SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(AMENDMENT NO. 2)
(Mark One)
(x) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2001
--------------
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period from to
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Commission file number 000-19579
INTERACTIVE NETWORK, INC.
(Exact name of registrant as specified in its charter)
California 94-3025019
(State of incorporation) (I.R.S. employer identification number)
180 Second Street, Suite B
Los Altos, California 94022
(Address of principal executive offices and zip code)
(650) 947-3345
(Registrant's telephone number, including area code)
with a copy to Robert S. Townsend
Morrison & Foerster, LLP
425 Market Street
San Francisco, CA 94105
(415) 268-7000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares outstanding as of January 4, 2002
- ----- -----------------------------------------
Common Stock 43,019,277
INTERACTIVE NETWORK, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
----
ITEM 1. FINANCIAL STATEMENTS.....................................1
CONSOLIDATED BALANCE SHEETS AS OF
MARCH 31, 2001 (Unaudited) AND DECEMBER 31, 2000........1
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000.....2
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
AND 2000...............................................3
NOTES TO FINANCIAL STATEMENTS (Unaudited)................4
SIGNATURES..........................................................11
EXPLANATORY NOTE
This Amendment No. 2 on Form 10-Q/A to the Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2001 is being filed to amend Item 1 of Part I
to read as follows. No other changes are being made to the Form 10-Q.
PART I.
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
INTERACTIVE NETWORK, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
As of As of
March 31, 2001 December 31, 2000
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(Unaudited)
Assets
Current assets:
Restricted cash $ 5,576,421 $ 5,609,735
Cash 413,979 685,168
Royalty fee receivable 67,500 250,000
Prepaid expenses and other current assets 53,027 47,218
-------------- --------------
Total current assets 6,110,927 6,592,121
Deposits and other assets 3,430 3,220
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Total assets $ 6,114,357 $ 6,595,341
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities $ 435,861 $ 443,952
Promissory note - current 171,130 85,565
Deferred legal fees 957,775 957,775
-------------- --------------
Total current liabilities 1,564,766 1,487,292
Liabilities subject to compromise 5,499,998 5,503,263
Promissory note - noncurrent 513,390 598,955
Shareholders' deficit:
Preferred stock, no par value, 10,000,000 shares
authorized; no shares issued and outstanding as of
March 31, 2001 and December 31, 2000 - -
Common stock, no par value, 150,000,000 shares
authorized; 43,019,277 shares issued and
outstanding as of both March 31, 2001 and December 31, 2000 145,874,986 145,874,986
Accumulated deficit (147,338,783) (146,869,155)
-------------- --------------
Total shareholders' equity (deficit) (1,463,797) (994,169)
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Total liabilities and shareholders' equity (deficit) $ 6,114,357 $ 6,595,341
============== ==============
See accompanying notes to consolidated financial statements.
1
INTERACTIVE NETWORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
2001 2000
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Royalty fees $ 67,500 $ -
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General and administrative expenses:
Salaries 77,919 65,641
Employer payroll taxes 6,630 5,592
Contract labor 25,507 25,670
Rent 9,000 2,066
D&O insurance 15,900 -
Other administrative costs 13,490 33,671
Legal fees 48,109 44,086
Accounting fees 21,096 37,318
Advisory fees - 390,000
Legal - NTN litigation 2,388 4,769
Shareholder relations - proxy 1,400 3,883
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General and administrative expenses 221,439 612,696
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Loss from operations (153,939) (612,696)
Other (income) and expense
Interest income (73,076) (2,526)
Interest expense 137,965 7,872
Net loss from investment in affiliate
accounted for by the equity method 304,859 5,491
Reserve for impairment of investment (54,859) -
Litigation settlement - (219,215)
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Other (income) and expense, net 314,889 (208,378)
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Income (loss) before reorganization expenses (468,828) (404,318)
Reorganization expenses - 106,272
---------- ----------
Net income (loss) before federal & state taxes (468,828) (510,590)
Federal & state taxes 800 800
Net income (loss) $(469,628) $(511,390)
========== ==========
Basic and diluted loss per share $ (0.01) $ (0.01)
Shares used in basic and diluted net loss per share 43,019,277 39,111,697
See accompanying notes to consolidated financial statements.
2
INTERACTIVE NETWORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31,
2001 2000
------------ ------------
Cash flows from operating activities:
Net loss $ (469,628) $ (511,390)
Adjustments to reconcile net loss to net cash provided by (used for)
operating activities:
Reorganization expenses - 105,521
Loss from investment in affiliate 304,859 5,491
Allowance for investment in affiliate (54,859) -
Changes in assets and liabilities:
Royalty fee receivable 182,500 -
Prepaid expenses and other assets (10,000) -
Accounts payable (8,091) (40,970)
Other accrued liabilities 716 (603,509)
------------ ------------
Cash provided by (used in) operating activities: (54,503) (1,044,857)
Cash flows from investing activities:
Investment in TWIN Entertainment (250,000) (500,000)
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Cash provided by (used in) financing activities: (250,000) (500,000)
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Cash flows from financing activities:
Sale of common stock - -
Exercise of options - 490,997
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Cash provided by (used in) financing activities: - 490,997
------------ ------------
Net decrease in cash (304,503) (1,053,860)
Cash at beginning of period 6,294,903 7,576,158
------------ ------------
End of period $ 5,990,400 $ 6,522,298
============ ============
See accompanying notes to consolidated financial statements.
3
INTERACTIVE NETWORK, INC.
Notes to Unaudited Consolidated Financial Statements
March 31, 2001
The consolidated financial information of Interactive Network, Inc. (the
"Company") furnished herein reflects all adjustments, consisting only of normal
recurring adjustments which in the opinion of management are necessary to
present fairly the financial position of the Company as of March 31, 2001 and
the results of its operations and cash flows for the periods presented. This
Quarterly Report on Form 10-Q should be read in conjunction with the financial
statements and notes thereto included in the Company's Form 10-K Report for the
year ended December 31, 2000 filed with the Securities and Exchange Commission
("SEC") on April 16, 2001. The results of operations for the three-month period
ended March 31, 2001 are not necessarily indicative of the results for any
subsequent quarter or for the entire year ending December 31, 2001.
Current liabilities consist of accounts payable, and legal fees and expenses
incurred in connection with the Company's Chapter 11 bankruptcy proceedings and
general corporate work. Payment of Morrison & Foerster's pre-confirmation fees,
which is subject to Bankruptcy Court approval, was deferred by agreement until
April 22, 2000, when payment was due in full without interest. As the Company
lacked funds to pay Morrison & Foerster's fees at that time, Morrison & Foerster
did not apply to the Bankruptcy Court for approval of its fees. However, it
expects to do so soon. The amount of preconfirmation fees sought by Morrison &
Foerster is subject to reduction by the Bankruptcy Court and the payment of the
preconfirmation fees is subject to an agreement between Morrison & Foerster and
the Company.
INVESTMENT IN AFFILIATE. The Company owns 50% of the outstanding capital stock
of TWIN Entertainment, Inc. ("TWIN Entertainment"), a corporate joint venture
between the Company and Two Way TV Limited ("Two Way TV"). TWIN Entertainment's
offices are located at 4929 Wilshire Boulevard - Suite 930, Los Angeles, CA
90010. TWIN Entertainment operates in the United States and Canada using
technology licensed by the Company and Two Way TV. The Company made additional
investments in TWIN Entertainment in the form of loans of $750,000 in September
2000, $250,000 in December 2000 and $250,000 in February 2001, and Two Way TV
made similar investments, leaving the relative ownership interests in TWIN
Entertainment unchanged. Each party reserves the right to convert such amounts
to equity in TWIN Entertainment in the future under terms to be determined and
agreed upon at a later date by the parties.
Condensed financial data of TWIN Entertainment for the three month period ended
March 31, 2001 follows:
FROM INCEPTION AT
THREE MONTHS ENDED JANUARY 10, 2001 THROUGH
MARCH 31, 2001 MARCH 31, 2001
-------------- --------------
SUMMARY OF OPERATIONS
Revenues $ 0 $ 0
Costs and expenses 872,112 3,058,561
Income taxes 0 800
Net loss (872,112) (3,059,361)
Interactive Network's equity in net income (436,056) (1,529,680)
BALANCE SHEET DATA ASSETS
Current assets 413,696 60,247
Non-current assets 438,092 351,115
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Total assets $ 851,788 $ 411,362
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities 369,974
Long-term debt 2,500,000
Other non-current liabilities
Shareholders' deficit (2,018,186)
------------
Total liabilities and shareholders'
deficit $ 851,788
4
The Company periodically evaluates the recoverability of its equity investments,
in accordance with APB No. 18, "The Equity Method of Accounting for Investments
in Common Stock," and if circumstances arise where a loss in value is considered
to be other than temporary, the Company will record a write-down of investment
cost. The Company's recoverability analysis is based on the projected
undiscounted cash flows of the operating ventures, which is the lowest level of
cash flow information available. The Company's share of the operating loss from
its joint venture investment in TWIN Entertainment was approximately $305,000
for the quarter ended March 31, 2001 accounted for by the equity method. The
Company also adjusted its allowance against its investment and outstanding loans
in the amount of $54,859 to write the investment, including loans, down to zero
at March 31, 2001, as no assurance can be made that the joint venture will be
profitable in the future.
5
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
Date: January 9, 2002
INTERACTIVE NETWORK, INC.
(Registrant)
By: /S/ Bruce W. Bauer
--------------------------
Bruce W. Bauer
Chairman of the Board
President, Chief Executive Officer
and Chief Financial Officer (principal financial
officer)