ACTV INC /DE/, S-8, 1996-06-20

ACTV INC /DE/
S-8, 1996-06-20
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 1996

REGISTRATION STATEMENT NO. 33-
--------------------------------

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

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

FORM S-8

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

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

ACTV, INC.
(Exact name of Registrant as specified in its charter)

DELAWARE 4894 94-2907258
- --------------------------------------------------------------------------------
(State or other (Primary Standard (IRS Employer
jurisdiction of Industrial Classification Identification No.)
incorporation or Code)
organization)

1270 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
(212) 262-2570
--------------
(Address, including zip code and telephone number,
including area code, of Registrant's principal executive offices)

CONSULTING AGREEMENT DATED FEBRUARY 15, 1996
------------------------------------------------
(Full Title of the Plan)

WILLIAM C. SAMUELS
PRESIDENT
ACTV, INC.
1270 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10020
(212) 262-2570
------------
(Name, address, including zip code and telephone number,
including area code, of agent for service)
------------
Copies To:
JAY M. KAPLOWITZ, ESQ.
GERSTEN, SAVAGE, KAPLOWITZ & CURTIN, LLP
575 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 752-9700

If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box [x]

<PAGE>

CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================
Title of Amount Being Proposed Maximum Proposed Amount of
Securities To Be Registered(1) Offering Price Per Maximum Registration Fee
Registered Security(2) Aggregate
Offering Price
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common
Stock, par value
$.10 per share
6,500(3) $4.03(4) $26,195 $100
---- -------

===============================================================================================================
Total
Registration
Fee $100
===============================================================================================================
</TABLE>

(1) Pursuant to Rule 416, the Registration Statement also relates to an
indeterminate number of additional interests to be offered or sold to
the employee benefit plan described herein.

(2) The price is estimated in accordance with Rule 457(h)(i) under the
Securities Act of 1933, as amended, solely for the purpose of
calculating the registration fee.

(3) These shares were issued pursuant to a consulting agreement between
the Company and Mr. Charles Payne dated February 15, 1996.

(4) Based on the average of the closing bid and asked prices per share of
the Common Stock as quoted by the National Association of Securities
Dealers Automated Quotation System on May 27, 1996.

(ii)

<PAGE>

ACTV, INC.
-------

CROSS-REFERENCE SHEET
(BETWEEN ITEMS OF FORM S-3 AND PROSPECTUS)
--------
<TABLE>
<CAPTION>
FORM S-3 ITEM AND CAPTION PROSPECTUS CAPTIONS
- ------------------------- --------------------
<S> <C> <C>
1. Forepart of Registration Front Cover Page
Statement and Cover Page
of Prospectus

2. Inside Front and Outside Inside Front and Outside Back Cover
Back Cover Pages of Prospectus Page; Additional Information,
Incorporation of Certain Documents
by Reference

3. Summary Information and Risk The Company; Risk Factors
Factors

4. Use of Proceeds Use of Proceeds

5. Determination of Offering Price Inside Front Cover

6. Dilution *

7. Selling Security Holders Selling Stockholder

8. Plan of Distribution Plan of Distribution

9. Description of Securities *
to be Registered

10. Interests of Named Experts Legal Matters, Experts
and Counsel

11. Material Changes Risk Factors

12. Incorporation of Certain Incorporation of Certain Information
Information by Reference by Reference

13. Disclosure of Commission Indemnification of Officers
Position on Indemnification and Directors
for Securities Act Liabilities
</TABLE>

* Not Applicable

(iii)

<PAGE>

EXPLANATORY NOTE

This Registration Statement on Form S-8/S-3 relates to the registration of 6,500
shares (the "Shares") of Common Stock, par value $.10 per share (the "Common
Stock") of ACTV, Inc., a Delaware Corporation ("ACTV" or the "Company") by the
Company, on behalf of Charles Payne (the "Selling Stockholder"). Such Shares
were issued to the Selling Stockholder in connection with a written consulting
agreement between the Selling Stockholder and the Company, dated February 15,
1996 (the "Consulting Agreement"). A Prospectus has been prepared in accordance
with the requirements of Form S-3 pursuant to General Instruction C of Form S-3
relating to the Shares.

PART I

INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS

Pursuant to the Note to Part I of the Form S-8, the information required by Part
I is not required to be filed with the Securities and Exchange Commission (the
"Commission").

The Company will provide without charge to each person to whom a copy of a
Section 10(a) Prospectus hereunder is delivered, upon the oral or written
request of such person, a copy of any document incorporated in this Registration
Statement by reference, except exhibits to such documents. Requests for such
information should be directed to ACTV, Inc., 1270 Avenue of Americas, New York,
New York 10020, Attention: Secretary, telephone number (212) 262- 2570.

(iv)

<PAGE>

PROSPECTUS
ACTV, INC.

6,500 SHARES OF COMMON STOCK

Par Value, $.10 Per Share

This Prospectus relates to the offer and sale of 6,500 shares (the "Shares") of
Common Stock, par value $.10 per share (the "Common Stock"), of ACTV, Inc., a
Delaware corporation ("ACTV" or the "Company"), by the Company, on behalf of
Charles Payne (the "Selling Stockholder"). The Shares were issued to the Selling
Stockholder pursuant to a written consulting agreement between the Selling
Stockholder and the Company, dated February 15, 1996 (the "Consulting
Agreement"). The Company's Common Stock is traded on the over-the- counter
market on the NASDAQ Small Cap Market ("NASDAQ") and the Boston Stock Exchange
("BSE"). On May 27, 1996, the closing bid and asked quotations for the Common
Stock as reported on NASDAQ were 3 15/16 and 4 1/8 per share, respectively.

The Shares covered by this Prospectus may be offered and sold from time to time
directly by the Selling Stockholder or through brokers in the over-the-counter
market or otherwise at market prices prevailing at the time of such sales or in
one or more negotiated transactions at prices acceptable to the Selling
Stockholder. No specified brokers or dealers have been designated by the Selling
Stockholder and no agreement has been entered into in respect of brokerage
commissions or for the exclusive or coordinated sale of any securities which may
be offered pursuant to this Prospectus. The net proceeds to the Selling
Stockholder will be the proceeds received by him upon such sales, less brokerage
commissions, if any. The Company will pay all expenses of preparing and
reproducing this Prospectus. The Company will receive proceeds from the exercise
of the Options, but will not receive any other proceeds from any sales by the
Selling Stockholder.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THIS SECURITIES AND
EXCHANGE COMMISSION (THE "COMMISSION") OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.

NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN AS CONTAINED OR
INCORPORATED BY REFERENCED HEREIN AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY SECURITIES BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY
NOT BE LAWFULLY BE MADE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THE INFORMATION HEREIN SINCE
THE DATE HEREOF. SEE "RISK FACTORS."

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

The date of this Prospectus is June , 1996

<PAGE>

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports and other information with the Commission. Such reports, proxy
statements, registration statements and other information can be examined
without charge at the public reference section maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 and, upon payment of the fees
prescribed by the Commission, copies may be obtained therefrom and at certain of
the Commission's Regional Offices located at 7 World Trade Center, New York, New
York 10048, 5757 Wilshire Boulevard, Los Angeles, California 90024; and 500 West
Madison Street, Northeastern Atrium Center, Suite 1400, Chicago, Illinois
60661-2511.

The Company's Common Stock is quoted on The Nasdaq Stock Market ("NASDAQ").
Reports, proxy statements, information statements, and other information
concerning the Company can be inspected at the office of the National
Association of Securities Dealers, Inc., located at 1735 K Street, N.W.,
Washington, DC 20006.

This Prospectus is part of a registration statement on Form S-8/S-3 (the
"Registration Statement") under the Securities Act of 1933 (the "Securities
Act") which the Company has filed with the Commission for the registration of
the securities offered by this Prospectus. This Prospectus does not contain all
of the information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company,
reference is hereby made to such Registration Statement, exhibits and schedules,
which may be obtained from the Commission's principal office in Washington,
D.C., upon payment of the fees prescribed by the Commission.

<PAGE>

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The following documents filed by the Company with the Commission are
incorporated herein by reference:

(1) The Company's Registration Statement on Form S-1 (File No. 33-
34618) which was declared effective on May 4, 1990.

(2) Annual Report on Form 10-K for the year ended December 31, 1994.

(3) Annual Report on Form 10-K/A-1 for the year ended December 31,
1994.

(4) Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1995.

(5) Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1995.

(6) Quarterly Report on Form 10-Q for quarterly period ended
September 30, 1995.

(7) Annual Report on Form 10K for year ended December 31, 1995.

(8) Annual Report on Form 10K/A-1 for year ended December 31, 1995.

(9) Post-Effective Amendment No. 1 to The Company's Registration
Statement on Form S-1 (File No. 33-63879) which was declared
effective on March 20, 1996.

(10) Quarterly Report on Form 10-Q for quarterly period ended March
31, 1996.

In addition to the foregoing, all documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the
filing of a post-effective amendment indicating that all of the securities
offered hereunder have been sold or deregistering all securities then remaining
unsold shall be deemed to be incorporated by reference in this Prospectus and to
be part hereof from the date of filing of such documents.

Any statement contained in a document incorporated or deemed to be incorporated
by reference in this Prospectus shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus. All information appearing in this
Prospectus is qualified in its entirety by the information and financial
statements (including notes thereto) appearing in the documents incorporated
herein by reference, except to the extent set forth in the immediately preceding
statement.

The Company will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon the oral or written request of such person, a copy
of any document incorporated in this Prospectus by reference, except exhibits to
such information, unless such exhibits are also expressly incorporated by
reference herein. Requests for such information should be directed

<PAGE>

to ACTV, Inc., 1270 Avenue of the Americas, New York, New York 10020, Attention:
Secretary, telephone number (212) 262-2570.

<PAGE>

THE COMPANY

ACTV, Inc. ("ACTV" or the "Company") has developed proprietary Programming
Technologies (the "Programming Technology") that individualize television
programming. ACTV's Programming Technology permits the delivery of
individualized television, which, in the Company's view, significantly enhances
the quality of most genres of television programming. ACTV's Programming
Technology provides instant and seamless changes in the live or prerecorded
video picture and/or audio and/or graphics in response to the various selections
supplied by each viewer. A specially prepared ACTV program (the "ACTV Program"
or "ACTV Programming") is like a linear TV program, except that it appears to be
individualized for each viewer. (Linear programs are standard television
programs that can be viewed only as created and do not offer the viewer the
option to make choices as to the content of the program or to respond to the
contents of the program in an individualized way.) There is no limit to the
number of viewers who can interact simultaneously with an ACTV Program.

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 Company also believes that the Programming Technology can enhance the
quality of television advertising by enabling the advertiser to customize each
commercial for various audience segments. It is the Company's objective to seek
advertiser support for its individualized home entertainment networks.

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.

The Company has eight subsidiaries, which include a national entertainment
company, a national education company, a three-dimensional company, and five
regional television networks: ACTV Entertainment Inc., a New York corporation
("ACTV Entertainment") incorporated on March 9, 1988, ACTV Interactive, Inc., a
Delaware corporation incorporated on July 8, 1992, 3D Virtual, Inc., a Delaware
corporation incorporated on July 20, 1995, The Los Angeles Individualized
Television Network, Inc., a Delaware corporation incorporated on March 7, 1995,
The San Francisco Individualized Television Network, Inc., a Delaware
corporation incorporated on December 22, 1995, The Chicago Individualized
Television Network, Inc., a Delaware corporation incorporated on December 22,
1995, The New York Individualized Television Network, Inc., a Delaware
corporation incorporated on December 22, 1995, and The

<PAGE>

Atlanta Individualized Television Network, Inc., a Delaware corporation
incorporated on December 22, 1995. Unless otherwise indicated, all references in
this Prospectus to the Company or ACTV include ACTV and its eight subsidiaries.

ACTV was incorporated under the laws of the State of Delaware on July 24, 1989.
The Company is the successor, by merger effective November 1, 1989, to ACTV,
Inc., a California corporation, organized on July 11, 1983. The Company's
executive offices are located at 1270 Avenue of the Americas, New York, New York
10020, telephone number (212) 262-2570.

ENTERTAINMENT

The Company anticipates that its individualized programming will be launched
through regional premium cable programming services that are
advertiser-supported, with monthly subscription prices comparable to other U.S.
premium channels.

In March 1995, the Company formed The Los Angeles Individualized Television
Network, Inc., one of its wholly-owned operating subsidiaries, to operate the
Company's individualized television trial in Southern California and the planned
regional television network that would roll-out to the potential 4.8 million
sports subscribers in the region that reaches from Los Angeles to San Diego and
Phoenix, if the trial is successful.

The trial, which marked the introduction of the Company's first U.S. regional
individualized network (the "Regional Network"), commenced in the Los Angeles
area in May 1995. The trial involves 1,000 cable subscribers and will run
throughout 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 Sports, which is a joint venture of Telecommunication,
Inc.'s ("T.C.I.") Liberty Media and the News Corporation. Prime Sports-West has
4.8 million subscribers in the Southwest region of the U.S. Prime Sports - West
is providing the Company with access to all its regional sports programming at
no cost to the Company. Similarly, Cable News Network, Inc. ("CNN") provides, at
no cost to the Company, access to Prime News, Sports Tonight, Inside Politics
and other selected shows. Similarly, the Game Show Network ("GSN"), a subsidiary
of Sony Entertainment, Inc. ("Sony") provides GSN programming and Viacom's
Nickelodeon children's programming at no cost to the Company in return for
consumer research, pursuant to agreements entered into in November 1995 and May
1996, respectively. The cable operator for the Regional Network is T.C.I.'s
Ventura County Cablevision.

In all cases, the Company is responsible for the incremental content,
transmission, delivery and master control costs incurred in connection with the
enhancement of the Prime Sports West CNN, Sony and Nickelodeon programming.

The Company entered into the arrangement with Prime Sports in February 1994,
with respect to the Regional Network. Assuming future commercialization of a
regional network in the footprint of Prime Sports - West no later than December
31, 1996, Prime Sports - West would receive an exclusive in its footprint for
sports programming and the companies will pursue a business understanding of
revenue sharing anticipated to include a license fee paid to Prime Sports - West
for each subscribing household on a monthly basis.

<PAGE>

The Company entered into the agreement with CNN in August 1995 with respect to
the Regional Network. Upon commercialization, CNN and ACTV will negotiate a
royalty agreement and/or advertising split for use of CNN programming. In
addition, CNN shall receive protection until December 31, 1997 to become ACTV's
exclusive provider of national and international news. CNN will also be given
the opportunity to be an equity investor in any new regional networks created by
ACTV.

Regional Network viewers, in addition to sports, news game shows and children's
programming, are able to individualize education programs produced by ACTV.

The Company plans, assuming a successful test phase, to direct initial marketing
of the Regional Network toward a majority of Ventura City Cablevision's 90,000
subscribers in the Los Angeles and Ventura County areas. In addition, expansion
could follow in other Prime Sports - West markets and, in stages, in other
regional markets within the U.S. The Company has established four new
wholly-owned subsidiaries which would serve as additional regional
individualized networks covering the San Francisco, Chicago, New York and
Atlanta regions in the event that the Company decides to expand and provide the
services provided by the Regional Network in other regions across the U.S. To
date, the four 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. There
can be no assurance that the results predicted with respect to the Regional
Network will be realized, or if realized, will generate significant revenues for
the Company.

ACTV first introduced its individualized programming applications for
entertainment outside the United States through a license with Le Groupe
Videotron, Ltee. ("LGV"), the second largest Canadian cable/broadcast television
company. The license was modified in June 1993 whereby ACTV gave up all its
royalty income for Canada and Europe. See "Reorganization of ACTV Entertainment
LGV Agreements."

EDUCATION

ACTV's principal strategy in education is to become the leading individualized
programming technology in the developing field of distance learning, in which
ACTV Programming, both live and pre-recorded, can be transmitted simultaneously
to multiple sites in a satellite, fiber or microwave network.

ACTV is currently developing new two-way analog and digital programming
technologies for distance learning. This is a point-to-multipoint interactive
broadcast system that can deliver prerecorded interactive lessons or integrate
interactive segments into live distance learning lessons. By using a simple
remote control, the student is able to alter program content to suit specific
needs and interests. Students receive individualized responses to their input,
and at the end of the lesson, the classroom teacher receives a printout of the
performance of each class member.

ACTV's new distance learning system is being commercially introduced, with an
installation in Georgia, that the Company believes will represent one of the
industry's most advanced distance learning projects. ACTV and the State of
Georgia have entered into an agreement through which ACTV's distance learning
system and software will be integrated into the Georgia

<PAGE>

Statewide Academic and Medical System ("GSAMS"), an existing fully interactive
service providing audio, video and data to classrooms.

In addition, 127 individualized television titles have been produced and
introduced into the kindergarten to 12th grade market. The programs focus on
reading, math, and vocational education. To date, programs have been sold to
approximately 300 different schools across the U.S., along with an ACTV
classroom system -- a terminal with compatible ACTV Programming functionality
that currently permits up to 24 students in a classroom to view single channel
ACTV Programs simultaneously. Education products are marketed through a direct
and distributor sales force.

Individualized programming is produced jointly through license agreements with
educational publishers, including Turner Educational Services, Inc. ("Turner"),
Phoenix, Bergwall, AIT, AIMS, Hasty Pudding and TakeOff.

In 1995, the Company also signed a distance learning agreement with General
Instrument Corporation ("GI"). ACTV's Programming Technology for distance
learning will be integrated with GI's DigiCipher'r' system. The new digital
system will be called "DigiCipher/ACTV Distance Learning System" and will allow
programming networks to develop individualized programming and distribute it
digitally to their customers.

The Company markets its products through its wholly owned subsidiary ACTV
Interactive, Inc., which was formed in 1992. Originally a joint venture general
partnership with the Washington Post Company (the "Post Company") , ACTV
Interactive became a wholly owned subsidiary of the Company in March 1994.

SITE-BASED ENTERTAINMENT AND INTERNET APPLICATIONS

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. In April, 1996, the Company invested approximately
$250,000 in the Greenwich Group.

The Company will receive an 8% to 10% royalty of annual ticket sales per
theater, dependent upon each theater's volume. The Company will receive a
minimum royalty 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 is not paid, the Company has the right to cancel its license as to
future theaters.

The first theater opened in the Mall of America in Minneapolis, Minnesota on
November 18, 1995. Recently, the Greenwich Group reached an agreement with
United Artists Theatre Circuit ("UA") to build one to five theaters within UA's
entertainment complexes. The first theater will be built in the Meadows Mall in
Denver, Colorado. The Greenwich Group will need to raise additional capital in
order to complete this project.

In July 1995, the Company established a new wholly-owned subsidiary, 3D Virtual,
Inc., to explore the commercial possibilities of integrating three-dimensional
("3D") technology and the Company's Programming Technology, using new technology
for which a patent is currently pending. Initial business activity for the
development of a prototype has just commenced.

<PAGE>

In December 1995, the Company entered into a joint venture agreement with
EarthWeb, LLC, a developer of internet technologies and a pioneer in JAVA(TM)
language applications, to develop new joint internet software applications. The
first program being developed, Hyper TV, will enable television producers to
launch web pages that directly correspond to their video content during a
broadcast.

ACTV PROGRAMMING TECHNOLOGY

The ACTV Programming Technology provides instant and seamless changes in the
live or prerecorded video picture and/or audio and/or graphics based on various
selections made by viewers. The program appears to be a standard TV program, as
if it were individualized for each viewer. Viewer selections are made through a
four button remote control, thereby limiting the viewer's number of choices when
inputting each response to four answers previously anticipated by the program's
creators.

ACTV's process of creating individualized television programming involves viewer
selection from a multiple number of frame-synchronized video, graphics, and/or
audio signals delivered at one time. The viewer sees and/or hears only one of
the signals at a given moment; the other signals are transparent. Using a remote
control, the viewer interacts with the television by making selections or
decisions called for by the specially prepared programming. In response to
viewer's inputs, the ACTV Programming Technology, which uses a microprocessor,
automatically switches at pre-determined intervals between various segments of
the multiple signals. In one-way analog transmission, this switching will occur
in the viewer's cable box, such as LGV's Videoway, while with two way
transmission, it may occur at the source of the transmission. The viewer cannot
detect when such a switch takes place because it occurs instantly and with frame
accuracy.

The results appear seamless and uninterrupted -- for the viewer the programming
is completely individualized. Although an individualized program and its
associated branches are taped in a normal linear fashion, the program, when
shown, has thousands of possible permutations and combinations available for
each viewer to experience. The particular version seen is based on each viewer's
individually selected preferences and inputs. An unlimited number of independent
viewers can interact with an ACTV Program simultaneously.

The ACTV microprocessor receives digital information from codes embedded into
the video program material. It thus maintains "memory" on the progress of the
viewer and provides automatic branching. At appropriate times during the
program, the microprocessor circuitry will make branch switches automatically,
accumulate data, recall information, create graphics and/or implement a
pre-programmed set of instructions.

In single channel analog (6MHz of band-width) applications, ACTV's Programming
Technology can individualize audio and/or graphics, based on multiple signals.
When additional analog channels of band-width are available, video can be
individualized as well. In digital systems multiple video, audio and graphics
can be individualized in 6MHz of band-width.

To develop individualized programming the Company generally seeks to form joint
ventures or licensing agreements with producers of standard linear shows or with
networks that have rights to such shows. ACTV Programming can be created in a
number of ways: enhancing existing programs that have been produced in a
standard linear format, adding "piggy-back" branch alternatives during the
shooting of ongoing shows, or creating entirely original productions that

<PAGE>

are solely for ACTV's purposes.

The cost of ACTV original productions has been on average approximately 20%
higher than a linear version of the same program of comparative length. However,
production costs are significantly lower than regular linear television shows
when existing material can be enhanced, or when productions are "piggy-backed."
Production costs vary significantly based upon the nature and type of
programming to be produced. An advantage of individualized programming is its
higher repeatability, as compared to standard programming, since an
individualized program's cost can be amortized over a greater number of
showings.

The types of entertainment programs that the Company plans to emphasize are
sports, news, education, game shows, children's programs and music. The Company
envisions that its in-home services will be supported by individualized
advertising. The programming focus for education is reading, math and vocational
education. Examples of ACTV Programming are:

1) Sports. Sporting events in the ACTV individualized format allow each viewer
in essence to become the director of the program by selecting close-ups, wide
angle shots, replays, statistics, player interviews and other features as may be
provided. ACTV's Programming Technology also allows the viewer to respond to
questions posed throughout the game. The system's memory records these responses
and winners may be offered promotional premiums, such as tickets to future
games.

2) News. In the first segment of a news program, viewers can choose between
in-depth follow-ups of headline stories. Later in the program, viewers can
choose segments on different categories of news (international, financial,
entertainment, politics, etc.).

3) Children's Programs. ACTV's Programming Technology allows children to
participate in television programs by answering questions from the characters on
screen, giving the characters advice -- even changing the plot of the program.
In addition to this dialogue children can have with the characters, children can
also be asked to predict the outcome of events, or as with sports, see an event
from different angles.

4) Music. Viewers are able to select a particular music video they want to see,
or the order they want to see them. Viewers may also choose to see the lyrics of
a music video, or access other information about the musicians. In addition,
with live or prerecorded concert performances, viewers can select from up to
four camera angles in a manner similar to live sports broadcasting.

5) Game Shows. The Programming Technology allows game show viewers to actively
participate in the game. They can decide which celebrity team to play on, enter
their answers and receive individualized responses to their choices. The
system's memory ability keeps the viewers informed of their performance and
provides final results at the conclusion of the show. This provides advertisers
and sponsors with the opportunity to offer promotional premiums to viewers with
the best scores.

6) Advertising. ACTV's Programming Technology offers television advertisers
unique opportunities to target their message. Commercials can be targeted
demographically: Men, women, boys and girls can all see different commercials
during the same commercial break. By asking the viewer basic questions at the
beginning of the program, the ACTV Programming Technology can recall this
information during a commercial break and based upon such

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<PAGE>

information send the viewer the appropriate advertisement. A second advantage
for advertisers is the concept of individualized commercials. For example,
before a commercial break in a sporting event, viewers are asked which type of
car they would like to hear about: sedan, truck, sport utility or luxury sedan.
ACTV's Programming Technology records this choice, then sends the appropriate
commercial to each viewer. This same choice can be recalled at a later
commercial break to provide additional information.

7) Live Distance Learning. Distance learning ("DL") networks typically involve a
teacher broadcasting a lesson to dozens or even hundreds of remote classroom
sites. ACTV's Programming Technology for DL allows the DL teacher to create
questions or offer choices relating to the lesson and pre-record individualized
responses. At selected points in the lesson, the DL teacher can initiate the
questions and interactions, with each student across the network receiving
individualized responses. In addition, the ACTV Programming Technology gives the
teacher immediate feedback on the students' responses, allowing the teacher to
pace the lesson accordingly. The system's memory component can recall each
student's performance throughout the entire semester, giving the teacher a
detailed accounting of their progress.

8) Educational Programming. Younger classroom students learn basic reading and
math skills, and older students learn vocational and career skills, in
pre-recorded individualized television programs using the ACTV Programming
Technology. Just as in the case of the DL programming, as the pre-recorded
television program progresses, a teacher appears on screen and asks the students
questions about the material presented. Students respond to the questions, then
receive individualized feedback based on their answers. At the end of the
lesson, the classroom teacher receives a report detailing the results of the
performance of the entire class, as well as the performance of each individual
student.

RESEARCH AND DEVELOPMENT

The Company is engaged in a field characterized by extensive research efforts
and rapid, significant technological change. During 1993, the Company began its
current research and development projects, relating primarily to the development
of a new analog/digital two-way distance learning system. There can be no
assurance that research or development by others will not render the Programming
Technology obsolete or that the research and development performed by the
Company and/or its licensees and joint venture partners will continue or will be
successful. The Company entered into a collaborative agreement in August, 1995
with The David Sarnoff Research Center ("Sarnoff") to investigate and
potentially develop digital applications of the Programming Technology.
Currently, the Company, Sarnoff, and General Instrument Corporation ("GI") are
working together to incorporate ACTV's programming technology into GIs new
MPEG-2 digital terminal.

The Company expended approximately $250,000 in the first quarter of 1996 related
to these research and development projects and may spend an additional $500,000
during the remainder of 1996.

GOVERNMENT REGULATION

The Company believes, on the basis of its review of current legislation and
regulations that neither its present nor any proposed commercial implementation
of the ACTV Programming Technology on distance learning networks, closed circuit
television systems, cable, DBS or MMDS will require governmental license or
approval. Certain broadcast applications and

<PAGE>

copper pairs with ADSL may require governmental approval. No assurance can be
given that applicable laws will not change. In the event such approval were to
be required, there can be no assurance that the Company would be able to obtain
such approval or the licenses required for the further implementation of the
ACTV Programming Technology.

MARKETING AND PROGRAM PRODUCTION

The primary markets targeted by the Company for the ACTV Programming Technology
are in-home entertainment, education (with an emphasis on distance learning),
and site-based entertainment. The Company seeks to exploit these markets
principally in the US through licensing the Programming Technology, by creating
joint venture relationships, and by direct sales. To date, the Company's capital
requirements to develop the Programming Technology, produce ACTV Programming,
develop marketing approaches and strategic alliances, and to cover costs of
sales and general and administrative expenses, have been significant, resulting
in an accumulated deficit as of March 31, 1996 of approximately $32.9 million.

The Company will continue to implement a marketing program consisting of the
employment of sales and marketing personnel, contracting with sales and
marketing consultants, and the use of promotional efforts, including product
demonstrations and participation in trade shows and conferences. The Company
currently has two entertainment marketing executives, four educational sales
people and fifteen educational distributors.

In entertainment, the Company has licensed the Programming Technology to LGV and
The Greenwich Group and continues to seek other licensees and joint venture
partners both in and outside the United States. The Company is and will continue
to be dependent upon the ability of licensees and joint venture partners to
offer products and services that are commercially viable, and to actively
promote and distribute the Programming Technology.

Since 1993, ACTV has not been active with LGV in Canada and Europe and no longer
receives any royalty income from the license. Focus group testing in Los Angeles
that preceded the Prime Sports - West and CNN agreements indicated interest in
ACTV sports, news, game shows, and in its educational and children's
programming.

The Greenwich Group has licensed the Programming Technology for use in the
theater environment, principally in shopping malls. The first children's theater
opened in the Mall of America in Minneapolis, Minnesota, on November 18, 1995.

Programming for the Regional Network is being provided to ACTV by Prime Sports -
West,

a unit of Liberty Sports, which is a joint venture of Liberty Media and the News
Corporation. Prime Sports - West has approximately 4.8 million subscribers in
the Southwest region of the U.S., CNN, GSN and Nickelodeon. The cable operator
is Ventura County Cablevision, a subsidiary of TCI. See "BUSINESS -
Entertainment."

The Company has established four new wholly-owned subsidiaries which would serve
as additional regional individualized networks covering the San Francisco,
Chicago, New York and Atlanta regions in the event that the Company decides to
expand and provide the services provided by the Regional Network in other
regions across the U.S. To date, the four new wholly-owned subsidiaries have not
engaged in any business activities, nor does the Company have any present
intention to launch their activities. There can be no assurance that the results
predicted with respect to the Regional Network will be realized, or if realized,
will generate significant revenues for the Company.

The Company, its licensees or joint venture partners must produce and/or provide
individualized programming for the Company to continue commercial entertainment
operations in the U.S. For the most part, the Company, its licensees and joint
venture partners are dependent upon third parties as sources for the linear
programming that is to be enhanced into ACTV Programming. For the entertainment
market, all programming to date has been produced either through LGV or by the
Company itself.

With respect to the education market, the Company has executed non-exclusive
agreements with seven entities to obtain linear programming that it can enhance
to create ACTV Programs. Linear programs are standard television programs that
can be viewed only as created and do not offer the viewer the option to make
choices as to the content of the program or to respond to the program in an
individualized way.

The Company has entered into agreements with Turner Educational Services, Inc.,
Phoenix Learning Group, Bergwall Productions, Inc., The Hasty Pudding Puppet
Co., AIMS Media, Agency for Instructional Technology ("AIT") and Takeoff/Video
Educational Excellence. Each of these agreements gives ACTV worldwide, perpetual
marketing rights (except for the AIT agreement, which limits the rights to 15
years) to the programming produced. The companies are to receive quarterly
royalties, based on the number of units of ACTV Programs sold.

There can be no assurance that the Company will be successful in reaching
agreements with licensees and joint venture partners, that the Company's
strategy of marketing the Programming Technology through its licensees and joint
venture partners will be successful, or that the methods that its licensees and
joint venture partners choose to market the Programming Technology will be
successful. Further, the Company may be adversely affected by the financial and
business considerations of its licensees and joint venture partners. Future
joint venture and license agreements may provide that the licensees and joint
venture partners will receive equity interest in the Company and/or its
subsidiaries.

SET-TOP CONVERTERS, TERMINALS, AND OTHER INTERACTIVE DEVICES

The Company does not intend to manufacture set-top converters, terminals, video
servers, or other interactive devices.

In the entertainment market, ACTV signed, on June 8, 1993, a 20-year,
non-exclusive, royalty-free manufacturing license with LGV. The Videoway
terminal manufactured through

<PAGE>

LGV is an analog ACTV-compatible set-top converter available to potential
distributors of ACTV Programming. In April 1996, ACTV and General Instrument
Corporation ("GI") signed a non-exclusive manufacturing agreement for GI's
MPEG-2 digital terminal. The digital terminals are scheduled for delivery in
late 1996 or early 1997. The Company intends to grant licensees similar to the
one granted to LGV and GI to other manufacturers that are selected by the future
distributors of ACTV Programming.

ACTV's Programming Technology can work with different modes of transmission
(cable, DBS, broadcast, and MMDS), and is compatible with commonly available
one-way, analog systems. In addition, it is compatible with the newer digital
systems that are just starting to be deployed. Therefore, there are many ways to
design a distribution system that is compatible with ACTV's Programming
functionality. The Company believes that the incremental cost of adding ACTV
Programming functionality will not be significant in digital systems.

There can be no assurance that the Company will be successful in developing
additional manufacturing licenses.

In the education market, the Company entered into an arrangement in March 1995,
with General Instrument Corporation ("GI") pursuant to which ACTV's Programming
Technology for distance learning will be integrated with GI's DigiCipher system.
The DigiCipher is a digital decoder used by many distance learning networks that
distribute their television signal digitally and require that the signal be
decoded at their downlink sites. The new digital system will be called
"DigiCipher/ACTV Distance Learning System," and will allow programming networks
to develop individualized programming and distribute it digitally to their
customers. Under the arrangement, the companies will cooperate technically, each
paying their own costs, and GI would receive any revenues generated from the
DigiCipher decoder while the Company would receive any revenues generated from
the digital learning unit. At present, the Company and GI's concerted research
and technical work toward the development of the new digital system is in its
initial stage and will take most of the remainder 1996 to complete. There can be
no assurance that the new digital system will be developed, or if developed,
that it will generate significant revenues for the Company.

The Company executed a non-exclusive agreement in June 1992 with KDI Precision
Products, Inc. ("KDI") to manufacture ACTV's classroom and distance learning
systems, with compatible ACTV Programming functionality. KDI sells the systems
to ACTV at prices and in accordance with a delivery schedule agreed upon from
time to time. KDI also is a distributor of components such as television
monitors, VCRs, remote controls, printers and cabinets used in conjunction with
the systems. The agreement is subject to automatic renewal for additional
one-year terms unless terminated by either party on six-months' written notice.

KDI is currently the only manufacturer of the classroom and distance learning
systems. The Company believes that KDI can produce sufficient systems to meet
the anticipated needs of ACTV in the education marketplace. In the event that
KDI were unable to supply the systems, there can be no assurance that the
Company could produce sufficient systems or obtain sufficient systems from
another manufacturer at an acceptable price. The inability of ACTV to obtain
systems would have a material adverse affect on the business of the Company.

<PAGE>

CONSOLIDATION OF EDUCATIONAL PARTNERSHIP INTO ACTV

On July 14, 1992, ACTV Interactive, Inc. entered into a partnership agreement
with Post-Newsweek Education, Inc., a wholly-owned subsidiary of the Post
Company, pursuant to which ACTV Interactive was formed as a Delaware general
partnership, for the purpose of selling products and services incorporating the
ACTV Programming Technology to the education market. The Post Company received a
51% interest in ACTV Interactive; ACTV Interactive, Inc., a wholly-owned
subsidiary of the Company, received a 49% interest in ACTV Interactive.

In connection with the formation of the partnership, the Company entered into a
license agreement (the "License Agreement") with ACTV Interactive. Pursuant to
the License Agreement, ACTV Interactive was given licenses to exploit certain of
the Company's patents and related technology (collectively the "Patents") in the
creation and distribution of educational programming. The License Agreement
provided that the Company receive five percent (5%) of all revenues generated by
ACTV Interactive.

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 promissory note. The note was paid in full
in October 1995. The consideration paid by the Company for the Post Company's
full 51% interest in ACTV Interactive was determined after arms-length
negotiations between the parties. The Company and the Post Company agreed to the
amount of such consideration without receiving a valuation from a disinterested
third party.

REORGANIZATION OF ACTV ENTERTAINMENT AND THE LGV AGREEMENTS

In March 1988, the Company formed ACTV Entertainment as equal stockholders with
a subsidiary of LGV, Videotron Technologies Ltd. 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.

On June 8, 1993, LGV withdrew from its ownership in ACTV Entertainment, and the
Company became the sole shareholder in ACTV Entertainment under the terms of an
agreement with the subsidiary of LGV, thereby settling all outstanding legal
disputes between the companies.

While ACTV gained full ownership and control of ACTV Entertainment in the
settlement, it did agree to give up the royalty income it was receiving from its
Videoway terminal license with LGV for Canada and Europe ($3.00 per user per
year). Simultaneously with the June 8, 1993 change in ownership of ACTV
Entertainment, the 1987 LGV exclusive foreign license for Canada, Europe and the
Soviet Union was renegotiated. The new license provides LGV with a 20-year,
non-exclusive, royalty-free license to manufacture its Videoway terminal with
compatible ACTV Programming functionality. Videoway is an analog cable converter
box capable of providing a variety of advanced services, including standard
cable tuning and decoding capabilities, access to videotext, closed-captioning,
data banks, video games, software downloading and electronic mail. LGV is not
currently producing ACTV programming in Montreal and is in the process of
selling its London, England cable systems.

Under the modified license, LGV has a 20-year, non-exclusive, royalty-free
license to manufacture Videoway terminals that incorporate ACTV's Programming
Technology. The agreement also allows LGV to produce ACTV Programming itself for
a certain number of

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<PAGE>

potential Videoway subscribers in Canada (1,300,000), Europe (500,000), and the
United States (500,000). The license is subject to the condition that neither
LGV nor its sub-licensees receive any royalty or other fees with respect to ACTV
Programming, except for promotion and direct production expenses paid by LGV.
Any royalties from third parties will be paid exclusively to ACTV.

The Company and LGV entered into their original agreement during the infancy of
the development of interactive television. LGV had developed its Videoway TV
set-top converter, which, among other things, enabled it to provide its
subscribers with interactive capacity. The arrangement provided the Company with
an outlet for its ACTV Programming while providing LGV with interactive product
for its Videoway converter. As both companies developed, however, their missions
began to diverge: LGV wanted to market its Videoway converter in the United
States, and was less interested in the actual production of ACTV Programming,
while the Company was interested in expanding its programming capacity and in
making its ACTV Programming available for use with set-top converters
manufactured and distributed by others. The restructuring of the relationship
with LGV enabled both companies to focus on their respective goals, in that LGV
now has the non-exclusive right to market the Videoway converter in the United
States, and the Company has control of ACTV Programming development. See
"Reorganization of ACTV Entertainment and the LGV Agreements."

PATENTS, APPLICATIONS, AND PROPRIETARY TECHNOLOGY

The Company has sought to protect the proprietary features of the Programming
Technology it employs through patents, copyrights, confidentiality agreements,
and trade secrets both in the United States and overseas. As of the present
time, the United States Patent and Trademark Office has issued nine patents,
with five additional patents pending, three of which name Dr. Michael Freeman,
the Company's Advanced Product Development Liaison, as an inventor thereof, and
two of which name Dr. Freeman and Gregory Harper, former President -- Technology
Consulting Group, and one of which named Richard Bennett, who is not affiliated
with the Company, as inventors thereof. The patents, which deal with different
aspects of the ACTV Programming Technology, expire at various dates from 1998 to
2009.

Corresponding patents for some of the above U.S. patents have been granted or
are pending in Canada, Japan, Australia and the European Patent Office. When a
patent is granted by the European Patent Office, and upon the filing of
appropriate translations, protection will be available in the designated
European countries. The Company believes such patents will strengthen its
competitive position in the aforementioned countries.

Dr. Freeman, Mr. Harper and Mr. Bennett have assigned to the Company all right,
title, and interest in and to the above US patents and any corresponding foreign
patents or applications based thereon. In addition, Dr. Freeman has agreed to
assign to the Company the rights and title in and to all future patents and
applications, and any corresponding foreign patents or application relating to
the ACTV Programming Technology.

There can be no assurance that the patents held by the Company are enforceable,
particularly in view of the high cost of patent litigation, nor can there be any
assurance that the Company will derive any competitive advantages therefrom. To
the extent that patents are not issued for any other products developed by the
Company, the Company would be subject to more competition. The issuance of
patents may be insufficient to prevent competitors from essentially duplicating
the Company's products by designing around the patented aspects. In addition,
there

<PAGE>

can be no assurance that the Company's products will not infringe on patents
owned by others, licenses to which may not be available to the Company, nor that
competitors will not develop functionally similar products outside the
protection of any patents the Company has or may obtain.

The Company requires each of its employees, consultants and advisors to execute
a confidentiality and assignment of proprietary rights agreement upon the
commencement of employment or a consulting relationship with the Company. These
arrangements generally provide that all inventions, ideas, and improvements made
or conceived by the individual arising out of the employment or consulting
relationship shall be the exclusive property of the Company. This information
shall be kept confidential and not disclosed to third parties, except by consent
of the Company or in other specified circumstances. There can be no assurance,
however, that these agreements will provide effective protection for the
Company's proprietary information in the event of unauthorized use or disclosure
of such information.

COMPETITION

The development of interactive television applications is highly competitive.
The Company competes within the television industry with many other applications
which may be considered interactive. Moreover, the Company also competes with
other forms of entertainment and educational programming, many of which are much
more established, including standard television programming and the rapidly
growing CD-ROM market. Among the Company's competitors in both the area of
interactive television and in other media are companies that have greater
financial, technical and marketing resources than the Company.

At the present time, there are a number of different interactive television
applications that have been developed or are under development by others which
might be considered to be competitive with the Company's Programming Technology.
These other interactive applications in general are delivered via cable
television, or through play-along devices that are attached to the television.
To the best of the Company's knowledge, none of the point to multi-point systems
based on these technologies allow the viewer to affect what is seen on the
television in the same manner or to the extent of the ACTV Programming
Technology.

The new interactive television applications principally fit in six primary
categories: (1) information and channel guide services, (2) transactional
services, (3) quantity/video-on-demand, (4) separate device play-along, (5)
video games and (6) individualized TV.

ACTV fits in the individualized TV category. Only individualized television
allows every television viewer to interact personally with and change the TV
program itself. Within the limits of the programmed choices, each sports fan can
watch the action the way he or she chooses, and each child receives individual
instructions based on his or her own response to the on-screen teacher.
Individualized television technology is the only technology that uses
traditional filmed entertainment where the program itself is interactive.

<PAGE>

automatically switches at pre-determined intervals between various segments of
the multiple signals. The viewer cannot detect when such a switch takes place
because it occurs instantly and with frame accuracy.

The results appear seamless and uninterrupted -- for the viewer the programming
is completely individualized. Although an individualized program and its
associated branches are taped in a normal linear fashion, the program, when
shown, has thousands of possible segment combinations available for each viewer
to experience. The particular version one sees is based on individually selected
preferences and inputs. An unlimited number of independent viewers can interact
with an ACTV Program simultaneously. See "ACTV Programming Technology."

A summary of each of the other interactive application follows:

1) Information and Channel Guide Services This form of interactivity enables the
television to serve as a tool for information accessibility and retrieval. The
most immediate application is for channel guide services, which allow viewers to
easily determine the locations of programs in an expanded channel universe.
Information services include access to large external text and graphic
information databases, such as those provided by America On-Line and Prodigy.

2) Transactional Services This application allows the television viewer to
purchase merchandise displayed on-screen by pressing a button on his or her
remote control. Transactional services could be in the form of a home shopping
program or an addendum to a commercial. Through their television sets, viewers
may receive video, still pictures, text or audio about the selected products.

3) Quantity/Video on Demand Cable, DBS and MMDS systems that incorporate digital
television delivery will be able to offer substantially more channels than their
analog predecessors. Programs transmitted digitally can be randomly accessed
through menu selection items. Extensive pay-per-view movies could be made
available, popular shows might be aired at many different starting times, and
the viewer could purchase, on an a la carte basis, television shows following
their initial air date on broadcast or cable TV.

4) Separate Device Play-Along This application allows viewers to play along with
television programs such as game shows or sporting events. The viewer has a
separate controller that receives information about the show in progress, and
either displays it on the controller itself, or overlays television pictures
with text and/or graphics. Players can compete with the on-screen contestants
for prizes. Although the TV programming itself is unchanged, game players at
home see their results displayed on the play-along device's screen.

5) Video Games Interactive television services will allow a user to call up
video games, like those now marketed by Nintendo and Sega, through the cable TV
box. Historically, video games have been delivered on cartridges inserted into
special-purpose terminals attached to a television set.

Since the Company's business strategy depends in large part on its ability to
attract joint venture partners and/or licensees, the Programming Technology must
be more appealing to potential joint venture partners or licensees than other
technologies which currently exist or are now under development or may be
developed in the future.

<PAGE>

EMPLOYEES

At March 31, 1996, the Company employed 25 full-time employees. The Company
believes that its relationships with its employees are generally satisfactory.

PROPERTY

The Company and its subsidiaries maintain their principal and executive offices
at Rockefeller Center, 1270 Avenue of the Americas, New York, New York, where
they lease approximately 6,300 square feet at a rent of approximately $17,400
per month pursuant to a lease that expire January 2001. The lease may be
terminated by the Company beginning in May 1999, but if it is so terminated, the
Company must pay an early termination fee to the landlord. the Company maintains
an engineering staff and an editing studio at 1600 Broadway, New York, New York,
where it leases approximately 2,500 square feet at a rent of $3,450 per month,
pursuant to a lease that expires in December 1999. The lease agreement provides
for cancellation by either party with no penalty at the end of 1996. In
addition, the Company maintains offices at 9454 Wilshire Boulevard, Beverly
Hills, California, which are leased on a month-to-month basis for approximately
$1,350 per month by The Los Angeles Individualized Television Network, Inc. The
Company believes its current facilities are suitable and adequate, and that they
provide the productive capacity necessary for the performance of the operations
of the Company. None of the Company's properties is leased from affiliated
persons.

LEGAL PROCEEDINGS

In March 1988, LGV and the Company formed ACTV Entertainment, in which they were
to be equal stockholders, each owning 50 shares of Common Stock. The parties
also entered into a license agreement regarding the use of the Programming
Technology by LGV in Canada, Europe and the Soviet Union. LGV had pledged 28.5
of its shares to secure two $4,000,000 payments it was to have made upon the
occurrence of certain conditions. The parties had a dispute as to whether such
conditions had been met, the payments were not made, and ACTV foreclosed on the
28.5 shares. An arbitration was commenced and subsequently stayed, pending
settlement discussions between the parties. On June 8, 1993, the parties reached
a settlement pursuant to which ACTV became the sole stockholder of ACTV
Entertainment and the license agreement between the parties was modified. See
"-- Reorganization of ACTV Entertainment and the LGV Agreements."

In August, 1993, a lawsuit was commenced against the Company by Nolan Bushnell
in the United States District Court for the Southern District of New York,
seeking damages in the amount of $290,872, plus interest on such amount from
April 1986, arising out of an alleged payment by plaintiff of a guaranty of an
equipment lease of the Company. On April 25, 1994 the Company entered into a
Settlement Agreement with Nolan Bushnell and Catalyst Technologies, a sole
proprietorship owned by Mr. Bushnell, pursuant to which (a) the lawsuit
commenced by Mr. Bushnell in connection with his guaranty of an equipment lease
($290,872) was withdrawn, and (b) Mr. Bushnell and Catalyst Technologies
relinquished any and all right to receive payments from the Company out of a
repayment pool established pursuant to the terms of a 1985 agreement. The
obligation to Mr. Bushnell and Catalyst under the 1985 agreement were reflected
on the Company's books, as of December 31, 1993 at $121,333, plus accrued
interest thereon.

Pursuant to the terms of the Settlement Agreement, the Company paid $100,000 to
Mr. Bushnell

<PAGE>

and issued a promissory note in the principal amount of $190,000, payable
$100,000 on June 30, 1995 and $90,000 on June 30, 1996. Of the aggregate
settlement amount, $255,000 was paid by the Company in settlement of Mr.
Bushnell's claims in the lawsuit relating to his guaranty of the Company's
equipment lease, and the balance of $35,000 is in full and final settlement of
the claims of Mr. Bushnell and Catalyst Technologies for payments from the
repayment pool. In January 1995, the Company prepaid the $190,000 Note in full
for a discounted amount of $100,000 in full satisfaction of this obligation.

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

<PAGE>

RISK FACTORS

The purchase of the securities being offered hereby involves a number of
significant risks that include, but may not be limited to, those described
below. Each prospective investor should carefully consider the following risk
factors inherent in and affecting the business of the Company and this Offering
before making an investment decision.

1. OPERATING LOSSES TO DATE. The Company has operated at a loss through the date
of this Prospectus. The Company's net losses for the three months ended March
31, 1996 and 1995 (the "March 1996 period" and the "March 1995 period,"
respectively) were $2,560,883 and $1,952,836, respectively. The March 1995
Period includes an extraordinary gain of $94,117. The Company had net losses of
$6,826,789 in the fiscal year ended December 31, 1995 ("Fiscal 1995"),
$4,465,240 in the fiscal year ended December 31, 1994 ("Fiscal 1994"), and
$4,465,240 in the fiscal year ended December 31, 1993 ("Fiscal 1993"). Through
March 31, 1996, the Company had an accumulated deficit of approximately $32.9
million. To date, the Company has had limited revenues, including revenues of
$350,674 in the March 1996 period, $1,311,860 in Fiscal 1995, $938,416 in Fiscal
1994, and $164,602 in Fiscal 1993.

The increase in revenues in Fiscal 1994 was partially the result of the
Company's including for the period March 11 to December 31 of Fiscal 1994 all
education sales, which were reported for Fiscal 1993 by ACTV Interactive, a
partnership in which ACTV held a 49% interest from July 14, 1992 to March 11,
1994. ACTV Interactive's gross sales were $839,165 in Fiscal 1993, compared with
$348,473 for the period from July 14, 1992, the partnership formation date, to
December 31, 1992. ACTV Interactive's results were accounted for under the
equity method of accounting.

There can be no assurance that the Company will generate significant revenues or
achieve profitability in the future.

2. UNPROVEN BUSINESS STRATEGY. Other than the activities of ACTV Interactive,
the Company's prior activities in the education market and the arrangement with
LGV in the entertainment market, the Company has not had significant sales of
the Programming Technology. While ACTV has recently consummated its first sale
of the new distance learning technology, there can be no assurance that the
results of this project will support the continuation of the project or lead to
other sales. Also, while the Company has recently entered into agreements with a
large regional cable sports network, a national news service, other programmers,
and a cable operator to create a trial for Los Angeles-based programming
service, which was launched in mid-1995, there can be no assurance that these
agreements will result in the development of a commercially successful
programming service. In addition, the Company is dependent on co-ventures or
licenses with third parties to produce ACTV Programs and the Company will be
required to demonstrate a market for such programs. There can be no assurance
that co-venturers or licensees, or ACTV's direct sales force will succeed in
marketing the ACTV Programs. See "BUSINESS - Entertainment."

Furthermore, the likelihood of the success of the Company must be considered in
light of the problems, costs, difficulties and delays encountered in connection
with the operation of a business, the operations of which consist of the
development and commercialization of new and unproven technologies, and the
competitive environment in which the Company operates. Accordingly, there can be
no assurance that the Company will successfully market the

<PAGE>

Programming Technology or operate on a profitable basis. See "BUSINESS."

3. POSSIBLE NEED FOR ADDITIONAL FINANCING. To date, the Company's capital
requirements to develop the Programming Technology, produce ACTV Programming,
develop marketing approaches and strategic alliances, and to cover costs of
selling and general and administrative expenses, have been significant,
resulting in an accumulated deficit as of March 31, 1996 of approximately $32.9
million.

The Company's continued marketing of all of its products and services on planned
levels and timetables is dependent upon the Company's obtaining the additional
capital necessary to support the Company's future operations at these levels.
Management is continuing its efforts to obtain such additional financing. If the
Company is not successful in obtaining such additional financing, management
believes that the Company can fund its operations at least through the end of
March 1997. To fund its operations at least through the end of March 1997,
without additional financing, the Company will 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, through the end
of March 1997.

4. PATENTS AND PROPRIETARY INFORMATION. The Company has obtained patents
covering certain aspects of the Programming Technology and has patents pending
with respect to other developments or enhancements thereof. However, there can
be no assurance (i) that patents applied for will be granted, (ii) that the
patents the Company owns or has rights to or that may be granted or obtained by
the Company in the future will be enforceable or will provide the Company with
meaningful protection from competition, (iii) that any products developed by the
Company will not infringe any patent or rights of others, or (iv) that the
Company will possess the financial resources necessary to enforce any patent
rights which it holds. See "BUSINESS -- Patents, Applications and Proprietary
Information."

The Company requires each of its employees, consultants and advisors to execute
a confidentiality and assignment of proprietary rights agreement upon the
commencement of employment or a consulting relationship with the Company. These
arrangements generally provide that all inventions, ideas and improvements made
or conceived by the individual arising out of the employment or consulting
relationship shall be the exclusive property of the Company. This information
shall be kept confidential and not disclosed to third parties except by consent
of the Company or in other specified circumstances. There can be no assurance,
however, that these arrangements will provide effective protection of the
Company's proprietary information in the event of unauthorized use or disclosure
of such information.

5. TECHNOLOGICAL OBSOLESCENCE; RESEARCH AND DEVELOPMENT. The Company is engaged
in a field characterized by extensive research efforts and rapid, significant
technological change. There can be no assurance that research or development by
others will not render the Programming Technology obsolete or that the limited
research and development performed by the Company will continue or will be
successful. In 1995, outside research and development costs totaled $476,155 and
were primarily related to development of a new analog/digital two-way distance
learning system. The Company believes that it may be required to expend
approximately $200,000 during 1996 to facilitate the completion of current
research and development projects. There can be no assurance that the new
distance learning system can be deployed on a timely basis, or that once
deployed, it will function satisfactorily. If the Company determines that
additional research and development is required, there can be no assurance that

<PAGE>

the Company will have sufficient funds or access to additional funds to engage
in substantial additional research and development. See "BUSINESS -- Research
and Development."

6. POSSIBLE SHORTAGE OF AVAILABLE CHANNELS FOR IN-HOME CABLE APPLICATIONS. In
order for the ACTV Programming Technology to be delivered over cable, MMDS and
DBS systems for the in-home market, it must compete for channel space on cable,
MMDS and DBS systems, many of which have limited available channel capacity.
Although a simpler form of individualization can be achieved by the Company's
using one channel of band-width, the more sophisticated applications of ACTV
Programming currently require three to four channels of analog band-width. There
is no assurance that cable, MMDS and DBS operators will devote a sufficient
number of channels of band-width to the Programming Technology in the future.
Nor is there any assurance that the Company will be able to expand, unless
cable, MMDS, or DBS operators continue to upgrade and increase their channel
capacity by using some form of "compression technology," whereby the
digitalization of the information required to produce a television picture
reduces the channel capacity required for programming that incorporates the
Programming Technology. The compression technologies recently deployed and those
currently under development could enable the Company to use the more complex
applications of the Programming Technology on one channel of band-width. The
Company believes, although there can be no assurance, that the cable, MMDS and
DBS industry is, in general, moving in the direction of increasing channel
capacity. The costs associated with such compression technology may result in
substantial additional costs to cable, MMDS and DBS operators. However, the
Company's management cannot currently quantify such additional costs, which may
adversely affect the Company's future operations. See "BUSINESS."

7. DEPENDENCE UPON LICENSEES AND JOINT VENTURERS. The Company has adopted as a
business strategy the exploitation of the Programming Technology through
licensing, the arrangement of joint ventures and by means of a direct sales
force. While the Company has established a direct sales force of four employees
and fifteen distributors, and intends to increase its direct sales forces, the
Company will continue to be, in substantial part, dependent upon the ability of
its licensees and prospective joint venture partners to offer products and
services that are commercially viable. In addition, the Company, its licensees
or joint venture partners will need to provide individualized programming to
continue commercial cable operations, and they are dependent upon third parties
for such programming. The Company will be dependent upon its ability, and that
of its licensees and joint venture partners, to actively promote and distribute
the Programming Technology and the products. There is no assurance that the
Company's marketing strategy will be successful. Further, the Company may be
adversely affected by the financial and business considerations of its licensees
and joint venture partners.

The Company is engaged in an ongoing program designed to evaluate the
Programming Technology as applied to the cable television market. The results of
such programs cannot yet be determined. No assurance can be given that the
results of the evaluation will be positive or that one or more of the markets
which the Company is evaluating may prove to be viable for the Programming
Technology.

There is a possibility that in the structuring of future joint ventures and
license agreements that the licensees and joint venture partners may be granted
interests in the Company, and or any of its subsidiaries, in the form of equity
securities or options to acquire equity securities. See "BUSINESS -- Marketing
and Program Production."

8. DEPENDENCE UPON SUPPLIERS OF PROGRAMMING. The Company is dependent upon the

<PAGE>

producers of linear programming that can be enhanced using the Programming
Technology to create individualized ACTV Programs. To date, the Company has
entered into agreements with eight such producers, but there can be no assurance
that such agreements will provide the Company with sufficient programming
appropriate for enhancement, that the Company will be able to develop additional
sources of programming, or that the enhanced programs can be successfully
marketed in an individualized format. See "BUSINESS - Marketing and Program
Production."

9. GOVERNMENT REGULATION. The Company believes that neither its present nor any
proposed commercial implementation of the ACTV Programming Technology on cable,
DBS or MMDS will require governmental license or approval. Certain broadcast
application and copper pairs with ADSL may require governmental approval. No
assurance can be given that applicable laws will not change. In the event such
approval were to be required, there can be no assurance that the Company would
be able to obtain such approval or the licenses required for the further
implementation of the ACTV Programming Technology. See "BUSINESS - Government
Regulation."

10. DEPENDENCE UPON KEY PERSONNEL. The Company has been largely dependent upon
the efforts of William C. Samuels in his roles as Chairman of the Board,
President, Chief Executive Officer and Director of the Company, David Reese as
Executive Vice President, President of ACTV Entertainment and a Director of the
Company, and Bruce Crowley, Executive Vice-President, President of ACTV
Interactive, Inc. and a Director of the Company. The Company has entered into
five-year employment agreements with Mr. Samuels and Mr. Reese. The Company
currently does not maintain "key employee" insurance on the lives of Messrs.
Samuels, Reese or Crowley and there can be no assurance that such insurance
would be available at an acceptable cost to the Company, should it seek to
acquire such insurance in the future. See "MANAGEMENT - Employment and
Consulting Agreements."

In order to compete in a marketplace with rapidly changing and expanding
technology, the Company requires employees not only with extensive management
experience, but also with certain technical abilities to direct the Company's
continuing research and development efforts. While the Company believes that it
currently employs such personnel, and that other persons could be retained in
such capacities, there can be no assurance that if the Company were required to
replace such personnel, it could readily do so, or that, even if such qualified
replacements were retained, the development of the Company's business would not
be delayed. See "BUSINESS -- Research and Development."

11. COMPETITION. The Programming Technology competes with many other forms of
entertainment, education and information dissemination, many of which are
significantly more established, including the standard television industry, the
movie industry, cable television, programming services and other forms of
entertainment. There can be no assurance that products and services
incorporating the Programming Technology will ever be established in the
marketplace in a significant enough manner to make the Company profitable.

In addition, the Programming Technology may compete with other technologies
described as interactive television, some of which may be developed or promoted
by companies with resources significantly greater than the Company's. See
"BUSINESS -- Competition."

12. DEPENDENCE ON EQUIPMENT SUPPLIERS. The Company does not intend itself to
manufacture set-top converters, terminals, video servers, or other interactive
devices. Currently,

<PAGE>

in the entertainment market, the Videoway terminal manufactured through LGV is
the only ACTV compatible set-top converter available to potential distributors
of ACTV Programming. The Company intends to grant licenses similar to the one
granted to LGV to other manufacturers that are selected by the future
distributors of ACTV Programming. All of the ACTV classroom and distance
learning systems which incorporate the Programming Technology and are sold by
ACTV in the education market are manufactured by KDI Precision Products, Inc.
("KDI"). While the Company believes that KDI can produce sufficient systems to
meet the anticipated needs of ACTV in the education marketplace, in the event
that KDI were unable to supply the systems, there can be no assurance that the
Company could produce sufficient systems or obtain sufficient systems from
another manufacturer at an acceptable price. The inability of ACTV to obtain
systems would have a material adverse effect on the business of the Company.
There is no assurance that the Company will be successful in developing
additional manufacturing licenses for the entertainment and education markets;
the failure of the Company to do so would have a material adverse effect on the
business of the Company. See "BUSINESS - Set Top Converters, Terminals and Other
Interactive Devices."

13. NO ASSURANCE OF PUBLIC MARKET FOR SECURITIES. Although the Company's Common
Stock is quoted on NASDAQ and listed on the Boston Stock Exchange, there can be
no assurance that the Company will be able to maintain such quotation or
listing, or that, if maintained, a significant public market will be sustained.
For continued listing on NASDAQ, the Company is required to maintain a minimum
stockholders' equity of $1,000,000 and assets of $2,000,000. The Boston Stock
Exchange's maintenance criteria require the Company to have total assets of at
least $1,000,000 and total stockholders' equity of at least $500,000. At March
31, 1996, the Company had stockholders' equity of $6,336,221 and assets of
$8,614,395. The Company has continued to operate at a loss through the date of
this Prospectus.

In the event the Common Stock were delisted from NASDAQ, trading, if any, would
be conducted on the Boston Stock Exchange and in the over-the-counter market on
the NASD's electronic bulletin board, in what are commonly referred to as the
"pink sheets." As a result, an investor may find it more difficult to dispose
of, or to obtain accurate quotations as to the price of, the Company's
securities. In addition, the Common Stock would be subject to Rules 15g1-15g6
promulgated under the Securities Exchange Act of 1934 (the "Exchange Act") that
impose additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally, a person with assets in excess of $1,000,000 or annual income
exceeding $200,000 or $300,000 together with his or her spouse). For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchaser and have received the purchaser's
written consent to the transaction prior to sale. Consequently, these rules may
affect the ability of broker-dealers to sell the Company's securities and may
affect the ability of purchasers in the Offering to sell their securities in the
secondary market.

The Commission has also recently adopted regulations that define a "penny stock"
to be any equity security that has a market price (as defined) of less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless exempt,
the regulations require the delivery, prior to the transaction, of a disclosure
schedule prepared by the Commission relating to the penny stock market. The
broker-dealer must also disclose the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and, if the broker-dealer is the sole market-maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information

<PAGE>

for the penny stock held in the account and information on the limited market in
penny stocks.

While many NASDAQ-listed securities are covered by the definition of penny
stock, transactions in a NASDAQ-listed security are exempt from all but the sole
market-maker provision for (i) issuers who have $2,000,000 in tangible assets
($5,000,000 if the issuer has not been in continuous operation for three years),
(ii) transactions in which the customer is an institutional accredited investor,
or (iii) transactions that are not recommended by the broker-dealer. In
addition, transactions in a NASDAQ security directly with a NASDAQ market-maker
for such security are subject only to the sole market-maker disclosure, and the
disclosure with respect to commissions to be paid to the broker-dealer and the
registered representative.

Finally, all NASDAQ securities would be exempt from the recently-adopted
regulations regarding penny stocks if NASDAQ raised its requirements for
continued listing so that any issuer with less than $2,000,000 in net tangible
assets or stockholders' equity would be subject to delisting. These criteria are
more stringent than the current NASDAQ maintenance requirements.

14. NO DIVIDENDS. The Company has not paid any cash dividends on its Common
Stock since inception and does not intend to pay cash dividends on its Common
Stock for the foreseeable future. Although there are no restrictions on the
Company's ability to pay dividends, the Company intends to follow a policy of
retaining earnings, if any, to finance the development and expansion of its
business.

15. PREFERRED STOCK AUTHORIZED. The Company's Board of Directors has the
authority, without further action of the stockholders, to issue shares of
preferred stock which have conversion, dividend, liquidation and voting rights
that could adversely affect holders of Common Stock or could be used to restrict
the Company's ability to merge with or sell its assets to a third party, thereby
preserving control of the Company by its present owners. Although the Company
has no present intention to issue any shares of preferred stock, there can be no
assurance that the Company will not do so in the future.

16. RULE 144 SALES. Of the shares of the Company's Common Stock presently
outstanding, approximately 3.0 million are "restricted securities" as that term
is defined by Rule 144 promulgated under the Securities Act and in the future
may be sold only in compliance with Rule 144 or pursuant to registration under
the Securities Act or pursuant to another exemption therefrom. For so long as
the Registration Statement of which the Concurrent Prospectus is a part is
current and effective, the shares owned by the Selling Stockholder thereunder
and offered thereby (6,500) may be sold without regard to the volume
limitations, described below, set forth in Rule 144. Generally, under Rule 144,
each person having held restricted securities for a period of two years may,
every three months, sell in ordinary brokerage transactions an amount of shares
which does not exceed the greater of one percent (1%) of the Company's then
outstanding shares of Common Stock, or the average weekly volume of trading of
such shares of Common Stock as reported during the preceding four calendar
weeks. A person who has not been an affiliate of the Company for at least the
three months immediately proceeding the sale and who has beneficially owned
shares of the Common Stock for at least three years is entitled to sell such
shares under Rule 144 without regard to any of the limitations described above.
Of the restricted shares, a substantial number have been held by non-affiliates
of the Company for more than three years or have been held by affiliates of the
Company for more than two years. Actual sales, or the prospect of sales by the
present stockholders of the Company or by future holders of restricted
securities under Rule 144, or otherwise, may, in the future, have a

<PAGE>

depressive effect upon the price of the Company's shares of Common Stock in any
market that may develop therefor, and also could render difficult sales of the
Company's securities purchased by investors herein.

17. CONTROL BY OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS. The Company's
officers and directors own, of record, 2,613,263 outstanding shares of Common
Stock. In addition, William C. Samuels, Chairman, President, Chief Executive
Officer and a director of the Company, pursuant to a voting agreement, has
voting control of the 2,341,334 shares of Common Stock owned of record by the
Post Company. In addition, pursuant to a separate voting agreement, Mr. Samuels
has voting control of the shares owned by Dr. Freeman. Consequently, Mr. Samuels
has voting control over 3,321,917 shares of Common Stock, or approximately 26.7%
of the outstanding shares of Common Stock, assuming issuance of 533,035 shares
of Common Stock upon exercise of options. Accordingly, Mr. Samuels could have
substantial influence over the affairs of the Company, including the election of
directors.

18. POSSIBLE ACQUISITION OF CONTROL BY THE WASHINGTON POST COMPANY. Through
March 17, 1997 (subject to extension in certain circumstances), the Post Company
shall have the right to purchase from the Company, at a price which has not yet
been determined, the amount of shares of Common Stock necessary to bring its
percentage ownership of the total then outstanding shares of Common Stock to
51%. If the Post Company should choose to exercise its right, the purchase price
would be established after arms-length negotiations between the parties. In the
event that the parties fail to agree on a purchase price, the parties would seek
an outside appraisal. At present, the Company does not have enough shares
authorized to accommodate the Post Company should it choose to exercise such
right. If the Post Company decides to exercise its right, the Company will seek
to take the necessary action to fulfill its obligations. If such right is
exercised, the ability, pursuant to agreement, of William C. Samuels, Chairman,
President and Chief Executive Officer of the Company, to vote the shares owned
of record by the Post Company will terminate, and the Post Company will be able
to control the affairs of the Company.

19. OUTSTANDING OPTIONS AND WARRANTS. As of the date of this Prospectus, the
Company had granted options and warrants to purchase an aggregate of 2,707,582
shares of Common Stock that had not been exercised. Of the shares of Common
Stock subject to these unexercised options and warrants, 10,000 may be purchased
for less than $1.00; 12,000 may be purchased for between $1.00 and $1.99 per
share; 694,082 may be purchased for between $2.00 and $2.99 per share; 1,521,500
may be purchased for between $3.00 and $3.99 per share; 367,500 may be purchased
for between $4.00 and $4.99 per share; and 102,500 may be purchased for between
$5.00 to $5.99 per share. To the extent that the outstanding stock options and
warrants are exercised, dilution to the interests of the Company's stockholders
will occur. Moreover, the terms upon which the Company will be able to obtain
additional equity capital may be affected adversely, since the holders of the
outstanding options and warrants can be expected to exercise them at a time when
the Company would, in all likelihood, be able to obtain any needed capital on
terms more favorable to the Company than those provided in the outstanding
options and warrants.

20. POSSIBLE VOLATILITY OF SECURITIES PRICES. The market price of the Company's
securities may be highly volatile, as has been the case with the securities of
other companies engaged in high technology research and development. Factors
such as announcements by the Company or its competitors concerning technological
innovations, new commercial products or procedures, proposed government
regulations and developments or disputes relating to patents

<PAGE>

or proprietary rights may have a significant impact on the market price of the
Company's securities.

<PAGE>

USE OF PROCEEDS

The Company will not receive any proceeds from the Selling
Stockholder's sale of shares of Common Stock, but will receive the proceeds of
the exercise of the Options. Such proceeds will be used by the Company for
working capital purposes.

<PAGE>

SELLING STOCKHOLDER

The Selling Stockholder acquired the Shares in connection with the Consulting
Agreement.

The following table sets forth the (a) the name of the Selling Stockholder, (b)
the number of shares of Common Stock beneficially owned by the Selling
Stockholder as of March 31, 1996 and (c) the number of shares of Common Stock
and the percentage of the total class of Common Stock outstanding to be
beneficially owned by the Selling Stockholder following this offering, assuming
the sale pursuant to this offering or otherwise of all shares of Common Stock
that are the subject of the Registration Statement of which this Prospectus is a
part, which shares are being registered. There is no assurance, however, that
the Selling Stockholder will sell any or all of the shares of Common Stock
offered hereunder.

Number of Shares of Common
Stock Beneficially Owned
After this Offering
-----------------------------------------
Selling Stockholder Beneficially Owned Offered Hereby Number Percent
- ------------------- ------------------ -------------- ------ -------
<S> <C> <C> <C> <C>
Charles Payne 6,500 6,500 0 0%
</TABLE>

<PAGE>

INDEMNIFICATION OF OFFICERS AND DIRECTORS

Reference is made to paragraph "Twelfth" of the Restated Certificate of
Incorporation of the Company (Exhibit 4.1.1), which contains a provision, as
permitted by Section 145 of the Delaware General Corporation Law, that
eliminates the personal liability of directors to the Company and its
stockholders for monetary damages for unintentional breach of a director's
fiduciary duty to the Company. This provision does not permit any limitation on,
or elimination of the liability of a director for disloyalty to the Company or
its stockholders, for failing to acting good faith, for engaging in intentional
misconduct or a knowing violation of law, for obtaining an improper personal
benefit or for paying a dividend or approving a stock repurchase that was
illegal under the Delaware General Corporation Law.

The Restated Certificate of Incorporation and By-Laws of the Company require the
Company to indemnify directors and officers against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement in connection
with specified actions, suits or proceedings, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
corporation (a "derivative action") if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. A similar standard of
care is applicable in the case of derivative actions, except that
indemnification only extends to expenses (including attorneys' fees) incurred in
connection with defense or settlement of such an action. Moreover, the Delaware
General Corporation Law requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the Company.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) in connection with the
securities being registered, the Company will, unless in the opinion of counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

<PAGE>

PLAN OF DISTRIBUTION

The Shares offered hereby are being sold by the Selling Stockholder as a
principal for his own account. The distribution of the Shares by the Selling
Stockholder may be effected from time to time in ordinary brokerage transactions
in the over-the-counter market at market prices prevailing at the time of sale
or in one or more negotiated transactions at prices acceptable to the Selling
Stockholder. The brokers or dealers through or to whom the Shares may be sold
may be deemed underwriters of the Shares within the meaning of the Securities
Act, in which event all brokerage commissions or discounts and other
compensation received by such brokers or dealers may be deemed to be
underwriting compensation. The Company will bear all expenses of the offering,
except that the Selling Stockholder will pay any applicable brokerage fees or
commissions and transfer taxes. In order to comply with the securities laws of
certain states, if applicable, the Shares will be sold only through registered
or licensed brokers or dealers. In addition, in certain states, the Shares may
not be sold unless they have been registered or qualified for sale in such state
or an exemption from such registration or qualification requirement is available
and is complied with.

<PAGE>

LEGAL MATTERS

Certain legal matters, including the legality of the issuance of the shares of
Common Stock offered by the Company, are being passed upon for the Company by
Gersten, Savage, Kaplowitz & Curtin, LLP, 575 Lexington Avenue, New York, New
York 10022. Jay M. Kaplowitz, a member of Gersten, Savage, Kaplowitz & Curtin,
LLP served as a director of the Company from 1989 to April 1996. Mr. Kaplowitz
owns 2,000 shares of the Company's Common Stock and options to purchase 25,000
shares.

<PAGE>

EXPERTS

The consolidated financial statements of ACTV and its subsidiaries incorporated
in this Prospectus by reference to the Company's Annual Report on Form 10-K and
10K/A-1 for the year ended December 31, 1995 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.

<PAGE>

No underwriter, dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer or solicitation to any person in any juris- diction
where such offer or solicitation would be unlawful. Neither delivery of this
Prospectus nor any Common Stock sale hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs of the
Company since the date hereof.

TABLE OF CONTENTS PAGE
- ----------------- ----
Available Information. . . . . . . . . . . 2
Incorporation of Certain
Documents by Reference . . . . . . . . . 3
The Company. . . . . . . . . . . . . . . . 5
Risk Factors . . . . . . . . . . . . . . . 21
Use of Proceeds. . . . . . . . . . . . . . 29
Selling Stockholder. . . . . . . . . . . . 30
Indemnification of
Officers and Directors. . . . . . . . .. 31
Plan of Distribution . .. . . . . . . . .. 32
Legal Matters . . . . . . . . . . . . . .. 33
Experts . . . . . . . . . . . . . . . .. . 34

ACTV, INC.

6,500 shares of
Common Stock

June 20, 1996

<PAGE>

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission are
incorporated herein by reference:

(1) The Company's Registration Statement on Form S-1 (File No.
33-34618) which was declared effective on May 4, 1990.

(2) Annual Report on Form 10-K for the year ended December 31, 1994.

(3) Annual Report on Form 10-K/A-1 for the year ended December 31,
1994.

(4) Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1995.

(5) Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 1995.

(6) Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995.

(7) Annual Report on Form 10-K for the year ended December 31, 1996.

(8) Annual Report on Form 10-K/A-1 for the year ended December 31,
1996.

(9) Post-Effective Amendment No. 1 to the Company's Registration
Statement to Form S-1 (File No. 33-63879) which was declared
effective on March 20, 1996.

(10) Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1996.

II-1

<PAGE>

Requests for such information should be directed to ACTV, Inc., 1270 Avenue of
the Americas, New York, New York 10020, Attention: Secretary, telephone number
(212) 262-2570.

ITEM 4. DESCRIPTION OF SECURITIES

The Common Stock of the Company is registered under Section 12 of the Securities
Exchange Act of 1934.

ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL

Certain legal matters, including the legality of the issuance of the shares of
Common Stock offered by the Company, are being passed upon for the Company by
Gersten, Savage, Kaplowitz & Curtin, LLP, 575 Lexington Avenue, New York, New
York 10022. Jay M. Kaplowitz, a member of Gersten, Savage, Kaplowitz & Curtin,
LLP served as a director of the Company from 1989 to 1996. Mr. Kaplowitz owns
2,000 shares of the Company's Common Stock and options to purchase 25,000
shares.

ITEM 6. INDEMNIFICATION OF DIRECTORS OF OFFICER

Reference is made to paragraph "Twelfth" of the Restated Certificate of
Incorporation of the Company (Exhibit 4.1.1), which contains a provision, as
permitted by Section 145 of the Delaware General Corporation Law, that
eliminates the personal liability of directors of the Company and its
stockholders for monetary damages for unintentional breach of a director's
fiduciary duty to the Company. This provision does not permit any limitation on,
or elimination of the liability of a director for disloyalty to the Company or
its stockholders, for failing to acting good faith, for engaging in intentional
misconduct or a knowing violation of law, for obtaining an improper personal
benefit or for paying a dividend or approving a stock repurchase that was
illegal under the Delaware General Corporation Law.

II-2

<PAGE>

ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED

Not Applicable.

ITEM 8. EXHIBITS

4.1.1 Restated Certificate of Incorporation(1)

4.1.2 Amendment to Certificate of Incorporation(1)

4.2.1 By-Laws(1)

4.3 Consulting Agreement between the Company and Charles Payne dated
February 15, 1996.(2)

5. Opinion of Gersten, Savage, Kaplowitz & Curtin, LLP(2)

24.1 Consent of Deloitte & Touche LLP(2)

24.2 Consent of Gersten, Savage, Kaplowitz & Curtin, LLP (included in
Exhibit 5)(2)

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

(1) Incorporated by reference to the Company's Registration
Statement on Form S-1 (File No. 33- 34618) which became
effective on May 4, 1990.

(2) Filed herewith.

ITEM 9. UNDERTAKINGS

The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or in the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.

(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-

II-3

<PAGE>

effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.

Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer, or controlling person of the Company in the
successful defense of any action, suit, or proceeding) is asserted by such
director, officer, or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act of 1933 and will be governed by the
final adjudication of such issue.

II-4

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8/S-3 has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York and State of New York on the 3rd day of
June, 1996.

ACTV, INC.

By: WILLIAM C. SAMUELS
------------------------
William C. Samuels
Chairman of the Board,
Chief Executive Officer,
President and Director

Pursuant to the requirements of the Securities Act of 1933, this Form S-8/S-3
registration statement has been signed by the following persons in the
capacities and on the date indicated.

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- -----
<S> <C> <C>
WILLIAM C. SAMUELS
- -------------------- Chairman of the Board, Chief June 3, 1996
William C. Samuels Executive Officer, President and Director

DAVID REESE
- -------------------- Executive Vice-President, June 3, 1996
David Reese President--ACTV Entertainment, Inc. and Director

BRUCE CROWLEY
- -------------------- Executive Vice-President, June 3, 1996
Bruce Crowley President--ACTV Interactive, Inc. and Director

RICHARD HYMAN
- -------------------- Director June 3, 1996
Richard Hyman

WILLIAM A. FRANK
- -------------------- Director June 3, 1996
William A. Frank

STEVEN W. SCHUSTER
- -------------------- Director June 3, 1996
Steven W. Schuster

CHRISTOPHER C. CLINE
- -------------------- Vice President, Chief Financial June 3, 1996
Christopher C. Cline Officer and Secretary

STATEMENT OF DIFFERENCES

The registered symbol shall be expressed as.........'r'

<PAGE>

EXHIBIT INDEX

4.3 Consulting Agreement between the Company and Charles Payne dated February
15, 1996.

5. Opinion of Gersten, Savage, Kaplowitz & Curtin, LLP

24.1 Consent of Deloitte & Touche LLP

24.2 Consent of Gersten, Savage, Kaplowitz & Curtin, LLP (included in
Exhibit 5)

<PAGE>

</TABLE>

<PAGE>

[LOGO]

February 15, 1996

Mr. Charles Payne
237 Elm Avenue
Teaneck, NJ 07666

Dear Mr. Payne:

This will confirm our understanding that you have been retained for 1996 as a
financial public relations counsel to ACTV, Inc.

You will be paid 6,500 unregistered shares with registration rights. These
shares shall vest immediately.

Any disputes arising under or in connection with the interpretation of this
Agreement or the rights and obligations of the parties hereto shall be resolved
by arbitration in the City of New York under the rules of the American
Arbitration Association then obtaining. The decision of the arbitrator(s) shall
be final and binding, and judgment may be entered thereon in the Supreme Court
of the State of New York or in the United States District Court of the Southern
District of New York or any court having jurisdiction. The costs and expenses,
including counsel fees, shall be borne by each of the parties or as the
arbitrator(s) may determine at the request of any party.

Agreed and Accepted Agreed and Accepted

By: WILLIAM C. SAMUELS By: CHARLES PAYNE
------------------------- ------------------------
William C. Samuels Charles Payne
Chief Executive Officer

1270 Avenue of the Americas, Suite 2401, Rockefeller Center, New York, NY 10020
tel (212) 262-2570 fax (212) 459-9548 e-mail [email protected]

<PAGE>

[GERSTEN, SAVAGE, KAPLOWITZ & CURTIN, LLP LETTERHEAD]

June 20, 1996

ACTV, Inc.
1270 Avenue of the Americas
New York, New York 10020

Gentlemen:

You have requested our opinion, as counsel for ACTV, Inc., a Delaware
corporation (the "Company"), in connection with the registration statement on
Form S-8 (the "Registration Statement"), under the Securities Act of 1933 (the
"Act"), being filed by the Company with the Securities and Exchange Commission.

The Registration Statement relates to an offer by the Company of 6,500 shares of
Common Stock (the "Selling Stockholder's Shares") which may be sold by Charles
Payne (the "Selling Stockholder"), who has received such shares from the Company
in connection with a consulting agreement between himself and the Company dated
February 15, 1996 (the "Consulting Agreement").

We have examined such records and documents and made such examinations of law as
we have deemed relevant in connection with this opinion. It is our opinion that
when there has been compliance with the Act, the Selling Stockholder's Shares,
when issued, delivered, and paid for, will be fully paid, validly issued and
nonassessable.

No opinion is expressed herein as to any laws other than the laws of the State
of New York, of the United States and the corporate laws of the State of
Delaware.

<PAGE>

ACTV, Inc.
June 20, 1996
Page 2

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Registration Statement. In so doing, we do not admit that we are
in the category of persons whose consent is required under Section 7 of the Act
of the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.

Very truly yours,

GERSTEN, SAVAGE, KAPLOWITZ & CURTIN, LLP

GERSTEN, SAVAGE, KAPLOWITZ &
CURTIN, LLP

<PAGE>

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement
relating to 6,500 shares of Common Stock of ACTV, Inc. on Form S-3/S-8 of our
report dated March 28, 1996, appearing in the Annual Report on Form 10-K of
ACTV, Inc. and subsidiaries for the year ended December 31, 1995, and to the
reference to us under the heading "Experts" in the Prospectus which is part of
this Registration Statement.

DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
New York, New York

June 18, 1996