<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 26, 1999
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 26, 1999
INTERACTIVE NETWORK, INC.
(Exact Name of Registrant as Specified in Its Charter)
CALIFORNIA
(State or Other Jurisdiction of Incorporation)
0-19579 94-3025019
(Commission file Number) (I.R.S. Employer Identification No.)
1161 OLD COUNTY ROAD, BELMONT, CA 94002
(Address of Principal Executive Offices) (Zip Code)
(650) 508-8793
(Registrant's Telephone Number, Including Area Code)
With a copy to:
Robert S. Townsend, Esq.
Morrison & Foerster LLP
425 Market Street
San Francisco, CA 94105
<PAGE>
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
The Registrant and KPMG LLP have each decided that it is in the best interest
of the Registrant that KPMG LLP, the Registrant's former independent accountants
engaged to audit the Registrant's financial statements, be replaced with an
accountant more suitable to the Registrant's current budgetary needs. This
decision was made for the Registrant by Bruce Bauer, Chief Executive Officer of
the Registrant, and ratified by the Executive Committee of Registrant's Board of
Directors. KPMG LLP's resignation was effective on May 20, 1999. The Registrant
is currently in the process of identifying a successor accountant with the
assistance of KPMG LLP.
As is required by SEC disclosure rules, the Registrant must state any
qualification in KPMG LLP's opinion for either of the last two years. KPMG LLP
did state in its opinion for fiscal years ended December 31, 1998, 1997 and 1996
(included in the Registrant's Annual Report filed with the SEC on March 15, 1999
and filed as Exhibit 1.1 hereto) that certain contingencies described in its
opinion and the uncertainties inherent in the bankruptcy process to which
Registrant was then subject raised substantial doubts about the ability of the
Registrant to continue as a going concern. The following contingencies were
referred to in KPMG LLP's opinion as the basis for its opinion, namely,
Registrant's ability to: (1) formulate an acceptable plan of reorganization that
will be confirmed by the Bankruptcy Court, and be able to fully implement that
plan in compliance with the Settlement Agreement, (2) settle the claims of
unsecured creditors within available cash resources as currently contemplated by
management, (3) develop an appropriate business plan and strategic direction for
the Company's planned future operations after reorganization including
conservation of available capital and working capital as the Company seeks to
further develop and exploit its patent portfolio, (4) confirm the availability
of net operating tax losses after reorganization, and (5) generate adequate
sources of working capital and other liquidity as necessary to meet future
obligations.
Subsequent to the issuance of KPMG LLP's opinion, the contingencies referred
to in KPMG LLP's opinion were resolved as follows: (1) the U.S. Bankruptcy Court
confirmed Registrant's plan of reorganization under Chapter 11 of the Bankruptcy
Act, (2) the Registrant consummated the Settlement Agreement with its senior
secured creditors, as a result of which $38.4 million in principal and accrued
interest of the Registrant's senior secured debt was converted at $5.00 per
share into 7,814,588 shares of Registrant's common stock, clear title to
Registrant's patent portfolio and other assets was returned to the Company, and
the senior secured creditors paid $10.3 million to Registrant, (3) Registrant
began paying allowed claims of unsecured creditors in full and setting aside a
reserve for claims it expects to contest within available cash resources, (4)
Registrant has begun to implement its business plan for developing and
exploiting its patent portfolio, as described in its Annual Report for the year
ended December 31, 1998, and (5) Registrant believes it currently has adequate
working capital to meet its obligations, based on its business plan. Registrant
has not yet taken steps to calculate its available net operating tax losses.
There were no disagreements in the two most recent fiscal years with KPMG LLP
on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure. The Registrant has authorized KPMG
LLP to respond fully to the inquiries of its successor accountant. There were
no "reportable events" (as defined in Item 304 of regulation S-K) in the
Registrant's two most recent fiscal years.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) 1.1 Opinion of KPMG LLP for the fiscal years ended December 31, 1998,
1997 and 1996
1.2 Letter of KPMG LLP to the Securities and Exchange Commission
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: May 26, 1999
INTERACTIVE NETWORK, INC.
By: /s/ BRUCE BAUER
----------------------------
Bruce Bauer
President and Chief Executive Officer
<PAGE>
Exhibit 1.1
Independent Auditors' Report
The Board of Directors and Shareholders
Interactive Network, Inc.
We have audited the accompanying consolidated balance sheets of Interactive
Network, Inc. (Debtor-in-Possession) and subsidiary (the "Company") as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, shareholders' deficit and cash flows for each of the years in the
three-year period ended December 31, 1998. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
as of December 31, 1998 and 1997, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1998 in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2, the Company entered into the Settlement Agreement whereby the Company
commenced a reorganization by filing a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court for the Northern District of California (the "Bankruptcy Court") on
September 14, 1998. Substantially all liabilities of the Company as of the date
of this report are subject to settlement under a plan of reorganization to be
confirmed by the Bankruptcy Court. The Company is currently operating as
debtor-in-possession under the jurisdiction of the Bankruptcy Court and
continuation of the Company as a going concern is contingent upon, among other
things, the ability to (1) formulate an acceptable plan of reorganization that
will be confirmed by the Bankruptcy Court, and be able to fully implement that
plan in compliance with the Settlement Agreement, (2) settle the claims of
unsecured creditors within available cash resources as currently contemplated by
management, (3) develop an appropriate business plan and strategic direction for
the Company's planned future operations after reorganization including
conservation of available capital and working capital as the Company seeks to
further develop and exploit its patent portfolio, (4) confirm the availability
of net operating tax losses after reorganization, and (5) generate adequate
sources of working capital and other liquidity as necessary to meet future
obligations. Management's plans in regard to these matters are also described in
Note 3. These contingencies and the uncertainties inherent in the bankruptcy
process raise substantial doubt about the ability of the Company to continue as
a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
KPMG LLP
March 15, 1999
<PAGE>
Exhibit 1.2
May 26, 1999
Securities and Exchange Commission
Washington, D.C. 20549
Ladies and Gentlemen:
We were previously principal accountants for Interactive Network, Inc. and,
under the date of March 15, 1999, we reported on the consolidated balance sheets
of Interactive Network, Inc. and subsidiaries as of December 31, 1998 and 1997
and the related consolidated statements of operations, shareholders deficit and
cash flows for each of the years in the three year period ended December 31,
1998. On May 20, 1999, we resigned. We have read Interactive Network, Inc's
statements included under item 4 of its Form 8-K dated May 26, 1999 and we agree
with such statements, except that we are not in a position to agree or disagree
with Interactive Network, Inc's statements regarding (a) the Company's
determination that it is in the best interest of the company that the former
independent accountant be replaced with an accountant more suitable to the
Company's current needs and, (b) the resolution of contingencies subsequent to
March 15, 1999.
This letter should not be regarded as in any way updating the aforementioned
report or representing that we performed any procedures subsequent to the date
of such report.
Very truly yours,
KPMG LLP
