985
      David Reese             10,983,118       79,785
      Steven W. Schuster      10,983,718       79,185
      Bruce Crowley           10,983,118       79,785
      Richard Hyman           10,983,718       79,185

3.  To  approve  an  amendment  to  the  Company's   Restated   Certificate   of
Incorporation  that would increase the authorized shares of the Company's Common
Stock to 35,000.

          For             Against           Abstain
       9,995,974          276,794           109,035

4.    To adopt the Company's 1996 Stock Appreciation Rights Plan.

          For             Against           Abstain
       5,337,077          687,706           497,265

5.    To adopt the Company's 1996 Stock Option Plan.

          For             Against           Abstain
       5,596,137          803,256           503,655

6.    To ratify appointment of Deloitte & Touche LLP as independent  auditors of
the Company.

          For             Against           Abstain
      10,524,583          28,735            85,585

Item 5                                 OTHER INFORMATION
                                             None.

Item 6                         EXHIBITS AND REPORTS ON FORM 8-K

(a)    The following Exhibits are filed herewith or incorporated by reference as
indicated:

3.1            Amended and Restated Certificate of Incorporation of ACTV, Inc.
10.1           Registration Rights and Exchange Agreement
10.2           Preferred Stock Investment Agreement [ACTV Financing, Inc.]
10.3           Preferred Stock Investment Agreement [ACTV Holdings, Inc.]
11.1           Computation of Loss Per Common Share
27             Financial Data Schedule


                                                                              19

<PAGE>
<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:    November 13, 1996                   /s/ William C. Samuels
         -----------------                   ----------------------
                                             William C. Samuels
                                             Chairman, Chief Executive Officer
                                             and Director

Date:    November 13, 1996                   /s/ Christopher C. Cline
         -----------------                   ------------------------
                                             Christopher C. Cline
                                             Vice President (principal financial
                                             and accounting officer)


                                                                              20

<PAGE>
<PAGE>

                                        INDEX TO EXHIBITS

      3.1    Amended and Restated Certificate of Incorporation of ACTV, Inc.

      10.1   Registration Rights and Exchange Agreement

      10.2   Preferred Stock Investment Agreement [ACTV Financing, Inc.]

      10.3   Preferred Stock Investment Agreement [ACTV Holdings, Inc.]

      11.1   Statement regarding computation of loss per share

      27.1   Financial data schedule


                                                                              21

<PAGE>