-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CjFG5gGdLighN4v1v0/8crQu4kIcaNalIZN/0Xngzv/F9YZCtTH94kq6nRJCavTn 6wHGvoak2hoLkNpX4FhmZA== 0000950146-97-000817.txt : 19970520 0000950146-97-000817.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950146-97-000817 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTV INC /DE/ CENTRAL INDEX KEY: 0000854152 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 942907258 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10377 FILM NUMBER: 97608886 BUSINESS ADDRESS: STREET 1: 1270 AVE OF THE AMERICAS CITY: NEW YORK STATE: NY ZIP: 10020 BUSINESS PHONE: 2122622571 MAIL ADDRESS: STREET 1: 12270 AVE OF THE AMERICAS #2401 STREET 2: 12270 AVE OF THE AMERICAS #2401 CITY: NEW YORK STATE: NY ZIP: 10020 10-Q 1 FORM 10-Q 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 March 31, 1997 - ------------------------------------------------------------------------------- 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 v No__________ As of May 13, 1997, there were 11,838,734 shares of the registrant's common stock outstanding. ACTV, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS (Audited) (Unaudited) December 31, March 31, 1996 1997 ---------------- ------------ Current Assets: Cash and cash equivalents .................... $ 6,520,756 $ 4,134,200 Accounts receivable-net ...................... 410,193 933,344 Education equipment inventory ................ 337,504 328,411 Other ........................................ 316,962 236,445 ------------ ------------ Total current assets .................... 7,585,415 5,632,400 ------------ ------------ Property and equipment-net ....................... 724,089 772,811 ------------ ------------ Other Assets: Patents and patents pending ................. 253,779 247,864 Goodwill .................................... 3,067,560 2,960,967 Other ....................................... 61,781 129,781 ------------ ------------ Total other assets ...................... 3,383,120 3,338,612 ============ ============ Total .............................. $ 11,692,624 $ 9,743,823 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable and accrued expenses ....... $ 1,594,655 $ 1,809,162 Deferred stock appreciation rights .......... 701,517 69,855 Preferred dividends payable ................. 195,384 316,926 ------------ ------------ Total current liabilities ............... 2,491,556 2,195,943 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 400,000 at December 31, 1996, 394,825 at March 31, 1997 ............... 9,115,664 8,976,716 Common stock, $.10 par value, 35,000,000 shares authorized: issued and outstand- ing 11,787,106 at December 31, 1996, 11,838,734 at March 31, 1997 ............ 1,178,711 1,183,874 Additional paid-in capital .................. 38,272,205 38,399,104 Notes receivable from stock sales ........... (200,000) (200,000) Accumulated deficit ......................... (39,165,512) (40,811,814) ------------ ------------ Total shareholders' equity .............. 9,201,068 7,547,880 ------------ ------------ Total .............................. $ 11,692,624 $ 9,743,823 ============ ============
See Notes to Consolidated Financial Statements 2 ACTV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, 1996 1997 ---------- ----------- Revenues: Sales revenues ............................ $ 343,522 $ 907,944 License fees from related party ........... 7,152 -- ---------- ----------- Total revenues ......................... 350,674 907,944 Cost of Sales ............................. 208,010 279,491 ---------- ----------- Gross profit .......................... 142,664 628,453 Expenses: Operating expenses ........................ 518,102 346,290 Selling and administrative ................ 1,530,619 1,984,845 Depreciation and amortization ............. 187,879 47,980 Amortization of goodwill .................. 106,593 106,593 Stock appreciation rights ................. 393,591 (277,037) ---------- ----------- Total expenses ......................... 2,736,784 2,208,671 Interest (income) ............................ (33,237) (58,137) ---------- ----------- Net loss ..................................... 2,560,883 1,522,081 Preferred stock dividend ..................... -- 124,221 ----------- ----------- Loss applicable to common stock shareholders ................................. $ 2,560,883 $ 1,646,302 =========== =========== Loss per common share ........................ $.22 $.14 Weighted average number of common shares outstanding .................................. 11,478,815 11,829,110 See Notes to Consolidated Financial Statements 3 ACTV, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, 1996 1997 ----------- ----------- Cash flows from operating activities: Net loss applicable to common stock holders .................................. $ 2,560,883 $ 1,646,302 ----------- ----------- Adjustments to reconcile net loss to net cash used in operations: Depreciation and amortization ................ 294,472 207,535 Stock appreciation rights .................... 393,591 (631,662) Common stock issued for preferred dividends ................................ -- 2,679 Common stock issued for services ............. 99,766 -- Changes in operating assets and liabilities: Loss from interest in ACTV Interactive ....... -- -- Accounts receivable .......................... 44,883 (523,151) Other assets ................................. (78,875) (40,445) Accounts payable and accrued expenses ........ 227,308 214,507 Education equipment inventory ................ (30,517) 9,093 Convertible preferred stock dividends payable .................................. -- 121,542 ----------- ----------- Net cash used in operating activities .......................... (1,610,255) (2,286,204) ----------- ----------- Cash flows from financing activities: Proceeds from sale of common stock ........... 1,903,485 -- Expense related to convertible preferred stock issuance ........................... -- (9,565) ----------- ----------- Net cash provided by (used in) financing activities 1,903,485 (9,565) Cash flows from investing activities: Investment in property and equipment ......... (169,033) (90,787) ----------- ----------- Net cash used in investing activities .......................... (169,033) (90,787) ----------- ----------- Net increase (decrease) in cash and cash equivalents ....................................... 124,197 (2,386,556) Cash and cash equivalents, beginning of period .......................... 3,531,782 6,520,756 ----------- ----------- Cash and cash equivalents, end of period ..................................... 3,655,979 4,134,200 =========== =========== See Notes to Consolidated Financial Statements 4 ACTV, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS THREE MONTHS ENDED MARCH 31, 1997 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) During 1996, the Company raised approximately $9.1 million in net proceeds from a private placement of 5% convertible preferred stock (the "Convertible Preferred Stock") issued by a wholly-owned subsidiary. The Convertible Preferred Stock is convertible into Common Stock of ACTV, Inc., beginning January 1, 1997, at discounts to the market price of the Common Stock that increase from 14% in January 1997 to a maximum of 30.375% in September 1997. After September 1, 1997, holders of the Convertible Preferred Stock will be 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 30.375% discount is applied for conversions. In addition, beginning in October 1997, the Company will have the right to redeem the Convertible 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 only if the closing price of the Company's Common Stock is above $9.00 for thirty consecutive trading days prior to redemption. Notwithstanding the foregoing, any or all of the Convertible Preferred Stock may be purchased by the Company from the holders at a price equal to the Redemption Price times 1.43627 at any time prior to October 1997. The Company believes that it is highly likely that the holders of the Convertible Preferred Stock will elect to convert their stock into Common Stock of the Company and, accordingly, has included the Convertible Preferred Stock in its consolidated statement of shareholders' equity. Management of the Company believes that its current funds will enable the Company to finance its operations at their present level for at least the next twelve months. Such belief is based on assumptions that could prove to be incorrect, in which case the Company may require additional financing during this period. Moreover, the Company believes that it will require additional funds of $25 million for the two InSports Regional Networks, whose launch and operation are planned during the next nine to twelve-month period. While the Company has engaged 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 such launches. 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, 1996. 3. The Company's balance sheets at March 31, 1997 and December 31, 1996 reflect credits to shareholders' equity of $55,000 and $27,500, respectively, 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 March 31, 1997 and December 31, 1996 also reflect a debit to shareholders' equity of $200,000 related to a non-recourse 5 loan made by the Company to an employee in August 1995 to purchase the Company's common stock by exercising options. The due date of the non-recourse loan corresponds with the respective expiration date of the option exercised. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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. (the "Company") was organized to develop and market ACTV's Individualized Programming, which permits each television viewer to control what he or she is watching by making seamless changes within the live or pre-recorded programming. Individualized Programming appears to be a standard TV program, but in fact is a multi-path telecast of several elements of programming material, such as instant replay, isolation cameras, statistical data, or alternative story lines. Since its inception, the Company has incurred operating losses approximating $41 million related directly to the development and marketing of the ACTV's Individualized Programming. ACTV's Individualized Programming is designed to work with both single and multiple channels of 6 MHz band-width and with different modes of transmission: cable, direct broadcast satellite ("DBS"), wireless cable, broadcast systems and distance learning networks. While it is compatible with one-way analog systems, the Company's emphasis is on the newer digital systems that have recently begun to be deployed. The chief markets presently targeted by the Company for ACTV's Individualized Programming are in-home entertainment and education (with an emphasis on distance learning and Internet applications). The Company seeks to exploit these markets, principally in the U.S., through licensing its Individualized Programming, by creating joint venture relationships, and by direct sales. In December 1996 the Company and FOX Sports Net entered into a master programming agreement that extends through June 30, 2003 and covers all FOX Sports Net programming. Under terms of the agreement, the Company has the right to offer enhanced FOX Sports Net programming to any distributor that carries the corresponding regional FOX Sports Net channel. The Company intends to enhance FOX Sports Net's professional and college sports programs as the basis for new individualized regional programming networks. FOX Sports Net will receive a share of subscriber fee and advertising revenue generated by future ACTV television networks located within FOX Sports Net regions. 6 FOX Sports Net is the domestic telecasting arm of the worldwide sports alliance recently formed between News Corporation, Liberty Media and TeleCommunications Inc. FOX Sports Net consists of eight owned and operated regional sports networks and six affiliated networks serving 40 million subscribers nationwide. The FOX Sports Net national agreement followed the completion of the Company's eighteen-month Individualized Programming trial within the TCI of Ventura County cable system in greater Los Angeles. Sports programming for the trial was supplied to ACTV by FOX Sports West. Viewers participating in the trial received individualized FOX Sports-West telecasts of Lakers and Clippers basketball, Kings and Ducks hockey, and California Angels baseball, among other offerings. Based on the success of the Los Angeles trial, the Company plans a commercial launch of two individualized networks over the next nine to twelve months within FOX Sports regions in Texas and Southern California. FOX Sports Southwest has 5.1 million homes in Texas, Louisiana, Arkansas, Oklahoma and nine New Mexico counties, while FOX Sports West reaches 4.4 million subscribers in the region from Los Angeles to San Diego and Phoenix. The planned regional networks, like the recently completed trial, will feature individualized FOX Sports regional programming. The Company will be responsible for the incremental content, transmission, delivery and master control costs incurred in connection with the production and distribution of the individualized programming to be presented through its regional networks. The Company has formed a wholly-owned holding company, Individualized Regional Sports Network, Inc. (InSports), and two operating subsidiaries of the holding company, Texas Individualized Television Network, Inc. and Los Angeles Individualized Television Network, Inc., to launch and operate the regional networks in the FOX Sports Southwest and West regions, respectively. The Company anticipates that its InSports regional networks will offer premium cable programming services that are advertiser-supported, with monthly subscription prices comparable to other U.S. premium channels. Although the Company's intention is to launch the InSports regional networks over the next nine to twelve month period, there is no assurance that it will secure the funding necessary to effect such launches, or that other factors might not delay or prohibit the successful implementation of the plan. The Company will direct initial marketing of the InSports regional networks toward the cable operators in each respective FOX Sports Net regional market who are buying digital set-top boxes. Expansion could follow in either additional FOX Sports Net regions or in other regional sports markets. The recently completed trial and the projected regional network expansion are 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. There can be no assurance that the regional networks, even if launched, will generate significant revenues for the Company. 7 The Company's objective in education is to create and deliver individualized instruction to the classroom through distance learning networks. ACTV's Individualized Programming enables students in remote classrooms to respond to questions during a televised lesson from the program's instructor. After choosing a response, each student receives individualized audio feedback based on his or her input. The instructor is able to create and include individualized segments in a TV lesson by means of the Company's easy-to-use digital television authoring software. This Windows-based application permits the instructor to enter questions into a computer and then record, in his or her own voice, individualized audio responses. The responses tell students more than whether they are right or wrong -- they provide explanations and reinforcement. During a live lesson telecast, the instructor receives an instantaneous graphical summary of the student responses on a monitor in the studio. This two-way communication enables each student to receive the benefit of individual attention, while the teacher gets real-time, empirical data on the effectiveness of the televised lesson. In March 1997, the Company released a new education service for the Internet, eSchool Online. eSchool Online's software enables instructors to stream web content to their students' desktop computers in sync with distance learning video content that is presented simultaneously. eSchool Online's user software provides each student with a PC interface that displays three separate instructional elements together on-screen: a television lesson received directly by the PC (or played on a TV adjacent to the computer; Internet web sites, delivered to each student's computer at pre-determined times during the lesson to support the televised content; and an interactive eSchool "chat" application, which promotes student collaboration and student/teacher dialogue. The Company's entertainment business is conducted through its wholly- owned subsidiary, ACTV Entertainment, Inc. ("ACTV Entertainment"). ACTV Entertainment, Inc. was formed in 1988 with ACTV, Inc. and Le Groupe Videotron ("LGV") of Canada as equal shareholders. In June 1993 the Company became the sole shareholder of ACTV Entertainment through an agreement that eliminated the royalty fees that LGV had been paying to the Company. Simultaneously with the change in ownership of ACTV Entertainment, LGV received a non-exclusive, royalty-free license to manufacture an analog set-top terminal with compatible ACTV Programming functionality and to produce ACTV Programming for its Videoway service. No ACTV Programming is currently in production under this license, except in the London, England cable systems that LGV has recently sold. The Company's education business, which accounts for all its current revenues, is conducted through its wholly-owned subsidiary, ACTV, Net, Inc. (formerly ACTV Interactive, Inc.). ACTV Net, Inc. was formed in 1992, first as a partnership between the Company and a subsidiary of the Washington Post Company (the "Post Company"), with the subsidiary of the Post Company owning a 51% share. In 1994, the Company purchased the Post Company's full 51% interest in ACTV Interactive. For purposes of discussing the combined statements of the Company and its subsidiaries, all intercompany items have been eliminated. RESULTS OF OPERATIONS Comparison of Three Month Periods Ended March 31, 1997 and March 31, 1996 8 During the three month period ended March 31, 1997 ("First Quarter 1997"), the Company's revenues increased approximately 2.6 times, to $907,944, from $350,674 in the three month period ended March 31, 1996 ("First Quarter 1996"). In the more recent quarter, most of the Company's revenues derived from distance learning education sales. Revenues in First Quarter 1995 were derived from sales to the education market as well as from license and executive producer fees. The cost of sales, as a percentage of sales revenue, decreased to 31% in the more recent quarter as compared to 59%, in the corresponding 1996 quarter. The decrease was the result of a preponderance of distance learning sales in more recent quarter, which carry a higher profit margin than much of the Company's other revenue sources. Total expenses excluding cost of sales and interest expense decreased approximately 19%, by $528,113 in First Quarter 1997, to $2,208,671, from $2,736,784 in First Quarter 1996. The decrease was due principally to lower stock appreciation rights (SARs) expense, and depreciation expense. The Company recognized net income related to SARs, in the amount of $277,037, in the more recent quarter, as compared to an expense of $393,591 in the corresponding period last year. The difference was the result of a decrease in the price of ACTV, Inc.'s common stock during the First Quarter 1997. The Company also incurred higher research and development costs in First Quarter 1997 related principally to digital set-top terminal software and Internet product development. Depreciation and amortization expense decreased $139,899 in First Quarter 1997 to $154,573, from $294,472 in First Quarter 1996, due to the full depreciation of video program inventory in 1996. The Company incurred no interest expense in the First Quarter of 1997, or the First Quarter of 1996. Interest income in First Quarter 1997 was $58,137, an increase of over 75%, compared with $33,237 in First Quarter 1996. The increase resulted from higher available cash balances and prevailing market interest rates in the more recent period. For the quarter ended March 31, 1997, the Company accrued $124,221 for the payment of dividends to holders of convertible preferred stock issued in August 1996 by one of its wholly-owned subsidiaries. The Company paid $2,679 in preferred dividends during First Quarter 1997 by issuing shares of common stock of ACTV, Inc. For First Quarter 1997, the Company's net loss applicable to common shareholders was $1,644,302 or $.14 per share, a decrease of 1.6 times compared to the net loss of $2,560,883, or $.22 per share, in First Quarter 1996. The decrease in net loss during the more recent quarter was the result of significantly higher revenues combined with an overall reduction in total expenses. Comparison of Three Month Periods Ended March 31, 1996 and March 31, 1995 During the three month period ended March 31, 1996 ("First Quarter 1996"), the Company's revenues increased approximately 3%, to $350,674, from $341,634 in the three month period ended March 31, 1995 ("First 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 First Quarter 1995 were derived from the education market. 9 Cost of sales in First Quarter 1996 was $208,010, a 139% increase compared to First Quarter 1995's cost of sales of $87,101. The Company's gross margin declined to 41% in the more recent quarter, from 75% in the corresponding 1995 quarter. The decline was due to the inclusion in the more recent quarter 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 First Quarter 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 increased approximately 19% in First Quarter 1996, to $2,736,784, from $2,299,282 in First Quarter 1995. The increase was due principally to higher selling and administrative and operating expenses associated with the Company's operation of its Los Angeles Regional Network, which had not yet been launched during First Quarter 1995. The Company also incurred higher research and development costs in First Quarter 1996 related to an ongoing distance learning project, new initiatives in digital set-top terminal software, and Internet product development. Depreciation and amortization expense increased in First Quarter 1996 to $294,238, from $215,272 in First Quarter 1995, due to greater depreciation costs associated with equipment purchased by the Los Angeles Regional Network. Interest expense declined to $0 in First Quarter 1996, from $40,262 in First Quarter 1995. During 1995, the Company paid in full all of its short and long-term interest bearing obligations. Interest income in First Quarter 1996 was $33,237, an increase of 12% compared with $29,779 in First Quarter 1995. The increase resulted from higher available cash balances and prevailing market interest rates in the more recent period. The Company recorded other income of $8,279 in First Quarter 1995 arising from reimbursements of expenses recognized in prior periods, compared to other income of $0 in First Quarter 1996. The Company's net loss in First Quarter 1996 before extraordinary gain increased approximately 25%, to $2,560,883, or $.22 per share, from $2,046,953, or $.22 per share, in First Quarter 1995, the result of greater selling and administrative and operating expenses and higher cost of sales. The Company recorded an extraordinary gain of $94,117 in First Quarter 1995 due to the discounted prepayment of a note payable. Net loss in First Quarter 1995 after this extraordinary gain was $1,952,836, or $.21 per share. 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 March 31, 1997, the Company had an accumulated deficit of approximately $40.8 million. The Company's cash position on March 31, 1997 was $4,134,200, compared to $6,520,756 on December 31, 1996. During First Quarter 1997 the Company used $2,286,204 in cash for its operations, compared with $1,610,255 in First Quarter 1996. The increase in First Quarter 1997 was due principally to higher operating and selling and administrative expenses. The Company met its cash needs in First Quarter 1997 from the remaining proceeds from the private sale of convertible preferred stock effected in August 1996. The Company met its cash needs in First Quarter 1996 from the remaining proceeds from private sales of common stock effected in 1995, as well as from sales of common stock totaling $1.9 million that were concluded during First Quarter 1996. 10 With respect to investing activities, in First Quarter 1997 and 1996 the Company used cash of $90,787 and $169,033, respectively. Investing activities, in the more recent quarter, were related to leasehold improvements, while such activities in the 1996 Quarter related to equipment purchases for the Los Angeles trial. The Company's balance sheets at March 31, 1997 and March 31, 1996 reflect expense accruals of $69,855 and $960,474, respectively, related to the Company's stock appreciation rights plan. The Company believes that it may be required to expend approximately $1.1 to $1.5 million during 1997 to facilitate the completion of current research and development projects, relating principally to firmware for digital set-top converter boxes, upgraded software for its entertainment master control facilities and Internet software applications. Management of the Company believes that its current funds will enable the Company to finance its operations at their present level for at least the next twelve months. Such belief is based on assumptions that could prove to be incorrect, in which case the Company may require additional financing during this period. Moreover, the Company believes that it will require additional funds of $25 million for the two InSports Regional Networks whose launch and operation are planned during the next nine to twelve-month period. While the Company has engaged 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 such launches. The Company does not have any material contractual commitments for capital expenditures. Statement of Financial Accounting Standards No. 128. Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings per Share, effective for interim and annual periods ending after December 15, 1997, establishes standards for computing and presenting earnings per share ("EPS") and simplifies the standards for computing EOS currently found in Accounting Principles Board Opinion No. 15, Earnings Per Share. Common stock equivalents under APB No. 15, with the exception of contingently issuable shares (shares issuable for little or no cash consideration), are no longer included in the calculation of primary, or basic EPS. Under SFAS No. 128, contingently issuable shares are included in the calculation of primary EPS. The Company has determined that the adoption of this statement will have no material effect on the financial statements. Statement of Financial Accounting Standards No. 129. SFAS No. 129, Disclosure of Information about Capital Structure, effective for periods ending after December 15, 1997, establishes standards for disclosing information about an entity's capital structure, for all entities. The statement requires disclosure of the pertinent rights and privileges of various securities outstanding (stock, options, warrants, preferred stock, debt and participation rights) including dividend and liquidation preferences, participant rights, call prices and dates, conversion of exercise prices and redemption requirements. Adoption of this statement will have no effect of the Company as it currently discloses the information specified. Impact of Inflation 11 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 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. 12 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: May 13, 1997 /s/ William C. Samuels ------------ ---------------------- William C. Samuels Chairman, Chief Executive Officer and Director Date: May 13, 1997 /s/ Christopher C. Cline ------------ ------------------------ Christopher C. Cline Senior Vice President (principal financial and accounting officer) 13 EXHIBIT 11 ACTV, INC. AND SUBSIDIARIES COMPUTATION OF LOSS PER SHARE Three Month Period Ended March 31, 1996 1997 ----------- ----------- Weighted average shares outstanding ............ 11,478,815 11,829,110 Common stock equivalents ....................... -- -- ----------- ----------- Total ................................. 11,478,815 11,829,110 =========== =========== Net loss .................................... $ 2,560,883 $ 1,646,302 =========== =========== Loss per share applicable to common shareholders ............................................... $.22 $.14 14 EX-27 2 ACTV FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL STATEMENTS. 0000854152 ACTV Financial Data Schedule 3-MOS DEC-31-1997 MAR-31-1997 4,134,200 0 933,344 0 328,411 5,632,400 1,542,739 769,928 9,743,823 2,195,943 0 1,183,874 0 8,976,716 (2,702,711) 9,743,823 907,944 907,944 279,491 2,208,671 124,221 0 0 (1,646,302) 0 (1,646,302) 0 0 0 (1,646,302) (.14) (.14)
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