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We also compete with providers of other content and services available to consumers through online services. The expanded use of online networks and the internet provides computer users with an increasing number of alternatives to video games and entertainment software. With this increasing competition and the rapid pace of change in product and service offerings in the interactive entertainment industry, we must be able to compete in terms of technology, content and management strategy. If we fail to provide competitive, engaging, quality services and products, we will lose revenues to other competitors in the entertainment industry. Increased competition may also result in price reductions, fewer customer orders, reduced gross margins, longer sales cycles, reduced revenues and loss of market share.

We may not be able to significantly grow our out-of-home Buzztime iTV Network revenue and implement our other business strategies.

We expect to derive a significant portion of our revenue for at least the next several years from our out-of-home Buzztime iTV Network. Accordingly, our success depends on our ability to increase market awareness and encourage the adoption of the Buzztime brand and our iTV game service among establishments such as restaurants, sports bars, taverns and pubs, and within the interactive game player community. Our success also depends on our ability to increase customer retention. We may not be able to leverage our resources to expand awareness of and demand for our iTV game service. In addition, our efforts to improve our game platform and content may not succeed in generating additional demand for our products within the player community or strengthening the loyalty and retention of our existing customers. The de gree of market adoption of Buzztime will depend on many factors, including consumer preferences, the availability and quality of competing products and services, and our ability to leverage our brand.

Our success also depends on our ability to implement our other business strategies, which include growing our advertising revenue, developing an integrated platform that provides cross-selling opportunities across our Network, the internet, and mobile devices, and focusing on national accounts. The implementation of these strategies will require us to dedicate significant resources to, among other things, expanding our product offerings, customizing our products and services to meet the unique needs of our national accounts and expanding and improving our advertising efforts. We may be unable to implement these strategies as currently planned.

Our management turnover creates uncertainties.

We have experienced significant changes in our executive leadership over the past several years. Terry Bateman was appointed Chief Executive Officer in February of 2009 and announced his resignation for personal reasons in January 2010. We are actively searching for, but have not yet hired, a new CEO. Dario Santana, our former CEO and President, separated from our Company in May 2008. Michael Fleming served as Interim Chief Executive Officer from May 2008 until his resignation in November 2008. Because of our recent financial and stock performance, geographic location and other business factors in a relatively small industry, we face substantial challenges in attracting and retaining experienced senior executives. Changes in senior management are inherently disruptive, and efforts to implement any new strategic or operating goals may not succeed in the absence of a long-term management team. Changes to strategic or operating goals with the appointment of new executives may themselves prove to be disruptive. Executive leadership transition periods are often difficult as the new executives gain detailed knowledge of company operations and due to cultural differences and friction that may result from changes in strategy and style. Without consistent and experienced leadership, customers, employees, creditors, stockholders and others may lose confidence in the company.

Our cash flow may not cover current capital needs and we may need to raise additional funds in the future. Such funds may not be available on favorable terms or at all and, if available, may dilute current stockholders.

Our capital requirements will depend on many factors, including:

	●	our ability to generate cash from operating activities;
	●	acceptance of, and demand for, our interactive games and entertainment;
	●	the costs of developing new entertainment content, products or technology or expanding our offering to new media platforms such as the internet and mobile phones;
	●	the extent to which we invest in the creation of new entertainment content and new technology; and
	●	the number and timing of acquisitions and other strategic transactions, if any.

In the future, we may need to raise additional funds, and such funds may not be available on favorable terms, or at all, particularly given the continuing credit crisis and downturn in the overall global economy. Furthermore, if we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences, and privileges senior to those of our existing stockholders. If we cannot raise funds on acceptable terms, or at all, we may not be able to develop or enhance our products and services, execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated customer requirements. This may materially harm our business, results of operations, and financial condition.

New products and rapid technological change may render our operations obsolete or noncompetitive.

The emergence of new entertainment products and technologies, changes in consumer preferences, the adoption of new industry standards and other factors may limit the life cycle of our technologies and any future products and services we develop. Accordingly, our future performance will depend on our ability to:

	●	identify emerging technological trends and industry standards in our market;

	●	identify changing consumer needs, desires or tastes;

	●	develop and maintain competitive technology, including new hardware and content products and service offerings;

	●	improve the performance, features and reliability of our existing products and services, particularly in response to changes in consumer preferences, technological changes and competitive offerings; and

	●	bring technology to the market quickly at cost-effective prices.

If we do not compete successfully in the development of new products and keep pace with rapid technological change, we will be unable to achieve profitability or sustain a meaningful market position. The interactive entertainment and game and out-of-home digital advertising industries are highly competitive and subject to rapid technological changes. We are aware of other companies that are introducing interactive game products on various platforms, including mobile devices and interactive television, that allow players to compete across the nation. Some of these companies may have substantially greater financial resources and organizational capital than we do, which could allow them to identify or better exploit emerging trends and market opportunities. In addition, changes in customer tastes may render our Buzztime iTV network and its content obsolete or noncompetitive.

We may not be successful in developing and marketing new products and services that respond to technological and competitive developments and changing customer needs. We may have to incur substantial expenditures to modify or adapt our products or services to respond to these developments. We must be able to incorporate new technologies into the products we design and develop in order to address the increasingly complex and varied needs of our customer base. Any significant delay or failure in developing new or enhanced technology, including new product and service offerings, could result in a loss of actual or potential market share and a decrease in revenues.

Communication or other equipment failures could result in the cancellation of subscribers and a decrease in our revenues.

We rely on telephone systems to communicate with our subscriber locations. We currently transmit our data to our hospitality customer sites via broadband connectivity. An interruption in communications with our subscriber locations could decrease customer loyalty and satisfaction and result in a cancellation of our services.

We have experienced significant losses, and we may incur significant losses in the future.

We have a history of significant losses, including net losses of $1,501,000 in 2009 and $6,466,000 in 2008 and an accumulated deficit of $106,868,000 as of December 31, 2009. We may also incur future operating and net losses, due in part to expenditures required to implement our business strategies. Despite significant expenditures, we may not be able to achieve or maintain profitability. Moreover, if we do achieve profitability, the level of any profitability cannot be predicted and may vary significantly from quarter to quarter and year to year.

Our success depends on our ability to recruit and retain skilled professionals for our business.

Our business requires experienced programmers, creative designers, application developers and sales and marketing personnel. Our success will depend on identifying, hiring, training and retaining such experienced and knowledgeable professionals. We must recruit talented professionals in order for our business to grow. There is significant competition for employees with the skills required to develop the products and perform the services we offer. We may be unable to attract a sufficient number of qualified employees in the future to sustain and grow our business, and we may not be successful in motivating and retaining the employees we are able to attract. If we cannot attract, motivate and retain qualified technical and sales and marketing professionals, our business, financial condition and results of operati ons will suffer.

We may not successfully address problems encountered in connection with any acquisitions.

During the second quarter of 2009, we acquired assets from two businesses and we expect to consider opportunities to acquire or make investments in other technologies, products, and businesses that could complement our current products and services, expand the breadth of our markets or enhance our technical capabilities. We have a limited history of acquiring and integrating businesses. Acquisitions and strategic investments involve numerous risks, which may include:

	●	problems assimilating employees, or the purchased products, business operations or technologies;
	●	unanticipated costs associated with the acquisition, including accounting and legal charges, capital expenditures, and transaction expenses;
	●	diversion of management's attention from our core business;
	●	adverse effects on existing business relationships with customers and suppliers;
	●	risks associated with entering markets in which we have no or limited prior experience;
	●	unanticipated or unknown liabilities relating to the acquired businesses;
	●	the need to integrate accounting, management information, manufacturing, human resources and other administrative systems to permit effective management; and
	●	potential loss of key employees of acquired organizations.

If we fail to properly evaluate and execute acquisitions and strategic investments, our management team may be distracted from our day-to-day operations, our business may be disrupted, and our operating results may suffer. In addition, if we finance acquisitions by issuing equity or convertible debt securities, our existing stockholders may be diluted. Also, the anticipated benefit of our acquisitions may not materialize. Future acquisitions could result in potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or write-offs of goodwill, any of which could harm our operating results or financial condition. Future acquisitions may also require us to obtain additional equity or debt financing, wh ich may not be available on favorable terms or at all.

Execution of our growth strategy may result in unsuitable acquisitions and we may fail to successfully integrate acquired companies.

We expect to continue to consider and pursue opportunities to grow our business through acquisitions of other businesses, assets, technologies and products. We have in the past and may in the future invest significant resources in evaluating, consummating and integrating such acquisitions. In making acquisition decisions, we may not be successful in selecting businesses, assets, technologies or products that complement our existing or future business and products. We may also be unsuccessful in integrating any acquired business and personnel.

We may face exposure on sales and use taxes in various states.

From time to time, state tax authorities have made and other states will make inquiries as to whether or not a portion of our services might require the collection of sales and use taxes from customers in those states. In the current difficult economic climate, many states are expanding their interpretation of their sales and use tax statutes to derive additional revenue. While in the past the sales and use tax assessments we have paid have not been significant to our operations, it is likely that such expenses will increase in the future.

We have had litigation and may face additional litigation or other challenges related to company control.

Trinad Capital Master Fund, Ltd., which beneficially owned 7% of our common stock as of December 31, 2009, wrote us a series of letters during 2008 critical of our company's performance and of certain decisions of our board. Trinad also attempted to nominate an alternative slate of Board of Directors candidates for our 2008 annual meeting of stockholders.

In October 2008, Trinad filed a "books and records" proceeding in the Delaware Chancery Court under Section 220 of the Delaware General Corporation Law asking the Court to require us to provide Trinad with certain of the requested information. This action was dismissed in May 2009. However, Trinad or other stockholders including hedge funds and similar entities could bring additional litigation against us and/or against directors and officers whom we are obliged to indemnify and defend. In addition, Trinad or others might attempt to wage a corporate control contest against us and our current Board of Directors.

Any further litigation and/or control contest could be significantly expensive and disruptive, could damage our image with customers, and could destabilize our relationships with key employees, directors and/or stockholders. Further litigation might seek damages and, if we and/or any officers or directors named as defendants were to lose, we might have to pay damages or indemnify such officers or directors. If we were to lose a control contest, any new personnel and strategies that may be implemented may not be effective, might be less effective than the present and any changeover would involve significant disruption. In addition, the costs and expenses of defending and/or setline any such litigation could be significant and any litigation/control-contest process could be time c onsuming and could divert our management and key personnel from our business operations. Any of these events could harm our business.

We may be liable for the content we make available on the Buzztime iTV Network, the Buzztime Trivia Channel and the internet.

We make content available on the Buzztime iTV Network, the Buzztime Trivia Channel for cable television and the internet. The availability of this content could result in claims against us based on a variety of theories, including defamation, obscenity, negligence or copyright or trademark infringement. We could also be exposed to liability for third-party content accessed through the links from our websites to other websites. Federal laws may limit, but not eliminate, our liability for linking to third-party websites that include materials that infringe copyrights or other rights, so long as we comply with certain statutory requirements. We may incur costs to defend against claims related to either our own content or that of third parties, and our financial condition could be materially adversely affected if w e are found liable for information that we make available. Implementing measures to reduce our exposure may require us to spend substantial resources and may limit the attractiveness of our services to users which would impair our profitability and harm our business operations.

Our products and services are subject to government regulations that may restrict our operations or cause demand for our products to decline significantly.

We are subject not only to regulations applicable to businesses generally, but also to laws and regulations that apply directly to the interactive television products and gaming industries. In the area of interactive television products, state and federal governments may adopt a number of laws and regulations governing any of the following issues:

	●	user privacy;

	●	copyrights;

	●	gaming, lottery and alcohol beverage control regulations;

	●	consumer protection;

	●	media distribution of specific material or content; and

	●	the characteristics and quality of interactive television products and services.

In addition, we operate games of chance and, in some instances, award prizes. These games are regulated in many jurisdictions. The selection of prizewinners is sometimes based on chance, although none of our games require any form of monetary payment. We also operate interactive card games, such as Texas Hold’em poker and Blackjack. These card games are restricted in several jurisdictions. The laws and regulations that govern these games, however, vary in different jurisdictions and are subject to legislative and regulatory change in all of the jurisdictions in which we offer our games, as well as law enforcement discretion. We may find it necessary to eliminate, modify or cancel certain components of our products in certain states or jurisdictions based on changes in law, regulations or law enforcement d iscretion, which could result in additional development costs and/or the possible loss of customers and revenue.

If intellectual property law and practice do not adequately protect our proprietary rights and intellectual property, our business could be seriously damaged.

We rely on a combination of trademarks, copyrights, patents and trade secret laws to protect our proprietary rights in our products. We believe that the success of our business also depends on such factors as the technical expertise, innovative skills, marketing and capabilities of our employees. It is our policy that all employees and consultants sign non-disclosure agreements and assignment of invention agreements. Our competitors and former employees and consultants may, however, misappropriate our technology or independently develop technologies that are as good as, or better than ours. Our competitors may also challenge or circumvent our proprietary rights. If we have to initiate or defend against an infringement claim to protect our proprietary rights, the litigation over such claims could be time-consumi ng and costly to us, adversely affecting our financial condition.

From time to time, we hire or retain employees or external consultants who may have worked for other companies developing products similar to those that we offer. These other employers may claim that our products are based on their products and that we have misappropriated their intellectual property. Any such litigation could prevent us from exploiting our proprietary portfolio and cause us to incur substantial costs, which in turn could materially adversely affect our business. As of December 31, 2009, we owned one U.S. patent covering certain aspects of technology related to an interactive learning system. This patent will expire in 2017. We have a small number of patent applications pending in the United States and Canada related to our interactive, network-based game technologies. Our pending pat ent applications and any future applications might not be approved. Moreover, our patents might not provide us with competitive advantages. Third parties might challenge our patents or trademarks or attempt to use infringing technologies or brands which could harm our ability to compete and reduce our revenues, as well as create significant litigation expenses. In addition, patents and trademarks held by third parties might have an adverse effect on our ability to do business and could likewise result in significant litigation expenses. Furthermore, third parties might independently develop similar products, duplicate our products or, to the extent patents are issued to us, design around those patents. Others may have filed and, in the future may file, patent applications that are similar or identical to ours. Such third-party patent applications might have priority over our patent applications. To determine the priority of inventions, we may have to participate in interference proceedings declared by the United States Patent and Trademark Office. Such interference proceedings could result in substantial cost to us.

We have incurred significant net operating loss carryforwards that we believe we will not be able to fully use.

As of December 31, 2009, we have federal income tax net operating loss carryforwards of approximately $61.7 million, which will begin expiring in 2010. As of December 31, 2009, we have state income tax net operating loss carryforwards of approximately $16.2 million, which will begin expiring in 2015. We believe that our ability to utilize our net operating loss carryforwards may be substantially restricted by the passage of time and the limitations of Section 382 of the Internal Revenue Code, which apply when there are certain changes in ownership of a corporation. To the extent we begin to realize significant taxable income, these Section 382 limitations may result in our incurring federal income tax liability notwithstanding the existence of otherwise available carryforwards. To date we have not quantified the potential impact of these limitations.

Foreign currency exchange rate fluctuations and trade barriers could harm our business.

We operate the Buzztime iTV Network in Canada. Since service fees and operating expenses from our Canadian subsidiary are recognized in its local currency, our financial position and results of operations could be significantly affected by large fluctuations in foreign currency exchange rates or by weak economic conditions in Canada. To the extent we attempt to expand our sales efforts in other international markets, we may also face difficulties in staffing and managing foreign operations, longer payment cycles and problems with collecting accounts receivable and increased risks of piracy and limits on our ability to enforce our intellectual property rights. If we are unable to adequately address the risks of doing business abroad, our business, financial condition and results of operations may be harmed.

Risk Factors Associated with our Common Stock

Our common stock could be delisted or suspended from trading on the NYSE Amex if we fail to maintain compliance with continued listing criteria.

NYSE Amex will normally consider suspending dealings in, or removing from the list, securities selling for a substantial period of time at a low price per share if the issuer fails to effect a reverse split of such stock within a reasonable time after being notified that NYSE Amex deems such action to be appropriate under the circumstances. While NYSE Amex does not provide bright line minimum share price standards for continued listing, we believe that a price less than $1.00 per share for a substantial period of time may be investigated. Our common stock has traded at below $1.00 per share since July 2007.

If we are unable to comply with the NYSE Amex continued listing requirements, including its trading price requirements, our common stock may be suspended from trading on and/or delisted from NYSE Amex. Alternatively, in order to avoid delisting by NYSE Amex, we may be required to effect a reverse split of our common stock. The delisting of our common stock from NYSE Amex may materially impair our stockholders’ ability to buy and sell shares of our common stock and could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock. In addition, the delisting of our common stock could significantly impair our ability to raise capital.

Our stock price has been highly volatile and your investment could suffer a decrease in value.

The trading price of our common stock has been, and may continue to be, subject to wide fluctuations. Our stock price may fluctuate in response to a number of events and factors, such as quarterly variations in operating results, announcements of technological innovations or new products and media properties by us or our competitors, changes in financial estimates and recommendations by securities analysts, the operating and stock price performance of other companies that investors may deem comparable, and news reports relating to trends in our markets. In addition, the stock market in general, and the market prices for technology-related companies in particular, have experienced extreme volatility that often has been unrelated to the operating performance of such companies. These broad market and industry fluc tuations may adversely affect the price of our stock, regardless of our operating performance.

Our charter contains provisions that may hinder or prevent a change in control of our company, which could result in our inability to approve a change in control and potentially receive a premium over the current market value of your stock.

Certain provisions of our certificate of incorporation could make it more difficult for a third party to acquire control of us, even if such a change in control would benefit our stockholders. For example, our certificate of incorporation requires a supermajority vote of at least 80% of the total voting power, voting together as a single class, to amend certain provisions of such document, including those provisions relating to:

	●	the number, election and term of directors;

	●	the removal of directors and the filling of vacancies; and

	●	the supermajority voting requirements of our restated certificate of incorporation.

Additionally, our certificate of incorporation and restated bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions:

	●	authorize the issuance of preferred stock which can be created and issued by the Board of Directors without prior stockholder approval, with rights senior to those of the common stock;

	●	prohibit stockholders from filling Board vacancies, calling special stockholder meetings, or taking action by written consent;

	●	prohibit our stockholders from making certain changes to our bylaws except with 66 2/3% stockholder approval; and

	●	require advance written notice of stockholder proposals and director nominations.

These provisions could discourage third parties from taking control of our company. Such provisions may also impede a transaction in which you could receive a premium over then current market prices and your ability to approve a transaction that you consider in your best interest.

In addition, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our Restated Certificate of Incorporation, Restated Bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our Board or initiate actions that are opposed by the then-current Board, including delaying or impeding a merger, tender offer, or proxy contest involving our company. Any delay or prevention of a change of control transaction or changes in our Board could cause the market price of our common stock to decline.

Future sales of our common stock reserved for issuance pursuant to stock option and warrant exercises may adversely affect the market price of our common stock.

Future sales of substantial amounts of our common stock in the public market or the anticipation of such sales could have a material adverse effect on then-prevailing market prices. As of December 31, 2009, there were approximately 4,870,000 shares of common stock reserved for issuance upon the exercise of outstanding stock options at exercise prices ranging from $0.13 to $0.91 per share. As of December 31, 2009, there were also outstanding warrants to purchase an aggregate of approximately 4,500,000 shares of common stock at exercise prices ranging from $0.30 to $1.50 per share.

These outstanding options and warrants could adversely affect our ability to obtain future financing or engage in certain mergers or other transactions because the holders of the options and warrants may exercise these securities when we are attempting to raise additional capital through a new offering of securities at a price per share that exceeds the exercise price of such options and warrants. To the extent the trading price of our common stock at the time of exercise of any of our outstanding options or warrants exceeds the exercise price, such exercise will have a dilutive effect on our stockholders.

ITEM 1B. UnresolvedStaff Comments

We do not have any unresolved comments issued by the SEC Staff.

ITEM 2. Properties

We lease approximately 41,000 square feet of office and warehouse space at 5966 La Place Court, Carlsbad, California, for our corporate headquarters. In October 2005, we entered into an amendment to our lease agreement whereby we extended the term of the lease through June 2011. In February 2006, we entered into a second amendment to our lease agreement whereby we expanded the square footage we lease from approximately 39,000 square feet to 41,000 square feet. The term of the lease for this expanded square footage is also through June 2011.

We lease approximately 3,361 square feet of office space in Santa Monica, California, which expires February 28, 2011. The property is currently vacant and we are seeking to sublease the property.

The facilities that we lease are suitable for our current needs and are considered adequate to support expected growth.

ITEM 3. Legal Proceedings

Sales and Use Tax

From time to time, state tax agencies have made and other states will make inquiries as to tax applicability of our service offerings. Many states have expanded their interpretation of their sales and use tax statues to derive additional revenue. We evaluate such inquiries on a case-by-case basis and have favorably resolved the majority of these tax issues in the past without any material adverse consequences.

During the quarter ended March 31, 2009, we settled a long on-going sales tax evaluation with the state of Texas. We entered into an Audit Resolution Agreement and Joint Motion to Dismiss with the State of Texas pursuant to which we will pay the state approximately $450,000 over a 2 year period. As part of those agreements, both parties agreed to waive all rights to any redetermination or refund hearings. In February 2009, the Company began collecting and remitting sales tax in the state of Texas in accordance with the state tax statutes. As of December 31, 2009, $334,000 is due to the State of Texas under this settlement agreement.

We are involved in ongoing sales tax inquiries, including certain formal assessments of $705,000, with other states and provinces. As a result of those inquiries and the Texas liability discussed above, we recorded a total net liability of $847,000 and $867,000 as of December 31, 2009 and 2008, respectively. Based on the guidance set forth by ASC No. 450, Contingencies, we deemed the likelihood that we will be required to pay all or part of these assessments with other states as reasonably possible.

ITEM 4. (Removed and Reserved)

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is listed on the NYSE Amex under the symbol “NTN.” Set forth below are the high and low sales prices for the common stock as reported by the NYSE Amex for the two most recent fiscal years:

	High		Low
Year Ended December 31, 2009
First Quarter	$	0.33	$	0.12
Second Quarter	$	0.50	$	0.21
Third Quarter	$	0.58	$	0.25
Fourth Quarter	$	0.63	$	0.42


	High		Low
Year Ended December 31, 2008
First Quarter	$	0.64	$	0.40
Second Quarter	$	0.54	$	0.30
Third Quarter	$	0.33	$	0.20
Fourth Quarter	$	0.25	$	0.11

On March 15, 2010, the closing price for our common stock as reported on the NYSE Amex was $0.45 and there were approximately 1,138 holders of record.

To date, we have not declared or paid any cash dividends with respect to our common stock, and the current policy of our Board of Directors is to retain earnings, if any, after payment of dividends on the outstanding preferred stock to provide for our growth. Consequently, no cash dividends are expected to be paid on our common stock in the foreseeable future.

We have 161,000 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Stock provides for a cumulative annual dividend of 10 cents per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or with shares of common stock. In 2009 we issued approximately 37,000 common shares for payment of these dividends.

ITEM 6. Selected Financial Data

Under SEC rules and regulations, as a smaller reporting company, we are not required to provide the information otherwise required by this item.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Annual Report on Form 10-K (including, but not limited to, the following discussion of our financial condition and results of operations) and the documents incorporated herein by reference contain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as “believes,” “anticipates,” “estimates,” “expects,” “projections,” “may,” “potential,” “plan,” “continue” and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this report. 0;All statements, other than statements of historical fact, are statements that could be deemed forward-looking statements, including but not limited to statements regarding our future financial performance or position, our business strategy, plans or expectations, and our objectives for future operations, including relating to our products and services. Forward-looking statements contained herein are inherently subject to risks and uncertainties and our actual results and outcomes may be materially different from those expressed or implied by the forward-looking statements. Our actual results and outcomes may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in our operations, development efforts and business environment, including those set forth under the Section entitled “Risk Factors” in Item 1A, and other documents we file with the Securities and Exchange Commission. We cannot guarantee fu ture results, levels of activity, performance or achievements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We do not undertake any obligation to revise or update any such forward-looking statement to reflect future events or circumstances.

You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and the notes to those statements included elsewhere in this Form 10-K.

Overview

We historically have operated principally through two operating divisions: Entertainment and Hospitality. The Entertainment division generates revenue primarily from the Buzztime iTV Network which distributes an interactive television promotional game network to restaurants, sports bars, taverns and pubs, primarily in North America. We also generate revenue by selling advertising for distribution via our interactive television network.

In March 2007, we completed the sale of substantially all of the assets of NTN Wireless, which produced and distributed guest and server paging systems to restaurants and other markets. In October 2007, we sold certain intellectual property assets of Software Solutions, which developed and distributed customer management software to manage reservations and table service in restaurants as well as provided professional help desk services and outsourced software development and support and maintenance services. The intellectual property assets were sold pursuant to an Asset Purchase Agreement, and in a separate agreement with a customer, we discontinued the outsourced software development. Additionally, we completed the wind down of our professional help desk and support and maintenance services during the third quarter of 2008.

Restructuring of Operations

During the third quarter of 2008, we ceased our operations in the United Kingdom. The closure of operations involved the termination of six employees, relocation of nearly all assets to the United States and disposal of certain other assets. As of the date we ceased operations, UK operations accounted for less than 1% of the total subscriber sites.

Recent Asset Acquisitions

iSports

In April 2009, we acquired from iSports Inc., or iSports, substantially all of its assets, including technology and other intangible assets, used in the conduct of its business as a provider of mobile sports and entertainment content. We are using these acquired assets to accelerate the development of our mobile gaming platform. Following the closing of the acquisition, we employed a co-founder of iSports as our Executive Vice President of Programming and Technology.

i-am TV

In May 2009, we acquired from Instant Access Media, LLC, or i-am TV, certain of its assets used in the conduct of i-am TV's business as a provider of out-of-home entertainment programming and advertising to hospitality venues. The assets we acquired consist primarily of approximately 1,400 flat panel television screens located in over 360 hospitality venues in the United States, together with satellite communications equipment. In addition, we acquired intangible assets related to customer and advertising relationships. We have used these acquired assets to generate customer leads, increase the number of customer sites by converting approximately 110 of the i-am TV customers, and further develop advertising relationships.

The Entertainment Division

The out-of-home Buzztime iTV Network has engaged in business in the hospitality industry for over 25 years as a promotional platform providing interactive entertainment to patrons in restaurants and sports bars. The iTV Network distributes a wide variety of engaging interactive multi-player games, including trivia quiz shows, play-along sports programming, casino-style and casual games to our Network. Patrons use our wireless game controllers, or Playmakers, to play along with the Buzztime games which are displayed on television screens. Buzztime players can compete with other players within their hospitality venue and also against players in other Network venues.

We target national and regional hospitality chains as well as local independent hospitality venues that desire a competitive point-of-difference to attract and retain customers. As of December 31, 2009, we had 3,689 United States Network subscribers and 327 Canadian subscribers. Approximately 29% of our Network subscribers come from leading national chains in the casual-dining restaurant segment such as Buffalo Wild Wings, TGI Friday’s and Old Chicago.

Through the transmission of interactive game content stored on a site server at each location, our Buzztime iTV Network enables single-player and multi-player participation as part of local, regional, national or international competitions supported with prizes and player recognition. Our Buzztime iTV Network also generates revenue through the sale of advertising and marketing services to companies seeking to reach the millions of consumers that visit the Buzztime iTV Network’s venues.

We also generate revenue from distributing and licensing our Buzztime-branded content and related technology to consumer platforms, with a focus on interactive networks such as cable TV, satellite TV and mobile phones. Our distribution efforts focus on licensing real-time, mass-participation games such as trivia, head-to-head multi-player games such as Texas Hold’em and single-player games such as solitaire.

The Hospitality Division

Results of Operations

Change in Reporting Format

Our Hospitality Division is classified as discontinued operations in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 360, Property, Plant, and Equipment. The operating results for these businesses have been separately classified and reported as discontinued operations in the consolidated financial statements. In accordance with ASC No. 360, corporate expenses previously allocated to these divisions have been reclassified to Buzztime iTV for all years affected.

Results of Continuing Operations

Year Ended December 31, 2009 compared to the Year Ended December 31, 2008

Continuing operations, which consists of the Entertainment division, generated a loss of $1,501,000 for the year ended December 31, 2009 compared to a loss of $6,134,000 for the year ended December 31, 2008.

Revenue

Revenue from continuing operations decreased $1,682,000, or 6%, to $25,814,000 for the year ended December 31, 2009 from $27,496,000 for the year ended December 31, 2008. This decrease was primarily due to a reduction in average revenue generated per site related to a strategic reduction in pricing, which was partially offset by increases in site count, an increase in advertising revenues primarily related to the i-am TV acquisition and certain nonrecurring hardware sales. Comparative site count information for Buzztime iTV Network is as follows:

	Network Subscribers as of December 31,
	2009		2008
United States		3,689		3,429
Canada		327		317
Total		4,016		3,746

Direct Costs and Gross Margin

The following table compares the direct costs and gross margins for the Entertainment Division for 2009 and 2008:

	For the year ended December 31,
	2009		2008
Revenues	$	25,814,000	$	27,496,000
Direct Costs		6,460,000		7,582,000
Gross Margin	$	19,354,000	$	19,914,000

Gross Margin Percentage		75%		72%

Gross margin as a percentage of revenue increased by three percentage points to 75% for the year ended December 31, 2009 compared to 72% in the prior year. The three point increase in the gross margin percentage is primarily the result of a reduction of $295,000 in depreciation expense as equipment became fully depreciated, a decrease of $254,000 in communication costs due to the conversion of sites from satellite to DSL communications, a reduction of $331,000 in content costs and a decrease of $291,000 in direct salaries as a result of reduced headcount. Additionally, the increase in the gross margin percentage is partially offset by the decrease in average revenue generated per site related to our strategic reduction in pricing.

Selling, General and Administrative Expenses

Selling, general and administrative expenses decreased $5,457,000, or 21%, to $20,031,000 in 2009 from $25,488,000 in 2008. Selling, general and administrative expenses decreased due to several factors. Payroll and payroll-related expenses decreased $1,454,000 due to a reduction in headcount that occurred in January 2009. Severance expenses decreased $879,000 due to severance expenses in 2008 associated with the departure of senior personnel including the CEO and the closing of our UK office. Marketing expenses decreased $1,113,000 due to a change in our marketing strategy, including reducing direct mail campaigns and reduced participation in promotions and trade shows. Consulting expenses decreased $891,000, as we decreased our overall utilization of exter nal consulting services. General spending related to payroll processing fees, professional tax and audit services and supplies decreased $343,000. Bad debt expense decreased $330,000 predominately due to an improvement in collection experience. Legal expenses decreased $162,000 due to a reduction in legal activity regarding corporate governance matters and a trademark infringement case. Expenses related to seminars, subscriptions and memberships decreased $128,000, and an aggregate $156,000 decrease was related to reduced spending in other miscellaneous expenses.

Depreciation and amortization

Depreciation and amortization not related to direct operating costs increased $387,000, or 73%, to $919,000 in 2009 from $532,000 in 2008 due to the acquisition of intangible assets, which has resulted in increased amortization expense. Approximately $300,000 of this increase was for an acquired intangible asset that was fully amortized in 2009.

Other Income, Net

Other income, net decreased $16,000 to $190,000 in 2009 from $206,000 in 2008. This increase was due to a foreign currency exchange gain of approximately $49,000 related to intercompany transactions with our Canadian subsidiary as well as a legal settlement we received related to a trademark infringement suit. This increase was offset by a decrease of $66,000 in interest income due to lower average cash balances invested in interest bearing securities, and increased interest expense of $61,000 predominately due to entering into additional equipment leases.

Income Taxes

We expect to report a U.S. tax loss for the year ended December 31, 2009. We expect that we will not incur a federal tax liability; however, we will likely incur state tax liabilities. We also expect to pay income taxes in Canada due to the profitability of NTN Canada. As a result, we recorded a tax provision of $95,000 for the year ended December 31, 2009. This was a $139,000 decrease compared to the $234,000 provision for income taxes recorded for the year ended December 31, 2008. We continue to provide a 100% valuation allowance against our deferred tax assets related to certain net operating losses as realization of such tax benefits is not assessed as more likely than not. Further, we have not quantified the potential impact that Section 382 of the Internal Revenue Code may have on the ability for us to utilize our net operating loss carryforwards. The use of some or all of those net operating losses may be limited if certain changes in ownership are deemed to have occurred.

Results of Discontinued Operations

Year Ended December 31, 2008

We completed the wind down of our discontinued operations in the third quarter of 2008; therefore, there is no activity to report for 2009. The operating results of the discontinued operations are as follows for 2008:

	December 31,
	2008
Operating revenues	$	21,000
Operating expenses		530,000
Operating loss		(509,000	)
Other income		177,000
Loss from discontinued operations, net of tax	$	(332,000	)

EBITDA—Consolidated Operations

Earnings before interest, taxes, depreciation and amortization, or EBITDA, is not intended to represent a measure of performance in accordance with accounting principles generally accepted in the United States (GAAP). Nor should EBITDA be considered as an alternative to statements of cash flows as a measure of liquidity. EBITDA is included herein because we believe it is a measure of operating performance that financial analysts, lenders, investors and other interested parties find to be a useful tool for analyzing companies like us that carry significant levels of non-cash depreciation and amortization charges in comparison to their GAAP earnings or loss.

The following table reconciles our consolidated net loss per GAAP to EBITDA:

	For the year ended December 31,
	2009			2008
Net loss per GAAP	$	(1,501,000	)	$	(6,466,000	)
Interest income, net		(6,000	)		(133,000	)
Depreciation and amortization		3,193,000			3,101,000
Income taxes		95,000			234,000
EBITDA	$	1,781,000		$	(3,264,000	)

Liquidity and Capital Resources

As of December 31, 2009, we had cash and cash equivalents of $3,637,000 compared to cash and cash equivalents of $3,362,000 as of December 31, 2008. Including the effects of exchange rates, we generated $275,000 in cash in 2009 compared to using cash of $6,911,000 in 2008. The $7,186,000 decrease of cash used during the twelve months ended December 31, 2009 compared to the prior year period was driven predominately by the $4,965,000 decrease in the amount of our net loss as well as the change in effects of exchange rates of $1,309,000. In 2008, especially in the second half of the year, and throughout 2009, we took strong measures to reduce our use of cash. Those measures included the following:

	●	reduced headcount through strategic reductions in our work force,

	●	renegotiated pricing with numerous vendors,

	●	decreased the use of certain vendors and consultants, and

	●	decreased marketing spending.

In May 2009, we entered into an agreement with certain investors in i-am TV whereby they purchased 2,419,355 shares of our Common Stock in a private placement raising $750,000 in additional working capital. We have used cash raised in that financing to fund general working capital requirements as well as certain capital expenditures.

During 2010, we intend to continue to rely upon our cash on hand and cash flow from operations to meet our liquidity needs. While we believe that the actions taken in 2008 and 2009 to reduce our operating costs, improve our gross profit margin and manage working capital should benefit us in 2010, there can be no assurance that those actions will be sufficient.

We believe existing cash and cash equivalents, together with funds generated from operations, will be sufficient to meet our operating cash requirements for at least the next 12 months. We have no debt obligations other than capital leases. It is our intention to continuing entering into capital lease facilities for certain equipment requirements when economically advantageous. In the event that net cash provided by operating activities and cash on hand are not sufficient to meet future cash requirements, we may be required to reduce planned capital expenses, further reduce operational cash uses, sell assets or seek financing. Any actions we may undertake to reduce planned capital purchases, further reduce expenses, or generate proceeds from the sale of assets may be insufficient to cover shortfalls in available funds. If we require additional capital, we may be unable to secure additional financing on terms that are acceptable to us, or at all.

Working Capital

As of December 31, 2009, we had working capital (current assets in excess of current liabilities) of $881,000 compared to $967,000 as of December 31, 2008. The following table shows our change in working capital from December 31, 2008 to December 31, 2009.

	Increase (Decrease)
Working capital as of December 31, 2008	$	967,000
Changes in current assets:
Cash and cash equivalents		275,000
Accounts receivable, net of allowance		(30,000	)
Investment available-for-sale		122,000
Prepaid expenses and other current assets		104,000
Total current assets		471,000
Changes in current liabilities:
Accounts payable		203,000
Accrued compensation		207,000
Accrued expenses		(184,000	)
Sales taxes payable		(103,000	)
Income taxes payable		(18,000	)
Obligations under capital lease		292,000
Deferred revenue		(134,000	)
Other current liabilities		294,000
Total current liabilities		557,000
Net change in working capital		(86,000	)
Working capital as of December 31, 2009	$	881,000

Cash Flows

Cash flows from operating, investing and financing activities, as reflected in the accompanying Consolidated Statements of Cash Flows, are summarized as follows:

	For the year ended December 31,
	2009			2008
Cash (used in) provided by:
Operating activities	$	2,503,000		$	(2,963,000	)
Investing activities		(3,170,000	)		(2,925,000	)
Financing activities		623,000			(24,000	)
Effect of exchange rates		319,000			(999,000	)
Net (decrease) increase in cash and cash equivalents	$	275,000		$	(6,911,000	)

Net cash from operating activities. We are dependent on cash flows from operations to meet our cash requirements. Net cash generated from operating activities was $2,503,000 for the twelve months ended December 31, 2009 compared to net cash used in operating activities of $2,963,000 for the same period in 2008. The $5,466,000 increase in cash provided by operations was primarily due to a decrease of $4,965,000 in the amount of our net loss.

Our largest use of cash is payroll and related costs. Payroll and related costs decreased $3,217,000 to $12,483,000 in 2009 from $15,700,000 in 2008. This decrease is the result of our strategic reductions in work force in 2008 and the first quarter of 2009. Our primary source of cash is cash we generate from customers. Cash received from customers decreased $2,301,000 to $26,299,000 in 2009 from $28,600,000 in 2008. That decrease in cash from customers is due to our strategic decrease in pricing offset by an increase in site count. The principal changes in non-cash items that affected operating cash flow in 2009 when compared to 2008 included a $92,000 increase in depreciation and amortization due to increased amortization expense in connection with the acquisition of intangible assets, offset by a decrease in depreciation expense as a result of fixed assets becoming fully depreciated, a $351,000 reduction in loss from disposition of equipment and capitalized software and a $330,000 decrease of the provision for doubtful accounts due to recoveries of certain accounts previously written off and an increased recovery rate.

Cash used by discontinued operations was $807,000 in 2008 compared to $0 used for discontinued operations in 2009. The reduction in cash used by discontinued operations was due to the completion of the wind down in operations, which we completed in the third quarter of 2008.

Net cash used by investing activities. We used $3,170,000 in cash for investing activities for the twelve months ended December 31, 2009 compared to $2,925,000 used in cash for investing activities during the same period in 2008. The increase in cash flows used in investing activities when comparing the twelve months ended December 31, 2009 to the same period in 2008 was primarily due to an increase of $303,000 in cash used for software development initiatives offset by a decrease of $197,000 in cash used for capital expenditures.

We currently anticipate investing approximately $2.8 million in 2010 for software development and equipment purchases, including payments on capitalized leases. Our actual future capital requirements will depend on a number of factors, including our cash availability, success in increasing sales, industry competition and technological developments.

Net cash from financing activities. Net cash provided by financing activities increased $647,000 to $623,000 for the twelve months ended December 31, 2009 compared to net cash used of $24,000 for the same period in 2008. Included in net cash provided by financing activities for 2009 was $750,000 in proceeds we received from the sale of common stock in the May 2009 aforementioned private placement financing. The sources of cash were offset by $155,000 in principal payments on capital leases.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to deferred costs and revenues, depreciation of broadcast equipment, allowance for doubtful accounts, investments, intangible assets and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for makin g judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most subjective judgments. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Allowance for Doubtful Accounts—We maintain allowances for doubtful accounts for estimated losses resulting from nonpayment by our customers. We reserve for all accounts that have been suspended or terminated from our Buzztime iTV Network services and auto debits customers with balances that are greater than 60 days past due. We analyze historical collection trends, customer concentrations and creditworthiness, economic trends and anticipated changes in customer payment patterns when evaluating the adequacy of our allowance for doubtful accounts for specific and general risks. Additional reserves may also be established if specific customers’ balances are identified as potentially uncollectible. If the financial c ondition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Broadcast Equipment and Fixed Assets—Broadcast equipment and fixed assets are recorded at cost. Equipment under capital leases is recorded at the present value of future minimum lease payments. Depreciation of broadcast equipment and fixed assets is computed using the straight-line method over the estimated useful lives of the assets. Depreciation of leasehold improvements and fixed assets under capital leases is computed using the straight-line method over the shorter of the estimated useful lives of the assets or the lease period.

We incur a relatively significant level of depreciation expense in relation to our operating income. The amount of depreciation expense in any fiscal year is largely related to the estimated life of handheld wireless Playmaker devices, and associated electronics and the computers located at our customer’s sites. The Playmakers are depreciated over a seven-year life and associated electronics and computers are depreciated over two to four years. The depreciable life of these assets was determined based on the shorter of the contractual capital lease period or their estimated useful life, which considers anticipated technology changes. We determined that the useful life our Playmakers that we purchased after June 2009 increased from four to seven years. This increase is the result of s uperior digital technology used in the current Playmakers. The impact of this change is immaterial to the 2009 results of operations. If our Playmakers and associated electronics and the computers turn out to have longer lives, on average, than estimated, our depreciation expense would be significantly reduced in those future periods. Conversely, if the Playmakers, and associated electronics and the computers turn out to have shorter lives, on average, than estimated, our depreciation expense would be significantly increased in those future periods.

Investments—ASC 320, Investments-Debt and Equity Securities, provides guidance on determining when an investment is other-than-temporarily impaired. Investments are reviewed quarterly for indicators of other-than-temporary impairment. This determination requires significant judgment. In making this judgment, we employ a systematic methodology that considers available quantitative and qualitative evidence in evaluating potential impairment of our investments. If the cost of an investment exceeds its fair value, we evaluate, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and our intent and ability to hold the investment. We also consider specific adverse conditions related to the financial health of, and business outlook of the investee, including industry and sector performance, changes in technology, operational and financing cash flow factors, and rating agency actions. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. If market, industry and/or investor conditions deteriorate, we may incur future impairments.

Goodwill and Other Intangible Assets—Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill and intangible assets acquired in a purchase combination determined to have an indefinite useful life are not amortized, but instead are tested for impairment at least annually in accordance with the provisions of ASC No. 350, Intangibles - Goodwill and Other. ASC No. 350 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with ASC No. 360, Prope rty, Plant and Equipment.

In accordance with ASC No. 360, we assess potential impairments of our long-lived assets whenever events or changes in circumstances indicate the asset’s carrying value may not be recoverable. An impairment loss would be recognized when the carrying amount of a long-lived asset or asset group is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group.

We performed our annual test for goodwill impairment by calculating the fair value for NTN Canada, Inc., as of September 30, 2009 and 2008. The valuation methods employed to determine the fair value for NTN Canada, Inc. as of September 30, 2009 and 2008 were (1) the market approach—guideline company method, (2) the market approach—guideline transaction method and (3) the income approach—discounted cash flow method.

We consider market conditions, new product offerings, pricing and selling strategies, revenue growth rates and additional investment needed to achieve these growth rates. We believe the projections are reasonable based on existing operations and prospective business opportunities. The resulting indicated value from each approach is weighted equally and added to interest bearing debt to arrive at the indicated fair market value of the invested capital. The resulting value is compared against the carrying value of equity after interest bearing debt to determine impairment. As a result of the annual test, we determined that there were no indications of impairment as of September 30, 2009. We considered the need to perform an additional test of goodwill of our Canadian business as of December 31, 2009, b ut determined that the overall health of the underlying Canadian business has remained stable since the September 30, 2009 valuation.

Purchase Accounting – We account for acquisitions pursuant to ASC No. 805, Business Combinations. We record all acquired tangible and intangible assets and all assumed liabilities based upon their estimated fair values. The purchase price allocation for the asset acquisitions of iSports and i-am TV are final as of December 31, 2009.

Assessments of Functional Currencies—The United States dollar is our functional currency, except for our operations in Canada where the functional currency is the Canadian dollar. In 2008, we ceased our operations in the United Kingdom. Prior to that, the British pound was the functional currency for operations in that entity. The financial position and results of operations of our foreign subsidiaries are measured using the foreign subsidiary’s local currency as the functional currency. In accordance with ASC No. 830, Foreign Currency Matters, revenues and expenses of our subsidiaries have been translated into U.S. dollars at weighted average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. For the year ended December 31, 2009, we recorded $49,000 in foreign currency transaction gains due to settlements of intercompany transactions and re-measurement of intercompany balances with our Canadian subsidiary, which are included in other income in the accompanying statements of operations. Fluctuations in the rate of exchange between the U.S. dollar and Canadian dollar may affect our results of operations and period-to-period comparisons of our operating results. We do not currently engage in hedging or similar transactions to reduce these risks. For the year ended December 31, 2009, the net impact to our results of operations from the effect of exchange rate fluctuations was immaterial when compared to the exchange rates for the year ended December 31, 2008.

Revenue Recognition—Our Entertainment Division recognizes revenue from recurring service fees earned from our Network subscribers, advertising revenues and distribution and licensing fees from our Buzztime-branded content and related technology to interactive consumer platforms. To the extent these arrangements contain multiple deliverables, we evaluate the criteria in ASC No. 605, Revenue Recognition, to determine whether such deliverables represent separate units of accounting. In order to be considered a separate unit of accounting, the delivered items in an arrangement must have stand-alone value to the customer and objective and reliable evidence of fair value must exis t for any undelivered elements. Arrangements for the transmission of our Buzztime iTV Network contain two deliverables: the installation of equipment and the transmission of our network content for which we receive monthly subscription fees. As the installation deliverable does not have stand-alone value to the customer, it does not represent a separate unit of accounting and, therefore, all installation fees received are deferred and recognized as revenue on a straight-line basis over the estimated life of the customer relationship. As a result, installation fees not recognized in revenue have been recorded as deferred revenue in the accompanying consolidated balance sheets.

In addition, the direct expenses of the installation, commissions, setup and training are being deferred and amortized on a straight-line basis and are classified as deferred costs on the accompanying consolidated balance sheets. The amortization period approximates the estimated life of the customer relationship for deferred direct costs that are of an amount that is less than or equal to the deferred revenue for the related contract. For costs that exceed the deferred revenue, the amortization period is the initial term of the contract, in accordance with ASC No. 605, which is generally one year.

Advertising and royalty revenues are recognized when all material services or conditions relating to the transaction have been performed or satisfied.

Software Development Costs—We capitalize costs related to the development of certain software products for the Entertainment Division in accordance with ASC No. 350. Amortization of costs related to interactive programs is recognized on a straight-line basis over three years. Amortization expense relating to capitalized software development costs totaled $370,000 and $366,000 for the years ended December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, approximately $554,000 and $404,000, respectively, of capitalized software costs was not subject to amortization as the development of various software projects was not complete.

We performed our annual review of software development projects for the year ended December 31, 2009, and determined to abandon various software development projects that we determined were no longer a current strategic fit or for which we determined that the marketability of the content had decreased due to obtaining additional information regarding the specific industry for which the content was intended. As a result, an impairment of $256,000 and $503,000 was recognized for the years ended December 31, 2009 and 2008, respectively, which was included in our selling, general and administrative expenses.

Stock Based Compensation—We estimate the fair value of our stock options using a Black-Scholes option pricing model, consistent with the provisions of ASC No. 718, Compensation – Stock Compensation. The fair value of stock options granted is recognized to expense over the requisite service period. Stock-based compensation expense for all share-based payment awards is recognized using the straight-line single-option method. Stock-based compensation expense is reported as selling, general and administrative based upon the departments to which substantially all of the associated employees report.

We used the historical stock price volatility as an input to value our stock options under ASC No. 718. The expected term of our stock options represents the period of time options are expected to be outstanding, and is based on observed historical exercise patterns for our company, which we believe are indicative of future exercise behavior. For the risk-free interest rate, we use the observed interest rates appropriate for the term of time options are expected to be outstanding. The dividend yield assumption is based on our history and expectation of dividend payouts.

The following weighted average assumptions were used for grants issued during 2009 and 2008 under the ASC No. 718 requirements:

	2009		2008
Weighted-average risk-free rate		1.72%		2.97%
Weighted-average volatility		88.55%		63.57%
Dividend yield		0.00%		0.00%
Expected life	6.05 years		4.38 years

ASC No. 718 requires forfeitures to be estimated at the time of grant and revised if necessary in subsequent periods if actual forfeiture rates differ from those estimates. Forfeitures were estimated based on historical activity for our company. We estimated a 17.63% annual forfeiture rate for each of the years ended December 31, 2009 and 2008. Stock-based compensation expense for employees in 2009 and 2008 was $180,000 and $312,000, respectively, and is expensed in selling, general and administrative expenses and credited to additional paid-in-capital.

Income Taxes—Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

ASC No. 740, Income Taxes, defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. A tax position that meets the “more-likely-than-not” criterion shall be measured at the largest amount of benefit that is more than 50% likely of being realized upon ultimate settlement. We have reviewed our tax positions and determined that an adjustment to the tax provision is not considered necessary nor is a reserve for income taxes required.

Recent Accounting Pronouncements

In December 2007, the FASB issued transition guidance ASC No. 805-10-65-1 Business Combinations – Overall – Transition Related to SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)) and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of Accounting Review Bulletin (“ARB”) No. 51 (SFAS 160), the provisions of which have been incorporated in ASC No. 805-10 Business Combinations – Overall and ASC No. 805-20 Business Combinations – Identifiable Assets and Liabilities, and Any Noncontrolling Interest. Among the more significant changes, ASC No. 805-10 expands the definition of a business and a business combination; requires the acquirer to recognize the assets acquired, liabilities assumed and noncontrolling interests (including goodwill), measured at fair value at the acquisition date; requires acquisition-related expenses and restructuring costs to be recognized separately from the business combination; requires assets acquired and liabilities assumed from contractual and non-contractual contingencies to be recognized at their acquisition-date fair values with subsequent changes recognized in earnings; and requires in-process research and development to be capitalized at fair value as an indefinite-lived intangible asset. ASC 805-20 changed the accounting and reporting for minority interests, reporting them as equity separate from the parent entity’s equity, as well a s requiring expanded disclosures. ASC No. 805-10 and ASC No. 805-20 are effective for financial statements issued for fiscal years beginning after December 15, 2008. We adopted ASC No. 805-10 and ASC No. 805-20 and applied the provisions of the guidance to the asset acquisitions completed during 2009.

In April 2008, the FASB issued ASC No. 350, Intangibles – Goodwill and Other, ASC No. 350-30-65, Transition and Open Effective Date Information (“ASC 350-30-65” and formerly referred to as FSP FAS 142-3). This update amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible. ASC No. 350-30-65 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The guidance in this ASC No. 350-30-65 for determining the useful life of a recognized intangible is to be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements of ASC No. 350-30-65, however, will be applied prospectively to all intangible assets recognized in our financial statements as of the effective date. The adoption of ASC No. 350-30-65 did not have a material impact on our consolidated financial statements.

In April 2009, the FASB issued transition guidance ASC No. 320-10-65-1, Transition Related to FSP SFAS No. 115-2 and SFAS No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, the provisions of which have been incorporated in ASC 320-10-35, Investments – Debt and Equity Securities – Overall – Subsequent Measurement and ASC No. 320-10-50, Investments – Debt and Equity Securities – Overall – Disclosure. The objective of an other-than-temporary impairment analysis under existing GAAP is to determine whether the holder of an investment in a debt or equity security for which changes in fair value are not regularly recognized in earnings (such as securities classified as held-to-maturity or available-for-sale) should recognize a loss in earnings when the investment is impaired. An investment is impaired if the fair value of the investment is less than its amortized cost basis. ASC No. 320-10-35 and ASC No. 320-10-50 amend the other-than-temporary impairment guidance in GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. ASC No. 320-10-35 and ASC 320-10-50 do not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. This guidance is effective for interim and annual periods ending after June 15, 2009. In response to this guidance, in April 2009, the SEC published ASC No. 320-10-S99-1, Investments – Debt and Equity Securities – Overall – SEC Materials – Staff Accounting Bulletin (“SAB”) Topic 5M, Other than Temporary Impairment of Certain Investments in Equity Securities. ASC No. 320-10-S99-1 maintains the staff’s previous views related to equity securities and excludes debt securities from its scope. We adopted this standard effective April 1, 2009, the results of which are disclosed in Note 7, Fair Value of Financial Instruments, to our consolidated financial statements.

In May 2009, the FASB issued ASC No. 855, Subsequent Events. The objective of this guidance is to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this guidance sets forth:

	●	The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements;

	●	The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and

	●	The disclosures that an entity should make about events or transactions that occurred after the balance sheet date.

In accordance with this guidance, an entity should apply the requirements to interim or annual financial periods ending after June 15, 2009. The adoption of this update did not have a material impact on our consolidated financial statements.

In June 2009, the FASB issued transition guidance ASC No. 105-10-65-1, Transition Related to SFAS No. 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles, the guidance of which was incorporated in ASC No. 105, Generally Accepted Accounting Principles (“GAAP”). The FASB Accounting Standards CodificationTM (“Codification”) has become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this guidance, the Codification superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification became nonauthoritative. This guidance is effective for financial statements issued for interim and annual periods ending after September 15, 2009. We adopted this standard effective July 1, 2009, and have incorporated the current codification in this report. The adoption of this standard did not have a material impact on our consolidated financial statements.

In August 2009, the FASB issued an accounting standards update to ASC No. 820, Fair Value Measurements and Disclosures. This update provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using one or more of the following techniques:

	●	A valuation technique that uses the quoted price of the identical liability when traded as an asset or the quoted prices for similar liabilities when traded as assets; and

	●	Another valuation technique that is consistent with the principles of Topic 820.

This update also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. Additionally, this update clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. This update was effective for the first reporting period beginning after issuance (our interim period ended September 30, 2009). The adoption of this update did not have a material impact on our conso lidated financial statements.

In September 2009, the FASB issued an accounting standards update to ASC No. 740, Income Taxes. This update addresses the need for additional implementation guidance on accounting for uncertainties in income taxes, specifically, whether income tax paid by an entity is attributable to the entity or its owners; what constitutes a tax position for a pass-through entity or a tax-exempt entity; and how to apply the uncertainty in income taxes when a group of related entities comprise both taxable and nontaxable entities. This update also eliminates certain disclosures for nonpublic entities. Since we currently apply the standards for accounting for uncertainty in income taxes, this update was effective for financial statements issued for interim and annual periods ending after September 15, 2009 (our interim period ended September 30, 2009). The adoption of this update did not have a material impact on our consolidated financial statements.

In October 2009, the FASB issued an accounting standards update to ASC No. 605-25, Revenue Recognition—Multiple-Element Arrangements. The purpose of this update is to amend the criteria used for separating consideration in multiple-deliverable arrangements. In particular, the amendment:

	●	Establishes a selling price hierarchy for determining the selling price of a deliverable; replaces the term “fair value” in the revenue allocation guidance with “selling price” to clarify that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a marketplace participant;

	●	Eliminates using the residual method of allocation and requires that the arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method; and

	●	Requires that the best estimate of a selling price is determined in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis.

The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which will be our 2011 fiscal year. Early adoption is permitted. If adopted early, we would be required to apply the amendments retrospectively from the beginning of the fiscal year of adoption. We do not intend to adopt the amendments early. We do not anticipate that the adoption of this amendment will have a material impact on our consolidated financial statements.

In October 2009, the FASB issued an accounting standards update to ASC No. 985, Software. The purpose of this update is to change the accounting model for revenue arrangements that include both tangible products and software elements. Tangible products containing software components and nonsoftware components that function together to deliver the tangible product’s essential functionality are no longer within the scope of the software revenue guidance in Subtopic 985-605. In addition, this update requires that hardware components of a tangible product containing software components always be excluded from the software revenue guidance. In addition, the update provides guidance on how a vendor should alloca te arrangement consideration to deliverables in an arrangement that includes both tangible products and software. The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which will be our 2011 fiscal year. Early adoption is permitted. If adopted early, we would be required to apply the amendments retrospectively from the beginning of the fiscal year of adoption. We do not intend to adopt the amendments early. We do not anticipate that the adoption of this amendment will have a material impact on our consolidated financial statements.

ITEM 7A. Quantitativeand Qualitative Disclosures about Market Risk

Under SEC rules and regulations, as a smaller reporting company we are not required to provide the information otherwise required by this item.

ITEM 8. Financial Statements and Supplementary Data

See “Index to Consolidated Financial Statements and Schedule” on page F-1 for a listing of the Consolidated Financial Statements and Schedule filed with this report.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

ITEM 9A(T). Controls and Procedures

Disclosure Controls and Procedures

We maintain “disclosure controls and procedures”, as such term is defined under Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed, in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

In designing and evaluating the disclosure controls and procedures, we recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and we were required to apply our judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation as of the end of the period covered by this report under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on our evaluation and subject to the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that there were no material weaknesses in our disclosure controls and procedures and that such disclosure controls and procedures were effective as of the end of the period covered by this report in providing reasonable assurance of achieving the desired control objectives, and therefore there were no corrective actions taken.

Management’s Report on Internal Control Over Financial Reporting

Our Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2009. According to the guidelines established by Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, one or more material weaknesses renders a company’s internal control over financial reporting ineffective. Based on this evaluation, we have concluded that our internal control over financial reporting was effective as of December 31, 2009.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting during the most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. Other Information

Not Applicable.

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance

The following table sets forth certain information regarding our executive officers:

Name	Age (1)	Position(s) Held
Terry Bateman	53	President and Chief Executive Officer
Kendra Berger	43	Chief Financial Officer
Ken Keymer	61	Chief Operating Officer
Peter Boylan III	47	Executive Vice President of Sales
Nick Glassman	36	Executive Vice President of Programming and Technology

(1)	As of March 31, 2010.

The following biographical information is furnished with respect to our other executive officers:

Terry Bateman was appointed our President and Chief Executive Officer in February 2009 and has served on our Board of Directors since November 2008. Mr. Bateman has nearly 30 years executive experience in developing, growing, managing and selling businesses. Mr. Bateman has been a personal investor in Red Zone Capital from 2006 to the present, and in connection with that investment activity, served as CEO of Dick Clark Productions, a television production company, from June 2007 to February 2008. Prior to that, Mr. Bateman served as interim Chief Marketing Officer of the Washington Redskins, a professional football team, from September 2006 to June 2007. From September 2005 to September 2006, Mr. Bateman served as President and Chief Executive Officer at Barton Cotton, Inc., a provider of integrated direct marketing fundraising services to non-profit organizations, and prior to that, served as its Executive Vice President of Fundraising beginning in 1998. He was President of Snyder Communications' Marketing Services Division between 1994 and 1997. Mr. Bateman was Executive Vice President, Vice President and Director of Whittle Communications between 1981 and 1994, having begun his career in marketing with The Gillette Company between 1979 and 1981. Mr. Bateman holds a B.S. in Economics from the University of Tennessee. In January 2010, Mr. Bateman announced his intention to resign as CEO. Mr. Bateman will remain active on the Board of Directors and be involved in finding his replacement, which we expect will be completed in the second quarter of 2010.

Kendra Berger was appointed our Chief Financial Officer and Secretary in August 2006. Ms. Berger served on our Board of Directors and as Chairperson of our Audit Committee from July 2005 until August 2006. From May 2005 until August 2006, Ms. Berger was the Executive Director of Finance and Controller of Nventa Biopharmaceuticals Corporation. Prior to that, from April 2001 until May 2005, she was the Vice President, Finance and Controller of Discovery Partners International, Inc. Both Nventa Biopharmaceuticals and Discovery Partners International were publicly traded biopharmaceutical companies. Prior to joining Discovery Partners International in 2001, Ms. Berger was the Chief Financial Officer of our company. She is a licensed CPA.

Ken Keymer was appointed our Chief Operating Officer in July 2009 and served on our Board of Directors from November 2008 until July 2009. Mr. Keymer has nearly 30 years of experience as an executive in large restaurant chain operations. He previously served as CEO of VICORP Restaurants between April 2007 and May 2008, where he oversaw the operations of 390 restaurants under the Baker’s Square and Village Inn brand names, two commissaries and a dessert manufacturing operation. He led a senior executive team in developing sales- and profit-enhancing menu initiatives and prototype designs, successfully reducing losses and improving profitability. He had served as a member of VICORP’s Board of Directors since July 20 05 before additionally becoming CEO at the request of the Board of Directors and investors. Mr. Keymer served as CEO of 1,800-unit AFC Enterprises between September 2005 and May 2007, having been President of that publicly traded company’s Popeyes Chicken and Biscuits business segment between June 2004 and September 2005. In those capacities, he was instrumental in enhancing relations with the investment community, achieving new unit growth of approximately 10% per year, broadening the menu and leading the company through the crisis of Hurricane Katrina, which severely impacted one of its most important geographic regions. In the 1984 through 1986 period, he had been a Vice President of Popeyes. Prior to June 2004, he was President, Co-CEO and Board member of Noodles & Company; President, COO and Board member of Sonic Corporation and its subsidiaries; Executive Vice President of Perkins Family Restaurants; Senior Vice President of Boston Chicken; Vice President of Taco Bell Co rporation; V.P. Operations and Human Resources with Sambos Restaurants; and Director of Human Resources for Hardee’s Food Systems. Prior to beginning his foodservice career in 1979, he held positions with the Office of the Chief of Naval Operations and the Defense Intelligence Agency. He holds an M.S.A in Information Technology from George Washington University and a B.S. in Engineering from the U.S. Naval Academy.

Peter J. Boylan III was appointed our Executive Vice President of Sales in July 2008. Prior to joining our company, Mr. Boylan served as Vice President of Sales from April 2007 to June 2008 and Director of Business Development from May 2005 to April 2007 at EMN8, Inc., a software company serving the restaurant industry. Between 1995 and May 2005, Mr. Boylan was employed by The Coca-Cola Company, where he held increasingly responsible executive positions, most recently serving as Director National Sales Travel Team from December 2004 to May 2005 and Sr. National Account Executive from August 2001 to December 2004. Mr. Boylan has over 17 years of sales, marketing and operational experience in the hospitali ty and foodservice industry. Mr. Boylan is also a veteran of the U.S. Army where he served with the 101st and 82nd Airborne Divisions. He earned an MBA from Wake Forest University’s Babcock Graduate School of Management and a Bachelor of Science degree in Aerospace Engineering from the U.S. Military Academy at West Point.

Nick Glassman was appointed Executive Vice President, Programming & Technology in April 2009, following our acquisition of substantially all the assets of iSports Inc., a company he founded in 2008. His 15-year career has focused on creating advanced user experiences out of emerging technology, with a focus on wireless. Prior to founding iSports, Mr. Glassman was Co-Founder, VP of Product Development of Transpera, a provider of web videos for mobile phones from 2007 until 2008. Previous to co-founding Transpera, from 2004 until 2007 he served as the Executive Producer of Qualcomm's MediaFLO USA, Inc., responsible for managing the design, integration, and launch of mobile video broadcasting services for FOX, CBS, NBC, ESPN, MTV, Come dy Central, and Nickelodeon on Verizon and AT&T. Prior to 2004, he also managed consumer applications at PacketVideo, a provider of streaming audio and video over wireless networks, and previously held senior positions at Excite, Inc., Moxi Digital, and Silicon Graphics. He began his career in 1996 at Pixar Animation Studios, working on the groundbreaking 'Toy Story' feature release.

Additional information responsive to Part III, Item 10 will be included in our proxy statement relating to our 2010 annual meeting of stockholders to be filed by us with the Securities and Exchange Commission no later than 120 days after the close of our fiscal year ended December 31, 2009 (the “Proxy Statement”) including under the captions entitled “Election of Directors,” “Executive Officers,” and “Section 16(a) Beneficial Ownership Reporting Compliance” and is incorporated herein by reference.

ITEM 11. Executive Compensation

Information responsive to Part III, Item 11 will be included in the Proxy Statement under the captions entitled “Executive Compensation,” and “Compensation of Directors” and is incorporated herein by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Information responsive to Part III, Item 12 will be included in the Proxy Statement under the captions entitled “Security Ownership of Certain Beneficial Owners and Management,” “Equity Compensation Plan Information” and “Compensation of Directors” and is incorporated herein by reference.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

Information concerning certain relationships and related transactions will be included in the Proxy Statement under the captions entitled “Certain Relationships and Related Transactions” and “Company Policy Regarding Related Party Transactions” and is incorporated herein by reference. Information concerning director independence will be included in the Proxy Statement under the heading “Election of Directors” and is incorporated herein by reference.

ITEM 14. Principal Accounting Fees and Services

Information responsive to Part III, Item 14 will be included in the Proxy Statement under the caption entitled “Principal Accounting Firm Fees” and is incorporated herein by reference.

PART IV

ITEM 15. Exhibits, Consolidated Financial Statement Schedules

(a) The following documents are filed as a part of this report:

Consolidated Financial Statements and Schedule. The consolidated financial statements and schedule of the Company and its consolidated subsidiaries are set forth in the “Index to Consolidated Financial Statements and Schedule” on page F-1.

Exhibits. The following exhibits are filed as a part of this report:

INDEX TO EXHIBITS

Exhibit	Description
2.1	Asset Purchase Agreement dated May 11, 2009 between NTN Buzztime, Inc. and Instant Access Media, LLC (13)

2.2	Asset Purchase Agreement dated April 24, 2009 between NTN Buzztime, Inc. and iSports Inc.(1)

3.1	Amended and Restated Certificate of Incorporation of the Company, as amended (2)

3.2	Certificate of Designations, Rights and Preferences of Series B Convertible Preferred Stock (5)

3.3	Bylaws of the Company, as amended (3)

4.1	Specimen Common Stock Certificate (12)

4.2	Form of Common Stock Purchase Warrant issued on January 30, 2004 by and between Roth Capital Partners, LLC and the Company (10)

4.3	Form of Common Stock Purchase Warrant issued on April 24, 2009 by and between NTN Buzztime, Inc. and iSports Inc. (1)

4.4	Form of Common Stock Purchase Warrant issued on May 11, 2009 by and between NTN Buzztime, Inc. and Instant Access Media, LLC (1)

4.5	Registration Rights Agreement dated as of May 11, 2009 by and between the Company and Instant Access Media, LLC et al. (13)

10.1	Securities Purchase Agreement dated as of May 11, 2009 by and between the Company and certain creditors and members of Instant Access Media, LLC (13)

10.2*	2004 Performance Incentive Plan (15)

10.3	Office Lease, dated July 17, 2000, by and between Prentiss Properties Acquisition Partners, L.P. and the Company (8)

10.4	First Amendment to Lease, dated October 4, 2005, by and between Prentiss Properties Acquisition Partners, L.P. and the Company (16)

10.5	Second Amendment to Lease, dated as of February 16, 2006, by and between Cognac Campus LLC (successor to Prentiss Properties) and the Company (1)

10.6*	2009 Incentive Bonus Plan (1)

10.7*	Form of Executive Employee Incentive Stock Option Agreement under the 2004 Performance Incentive Plan (4)

10.8*	Form of Non-Executive Employee Incentive Stock Option Agreement under the 2004 Performance Incentive Plan (4)

10.9*	Form of Stock Unit Award Agreement under the 2004 Performance Incentive Plan (4)

10.10*	Form of Initial Director Stock Option Agreement under the 2004 Performance Incentive Plan (4)

10.11*	Form of Annual Director Stock Option Agreement under the 2004 Performance Incentive Plan (4)

10.12*	Summary of Non-Employee Director Compensation (4)

10.13*	Retention and Severance Agreement, dated June 27, 2008, by and between the Company and Kendra Berger (2)

10.14*	Form of Stock Unit Award Agreement under the 2004 Performance Incentive Plan (2)

10.15*	Amendment to Stock Option Grants, dated October 16, 2008, by and between the Company and Barry Bergsman (14)

10.16*	Consultation Agreement, dated November 18, 2008, by and between the Company and Terry Bateman (7)

10.17*	Employment Agreement, dated February 2, 2009, by and between the Company and Terry Bateman (11)

10.18*	Separation Agreement, dated February 6, 2009, by and between the Company and Gary Arlen (6)

10.19*	Employment Agreement, dated as of July 27, 2009, by and between the Company Kenneth Keymer (9)

10.20	Master Equipment Lease dated as of September 29, 2009, by and between the Company and Data Sales Co. (1)

14.1	Company Code of Ethics (7)

21.1	Subsidiaries of Registrant (7)

23.1	Consent of Mayer Hoffman McCann P.C. (1)

31.1#	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)

31.2#	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)

32.1#	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)

32.2#	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)

*	Management Contract or Compensatory Plan
#	This certification is being furnished solely to accompany this report pursuant to U.S.C. § 1350, and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated herein by reference into any filing of the Company whether made before or after the date hereof, regardless of any general incorporation language in such filing.
(1)	Filed herewith.
(2)	Previously filed as an exhibit to NTN’s report on Form 10-Q for the quarter ended June 30, 2008 and incorporated herein by reference.
(3)	Previously filed as an exhibit to NTN’s report on Form 10-K for the fiscal year ended December 31, 2007 and incorporated herein by reference.
(4)	Previously filed as an exhibit to NTN’s report on Form 10-Q for the quarterly period ended June 30, 2007 and incorporated herein by reference.
(5)	Previously filed as an exhibit to NTN’s report on Form 8-K filed on November 7, 1997 and incorporated herein by reference.
(6)	Previously filed as an exhibit to NTN’s report on Form 8-K filed February 9, 2009 and incorporated herein by reference.
(7)	Previously filed as an exhibit to NTN’s report on Form 10-K for the fiscal year ended December 31, 2008 and incorporated herein by reference.
(8)	Previously filed as an exhibit to NTN’s report on Form 10-K for the fiscal year ended December 31, 2000 and incorporated herein by reference.
(9)	Previously filed as an exhibit to the registrant's current report on Form 8-K filed on July 23, 2009 and incorporated by reference.
(10)	Previously filed as an exhibit to NTN’s report on Form 8-K filed on January 29, 2004 and incorporated herein by reference.
(11)	Previously filed as an exhibit to NTN’s report on Form 8-K filed February 4, 2009 and incorporated herein by reference.
(12)	Previously filed as an exhibit to NTN’s registration statement on Form 8-A, File No. 0-19383, and incorporated by reference..
(13)	Previously filed as an exhibit to the registrant's current report on Form 8-K filed on May 15, 2009 and incorporated by reference.
(14)	Previously filed as an exhibit to NTN’s report on Form 8-K filed October 21, 2008 and incorporated herein by reference.
(15)	Previously filed as Appendix A to the Definitive Proxy Statement on Schedule 14A filed by NTN on September 3, 2004 and incorporated herein by reference.
(16)	Previously filed as an exhibit to NTN’s report on Form 10-K/A filed on July 12, 2006 and incorporated herein by reference.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


	NTN BUZZTIME, INC.

	By:	/s/ KENDRA BERGER
		Kendra Berger Chief Financial Officer (As Principal Financial and Accounting Officer)

Dated: March 31, 2010

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ TERRY A. BATEMAN	Chief Executive Officer and Director	March 31, 2010
Terry A. Bateman

/s/ JEFF BERG	Director and Chairman of the Board	March 31, 2010
Jeff Berg

/s/ MARY BETH LEWIS	Director	March 31, 2010
Mary Beth Lewis

/s/ MICHAEL J. BUSH	Director	March 31, 2010
Michael J. Bush

NTN BUZZTIME, INC. AND SUBSIDIARIES

(Formerly NTN Communications, Inc. and Subsidiaries)

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE


	Page
Report of Independent Registered Public Accounting Firm	F-1

Consolidated Financial Statements:

Consolidated Balance Sheets as of December 31, 2009 and 2008	F-2

Consolidated Statements of Operations for the years ended December 31, 2009 and 2008	F-3

Consolidated Statements of Comprehensive Loss for the years ended December 31, 2009 and 2008	F-4

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2009 and 2008	F-5

Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008	F-6

Notes to the Consolidated Financial Statements	F-8

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of

NTN Buzztime, Inc.

We have audited the accompanying consolidated balance sheets of NTN Buzztime, Inc. (“the Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years then ended. Our audit also included the financial statement schedule for each of the years ended December 31, 2009 and 2008, listed in the Index at Item 15. These consolidated financial statements and the financial statement schedule 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amo unts 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 consolidated financial position of NTN Buzztime, Inc. as of December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule referred to above, presents fairly, in all material respects, the information set forth therein.

/s/ Mayer Hoffman McCann P.C.

San Diego, CA

March 31, 2010

F-1

NTN BUZZTIME, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands, except par value amount)

	December 31,
	2009			2008
ASSETS
Current Assets:
Cash and cash equivalents	$	3,637		$	3,362
Accounts receivable, net of allowances of $321 and $298, respectively		606			636
Investments available-for-sale (Note 7)		180			58
Prepaid expenses and other current assets		715			611
Total current assets		5,138			4,667
Broadcast equipment and fixed assets, net		3,809			3,428
Software development costs, net of accumulated amortization of $1,197 and $1,002, respectively		1,374			860
Deferred costs		999			1,383
Goodwill (Note 6)		1,202			1,032
Intangible assets, net (Note 6)		1,585			185
Other assets		190			107
Total assets	$	14,297		$	11,662

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	422		$	219
Accrued compensation (Note 8)		1,075			868
Accrued expenses		788			972
Sales taxes payable		855			958
Income taxes payable		-			18
Obligations under capital lease - current portion (Note 16)		300			8
Deferred revenue		523			657
Other current liabilities		294			-
Total current liabilities		4,257			3,700
Sales taxes payable, excluding current portion		128			-
Obligations under capital leases, excluding current portion		173			32
Deferred revenue, excluding current portion		82			91
Other liabilities		239			93
Total liabilities		4,879			3,916
Commitments and contingencies (Notes 16 and 17)

Shareholders' Equity:
Series A 10% cumulative convertible preferred stock, $.005 par value,
$161 liquidation preference, 5,000 shares authorized; 161 shares issued and
outstanding at December 31, 2009 and December 31, 2008		1			1
Common stock, $.005 par value, 84,000 shares authorized; 60,359 and 55,727
shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively		302			277
Treasury stock, at cost, 503 shares at December 31, 2009 and December 31, 2008, respectively		(456	)		(456	)
Additional paid-in capital		115,740			113,267
Accumulated deficit		(106,868	)		(105,351	)
Accumulated other comprehensive income (Note 20)		699			8
Total shareholders' equity		9,418			7,746
Total shareholders' equity and liabilities	$	14,297		$	11,662

See accompanying notes to consolidated financial statements

F-2

NTN BUZZTIME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

	Years Ended December 31,
	2009			2008

Revenues	$	25,814		$	27,496
Operating expenses:
Direct operating costs (includes depreciation and amortization of $2,274 and $2,569, respectively)		6,460			7,582
Selling, general and administrative		20,031			25,488
Depreciation and amortization (excluding depreciation and amortization included in direct operating costs)		919			532
Total operating expenses		27,410			33,602
Operating loss		(1,596	)		(6,106	)
Other income (expense):
Interest income		72			138
Interest expense		(66	)		(5	)
Other income		184			73
Total other income, net		190			206
Loss from continuing operations before income taxes		(1,406	)		(5,900	)
Provision for income taxes		(95	)		(234	)
Loss from continuing operations		(1,501	)		(6,134	)
Loss from discontinued operations, net of tax		-			(332	)
Net loss	$	(1,501	)	$	(6,466	)

Net loss per common share - basic and diluted
Loss from continuing operations	$	(0.03	)	$	(0.11	)
Loss from discontinued operations		-			(0.01	)
Basic and diluted net loss per share	$	(0.03	)	$	(0.12	)

Weighted average shares outstanding - basic and diluted		58,188			55,189

See accompanying notes to consolidated financial statements

F-3

NTN BUZZTIME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)

	Years Ended December 31,
	2009			2008

Net loss	$	(1,501	)	$	(6,466	)
Other comprehensive loss, net of tax:
Foreign currency translation adjustments (Note 20)		569			(1,448	)
Unrealized holding gain (loss) on investment available-for-sale		122			(206	)

Other comprehensive income (loss)		691			(1,654	)
Comprehensive loss	$	(810	)	$	(8,120	)

See accompanying notes to consolidated financial statements

F-4

NTN BUZZTIME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 2009 and 2008
(in thousands)

	Series A Cumulative Convertible Preferred Stock				Common Stock				Additional Paid-in			Treasury			Accumulated			Accumulated Other Comprehensive
	Shares		Amount		Shares		Amount		Capital			Stock			Deficit			Income (Loss)			Total

Balance at December 31, 2007		161	$	1		55,640	$	277	$	112,942		$	(444	)	$	(98,870	)	$	1,662		$	15,568

Issuance of deferred stock units		-		-		17		-		(2	)		-			-			-			(2	)
Issuance of stock in lieu of dividends		-		-		70		-		15			-			(15	)		-			-
Purchase of treasury stock		-		-		-		-		-			(12	)		-			-			(12	)
Non-cash stock based compensation		-		-		-		-		312			-			-			-			312
Accumulated other comprehensive income (Note 20)		-		-		-		-		-			-			-			(1,654	)		(1,654	)
Net loss		-		-		-		-		-			-			(6,466	)		-			(6,466	)

Balances at December 31, 2008		161		1		55,727		277		113,267			(456	)		(105,351	)		8			7,746

Issuance of stock in lieu of dividends		-		-		37		1		15			-			(16	)		-			-
Issuance of common stock upon exercise of stock option		-		-		176		1		27			-			-			-			28
Issuance of common stock for the acquisition of iSports, Inc.		-		-		500		3		163			-			-			-			166
Issuance of warrants for the acquisition of iSports, Inc.		-		-		-		-		371			-			-			-			371
Issuance of common stock for the acquisition of i-am TV		-		-		1,500		8		442			-			-			-			450
Issuance of warrants for the acquisition of i-am TV		-		-		-		-		537			-			-			-			537
Sale of common stock in private placement		-		-		2,419		12		738			-			-			-			750
Non-cash stock based compensation		-		-		-		-		180			-			-			-			180
Accumulated other comprehensive income (Note 20)		-		-		-		-		-			-			-			691			691
Net loss		-		-		-		-		-			-			(1,501	)		-			(1,501	)

Balances at December 31, 2009		161	$	1		60,359	$	302	$	115,740		$	(456	)	$	(106,868	)	$	699		$	9,418

See accompanying notes to consolidated financial statements

F-5

NTN BUZZTIME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

	For the year ended December 31,
	2009			2008
Cash flows (used in) provided by operating activities:
Net loss	$	(1,501	)	$	(6,466	)
Loss from discontinued operations, net of tax		-			(332	)
Loss from continuing operations		(1,501	)		(6,134	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		3,193			3,101
Provision for doubtful accounts		227			557
Stock-based compensation		180			312
Loss from disposition of equipment and capitalized software		267			618
Changes in assets and liabilities:
Accounts receivable		(181	)		142
Prepaid expenses and other assets		95			129
Accounts payable and accrued expenses		139			(367	)
Income taxes payable		(161	)		(19	)
Deferred costs		393			(199	)
Deferred revenue		(148	)		(296	)
Net cash provided by (used in) continuing operations		2,503			(2,156	)
Discontinued operations		-			(807	)
Net cash provided by (used in) operating activities		2,503			(2,963	)
Cash flows provided by (used in) investing activities:
Capital expenditures		(1,910	)		(2,160	)
Software development expenditures		(1,138	)		(835	)
Trademark license		(94	)		-
Deposits on broadcast equipment		(28	)		-
Proceeds from sale of equipment and other assets		-			12
Restricted cash		-			51
Net cash used in investing activities by continuing operations		(3,170	)		(2,932	)
Discontinued operations		-			7
Net cash used in investing activities		(3,170	)		(2,925	)
Cash flows (used in) provided by financing activities:
Principal payments on capital lease		(155	)		(12	)
Proceed from sale of common stock		750			-
Proceeds from exercise of options		28			-
Purchase of treasury stock		-			(12	)
Net cash provided by (used in) financing activities by continuing operations		623			(24	)
Net decrease in cash and cash equivalents		(44	)		(5,912	)
Effect of exchange rate on cash		319			(999	)
Cash and cash equivalents at beginning of year		3,362			10,273
Cash and cash equivalents at end of year	$	3,637		$	3,362

See accompanying notes to consolidated financial statements

F-6

NTN BUZZTIME, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS - (Continued)
(In thousands)

	For the year ended December 31,
	2009		2008
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	63	$	5
Income taxes	$	223	$	234
Supplemental disclosure of non-cash investing and financing activities:
Assumed obligations in connection with the acquisition of intangible assets	$	63	$	-
Issuance of common stock in connection with the acquisition of intangible assets	$	616	$	-
Issuance of warrants in connection with the acquitision of intangible assets	$	908	$	-
Earn-out liability in connection with the acquisition of of intangible assets	$	188	$	-
Insurance financed through a third-party	$	81	$	-
Unrealized holding gain (loss) on investments available-for-sale	$	122	$	(206	)
Issuance of common stock in lieu of payment of dividends	$	16	$	15
Equipment acquired under capital lease	$	603	$	43

See accompanying notes to consolidated financial statements

F-7

NTN BUZZTIME, INC. AND SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

For the Years Ended December 31, 2009 and 2008

1. Organization of Company

Description of Business

The Company historically has operated principally through two operating divisions: Entertainment and Hospitality. The Entertainment division generates revenue primarily from the Buzztime iTV Network which distributes an interactive promotional television game network to restaurants, sports bars, taverns and pubs in North America. Additionally, revenue is generated through the sale of advertising for distribution via the Buzztime iTV Network.

The Hospitality division, which is now discontinued, was historically comprised of NTN Wireless Communications, Inc. (“NTN Wireless”) and NTN Software Solutions, Inc. (“Software Solutions”). In 2006, the Company determined that the operation of the Hospitality division was not a strategic fit with its core business and committed to a divestiture plan. These operations have been reclassified as discontinued operations from 2006 through 2008. In March 2007, the Company completed the sale of substantially all of the assets of NTN Wireless, which produced and distributed guest and server paging systems to restaurants and other markets. In October 2007, the Company sold certain intellectual property assets of Software Solutions, which developed and distributed customer management software to manage reservations and table service in restaurants as well as provided professional help desk services and outsourced software development and support and maintenance services. The intellectual property assets were sold pursuant to an Asset Purchase Agreement, and in a separate agreement with a customer, the Company discontinued the outsourced software development. Additionally, the Company completed the wind down of its professional help desk and support and maintenance services during the third quarter of 2008 (see Note 21).

Basis of Accounting Presentation

The consolidated financial statements include the accounts of NTN Buzztime, Inc. and its wholly-owned subsidiaries: IWN, Inc., IWN, L.P., Buzztime Distribution, Inc., NTN Wireless Communications, Inc., NTN Software Solutions, Inc., NTN Canada, Inc., and NTN Buzztime, Ltd. Unless otherwise indicated, references to “NTN,” “we”, “us” and “our” include the Company and its consolidated subsidiaries.

IWN, Inc. and IWN, L.P. are dormant subsidiaries. As of December 31, 2006, the Company’s Hospitality division was classified as discontinued operations in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 360, Property, Plant, and Equipment, (see Note 21). The operating results for these businesses have been separately classified and reported as discontinued operations in the consolidated financial statements.

Reclassifications

Certain reclassifications have been made to the consolidated balance sheet and statement of operations for the year ended December 31, 2008 to conform to the 2009 presentation.

2. Summary of Significant Accounting Policies and Estimates

Consolidation—The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates—Preparing the Company’s consolidated financial statements requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to deferred costs and revenues; depreciation of broadcast equipment; allowance for doubtful accounts; investments; stock-based compensation assumptions; impairment of software development costs, intangible assets and goodwill, and broadcast equipment; contingencies, including the reserve for sales tax inquiries; the provision for income taxes, including the valuation allowance; and purchas e price allocations related to acquisitions. The Company bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about significant carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates.

Cash and Cash Equivalents—ASC No. 230, Statement of Cash Flows, defines “cash and cash equivalents” as any short-term, highly liquid investment that is both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. For the purpose of financial statement presentation, the Company has applied the provisions of ASC No. 230, as it considers all highly liquid investment instruments with original maturities of three months or less or any investment redeemable without penalty or loss of interest to be cash equivalents.

F-8

Capital Resources—The Company is dependent upon cash on hand and cash flow from operations to meet its liquidity needs. The Company believes existing cash and cash equivalents, together with funds generated from operations, will be sufficient to meet its operating cash requirements for at least the next 12 months. The Company currently has no debt obligations other than capital leases. It is the Company’s intention to continuing entering into capital lease facilities for certain equipment requirements when economically advantageous. In the event that net cash provided by operating activities and cash on hand are not sufficient to meet future cash requirements, the Company may be required to r educe planned capital expenses, reduce operational cash uses, sell assets or seek financing. Any actions the Company may undertake to reduce planned capital purchases, further reduce expenses or generate proceeds from the sale of assets may be insufficient to cover shortfalls in available funds. If the Company requires additional capital, it may be unable to secure additional financing on terms that are acceptable to the Company, or at all.

Allowance for Doubtful Accounts—The Company maintains allowances for doubtful accounts for estimated losses resulting from nonpayment by its customers. The Company reserves for all accounts that have been suspended or terminated from its Buzztime iTV Network services and auto debits customers with balances that are greater than 60 days past due. The Company analyzes historical collection trends, customer concentrations and creditworthiness, economic trends and anticipated changes in customer payment patterns when evaluating the adequacy of its allowance for doubtful accounts for specific and general risks. Additional reserves may also be established if specific customers’ balances are identified as potentially uncollectible. If the financial condition of its customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

The Company incurs a relatively significant level of depreciation expense in relation to its operating income. The amount of depreciation expense in any fiscal year is largely related to the estimated life of handheld wireless Playmaker devices, and associated electronics, and the computers located at its customer’s sites. The Playmakers are depreciated over a seven-year life and the associated electronics and computers are depreciated over two to four years. The depreciable life of these assets was determined based on the shorter of the contractual capital lease period or their estimated useful life, which considers anticipated technology changes. The Company determined that the useful life of Playmakers purchased after June 2009 increased from four to seven years. This increase is the result of superior digital technology used in the current Playmakers. The impact of this change is immaterial to the 2009 results of operations. If its Playmakers and associated electronics and computers turn out to have longer average lives than estimated, the Company’s depreciation expense would be significantly reduced in those future periods. Conversely, if the Playmakers and associated electronics and the computers turn out to have shorter average lives than estimated, the Company’s depreciation expense would be significantly increased in those future periods.

Investments—ASC No. 320, Investments - Debt and Equity Securities, provides guidance on determining when an investment is other-than-temporarily impaired. Investments are reviewed quarterly for indicators of other-than-temporary impairment. This determination requires significant judgment. In making this judgment, the Company employs a systematic methodology that considers available quantitative and qualitative evidence in evaluating potential impairment of its investments. If the cost of an investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost and its intent and ability to hold the investment. The Company also considers specific adverse conditions related to the financial health, and business outlook of the investee, including industry and sector performance, changes in technology, operational and financing cash flow factors and rating agency actions. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. If market, industry and/or investor conditions deteriorate, the Company may incur future impairments.

In accordance with ASC No. 360, the Company assesses potential impairments of its long-lived assets whenever events or changes in circumstances indicate the asset’s carrying value may not be recoverable. An impairment loss would be recognized when the carrying amount of a long-lived asset or asset group is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset or asset group is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group.

F-9

The Company has performed its annual test for goodwill impairment by calculating the fair value for NTN Canada, Inc., as of September 30, 2009. The valuation methods employed to determine the fair value for NTN Canada, Inc. at September 30, 2009 were (1) the market approach—guideline company method (2) the market approach—guideline transaction method and (3) the income approach—discounted cash flow method.

Management considers market conditions, new product offerings, pricing and selling strategies, revenue growth rates and additional investment needed to achieve these growth rates. The Company believes the projections are reasonable based on existing operations and prospective business opportunities. The resulting indicated value from each approach is weighted equally and added to interest bearing debt to arrive at the indicated fair market value of the invested capital. The resulting value is compared against the carrying value of equity after interest bearing debt to determine impairment. As a result of the annual test, the Company determined that there were no indications of impairment as of September 30, 2009. The Company considered the need to perform an additional test of goodwill of its Canadia n business as of December 31, 2009, but determined that the overall health of the underlying Canadian business has remained stable since the September 30, 2009 valuation.

Assessments of Functional Currencies—The United States dollar is the Company’s functional currency, except for its operations in Canada where the functional currency is the Canadian dollar. In 2008, the Company ceased its operations in the United Kingdom. Prior to that, the British pound was the functional currency for operations in that entity. The financial position and results of operations of the Company’s foreign subsidiaries are measured using the foreign subsidiary’s local currency as the functional currency. In accordance with ASC No. 830, Foreign Currency Matters, revenues and expenses of its subsidiaries have been translated into U.S. dollars at weighted average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the balance sheet date. The resulting translation gain and loss adjustments are recorded as a separate component of shareholders’ equity, unless there is a sale or complete liquidation of the underlying foreign investments. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. For the year ended December 31, 2009, the Company recorded $49,000 in foreign currency transaction gains due to settlements of intercompany transactions and re-measurement of intercompany balances with its Canadian subsidiary, which are included in other income in the accompanying statements of operations. Fluctuations in the rate of exchange between the U.S. dollar and Canadian dollar may affect the Company& #8217;s results of operations and period-to-period comparisons of its operating results. The Company does not currently engage in hedging or similar transactions to reduce these risks. For the year ended December 31, 2009, the net impact to the Company’s results of operations from the effect of exchange rate fluctuations was immaterial when compared to the exchange rates for the year ended December 31, 2008.

Purchase Accounting – The Company accounts for acquisitions pursuant to ASC No. 805, Business Combinations. The Company records all acquired tangible and intangible assets and all assumed liabilities based upon their estimated fair values. The purchase price allocation for the asset acquisitions of iSports and i-am TV are final as of December 31, 2009.

Revenue Recognition—The Company recognizes revenue from recurring service fees earned from its Network subscribers, advertising revenues, and distribution and licensing fees from its Buzztime-branded content and related technology to interactive consumer platforms. To the extent its arrangements contain multiple deliverables the Company evaluates the criteria in ASC No. 605, Revenue Recognition, to determine whether such deliverables represent separate units of accounting. In order to be considered a separate unit of accounting, the delivered items in an arrangement must have stand-alone value to the customer and objective and reliable evidence of fair value must exist for a ny undelivered elements. The Company’s arrangements for the transmission of the Buzztime iTV Network contain two deliverables: the installation of its equipment and the transmission of its network content for which the Company receives monthly subscription fees. As the installation deliverable does not have stand-alone value to the customer, it does not represent a separate unit of accounting and, therefore, all installation fees received are deferred and recognized as revenue on a straight-line basis over the estimated life of the customer relationship. As a result, installation fees not recognized in revenue have been recorded as deferred revenue in the accompanying consolidated balance sheets.

Advertising and royalty revenues are recognized when all material services or conditions relating to the transaction have been performed or satisfied.

Software Development Costs—The Company capitalizes costs related to the development of certain software products for the Entertainment Division in accordance with ASC No. 350. Amortization expense relating to capitalized software development costs totaled $370,000 and $366,000 for the years ended December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, approximately $554,000 and $404,000, respectively, of capitalized software costs were not subject to amortization as the development of various software projects was not complete.

F-10

The Company performed its annual review of software development projects for the year ended December 31, 2009, and determined to abandon various software development projects that it determined were no longer a current strategic fit or for which the Company determined that the marketability of the content had decreased due to obtaining additional information regarding the specific industry for which the content was intended. As a result, an impairment loss of $256,000 was recognized, which is included in selling, general and administrative expenses. An impairment of $503,000 was recognized for the year ended December 31, 2008.

Advertising Costs—Marketing-related advertising costs are expensed as incurred and amounted to $5,000 and $172,000 in the years ended December 31, 2009 and 2008, respectively, and are included in selling, general and administrative expenses in the accompanying consolidated statements of operations.

Shipping and Handling Costs—Shipping and handling costs are included in direct operating costs in the accompanying consolidated statements of operations and are expensed as incurred.

Stock-Based Compensation— The Company estimates the fair value of its stock options using a Black-Scholes option pricing model, consistent with the provisions of ASC No. 718, Compensation – Stock Compensation. The fair value of stock options granted is recognized to expense over the requisite service period. Stock-based compensation expense for all share-based payment awards is recognized using the straight-line single-option method. Stock-based compensation expense is reported as selling, general and administrative based upon the departments to which substantially all of the associated employees report.

ASC No. 740, Income Taxes, defines the threshold for recognizing the benefits of tax return positions in the financial statements as “more-likely-than-not” to be sustained by the taxing authority. A tax position that meets the “more-likely-than-not” criterion shall be measured at the largest amount of benefit that is more than 50% likely of being realized upon ultimate settlement. The Company reviewed its tax positions and determined that an adjustment to the tax provision is not considered necessary nor is a reserve for income taxes required.

Earnings Per Share—Basic and diluted loss per common share have been computed by dividing the losses applicable to common stock by the weighted average number of common shares outstanding. The Company’s basic and fully diluted EPS calculation are the same since the increased number of shares that would be included in the diluted calculation from assumed exercise of common stock equivalents would be anti-dilutive to the net loss in each of the years shown in the consolidated financial statements.

Recent Accounting Pronouncements—

In December 2007, the FASB issued transition guidance ASC No. 805-10-65-1 Business Combinations – Overall – Transition Related to SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)) and SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements – an amendment of Accounting Review Bulletin (“ARB”) No. 51 (SFAS 160), the provisions of which have been incorporated in ASC No. 805-10 Business Combinations – Overall and ASC No. 805-20 Business Combinations – Identifiable Assets and Liabilities, and Any Noncontrolling Interest. Among the more significant changes, ASC No. 805-10 expands the definition of a business and a business combination; requires the acquirer to recognize the assets acquired, liabilities assumed and noncontrolling interests (including goodwill), measured at fair value at the acquisition date; requires acquisition-related expenses and restructuring costs to be recognized separately from the business combination; requires assets acquired and liabilities assumed from contractual and non-contractual contingencies to be recognized at their acquisition-date fair values with subsequent changes recognized in earnings; and requires in-process research and development to be capitalized at fair value as an indefinite-lived intangible asset. ASC No. 805-20 changed the accounting and reporting for minority interests, reporting them as equity separate from the parent entity’s eq uity, as well as requiring expanded disclosures. ASC No. 805-10 and ASC No. 805-20 are effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company adopted ASC No. 805-10 and ASC No. 805-20 and applied the provisions of the guidance to the asset acquisitions completed during 2009.

In April 2008, the FASB issued ASC No. 350, Intangibles – Goodwill and Other, ASC No. 350-30-65, Transition and Open Effective Date Information (“ASC No. 350-30-65” and formerly referred to as FSP FAS 142-3). This update amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible. ASC No. 350-30-65 is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The guidance in this ASC No. 350-30-65 for determining the useful life of a recognized intangible is to be applied prospectively to intangible assets acquired after the effective d ate. The disclosure requirements of ASC No. 350-30-65, however, will be applied prospectively to all intangible assets recognized in the Company’s financial statements as of the effective date. The adoption of ASC No. 350-30-65 did not have a material impact on the Company’s consolidated financial statements.

F-11

In April 2009, the FASB issued transition guidance ASC No. 320-10-65-1, Transition Related to FSP SFAS No. 115-2 and SFAS No. 124-2, Recognition and Presentation of Other-Than-Temporary Impairments, the provisions of which have been incorporated in ASC No. 320-10-35, Investments – Debt and Equity Securities – Overall – Subsequent Measurement and ASC No. 320-10-50, Investments – Debt and Equity Securities – Overall – Disclosure. The objective of an other-than-temporary impairment analysis under existing GAAP is to determine whether the holder of an investment in a debt or equity security for which changes in fair value are not regularly recognized in earnings (such as securities classified as held-to-maturity or available-for-sale) should recognize a loss in earnings when the investment is impaired. An investment is impaired if the fair value of the investment is less than its amortized cost basis. ASC No. 320-10-35 and ASC No. 320-10-50 amend the other-than-temporary impairment guidance in GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. ASC No. 320-10-35 and ASC No. 320-10-50 do not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. This guidance is effective for interim and annual periods ending after June 15, 2009. In response to this guidance, in April 2009, the SEC published ASC No. 320-10-S99-1, Investments – Debt and Equity Securities – Overall – SEC Materials – Staff Accounting Bulletin (“SAB”) Topic 5M, Other than Temporary Impairment of Certain Investments in Equity Securities. ASC No. 320-10-S99-1 maintains the staff’s previous views related to equity securities and excludes debt securities from its scope. The Company adopted this standard effective April 1, 2009, the results of which are disclosed in Note 7, Fair Value of Financial Instruments.

	●	The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements;

	●	The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and

	●	The disclosures that an entity should make about events or transactions that occurred after the balance sheet date.

In June 2009, the FASB issued transition guidance ASC No. 105-10-65-1, Transition Related to SFAS No. 168, The FASB Accounting Standards Codification™ and the Hierarchy of Generally Accepted Accounting Principles, the guidance of which was incorporated in ASC No. 105, Generally Accepted Accounting Principles (“GAAP”). The FASB Accounting Standards CodificationTM (“Codification”) has become the source of authoritative GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the SEC under authority of federal sec urities laws are also sources of authoritative GAAP for SEC registrants. On the effective date of this guidance, the Codification superseded all then-existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification became nonauthoritative. This guidance is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The Company adopted this standard effective July 1, 2009, and has incorporated the current codification in this report. The adoption of this standard did not have a material impact on the Company’s financial statements.

	●	A valuation technique that uses the quoted price of the identical liability when traded as an asset or the quoted prices for similar liabilities when traded as assets; and

	●	Another valuation technique that is consistent with the principles of Topic 820.

This update also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability. Additionally, this update clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. This update was effective for the first reporting period beginning after issuance (the Company’s interim period ended September 30, 2009). The adoption of this update did not have a material imp act on the Company’s consolidated financial statements.

F-12

In September 2009, the FASB issued an accounting standards update to ASC No. 740, Income Taxes. This update addresses the need for additional implementation guidance on accounting for uncertainties in income taxes, specifically, whether income tax paid to an entity is attributable to the entity or its owners; what constitutes a tax position for a pass-through entity or a tax-exempt entity; and how to apply the uncertainty in income taxes when a group of related entities comprise both taxable and nontaxable entities. This update also eliminates certain disclosures for nonpublic entities. Since the Company currently applies the standards for accounting for uncertainty in income taxes, this update was effective for financial statements issued for interim and annual periods ending after September 15, 2009 (the Company’s interim period ended September 30, 2009). The adoption of this update did not have a material impact on the Company’s consolidated financial statements.

	●	Establishes a selling price hierarchy for determining the selling price of a deliverable; replaces the term “fair value” in the revenue allocation guidance with “selling price” to clarify that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a marketplace participant;

	●	Eliminates using the residual method of allocation and requires that the arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method; and

	●	Requires that the best estimate of a selling price is determined in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis.

The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which will be the Company’s 2011 fiscal year. Early adoption is permitted. If adopted early, the Company would be required to apply the amendments retrospectively from the beginning of the fiscal year of adoption. The Company does not intend to adopt the amendments early. The Company does not anticipate that the adoption of this amendment will have a material impact on the Company’s consolidated financial statements.

In October 2009, the FASB issued an accounting standards update to ASC No. 985, Software. The purpose of this update is to change the accounting model for revenue arrangements that include both tangible products and software elements. Tangible products containing software components and nonsoftware components that function together to deliver the tangible product’s essential functionality are no longer within the scope of the software revenue guidance in Subtopic 985-605. In addition, this update requires that hardware components of a tangible product containing software components always be excluded from the software revenue guidance. In addition, the update provides guidance on how a vendor should alloca te arrangement consideration to deliverables in an arrangement that includes both tangible products and software. The amendments in this update will be effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010, which will be the Company’s 2011 fiscal year. Early adoption is permitted. If adopted early, the Company would be required to apply the amendments retrospectively from the beginning of the fiscal year of adoption. The Company does not intend to adopt the amendments early. The Company does not anticipate that the adoption of this amendment will have a material impact on the Company’s consolidated financial statements.

3. Acquisitions

iSports Acquisition

On April 24, 2009, the Company entered into an asset purchase agreement with iSports Inc., a California corporation. iSports was a provider of mobile sports scores, news and interactive gameplay. Pursuant to the terms of the agreement, in consideration for the acquired assets, the Company issued (i) five hundred thousand (500,000) unregistered shares of the Company’s common stock, (ii) a warrant to purchase one million (1,000,000) shares of unregistered common stock, with an exercise price of $0.30 per share, and (iii) a warrant to purchase five hundred thousand (500,000) shares of unregistered common stock, with an exercise price of $0.50 per share. In addition, if certain business conditions are satisfied in each of calendar years 2009, 2010 and 2011, the Company would b e required to pay as additional consideration 35% of the amount by which the Company’s net media revenues (as defined in the Asset Purchase Agreement) for such years exceed specified threshold amounts. The agreement also contains customary representations, warranties and covenants.

The total value assigned to the transaction, including liabilities assumed, was calculated as $599,000. The purchase price of $599,000 was comprised of $371,000 in warrants to purchase shares of unregistered common stock of the Company, $166,000 in unregistered shares of common stock of the Company and approximately $62,000 in assumed liabilities. See Note 12, Common Stock Options, Deferred Stock Units and Warrants, for the assumptions used to value the warrants associated with this acquisition.

F-13

The acquired assets will be used by the Company to accelerate the development of its mobile gaming platform. Following the closing, the Company employed a co-founder of iSports, Inc. as the Company’s Executive Vice President of Programming and Technology.

The Company accounted for the acquisition pursuant to ASC No. 805, Business Combinations. Accordingly, it recorded net assets and liabilities acquired at their fair values. The purchase price allocation amounts reflected in the Company’s financial statements are final as of December 31, 2009. The purchase price allocation was as follows:

Intangible assets – acquired technology	$	599,000
Total assets		599,000

Accounts payable		(62,000	)
Total liabilities		(62,000	)

Purchase price allocated to assets and liabilities acquired	$	537,000

The purchase price may be increased if certain thresholds of net media revenues are exceeded in calendar years 2010 and 2011. The thresholds of net media revenues were not exceeded in 2009, and the Company does not estimate that they will be met in the future. In the event the thresholds are met, the purchase price allocation will be adjusted and reflected in current earnings in the period that the additional purchase price amount is earned.

As a result of the iSports acquisition, the impact to revenue and net loss for the 12 months ended December 30, 2009 was immaterial. Because there was no continuity of iSports operations after the acquisition date, the Company has determined that the proforma revenue and net loss information for 2008 and 2009 generally required by ASC No. 805 would not be meaningful and may be misleading. The Company has therefore omitted these disclosures from the financial statements.

i-am TV Acquisition

On May 11, 2009, the Company entered into an asset purchase agreement (the “i-am TV Agreement”) through which it acquired certain assets of “i-am TV” from Instant Access Media, LLC. i-am TV had been in the business of providing programming and advertising to hospitality venues located in the top 15 designated market areas throughout the United States. The transaction included the acquisition of approximately 1,400 flat panel television screens installed in 368 locations as well as the related communication equipment. Pursuant to the terms of the i-am TV Agreement, in consideration for the acquired assets, the Company issued (i) one million five hundred thousand (1,500,000) unregistered shares of the Company’s common stock, (ii) warrants to purchase one million (1,000,000) shares of unregistered common stock with an exercise price of $0.50 per share, (iii) warrants to purchase one million (1,000,000) shares of unregistered common stock with an exercise price of $1.00 per share and (iv) warrants to purchase one million (1,000,000) shares of unregistered common stock with an exercise price of $1.50 per share. In addition, the Company has agreed to provide future earnout consideration (the “Earnout”) in calendar years 2010 through 2012 based on net advertising revenues as defined in the i-am TV Agreement. The Earnout will be calculated as the product of the total net advertising revenues for the Company multiplied by the percentage of qualifying venues that have converted from i-am TV to the Company’s Buzztime iTV Network in relation to the total population of Buzztime iTV Network subscribers. The i-am TV Agreement also contained customary representations, warranties and covenants.

The total value assigned to the transaction, including liabilities assumed, was calculated as $1,176,000. The purchase price of $1,176,000 was comprised of $537,000 in warrants to purchase shares of unregistered common stock of the Company, $450,000 in unregistered shares of common stock of the Company, $188,000 of contingent consideration in the form of an earnout and approximately $1,000 in assumed liabilities. See Note 12, Common Stock Options, Deferred Stock Units and Warrants, for the assumptions used to value the warrants associated with this acquisition.

The Company also entered into an agreement with certain investors in Instant Access Media, LLC whereby they purchased 2,419,355 shares of the Company’s common stock in a private placement raising $750,000 in additional working capital.

The Company accounted for the acquisition pursuant to ASC No. 805. Accordingly, it recorded net assets and liabilities acquired at their fair values. The fair value calculations are based on certain assumptions, including the number of i-am TV sites that will be converted to Buzztime customers and the incremental cash flows to the Company from those sites. The purchase price allocation amounts reflected in the Company’s financial statements are final as of December 31, 2009. The purchase price allocation was as follows:

F-14

Intangible assets – customer relationships – advertising	$	302,000
Intangible assets – customer relationships – subscription		874,000
Total assets		1,176,000

Accounts payable		(1,000	)
i-am TV earnout – long term liabilities		(188,000	)
Total liabilities		(189,000	)
Purchase price allocated to assets and liabilities acquired	$	987,000

The purchase price may be increased or decreased if net advertising revenues for the Company deviate from estimations in calendar years 2010, 2011 and 2012. In that event, the purchase price allocation will be adjusted and reflected in current earnings in the period that the adjustment becomes necessary.

As a result of the i-am TV acquisition, the Company recognized approximately $315,000 of advertising revenue resulting from the continuation of contract relationships with certain legacy i-am TV advertising customers. Additionally, based on the sales efforts of the Company to convert approximately 110 legacy i-am TV customers to the Buzztime platform, the Company recognized an additional $414,000 in subscription and other revenue for the 12 months ended December 31, 2009. Based on the post acquisition integration efforts of the Company, it is not practical to determine the impact on net loss for the 12 months ended December 31, 2009.

Because there was no continuity of i-am TV’s operations after the acquisition date, the Company has determined that the proforma revenue and net loss information for 2008 and 2009 generally required by ASC No. 805 would not be meaningful and may be misleading. The Company has therefore omitted these disclosures from the financial statements.

4. Cash and Cash Equivalents

As of December 31, 2008, the Company had approximately $2,600,000 in a Canadian Variable Rate Guaranteed Investment Contract. The contract, when initiated, had a one year term, which could be redeemed at any time without penalty or loss of interest; therefore, management classified this security as a cash equivalent, as the security was highly liquid. During 2009, the Canadian Variable Rate Guaranteed Investment Contract expired and the Company elected not to reinvest the funds into a Canadian Variable Rate Guaranteed Investment Contract.

The remaining cash equivalents are deposited in an overnight interest-bearing sweep depository account.

5. Broadcast Equipment and Fixed Assets

Broadcast equipment and fixed assets are recorded at cost and consist of the following:

	For the Year Ended
	December 31,
	2009			2008
Broadcast equipment	$	17,897,000		$	17,208,000
Furniture and fixtures		736,000			733,000
Machinery and equipment		4,919,000			4,768,000
Leasehold improvements		633,000			615,000
Other equipment		24,000			24,000
		24,209,000			23,348,000

Accumulated depreciation		(20,400,000	)		(19,920,000	)

Total	$	3,809,000		$	3,428,000

Depreciation expense totaled $2,148,000 and $2,650,000 for the years ended December 31, 2009 and 2008, respectively.

6. Goodwill and Other Intangible Assets

The Company’s goodwill balance relates to the purchase of NTN Canada. The Company performed its annual test for goodwill impairment for NTN Canada as of September 30, 2009 and it was determined that there were no indications of impairment. The Company considered the need to perform an additional test of goodwill of its Canadian business as of December 31, 2009, but determined that the overall health of the underlying Canadian business has remained stable since the September 30, 2009 valuation.

F-15

As discussed in Note 3, during the quarter ended June 30, 2009, the Company acquired certain assets of iSports Inc. and Instant Access Media, LLC. As a result of those transactions, the Company recorded $1,176,000 in customer relationship intangible assets and $599,000 in unpatented technology. The majority of the customer relationship intangible asset will be amortized on a straight line basis over a period of 44 months and recorded in selling, general and administrative expenses. Approximately $300,000 was amortized over the three months ended August 31, 2009 coinciding with the period that the related advertising revenue was recognized. The unpatented technology intangible asset will be amortized on a straight line basis over a period of 60 months and recorded in direct expen ses. The useful lives reflect the estimated period of time and method by which the underlying intangible asset benefits will be realized.

The Company also has other intangible assets comprised predominantly of developed technology, trivia databases and trademarks. The weighted average remaining useful life for all intangible assets is 3.3 years as of December 31, 2009. Amortization expense relating to all intangible assets totaled $675,000 and $85,000 for the years ended December 31, 2009 and 2008, respectively.

F-16

As of December 31, 2009, intangible assets with estimable lives were comprised of the following:

	Gross Carrying Value		Accumulated Amortization			Net
Developed technology	$	206,000	$	(206,000	)	$	-
Trivia database		426,000		(257,000	)		169,000
Trademarks and trademark licenses		340,000		(176,000	)		164,000
Acquired technology		599,000		(82,000	)		517,000
Acquired customer advertising		302,000		(302,000	)		-
Acquired customer subscriptions		874,000		(139,000	)		735,000
Total	$	2,747,000	$	(1,162,000	)	$	1,585,000

As of December 31, 2008, intangible assets with estimable lives were comprised of the following:

	Gross Carrying Value		Accumulated Amortization			Net
Developed technology	$	206,000	$	(206,000	)	$	-
Trivia database		365,000		(184,000	)		181,000
Trademarks		67,000		(63,000	)		4,000
Total	$	638,000	$	(453,000	)	$	185,000

The estimated aggregate amortization expense relating to the Company’s intangible assets for each of the five succeeding years is as follows:

Year Ending	Estimated Aggregate Amortization Expense
2010	$	543,000
2011		434,000
2012		406,000
2013		164,000
2014		37,000
Thereafter		1,000
Total	$	1,585,000

7. Fair Value of Financial Instruments

The carrying values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities approximate fair value due to the short maturity of these instruments.

Available-for-sale securities are recorded at fair value and unrealized holding gains and losses are excluded from earnings and are reported as a separate component of comprehensive income until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification basis. A decline in the market value of any available-for-sale security below cost that is deemed to be other-than-temporary, results in a reduction in the carrying amount to fair value. Any resulting impairment is charged to other income (expense) and a new cost basis for the security is established.

The one investment available-for-sale that the Company holds is 2,518,260 shares in its Australian licensee eBet Limited (eBet), an Australian gaming technology corporation. The Company’s original cost basis in the eBet shares is AUD$0.50 per share. The Company’s initial investment in 1999 was for 4,000,000 shares and at various points in 2000, the Company sold 1,481,740 eBet shares, leaving its existing holding of 2,518,260 shares, which represents less than 1.2% of eBet’s current shares outstanding. The value of the investment increased $122,000 for the year ended December 31, 2009 and decreased $206,000 for the year ended December 31, 2008. Based on the closing market price at December 31, 2009, the value of the investment was approximately $180,000. The unr ealized gains and losses of this investment are recorded as other comprehensive income (loss) in the Company’s consolidated balance sheet (See Note 20). The Company will continue to monitor this investment for any decline in value that could be deemed other-than-temporary ultimately resulting in future impairments.

F-17

The Company adopted ASC No. 820, Fair Value Measurements and Disclosures, prospectively effective January 1, 2008, with respect to fair value measurements of (a) nonfinancial assets and liabilities that are recognized or disclosed at fair value in the Company’s financial statements on a recurring basis (at least annually) and (b) all financial assets and liabilities. The Company adopted the remaining aspects of ASC No. 820 relative to nonfinancial assets and liabilities that are measured at fair value, but are recognized and disclosed at fair value on a nonre curring basis, prospectively effective January 1, 2009.

ASC No. 820 applies to certain assets and liabilities that are being measured and reported on a fair value basis. ASC No. 820 defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. Broadly, the ASC No. 820 framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. This Statement enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determ ine fair values. The Statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Assets and Liabilities that are Measured at Fair Value on a Recurring Basis:

The fair value of the Company’s investment in eBet Limited is determined based on quoted market prices, which is a Level 1 classification. The Company records the investment on the balance sheet at fair value with changes in fair value recorded as a component of other comprehensive income (loss) in the consolidated balance sheet (see Note 20).

Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis:

Certain assets are measured at fair value on a non-recurring basis and are subject to fair value adjustments only in certain circumstances. Included in this category are goodwill written down to fair value when determined to be impaired, assets and liabilities with respect to the business combinations closed during 2009, and long-lived assets including capitalized software that are written down to fair value when they are held for sale or determined to be impaired. The valuation methods for goodwill, assets and liabilities resulting from business combinations, and long-lived assets involve assumptions concerning interest and discount rates, growth projections, and/or other assumptions of future business conditions. As all of the assumptions employed to measure these assets and liabilities on a nonre curring basis are based on management’s judgment using internal and external data, these fair value determinations are classified in Level 3 of the valuation hierarchy.

8. Accrued Compensation

Accrued compensation consisted of the following at December 31, 2009 and 2008:

	For the Year Ended
	December 31,
	2009		2008
Accrued bonuses	$	401,000	$	11,000
Accrued vacation		398,000		381,000
Accrued salaries		194,000		383,000
Accrued commissions		82,000		93,000
Total accrued compensation	$	1,075,000	$	868,000

9. Concentrations of Credit Risk

At times, the Company’s cash balances held in financial institutions are in excess of federally insured limits. The Company performs periodic evaluations of the relative credit standing of financial institutions and seeks to limit the amount of risk by selecting financial institutions with a strong credit standing. The Company believes it is not exposed to any significant credit risk with respect to its cash and cash equivalents.

The Buzztime iTV Network segment provides services to group viewing locations, generally restaurants, sports bars and lounges throughout North America. Concentration of credit risk with respect to trade receivables is limited due to the large number of customers comprising the Company’s customer base, and their dispersion across many different geographies. The Company performs ongoing credit evaluations of its customers and generally requires no collateral. The Company maintains an allowance for doubtful accounts to provide for credit losses.

F-18

10. Significant Customer

For the years ended December 31, 2009 and 2008, the Company generated approximately 16% and 12%, respectively, of total revenue from a national chain, Buffalo Wild Wings together with its franchisees. As of December 31, 2009 and 2008, approximately $71,000 and $47,000, respectively, was included in accounts receivable from this customer.

11. Basic and Diluted Earnings Per Common Share

Basic earnings per share excludes the dilutive effects of options, warrants and other convertible securities. Diluted earnings per share reflects the potential dilutions of securities that could share in the Company’s earnings. Options, warrants, convertible preferred stock and deferred stock units representing approximately 9,640,000 and 5,954,000 shares were excluded from the computations of diluted net loss per common share for the years ended December 31, 2009 and 2008, respectively, as their effect was anti-dilutive.

12. Common Stock Options, Deferred Stock Units and Warrants

Stock Option Plans

2004 Performance Incentive Plan

In September 2004 at a Special Meeting of Stockholders, the Company’s stockholders approved the 2004 Performance Incentive Plan (the “2004 Plan”). The 2004 Plan provides for the issuance of up to 2,500,000 shares of NTN common stock. In addition, all shares that remained unissued under the 1995 Employee Stock Option Plan (the “1995 Plan”) on the effective date of the 2004 Plan, and all shares issuable upon exercise of options granted pursuant to the 1995 Plan that expire or become unexercisable for any reason without having been exercised in full, are available for issuance under the 2004 Plan. On the effective date, the 1995 Plan had approximately 77,000 options available for grant.

Under the 2004 Plan, options for the purchase of NTN common stock or other instruments such as deferred stock units may be granted to officers, directors and employees. Options may be designated as incentive stock options or as nonqualified stock options, and generally vest over four years. At its discretion, the Board of Directors can authorize acceleration of vesting periods. Options under both the 1995 Plan and the 2004 Plan have a term of up to ten years, and are exercisable at a price per share not less than the fair market value on the date of grant. In September 2009, the 2004 Plan expired.

2010 Performance Incentive Plan

Subject to shareholder approval at the Company’s 2010 Annual Meeting of Stockholders, the Board of Directors has adopted a new performance incentive plan (the “2010 Plan”). The 2010 Plan provides for the issuance of 6,000,000 shares of NTN common stock. Under the 2010 Plan, options for the purchase of NTN common stock or other instruments such as deferred stock units may be granted to officers, directors and employees. Options may be designated as incentive stock options or as nonqualified stock options, and generally vest over four years. At its discretion, the Board of Directors can authorize acceleration of vesting periods. Options under the 2010 Plan have a term of up to ten years, and are exercisable at a price per share not less than the fair market value on the dat e of grant.

Buzztime Distribution Stock Incentive Plan

On May 31, 2001, Buzztime Distribution (“Buzztime”) adopted an incentive stock option plan. Pursuant to the plan, Buzztime may grant options to purchase Buzztime common stock, subject to applicable share limits, upon terms and conditions specified in the plan. There are 300,000 shares authorized under this plan. To date, no options have been granted under the plan.

Stock-Based Compensation Valuation Assumptions

The Company records stock-based compensation in accordance with ASC No. 718, Compensation – Stock Compensation. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as expense over the requisite service period. Stock-based compensation expense for all share-based payment awards is recognized using the straight-line single-option method.

The Company uses the historical stock price volatility as an input to value its stock options under ASC No. 718. The expected term of stock options represents the period of time options are expected to be outstanding and is based on observed historical exercise patterns of the Company, which the Company believes are indicative of future exercise behavior. For the risk-free interest rate, the Company uses the observed interest rates appropriate for the term of time options are expected to be outstanding. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

F-19

The following weighted-average assumptions were used for grants issued during 2009 and 2008 under the ASC No. 718 requirements:

	2009		2008
Weighted-average risk-free rate		1.72%		2.97%
Weighted-average volatility		88.55%		63.57%
Dividend yield		0.00%		0.00%
Expected life	6.05 years		4.38 years

ASC No. 718 requires forfeitures to be estimated at the time of grant and revised if necessary in subsequent periods if actual forfeiture rates differ from those estimates. Forfeitures were estimated based on historical activity for the Company. The Company estimated a 17.63% annual forfeiture rate for each of the years ended December 31, 2009 and 2008. Stock-based compensation expense for employees in 2009 and 2008 was $180,000 and $312,000, respectively, and is expensed in selling, general and administrative expenses and credited to the additional paid-in-capital account.

Stock Option Activity

The following table summarizes stock option activity for and the year ended December 31, 2009:

	Shares			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value
Outstanding December 31, 2008		5,249,000		$	1.22		2.58	$	2,000
Granted		3,250,000			0.24		-		-
Exercised		(176,000	)		0.16		-		-
Forfeited		(427,000	)		0.28		-		-
Expired		(3,026,000	)		1.26		-		-
Outstanding December 31, 2009		4,870,000		$	0.66		7.16	$	655,000

Options vested and exercisable at December 31, 2009		1,993,000		$	1.18		4.37	$	92,000

The aggregate intrinsic value of options at December 31, 2009 is based on the company’s closing stock price on that date of $0.45 per share as reported by the NYSE Amex. The total intrinsic value of options exercised during 2009 was $56,000 and no options were exercised during 2008. The total cash received as a result of stock option exercises during 2009 was approximately $28,000 and no cash was received as a result of stock option exercises during 2008.

The per share weighted-average grant-date fair value of stock options granted during 2009 and 2008 was $0.18 for both years.

As of December 31, 2009, the unamortized compensation expense related to outstanding unvested options was approximately $536,000 with a weighted average remaining requisite service period of 3.13 years. The Company expects to amortize this expense over the remaining requisite service period of these stock options. A deferred tax asset generally would be recorded related to the expected future tax benefit from the exercise of the non-qualified stock options. However, due to a history of net operating losses, a full valuation allowance has been recorded related to the tax benefit for non-qualified stock options.

Deferred Stock Unit Activity

Grants of deferred stock units are paid in an equal number of shares of common stock on the vesting date of the award, subject to any deferred payment date that the holder may elect. A stock unit award is paid only to the extent vested. Vesting generally requires the continued employment by the award recipient through the respective vesting date, subject to accelerated vesting in certain circumstances. Since the deferred stock units are paid in an equal number of shares of common stock without any kind of offsetting payment by the employee, the measurement of cost is based on the quoted market price of the stock at the measurement date which is the date of grant.

F-20

The following table summarizes deferred stock unit activity during 2009:

	Outstanding Deferred Stock
December 31, 2008		141,000
Granted		-
Canceled		(32,000	)
December 31, 2009		109,000

Balance exercisable at December 31, 2009		20,000

The Company did not grant any deferred stock units during 2009. The Company granted 158,000 deferred stock units with performance based accelerated vesting provisions during the year ended December 31, 2008. Those provisions are based on certain revenue targets for the Company which could result in accelerated vesting of up to 50% of the total award. The Company has evaluated the likelihood of attaining the performance based targets and they are not considered probable, therefore, accelerated expense was not recorded. The Company will continue to monitor its revenue results and should any estimates made regarding the satisfaction of those performances based conditions change at any time during the estimated requisite period, an adjustment will be calculated and record ed in accordance with ASC No. 718.

Warrant Activity

The following summarizes warrant activity during 2009:

	Outstanding Warrants			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Life (in years)
Outstanding December 31, 2008		403,000		$	2.71		0.35
Granted		4,500,000			0.79		-
Exercised		-			-		-
Forfeited		(403,000	)		2.71		-
Outstanding December 31, 2009		4,500,000		$	0.79		7.35

Balance exercisable at December 31, 2009		4,500,000		$	0.79		7.35

The 4,500,000 warrants outstanding were issued during 2009 in connection with the iSports and i-am TV asset acquisitions. The fair values of the warrants were approximately $908,000 in aggregate and were determined using the Black-Scholes model using the following weighted-average assumptions: risk-free interest rates of 2.79%; dividend yield of 0%; expected volatility of 78.1%; and a term of 8 years.

F-21

13. Common Stock

On April 5, 2007, the Company’s Board of Directors authorized a Stock Repurchase Plan, whereby management was authorized to repurchase up to a maximum of $3,500,000 of NTN Common Stock from time to time in the open market at prevailing market prices, or in privately negotiated transactions over an eighteen month period, which expired on October 4, 2008. During 2008, the Company purchased approximately 49,000 shares for a total of $12,000. In addition, the Company purchased approximately 454,000 shares for a total $444,000 during 2007. In total, the Company has purchased approximately 503,000 shares for a total of $456,000.

14. Cumulative Convertible Preferred Stock

The Company authorized 10,000,000 shares of preferred stock. The preferred stock may be issued in one or more series. The only series currently designated is a series of 5,000,000 shares of Series A Cumulative Convertible Preferred Stock (Series A Preferred Stock).

As of December 31, 2009 and 2008, there were 161,000 shares of Series A Preferred Stock issued and outstanding. The Series A Preferred Stock provides for a cumulative annual dividend of 10 cents per share, payable in semi-annual installments in June and December. Dividends may be paid in cash or with shares of common stock. In 2009 and 2008, the Company issued approximately 37,000 and 70,000 common shares, respectively, for payment of dividends.

The Series A Preferred Stock has no voting rights and has a $1.00 per share liquidation preference over common stock. The registered holder has the right at any time to convert shares of Series A Preferred Stock into that number of shares of common stock that equals the number of shares of Series A Preferred Stock that are surrendered for conversion divided by the conversion rate. The conversion rate is subject to adjustment in certain events and is established at the time of each conversion, such that the number of shares of common stock issuable upon conversion of the preferred stock is convertible into is higher than the original conversion rate. During 2009 and 2008, there were no conversions. There is no mandatory conversion term, date or any redemption features associated with the Series A Preferred Stock .

15. Income Taxes

For each of the years 2009 and 2008, current tax provisions and current deferred provisions were recorded as follows:

	2009			2008
Current Tax Provision
Federal	$	57,000		$	50,000
State		13,000			15,000
Foreign		(41,000	)		139,000
		29,000			204,000
Deferred Tax Provision
Federal		-			-
State		-			-
Foreign		66,000			30,000
		66,000			30,000
Total Tax Provison
Federal		57,000			50,000
State		13,000			15,000
Foreign		25,000			169,000
	$	95,000		$	234,000

F-22

The net deferred tax assets and liabilities have been reported in the consolidated balance sheets at December 31, 2009 and 2008 as follows:

	2009						2008
	Current			Noncurrent			Current			Noncurrent

Deferred Tax Assets:
NOL Carryforwards	$	-		$	21,826,000		$	-		$	21,297,000
UK NOL Carryforwards		-			904,000			-			904,000
Legal & litigation accruals		-			-			41,000			-
Allowance for doubtful accounts		128,000			-			126,000			-
Compensation and vacation accrual		405,000			-			116,000			-
Operating accruals		272,000			-			356,000			-
Deferred revenue		59,000			-			78,000			-
Research and experimentation credit		-			9,000			-			9,000
AMT Credit		-			21,000			-			21,000
Foreign tax Credit		-			105,000			-			50,000
Amortization		-			741,000			-			524,000
Depreciation		-			889,000			-			983,000
Foreign		-			53,000			-			118,900
Charitable contributions		-			1,000			-			-
Other		-			303,000			-			306,000
Total gross deferred tax assets		864,000			24,852,000			717,000			24,212,900
Valuation allowance		(655,000	)		(23,848,000	)		(717,000	)		(23,338,000	)
Net deferred tax assets		209,000			1,004,000			-			874,900

Deferred tax liabilities:
Capitalized software		-			951,000			-			661,000
Amortization		-			-			-			-
Deferred Revenue		209,000			-			-			95,000
Total gross deferred liabilities		209,000			951,000			-			756,000
Net deferred taxes	$	-		$	53,000		$	-		$	118,900

The reconciliation of computed expected income taxes to effective income taxes by applying the federal statutory rate of 34% is as follows:

	For the year ended December 31,
	2009			2008
Tax at federal income tax rate	$	(478,000	)	$	(2,120,000	)
State (benefit)		(52,000	)		(177,000	)
Foreign tax differential		(17,000	)		(32,000	)
Foreign losses with no federal benefit		-			155,000
Change in valuation allowance		448,000			(1,137,000	)
Expiration of net operating loss carryforwards		-			2,840,000
Permanent Items		113,000			165,000
Expiration of research credit		-			177,000
Other		81,000			363,000
Total Provision	$	95,000		$	234,000

The net change in the total valuation allowance for the year ended December 31, 2009 was an increase of $448,000. The net change in the total valuation allowance for the year ended December 31, 2008 was a decrease of $1,137,000. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and planning strategies in making this assessment. Based on the level of historic al operating results and projections for the taxable income for the future, management has determined that it is more likely than not that the portion of deferred taxes not utilized through the reversal of deferred tax liabilities will not be realized. Accordingly, the Company has recorded a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.

F-23

At December 31, 2009, the Company has available net operating loss carryforwards of approximately $61,732,000 for federal income tax purposes, which will begin expiring in 2010. The net operating loss carryforwards for state purposes, which will begin expiring in 2015, are approximately $16,217,000. There can be no assurance that the Company will ever be able to realize the benefit of some or all of the federal and state loss carryforwards due to continued operating losses. Further, the Company has not quantified the potential impact that Section 382 of the Internal Revenue Code may have on the ability for us to utilize our net operating loss carryforwards. Under this code section, the use of some or all of those net operating losses may be limited if certain changes in ownership are deemed to have occurred.

Under Section 382 of the Internal Revenue Code (IRC) and similar state provisions, ownership changes will limit the annual utilization of net operating loss carryforwards existing prior to a change in control that are available to offset future taxable income. Based upon the equity transactions that have occurred during the Section 382 statutory "look-back" period, some or all of the Company's existing net operating loss carryforwards may be subject to annual limitations. The Company has not performed an analysis to determine whether an ownership change or multiple ownership changes have occurred for tax reporting purposes due to the complexity and cost associated with such a study, and the fact that there may be additional such ownership changes in the future. Such limitations wou ld reduce, potentially significantly, the gross deferred tax assets disclosed in the table above related to the net operating loss carryforwards. The Company continues to disclose the net operating loss carryforwards at their original amount in the table above as no potential limitation has been quantified. The Company has also established a full valuation allowance for substantially all deferred tax assets due to uncertainties surrounding its ability to generate future taxable income to realize these assets. Since substantially all deferred tax assets are fully reserved, future changes in tax benefits will not impact the effective tax rate.

The Company and its subsidiaries are subject to federal income tax as well as income tax of multiple state jurisdictions. With few exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for years prior to 2004. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the carryforwards. The Company is not currently under examination by the IRS or state taxing authorities.

The deferred tax assets as of December 31, 2009 include a deferred tax asset of $1,286,000 representing net operating losses arising from the exercise of stock options by Company employees. To the extent the Company realizes any tax benefit for the net operating losses attributable to the stock option exercises, such amount would be credited directly to stockholders' equity.

16. Commitments

Operating Leases

The Company leases office and production facilities and equipment under agreements which expire at various dates through 2011. Certain leases contain renewal provisions and escalating rental clauses and generally require us to pay utilities, insurance, taxes and other operating expenses. Lease expense under operating leases totaled $856,000 and $1,030,000 in 2009 and 2008, respectively.

Year Ending December 31,	Lease Payment
2010	$	808,000
2011		338,000
Thereafter		-
Total	$	1,146,000

F-24

Sublease

In January 2007 the Company restructured its Canadian operations to reduce costs and streamline operations. The restructuring involved moving the operation to a smaller facility and subleasing the previously occupied facility until the end of the original lease, which expires in December 2014. In March 2009, the Company exercised its right to terminate both the original lease and the sublease with the subtenant. Accordingly, the Company will not receive any additional sublease proceeds.

Capital Leases

In 2009, the Company entered into a $500,000 equipment lease facility with an equipment leasing company. The terms of that agreement allow for use of the facility in multiple tranches with each individual tranche having a 24 month term. Additionally, the equipment lease has a collateral obligation whereby the Company has pledged certain equipment located at the Carlsbad, California location to satisfy the equipment leasing company’s requirements. As of December 31, 2009, the Company had utilized $457,000 of this facility, which has been accounted for as a capital lease.

In October 2009, the Company entered into a $1,000,000 equipment lease facility with an equipment leasing company. The terms of that agreement allow for use of the facility for 24 months and for use of the facility in multiple tranches with each individual tranche having a 24 month term. As of December 31, 2009, the Company had utilized $146,000 of this facility, which has been accounted for as a capital lease.

As of December 31, 2009 and 2008, property held under capital leases was as follows:

	For the Year Ended
	December 31,
	2009			2008
Broadcast equipment	$	983,000		$	408,000
Machinery and equipment		1,509,000			1,509,000
Other equipment		24,000			21,000
		2,516,000			1,938,000
Accumulated depreciation		(2,048,000	)		(1,898,000	)

Total	$	468,000		$	40,000

Total depreciation expense under capital leases was $148,000 and $100,000 for the years ended December 31, 2009 and 2008, respectively.

As of December 31, 2009, future minimum payments under all capital leases are as follows:

Year Ending December 31,	Lease Payment
2010	$	347,000
2011		167,000
2012		11,000
2013		5,000
2014		-
Total minimum payment		530,000
Less amounts representing interest		(57,000	)
Present value of net minimum payments		473,000
Less current portion		(300,000	)
Long-term capital lease obligations	$	173,000

Purchase Commitments

The Company had a commitment, under a long-term agreement, to purchase equipment from a vendor. Under the original terms of the agreement, the Company was obligated to purchase $835,000 and $76,000 of equipment in 2008 and 2009, respectively, after the Company’s acceptance of certain milestones. Issues arose under the terms of the agreement, which still remain unresolved as of December 31, 2009. In early 2008, the Company informed the vendor that numerous defects existed with the equipment. The vendor failed to remedy the defects in a timely manner and the Company was forced to purchase equipment from a different manufacturer. Due to the vendor's failure to cure the defects in accordance with the provisions in the agreement, the Company does not believe the requ ired milestones were met.

F-25

On April 15, 2009, the Company received a letter from the vendor requesting $300,000 to cover certain costs incurred citing breach of the agreement. The Company responded to the letter, indicating that certain contract milestones had not been met by the vendor and therefore, the Company was not obligated to purchase equipment under the contract. The Company ultimately requested a mutual release to the agreement without any cash payment by either party. The vendor responded to the Company's rebuttal indicating that it disagreed with the Company's assertions, however, was willing to resolve the matter amicably. The last communication was on May 19, 2009, whereby the Company sent a letter which reaffirmed its desire to bring closure to this issue amicably and with no payment by either party. The Company believes the vendor's claim lacks merit and does not plan to make any payments. The Company has not recorded a reserve as it has assessed the likelihood that it would have to pay any amounts as being less than probable.

During the quarter ended June 30, 2009, the Company entered into a material manufacturing and supply agreement with a vendor to manufacture certain equipment. Under the terms of that agreement as amended, the Company was obligated to purchase approximately $1 million in equipment over the three year term of the agreement. As of December 31, 2009, the Company has satisfied $38,000 of that obligation. In January 2010, the Company provided written notice of its intention to terminate the material manufacturing and supply agreement, citing failure to deliver certain prototypes on the contractually agreed upon dates. The vendor has verbally accepted the termination and has agreed to refund the $38,000 deposit.

17. Contingencies

The Company is subject to litigation from time to time in the ordinary course of its business. There can be no assurance that any or all of the following claims will be decided in the Company’s favor and the Company is not insured against all claims made. During the pendency of such claims, the Company will continue to incur the costs of its legal defense. Other than set forth below, there is no material litigation pending or threatened against the Company.

Sales and Use Tax

From time to time, state tax authorities will make inquiries as to whether or not a portion of the Company’s services require the collection of sales and use taxes from customers in those states. Many states have expanded their interpretation of their sales and use tax statutes to derive additional revenue. The Company evaluates such inquiries on a case-by-case basis and has favorably resolved the majority of these tax issues in the past without any material adverse consequences.

During the quarter ended March 31, 2009, the Company settled a long on-going sales tax evaluation with the state of Texas. The Company and the State of Texas executed an Audit Resolution Agreement and Joint Motion to Dismiss pursuant to which the Company will pay the state approximately $450,000 over a 2 year period. As part of those agreements, both parties agreed to waive all rights to any redetermination or refund hearings. In February 2009, the Company began collecting and remitting sales tax in the state of Texas in accordance with the state tax statutes. As of December 31, 2009, $334,000 is due to the State of Texas under this settlement agreement.

The Company is involved in ongoing sales tax inquiries, including certain formal assessments which total $705,000, with other states and provinces. As a result of those inquiries and the Texas liability discussed above, the Company recorded a total liability of $847,000 and $867,000 as of December 31, 2009 and December 31, 2008, respectively. Based on the guidance set forth by ASC No. 450, Contingencies, management has deemed the likelihood that it will be forced to pay all or part of these assessments with other states as reasonably possible.

18. Retirement Savings Plan

In 1994 the Company established a defined contribution plan, organized under Section 401(k) of the Internal Revenue Code, which allowed employees who have completed at least one month of service and have reached age 18 to defer up to 50% of their pay on a pre-tax basis. Effective April 1, 2007, the Company began to match 50% of the first 6% of employee contributions up to a maximum of $2,000 per employee. However, after March 31, 2009, the Company discontinued the employer contribution. For the years ended December 31, 2009 and 2008, the Company contributed $41,000 and $158,000, respectively.

19. Related Parties

In November 2008, the Company entered into executive advisory agreement with Terry Bateman, a member of its Board of Directors. Under the terms of this agreement, the Company engaged Mr. Bateman to serve as a consultant and to assist it with a strategic analysis of our operations and to advise and assist the Company’s management team as it sought to identify and employ a permanent chief executive officer. The initial term of the agreement was 90 days and the Company agreed to pay Mr. Bateman $20,000 per month. The agreement terminated on February 2, 2009 when Mr. Bateman was appointed as the Company’s Chief Executive Officer.

F-26

The Company entered into a three month consulting engagement with Kenneth Keymer, a member of the Company’s Board of Directors, in the first quarter of 2009. The Company used Mr. Keymer’s business experience to analyze and improve certain business processes and compensated him $20,000 per month for these services. The three month agreement was extended for an additional two months, at which time the agreement terminated when Mr. Keymer was appointed as the Company’s Chief Operating Officer in July 2009.

20. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) is the combination of accumulated net unrealized gains or losses on investments available-for-sale and the accumulated gains or losses from foreign currency translation adjustments. The Company translated the assets and liabilities of its Canadian and United Kingdom statements of financial position into U.S. dollars using the period end exchange rates. Revenue and expenses were translated using the weighted-average exchange rates for the reporting period.

The carrying value of the Company’s Australian investment, eBet, has fluctuated and the respective unrealized gains and losses are recorded in accumulated other comprehensive loss. For the years ended December 31, 2009 and 2008, the components of accumulated other comprehensive loss are as follows:

	2009		2008
Unrealized gain (loss) on investment available-for-sale	$	16,000	$	(106,000	)
Foreign currency translation adjustment		683,000		114,000
Ending balance	$	699,000	$	8,000

21. Discontinued Operations and Assets Held for Sale

In November 2006, the Company began to actively pursue the sale of its Hospitality division comprised of NTN Wireless and Software Solutions. In the fourth quarter of 2006, the Company applied the provisions of ASC No. 360, “Property, Plant and Equipment,” to certain of its assets which were held for sale. ASC No. 360 requires that a long-lived asset classified as held for sale, be measured at the lower of its carrying amount or fair value, less costs to sell, and that the Company ceases depreciation, depletion and amortization. As of December 31, 2006, the Hospitality division’s assets were classified as held for sale and the respective assets were revalued as of December 31, 2006. Depreciation on these assets ceased effective December 31, 2006. Additionally, corporate expenses previously allocated to the discontinued operations have been reclassified to Buzztime iTV in accordance with ASC No. 360.

In March 2007, the Company completed the sale of substantially all of the assets of NTN Wireless for $2.4 million and recognized a gain, net of tax, of approximately $396,000. In October 2007, the Company sold certain intellectual property assets of Software Solutions pursuant to an Asset Purchase Agreement, and in a separate agreement with a customer, the Company discontinued the outsourced software development it was providing. The Company wound down the professional help desk and support and maintenance services as the Company fulfilled its obligations under existing customer agreements. The intellectual property sold constituted substantially all of the remaining operating assets of the Company’s Hospitality Division, which had originally consisted of its Software Solutions and Wireless communications businesses.

F-27

The operating results for the Hospitality division have been separately classified and reported as discontinued operations in the consolidated statements of operations as follows:

	December 31,
	2008
Operating revenues	$	21,000
Operating expenses		530,000
Operating loss		(509,000	)
Other income		177,000
Loss from discontinued operations, net of tax	$	(332,000	)

The Company accounted for the dissolution of the help desk and support and maintenance operation pursuant to the provisions of ASC No. 420, “Exit or Disposal Cost Obligations.” ASC No. 420 requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred, as opposed to when there is a commitment to dispose of a business segment. Severance for involuntary employee terminations was expensed over the requisite service period in which it was earned as certain employees are required to continue to render service until the Company had fulfilled its obligations under existing customer contracts. Moving, relocation and other associated costs related to the dissolution were expensed as incurred. The Company did not incur severance expenses for involuntary employee terminations after the quarter ended June 30, 2008 and incurred $52,000 for 2008. The Company concluded its wind down activities in 2008 and it does not expect to incur any additional expenses related to the help desk and support and maintenance function in subsequent periods.

The Company does not have components of assets and liabilities of discontinued operations on its consolidated balance sheet as of December 31, 2009 or 2008.

22. Geographical Information

In 2007, the Company had two reportable segments within the Entertainment division; Buzztime iTV Network and Buzztime Distribution. In 2008, the Company changed the method in which the chief decision makers evaluated the business and began making operational and strategic decisions based on the Entertainment division as a whole. As such, the Company no longer has multiple reporting segments.

The tables below contain information about the geographical areas in which the Company operated. In the third quarter of 2008, the Company ceased its operations in the United Kingdom.

Geographic breakdown of the Company’s revenue for the last two fiscal years were as follows:

	For the year ended December 31,
	2009		2008
United States	$	23,289,000	$	23,946,000
Canada		2,525,000		3,373,000
United Kingdom		-		177,000
Total revenue	$	25,814,000	$	27,496,000

F-28

Geographic breakdown of the Company’s long-term tangible assets for the last two fiscal years were as follows:

	As of December 31,
	2009		2008
United States	$	3,588,000	$	3,268,000
Canada		221,000		160,000
Total assets	$	3,809,000	$	3,428,000

23. Selected Quarterly Financial Information (Unaudited) (amounts in thousands, except per share data)

The following table presents selected unaudited financial results for each of the eight quarters during the two year period ended December 31, 2009. In the opinion of management, this unaudited information has been prepared on the same basis as the audited information and includes all adjustments (consisting of only normal recurring adjustments) necessary for the fair statement of the financial information for the periods presented.

	For the three months ended
	Mar 31, 2009			Jun 30, 2009			Sep 30, 2009			Dec 31, 2009			Total 2009 (1)
Total revenue	$	6,196		$	6,285		$	6,717		$	6,616		$	25,814
Opeating loss		(265	)		(311	)		(916	)		(104	)		(1,596	)
Loss from continuing operations		(224	)		(300	)		(777	)		(105	)		(1,406	)
Net loss		(255	)		(282	)		(768	)		(196	)		(1,501	)

Per share amounts:
Net loss	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.00	)	$	(0.03	)
Weighted-average shares outstanding-
basic and diluted		55,224			57,762			59,845			59,850			58,188




	For the three months ended
	Mar 31, 2008			Jun 30, 2008			Sep 30, 2008			Dec 31, 2008			Total 2008 (1)
Total revenue	$	7,182		$	7,017		$	6,772		$	6,525		$	27,496
Opeating loss		(2,301	)		(2,108	)		(1,056	)		(641	)		(6,106	)
Loss from continuing operations		(2,283	)		(2,129	)		(1,032	)		(690	)		(6,134	)
(Loss) income from discontinued
operations, net of tax		(291	)		(216	)		175			-			(332	)
Net loss		(2,574	)		(2,345	)		(857	)		(690	)		(6,466	)

Per share amounts:
Loss from continuing operations	$	(0.04	)	$	(0.04	)	$	(0.02	)	$	(0.01	)	$	(0.11	)
Loss from discountinued operations	$	(0.01	)	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.01	)
Net loss	$	(0.05	)	$	(0.04	)	$	(0.02	)	$	(0.01	)	$	(0.12	)
Weighted-average shares outstanding-
basic and diluted		55,187			55,203			55,196			55,170			55,189

(1)	The sum of the four quarters may not necessarily agree to the year total due to rounding within a quarter.

24. Subsequent Event

In January 2010, Terry Bateman, the Company’s Chief Executive Officer, announced his intention to resign. Mr. Bateman will remain active on the Board of Directors and be involved in finding his replacement. The Board of Directors has established a CEO Selection Committee to fill the CEO role, has engaged an executive search firm to assist them in the identification and selection of a new CEO, and expects this process to be completed in the second quarter of 2010.

F-29

SCHEDULE II

NTN BUZZTIME, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2009 and 2008

Allowance for Doubtful Accounts	Balance at Beginning of Period		Additions Charged to Expense		Deductions (a)			Balance at End of Period
2009	$	298,000		227,000		(204,000	)	$	321,000
2008	$	396,000		557,000		(655,000	)	$	298,000

(a)	Reflects trade accounts receivable written off during the year, net of amounts recovered.

See accompanying report of independent registered public accounting firm.

F-30

EX-2.2 2 ntn_10k-ex0202.htm ASSET PURCHASE AGREEMENT ntn_10k-ex0202.htm

Exhibit 2.2

ASSET PURCHASE AGREEMENT

among:

iSports Inc.,

a California corporation; and

NTN Buzztime, Inc.,

a Delaware corporation.

___________________________

Dated as of April 24, 2009

____________________________

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement, dated April __, 2009 (this "Agreement"), is entered into by and among: iSports Inc., a California corporation ("Seller"); and NTN Buzztime, Inc., a Delaware corporation ("Buyer"). Unless otherwise defined herein, capitalized terms shall have the meanings ascribed to them in Exhibit A.

RECITALS

A. Seller is engaged in the business of developing, offering and marketing mobile social gaming, offering sports scores, gamecasting, news and interactive games (the "Business").

B. Seller desires to sell, and Buyer desires to buy, certain of Seller's assets on the terms and subject to the conditions set forth in this Agreement.

In consideration of the premises and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE I

PURCHASE AND SALE OF ASSETS

1.1 Purchase of Assets. Upon the terms and subject to the conditions contained in this Agreement, at the Closing, Seller shall sell, assign, transfer and convey to Buyer, and Buyer shall purchase, acquire and accept from Seller, as more specifically set forth on Schedule 1.1, all of Seller's assets of every kind and description (other than the Excluded Assets) that are used or useful in the Business wherever located and whether or not such assets and properties are reflected on the books and records of Seller or the Business (the "Purchased Assets"), free and clear of all Liens, other than Permitted Liens. The Purchased Assets include:

(a) all of Seller's rights under all licenses, permits, authorizations, orders, registrations, certificates, approvals, consents and franchises, or any pending applications for any of the foregoing;

(b) all rights and interests in the Seller IP Rights;

(c) any Contract set forth on Schedule 2.11 (i) to which Seller is a party or which is attributable to or related to the Business, including all of Seller's rights under said Contracts, (ii) pursuant to which any of the Purchased Assets are bound or subject, or (iii) involving the Purchased Assets or any insurance policies pursuant to which Seller is a beneficiary or any of the Purchased Assets are insured (together, the "Purchased Contracts");

(d) all of Seller's claims, customer deposits, prepayments, prepaid expenses, refunds, causes of action, rights of recovery, rights of setoff and rights of recoupment existing as of the Closing Date and whether or not recorded in the books and records of Seller;

(e) all (i) of Seller's advertiser and customer and supplier lists and all other sales, marketing and supplier information, (ii) of Seller's know-how, technology, drawings, engineering specifications, bills of materials, (iii) of Seller's software, database and related programs used or useful in the conduct of the Business, and (iv) other intangible assets of Seller;

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(f) all books and records which relate to the operations and finance of Seller, including books, records, ledgers, files, documents, correspondence, computer discs, computer files, diagrams, construction data, blueprints, instruction manuals, maintenance manuals, reports and similar documents used or useful in connection with the Business;

(g) Seller's corporate name and any trade names (current and any former, if applicable) and any and all goodwill associated therewith;

(h) all of the rights and interests of the Business in, to and under any third party manufacturers' warranties;

(i) all other assets of Seller of every kind and description, tangible or intangible, to the extent used or useful in the conduct of the Business not provided for above.

1.2 Excluded Assets. Notwithstanding the foregoing, Seller is not selling, assigning, transferring or conveying to Buyer hereunder and Buyer is not purchasing hereunder the assets of Seller set forth on Schedule 1.2 (collectively, the "Excluded Assets")

1.3 Assumed Liabilities. In connection with the purchase and sale of the Purchased Assets, Buyer shall only assume the following obligations and liabilities of Seller (the "Assumed Liabilities"):

(a) all Liabilities of Seller arising on and after the Closing Date under the executory portion of the Purchased Contracts; provided, however, that the Assumed Liabilities shall not include any Liabilities arising out of any breach by Seller on or prior to the Closing of any provision of any such Purchased Contract, including Liabilities arising out of Seller's failure to perform under any such Purchased Contract in accordance with its terms prior to the Closing; and

(b) the accounts payable of Seller listed on Schedule 1.3(b).

Notwithstanding anything to the contrary herein, the Assumed Liabilities do not and shall not include the Excluded Liabilities.

1.4 Excluded Liabilities. Notwithstanding anything in this Agreement to the contrary, or any disclosure contained herein or made pursuant hereto, or anything otherwise known to Buyer, Buyer does not assume and will not become responsible for any Liability of Seller except the Assumed Liabilities. Without limiting the generality of the foregoing, the following are included among the Liabilities of Seller which Buyer does not expressly or impliedly assume (collectively, the "Excluded Liabilities"):

(a) all Liabilities of Seller that exist or may arise under that certain License Agreement dated July 7, 2008 between Seller and STATS LLC, and all amendments thereto (the "STATS Agreement");

(b) all Indebtedness of Seller except as set forth on Schedule 1.4(b);

(d) all Liabilities of Seller under any Environmental Law existing on the Closing Date, including all Liabilities which are attributable to non-compliance with federal, state, and local statutes or regulations governing water discharges, air emissions, and to the disposal, release, generation, treatment, transport, recycling or storage of any Hazardous Materials at or from any property or facility owned, leased, used or occupied at any time by Seller or any predecessor, including any predecessor in ownership, or arising out of or attributable to arrangements for any of the foregoing by Seller or any predecessor, including any predecessor in ownership, and any environmental condition or violation of Environmental Law with respect to any Real Property leased by Seller which existed on or prior to the Closing Date;

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(e) all Liabilities of Seller with respect to all Taxes for all periods prior to the Closing Date;

(f) all Liabilities of Seller with respect to any pending, threatened or unasserted Action including Liabilities relating to the Excluded Assets or to the leased Real Property and Liabilities relating to any Tax owed, alleged to be owed, or that may become owed to any Governmental Entity with respect to matters which occurred prior to the Closing Date;

(g) all product liability or product warranty obligations of Seller;

(h) any Liability of Seller incurred in connection with the execution, delivery or performance of this Agreement;

(i) all Liabilities of Seller which are attributable to non-compliance with applicable Laws;

(j) all Liabilities associated with, relating to or arising from the employment relationships of Seller, including the termination of employees of Seller; and

(k) all Liabilities associated with any Employee Benefit Plan, including any Liabilities associated with, relating to or arising from the failure to provide coverage and/or benefits under any Employee Benefit Plan.

1.5 Purchase Price.

(a) The aggregate consideration payable for the Purchased Assets consists of (i) Five Hundred Thousand (500,000) unregistered shares of Buyer's common stock, $0.005 par value per share (the "Closing Shares"), (ii) the $0.30 Warrant, (iii) the $0.50 Warrant and (iv) the assumption by Buyer of the Assumed Liabilities (collectively, the "Closing Purchase Price"). At the Closing:

(A) Buyer shall issue a certificate in the name of Seller representing the Closing Shares, which shall be placed and held in the Holdback Account. The Closing Shares shall remain in the Holdback Account for the Holdback Period to secure the performance of the obligations of Seller under ARTICLE VI. During the Holdback Period or until the Closing Shares have been distributed from the Holdback Account, all dividends paid and distributions made with respect to the Closing Shares shall be the property of Seller, and Seller shall have the sole power to exercise all voting rights pertaining to the Closing Shares. As soon as reasonably practicable (but in any event within 10 Business Days) following the expiration of the Holdback Period, Buyer shall cause to be released to the Seller all of the remaining Closing Shares, if any, in excess of (i) any Closing Shares retained by Buyer pursuant to Section 6.9, and (ii) the Closing Shares calculated pursuant to the following sentence to satisfy all unresolved, unsatisfied or disputed claims for Damages specified in any Indemnification Demand delivered to Seller before the expiration of the Holdback Period. If any claims for indemnification are unresolved, unsatisfied or disputed as of the expiration of the Holdback Period, then Buyer shall retain possession and custody of that portion of the Closing Shares that equals the total maximum amount of Damages then being claimed by Buyer in all such unresolved, unsatisfied or disputed claims, and as soon as reasonably practicable (but in any event within ten (10) Business Days) following resolution of all such claims, Buyer shall release to Seller the remaining Closing Shares, if any, not required to satisfy such claims. Any dispute concerning the valuation of the indemnity claim for purposes of retention of the Closing Shares or the number of Closing Shares to be retained shall be resolved in accordance with Section 6.4(c).

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(B) Buyer shall deliver to Seller each of the $0.30 Warrant and $0.50 Warrant.

(b) Following placement of the Closing Shares in the Holdback Account and delivery by Buyer of the $0.30 Warrant and the $0.50 Warrant as set forth above, Seller shall in all events be solely responsible for any and all further distribution of proceeds to its creditors and shareholders, as appropriate, and Buyer shall in no way be liable or responsible for distribution of any portion of the Closing Purchase Price directly to any of Seller's creditors or shareholders.

1.6 Earnout.

(a) Earnout Consideration. In addition to the Closing Purchase Price, if the earnout performance milestones (each an "Earnout Milestone" and collectively the "Earnout Milestones") set forth below in Section 1.6(b) are satisfied, Seller shall receive, subject to the terms and conditions of this Agreement, additional consideration (the "Earnout Consideration") as set forth below in Section 1.6(b). Notwithstanding anything to the contrary in this Agreement, Buyer shall have a right to offset against the Earnout Consideration in order to secure Seller's indemnification obligations under ARTICLE VI.

(b) Earnout Milestones.

(A) If the Earnout Milestones described below are satisfied, then Seller will receive additional consideration at such times and on the terms set forth below.

(B) Subject to the terms and conditions in this Section 1.6, payments related to the successful satisfaction of an Earnout Milestone (each, an "Earnout Payment") will be paid by Buyer to Seller in immediately available cash funds by wire transfer to an account designated by Seller within 30 Business Days after it has been determined that the applicable Earnout Milestone has been successfully satisfied. Following delivery by Buyer to Seller of an Earnout Payment, Seller shall in all events be solely responsible for any and all further distribution of such Earnout Payment to its creditors and its shareholders, as appropriate, and Buyer shall in no way be liable or responsible for distribution, or lack thereof, of any portion of any Earnout Payment directly to any of Seller's creditors or its shareholders. The Earnout Milestones shall be as follows:

(i) Year 1. With respect to Year 1, Buyer shall pay Seller 35% of the amount by which Buyer's Net Media Revenues for Year 1 exceeds $1,500,000 if and only if all of the following Business Conditions are satisfied:

(1) Buyer achieves an average of at least 250,000 Active Mobile Users per month during the months of October, November and December of Year 1.

(2) Buyer achieves an average of at least 100,000 users per month playing Challenges via Mobile Devices during the months of October, November and December of Year 1.

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(ii) Year 2. With respect to Year 2, Buyer shall pay Seller 35% of the amount by which Buyer's Net Media Revenues for Year 2 exceeds $5,000,000 if and only if all of the following Business Conditions are satisfied:

(1) Average monthly Unique Viewers on Buyer's consumer websites for Year 2 are at least 150,000 per month.

(2) Average monthly Page Views from Mobile Devices for Year 2 are at least 50,000,000 per month.

(3) Total Unique Viewers accessing Buyer's products from mobile devices average at least 1,500,000 per month during the months of July, August, September, October, November and December of Year 2.

(4) Buyer's Premium Mobile and Web Revenues for Year 2 equal or exceed $500,000.

(iii) Year 3. With respect to Year 3, Buyer shall pay Seller 35% of the amount by which Buyer's Net Media Revenues for Year 3 exceeds $10,000,000 if and only if all of the following Business Conditions are satisfied:

(1) Average monthly Unique Viewers on Buyer's consumer websites for Year 3 are at least 250,000 per month.

(2) Average monthly Page Views from Mobile Devices for Year 3 are at least 100,000,000 per month.

(3) Total Unique Users accessing Buyer's products from mobile devices average at least 2,500,000 per month during all of Year 3.

(4) Buyer's Premium Mobile and Web Revenues for Year 3 equal or exceed $1,000,000.

(c) Milestone Notice. As soon as reasonably practicable (but in no event later than 30 days after Buyer can determine whether a particular Earnout Milestone has been satisfied), Buyer will give notice (in each case, a "Milestone Notice") to Seller informing Seller as to whether or not the applicable Earnout Milestone was satisfied. The "Milestone Notice Date," in any case, will mean the date on which the Milestone Notice was delivered by Buyer to Seller. If a dispute arises between Buyer and Seller as to whether an Earnout Milestone has been satisfied, such dispute will be resolved pursuant to Section 1.6(f).

(d) Exclusion of Later Acquired Businesses or Assets. For purposes of determining whether or not any of the Business Conditions set forth in Section 1.6(b) above have been achieved during any given period, the portion of revenue, users, viewers, page views and/or other business metrics relating to such Business Condition that are attributable to businesses and assets that Buyer acquires after the Closing shall be excluded, the value of which shall be based on reasonable methods of measurement and valuation and mutually determined by Buyer and Seller in good faith.

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(e) Employment Condition. Notwithstanding anything else in this Section 1.6, the Earnout Payments described above relating to Year 1, Year 2 and Year 3 shall be conditioned on the continued full time employment by Buyer of each of Nick Glassman and Kartik Ramachandran from the Closing Date through the end of Year 1, Year 2 or Year 3, as applicable, except in the case of the death or termination without Cause by Buyer of such individual; provided, however, that if, after 18 months following the Closing Date and during Year 2 and/or Year 3, as applicable, (i) one of either Mr. Glassman or Mr. Ramachandran ceases to be a full time employee of Buyer for any reason other than such individual's death or termination without Cause by Buyer, then the amount of any Earnout Payment that would otherwise be payable with respect to such year and any future year shall be reduced by 50%, and (ii) both of Messrs. Glassman and Ramachandran cease to be full time employees of Buyer for any reason other than their death or termination without Cause by Buyer, then no Earnout Payment shall be due or payable with respect to such year or any future year.

(f) Milestone Dispute Resolution. If Seller disagrees as to whether or not an Earnout Milestone set forth in Section 1.6(b) has been satisfied, Seller shall give written notice (a "Dispute Notice") to Buyer with a reasonable description of the basis for such disagreement within 15 days following the applicable Milestone Notice Date. For a period of 15 days following Buyer's receipt of the Dispute Notice, Buyer and Seller shall negotiate in good faith to attempt to agree whether or not the Earnout Milestone that is the subject of the Dispute Notice has been satisfied. If Buyer and Seller cannot resolve the dispute within that 15 day period, then the parties shall submit the dispute to a mutually acceptable independent registered public accounting firm or other relevant subject matter expert for final determination, provided that such accounting firm or other relevant subject matter expert shall not have performed services for Buyer or Seller in the past year (the "Determining Experts"). The determination of the Determining Experts shall be final, binding and conclusive on the parties hereto. The Determining Experts shall consider only the items in dispute and shall be instructed to act within 30 days (or such longer period as the parties may agree) to resolve the dispute. The fees and expenses of the Determining Accountants shall be paid by the non-prevailing party in the dispute.

(g) Management of the Business. The parties hereto acknowledge and agree that, from and after the Closing, Buyer shall have the complete right, power and authority to operate and control its business and operations, including the Business, in any manner as it shall determine in its sole and absolute discretion.

1.7 Sales, Use and Transfer Taxes. Seller shall be responsible for paying, shall promptly discharge when due, and shall reimburse, indemnify and hold harmless Buyer from, any sales or use, transfer, value added, real property gains, excise, stamp, stamp duty, stamp duty reserve tax, or other Taxes imposed by reason of the transfer of the Purchased Assets provided hereunder, and any deficiency, interest or penalty asserted with respect thereto; provided, however, that Buyer and Seller shall cooperate to reduce or eliminate, to the extent practicable, any such taxes that may be imposed on the transfer of the Purchased Assets (including, without limitation, by causing the transfer of any suitable intangible assets from Seller to Buyer to be made by means of remote telecommunications rather than by delivery of any item of tangible personal property). For California sales and use tax purposes this Agreement shall constitute a "technology transfer agreement" within the meaning of Cal. Code Regs. section 1507. Seller shall bear sole responsibility for any Tax in the nature of an income, franchise or occupation tax imposed on Seller as a result of the transfer of the Purchased Assets to Buyer as provided herein

1.8 Allocation. The Closing Purchase Price and any other consideration for the Purchased Assets, as determined for U.S. federal income tax purposes pursuant to Treasury Regulation Section 1.1060-1(c) (the "Tax Purchase Price"), shall be allocated for such purposes as mutually agreed by the parties hereto within 30 days following the Closing Date, in accordance with the provisions of Treasury Regulations Section 1.1060-1(c) and the Treasury Regulations referred to therein. Buyer and Seller shall execute and file all U.S. federal and applicable state income Tax Returns in a manner consistent with any allocations agreed or determined pursuant hereto and shall not take any position in any other Tax Return, before any Governmental Entity, or in any tax proceeding that is inconsistent with any such allocation, except pursuant to a final "determination" (as defined in Code Section 1313(a) or corresponding provision of state, local or foreign law). Buyer and Seller shall timely file any IRS Forms 8594, and any other U.S. federal and applicable state income Tax Returns prepared in a manner consistent with the allocations agreed or determined pursuant hereto and shall file any other Tax Return with any state, local or foreign Governmental Entity in a manner that is not inconsistent therewith. Any redetermination of the Tax Purchase Price within the meaning of Treasury Regulations Section 1.338-7 shall be made as required thereby and shall be taken into account by Buyer and Seller in carrying out the provisions hereof and the preparation and filing of Tax Returns referred to above to the extent applicable.

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1.9 Closing. Subject to the satisfaction or waiver of the conditions set forth in this Agreement, the closing of the transactions contemplated by this Agreement, including the purchase and sale of the Purchased Assets (the "Closing"), shall take place at the offices of Sheppard Mullin Richter & Hampton, LLP located at 12275 El Camino Real, Suite 200, San Diego, California 92130 on: (a) April __, 2009, or (b) such date, time and place as the parties may agree (the "Closing Date"). Notwithstanding the foregoing, the parties agree that the Closing shall be deemed effective as of 12:01 a.m. on the Closing Date.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SELLER

As of the Closing Date, Seller represents and warrants to Buyer as follows

2.1 Organization. Seller is a corporation, duly incorporated, validly existing and in good standing under the laws of the State of California. Seller has all requisite power and authority to own and lease its assets and to operate the Business as the same are now being owned, leased and operated. Seller is duly qualified or licensed to do business as a foreign corporation or foreign entity in, and is in good corporate standing in, each jurisdiction in which the nature of the Business or its ownership of its properties requires it to be so qualified or licensed. Schedule 2.1 sets forth a true and complete list of (a) all jurisdictions in which Seller is qualified or licensed to do business as a foreign corporation or foreign entity, and (b) all powers of attorney granted by Seller to any third party that are currently in effect. All necessary corporate action on the part of Seller with respect to the consummation of the transactions contemplated hereby has been taken. Seller has provided Buyer with a true, complete and correct copy of its articles of incorporation and bylaws, each as currently in effect and reflecting any and all amendments thereto (the "Organizational Documents"). Each of the Organizational Documents is in full force and effect, and Seller is not in violation of any provision thereof.

2.2 Authorization. The execution, delivery and performance by Seller of this Agreement, the other agreements contemplated hereby (each, a "Transaction Document") and each of the transactions contemplated hereby or thereby have been duly and validly authorized by Seller, and no other act or proceeding on the part of Seller, its board of directors or its shareholders is necessary to authorize the execution, delivery or performance by Seller of this Agreement or any Transaction Document or the consummation of any of the transactions contemplated hereby or thereby. This Agreement has been duly executed and delivered by Seller and this Agreement constitutes, and the Transaction Documents upon execution and delivery by Seller, will each constitute, a valid and binding obligation of Seller, enforceable against Seller in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect, relating to or limiting creditors' rights generally and (ii) general principles of equity (whether considered in an action in equity or at law). The board of directors of Seller has duly and unanimously approved this Agreement and the transactions contemplated hereby, and has recommended adoption thereof by Seller's shareholders.

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2.3 No Conflict. The execution, delivery and performance by Seller of this Agreement and the Transaction Documents and the consummation of each of the transactions contemplated hereby or thereby will not (i) violate or conflict with the Organizational Documents, (ii) violate, conflict with, result in any material breach of, constitute a default under, result in the termination of, result in the acceleration of any obligations under, result in a material change in terms of, create in any party the right to accelerate, terminate, modify or cancel, or require any consent or notice under, or create an event that, with the giving of notice or the lapse of time, or both, would be a default under or material breach of, any (A) Contract to which Seller is a party or by which it is bound or affected or to which any of its assets is bound or affected; or (B) judgment, order, writ, injunction, decree or demand of any Governmental Entity which materially affects the ability of Seller to perform its obligations under this Agreement; (iii) result in the creation or imposition of any Lien upon any assets or any of the equity of Seller, or which affects the ability to conduct the Business as conducted prior to the date of this Agreement or perform its obligations under this Agreement; (iv) except as set forth on Schedule 2.3, require any declaration, filing or registration with, or authorization, consent or approval of, exemption or other action by or notice to, any Governmental Entity or other Person under the provisions of any Law or any Contract to which Seller is subject, or by which Seller is bound or affected or by which Seller or any of its assets are bound or affected.

2.4 Capitalization. The authorized capital stock of Seller consists of 5,000,000 shares of common stock, and 1,000,000 shares of preferred stock. A total of 1,666,666 shares of Seller's common stock, and 680,000 shares of Seller's preferred stock, are issued and outstanding as of date of this Agreement. Schedule 2.4 accurately sets forth the authorized and outstanding equity securities of Seller and the number of shares of each class or series of Seller capital stock held by each shareholder of Seller, including, with respect to the outstanding shares of preferred stock, the number of shares of common stock issuable upon conversion thereof. Schedule 2.4 also accurately sets forth an accurate and complete schedule by holder of all outstanding options and warrants and the number of shares of each class or series of Seller capital stock issuable upon exercise of such options and warrants. All of the issued and outstanding shares of capital stock of Seller have been duly authorized, are validly issued in accordance with applicable laws, fully paid and nonassessable, are not subject to and were not issued in violation of any preemptive rights, are free and clear of all Liens, and are owned of record and beneficially by the shareholders as set forth on Schedule 2.4.

2.5 Legal Proceedings. Except as set forth on Schedule 2.5, there are no, and since January 1, 2006, there have been no (a) outstanding judgments, orders, decrees, awards, stipulations or injunctions of any kind against Seller that otherwise affect the Purchased Assets or the Business or (b) Actions pending or, to Seller's Knowledge, threatened against Seller that otherwise affect the Purchased Assets or the Business. There is no action, claim suit or proceeding pending or, to Seller's Knowledge, threatened, by or against Seller that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with the execution and delivery by Seller of this Agreement or any of the Transaction Documents or the performance of Seller hereunder or thereunder.

2.6 Intellectual Property and Proprietary Rights.

(a) Schedule 2.6(a) sets forth a true, correct and complete list of all Intellectual Property, and any Contracts relating to the Intellectual Property (other than trade secrets, know-how and goodwill attendant to the Intellectual Property and other intellectual property rights not reducible to schedule form) owned, licensed to or used by Seller with respect to the conduct of the Business as presently conducted or presently proposed to be conducted. Schedule 2.6(a) separately identifies the Intellectual Property owned by Seller and the Intellectual Property licensed to or used by Seller.

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(b) Except as set forth on Schedule 2.6(b), Seller has not interfered with, infringed upon or misappropriated any Intellectual Property rights of any Person, and Seller (and management level employees with direct responsibility for Intellectual Property matters) has never received any charge, complaint, claim, demand, or notice alleging any such interference, infringement, misappropriation, or violation (including any claim that Seller must license or refrain from using any Intellectual Property rights of any Person). To Seller's Knowledge, no Person has interfered with, infringed upon or misappropriated any Intellectual Property rights of Seller.

(c) Except as set forth on Schedule 2.6(c), (i) Seller owns all right, title and interest in, or has a valid and binding license to use, the Intellectual Property, and, to the extent required in connection with the way in which Seller has conducted, conducts, or presently proposes to conduct the Business, to make, have made, use, sell, import and export, distribute, publicly perform, publicly display, reproduce and prepare derivative works of the Intellectual Property; (ii) the rights of Seller to the Intellectual Property are free and clear of all Liens; (iii) all registrations with and applications to Governmental Entities in respect of the Intellectual Property are valid and in full force and effect and Seller has taken all action required to maintain their validity and effectiveness; (iv) there are no restrictions on the direct or indirect (A) transfer of any license, or any interest therein, held by Seller in respect of the Intellectual Property or (B) changes of control of Seller; (v) Seller has delivered to Buyer prior to the execution of this Agreement documentation with respect to any invention, process, design, computer program or other know-how or trade secret included in the Intellectual Property, which documentation is accurate in all material respects and reasonably sufficient in detail and content to identify and explain such invention, process, design, computer program or other know-how or trade secret and to facilitate its use without reliance on the special knowledge or memory of any Person; (vi) Seller has taken reasonable measures to protect the secrecy, confidentiality and value of its trade secrets; and (vii) Seller is not, nor has it received any notice that it is, in default (or with the giving of notice or lapse of time or both, would be in default) under any license with respect to the Intellectual Property.

(d) Except as identified on Schedule 2.6(d), no approval or consent of or payment of any consideration to any Person is required so that the interest of Buyer in the Intellectual Property shall continue to be in full force and effect following the transactions contemplated by this Agreement, and Seller is not subject to any restriction, agreement, instrument, order, judgment or decree which would be violated or breached by the consummation of the transactions contemplated by this Agreement.

(e) Except for the fees identified in Schedule 2.6(e) for the agreements identified therein, no licensing fees, royalties or payments are due or payable by Seller in connection with the Intellectual Property, other than maintenance fees. Schedule 2.6(e) lists all actions that must be taken by Seller within one year from the date hereof, including the payment of any registration, maintenance, renewal fee, annuity fee and Tax or the filing of any document, application or certificate for the purposes of maintaining, perfecting or preserving or renewing any Intellectual Property.

(f) Schedule 2.6(f) separately lists and identifies all (i) computer programs, (ii) computer databases (including, but not limited to, databases used in conjunction with such computer programs) and (iii), specifications, manuals and materials associated therewith, owned, licensed or used by Seller, excluding generally available off-the-shelf microcomputer and work station software (collectively, the "Software Rights"). Except as set forth in Schedule 2.6(f), all right, title and interest in and to the Software is owned by Seller free and clear of all Liens, is fully transferable to Buyer, and no party other than Seller has any interest in the Software. Each of the representations in Sections 2.6(b) through 2.6(e), inclusive, is applicable to the Software Rights.

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(g) The Software performs in accordance with the documentation and other written materials related to the Software and is free from substantial defects in programming and operations, is in machine readable form, contains all current revisions of such Software, and includes all computer programs, materials, tapes, know-how, object and source codes, other written materials, know-how and processes related to the Software. Seller has delivered to Buyer complete and correct copies of the Software in its current form and all user and technical documentation related thereto.

(h) All copies of the Software embodied in physical form are being delivered to Buyer at or prior to the Closing.

(i) Seller has kept secret and has not disclosed the source code for the Software to any Person other than certain employees of Seller who are subject to the terms of a binding confidentiality agreement with respect thereto. Seller has taken all appropriate measures to protect the confidentiality and proprietary nature of the Software, including the use of confidentiality agreements with all of its employees and consultants having access to the Software source and object code.

(j) No employee of Seller is in default under, and the consummation of the transactions contemplated by this Agreement will not result in a default of, any term of any employment Contract relating to the Software or any noncompetition arrangement, or any other Contract or any restrictive covenant relating to the Software or its development or exploitation. Seller does not have any obligation to compensate any Person for the development, use, sale or exploitation of the Software nor has Seller granted to any other Person or entity any license, option or other rights to develop, use, sell or exploit in any manner the Software whether requiring the payment of royalties or not.

(k) Except as set forth on Schedule 2.6(k), all Intellectual Property owned by Seller and for which confidentiality is appropriate has been maintained in confidence in accordance with protection procedures believed by Seller to be adequate for protection customarily used in the industry to protect rights of like importance. All former and current managers, employees, agents, consultants and independent contractors who have authored, co-authored or otherwise contributed to or participated in the conception and development of Intellectual Property which is used in and material to the Business ("IP Participant"), have executed and delivered to Seller a proprietary information agreement, pursuant to which, inter alia, such IP Participant has assigned any and all of his, her or its rights in such Intellectual Property to Seller and has agreed to keep such Intellectual Property confidential and not to use such Intellectual Property for any purpose unrelated to his, her or its work for Seller. Except as set forth on Schedule 2.6(k), no former or current IP Participant has filed, asserted in writing or, to Seller's Knowledge (or management employees of Seller with direct responsibility for Intellectual Property matters), threatened any claim against Seller in connection with his, her or its involvement in Intellectual Property which is used in and material to the Business. To Seller's Knowledge (or management employees of Seller with direct responsibility for Intellectual Property matters), except as set forth on Schedule 2.6(k), no IP Participant has any patents issued or applications pending for any device, process, design or invention of any kind now used or needed by Seller which patents or applications have not been assigned to Seller.

(l) No former or current shareholder, director or officer, employee or independent contractor of Seller has any right to receive royalty payments or license fees from Seller.

(m) With respect to privacy and security agreements and contractual commitments (the "Commitments"), (i) Seller is in full compliance with all applicable Commitments; (ii) the transactions contemplated by this Agreement and the Transaction Documents will not violate any Commitments; (iii) Seller has not received inquiries from the Federal Trade Commission or any other Governmental Entity regarding Commitments; (iv) Seller has not received any written (including email) complaints from any web site user regarding Commitments, or compliance with Commitments; (v) the Commitments have not been rejected by any applicable certification organization which has reviewed such Commitment or to which any such Commitment has been submitted and (vi) Seller has not experienced the cancellation, termination or revocation of any privacy or security certification issued by any Commitments.

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(n) Except as set forth on Schedule 2.6(n), Seller has in its possession or control: (i) correct and complete, fully-executed copies of all of the Contracts (as amended to date) that are required to be identified on any of the schedules required by this Section 2.6; and (ii) correct and complete copies of all documents (including without limitation patents, registration certificates, renewal certificates, applications, prosecution histories, and all documents submitted to or received from the relevant patent, copyright, trademark, domain name or other authorities in the United States and foreign jurisdictions, as the case may be) relating to each item of the Intellectual Property identified on Schedule 2.6(a). Seller has delivered to Buyer correct and complete, fully-executed copies of all of the documents described in this Section 2.6(n).

2.7 Employees and Independent Contractors.

(a) Schedule 2.7(a) contains a true and complete list, as of March 31, 2009, of all employees currently employed or who have at any time been employed by Seller or in the Business (the "Business Employees"), including each such employee's (i) name, (ii) title, (iii) principal location of employment, (iv) with respect to all currently employed Business Employees, their current salary and other compensation arrangement (i.e. commission rate) and whether the employee is actively working or on a leave of absence, and (v) with respect to all previously employed Business Employees, a description of their duties and services to Seller.

(b) (i) all Business Employees have executed Seller's form proprietary information and inventions agreement, a copy of which has been provided to Buyer; (ii) to Seller's Knowledge, no Business Employee is a party to or is bound by any employment contract, patent disclosure agreement, non-competition agreement or other restrictive covenant or other Contract with any third party that could be reasonably expected to affect (A) the performance by such Business Employee of any of his or her duties or responsibilities as an employee of the Business, or (B) the Business; and (iii) to Seller's Knowledge, no Business Employee is in violation of any term of any employment contract, patent disclosure agreement, non-competition agreement, or any other restrictive covenant or other Contract with any third party relating to the right of any such Business Employee to be employed by Seller, or after the closing, by Buyer.

(c) Except as set forth on Schedule 2.7(c), Seller has paid or otherwise satisfied all obligations due to the Transferred Employees in respect of their employment with Seller, including if applicable, any wages, salaries, bonuses (including any bonuses that arise out of the completion of the transactions contemplated hereby), accrued vacation pay, and severance pay, and all payroll taxes payable with respect to such employees, which will be discharged by Seller in accordance with their terms. Buyer shall have no obligations or liabilities to any Transferred Employee whatsoever, including but not limited to any wages, salaries, bonuses (including any bonuses that arise out of the completion of the transactions contemplated hereby or any Earnout Consideration, if any), accrued vacation pay and severance pay, if any, owing to a Transferred Employee as a result of such employee's employment with Seller.

(d) Schedule 2.7(d) contains a true and complete list, as of February 28, 2009, of all consultants and other independent contractors who are providing or who have at any time provided services to the Business (the "Independent Contractors"), including (i) their name, (ii) type of services provided, (iii) the dates during which they provided services, and (iv) principal location where services are provided.

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(e) Seller has complied in all respects with all legal requirements relating to employment practices, terms and conditions of employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining requirements, the payment of social security and similar Taxes and occupational safety and health. Seller is not liable for the payment of any Taxes, fines, penalties, or other amounts, however designated, for failure to comply with any of the foregoing legal requirements.

(f) Except as set forth in Schedule 2.7(f), there has not been and there are no pending or, to Seller's Knowledge, threatened controversies, grievances, administrative charges, lawsuits or claims by any Business Employee with respect to his or her employment, termination of employment or compensation and benefits. Seller has not (i) been a party to, or bound by, any collective bargaining agreement with any labor organization; or (ii) experienced any strike, work stoppage, lock-up, slow-down or other material labor dispute or any attempt by organized labor or employees to cause Seller to comply with or conform to demands of organized labor relating to its employees or recognize any union or collective bargaining units. No labor strike or stoppage is pending or, to Seller's Knowledge, threatened against Seller. Seller is in material compliance with all laws relating to the employment of labor, including all such laws relating to wages, hours, the WARN Act, collective bargaining, discrimination, civil rights, safety and health, workers' compensation and the collection and payment of withholding or social security Taxes and any similar Tax. There has been no "mass layoff" or "plant closing" as defined by the WARN Act with respect to Seller. There are no pending or, to Seller's Knowledge, threatened governmental audits or investigative proceedings with respect to Seller's employees, including but not limited to audits or investigations by the Department of Labor, the Occupational Safety and Health Administration, the Equal Employment Opportunity Commission or any state counterpart. To Seller's Knowledge, all of the Transferred Employees are legally eligible to work in the United States and Seller and Transferred Employees have properly completed Form I-9s with respect to each Transferred Employee.

2.8 Employee Benefit Plans.

(a) Except for the arrangements set forth on Schedule 2.8(a), Seller does not maintain or contribute to, and has not in the current or preceding six calendar years maintained or contributed to, any pension, profit-sharing, deferred compensation, bonus, stock option, share appreciation right, severance, group or individual health, dental, medical, life insurance, survivor benefit, or similar plan, policy or arrangement, whether formal or informal, for the benefit of any director, officer, consultant or employee, whether active or terminated, of Seller. Each of the arrangements set forth on Schedule 2.8(a) is hereinafter referred to as an "Employee Benefit Plan".

(b) Seller has heretofore provided to Buyer true, correct and complete copies of each Employee Benefit Plan, and with respect to each such plan (i) any associated trust, custodial, insurance or service agreements, (ii) any Form 5500 annual report, actuarial report, or disclosure materials (including specifically any summary plan descriptions) submitted to any Governmental Entity or distributed to participants or beneficiaries thereunder in the current or any of the three preceding calendar years and (iii) the most recently received IRS determination or opinion letters and any governmental advisory opinions or rulings.

(c) Each Employee Benefit Plan is and has heretofore been maintained and operated in all material respects in compliance with the terms of such plan and with the requirements prescribed (whether as a matter of substantive law or as necessary to secure favorable tax treatment) by any and all applicable statutes, governmental or court orders, or governmental rules or regulations in effect from time to time, including but not limited to ERISA and the Code. Each Employee Benefit Plan that is intended to be qualified under Code Section 401(a) has obtained a favorable determination letter issued by the IRS as to its tax-qualified status and nothing has occurred since the issuance of such favorable determination letter, whether by action or failure to act, which would cause the loss of such qualification.

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(d) There is no pending or, to Seller's Knowledge, threatened Action, other than routine claims for benefits, concerning any Employee Benefit Plan or any fiduciary or service provider thereof and, to Seller's Knowledge, there is no basis for any such Action.

(e) Neither Seller nor any ERISA Affiliate has ever maintained, sponsored or been required to contribute to any (i) "defined benefit plan" (as defined in Section 3(35) of ERISA), (ii) "employee pension benefit plan" (as defined in Section 3(2) of ERISA) that is subject to Title IV of ERISA or Code Section 412, or (iii) "multiemployer plan" (as defined in Section 3(37) of ERISA).

(f) No Employee Benefit Plan nor any party in interest with respect thereof, has engaged in a "prohibited transaction" which could subject Seller or any ERISA Affiliate directly or indirectly to liability under Section 409 or 502(i) of ERISA or Code Section 4975.

(g) Seller and any ERISA Affiliate have at all times complied with the applicable continuation coverage requirements for their group health plans under Code Section 4980B(f) and Part 6 of Title I of ERISA ("COBRA"). Except for the continuation coverage requirements of COBRA, Seller has no obligations or potential liability for continuation of medical, dental, life or disability coverage to employees, former employees or their respective dependents following termination of employment or retirement.

2.9 Financial Statements. Schedule 2.9 sets forth true and complete copies of the following (collectively, the "Financial Statements") (a) unaudited consolidated balance sheets of Seller as of December 31, 2008, and the related unaudited statement of operations for the twelve-month period ended December 31, 2008, and (b) the unaudited consolidated balance sheet of Seller as of March 31, 2009 ("Acquisition Balance Sheet"), and the related unaudited statement of operations for the three-month period then ended, in each case prepared in a manner consistent with Seller's historical basis and accounting methods. Each of the Financial Statements (including in all cases the notes thereto, if any) is accurate and complete in all respects and presents fairly the consolidated financial condition, results of operations and cash flows of Seller throughout the periods covered thereby, and such Financial Statements have been prepared in accordance with accounting methods consistently applied throughout the periods indicated. Seller maintains books, records and accounts which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of Seller. Seller maintains systems of internal accounting controls reasonably sufficient to provide reasonable assurances that: (i) Seller's transactions are executed in accordance with management's general or specific authorization; (ii) Seller's transactions are recorded as necessary to permit the preparation of financial statements and to maintain accountability for its assets; (iii) access to Seller's assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for Seller's assets is compared with the actual levels at reasonable intervals and appropriate action is taken with respect to any differences. Seller has provided Buyer copies of each management letter or other letter delivered to Seller by its outside accountants in connection with the Financial Statements or relating to any review by Seller's outside accountants of the internal controls of Seller.

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2.10 Changes. Except as described in Schedule 2.10, since December 31, 2008, Seller has conducted the Business only in the ordinary course and in a manner consistent with past practice and, since such date there has not been a Material Adverse Effect. Specifically, except as described in Schedule 2.10, since December 31, 2008, Seller has not: (a) incurred any material Liabilities (including liabilities as guarantor or otherwise with respect to the obligations of others) of the Business, other than in the ordinary course of business; (b) subjected to or permitted an Lien upon or otherwise encumbered any of the Purchased Assets; (c) sold, transferred, licensed or leased any of the Purchased Assets except in the ordinary course of business; (d) suffered any physical damage, destruction or loss (whether or not covered by insurance) to the Purchased Assets causing, or which could cause, a Material Adverse Effect; (e) amended or terminated any Material Contract; (f) experienced any change in the assets, liabilities, sales, income or business of Seller or in its relationships with suppliers, customers or lessors, other than changes which were both in the ordinary course of business and have not, either in any case or in the aggregate, had, or which could have, a Material Adverse Effect; (g) acquired or disposed of any asset or property other than in the ordinary course of business; (h) made any declaration, setting aside or payment of any distributions in respect of Seller's securities; (i) made any increase in the compensation, pension or other benefits payable or to become payable by Seller to any of its officers, directors, shareholders, or employees, or any bonus payments or arrangements made to or with any of them (other than pursuant to the terms of any existing written agreement or plan of which Buyer has been supplied complete and correct copies); (j) forgiven or cancelled any debt or claim or waived any right of material value other than compromises of accounts receivable in the ordinary course of business; (k) entered into any transaction other than in the ordinary course of business; (l) discharged or satisfied any Lien or made any payment of any Liability other than (i) current liabilities included in the Acquisition Balance Sheet and (ii) current liabilities incurred since the date of the Acquisition Balance Sheet in the ordinary course of business; or (m) entered into any Contract obligated itself to do any of the foregoing.

2.11 Material Contracts.

(a) Schedule 2.11 lists all of the following to which Seller is a party or by which Seller is bound and which are currently in effect (including the subsection(s) below to which each such item is responsive) (each a "Material Contract"):

(A) Contracts which involve commitments to make capital expenditures or which provide for the purchase of goods or services by Seller from any Person under which the undelivered balance of such goods or services has a purchase price in excess of $5,000;

(B) Contracts which provide for the sale of goods or services by Seller and under which the undelivered balance of such goods or services has a sale price in excess of $5,000;

(C) Contracts relating to the borrowing of money by Seller, to the granting by Seller of a Lien on any of its assets, or any guaranty by Seller of any Indebtedness or otherwise;

(D) extensions of credit by Seller except for trade accounts receivable in the ordinary course of business consistent with past practice;

(E) warranties, guaranties, or other similar undertakings by Seller;

(F) joint venture, partnership or similar Contracts involving a sharing of profits, losses, costs or Liabilities by Seller with any other Person;

(G) Contracts continuing over a period of more than six months from the date thereof, not terminable by Seller without penalty upon 30 days' or less notice;

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(H) Contracts relating to the marketing, sale, advertising or promotion of its products or services;

(I) non competition agreements with any Business Employee or Independent Contractor and employment agreements and consulting agreements with any Business Employee or Independent Contractor;

(J) Contracts that restrict or purport to restrict in any respect (including as to manner or place) the ability of Seller to engage in any line of business or compete with any Person;

(K) Contracts that restrict or purport to restrict in any respect the right of Seller to sell to or purchase from any other Person;

(L) Contracts pursuant to which Seller is a lessor or a lessee of any property, personal or real, or holds or operates any tangible personal property owned by another Person, except for any leases of personal property under which the aggregate annual rent or lease payments do not exceed $5,000;

(M) Contracts with respect to Intellectual Property, including Contracts with any Business Employee or Independent Contractor regarding the appropriation or the non-disclosure of any Intellectual Property;

(N) Employee Benefit Plans or Contracts providing for the payment of any cash or other compensation or benefits upon the consummation of the transactions contemplated hereby or Contracts relating to loans to any officers, directors or Affiliates;

(O) collective bargaining agreements and other Contracts to or with any labor union, employees' association or other employee representative of a group of employees;

(P) sales representative or other Contracts obligating Seller to pay commissions to any Person;

(Q) Contracts that grant a currently effective power of attorney to any Person;

(R) Contracts that contain any provision requiring Seller to indemnify any other party thereto;

(S) stock option agreements, warrants and convertible or exchangeable securities for the purchase or issuance of capital stock of Seller; and

(T) Contracts restricting the transfer of capital stock of Seller, obligating Seller to issue or repurchase shares of its capital stock, or relating to the voting of stock or the election of directors of Seller.

(b) Except as disclosed on Schedule 2.11(b): (i) no Material Contract has been breached in any respect or canceled by the other party that has not been duly cured or reinstated; (ii) Seller is not in receipt of any claim of default under any Material Contract or other item; and (iii) no event has occurred which with the passage of time or the giving of notice or both would result in a breach or default under any such Material Contract. Each Material Contract is valid, binding and enforceable against Seller, and, to Seller's Knowledge, against any other Person that is a party thereto. The consummation of the transactions contemplated by this Agreement will not (and will not give any Person a right to) terminate or modify any rights of, or accelerate or augment any obligation of, Seller under any Material Contract.

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(c) Seller has delivered to Buyer copies of all Material Contracts, together with all amendments, waivers or other changes thereto.

2.12 Compliance with Laws. Seller is not in violation of or in default in any material respect under any foreign or domestic (federal, state or local) law, statute, treaty, rule, regulation, ordinance, franchise, permit, concession, license, order, decree, consent decree or similar instrument or determination or award applicable to it by which any of the Purchased Assets or the Business is bound or affected (including any labor, environmental, occupational health, zoning or other law, regulation or ordinance). Except as set forth on Schedule 2.12, Seller has not committed, been charged with, or, to Seller's Knowledge, been under investigation with respect to, nor does there exist, any material violation of any provision of any federal, state or local law or administrative regulation in respect of Seller or the Purchased Assets or the Business.

2.13 Permits, Licenses, Etc. Schedule 2.13 contains a complete listing of all Government Licenses used by Seller in the conduct of the Business. Seller owns or possesses all right, title and interest in and to all of the Government Licenses that are necessary to own and operate the Business, including those Government Licenses necessary for the employment of Seller's employees. Seller is in compliance with the terms and conditions of such Government Licenses and has not received any notice that it is in violation of any of the terms or conditions of any such Government Licenses. All of the Government Licenses are currently effective and valid, and will remain so upon consummation of the transactions contemplated by this Agreement. To Seller's Knowledge, no event has occurred or circumstances exist which would currently or upon notice or lapse of time constitute a default under any of the Government Licenses. To Seller's Knowledge, there is no threatened suspension, cancellation or invalidation of any Government License.

2.14 Taxes.

(a) All Tax Returns required to be filed by or on behalf of Seller, on or before the date hereof were true, correct and complete as of the date filed, or if amended on or before the date hereof, were true, correct and complete after giving effect to such amendment. All such Tax Returns that were required to be filed were duly and timely filed (taking into account any extension of time to file granted or obtained) and all Taxes (including, Taxes withheld from employees' salaries and all other withholding Taxes and obligations and deposits required to be made by or with respect to Seller) due have been timely paid, or to the extent not due and payable as of the date hereof, adequate provision for the payment thereof has been made on the Acquisition Balance Sheet.

(b) No Tax Return of Seller has been examined by or settled with any tax authority during the last seven years. During the last seven years, no deficiency, delinquency or default for any Taxes relating to Seller or its receipts, income, sales, transactions or other business activities has been claimed, proposed or assessed against Seller, nor has Seller received notice of any such deficiency, delinquency or default; and there is no audit, examination, investigation, claim, assessment, action, suit, or proceeding, pending or proposed by any tax authority, with respect to any Tax or with respect to any Tax Return of Seller.

(c) There are no Liens on the Purchased Assets relating to or attributable to Taxes, other than for Taxes not yet due and payable. No Governmental Entity has asserted any claim relating to or attributable to Taxes, which, if adversely determined, would result in any Lien on the Purchased Assets.

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(d) No extension or waiver of any statute of limitations has been requested of or granted by Seller with respect to any Tax for any period. No extension or waiver of time within which to file any Tax Return has been requested by or granted to Seller with respect to any Tax Return that has not been filed. No power of attorney with respect to Taxes has been executed by Seller or filed with any tax authority with respect to Seller during the last three years.

(e) No claim has ever been made by an authority in a jurisdiction where Seller does not file Tax Returns that Seller is or may be subject to taxation by that jurisdiction.

(f) Seller is not a party to, bound by, or obligated under any tax sharing or allocation agreements, tax indemnification agreement or similar Contract whether written or unwritten.

(g) Except as set forth in the Acquisition Balance Sheet, Seller has not, in the past 10 years acquired assets from another corporation in a transaction in which Seller's U.S. federal income tax basis for the acquired assets was determined, in whole or in part, by reference to the tax basis of the acquired assets (or any other property) in the hands of the transferor.

(h) There is no tax ruling, request for ruling or settlement, compromise, closing or Tax collection agreement in effect or pending which does or could reasonably be expected to affect the liability of Seller for Taxes for any period after the Closing Date.

(i) Seller is not required to document a transfer pricing methodology in compliance with Code Section 482 and any related provisions, the Treasury Regulations thereunder, and any comparable provisions of state, local or foreign Tax law. Seller has not agreed to, and is not required to include in income, any adjustment pursuant to Code Section 482 (or similar provision of other law or regulations), nor has any Tax authority proposed, or is any Tax authority considering, such adjustment.

(j) Seller has never been a member of any affiliated group filing a consolidated federal Tax Return, or incurred any liability for the Taxes of any Person under Treasury Regulation Section 1.1502–6 (or any similar provision of state, local or foreign law), as a transferee or successor, by Contract, or otherwise.

(k) Seller is not and has never been required to make a basis reduction pursuant to Treasury Regulation Sections 1.1502-20(b) or Section 1.337(d)-2(b).

(l) At no time during the five-year period ending on the date hereof was Seller a "distributing corporation" or "controlled corporation" within the meaning of Code Section 355(a)(1)(A) in any distribution intended to qualify under Code Section 355.

(m) Seller has no interest in and is not subject to any joint venture, partnership, or other Contract which is treated as a partnership for U.S. federal Tax purposes.

(n) Seller is not successor to any other Person by way of merger, reorganization or similar transaction.

(o) Seller has not made any payments, is not obligated to make any payment(s), and is not a party to any agreement that could obligate Seller to make any payment(s) that would not be deductible under either Code Sections 280G or 162(m).

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(p) No property owned by Seller is treated as "tax-exempt use property" within the meaning of Code Section 168(h).

(q) Seller has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662.

(r) Seller has not been a party to a transaction that constitutes a "reportable transaction" within the meaning of Treasury Regulation Section 1.6011-4(b) (or a similar provision of state law).

(s) Seller does not have and has never had any obligation to register a tax shelter under Code Section 6111 or to file any disclosure or maintain any list pursuant to Code Section 6112 and regulations promulgated thereunder.

(t) Seller has previously provided Buyer with the following information with respect to Seller as of the most recent practicable date: each state, county, local municipal, domestic or foreign jurisdiction in which Seller (i) files, or is or has been required to file, a Tax Return relating to Taxes of any kind, (ii) is required to register for Tax purposes, (iii) is or has been liable for any Taxes on a "nexus" basis at any time, (iv) is qualified to do business, (v) owns or regularly uses property, (vi) has any employee or in which any employee of Seller is regularly present, or (vii) has any agent, representative or distributor.

2.15 Brokers. Except as set forth on Schedule 2.15, there are no claims or rights to brokerage commissions, finders fees or similar compensation in connection with the transactions contemplated by this Agreement based on any Contract made or alleged to have been made by or on behalf of Seller or any of its Affiliates, officers, employees or directors. All fees and expenses related to the items set forth on Schedule 2.15 will be paid by Seller at or prior to the Closing, and neither Buyer nor any of its Affiliates shall have any liability of any kind with respect thereto.

2.16 Purchased Assets.

(a) The Purchased Assets represent all of the assets currently used in the conduct of the Business in the ordinary course.

(b) The Purchased Assets and the assets presently owned, leased, or licensed by Seller are reasonably sufficient in all material respects for the conduct of the Business as presently conducted and as the Business is intended to be conducted for the next 12 months. Except as set forth on Schedule 2.16(b), Seller does not own any material assets which are used in or have been used in the Business that are not included in the Purchased Assets.

(c) Seller has good title to, a valid leasehold interest in, or valid rights to use, all the Purchased Assets free and clear of all Liens other than Permitted Liens.

(d) The Purchased Assets taken as a whole are sufficient in all material respects for the purposes for which they are used by Seller in the ordinary course of the Business.

(e) Seller has the full right to contribute, convey, transfer, assign and deliver the Purchased Assets without the need to obtain the consent or approval of or pay any consideration to any Person.

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(f) At and as of the Closing, Seller will convey the Purchased Assets to Buyer in the manner set forth on Schedule 1.1, by bills of sale, certificates of title and other instruments of assignment and transfer effective in each case to vest in Buyer, and Buyer will have, good and valid record and marketable title to all of the Purchased Assets, free and clear of all Liens other than Permitted Liens.

2.17 Suppliers. Schedule 2.17 hereto sets forth the top 10 suppliers of Seller, based upon dollar volume as of the date hereof, listed in order of the dollar amount of purchases, for each of the 2007 and 2008 fiscal years and for the first two months of the 2009 fiscal year. To Seller's Knowledge, the relationships of Seller with such suppliers are good commercial working relationships. Except as set forth on Schedule 2.17, no supplier of material importance to the Business or Seller has cancelled or otherwise terminated, or, to Seller's Knowledge, threatened to cancel or otherwise to terminate, its relationship with Seller or has during the last 12 months decreased materially, or, to Seller's Knowledge, threatened to decrease or limit materially, its services or materials for use in the Business. To Seller's Knowledge, no such supplier intends to cancel or otherwise substantially modify its relationship with Seller or to decrease materially or limit its services, supplies or materials to Seller.

2.18 Title to Properties.

(a) Owned Real Property. Seller does not now own nor in the past owned any real property.

(b) Leased Real Property. Schedule 2.18(b) sets forth the address of each parcel of real property leased by Seller or used by Seller in connection with the Business (the "Real Property") and a list of all leases of Seller (including all amendments, extensions, renewals, guaranties and other Contracts with respect thereto) for each parcel of Real Property (collectively, the "Leases"). With respect to each of the Leases: (i) such Lease is legal, valid, binding and enforceable against Seller and the applicable lessor and is in full force and effect and has not been modified and Seller holds good, valid and marketable leasehold title to each parcel of Real Property that is the subject of such Lease free and clear of all Liens, except for Liens that have been placed by the applicable lessor on any parcel of Real Property and for which Seller has subordination and non disturbance or similar agreements relating thereto; (ii) neither Seller nor, to Seller's Knowledge, any other party to the Lease is in breach or default under such Lease, and no event has occurred or circumstance exists which, with the delivery of notice, passage of time or both, would constitute such a breach or default or permit the termination or modification of such Lease or the acceleration of rent under such Lease; (iii) no security deposit or portion thereof deposited with respect to such Lease has been applied in respect of a breach of or default under such Lease that has not been redeposited in full; (iv) Seller does not owe and will not owe in the future any brokerage commissions or finder's fees with respect to such Lease; (v) all rents and additional rents due as of the Closing Date have been paid; (vi) Seller has been (and continues to be) in peaceable possession since the commencement of the term of the Lease; (vii) no waiver, indulgence, or postponement of Seller's obligations under the Lease has been granted by the lessor, and no waiver, indulgence or postponement of the lessor's obligations under the Lease has been granted by Seller; (viii) Seller has provided to Buyer a true, correct and complete copy of such Lease; and (ix) Seller has not assigned, subleased or otherwise granted to any Person the right to use or occupy the Real Property that is the subject of such Lease or any portion thereof.

(c) Seller has obtained all consents and other permissions related to the transactions contemplated herein and required under any agreements related to all or any portion of the Real Property. Such transactions will not result in a breach of or default under any Lease or other such agreement with respect to all or any portion of the Real Property, or otherwise cause any Lease or other such agreement to cease to be legal, valid, binding, enforceable and in full force and effect on identical terms following the Closing.

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(d) The Real Property comprises all of the real property used or intended to be used in the Business. Seller is not a party to any agreement or option to purchase any real property or interest therein.

(e) There are no pending or, to Seller's Knowledge, contemplated or threatened, condemnation or eminent domain proceedings against all or any portion of the Real Property. There are no (i) public improvements which have been commenced or completed and for which an assessment may be levied against all or any portion of the Real Property, or (ii) planned public or other improvements which may result in any assessment against all or any portion of the Real Property.

(f) Seller has neither received any notice nor has any Knowledge of any violation of any zoning, entitlement, building or other land use regulations or of any covenants, conditions, restrictions, or easements related to all or any portion of the Real Property. The Real Property is properly and fully zoned for the operation and use thereof consistent with past practice at the applicable Real Property and for the operation of the Business.

(g) All water, storm and sanitary sewage facilities, telephone, gas, electricity, fire protection and, without limitation, other required utilities have been installed and are operational and sufficient to permit the operation of the Business after the Closing Date in the ordinary course consistent with past practice at the applicable Real Property.

(h) The Real Property, and each part and portion thereof and improvements thereto, is in good condition and repair and free from material defects.

(i) Seller has not received any notice nor has any Knowledge that:

(A) any government agency or any employee or official thereof considers that the operation of any of the Real Property consistent with past practice at the applicable Real Property has failed or will fail to comply with any laws;

(B) any investigation has been commenced or is contemplated respecting any such possible or actual failure of compliance; or

(C) there are any unsatisfied requests for repairs, restorations or alterations with regard to any of the Real Property or improvements thereto from any Person, including any tenant, lender, insurance carrier or Governmental Entity.

(j) There are no moratoria, initiatives, referenda or similar governmental or quasi-governmental enactments or policies existing, pending, or to Seller's Knowledge, threatened or contemplated, which would prohibit, hinder or render more expensive the operation of the Business at any of the Real Property consistent with past practices at the applicable Real Property.

(k) There are no Actions pending, or to Seller's Knowledge, threatened, before or by any judicial, administrative or union body, any arbiter or any governmental authority, against or affecting the Real Property (or any portion thereof).

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(l) Schedule 2.18(l) lists all leases and other Contracts under which Seller is lessee or lessor of any asset (other than Real Property), or holds, manages or operates any asset (other than Real Property) owned by any other Person, or under which any asset (other than Real Property) owned by Seller is held, operated or managed by a third party. Seller is the holder of all the leasehold estates purported to be granted to such entity by the leases set forth on Schedule 2.18(l) and is the owner of all equipment, machinery and other assets purported to be owned by Seller thereon, free and clear of all Liens other than Permitted Liens. Each such lease and other Contract is in full force and effect and constitutes a legal, valid and binding obligation of, and is legally enforceable against, Seller and, to Seller's Knowledge, each of the respective parties thereto (except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws of general applicability relating to or affecting creditors' rights generally and by the application of general principles of equity) and grants the leasehold estate it purports to grant free and clear of all Liens other than Permitted Liens. All necessary governmental approvals required to be obtained by Seller with respect thereto have been obtained, all necessary filings or registrations therefor have been made, and to Seller's Knowledge, there have been no threatened cancellations thereof and are no outstanding disputes thereunder. Seller has performed all obligations thereunder required to be performed to date. Seller is not in default in any material respect under any of the foregoing and to Seller's Knowledge, no other party is in default in any material respect under any of the foregoing, and there has not occurred any event which (whether with or without notice, lapse of time or the happening or occurrence of any other event) could, constitute a default on the part of Seller, or to Seller's Knowledge, a party thereto other than Seller.

2.19 Environmental Matters. Except as set forth in Schedule 2.19, to Seller's Knowledge:

(a) Seller is in compliance in all material respects with all applicable Environmental Laws;

(b) Seller has obtained and is in material compliance with all permits, licenses and other authorizations required under applicable Environmental Laws for the Business and/or the operations of Seller as it is currently operated;

(c) there has not been a Release at, on, under or from any Real Property during Seller's period of ownership, lease term or operation on any Real Property, or, to Seller's Knowledge, prior to Seller's period of ownership, lease term or operation on any Real Property;

(d) Seller has not received any notice regarding any violation of, or any Liability (including any investigatory, corrective or remedial obligation) under, any Environmental Laws with respect to the past or current operations, properties, products or facilities of Seller;

(e) Seller's products comply with all applicable Environmental Laws.

2.20 Product and Warranty Liability. Schedule 2.20 contains a true, correct and complete description of the product and service warranties provided by Seller. There have not been any material deviations from such warranties, and neither Seller nor any of its salespeople, employees, distributors or agents is authorized to undertake obligations to any customer or to other third parties in excess of such warranties. Seller has not made any oral warranty with respect to any of its products or services. Seller has provided Buyer with a true, correct and complete schedule of all product warranty claims against Seller since January 1, 2006. There are no claims pending against Seller alleging defects in or other claims relating to the performance or non-performance of the products of Seller, and to Seller's Knowledge, no facts or circumstances exist that could give rise to such a claim. Except as set forth on Schedule 2.20, all third party manufacturers' warranties relevant to the conduct of the Business are assignable, without requiring the consent of or the payment of any consideration to any Person.

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2.21 Insurance. Schedule 2.21 sets forth a list of each insurance policy to which Seller is a party or a named insured. All of such insurance policies are legal, valid, binding and enforceable and in full force and effect and will remain so immediately after the Closing and Seller is not in breach or default with respect to its obligations under such insurance policies (including with respect to payment of premiums). Seller has not received any notice or other indication from any insurer or agent of any intent to cancel or not renew any insurance policy. Schedule 2.21 sets forth a list of all claims filed by Seller with its insurers over the past three years. Seller has timely filed claims with its insurers with respect to all matters and occurrences for which Seller believes it has coverage. Seller has not been refused any insurance with respect to its assets or operations, and Seller's coverage has not been limited by any insurance carrier with which it has carried insurance.

2.22 No Undisclosed Liabilities. Seller has no Liabilities except for Liabilities set forth in the Acquisition Balance Sheet and Liabilities that are not material that have arisen after the date of the Acquisition Balance Sheet in the ordinary course of business consistent with past practice

2.23 Affiliate Transactions. Except as set forth on Schedule 2.23, no shareholder, officer, director, or Affiliate of Seller (a) is a party to any Contract with Seller or has any interest in, or has any claim or right against, any property or asset of Seller or any tangible or intangible property which Seller is using or the use of which is necessary for the Business as currently conducted or currently proposed to be conducted, (b) owns or has owned (of record or as a beneficial owner) an equity interest or any other financial or profit interest in a Person that has (i) had business dealings or a material financial interest in any transaction with Seller or (ii) engaged in a business competing with Seller with respect to any line of the products or services of such entity in any market; or (c) has any cause of action or other claim whatsoever against, or owes any amount to, Seller, except for claims in the ordinary course of business, such as for accrued vacation pay, accrued benefits under Employee Benefit Plans and similar matters and agreements.

2.24 Indebtedness. Except for Indebtedness described on Schedule 2.24 hereto, Seller has no Indebtedness outstanding at the date hereof. Except as disclosed on Schedule 2.24 hereto, Seller is not in default with respect to any outstanding Indebtedness or any instrument relating thereto and no such Indebtedness or any instrument or agreement relating thereto purports to limit the issuance of any securities by Seller or the operation of the Business. Seller has furnished to Buyer complete and correct copies of all Contracts (including all amendments, supplements, waivers and consents) relating to (a) any Indebtedness of Seller, (b) any conditional sale or other title retention agreement with respect to any assets used in the Business, (c) any purchase money mortgage or other agreement securing all or part of the purchase price of property used in the Business, and (d) any capital leases of any assets used in the Business or in respect of which Seller is liable as lessee.

2.25 STATS Agreement. All Liabilities under, or relating to, the STATS Agreement have been fully discharged by Seller. Seller has paid and satisfied in full all amounts due or payable under the STATS Agreement. The STATS Agreement has been terminated prior to the Closing and STATS LLC has no claims whatsoever under or relating to the termination of the STATS Agreement against Seller or Buyer.

2.26 Subsidiaries. Seller neither has any Subsidiaries nor owns or holds of record and/or beneficially any shares of any class in the capital of any corporation. Seller owns no legal and/or beneficial interests in any limited liability companies, partnerships, business trusts or joint ventures or in any other unincorporated trade or business enterprises.

2.27 Absence of Certain Business Practices.

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(a) Neither Seller nor any predecessor of Seller, nor any of their respective directors, officers, employees, agents or, to Seller's Knowledge, any other Person affiliated with or acting for or on the behalf of Seller or of any predecessor of Seller, has, (i) directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses relating to political activity, made any unlawful payment to foreign or domestic government officials or employees or to foreign or domestic political parties or campaigns from corporate funds, violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback or other similar unlawful payment or (ii) agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other Person which could subject the Business or Buyer to any damage or penalty in any civil, criminal or governmental litigation or proceeding.

(b) Seller has in the conduct of the Business and the ownership and operation of its assets complied in all material respects with all statutory and regulatory requirements relating to export controls and trade sanctions under all applicable legal requirements of each jurisdiction in which Seller conducts the Business or holds any assets, including, without limitation, the International Traffic in Arms Regulations, the Export Administration Regulations, and anti-boycott provisions, regulations administered by the Office of Foreign Assets Control.

(c) Seller does not maintain or conduct, and has not maintained or conducted, any business, investment, operation or other activity in the conduct of the Business and the ownership, operation or use of Seller's assets in or with: (i) any country or Person targeted by any of the economic sanctions of the United States of America administered by the United States Treasury Department's Office of Foreign Assets Control; (ii) any Person appearing on the list of Specially Designated Nationals and Blocked Persons issued by the United States Treasury Department's Office of Foreign Assets Control; or (iii) any country or Person designated by the United States Secretary of the Treasury pursuant to the USA PATRIOT Act as being of "primary money laundering concern."

2.28 Disclosure. No representation or warranty by Seller in this Agreement or in any exhibit, schedule, written statement, certificate or other document delivered or to be delivered to Buyer pursuant hereto or in connection with the consummation of the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact required to be stated therein or necessary to make the statements contained therein not misleading or necessary in order to provide Buyer with proper and complete information as to Seller and the identity, value and usability of the Purchased Assets. There is no fact relating to the Business, the Purchased Assets or Seller which may materially adversely affect the same and which has not been disclosed to Buyer in writing.

2.29 Investment Representations.

(a) No Representations. Seller confirms that neither Buyer nor any of its authorized agents has made any representation or warranty to Seller about Buyer or the Securities other than those set forth in this Agreement, and that Seller has not relied upon any other representation or warranty, express or implied, in connection with the transactions contemplated by this Agreement.

(b) Investment Representations. Seller represents, warrants and covenants to Buyer that Seller is acquiring the Securities for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act. Seller is either (i) an "accredited investor(s)" as such term is defined in Rule 501(a) under the Securities Act, or (ii) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of acquiring the Securities.

(c) Investment Risks. Seller acknowledges and is aware that: (i) there are substantial restrictions on the transferability of the Securities, (ii) the Securities will not be, and Seller does not have the right to require that the Securities be, registered under the Securities Act; (iii) the certificates representing the Securities shall bear a legend similar to the legend set out below and (iv) such legend shall not be removed from any such certificates unless either (A) such Securities are sold under an effective registration statement under the Securities Act, or (B) Seller delivers to Buyer a written opinion of counsel, in form and substance reasonably satisfactory to Buyer, that no such registration is required and that the transfer will not otherwise violate the Securities Act, the Securities Exchange Act of 1934, or applicable state securities laws.

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), IN RELIANCE UPON ONE OR MORE EXEMPTIONS FROM REGISTRATION OR QUALIFICATION AFFORDED BY THE SECURITIES ACT AND/OR RULES PROMULGATED BY THE COMMISSION PURSUANT THERETO. THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE ALSO NOT BEEN REGISTERED OR QUALIFIED (AS THE CASE MAY BE) UNDER THE SECURITIES LAWS OF ANY STATE OR TERRITORY OF THE UNITED STATES (THE "BLUE SKY LAWS"), IN RELIANCE UPON ONE OR MORE EXEMPTIONS FROM REGISTRATION OR QUALIFICATION (AS THE CASE MAY BE) AFFORDED UNDER SUCH SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR THE HOLDER'S OWN ACCOUNT FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW FOR RESALE OR DISTRIBUTION.

(d) Opportunity to Ask Questions. During the course of the transaction contemplated by this Agreement, and before acquiring the Securities, Seller has had the opportunity (i) to be provided with financial and other written information about Buyer included in all documents Buyer has publicly filed with the Securities and Exchange Commission, and (ii) to ask questions and receive answers concerning the business of Buyer and its finances. Seller has, to the extent it has availed itself of this opportunity, received satisfactory information and answers.

(e) Sophistication. Seller represents that by reason of its business or financial experience or the business or financial experience of Seller's professional advisors who are unaffiliated with and who are not compensated by Buyer or any Affiliate or selling agent of Buyer, directly or indirectly, Seller has the capacity to protect its own interests in connection with the transactions contemplated by this Agreement.

(f) Reliance by Buyer. Seller understands that the foregoing representations and warranties are to be relied upon by Buyer as a basis for exemption of the sale of the Securities under the Securities Act and under the securities laws of all applicable states and for other purposes.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF BUYER

As of the Closing Date, Buyer represents and warrants to Seller as follows:

3.1 Organization and Qualification. Buyer is an entity duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to perform its obligations under this Agreement.

3.2 Authorization. The execution, delivery and performance by Buyer of this Agreement and each other Transaction Document to which it is a party and each of the transactions contemplated hereby or thereby have been duly and validly authorized by Buyer, and no other corporate act or proceeding on the part of Buyer, its board of directors or its shareholders is necessary to authorize the execution, delivery or performance by Buyer of this Agreement or any Transaction Document to which it is a party or the consummation of any of the transactions contemplated hereby or thereby. This Agreement has been duly executed and delivered by Buyer and this Agreement constitutes, and the Transaction Documents upon execution and delivery by Buyer, will each constitute, a valid and binding obligation of Buyer, enforceable against Buyer in accordance with their respective terms, except as such enforceability may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect, relating to or limiting creditors' rights generally and (ii) general principles of equity (whether considered in an action in equity or at law).

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3.3 No Conflict. The execution, delivery and performance by Buyer of this Agreement and the Transaction Documents to which it is a party and the consummation of each of the transactions contemplated hereby or thereby will not (i) violate or conflict with the certificate of incorporation, bylaws or other organizational documents of Buyer, (ii) violate, conflict with, result in any material breach of, constitute a default under, result in the termination of, result in the acceleration of any obligations under, result in a material change in terms of, create in any party the right to accelerate, terminate, modify or cancel, or require any consent or notice under, or create an event that, with the giving of notice or the lapse of time, or both, would be a default under or material breach of, any (A) Contract to which Buyer is a party or by which it is bound or affected or to which any of its assets is bound or affected; or (B) judgment, order, writ, injunction, decree or demand of any Governmental Entity which materially affects the ability of Buyer to perform its obligations under this Agreement; (iii) result in the creation or imposition of any Lien upon any assets or any of the equity of Buyer, or which affects the ability to conduct its business as conducted prior to the date of this Agreement or perform its obligations under this Agreement; (iv) require any declaration, filing or registration with, or authorization, consent or approval of, exemption or other action by or notice to, any Governmental Entity or other Person under the provisions of any law, statute, rule, regulation, judgment, order or decree or any Contract to which Buyer is subject, or by which Buyer is bound or affected or by which Buyer or any of its assets are bound or affected.

3.4 Legal Proceedings. There is no action, claim suit or proceeding pending or, to the Knowledge of Buyer, threatened, by or against or Buyer that challenges, or may have the effect of preventing, delaying, making illegal or otherwise interfering with the execution and delivery by Buyer of this Agreement or any of the Transaction Documents to which it is a party or the performance of Buyer hereunder or thereunder.

3.5 Brokers. There are no claims or rights to brokerage commissions, finders fees or similar compensation in connection with the transactions contemplated by this Agreement based on any Contract made or alleged to have been made by or on behalf of Buyer or any of its Affiliates, officers, employees or directors.

ARTICLE IV

COVENANTS

4.1 Employee Matters.

(a) No Rights Conferred Upon Employees. The parties hereby acknowledge that, other than the Transferred Employees, Buyer is under no obligation to employ any current or future employee of Seller. Except as specifically set forth in the Offer Letters, Buyer shall be under no obligation to (i) continue the employment of any Transferred Employee after the Closing Date, and nothing in this Agreement shall confer any rights or remedies under this Agreement on any such Transferred Employee or (ii) continue any Transferred Employee's coverage under any Employee Benefit Plan.

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(b) COBRA Continuation Coverage. On and after the Closing Date, Seller shall be responsible for (i) complying with all notice requirements of COBRA, and (ii) providing COBRA continuation coverage to all "M&A qualified beneficiaries," as that term is defined by Treasury Regulations §54.4980B-9, Q&A-4, with respect to the transactions contemplated by this Agreement for at least the maximum period that continuation coverage may be available to the M&A qualified beneficiaries (including any second qualifying events experienced by the M&A qualified beneficiaries) under COBRA.

4.2 Filing of Tax Returns; Allocation of Straddle Period Taxes; Cooperation.

(a) Subject to Sections 4.2(b) and 4.2(c), Seller shall be responsible for the preparation and filing of all Tax Returns of Seller (including Tax Returns required to be filed after the Closing Date) to the extent such Tax Returns include or relate to Seller's operation of the Business or Seller's use or ownership of the Purchased Assets on or prior to the Closing Date. Seller's Tax Returns, to the extent they relate to the Business or the Purchased Assets, shall, in all material respects, be true, complete and correct and prepared in accordance with applicable law. Seller will be responsible for and make all payments of Taxes shown to be due on such Tax Returns.

(b) Buyer will be responsible for the preparation and filing of all Tax Returns it is required to file with respect to (i) Buyer's ownership or use of the Purchased Assets or (ii) the operation of the Business attributable to taxable periods (or portions thereof) commencing after the Closing Date. Buyer's Tax Returns, to the extent they relate to the Purchased Assets or the Business, shall be true, complete and correct and prepared in accordance with applicable law in all material respects. Buyer will make all payments of Taxes shown to be due on such Tax Returns.

(c) Buyer will be responsible for the preparation and filing of all Tax Returns (other than income Tax Returns), if any, required to filed with respect to the Business or the Purchased Assets for which Taxes are reported on a Tax Return covering a period commencing before and ending after the Closing Date (a "Straddle Period"). Unless otherwise required by applicable law, each such Tax Return shall be prepared in a manner consistent with past accounting methods and practices of Seller. Seller shall promptly pay to Buyer the portion of any Tax liability attributable to the portion of the Straddle Period ending on the Closing Date, as determined in accordance with Section 4.2(d).

(d) For purposes of apportioning liability for Taxes in connection with any Straddle Period (i) in the case of Taxes based upon or related to receipts or employee payroll amounts, the amount of any such Taxes allocable to the portion of the taxable period ending on the Closing Date shall be determined based on an interim closing of the books as of the close of business on the Closing Date; and (ii) in the case of Taxes other than Taxes described in clause (i), the amount of such Taxes allocable to the portion of the taxable period ending on the Closing Date shall be the product of (A) the amount of such Taxes for the entire period and (B) a fraction the numerator of which is the number of calendar days in the period ending with the Closing Date and the denominator of which is the number of calendar days in the entire Straddle Period.

(e) To the extent relevant to the Business or the Purchased Assets, each party shall (i) provide the other with such assistance as may reasonably be required in connection with the preparation of any Tax Return and the conduct of any audit or other examination by any taxing authority or in connection with judicial or administrative proceedings relating to any liability for Taxes and (ii) retain and provide the other with all records or other information that may be relevant to the preparation of any Tax Return, or the conduct of any audit or examination, or other proceeding relating to Taxes.

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4.3 Cooperation With Intellectual Property Assignments. Seller agrees to execute and deliver at the request of Buyer, all documents, instruments and assignments reasonably requested by Buyer, and to perform any other reasonable acts Buyer may require in order to vest all of right, title, and interest in and to the Seller IP Rights in Buyer or to provide evidence to support any of the foregoing in the event such evidence is reasonably deemed necessary by Buyer to the extent such evidence is in the possession or control of Seller.

4.4 Confidentiality. Seller acknowledges and agrees to continue to abide by the terms and conditions of the Confidentiality Agreement. Notwithstanding the foregoing or anything to the contrary in the Confidentiality Agreement, Seller agrees not to divulge or disclose or use for its benefit or purposes at any time after the Closing any information with respect to the Purchased Assets, Buyer or the Business, unless such information has already become public (without violation of this Agreement). The information intended to be protected hereby shall include financial information, customers, sales representatives, and anything else having an economic or pecuniary benefit to Buyer or Seller.

4.5 Use of Name. Buyer is purchasing all of Seller's rights to the business names of Seller, and therefore Seller shall not be entitled to use the name "iSports", variations thereof, or any confusingly similar name as corporate or business names or titles anywhere in the world from and after the Closing. Seller shall, promptly following with the Closing, undertake and promptly pursue all necessary action to change its business and corporate names to new names bearing no resemblance or confusing similarity to any of its pre-Closing names, so as to permit the use of such pre-Closing names by Buyer and its Affiliates. Buyer agrees to pay the filing fees with the State of California associated with this name change.

4.6 Payment of the Closing Purchase Price and Earnout Consideration. Seller shall be solely responsible for further distributing the Closing Purchase Price and the Earnout Consideration, if any, when and if received by Seller from Buyer, to those Persons entitled to any portion of the Closing Purchase Price and the Earnout Consideration.

4.7 Transfer Restrictions. Seller acknowledges and agrees that the Securities may only be disposed of in compliance with state and federal securities laws. Without in any way limiting the representations set forth in Section 2.29, Seller further agrees not to Transfer all or any portion of the Securities, unless and until:

(a) there is then in effect a registration statement under the Securities Act covering such proposed Transfer and such Transfer is made in accordance with such registration statement; or

(b) Seller shall have notified Buyer of the proposed Transfer and shall have furnished Buyer with a statement of the circumstances surrounding the proposed Transfer, and, at the expense of Seller or the transferee, with an opinion of counsel, reasonably satisfactory to Buyer, that such Transfer will not require registration of such securities under the Securities Act and that such Transfer is in compliance with applicable state securities laws.

Notwithstanding the provisions of Sections 4.7(a) and 4.7(b), no such registration statement or opinion of counsel shall be required for any Transfer of any Securities in compliance with Rule 144 promulgated under the Securities Act, except in unusual circumstances.

4.8 Piggyback Registration Rights.

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(a) If at any time or from time to time Buyer shall determine to register any of its securities, either for its own account or the account of a security holder or holders, other than (1) a registration relating solely to employee benefit plans on Form S-8 (or any successor form) or (2) a registration relating on Form S-4 (or any successor form), Buyer will:

(A) promptly give to Seller written notice thereof, and

(B) include in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all the Closing Shares and the shares of Buyer's common stock issuable upon exercise of the $0.30 Warrant and the $0.50 Warrant (collectively, the "Registrable Shares") specified in a written request or requests, made within 10 days after delivery of such written notice from Buyer.

(b) If the registration for which Buyer gives notice is for a registered public offering involving an underwriting, Buyer shall so advise Seller as a part of the written notice described above. Seller shall (together with Buyer) enter into an underwriting agreement in customary form with the managing underwriter selected for such underwriting by Buyer.

(A) If the managing underwriter determines in good faith that marketing factors (including pricing) require a limitation of the number of shares to be underwritten, the underwriter may exclude some or all of the Registrable Shares from such registration and underwriting. Buyer shall so advise Seller, and the number of Registrable Shares to be included in such registration shall be allocated as follows: first, for the account of Buyer, all shares of Common Stock proposed to be sold by Buyer; second, for the account of Seller, the number of Registrable Shares requested to be included in the registration up to the amount of the limitation imposed by the managing underwriter; and third, for the account of any other investor that has been granted registration rights with respect to the Common Stock on the terms and conditions of any agreement pertaining to such registration rights.

(B) If Seller disapproves of the terms of any such underwriting, Seller may elect to withdraw by written notice to Buyer and the managing underwriter. Any Registrable Shares excluded or withdrawn from such underwriting shall be withdrawn from such registration.

(C) Buyer shall have the right to terminate or withdraw any registration initiated by it prior to the effectiveness of such registration, whether or not Seller has elected to include any or all of the Registrable Shares in such registration.

(c) All expenses incurred in connection with any registration, qualification, or compliance pursuant to this Section 4.8 shall be borne by Buyer. All selling expenses relating to the Registrable Shares shall be borne by Seller.

(d) The registration rights set forth in this Section 4.8 shall expire at such time as the Registrable Shares may be immediately sold to the public without registration or restriction (including without limitation as to volume) under the Securities Act, including pursuant to Rule 144.

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ARTICLE V

CLOSING CONDITIONS AND DELIVERABLES

5.1 Conditions Precedent to Buyer's Obligations. The obligation of Buyer to consummate the Closing shall be subject to the satisfaction at or prior to the Closing of each of the following conditions (to the extent noncompliance is not waived in writing by Buyer):

(a) Buyer shall have received a bill of sale (the "Bill of Sale") and an assignment, assumption, and general conveyance (the "Assignment and Assumption Agreement"), duly executed by Seller in favor of Buyer for transfer of the Purchased Assets in substantially the forms attached hereto as Exhibits B and C, dated as of the Closing Date;

(b) Buyer shall have received an assignment from Seller of all right, title and interest of Seller in all the Seller IP Rights (the "Seller IP Assignment"), duly executed by Seller in favor of Buyer as described in Schedule 1.1, in substantially the form attached hereto as Exhibit D, dated as of the Closing Date;

(c) Buyer shall have received the employment offer letters, in form and substance acceptable to Buyer (collectively, the "Offer Letters"), between Buyer and each of Nick Glassman and Kartik Ramachandran, respectively (collectively, the "Transferred Employees"), duly executed by each of the Transferred Employees, dated as of the Closing Date.

(d) Buyer shall have received the non-competition agreements in the form attached hereto as Exhibit E (the "Non-Competition Agreements"), between Buyer and each of the Transferred Employees duly executed by each of the Transferred Employees, dated as of the Closing Date.

(e) Seller shall prepare and deliver to Buyer a certificate (the "Certificate of Indebtedness") certifying as to the amount of Indebtedness of Seller outstanding on the Closing Date, and specifying the amount owed to each creditor listed thereon.

(f) Buyer shall have received the Payoff Letters, providing for terminations of any and all Liens in, and releases of any and all Liens and Indebtedness on, the Purchased Assets, including, but not limited to, UCC termination statements from the secured creditors of Seller;

(g) Buyer shall have received certificates of corporate good standing as of the most recent practicable date from Secretary of State where Seller is incorporated or qualified to do business;

(h) All filings, authorizations and approvals and consents necessary to consummate the transactions contemplated by this Agreement shall have been made with or obtained from all applicable Governmental Entities and other Persons, as the case may be;

(i) Buyer shall have received: (i) evidence of the change in Seller's corporate name to one not using the word "iSports" or any derivation or variation thereof, and (ii) all required consents from Seller related to Buyer's use of Seller's name on the Closing Date and thereafter, in the state of its incorporation and all other states wherein it is qualified to do business as a foreign corporation or has business nexus;

(j) Buyer shall have received evidence to Buyer's satisfaction that all third party inventor assignments with respect to the Seller IP Rights have been properly executed in favor of Seller;

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(k) Buyer shall have received a certificate duly executed by a duly authorized officer of Seller, in form and substance reasonably satisfactory to Buyer, certifying that Seller has secured all necessary corporate and other approvals authorizing the execution, delivery and performance by Seller of this Agreement and the transactions contemplated hereby;

(l) Buyer shall have received approval from NYSE Amex for the additional listing of shares of Common Stock with respect to the Closing Shares and the shares of Common Stock issuable upon exercise of the $0.30 Warrant and the $0.50 Warrant;

(m) Seller shall have terminated the STATS Agreement to the satisfaction of Buyer in its sole discretion;

(n) Seller shall have received approval of this Agreement and the transactions contemplated hereby from holders of at least 90% of the outstanding shares of Seller's common stock and preferred stock, voting separately; and

(o) Seller shall have amended its Articles of Incorporation in form and substance acceptable to Buyer.

Any agreement or document to be delivered to Buyer pursuant to this Section 5.1, the form of which is not attached to this Agreement as an exhibit, shall be in form and substance reasonably satisfactory to Buyer.

5.2 Conditions Precedent to Seller's Obligations. The obligation of Seller to consummate the Closing shall be subject to the satisfaction at or prior to the Closing of each of the following conditions (to the extent noncompliance is not waived in writing by Seller):

(a) Seller shall have received the Assignment and Assumption Agreements duly executed by Buyer, dated as of the Closing Date;

(b) Seller shall have received the Seller IP Assignment duly executed by Buyer, dated as of the Closing Date;

(c) Seller shall have received a certificate duly executed by a duly authorized officer of Buyer, in form and substance reasonably satisfactory to Seller, certifying that Buyer has secured all necessary corporate and other approvals authorizing the execution, delivery and performance by Buyer of this Agreement and the transactions contemplated hereby; and

(d) Buyer shall have delivered to Seller each of the $0.30 Warrant and $0.50 Warrant in accordance with Section 5.2(d) and shall have delivered the Closing Shares into the Holdback Account.

Any agreement or document to be delivered to Seller pursuant to this Section 5.2, the form of which is not attached to this Agreement as an exhibit, shall be in form and substance reasonably satisfactory to Seller.

ARTICLE VI

INDEMNIFICATION

6.1 Survival of Representations and Warranties and Covenants.

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(a) The representations and warranties contained in this Agreement shall survive the execution and delivery of this Agreement and the closing and the consummation of the transactions contemplated hereby (and any examination or investigation by or on behalf of any party hereto) for a period of 24 months from the Closing Date (the "Cut-Off Date"). Notwithstanding the foregoing, (i) any obligation in respect of a claim for indemnity as a result of a breach of any representation or warranty of any party that is asserted in writing with reasonable specificity as to the nature and, if then reasonably determinable, amount of the claim prior to the Cut-Off Date, the IP Claim Date or the applicable Statute of Limitations Date, in each case as applicable, shall survive past such date until finally resolved or settled, (ii) any obligation in respect of a claim by a party for indemnity as a result of a breach of a representation or warranty arising or resulting from a breach of Section 2.6 (the "IP Claim") shall survive for a period of 36 months from the Closing Date (the "IP Claim Date"); (iii) any obligation in respect of a claim by a party for indemnity as a result of a breach of a representation or warranty arising or resulting from a breach of Sections 2.8, 2.14 or 2.18(c) shall survive until the expiration of the applicable statute of limitations (collectively, the "Statute of Limitation Claims" and each such date, the applicable "Statute of Limitations Date"); and (iv) any obligation in respect of a claim by a party for indemnity as a result of a breach of Sections 2.16 ("Purchased Assets"), 2.25 ("License Agreement"), or 2.27 ("Absence of Certain Business Practices"), a breach of a covenant contained in ARTICLE IV, except as otherwise provided in Section 4.5, a claim arising or resulting from fraud or willful misrepresentation on the part of the other party, or a claim with respect to the Excluded Assets or Excluded Liabilities shall survive indefinitely (collectively, the "Indefinite Claims").

(b) No Action may be commenced with respect to any representation or warranty, or covenant hereunder, or in any writing delivered pursuant hereto, unless written notice, setting forth in reasonable detail the claimed breach thereof, shall be delivered pursuant to Section 7.6 to the party or parties against whom liability for the claimed breach is charged on or before the termination of the survival period specified in Section 6.1(a) for such representation, warranty, covenant or agreement; provided, that the foregoing shall not apply to an Action related to any Indefinite Claim.

6.2 Indemnification by Seller. Subject to the provisions of this ARTICLE VI, Seller covenants and agrees to defend, indemnify and hold harmless Buyer and each of its directors, officers, Affiliates, successors, assigns and agents from and against and with respect to any Damages directly or indirectly, relating to, resulting from or arising out of (i) any inaccuracy in or breach of any representation or warranty in ARTICLE II, (ii) the failure of Seller to perform or observe any covenant, agreement or provision to be performed or observed pursuant to this Agreement, (iii) the operation of the Business before the Closing Date or any claims, actions or litigation concerning the same, or (iv) any Excluded Assets or Excluded Liabilities.

6.3 Indemnification by Buyer. Buyer covenants and agrees to defend, indemnify and hold harmless Seller and its directors, officers, affiliates, successors, assigns and agents, as applicable, from and against any and all Damages arising out of or resulting from (i) any inaccuracy in or breach of any representation or warranty in ARTICLE III, (ii) the failure of Buyer to perform or observe any covenant, agreement or provision to be performed or observed pursuant to this Agreement, or (iii) the operation of the Business after the Closing Date for periods after the Closing Date or any claims, actions or litigation concerning the same.

6.4 Direct Claims.

(a) In order to seek indemnification under this ARTICLE VI (other than with respect to Third Party Claims), a party entitled to indemnification under Section 6.2 or Section 6.3 (an "Indemnified Party") shall deliver a written demand (an "Indemnification Demand") to Seller (in the case of Indemnification Demands from Buyer) or Buyer (in the case of Indemnification Demands from Seller) which contains (i) a description of and if reasonably determinable at the time such demand is delivered, the amount (the "Asserted Damages Amount") of any Damages incurred or reasonably expected to be incurred by the Indemnified Party, (ii) a statement that the Indemnified Party may be entitled to indemnification under this ARTICLE VI for such Damages and a reasonable explanation of the basis therefor, and (iii) a demand for indemnification hereunder and payment of all such Damages.

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(b) Within 30 days after delivery of an Indemnification Demand to Seller or Buyer (as the case may be), such party shall deliver to the other of such parties a written response (the "Response") in which the party providing the Response shall either: (i) agree that the Indemnified Party is entitled to receive all of the Asserted Damages Amount, if any (in which case, if the Indemnified Party is (A) Buyer, then Buyer shall be entitled to retain as an offset, without any further action by Seller, a portion (up to all) of the Closing Shares or the Earnout Consideration equal to such Asserted Damages Amount in satisfaction thereof, and such offset shall be deemed to occur automatically such as to reduce the Closing Shares otherwise deliverable to Seller upon the expiration of the Holdback Period (and any extended period required to resolve any timely made claims for indemnification) or the Earnout Consideration, if any, and Seller shall, in accordance with a payment method reasonably acceptable to Buyer, pay to Buyer cash equal to any remainder of such Asserted Damages Amount not offset from the Closing Shares or the Earnout Consideration, if any, or (B) Seller, then Buyer shall, in accordance with a payment method reasonably acceptable to Seller, pay to Seller cash equal to the amount of such Asserted Damages (in either case, subject to the limitations of Section 6.6)); (ii) agree that the Indemnified Party is entitled to receive part, but not all, of the Damages related to such Indemnification Demand (such portion, the "Agreed Portion") (in which case, if the Indemnified Party is (A) Buyer, then Buyer shall be entitled to retain as an offset, without any further action by Seller, a portion (up to all) of the Closing Shares or the Earnout Consideration equal to such Asserted Damages Amount in satisfaction thereof, and such offset shall be deemed to occur automatically such as to reduce the Closing Shares otherwise deliverable to Seller upon the expiration of the Holdback Period (and any extended period required to resolve any timely made claims for indemnification) or the Earnout Consideration, if any, and Seller shall, in accordance with a payment method reasonably acceptable to Buyer, pay to Buyer cash equal to any remainder of such Agreed Portion not offset from the Closing Shares or the Earnout Consideration, if any, or (B) Seller, then Buyer shall, in accordance with a payment method reasonably acceptable to Seller, pay to Seller cash equal to the amount of such Agreed Portion (in either case, subject to the limitations of Section 6.6)); or (iii) dispute that the Indemnified Party is entitled to receive any of the Asserted Damages Amount.

(c) In the event that the party providing a Response shall (i) dispute that the Indemnified Party is entitled to receive any of the Damages related to such Indemnification Demand, or (ii) agree that the Indemnified Party is entitled to only the Agreed Portion of the Damages related to such Indemnification Demand, Buyer and Seller shall attempt in good faith to agree upon the rights of the respective parties with respect to each of the indemnification claims that comprise the Damages related to such Indemnification Demand (or the portion of the Damages related to such Indemnification Demand not comprising the Agreed Portion). If Buyer and Seller should so agree, then the amount of Damages upon which they agree (as applicable) shall be offset as provided in Section 6.4(b). If no such agreement can be reached after good faith negotiation within 15 days after delivery of a Response, then, at the request of either party, the parties will submit the dispute to a mutually acceptable arbitrator in San Diego County, California designated by the American Arbitration Association, under its rules for Commercial Arbitration, for binding and final resolution. The fees and expenses of the arbitration shall be paid jointly, one-half by Buyer, on the one hand, and one-half by Seller, on the other hand.

6.5 Third Party Claims.

(a) If an Indemnified Party receives notice of the assertion by any Person (other than a party hereto) of any claim or of the commencement by any such Person of any Action (a "Third Party Claim") with respect to which an Indemnifying Party is or may be obligated to provide indemnification, the Indemnified Party shall promptly notify the Indemnifying Party in writing of the Third Party Claim (the "Third Party Claim Notice"); provided, however, that the failure to provide such notice shall not relieve or otherwise affect the obligation of the Indemnifying Party to provide indemnification hereunder, except to the extent that such failure or delay materially prejudices the defense thereof.

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(b) The Indemnifying Party shall be entitled to participate in the defense of a Third Party Claim after receipt of a Third Party Claim Notice. Within 30 days after receipt of a Third Party Claim Notice, the Indemnifying Party may assume the defense of the Third Party Claim subject of such Third Party Claim Notice, in which case the Indemnifying Party shall have the authority to negotiate, compromise and settle such Third Party Claim, if and only if all of the following conditions are satisfied:

(i) the Indemnifying Party shall have confirmed in writing that it is obligated hereunder to indemnify the Indemnified Party with respect to such Third Party Claim;

(ii) the Indemnified Party shall not have given the Indemnifying Party written notice that it has determined, in the exercise of its reasonable discretion and in good faith, that matters of corporate or management policy or a conflict of interest make separate representation by the Indemnified Party's own counsel advisable; and

(iii) such Third Party Claim involves only money damages and does not seek an injunction or other equitable relief.

The Indemnified Party shall retain the right to employ its own counsel and to participate in the defense of any Third Party Claim, the defense of which has been assumed by the Indemnifying Party pursuant hereto, but the Indemnified Party shall bear and shall be solely responsible for its own costs and expenses in connection with such participation unless: (A) the employment of such counsel has been specifically authorized by the Indemnifying Party in writing, (B) the Indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 6.5(b), or (C) the named parties to such Third Party Claim (including any impleaded parties) include both the Indemnifying Party and the Indemnified Party and the Indemnified Party reasonably believes that there may be one or more material legal defenses available to the Indemnified Party that are different from or additional to those available to the Indemnifying Party (other than differing interests associated with an Indemnifying Party's obligation to indemnify), in which cases the fees and expenses of the Indemnified Party's counsel shall be paid by the Indemnifying Party on a current basis.

(c) Subject to the foregoing provisions of this Section 6.5, for a period of 20 days after delivery of a Third Party Claim Notice, the Indemnifying Party shall have the right to object in a written statement (an "Objection") to the claim made in the Third Party Claim Notice, and such statement shall have been delivered to the Indemnified Party prior to the expiration of such 20-day period. If an Objection has been made, the Indemnifying Party shall attempt to resolve the dispute with the Indemnified Party in accordance with this Section 6.5(c). Once an Objection has been made, the Indemnifying Party and Indemnified Party shall attempt in good faith to agree upon the rights of the respective parties with respect to the claim or claims relating to the Third Party Claim Notice. Any such agreement shall be set forth in a written memorandum signed by both parties. If the parties cannot come to such agreement within 15 days after receipt by the Indemnified Party of the Objection, then, at the request of either party, the parties will submit the dispute to a mutually acceptable arbitrator in San Diego County, California designated by the American Arbitration Association, under its rules for Commercial Arbitration, for binding and final resolution. The fees and expenses of the arbitration shall be paid jointly, one-half by Buyer, on the one hand, and one-half by Seller, on the other hand.

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6.6 Limitations on Indemnity. Buyer and Seller are not entitled to indemnity under this ARTICLE VI except to the extent that the aggregate amount of indemnifiable Damages incurred by the respective party, in the aggregate, exceeds Ten Thousand Dollars ($10,000) (the "Threshold Amount"), in which case the party seeking indemnification may bring a claim for the entire amount of such Damages from dollar one. The parties agree that they will not submit any claim for indemnification pursuant to this ARTICLE VI unless and to the extent that the aggregate amount of all Damages for which indemnity is claimed exceeds the Threshold Amount; provided, however, that the Threshold Amount shall not apply in respect of an IP Claim, Statute of Limitation Claims or Indefinite Claims.

6.7 Relationship Between Assumed Liabilities and Indemnification. Subject to the provisions of this ARTICLE VI, Buyer shall be entitled to indemnification pursuant to this ARTICLE VI for Damages in respect of the breach by Seller of the representations and warranties contained in ARTICLE II even if such Damages would otherwise be assumed by Buyer under Section 1.3.

6.8 Exclusive Remedy. This ARTICLE VI sets forth the sole and exclusive remedies of Buyer and Seller, and their respective successors and assigns for any Action any of them may assert or attempt to assert against the other to the extent the Action in any way relates to this Agreement or its negotiation, execution, delivery or performance, any alleged breach of or default under this Agreement, or the transactions contemplated hereby, regardless of whether such Action is based in tort (for example, intentional or negligent misrepresentation) or contract, or arises at law or in equity; provided, however, the foregoing limitation shall not apply to a claim arising or resulting from fraud or willful misrepresentation on the part of the other party.

6.9 Right of Offset. Notwithstanding anything to the contrary herein, Buyer may offset any amount to which it may be entitled under this ARTICLE VI against the Closing Shares and any other amount otherwise payable to Seller under this Agreement or under any document delivered in connection herewith, including with respect to any Earnout Payment. For purposes of exercising Buyer's offset rights against the Closing Shares, the value per share of the Closing Shares shall be deemed to be the closing price per share of the Buyer's common stock as reported on NYSE Amex on the date of delivery of the Indemnification Demand or the Third Party Claim Notice, as applicable. The exercise of such right of offset by Buyer in good faith, whether or not ultimately determined to be justified, will not constitute a breach of this Agreement. Neither the exercise of, nor the failure to exercise, such right of offset shall constitute an election of remedies or limit Buyer in any manner in the enforcement of any other remedies that may be available to it, in law or in equity. Buyer may exercise its offset rights by notice to Seller at any time setting forth the amount of offset and the basis for such offset.

ARTICLE VII

MISCELLANEOUS

7.1 Rules of Construction. This Agreement has been negotiated by the parties and is to be interpreted according to its fair meaning as if the parties had prepared it together and not strictly for or against any party. All references in this Agreement to articles, sections, schedules and exhibits are to articles, sections, schedules and exhibits of or to this Agreement unless expressly otherwise indicated. At each place in this Agreement where the context so requires, the masculine, feminine or neuter gender includes others. "Including" or "include" means "including without limitation" and "include without limitation," respectively, "Or" is used in the inclusive sense of "and/or." Currency amounts referenced herein, unless otherwise specified, are in U.S. Dollars.

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7.2 Further Actions. From time to time, as and when requested by any party hereto, each other party shall execute and deliver, or cause to be executed and delivered, such documents and instruments and shall take, or cause to be taken, such further or other actions as the requesting party may reasonably deem necessary or desirable to carry out the intent and purposes of this Agreement, to transfer, assign and deliver the Purchased Assets to Buyer and its respective successors and assigns effective as of the Closing Date (or to evidence the foregoing) and to consummate and give effect to the other transactions, covenants and agreements contemplated hereby.

7.3 Expenses. Except as expressly set forth herein, the parties shall bear their own legal fees and other costs and expenses with respect to the negotiation, execution and delivery of this Agreement and the consummation of the transactions contemplated hereunder.

7.4 Entire Agreement. This Agreement, which includes the all schedules and exhibits hereto and the other documents, agreements and instruments executed and delivered pursuant to this Agreement, contains the entire agreement between the parties hereto with respect to the transactions contemplated by this Agreement and supersedes all prior arrangements, understandings, proposals, prospectuses, projections and related materials with respect thereto, other than the Confidentiality Agreement, which shall survive in accordance with its terms.

7.5 Descriptive Headings. The descriptive headings of this Agreement are for convenience only and shall not control or affect the meaning or construction of any provision of this Agreement.

7.6 Notices. All notices or other communications which are required or permitted hereunder shall be in writing and shall be sufficiently given if (a) delivered personally or (b) sent by registered or certified mail, postage prepaid, or (c) sent by overnight courier with a nationally recognized courier, or (d) sent via facsimile confirmed in writing in any of the foregoing manners, as follows:

	If to Seller:	iSports Inc. 2051 Glencoe Way Los Angeles, CA 90068 Attn: Kartik Ramachandran Email: Kartikr@alumni.princeton.edu

	With a copy to:	Kendall, Koenig, and Oelsner, LLP 999 Eighteenth Street, Suite 1825 Denver CO 80202 Attn: David Kendall Email: dkendall@kkofirm.com

	If to Buyer:	NTN Buzztime, Inc. 5966 La Place Court, Suite 100 Carlsbad, CA 92008 Attention: Kendra Berger Fax: 760.930.1187

	With a copy to:	Sheppard Mullin Richter & Hampton, LLP 12275 El Camino Real, Suite 200 San Diego, CA 92130-2006 Attention: Kirt Shuldberg Fax: 858.523.6712

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If sent by mail, notice shall be considered delivered five Business Days after the date of mailing, and if sent by any other means set forth above, notice shall be considered delivered upon receipt thereof. Any party may by notice to the other parties change the address or facsimile number to which notice or other communications to it are to be delivered or mailed.

7.7 Publicity. Buyer shall have sole control over any press release, public announcement, statement or acknowledgment (collectively, "Public Statements") with respect to this Agreement and the consummation of the transactions contemplated herein; provided, however, that Messrs. Ramachandran and Glassman shall have a right to review any Public Statements which shall include their name,

7.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to the choice of law principles thereof.

7.9 Assignment. This Agreement shall inure to the benefit of and shall be binding upon the parties hereto and their respective successors and permitted assigns. This Agreement shall not be assignable (whether voluntarily or involuntarily, directly or indirectly or by operation of law) by Seller without the written consent of Buyer and any such purported assignment by Seller without such consent shall be void.

7.10 Waivers and Amendments. Any amendment or supplementation of this Agreement shall be effective only if in writing signed by each of the parties hereto. Any waiver of any term or condition of this Agreement shall be effective only if in writing signed by the party giving the waiver. A waiver of any breach or failure to enforce any of the terms or conditions of this Agreement shall not in any way affect, limit or waive a party's rights hereunder at any time to enforce strict compliance thereafter with every term or condition of this Agreement, except to the extent such future rights are specifically included within the scope of such written waiver.

7.11 Third Party Rights. This Agreement shall not create benefits on behalf of any other Person (including any Business Employee, broker or finder), and this Agreement shall be effective only as between the parties hereto, their successors and permitted assigns.

7.12 Severability. If any term or provision of this Agreement or the application thereof to any circumstance shall, in any jurisdiction, be invalid or unenforceable, such term or provision shall be ineffective as to such jurisdiction to the extent of such invalidity or unenforceability without invalidating or rendering unenforceable such term or provision in any other jurisdiction, the remaining terms and provisions of this Agreement or the application of such terms and provisions to circumstances other than those as to which it is held invalid or enforceable.

7.13 Counterparts. This Agreement may be executed in any number of counterparts, and each such counterpart hereof shall be deemed to be an original instrument, but all such counterparts together shall constitute but one agreement. Facsimile and PDF signatures shall be treated as if they were originals.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties hereto have caused this Agreement to be duly executed and delivered as a sealed instrument as of the date and year first above written.

BUYER

NTN Buzztime, Inc.,

a Delaware corporation.

By: ______________________________

Name: ____________________________

Title: _____________________________

SELLER

iSports Inc.,

a California corporation

By: ______________________________

Name: ____________________________

Title: _____________________________

[Signature Page to Asset Purchase Agreement]

-38-

LIST OF EXHIBITS

Exhibit A	Definitions
Exhibit B	Bill of Sale [Not Attached]
Exhibit C	Assignment and Assumption Agreement [Not Attached]
Exhibit D	Seller IP Assignment [Not Attached]
Exhibit E	Form of Non-Competition Agreement [Not Attached]
Exhibit F	$0.30 Warrant [Not Attached]
Exhibit G	$0.50 Warrant [Not Attached]

EXHIBIT A

DEFINITIONS

The terms defined in this Exhibit A, whenever used in this Agreement (including in any schedule to this Agreement), shall have the respective meanings indicated below for all purposes of this Agreement, unless otherwise indicated in this Agreement (or the applicable schedule):

"$0.30 Warrant": means a warrant to purchase 1,000,000 unregistered shares of Common Stock, with an exercise price of $0.30 per share, substantially in the form attached hereto as Exhibit F.

"$0.50 Warrant": means a warrant to purchase 500,000 unregistered shares of Common Stock, with an exercise price of $0.50 per share, substantially in the form attached hereto as Exhibit G.

"Action": means any claim, action, suit, arbitration, hearing, inquiry, proceeding, complaint, charge or investigation of any kind, whether civil, criminal or administrative, at law or in equity and any appeal from any of the foregoing.

"Active Mobile User": means a unique user who accesses Buyer's products from a mobile device during the period in question.

"Affiliate": with respect to any Person, means any Person directly or indirectly through one or more intermediaries, that controls, is controlled by, or is under common control with such other Person.

"Assumed Liabilities": as defined in Section 1.3.

"Business": as defined in the Recitals.

"Business Day" means Monday through Friday, excluding any day of the year on which banks are required or authorized to close in the State of California.

"Business Conditions": means those conditions set forth in Sections 1.6(b)(B)(i)(1) and (2), 1.6(b)(B)(ii(1) – (4), and 1.6(b)(B)(iii)(1) – (4).

"Business Employees": as defined in Section 2.7(a).

"Cause": Cause for termination of employment of the Transferred Employees shall be defined as when there is, as reasonably determined by Buyer: (i) any act of personal dishonesty taken by the Transferred Employee in connection with his responsibilities as an employee of Buyer which is intended to result in substantial personal enrichment of the Transferred Employee and is reasonably likely to result in material harm to Buyer, (ii) the Transferred Employee's conviction of a felony which Buyer reasonably believes has had or will have a material detrimental effect on Buyer's reputation or business, (iii) a willful act by the Transferred Employee which constitutes misconduct and is materially injurious to Buyer, (iv) continued willful violations by the Transferred Employee of the Transferred Employee's obligations to Buyer after there has been delivered to the Transferred Employee a written demand for performance from Buyer which describes the basis for Buyer's belief that the Transferred Employee has willfully violated his obligations to Buyer.

"Challenges": means any individual or group gaming experience on any of Buyer's products or services where users compete against each other, in groups, or individually against Buyer's product offering.

Exhibit A-1

"Closing": as defined in Section 1.9.

"Closing Date": as defined in Section 1.9.

"Closing Purchase Price": as defined in Section 1.5(a).

"Closing Shares" as defined in Section 1.5(a).

"Code": Internal Revenue Code of 1986, as amended.

"Commitments": as defined in Section 2.6(m).

"Common Stock": means shares of Buyer's common stock, $0.005 par value per share.

"Confidentiality Agreement": means that certain Nondisclosure Agreement dated as of February 16, 2009 by and between Seller and Buyer, as the same may be amended from time to time.

"Contract": means any written or oral contract, agreement, instrument, commitment, arrangement, understanding or undertaking (including leases, franchises, bonds, guaranties, licenses, mortgages, notes, guarantees, sublicenses, subcontracts and purchase orders).

"Damages": means any and all losses, liabilities, obligations, costs, expenses, orders, decrees, damages (including incidental and consequential damages) or judgments of any kind or nature whatsoever (including costs of investigation and defense reasonable attorneys', accountants' and experts' fees, and disbursements of counsel).

"Dispute Notice": as defined in Section 1.6(f).

"Determining Experts": as defined in Section 1.6(f).

"Earnout Consideration": as defined in Section Section 1.6(a).

"Earnout Milestone": as defined in Section 1.6(a).

"Earnout Payment": as defined in Section 1.6(b)(B).

"Employee Benefit Plan": as defined in Section 2.8(a).

"Environmental Laws": means all civil and criminal, foreign, international, provincial, federal, state and local laws, rules, regulations, orders, ordinances, policies, guidance documents and common law, which govern or relate to pollution, protection or restoration of the environment, natural resources, safety and health, Releases or threatened Releases of Hazardous Materials, solid or hazardous waste, or otherwise relating to the manufacture, processing, distribution, use, recycling, treatment, storage, Release, transport or handling of Hazardous Materials and all laws and regulations with regard to record keeping, notification, disclosure and reporting requirements respecting Hazardous Materials, together with any governmental entity interpretations of each of the foregoing.

"ERISA": means Employee Retirement Income Security Act of 1974, as amended.

"ERISA Affiliate": means any entity, trade or business (whether or not incorporated) that is treated as a single employer with Seller under Section 4001(b) of ERISA or Code Sections 414(b), (c), (m) or (o).

Exhibit A-2

"Excluded Assets": as defined in Section 1.2.

"Excluded Liabilities": as defined in Section 1.4.

"GAAP": means generally accepted accounting principles as in effect in the United States.

"Government Licenses" means all permits, licenses, franchises, orders, registrations, certificates, variances, approvals and other authorizations obtained from any Governmental Entity, including those listed on Schedule 2.11.

"Governmental Entity": means any foreign, federal, state, municipal or local government, governmental, regulatory or administrative authority, agency, instrumentality or commission or any United States court, tribunal, or judicial or arbitral body of any nature; or any United States body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature.

"Hazardous Materials": means (i) any chemical, compound, material, mixture or substance that is now or hereafter defined or listed in, or otherwise classified pursuant to, any Environmental Laws as a "hazardous substance", "hazardous material", "hazardous waste", "extremely hazardous waste", "acutely hazardous waste", "radioactive waste", "infectious waste", "biohazardous waste", "toxic substance", "pollutant", "toxic pollutant", "contaminant" , "special waste", as well as any formulation not mentioned herein intended to define, list, or classify substances by reason of deleterious properties, including ignitability, corrosivity, reactivity, carcinogenicity, toxicity, reproductive toxicity "EP toxicity," or "TCLP toxicity"; (ii) petroleum, natural gas, natural gas liquids, liquefied natural gas, synthetic gas usable for fuel (or mixtures of natural gas and such synthetic gas) and ash produced by a resource recovery facility utilizing a municipal solid waste stream, and drilling fluids, produced waters and other wastes associated with the exploration, development or production of crude oil, natural gas, or geothermal resources; (iii) "hazardous substance" as defined in Section 25281(f) of the California Health and Safety Code; (iv) "waste" as defined in Section 13050(d) of the California Water Code (v) asbestos in any form; (vi) urea formaldehyde foam insulation; (vii) transformers or other equipment which contain dielectric fluid containing levels of polychlorinated biphenyls (PCBs); (viii) radon; and (ix) any other chemical, material, or substance that, because of its quantity, concentration, or physical or chemical characteristics, exposure to which is limited or regulated for health and safety reasons by any governmental authority, or which poses a present or potential hazard to human health and safety or to the environment if released into the workplace or the environment

"Holdback Account": means the account consisting of the Closing Shares to be established by and administered by Buyer to secure the indemnification obligations of Seller under ARTICLE VI.

"Holdback Period": means the period beginning with the Closing Date and ending on the one year anniversary of the Closing Date.

"Indebtedness": means, as at any date of determination thereof (without duplication): (i) all obligations of Seller for borrowed money or funded indebtedness or issued in substitution for or exchange for borrowed money or funded indebtedness (including obligations in respect of principal, accrued interest, any applicable prepayment charges or premiums and any unpaid fees, expenses or other monetary obligations in respect thereof); (ii) any indebtedness evidenced by any note, bond, debenture or other debt security; (iii) the lease obligations required to be listed on Schedule 2.18(b) and Schedule 2.18(l) or required to be capitalized in accordance with GAAP; (iv) all obligations for reimbursement then required to be made of any obligor on any banker's acceptance or similar transactions (including all letters of credit and all obligations thereunder); (v) all obligations for the deferred purchase price of property or conditional sale obligations of Seller under any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business); (vi) any obligations with respect to the termination of any interest rate hedging or swap agreements; (vii) all obligations of the type referred to in clauses (i) through (vi) of any Person for the payment of which Seller is responsible or liable, directly or indirectly, as guarantor, obligor, surety or otherwise; (viii) obligations of the type referred to in clauses (i) through (vii) of other Persons secured by any Lien on any property or asset of Seller but only to the extent of the value of the property or asset that is subject to such Lien; and (ix) any outstanding but not cleared checks.

Exhibit A-3

"Independent Contractors": as defined in Section 2.7(d).

"Intellectual Property": means: (i) inventions and discoveries (whether or not patentable and whether or not reduced to practice), improvements thereto, and patents, patent applications, invention disclosures, and other rights of invention, worldwide, including without limitation any reissues, divisions, continuations and continuations-in-part, provisionals, reexamined patents or other applications or patents claiming the benefit of the filing date of any such application or patent; (ii) trademarks, service marks, trade names, trade dress, logos, domain names, product names and slogans, including any common law rights, registrations, and applications for registration for any of the foregoing, and the goodwill associated with all of the foregoing, worldwide; (iii) copyrightable works, all rights in copyrights, including moral rights, copyrights, website content, and other rights of authorship and exploitation, and any applications, registrations and renewals in connection therewith, worldwide; (iv) trade secrets and confidential business and technical information, including, without limitation, web site user information, customer and supplier lists and related information, pricing and cost information, business and marketing plans, advertising statistics, any other financial, marketing and business data, technical data, specifications, schematics and know-how; (v) to the extent not covered by subsections (i) through (iv), above, Software and web sites (including all related computer code and content); (vi) rights to exclude others from appropriating any of such intellectual property, including the rights to sue for and remedies against past, present and future infringements of any or all of the foregoing and rights of priority and protection of interests therein; and (vii) any other proprietary, intellectual property and other rights relating to any or all of the foregoing anywhere in the world.

"IP Participant": as defined in Section 2.6(k).

"Knowledge of Buyer" and "Buyer's Knowledge": any particular fact, circumstance, event or other matter in question of which any of Buyer's officers and directors have knowledge. An individual shall be deemed to have knowledge of a particular fact, circumstance, event or other matter if (i) such fact, circumstance, event or other matter is reflected in one or more documents, written or electronic, that are or have been in such individual's possession or that would likely be reviewed by an individual who has the duties and responsibilities of such individual in the customary performance of such duties and responsibilities or (ii) such knowledge would be obtained from reasonable and customary inquiry of those Persons employed by Buyer charged with administrative or operational responsibility for such matter.

"Knowledge of Seller" and "Seller's Knowledge": any particular fact, circumstance, event or other matter in question of which either Nick Glassman, Kartik Ramachandran or any of Seller's other officers and directors have knowledge. An individual shall be deemed to have knowledge of a particular fact, circumstance, event or other matter if (i) such fact, circumstance, event or other matter is reflected in one or more documents, written or electronic, that are or have been in such individual's possession or that would likely be reviewed by an individual who has the duties and responsibilities of such individual in the customary performance of such duties and responsibilities or (ii) such knowledge would be obtained from reasonable and customary inquiry of those Persons employed by Seller charged with administrative or operational responsibility for such matter.

Exhibit A-4

"Law": means any United States federal, state, municipal or local statute, law, ordinance, regulation, rule, code, executive order, injunction, judgment, decree or other order of any Governmental Entity.

"Liabilities": means any and all debts, liabilities, commitments and obligations of any kind, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, asserted or not asserted, known or unknown, determined, determinable or otherwise, whenever or however arising (including, whether arising out of any contract or tort based on negligence or strict liability) and whether or not the same would be required by GAAP to be reflected in financial statements or disclosed in the notes thereto.

"Lien": means any charge, claim, community property interest, condition, equitable interest, lien, license, option, pledge, security interest, right of first refusal or restriction of any kind, including any restriction on use, voting, transfer, receipt of income or exercise of any other attribute of ownership.

"Material Adverse Effect": means any material adverse effect on the Business, the Purchased Assets, the Assumed Liabilities, operations, prospects, or results of operations of the Business or condition (financial or otherwise) of the Business taken as a whole.

"Material Contract": as defined in Section 2.11(a).

"Milestone Notice": as defined in Section 1.6(c).

"Milestone Notice Date": as defined in Section 1.6(c).

"Mobile Devices": means any device, such as a personal data assistant (PDA), mobile phone, or portable gaming device, whose primary networking capability is derived from WiFi (802.11x), RF (radio frequency), IR (infra-red), or satellite technology. Mobile Devices are understood to exclude personal computers.

"Net Media Revenues": means all revenues derived from sources other than subscription revenues from Buyer's retail customers. For purposes of calculating Net Media Revenues for any given period, all revenue attributable to businesses and assets that Buyer acquires after the Closing shall be excluded.

"Organizational Documents": as defined in Section 2.1.

"Page View": means any impression that has the technical capability of delivering an advertising asset within it.

"Payoff Letters": means the letters provided by the lenders or other holders of Indebtedness to Seller in connection with the repayment of the Indebtedness as contemplated hereby.

"Permitted Liens": means Liens for Taxes not yet due and payable.

"Person": means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated association, corporation, limited liability company, entity or Governmental Entity.

"Premium Mobile and Web Revenues": means all revenues outside of mobile advertising and sponsorship generated by Buyer, including one time billing events, subscriptions, or season/league-long purchases, and third-party content licensing and services relationships, but excluding in all cases subscription revenue from Buyer's retail customers.

Exhibit A-5

"Purchased Assets": as defined in Section 1.1.

"Purchased Contracts": as defined in Section 1.1(c).

"Release": means any spill, emission, discharge, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, release, presence or migration of Hazardous Materials on, above, under, onto, in or into the environment or into or out of any property.

"Securities": means the Closing Shares, the $0.30 Warrant, the $0.50 Warrant and the shares of Buyer's common stock issuable upon exercise of the $0.30 Warrant and the $0.50 Warrant.

"Securities Act": means the Securities Act of 1933, as amended.

"Seller IP Rights": means all of the rights and interests of Seller in Intellectual Property used in, or useful in the conduct of, the Business wherever located, remedies against infringement thereof and rights of protection of interests therein and all related goodwill, including without limitation, Software and the other Intellectual Property and related rights as set forth on Schedule 2.6.

"Software": means the computer software included in the Software Rights.

"Software Rights": as defined in Section 2.6(f).

"Straddle Period": as defined in Section 4.2(c).

"Subsidiary": with respect to any Person, means any corporation a majority (by number of votes) of the outstanding shares of any class or classes of which shall at the time be owned by such Person or by a Subsidiary of such Person, if the holders of the shares of such class or classes (i) are ordinarily, in the absence of contingencies, entitled to vote for the election of a majority of the directors (or Persons performing similar functions) of the issuer thereof, even though the right so to vote has been suspended by the happening of such a contingency, or (ii) are at the time entitled, as such holders, to vote for the election of a majority of the directors (or Persons performing similar functions) of the issuer thereof, whether or not the right so to vote exists by reason of the happening of a contingency.

"Tax" or, collectively, "Taxes": means (i) any and all federal, state, local, or non-U.S. income, franchise, sales and use taxes, real and personal property (tangible and intangible) taxes, gross receipts taxes, documentary transfer taxes, excise taxes, employment taxes, withholding taxes, unemployment insurance contributions, unclaimed property, value added taxes and any other taxes or governmental charges of any kind, however denominated, including any interest, penalties and additions to tax in respect thereto, and (ii) any liability for the payment of any amounts of the type described in clause (i) as a result of any express or implied obligation to indemnify any other Person as a result of any obligations under any agreements or arrangements with any other Person with respect to such amounts, or as a successor or transferee, or pursuant to the provisions of Treasury Regulation 1.1502-6 (and any comparable provision of state, foreign or local law).

"Tax Purchase Price": as defined in Section 1.8.

Exhibit A-6

"Tax Return": means any return, declaration, report, claim for refund, or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof.

"Transaction Document": as defined in Section 2.2.

"Transfer": means any sale, assignment, transfer, conveyance, pledge, hypothecation or other disposition, voluntarily or involuntarily, by operation of law, with or without consideration, or otherwise (including by way of intestacy, will, gift, bankruptcy, receivership, levy, execution, charging order or other similar sale or seizure by legal process).

"Transferred Employees": as defined in Section 5.1(c).

"Unique Viewer": means a visitor to one of Buyer's consumer websites who is identified unique by one of several different variables based on the technology used, including IP address via reverse DNS lookup, user agent, and cookie and/or registration identification.

"Year 1": means the partial-year period commencing on the Closing Date and ending on December 31, 2009.

"Year 2": means the 12-month period commencing on January 1, 2010 and ending on December 31, 2010.

"Year 3": means the 12-month period commencing on January 1, 2011 and ending on December 31, 2011.

Exhibit A-7

EX-4.1 3 ntn_10k-ex401.htm STOCK CERTIFICATE ntn_10k-ex404.htm

Exhibit 4.1

[OBVERSE]

Common Stock

Buzztime®

>>PLAY ALONG TV®

Number

INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE

SEE REVERSE FOR CERTAIN DEFINITIONS

NTN BUZZTIME, INC.

This Certifies That _______________

is the record holder of _____________

FULLY PAID AND NONASSESABLE SHARES OF THE COMMON STOCK, $.005 PAR VALUE OF

NTN BUZZTIME, INC.

transferable on the books of the Corporation in person or by duly authorized attorney on surrender of this certificate properly endorsed. This certificate shall not be valid until countersigned and registered by the Transfer Agent and Registrar.

WITNESS the facsimile seal of the Corporation and the signatures of its duly authorized officers.

Dated: _________________

SECRETARY

[SEAL]

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

[REVERSE]

THe Corporation shall furnish without charge to each holder who so requests a statement of the powers, designations, preferences and relative, participating, optional or other special rights of each class of stock of the Corporation or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Such requests shall be made to the Corporation's Secretary at the principal office of the Corporation.

KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR DESTROYED TEH CORPORATION WILL REQUIRED A BOND OF INDEMNITY AS CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:

TEN COM – as tenants in common	UNIF GIFT MIN ACT–	Custodian .
TEN ENT – as tenants by the entireties	(Cust)	(Minor)
JT TEN – as joint tenants with right of survivorship and not as tenants in common		under Uniform Gifts to Minors Act
		(State)
	UNIF TRF MIN ACT– ...........	Custodian (until age.....)
	(Cust)	(Minor)
	to Minors Act	(State)

Additional abbreviations may also be used though not in the above list.

[STOCK POWER]

EX-4.3 4 ntn_10k-ex0403.htm WARRANT ntn_10k-ex0403.htm

Exhibit 4.3

NTN BUZZTIME INC.

WARRANT

[_________], 2009

NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED WITH THE SEC UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), IN RELIANCE UPON ONE OR MORE EXEMPTIONS FROM REGISTRATION OR QUALIFICATION AFFORDED BY THE SECURITIES ACT AND/OR RULES PROMULGATED BY THE SEC PURSUANT THERETO. NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED OR QUALIFIED (AS THE CASE MAY BE) UNDER THE SECURITIES LAWS OF ANY STATE OR TERRITORY OF THE UNITED STATES (THE "BLUE SKY LAWS"), IN RELIANCE UPON ONE OR MORE EXEMPTIONS FROM REGISTRATION OR QUALIFICATION (AS THE CASE MAY BE) AFFORDED UNDER SUCH SECURITIES LAWS. THIS WARRANT HAS BEEN ACQUIRED FOR THE HOLDER'S OWN ACCOUNT FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW FOR RESALE OR DISTRIBUTION.

THIS CERTIFIES THAT, for value received, Holder is entitled, subject to the terms and conditions of this Warrant, at any time following the Effective Date and before 5:30 P.M. San Diego, California time on the Expiration Date, to purchase from Company, __________________________________ shares of Common Stock (such shares and all other shares issued or issuable pursuant to this Warrant referred to hereinafter as "Warrant Shares") at a price of _________________________ per share (the "Exercise Price").

1. Definitions: As used in this Warrant, the following terms shall have the following respective meanings:

"Common Stock" means the common stock, $0.005 par value, of the Company.

"Effective Date" means the date hereof.

"Expiration Date" means the eight year anniversary of the Effective Date.

"Fair Market Value" of a share of Common Stock as of a particular date means:

(a)	If the Common Stock is then listed or quoted on a Trading Market, the Fair Market Value shall be deemed to be the average of the closing price of the Common Stock on such Trading Market over the ten (10) Trading Days ending on the Trading Day immediately prior to the applicable date of valuation;

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(b)

If the Common Stock is not then quoted or listed on a Trading Market and if prices for the Common Stock are then reported in the "Pink Sheets" published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; and

(c)

If the Common Stock is not then quoted or listed on a Trading Market and if prices for the Common Stock are not then reported in the "Pink Sheets," the Fair Market Value shall be the value thereof, as agreed upon by the Company and the Holder; provided, however, that if the Company and the Holder cannot agree on such value, such value shall be determined by an independent valuation firm experienced in valuing businesses such as the Company and jointly selected in good faith by the Company and the Holder. Fees and expenses of the valuation firms shall be paid equally by the Company and the Holder.

"Person" means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated association, corporation, limited liability company, entity, including any governmental authority or political subdivision thereof.

"SEC" means the United States Securities and Exchange Commission.

"Trading Day" means a day on which the NYSE Amex is open for trading.

"Trading Market" means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE Amex, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange or the OTC Bulletin Board.

"Transfer" means any sale, assignment, transfer, conveyance, pledge, hypothecation or other disposition, voluntarily or involuntarily, by operation of law, with or without consideration, or otherwise (including by way of intestacy, will, gift, bankruptcy, receivership, levy, execution, charging order or other similar sale or seizure by legal process).

"Warrant" means this Warrant and any warrant delivered in substitution or exchange therefor as provided herein.

2. Exercise.

2.1 Payment. Subject to compliance with the terms and conditions of this Warrant and applicable securities laws, this Warrant may be exercised, in whole or in part at any time or from time to time, from and after the Effective Date and on or before the Expiration Date by delivery of the form of Notice of Exercise attached hereto as Exhibit 1 (the "Notice of Exercise"), duly executed by the Holder, to the Company at its then principal office, and as soon as practicable after such date, surrendering:

(a)	this Warrant at the principal office of the Company, and

(b)	payment in cash, by check or by wire transfer of an amount equal to the product obtained by multiplying the number of shares of Warrant Shares being purchased upon such exercise by the then effective Exercise Price.

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2.2 Cashless Exercise. In lieu of the payment methods set forth in Section 2.1(b) above, this Warrant may also be exercised, in whole or in part at any time or from time to time, from and after the Effective Date and on or before the Expiration Date, by means of a "cashless exercise" in which Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A)	=	the Fair Market Value of one share of Common Stock on the Trading Day immediately preceding the date of such election
(B)	=	the Exercise Price of one share of Warrant Shares (as adjusted to the date of such calculation)
(X)	=	the number of Warrant Shares purchasable under this Warrant or, if only a portion of this Warrant is being exercised, the portion of this Warrant being canceled (at the date of such calculation)

If the Holder elects to exchange this Warrant as provided in this Section 2.2, the Holder shall tender the Warrant for the amount being exchanged, along with the Notice of Exercise, duly executed by the Holder, to the Company at its then principal office, and the Company shall issue to the Holder the number of shares of the Warrant Shares computed using the formula above.

2.3 Stock Certificates; Fractional Shares. As soon as practicable on or after any date of exercise of this Warrant pursuant to this Section 2, the Company shall issue and deliver to Holder a certificate or certificates for the number of whole shares of Warrant Shares issuable upon such exercise, together with cash in lieu of any fraction of a share equal to such fraction of the current Fair Market Value of one whole share of Warrant Shares as of the date of exercise of this Warrant. No fractional shares or scrip representing fractional shares shall be issued upon an exercise of this Warrant.

2.4 Partial Exercise; Effective Date of Exercise. In case of any partial exercise of this Warrant, the Company shall cancel this Warrant upon surrender hereof and shall execute and deliver a new Warrant of like tenor and date for the balance of the shares of Warrant Shares purchasable hereunder. This Warrant shall be deemed to have been exercised immediately prior to the close of business on the date of its surrender for exercise as provided above. Holder shall be treated for all purposes as the holder of record of the Warrant Shares to which it is entitled upon exercise of this Warrant as of the close of business on the date the Holder is deemed to have exercised this Warrant.

2.5 Exercise Price Adjustment. The Exercise Price in effect at any time and the number of Warrant Shares purchased upon the exercise of this Warrant shall be subject to adjustment from time to time only upon the happening of the following events:

(a) Stock Dividend, Subdivision and Combination. In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action and the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action. Such adjustment shall be made successively whenever any event listed above shall occur.

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(b) Adjustment in Number of Securities. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 2.5, the number of Warrant Shares issuable upon the exercise at the adjusted Exercise Price of this Warrant shall be adjusted to the nearest number of whole shares of Common Stock by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price.

(c) Notice of Adjustment. Whenever the Exercise Price shall be adjusted as provided in this Section 2.5, the Company shall provide notice of such adjustment to the holder of this Warrant together with a statement, certified by the chief financial officer of the Company, showing in detail the facts requiring such adjustment and the Exercise Price that shall be in effect after such adjustment. Notwithstanding anything to the contrary, no adjustment in the Exercise Price shall be required unless such adjustment would require a change in the Exercise Price of at least one cent ($0.01); provided, however, that any adjustments which by reason of this Section 2.5(c) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.

3. Valid Issuance; Taxes. All shares of Warrant Shares issued upon the exercise of this Warrant shall be validly issued, fully paid and non-assessable; provided that Holder shall pay all taxes and other governmental charges that may be imposed in respect of the issue or delivery thereof. The Company shall not be required to pay any tax or other charge imposed in connection with any transfer involved in the issuance of any certificate for shares of Warrant Shares in any name other than that of the Holder, and in such case the Company shall not be required to issue or deliver any stock certificate or security until such tax or other charge has been paid, or it has been established to the Company's satisfaction that no tax or other charge is due.

4. Loss or Mutilation. Upon receipt of evidence satisfactory to the Company of the ownership of and the loss, theft, destruction or mutilation of this Warrant, and of indemnity satisfactory to it, and (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company shall execute and deliver in lieu thereof a new Warrant of like tenor as the lost, stolen, destroyed or mutilated Warrant.

5. Reservation of Warrant Shares. The Company hereby covenants that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant such number of shares of Common Stock or other shares of capital stock of the Company as are from time to time issuable upon exercise of this Warrant and, from time to time as necessary, will take all steps necessary to amend its certificate of incorporation to provide sufficient reserves of shares of Common Stock issuable upon exercise of this Warrant. All such shares shall be duly authorized, and when issued upon such exercise, shall be validly issued, fully paid and non-assessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights, except encumbrances or restrictions arising under federal or state securities laws. Issuance of this Warrant shall constitute full authority to the Company's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Warrant Shares upon the exercise of this Warrant.

6. Restrictions On Transfer. The Holder, by acceptance hereof, agrees that, absent an effective registration statement filed with the SEC under the Securities Act of 1933, as amended (the "Securities Act"), covering the disposition or sale of this Warrant or the Warrant Shares, as the case may be, and registration or qualification under applicable state securities laws, such Holder shall not Transfer any or all of this Warrant or Warrant Shares, as the case may be, unless the Company has received a written opinion of counsel, in form and substance satisfactory to the Company, that no such registration is required and that the transfer will not otherwise violate the Securities Act, the Securities Exchange Act of 1934, or applicable state securities laws.

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7. Notice. All notices and other communications from the Company to the Holder shall be sent to the Holder at the address for such Holder set forth on the Company's books and records.

8. Headings; Section Reference. The headings in this Warrant are for purposes of convenience in reference only, and shall not be deemed to constitute a part hereof. All Section references herein are references to Sections of this Warrant unless specified otherwise.

9. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of California without regard to the conflict of laws provisions. The parties agree that the California Superior Court located in the County of San Diego, State of California shall have exclusive jurisdiction in connection with any dispute concerning or arising out of this Warrant, or otherwise relating to the parties relationship. In any action, lawsuit or proceeding brought to enforce or interpret the provisions of this Warrant and/or arising out of or relating to any dispute between the parties, the prevailing party with respect to each specific issue in a matter shall be entitled to recover all of his or its costs and expenses relating to such issue (including without limitation, reasonable attorney's fees and disbursements) in addition to any other relief to which such party may be entitled.

10. Severability. If any term, provision, covenant or restriction of this Warrant is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Warrant shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

11. Counterparts. For the convenience of the parties, any number of counterparts of this Warrant may be executed by the parties hereto and each such executed counterpart shall be, and shall be deemed to be, an original instrument.

12. Saturdays, Sundays and Holidays. If the Expiration Date falls on any day that is not a Trading Day, the Expiration Date shall automatically be extended until 5:30 P.M. the next Trading Day.

[Signature Page Follows]

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IN WITNESS WHEREOF, the undersigned duly authorized representative of the Company has executed this Warrant as of the day and date first written above.

NTN Buzztime, Inc.

By:___________________________

Agreed and Accepted:

Holder:

iSports Inc., a California corporation

/s/ Nicholas Glassman

Nicholas Glassman

Chief Executive Officer

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EXHIBIT 1

NOTICE OF EXERCISE

(To be executed upon exercise of Warrant)

TO: NTN BUZZTIME, INC.

The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant, and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. If said number of Warrant Shares shall not be all the Warrant Shares purchasable under the attached Warrant, a new Warrant is to be issued in the name of the undersigned for the balance remaining of the shares purchasable thereunder rounded up to the next higher whole number of shares.

2.	Payment shall take the form of (check applicable box):

[ ] in lawful money of the United States; or

[ ] the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in Section 2.2, to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in Section 2.2.

Date:__________________________	iSports Inc., a California corporation

	__________________________________
	By:
	Its:

EX-4.4 5 ntn_10k-ex404.htm WARRANT ntn_10k-ex404.htm

Exhibit 4.4

NTN BUZZTIME INC.

WARRANT

May 11, 2009

This Warrant is being issued in connection with that certain Asset Purchase Agreement (the "Purchase Agreement") of even date herewith by and between NTN Buzztime, Inc., a Delaware corporation ("Company") and Instant Access Media, LLC, a Colorado limited liability company ("IAM"), pursuant to which Company is acquiring from IAM certain assets, and is assuming certain liabilities, related to the business of IAM. Pursuant to an instruction letter of even date herewith given by IAM to Company, IAM has instructed Company to issue this Warrant to ________________ or its permitted assigns ("Holder").

THIS CERTIFIES THAT, for value received, Holder is entitled, subject to the terms and conditions of this Warrant, at any time following the Effective Date and before 5:30 P.M. San Diego, California time on the Expiration Date, to purchase from Company, ____________ shares of Common Stock (such shares and all other shares issued or issuable pursuant to this Warrant referred to hereinafter as "Warrant Shares") at a price of $[___] per share (such price, as adjusted hereunder, the "Exercise Price").

1. Definitions: As used in this Warrant, the following terms shall have the following respective meanings:

"Common Stock" means the common stock, $0.005 par value, of the Company.

"Convertible Securities" means evidences of indebtedness, shares of stock or other securities which are convertible into or exchangeable for, with or without payment of additional consideration, shares of Common Stock, either immediately or upon the arrival of a specified date or the happening of a specified event or both.

"Effective Date" means the date hereof.

"Exercise Date" means, in the case of an exercise pursuant to Section 2.1, the date on which the aggregate Exercise Price is received by the Company, together with delivery of the Notice of Exercise and this Warrant, in accordance with Section 2.1, and, in the case of an exercise pursuant to Section 2.2, the date on which the Notice of Exercise and this Warrant are delivered to the Company in accordance with Section 2.2.

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"Expiration Date" means the eight year anniversary of the Effective Date.

"Fair Market Value" of a share of Common Stock as of a particular date means:

(a)

If the Common Stock is then listed or quoted on a Trading Market, the Fair Market Value shall be deemed to be the average of the closing price of the Common Stock on such Trading Market over the ten (10) Trading Days ending on the Trading Day immediately prior to the Exercise Date;

(b)

(c)

"Fundamental Transaction" means (i) any consolidation or merger of the Company with or into any other corporation or other entity or person, or any other corporate reorganization, in which the stockholders of the Company immediately prior to such consolidation, merger or reorganization own less than 50% of the voting power of the surviving entity immediately after such consolidation, merger or reorganization, or the Common Stock is converted into or exchanged for securities, cash or other property (ii) any transaction or series of related transactions to which the Company is a party in which in excess of 50% of the Company’s voting power is transferred or (iii) any sale, lease, exclusive license or other transfer (in one transaction or a series of related transactions) of all or substantially all of the Company’s assets to any person or group of related persons (other than to any of the Company’s wholly owned subsidiaries.

"SEC" means the United States Securities and Exchange Commission.

"Trading Day" means a day on which the NYSE Amex is open for trading.

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"Warrant" means this Warrant and any warrant delivered in substitution or exchange therefor as provided herein.

2. Exercise.

(a)

the form of Notice of Exercise attached hereto as Exhibit 1 (the "Notice of Exercise"), duly executed by the Holder, to the Company at its principal office,

(b)

this Warrant to the Company at its principal office, and

(c)

payment in cash, by check or by wire transfer of an amount equal to the product obtained by multiplying the number of shares of Warrant Shares being purchased upon such exercise by the then effective Exercise Price.

2.2 Cashless Exercise. In lieu of the payment methods set forth in Section 2.1(c) above, this Warrant may also be exercised, in whole or in part at any time or from time to time, from and after the Effective Date and on or before the Expiration Date, by means of a "cashless exercise" in which Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

(A)	=	the Fair Market Value of one share of Common Stock on the Trading Day immediately preceding the Exercise Date
(B)	=	the Exercise Price of one share of Warrant Shares (as adjusted to the date of such calculation)
(X)	=	the number of Warrant Shares purchasable under this Warrant or, if only a portion of this Warrant is being exercised, the portion of this Warrant being canceled (at the date of such calculation)

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(a) Stock Dividend, Subdivision and Combination. In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock or Convertible Securities without payment of any consideration for the additional shares of Common Stock or the Convertible Securities (including the additional shares of Common Stock issuable pursuant to the terms thereof), (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately prior to such action and the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action (including the additional shares of Common Stock issuable pursuant to the terms of Convertible Securities issued as a dividend or as a distribution as contemplated by clause (i) of this Section 2.5(a)). Such adjustment shall be made successively whenever any event listed above shall occur.

(b) Other Distributions. If at any time after the date hereof the Company distributes to holders of its Common Stock, other than as part of its dissolution or liquidation or the winding up of its affairs, any shares of its capital stock, any evidence of indebtedness or any of its assets (other than cash, Common Stock or Convertible Securities), then the Company may, at its option, either (i) decrease the Exercise Price of this Warrant by an appropriate amount based upon the value distributed on each share of Common Stock as determined in good faith by the Company’s board of directors or (ii) provide by resolution of the Company’s board of directors that on exercise of this Warrant, the Holder hereof shall thereafter be entitled to receive, in addition to the Shares of Common Stock otherwise receivable on exercise hereof, the number of shares or other securities or property which would have been received had this Warrant at the time been exercised.

(c) Merger. If at any time after the date hereof there shall be a merger, consolidation, share exchange or similar transaction of the Company with or into another entity (other than any such transaction in which the Company is the surviving entity and which does not result in any reclassification or change in the securities issuable upon exercise of this Warrant), then the Company will make provision to ensure that the Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the aggregate Exercise Price then in effect, the number of shares or other securities or property of the Company, or successor entity resulting from such transaction, which would have been received by Holder for the Shares subject to this Warrant had this Warrant been exercised at such time.

(d) Reclassification, Etc. If at any time after the date hereof there shall be a change or reclassification of the securities as to which purchase rights under this Warrant exist into the same or a different number of securities of any other class or classes, then the Holder shall thereafter be entitled to receive upon exercise of this Warrant, during the period specified herein and upon payment of the Exercise Price then in effect, the number of shares or other securities or property resulting from such change or reclassification, which would have been received by Holder for the Shares subject to this Warrant had this Warrant been exercised at such time.

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(e) Adjustment in Number of Securities. Upon each adjustment of the Exercise Price pursuant to the provisions of this Section 2.5, the number of Warrant Shares issuable upon the exercise at the adjusted Exercise Price of this Warrant shall be adjusted to the nearest number of whole shares of Common Stock by multiplying a number equal to the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares issuable upon exercise of this Warrant immediately prior to such adjustment and dividing the product so obtained by the adjusted Exercise Price.

(f) Notice of Adjustment. Whenever the Exercise Price shall be adjusted as provided in this Section 2.5, the Company shall provide notice of such adjustment to the holder of this Warrant together with a statement, certified by the chief financial officer of the Company, showing in detail the facts requiring such adjustment and the Exercise Price that shall be in effect after such adjustment. Notwithstanding anything to the contrary, no adjustment in the Exercise Price shall be required unless such adjustment would require a change in the Exercise Price of at least one cent ($0.01); provided, however, that any adjustments which by reason of this Section 2.5(f) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.

4. Listing. Prior to the issuance of any shares of Common Stock upon exercise of this Warrant, the Company shall secure the listing of such shares of Common Stock upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance upon exercise of this Warrant) and shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all shares of Common Stock from time to time issuable upon the exercise of this Warrant; and the Company shall so list on each national securities exchange or automated quotation system, and shall maintain such listing of, any other shares of capital stock of the Company issuable upon the exercise of this Warrant if and so long as any shares of the same class shall be listed on such national securities exchange or automated quotation system.

5. Loss or Mutilation. Upon receipt of evidence satisfactory to the Company of the ownership of and the loss, theft, destruction or mutilation of this Warrant, and of indemnity satisfactory to it, or (in the case of mutilation) upon surrender and cancellation of this Warrant, the Company shall execute and deliver in lieu thereof a new Warrant of like tenor as the lost, stolen, destroyed or mutilated Warrant.

6. Reservation of Warrant Shares. The Company hereby covenants that at all times there shall be reserved for issuance and delivery upon exercise of this Warrant such number of shares of Common Stock or other shares of capital stock of the Company as are from time to time issuable upon exercise of this Warrant and, from time to time as necessary, will take all steps necessary to amend its certificate of incorporation to provide sufficient reserves of shares of Common Stock issuable upon exercise of this Warrant. All such shares shall be duly authorized, and when issued upon such exercise, shall be validly issued, fully paid and non-assessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights, except encumbrances or restrictions arising under federal or state securities laws. Issuance of this Warrant shall constitute full authority to the Company's officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Warrant Shares upon the exercise of this Warrant.

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7. Restrictions On Transfer. This Warrant and the Warrant Shares are subject to the transfer restrictions as set forth in the Purchase Agreement. The Holder, by acceptance hereof, agrees that, such Holder shall not Transfer any or all of this Warrant or the Warrant Shares, as the case may be, except in compliance with the restrictions on transfer as set forth in the Purchase Agreement.

8. Notice of Record Date and Certain Other Events. In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, the Company shall mail to the Holder, at least fifteen (15) days prior to the date on which any such record is to be taken for the purpose of such dividend or distribution, a notice specifying such date. In the event of any voluntary dissolution, liquidation or winding up of the Company, the Company shall mail to the Holder, at least fifteen (15) days prior to the date of the occurrence of any such event, a notice specifying such date. In the event the Company authorizes or approves, enters into any agreement contemplating, or solicits stockholder approval for any Fundamental Transaction, the Company shall mail to the Holder, at least fifteen (15) days prior to the date of the closing of such event, a notice specifying such date. Notwithstanding the foregoing, the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.

9. Notice. All notices and other communications from the Company to the Holder shall be in writing and shall be sufficiently given if (a) delivered personally or (b) sent by registered or certified mail, postage prepaid, or (c) sent by overnight courier with a nationally recognized courier, or (d) sent via facsimile confirmed in writing in any of the foregoing manners to the Holder at the address for such Holder set forth on the Company's books and records. If sent by mail, notice shall be considered delivered five business days after the date of mailing, and if sent by any other means set forth above, notice shall be considered delivered upon receipt thereof.

10. Headings; Section Reference. The headings in this Warrant are for purposes of convenience in reference only, and shall not be deemed to constitute a part hereof. All Section references herein are references to Sections of this Warrant unless specified otherwise.

11. Governing Law. This Warrant shall be governed by and construed in accordance with the laws of the State of California without regard to the conflict of laws provisions. In any action, lawsuit or proceeding brought to enforce or interpret the provisions of this Warrant and/or arising out of or relating to any dispute between the parties, the prevailing party with respect to each specific issue in a matter shall be entitled to recover all of his or its costs and expenses relating to such issue (including without limitation, reasonable attorney's fees and disbursements) in addition to any other relief to which such party may be entitled.

12. Severability. If any term, provision, covenant or restriction of this Warrant is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Warrant shall remain in full force and effect and shall in no way be affected, impaired or invalidated.

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13. Counterparts. For the convenience of the parties, any number of counterparts of this Warrant may be executed by the parties hereto and each such executed counterpart shall be, and shall be deemed to be, an original instrument.

14. Saturdays, Sundays and Holidays. If the Expiration Date falls on any day that is not a Trading Day, the Expiration Date shall automatically be extended until 5:30 P.M. the next Trading Day.

[Signature Page Follows]

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IN WITNESS WHEREOF, the undersigned duly authorized representative of the Company has executed this Warrant as of the day and date first written above.

	NTN Buzztime, Inc.


	By:
	Its:

	Agreed and Accepted:

	Holder:




	By:
	Its:

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EXHIBIT 1

NOTICE OF EXERCISE

(To be executed upon exercise of Warrant)

TO: NTN BUZZTIME, INC.

2.	Payment shall take the form of (check applicable box):

[ ] in lawful money of the United States; or

Date: _________________________	Instant Access Media, LLC


By:
Its:

EX-10.5 6 ntn_10k-ex1005.htm 2ND AMENDMENT TO LEASE ntn_10k-ex1005.htm

Exhibit 10.5

SECOND AMENDMENT TO LEASE

(The Campus)

THIS SECOND AMENDMENT TO LEASE ("Second Amendment") is made and entered into as of the I& day of February, 2006, by and between COGNAC CAMPUS LLC, a Delaware limited liability company ("Landlord") and NTN BUZZTIME, INC., a Delaware corporation ("Tenant").

RECITALS:

A. Prentiss Properties Acquisition Partners, L.P., a Delaware limited partnership ("Original Landlord") and NTN Communications, Inc., a Delaware corporation ("Original Tenant"), entered into that certain Standard Multi-Occupancy Lease dated as of July 17, 2000 (the "Original Lease"), as amended by that certain First Amendment to Lease dated October 4, 2005 by and between Original Landlord and Original Tenant ("First Amendment"), whereby Original Landlord leased to Original Tenant and Original Tenant leased from Original Landlord certain space located in that certain building located and addressed at 5966 La Place Court, Carlsbad, California (the "Building"). The Original Lease, as amended by the First Amendment, may be referred to herein as the "Lease." Landlord is the successor-in-interest in the Lease to Original Landlord. Tenant is the successor-in-interest in the Lease to Original Tenant by way of name change.

B. By this Second Amendment, Landlord and Tenant desire to (i) expand the Existing Premises (as defined below), (ii) extend the Term of the Lease, and (iii) otherwise modify the Lease as provided herein.

C. Unless otherwise defined herein, capitalized terms as used herein shall have the same meanings as given thereto in the Lease.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

AGREEMENT:

1. The Existing Premises. Landlord and Tenant hereby agree that pursuant to the Lease, Landlord currently leases to Tenant and Tenant currently leases from Landlord that certain space in the Building containing 39,397 rentable square feet of space ("Existing Premises"), as more particularly described in the Lease.

2. The Expansion Space; Term.

2.1. The Expansion Space. That certain space in the Building containing 2,122 rentable (2,034 usable) square feet of space, as outlined on the floor plan attached hereto as Exhibit "A" and made a part hereof, may be referred to herein as the "Expansion Space." From and after April 1, 2006 ("Expansion Space Commencement Date"), Tenant shall lease from Landlord and Landlord shall lease to Tenant the Expansion Space. Accordingly, effective upon the Expansion Space Commencement Date, the Existing Pre mises shall be increased to include the Expansion Space. Landlord and Tenant hereby agree that such addition of the Expansion Space to the Existing Premises shall, effective as of the Expansion Space Commencement Date, increase the number of rentable square feet leased by Tenant in the Building to a total of 41,519 rentable square feet. Effective as of the Expansion Space Commencement Date, all references in the Lease to the "Premises" shall mean and refer to the Existing Premises and the Expansion Space.

2.2. Term. The term of Tenant's lease of the Expansion Space ("Expansion Space Term") shall be for a period of sixty-three (63) months, commencing on the Expansion Space Commencement Date and ending, unless sooner terminated as provided in the Lease, on June 30, 2011 ("Expansion Space Termination Date").

3. Monthly Base Rent for the Expansion Space. Commencing as of the Expansion Space Commencement Date and continuing until the Expansion Space Termination Date, Tenant shall pay, in accordance with the provisions of this Section 3, monthly Base Rent for the Expansion Space and in addition to all other charges and additional rent payable by Tenant for the Premises (including the Existing Premises and the Expansion Space) as follows:

Monthly Base Rent

Months of Expansion Space Term	Monthly Base Rent	Monthly Base Rent per rentable square feet of Expansion Space
4/1/06 — 06/30/07	$1,697.60	$0.80
7/1/07 — 06/30/08	$1,740.04	$0.82
7/1/08 — 06/30/09	$1,803.70	$0.85
7/1/09 — 06/30/10	$1,846.14	$0.87
7/1/10 — 06/30/11	$1,909.80	$0.90

4. Tenant's Proportionate Share. Commencing as of the Expansion Space Commencement Date and continuing until the Expansion Space Termination Date, Tenant's Proportionate Share shall be 65.86%; provided, however, that in determining Tenant's Proportionate Share of Operating Expenses, Landlord shall have the right, from time to time, to equitably allocate some or all of the Operating Expenses between the Building and/or among different tenants of the Project and/or different buildings of the Project (the "Cost Pools"). Such Cost Pools may include, without limitation, the office space tenants and industrial space tenants of the Project or of a building or buildings in the Project. As of the date hereof, Tenant acknowledges and agrees that such Cost Pools include an allocation by Landlord of (i) certain Operating Expenses attributable solely to the buildings located at 5964 and 5966 La Place Court to the tenants of those buildings, and (ii) certain Operating Expenses attributable to the Project as a whole to all tenants of the Project. Such Cost Pools may also include an allocation of certain Operating Expenses within or under covenants, conditions and restrictions affecting the Project. In addition, Landlord shall have the right from time to time, in its reasonable discretion, to include or exclude existing or future buildings in the Project for purposes of determining Operating Expenses and/or the provision of various services and amenities thereto, including allocation of Operating Expenses in any such Cost Pools.

5. Condition of Premises and Landlord's Work.

5.1. Condition of Premises. Tenant hereby agrees to accept the Premises (including the Existing Premises and the Expansion Space) in its "as-is" condition and Tenant hereby acknowledges that Landlord, except as otherwise provided below, shall not be obligated to provide or pay for any improvement work or services related to the improvement of the Premises. Tenant also acknowledges that Landlord has made no representation or warranty regarding the condition of the Premises.

5.2. Landlord's Work in Expansion Space. Prior to the Expansion Space Commencement Date, Landlord shall, at Landlord's sole cost and expense, using Building-standard materials and in Landlord's Building-standard manner, construct those certain improvements in the Expansion Space as described on the scope of work and work plan attached hereto as Exhibit "B" (collectively, "Landlord's Work").

6. Use of Expansion Space. Notwithstanding anything in the Lease to the contrary, the Expansion Space may only be utilized by Tenant for warehouse purposes (and for no other purpose whatsoever), all to the extent in compliance with all applicable laws and consistent with the character of the Project as a first-class project.

7. Brokers. Except for Brandywine Operating Partnership, L.P. ("Landlord's Broker"), each party represents and warrants to the other that no broker, agent or finder negotiated or was instrumental in negotiating or consummating this Second Amendment. Each party further agrees to defend, indemnify and hold harmless the other party from and against any claim for commission or finder's fee by any entity (other than Landlord's Broker) who claims or alleges that they were retained or engaged by the first party or at the request of such party in connection with this Second Amendment.

8. Security Deposit. Tenant has previously deposited with Landlord Forty-Five Thousand One Hundred Sixty-Seven and 14/100 Dollars ($45,167.14) as a Security Deposit under the Lease. On or before the Expansion Space Commencement Date, Tenant shall deposit with Landlord an additional One Thousand Nine Hundred Nine and 80/100 Dollars ($1,909.80), for a total Security Deposit under the Lease, as amended herein, of Forty-Seven Thousand Seventy-Six and 94/100 Dollars ($47,076.94). Landlord shall continue to hold the Security Deposit (as increased herein) in accordance with the terms and conditions of Section Q-12 of the Lease.

9. Notices to Landlord. Effective as of the date of this Second Amendment, any notices to Landlord must be sent, delivered or transmitted, as the case may be, as follows:

Notices for Rent:

Cognac Campus LLC

P.O. Box 100276

Pasadena, CA 91189-0276

All other notices:

Cognac Campus LLC

c/o Prudential Real Estate Investors

4 Embarcadero Center, Suite 2700

San Francisco, CA 94111

Attention: Pat Coffey

with a copy to:

Cognac Campus LLC

c/o Prudential Real Estate Investors

8 Campus Drive, 4th Floor

Parsippany, NJ 07054

Attention: Greg Shanklin, Legal Department

and

Brandywine Operating Partnership, LP

705 Palomar Airport Road, Suite 320

Carlsbad, CA 92011

Attention: Vice President

10. Authority. Each individual executing this Second Amendment on behalf of Tenant represents and warrants that Tenant is a duly formed and existing entity qualified to do business in California and that Tenant has full right and authority to deliver this Second Amendment and that each person signing on behalf of Tenant is authorized to do so.

11. ERISA. To induce Landlord to enter into this Second Amendment, and in order to enable The Prudential Insurance Company of America ("Prudential") to satisfy its compliance with the Employee Retirement Income Security Act of 1974, as amended, Tenant represents and warrants to Landlord and Prudential that: (i) neither Tenant nor any of its affiliates (within the meaning of Part V(c) of Prohibited Transaction Exemption 84-14 granted by the U.S. Department of Labor ("PTE 84-14")) has, or during the immediately preceding year has exercised, the authority to appoint or terminate Pr udential as investment manager of any assets of the employee benefit plan whose assets are held by Prudential or to negotiate the terms of any management agreement with Prudential on behalf of any such plan; (ii) the transaction evidenced by the Lease (as modified by this Second Amendment) is not specifically excluded by Part I(b) of PTE 84-14; (iii) the undersigned is not a related party of Prudential (as defined in V(h) of PTE 84-14, and (iv) the terms of the Lease (as modified by this Second Amendment) have been negotiated and determined at arm's length, as such terms would be negotiated and determined by unrelated parties.

12. No Further Modification. Except as set forth in this Second Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.

IN WITNESS WHEREOF, this Second Amendment has been executed as of the day and year first above written.

"LANDLORD"	COGNAC CAMPUS LLC,
	a Delaware limited liability company

	By: The Prudential Insurance Company of America, a New Jersey corporation, its sole member

	By: /s/ Patrick Coffey
	pat Coffey, Vice President


"TENANT"	NTN BUZZTIME, INC., a Delaware corporation

	By: /s/ Andy Wrobel
	Print Name: Andy Wrobel
	Title: CFO

	By:
	Print Name:
	Title:

EXHIBIT "A"

-1-

EXHIBIT "B"

-1-

EXHIBIT "B"

-2-

EXHIBIT "B"

-3-

EX-10.6 7 ntn_10k-ex1006.htm CORPORATE INCENTIVE PLAN ntn_10k-ex1006.htm

Exhibit 10.6

NTN Buzztime, Inc. Corporate Incentive Plan for Eligible Employees of NTN

Buzztime, Inc. and NTN Canada, Inc.

Fiscal Year 2009

Section		Description
1	Purpose	The purpose of the NTN Buzztime, Inc. Corporate Incentive Plan for Eligible Employees of NTN Buzztime, Inc. and NTN Canada, Inc., (“Plan”) is twofold: (1) To motivate Participants to focus on and maximize their efforts to achieve Buzztime’s Corporate Goals. (2) To encourage the retention of those employees who do so. It is anticipated that the pursuit of goals will foster teamwork, promote accountability and drive performance. This Plan has been approved by the Executive Committee and Board Compensation Committee. This Plan may be changed or modified at any time, on a prospective basis, at the discretion of the Board Compensation Committee.
2	Effective Dates	The Plan Period is January 1, 2009 – December 31, 2009.
3	Eligibility	To be an eligible participant in the Plan, employees must be employed by Buzztime on or before November 30, 2009, on active, full-time, paid status and not be a participant in any other Buzztime incentive compensation program. (All eligible employees are referred to in this Plan as “Participant(s)”). Only Participants may earn incentive compensation under this Plan. Each Participant will receive a performance evaluation assessing his/her overall performance for the Plan Period. Only Participants receiving an overall rating of “Meets Requirements” or higher in their performance evaluation assessed by his or her supervisor at the end of the Plan Period will be eligible. Any Participant who received a performance rating below “Meets Requirements” will be ineligible to participate in the Plan. Any Participant under disciplinary action (any level of performance counseling, warning and performance improvement plan) will be ineligible to participate in the Plan. If the employee upon reevaluation, however, is released from disciplinary action, he/she will at that same time resume eligibility under the Plan and may be eligible to receive a prorated incentive amount that excludes the period of time he/she was under disciplinary action. Any newly hired employee who becomes eligible for the Plan during the year may be eligible to receive a prorated incentive amount.
4	Plan Design	(1) Prerequisites to Earning Incentive Compensation To earn incentive compensation under this Plan, subject to provisions of Section 6, the following criteria must be satisfied: (a) The Plan must be funded, based on the achievement of the Corporate Goal during the Plan Period which is to meet target EBITDA and free cash flow expectations; and (b) the Participant must be employed by Buzztime on the Payout Date. If Buzztime does not achieve the EBITDA and free cash flow targets, no incentive amounts will be paid under this Plan. (2) Corporate Goal – Our 2009 Corporate Goal is comprised of two parts; First, to meet our target EBITDA and second to meet our target free cash flow. EBITDA and free cash flow targets are as approved by the Board of Directors. EBITDA is defined as earnings before interest, tax, depreciation and amortization ( “EBITDA” ) as defined in Buzztime’s financial reports. Free cash flow ( “FCF” ) is defined as operating cash flow less capital expenditures.

Confidential, internal use only

		Management will aim to provide monthly Incentive Plan updates against targets to all Participants. Additionally, Buzztime will communicate how the Incentive Plan is tracking against targets on a quarterly basis after quarterly earnings are released, typically this occurs 6 weeks after each calendar quarter ends. The payout pool is determined and funded based on meeting the Corporate Goal. If the Company meets the Corporate Goal, there is a 100% payout pool generated. If the Corporate Goal is exceeded the payout pool remains the same at 100%. If the Corporate Goal is not met, the plan is not funded and no payout will be earned nor paid. (3) Target Payout Each Participant will have a Target Payout, assigned by his/her position and job level, and defined either as a percentage or a specific amount of their annual base salary. (Please refer to your personal incentive memo). The “annual base salary” is defined as the Participant’s annual base salary excluding benefits as of December 31, 2009. The Target Payout amount will be adjusted when warranted pursuant to Sections 5 and 6. (4) Performance Measures The Incentive Plan is based upon the attainment of financial and non- financial weighted goals in the following categories. Please see your personal incentive memo for your role’s corresponding level. Individual goal achievement will be tracked using Success Factors. It is in your best interest to maintain and update your progress against your goals on a monthly basis.

Performance Measure	Corporate Goal Weight	Department Goals Weight	Individual Goals Weight (3-6 performance goals)	Total Weight
Level G	75%	N/A	25%	100%
Level H	50%	30%	20%	100%
Level I	N/A	50%	50%	100%

5) Payout Formula Terms

The Incentive Payout amount is based on the following terms:

% of Corporate Goal Achievement - Overall percent achieved of the Corporate Goal.

Participant’s Target Payout Amount - Participant’s annual base salary x the Target Payout or this could be a specific amount. Please refer to your personal incentive memo.

Department Weight – The ratio of weight assigned to the attainment of the departments goals achieved expressed as a percentage (i.e., if the Content department achieved 95% of it's goals, they could carry a 30% weight in the payout formula for level H from the table above)

Confidential, internal use only

		Corporate Weight – The ratio of weight assigned to the attainment of the corporate goal achieved expressed as a percentage (i.e., if Buzztime achieved 100% of its goals, it carry’s a weight of 50% in calculating the payout formula for level H from the table above).
		Individual Weight – The ratio of weight assigned to the attainment of a Participant’s goals achieved expressed as a percentage (i.e., if Bob Smith achieved 100% of his goals, they carry a weight of 20% in calculating the payout formula for level H from the table above).
		Total Weight – The total of the department, corporate and individual weights expressed as a percentage.
		Individual Incentive Payout – The incentive payout amount an individual is awarded after the payout formula is completed subject to all sections of this Plan.
		(6) Performance Determination Buzztime’s actual performance against the Corporate Goal for the Plan Period will be determined and approved by the Board Compensation Committee as soon as practicable after the Plan Period ends, subject to the completion and approval by Buzztime of the relevant financial or other Buzztime reports upon which the Corporate Goal is measured. (7) Payout Schedule 50% of the incentive pool will be paid out provided all prerequisites to earning incentive compensation are met pursuant to Sections 4, 5, 8 and the Company has forecasted to meet or exceed the Corporate Goal for 2009 and the YTD results for the first half of the fiscal year were at or better than budget. The remaining 50%, if there was a payout made June 2009, will be made pursuant to Section 5. (8) Annual Recovery Opportunity An Annual Recovery incentive payment will be made if there was no semi-annual payout paid because June 2009 targets were not met or 2009 forecast was below budget. The annual recovery is met if the Corporate Goals are achieved at 100% or greater (same as Section 4 (2) “Corporate Goal”) at the close of the year provided all the of prerequisites to earning incentive compensation are met pursuant to Sections 4,5 and 8. (9) Payout Formula Please refer to your personal incentive memo for formula payout examples.
5	Payout Details	Payout Date(s): Subject to Section 8, and provided all the of prerequisites to earning incentive compensation are met pursuant to Section 4 a semi-annual payment of the Plan will occur (a) within 30 days after the June 2009 month-end close and (b) within 30 days after receipt of the independent’s auditor’s report on Buzztime’s annual financial statements for the prior year, but no later than March 15, 2010. The first incentive payment will be equal to 50% of the calculated payout and the second payment will be the remaining 50% of the calculated payout. Prorated Payouts: The Individual Incentive Payout that otherwise would have been earned in the Plan Period will be prorated when the provisions of Section 6 apply. Plan Administration and Interpretation: This Plan shall be administered and interpreted by the Executive Committee (CEO, CFO, and VP, HR) at its sole discretion. The Executive Committee must approve any exceptions to the term and conditions of this Plan.

Confidential, internal use only

		401 k deferrals: In accordance with the NTN Buzztime, Inc. 401 k Plan, no 401 k deductions will be withheld from incentive (“bonus”) wages. Taxes: Incentive payments are in addition to the Participant’s base salary and are included as total cash compensation and, as such, recorded on the Participant’s W-2 (or applicable country statement) statement of wages. Individual Incentive Payouts are considered taxable income and are reported as Gross Income (not “after taxes”). Participants will have all appropriate payroll taxes and withholdings deducted from these incentive payments at the IRS supplemental tax rate.
6	Prorated Participation	Late Entry into the Plan: An employee who enters into an eligible position and, therefore, becomes a Participant after the beginning of the Plan Period (either through new hire, promotion or transfer) will be assigned a Target Payout and will be able to earn prorated incentive payment on that basis. Effect of Termination: A Participant must be employed on the Payout Date(s) to earn an incentive payment. If a Participant voluntarily resigns from employment prior to the Payout Date(s), no incentive payment is earned. If Buzztime terminates a Participant’s employment prior to the Payout Date(s), no incentive payment is earned. Effect of Disciplinary Action: Any Participant under disciplinary action (any level of performance counseling, warning and/or performance improvement plan) will be ineligible to participate in the Plan. If the employee upon reevaluation, however, is released from disciplinary action, he/she will at that same time resume eligibility under the Plan and may be eligible to receive a prorated incentive amount that excludes the period of time he/she was under disciplinary action. Internal Promotions and Transfers: Employees who transfer within Buzztime and/or are promoted into new positions that are not eligible to participate in this Plan will be paid a prorated Individual Incentive Payout. Participants who transfer within and/or promoted into new positions will be re-evaluated to ensure they are at the appropriate incentive level based on their position and job level. The incentive payment during the time in the Plan Period he or she was a Participant is subject to the prerequisites to earning incentive compensation. Approved Time Off: The Individual Incentive Payout will not be prorated to account for time off due to paid time off except when time off is used on an approved leave of absence. Leave of Absence: The Individual Incentive Payout for Participants who are on an approved leave of absence from Buzztime will be prorated based on the length of the approved leave during the Plan Period. During the time an employee is on an approved leave of absence, he or she will not be considered a Participant.
7	At Will Employment	Employment with Buzztime is at-will. This means that just as a Participant is free to resign at any time, Buzztime reserves the right to discharge a Participant at any time, with or without cause or advance notice. In connection with the “at-will” employment relationship, Buzztime also reserves the right to exercise its managerial discretion in reassigning, transferring, promoting or demoting an employee, at any time. Participation in the Plan does not guarantee continued employment for any particular period of time or otherwise change Buzztime’s policy of employment at-will.
8	Management Rights	Buzztime reserves the right to amend or terminate this Plan, at any time, at management’s discretion, with or without advance notice. Any amendments to the

Confidential, internal use only

Plan will be in writing and approved by the Board Compensation Committee. If this Plan is amended or terminated prior to the end of the Plan Period, Participants will be paid, according to any amending or terminating documents.

This Plan will automatically terminate at the end of the Plan Period, except that the Payout provisions will continue in effect until satisfied. However, Buzztime, at its discretion, may elect to re-issue the Plan, in writing, with new Effective Dates.

Confidential, internal use only

Level G Payout Formula examples

Example 1 Half –Year Payout

An employee earns a base of $105,000, is a Participant for the entire FIRST HALF of the Plan Period, and the Target Payout percent is 25% which equals a FIRST HALF of the year Target Payout Amount of $26,250 x 50% (first-half) = $13,125. The individual goals are achieved at 100% or are tracking at 100%. Corporate achieved 100% of its goal, mid-year, so the plan is funded at 50% of the 100% payout pool (it is divided in half to represent the FIRST HALF of the year).

Participants Target Payout Amount	x	Corporate Goal Achievement	+	Department Goal Achievement	+	Individual Goal Achievement	=	Individual Incentive Amount
Weighting		75%	+	N/A	+	25%	=	100%
Overall Goal Attainment %		100%		100%		100%
Apply Weighting		(100%x.75)		N/A		(100%x.25)
$26,250	x	75%	+	N/A	+	25%	=	$26,250

Individual Incentive Amount	x	Payout Pool Percentage	=	Incentive Payout
$26,250	x	50%	=	$13,125

Example 2 – Full Year Payout w/ Half Year Payout Occurred

An employee earns a base of $105,000, is a Participant for the entire Plan Period and his/her Target Payout percent is 25%, will equals a Target Payout of $26,250. The individual goals are achieved at 95%. Corporate achieved 105% of its goals, which yields a 100% payout pool.

Participants Target Payout Amount	x	Corporate Goal Achievement	+	Department Goal Achievement	+	Individual Goal Achievement	=	Individual Incentive Amount
Weighting		75%	+	N/A	+	25%	=	100%
Overall Goal Attainment %		105%				95%
Apply Weighting		(100%x.75)		N/A		(95%x.25)
$26,250	x	75%	+	N/A	+	23.75%	=	$25,921.87

Individual Incentive Amount	-	Incentive Amount Paid to Date	=	Incentive Payout to be Paid
$25,921.87	-	$13,125	=	$12,796.87

Confidential, internal use only

Level H Payout Formula examples

Example 1 Half –Year Payout

An employee earns a base of $40,000, is a Participant for the entire FIRST HALF of the Plan Period, and the Target Payout percent is 5% which equals a FIRST HALF of the year Target Payout Amount of $2,000 x 50% (first-half) = $1,000. The individual goals are achieved at 90% or are tracking at 90%, department goals are tracking or achieved at 95%. Corporate achieved 100% of its goal, mid-year, so the plan is funded at 50% of the 100% payout pool (it is divided in half to represent the FIRST HALF of the year).

Participants Target Payout Amount	x	Corporate Goal Achievement	+	Department Goal Achievement	+	Individual Goal Achievement	=	Individual Incentive Amount
Weighting		50%	+	30%	+	20%	=	100%
Overall Goal Attainment %		100%		95%		90%
Apply Weighting		(100% x.50)		(95% x.30)		(90%x.20)
$2,000	x	50%	+	28.5%	+	18%	=	$1,930

Individual Incentive Amount	x	Payout Pool Percentage	=	Incentive Payout to be PAID
$1,930	x	50%	=	$965

Example 2 – Full Year Payout w/ Half Year Payout Occurred

An employee earns a base of $40,000, is a Participant for the entire Plan Period and his/her Target Payout percent is 5%, will equals a Target Payout of $2,000. The individual goals are achieved at 95%, department goals are achieved at 95%. Corporate achieved 105% of its goals, which yields a 100% payout pool.

Participants Target Payout Amount	x	Corporate Goal Achievement	+	Department Goal Achievement	+	Individual Goal Achievement	=	Individual Incentive Amount
Weighting		50%	+	30%	+	20%	=	100%
Overall Goal Attainment %		105%		95%		95%
Apply Weighting		(100%x.50)		(95% x .30)		(95%x.20)
$2,000	x	50%	+	28.5%	+	19%	=	$1,950

Individual Incentive Amount	-	Incentive Amount Paid to Date	=	Incentive Payout to be Paid
$1,950	-	$965	=	$985

Confidential, internal use only

Level I Payout Formula examples

Example 1 Half –Year Payout

An employee earns a base of $25,000, is a Participant for the entire FIRST HALF of the Plan Period, and the Target Payout is $500 which equals a FIRST HALF of the year Target Payout Amount of $500 x 50% (first-half) = $250. The individual goals are achieved at 90% or are tracking at 90%, department goals are tracking or achieved at 95%. Corporate achieved 100% of its goal, mid-year, so the plan is funded at 50% of the 100% payout pool (it is divided in half to represent the FIRST HALF of the year).

Participants Target Payout Amount	x	Corporate Goal Achievement	Department Goal Achievement	+	Individual Goal Achievement	=	Individual Incentive Amount
Weighting		N/A	50%	+	50%	=	100%
Overall Goal Attainment %		100%	95%		90%
Apply Weighting		N/A	(95% x.50)		(90%x.50)
$500	x	Plan Funded	47.5%	+	45%	=	$462.50

Individual Incentive Amount	x	Payout Pool Percentage	=	Incentive Payout to be PAID
$462.50	x	50%	=	$231.25

Example 2 – Full Year Payout w/ Half Year Payout Occurred

An employee earns a base of $25,000, is a Participant for the entire Plan Period and his/her Target Payout is $500. The individual goals are achieved at 95%, department goals are achieved at 95%. Corporate achieved 105% of its goals, which yields a 100% payout pool.

Participants Target Payout Amount	x	Corporate Goal Achievement	+	Department Goal Achievement	+	Individual Goal Achievement	=	Individual Incentive Amount
Weighting		N/A		50%	+	50%	=	100%
Overall Goal Attainment %		105%		95%		95%
Apply Weighting		N/A		(95% x .50)		(95%x.50)
$500	x	Plan Funded		47.5%	+	47.5%	=	$475

Individual Incentive Amount	-	Incentive Amount Paid to Date	=	Incentive Payout to be Paid
$475	-	$231.25	=	$243.75

Confidential, internal use only

EX-10.20 8 ntn_10k-ex1020.htm MASTER EQUIPMENT LEASE ntn_10k-ex1020.htm

Exhibit 10.20

3450 west burnsville parkway • burnsville, mn 55337

952-890-8838 • fax 952-890-8917

www.datasales.com

Master Equipment Lease

NTN Buzztime, Inc.		3-10125
Name of Lessee		Master Equipment Lease No.

5966 La Place Court		9/29/09
Street Address		Date

Carlsbad, CA 92008
City, State and Zip Code

Form of Organization: o sole proprietor x Corporation o limited liability company o partnership o other _____________

Delaware		2033004
Lessee State of Organization		State of Organization No.

1. LEASE:

Data Sales Co., Inc. ("Lessor"), by its acceptance hereof at its home office, agrees to lease to Lessee and Lessee agrees to lease from Lessor, in accordance with the terms and conditions hereinafter set forth, the items of equipment and other property (the "Equipment") described in each equipment schedule ("Equipment Schedule) in the form of Exhibit "A" attached hereto, executed from time to time pursuant to this Master Equipment Lease ("Master Equipment Lease"). Each Equipment Schedule shall incorporate the terms of this Master Equipment Lease and shall constitute a separate and enforceable lease of the Equipment described in such Equipment Schedule. Any reference to the "Lease"shall mean each such Equipment Schedule (including all amendments, addenda or riders thereto) to the extent it incorporates this Master Equ ipment Lease. In the event of any conflict between the terms of an Equipment Schedule and the terms of this Master Equipment Lease, the terms of the Equipment Schedule shall prevail.

2. DEFINITIONS:

A. The "Installation Date" means the date determined in accordance with the Equipment Schedule.

B. The "Commencement Date" means the first day of the month following the Installation Date, unless the Installation Date occurs on the first day of a month, in which case the Commencement Date shall be the Installation Date.

3. TERM OF LEASE:

The term of the Lease as to Equipment designated on the Equipment Schedule shall begin on the Installation Date in accordance with the Equipment Schedule, and shall continue for an initial period ending that number of months from the Commencement Date as is specified on the Equipment Schedule (the "Initial Term"). THE LEASE IS NON-CANCELABLE FOR THE INITIAL TERM and Lessee has no right of prepayment unless such right is specifically granted to Lessee in the Equipment Schedule. Lessee shall execute and deliver to Lessor a Certificate of Delivery and Acceptance.

("Acceptance") on the date the Equipment has been installed and accepted by Lessee, and Lessor shall have no obligation to advance funds for the Equipment's purchase unless and until Lessor receives such Acceptance.

Except as otherwise provided in the Equipment Schedule or any amendment thereto, Lessee or Lessor may terminate the Lease at the expiration of the Initial Term by giving the other at least two (2) months prior written notice of termination. If neither party gives such notice, then the term shall automatically be extended on the same rental terms for successive periods of one (1) month until terminated by either Lessee or Lessor giving the other at least two (2) months written notice of termination.

4. RENTAL PAYMENTS:

The monthly rental payments for each item of Equipment (the "Monthly Rental Payments") shall be set forth In the applicable Equipment Schedule, shall begin to accrue on the Installation Date of the Equipment and shall be due and payable by Lessee in advance on the first day of each month. If the Installation Date does not fall on the first day of the month, the rental for that period of time from the Installation Date until the first day of the succeeding month shall be a pro rata portion of the Monthly Rental Payment, calculated on a 30-day basis, due and payable on the Installation Date. Lessee shall pay a late charge on all Monthly Rental Payments unpaid after the due date thereof equal to one and one-half percent (1-1/2%), or the highest rate permissible by law, whichever is less.

5. NET AND NON-CANCELABLE LEASE:

This is a net Lease and Lessee's obligation to pay the rent and other amounts due hereunder Is unconditional and not subject to abatement, reduction or set off, defense, counterclaim or interruption of any kind. The Lease is a non-cancelable lease and will not terminate in the event of any damage to or destruction of the equipment. The lease may be terminated only as expressly provided herein. To the extent permitted by law, Lessee waives the right to (i) cancel the Lease; (ii) repudiate the Lease; (iii) revoke acceptance of the equipment (iv) recover damages from Lessor for any breaches of warranty or for any other reasons; (v) grant a security interest in the equipment to a third party; (vi) deduct from rents all or any part of claimed damages resulting from Lessor's default, if any.

6. PAYMENT OF TAXES:

Lessee shall also pay all taxes, however designated, which are levied or based on the Lease, the Equipment or its purchase, use, lease, operation, control or value, including, without limitation, personal property taxes, state and local privilege or excise taxes based on gross revenue, and any penalties or interest in connection therewith, or taxes or amounts in lieu thereof paid or payable by Lessor or Lessee in respect of the foregoing, but excluding taxes based on Lessor's net income. Charges for taxes, penalties and interest, if any, shall be promptly paid by Lessee. In the event Lessee defaults in the payment of any such tax, Lessor may pay such tax and shall be promptly reimbursed by Lessee, with interest (plus attorneys' fees and costs if any) as additional rent.

7. ARTICLE 2A LEASE; DISCLAIMER OF WARRANTIES:

This Lease is a true lease, which is a "finance lease", as that term is defined under Uniform Commercial Code ("UCC") Article 2A-103. Lessor has not selected, manufactured or supplied the Equipment. Lessee has selected the Equipment from the manufacturer, supplier or distributor of the Equipment (the "Vendor"). Lessor acquired the Equipment or the right to possession and use of the Equipment only in connection with this Lease. Either Lessee has assigned to Lessor its acquisition agreement for the Equipment on or before signing this Lease or Lessee's approval of the contract evidencing Lessor's purchase of the Equipment is a condition to the effectiveness of this Lease (and Lessee's execution of this Lease evidences its approval of said contract). Lessor hereby informs Lessee that Lessee may have rights under the cont ract evidencing Lessor's purchase of the Equipment and advises Lessee to contact the Vendor for a description of any such rights. If Lessee has entered into any acquisition agreement with Vendor, Lessee shall perform all of the obligations set forth therein as if this Lease did not exist. LESSOR HAS NOT MADE AND MAKES NO, AND HEREBY EXPRESSLY DISCLAIMS ANY REPRESENTATION OR EXPRESS OR IMPLIED WARRANTY WHATSOEVER HEREUNDER, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR ANY PURPOSE, OR OTHERWISE, REGARDING THE EQUIPMENT OR ANY PART OR THE DESIGN, QUALITY, OPERATION OR CONDITION THEREOF OR WITH RESPECT TO PATENT INFRINGEMENT OR THE LIKE. Lessor hereby grants, transfers and assigns to Lessee during the term of this Lease all of its right, title and interest in any express or implied warranties, indemnities or service agreements of the Vendor which are assignable by Lessor. Lessor shall permit Lessee, as Lessee's sole remedy, to enforce any such representation, warranty, indemnity or service agreement ag ainst the Vendor in the name of Lessor, and not against Lessor or Assignee (as hereinafter defined).

Lessee acknowledges that it is not relying on Lessor's skill or judgment to select or furnish goods suitable for any particular purpose and that there are no warranties which are not contained in this Lease. LESSOR SHALL NOT BE LIABLE FOR DAMAGES, INCLUDING SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, arising out of or in connection with the performance of the Equipment or the use thereof by Lessee and shall not be liable for any special, incidental or consequential damages, arising out of or in connection with Lessor's failure to perform its obligations hereunder. Upon written request from the Lessee, Lessor shall take all reasonable action requested by Lessee to enforce any manufacturer's warranty express or implied, relating to the condition or performance of the Equipment which is enforceable by Lessor in its own name, provided, however, that Lessor shall not be obligated to resort to litigation to enforce any such warranty unless Lessee shall pay all expenses incurred in connection therewith. Similarly, if any such warranty shall be enforceable by Lessee in its own name, Lessee shall take reasonable action requested by lessor to enforce any such warranty. Lessee shall indemnify and hold Lessor and its assigns harmless from any liability, claim, loss, damage or expense (including reasonable attorneys' fees) of any kind or nature caused, directly or indirectly by (1) inadequacy of any Equipment for any purpose, (2) any deficiency or defect in any Equipment, (3) the use or performance of any Equipment, (4) any interruption or loss of service, use or performance of any Equipment, (5) any patent, copyright, or other infringement, or (6) any loss of business or other consequential damage whether or not resulting directly from any or all of the above. Lessee acknowledges that it has made the selectio n of the Equipment based on its own judgment, and expressly disclaims any reliance upon statements made by Lessor. Lessee acknowledges that Lessor has made no statements or representations upon which Lessee is relying in leasing the Equipment, and that this Lease contains all agreements and understandings between the parties.

8. RISK OF LOSS:

A. Lessor shall not be responsible for, nor shall the Monthly Rental Payments or other sums due hereunder above for any reason, including, but not limited to, any interruption in or loss of the service or use of the Equipment or any part thereof, or any loss or damage caused thereby, or by error in programming or instruction to the Equipment, latent defect, wear and tear, or gradual deterioration of the Equipment or any part thereof.

B. Lessee assumes and shall bear the entire risk of partial or complete loss, theft, damage, destruction or other interruption or termination of use of the Equipment from any cause whatsoever, from the date of delivery of the Equipment to Lessee until the Equipment is returned to and received by Lessor.

During the term of the Lease, and until the Equipment is redelivered to Lessor, Lessee shall be liable for the prompt repair of the Equipment at its sole expense. If the Equipment or any portion thereof is lost, stolen, destroyed or damaged beyond repair, Lessee, at its option, will (i) continue to make the Monthly Rental Payments, and, at Lessee's sole expense, replace the Equipment with equipment of identical value to that of the Equipment replaced (in which case Lessee will transfer title to the replacement Equipment to the Lessor free of all liens, claims and encumbrances), or (ii) pay Lessor on the next Monthly Rental Payment date following the loss, theft, damage or destruction of the Equipment an amount equal to the replacement value or the minimum casualty value, whichever is greater, attached to the applicab le Equipment Schedule for such Equipment in effect on the date of the loss, theft, damage or destruction thereof and all rent accrued on such Equipment up to the date of payment and all other amounts then due in connection with such Equipment. Upon such payment, the Equipment Schedule, or portion thereof, as applicable, will terminate with respect to the Equipment so paid for, and Lessor will transfer full ownership and title to such Equipment to Lessee, free of liens, claims and encumbrances created by Lessor.

9. INSURANCE AND INDEMNITY:

Lessee shall at all times during the term of this Lease, at its own expense, maintain: (A) all-risk property damage insurance covering the Equipment in an amount not less than the greater of (i) the replacement value of the Equipment, or (ii) the minimum casualty value of such Equipment as set forth in the Equipment Schedule, and (B) public liability coverage in such amounts, and with such companies as are in general usage by companies owning or operating similar property and engaged in a business similar to Lessee's. The insurance required by this Section 9 may be obtained by Lessee by endorsement on any blanket insurance policies maintained by Lessee or its parent. All insurance so maintained shall provide for a thirty-day (30) prior written notice to Lessor and Assignee of any cancellation or reduction of coverage s and an option in favor of Lessor or Assignee to prevent cancellation by payment of premiums, which shall promptly be repaid by Lessee, and further shall provide that all insurance proceeds shall be payable to the Lessee, Lessor and any Assignee as their respective interests may appear. Lessor and any such Assignee shall be named as loss payee and additional insured on all public liability insurance policies so maintained. Lessee shall furnish to Lessor copies of such insurance policies and satisfactory insurance certificates on or before the Installation Date. Lessee's above obligation shall commence on the date of delivery of the Equipment and shall continue until the Initial Term (or any extension or renewal thereof) of each Equipment Schedule expires and the Equipment is returned to Lessor. By this Section 9, Lessor does not modify or limit any provision of this Lease relating to disclaimer of warranties and liability, or indemnity.

Lessee assumes all risk and liabilities, whether or not covered by insurance, and shall indemnify and hold Lessor and its assigns (including any Assignee) harmless of and from any liability, claim, loss, damage or expense (including reasonable attorneys' fees) for injuries or deaths of persons and for damage to property, howsoever arising from or incident to the use, operation or storage of the Equipment, whether such injury or death to person be of agents or employees of Lessee or be of third persons and whether such damage to property be of Lessee, or to property of others.

10. MAINTENANCE, REPAIRS, INSTALLATION AND RETURN:

Unless otherwise agreed to by Lessor in writing, Lessee shall, at its expense, obtain and keep in full effect, throughout the term of this Lease, a contract from the manufacturer of the Equipment (or another reputable maintenance organization approved by Lessor) providing for prime shift maintenance service (as that term is defined by the manufacturer) and will otherwise maintain the Equipment in good working order and appearance and make all necessary adjustments and repairs thereto. Lessee will at all times cooperate with Lessor in allowing the manufacturer or Lessor to control and install all engineering changes on the Equipment as when determined necessary or desirable by the manufacturer or Lessor. Upon termination of the Lease, Lessee, at its sole expense, shall return the Equipment, together with manufacturer' s certificate of authenticity, if provided, to Lessor, or to such other location within the Continental U.S. designated by Lessor, in good condition and repair excepting only reasonable wear and tear, and eligible for a manufacturer's standard, full service maintenance contract. If the Equipment returned is not so eligible, Lessee shall reimburse Lessor for the cost of qualifying the Equipment for such maintenance contract eligibility. Lessee shall pack the Equipment to be so returned in accordance with the manufacturer's guidelines.

If Lessee fails to return the Equipment In accordance with the preceding paragraph upon the expiration of the Initial Term or any extension thereof, Lessee shall be obligated to pay to Lessor per diem rent until the Equipment is returned in addition to all other remedies available to Lessor pursuant to Section 16 hereunder.

Lessee will provide the required suitable electric current to operate the Equipment, with all appropriate facilities as specified by the manufacturer. Lessee will grant access to the Equipment to Lessor, its designee, or the manufacturer, during normal working hours for inspection, repair, maintenance, installation or engineering changes, and for any other reasonable purpose. Lessee shall immediately notify Lessor of all details concerning any accident arising out of the alleged or apparent improper manufacture, functioning or operation of the Equipment.

11. ALTERATION AND ATTACHMENTS:

No alterations or attachments to the Equipment shall be made without first obtaining in each instance the prior written approval of Lessor, which approval shall not unreasonably be withheld. If, after such written approval has been obtained, the alterations or attachments interfere with the normal or satisfactory maintenance, operation or insurability of the Equipment, or any part thereof, in such manner as to increase the cost of maintenance or insurance thereof, or create a safety hazard, Lessee will, upon notice from Lessor to that effect, promptly remove the alterations or attachments and restore the Equipment to its normal condition. In the case of increased cost of maintenance and insurance, or either, Lessee shall pay such increase.

12. ASSIGNMENTS:

Lessee may not assign the Lease or any of Lessee's rights hereunder or sublease any Equipment or its use without the prior written consent of Lessor or any such assignment or sublease shall be void. Any permitted sublessee or assignee of Lessee must execute an assumption of this Lease in form and substance acceptable to Lessor, but no sublease or assignment shall relieve Lessee of any of its obligations or liabilities under this Lease.

Lessor may assign or transfer this Lease to an assignee or may grant a security interest in all or part of this Lease, the Equipment and/or sums payable hereunder as collateral security for any loans or advances made or to be made to Lessor by a financial institution (such assignee or financial institution, herein, the "Assignee"), Lessee hereby consents to such assignment, transfer and/or grant of security interest Lessee, upon receipt of notice of any such transfer, assignment, or grant to an Assignee and instructions from Lessor, shall pay all outstanding Monthly Rental Payments and all other sums when due under this Lease (hereafter, collectively, the 'Payments'), to such Assignee in the manner specified in said instructions, and Lessee's obligation to make the Payments to such Assignee shall be absolute and unco nditional. Upon notice of any intended transfer, assignment, or granting of a security interest: (a) Lessee shall promptly submit to Lessor such documents as may be reasonably required by the Intended Assignee, in form and substance satisfactory to the intended Assignee, including, without limitation: (i) A certificate that the equipment was delivered and accepted; (2) if Lessee Is a corporation, a certified copy of resolutions adopted by Lessee's Board of Directors authorizing execution of the Lease; (3) an acknowledgement to the Lessor's transfer, assignment or granting of a security interest; (4) a UCC Financing Statement; (b) In the event of any such assignment, transfer, or granting of a security interest: (1) Lessee shall send copies of any notices which are required hereunder to be sent to Lessor to the Assignee as well as to Lessor; (2) Lessee shall not permit the Lease to be amended or any provision thereof to be waived without the prior written consent of the Assignee; (3) Lessee agrees not to look to the Assignee to perform any of Lessor's obligations hereunder, (4) Lessee agrees that Assignee shall be exclusively entitled to all of the rights and remedies provided to the Lessor under the Lease; (c) no such transfer, assignment or granting of a security interest by lessor shall relieve Lessor of any of its obligations hereunder the Lease, or shall limit Lessee's rights to look to Lessor for the performance for such obligations.

Notwithstanding any assignment, transfer or grant by Lessor, and so long as the Lessee shall not be in default hereunder, neither Lessor, nor any Assignee, shall interfere with Lessee's right of quiet enjoyment and use of the Equipment. In the event that Lessor notifies Lessee of its intention to transfer, assign, or grant a security interest in all or any part of this Lease, the Equipment and/or sums payable hereunder, Lessee agrees to execute such documents as may be reasonably necessary to secure and/or complete such transfer, assignment or grant.

13. USE OF EQUIPMENT:

The Equipment will be kept by Lessee in its sole possession and control, will at all times be located at the location stated in the Equipment Schedule, and will not be removed therefrom, without prior written consent of Lessor, which shall not be unreasonably withheld. Notwithstanding the preceding sentence, Lessor shall allow Lessee, in the normal course of Lessee's business, to locate Equipment at Lessee's customer premises where Lessee has an existing contract with said customer to provide services and where delivery of such services requires Equipment to be located at Lessee's customer's premises. Lessee shall provide to Lessor the address of Equipment located at customer premises as soon as it is reasonably available and provide updated address should Equipment be re-located during the Lease. Lessee and Lessee's applicable customers will not use the Equipment for any purpose other than which it was designed and in accordance with the manufacturer's specification. Lessee and Lessee's applicable customers will keep and maintain the Equipment free and clear of all liens, charges and encumbrances (except any placed thereon by Lessor). This Lease shall be binding upon, and shall inure to, the benefit of the parties hereto and their respective successors and assigns.

14. TRANSPORTATION AND INSTALLATION:

The Equipment is to be installed at the location indicated on the Equipment Schedule.

All transportation, rigging, drayage, and any other charges for the delivery of the Equipment to Lessee's premises shall be paid by the Lessee, unless indicated otherwise on the Equipment Schedule. All installation charges shall be paid by Lessee unless indicated otherwise on the Equipment Schedule. All charges for the deinstallation shall be paid by Lessee. Transportation, rigging, and drayage from Lessee's premises at the termination of the Lease shall be arranged for by Lessor and paid by Lessee.

15. DEFAULT:

Any one of the following events shall constitute an "Event of Default" hereunder (a) Lessee shall fail to pay when due any installment of rent or other amount due hereunder (b) Lessee shall fail to observe or perform any other agreement to be observed or performed by Lessee hereunder; (c) Lessee, any guarantor of the Lease, or any partner of Lessee if Lessee is a partnership shall cease doing business as a going concern or make an assignment for the benefit of creditors; (d) Lessee, any guarantor of the Lease, or any partner of Lessee if Lessee is a partnership shall voluntarily file, take any action to authorize the filing, or have filed against it involuntarily, a petition for liquidation, reorganization, adjustment of debt or similar relief under the federal or state bankruptcy or insolvency law, (e) a trustee, re ceiver, or liquidator be appointed for Lessee, any guarantor of the Lease, or for all or a substantial part of the assets of Lessee or any guarantor; (f) any individual Lessee or individual guarantor of the Lease, or partner of Lessee if Lessee Is a partnership, shall die; (g) an event of default shall occur under any other obligation Lessee or any guarantor of the Lease owes to Lessor, (h) an event of default by Lessee shall occur under any agreement involving Lessee's or a guarantor's indebtedness to a lender for borrowed money; or () Lessee shall have terminated its corporate existence, consolidated with, merged into, or conveyed or leased substantially all of its assets as an entity to any person unless:(i) such person executes and delivers to Lessor an agreement satisfactory in form and substance to Lessor, in its sole discretion, containing such person's effective assumption and its agreement to pay, perform, comply with and otherwise be liable for all of Lessee's obligations having previously arisen, or then or thereafter arising, under the Lease together with any documents, Agreements investments, certificates, opinions and filings by Lessor; and (ii) Lessor (and any Assignee) is satisfied as to the creditworthiness of such person.

16. REMEDIES:

Upon the occurrence of an Event of Default and at any time thereafter, Lessor or Assignee may exercise from time to time any one or more of the following remedies: (a) terminate this Lease as to any portion or all of the Equipment; (b) take immediate possession of any or all of the Equipment; wherever situated, and for such purpose enter upon any premises without liability for so doing or requirement to post bond in any legal proceeding; (c) hold, use, lease, sell or otherwise dispose of any or all of the Equipment in such manner as Lessor in its sole discretion may decide. With respect to any exercise of its rights to recover and/or dispose of any Equipment, Lessee acknowledges and agrees that Lessor shall have no obligation, subject to the requirements of commercial reasonableness, to clean up or otherwise prepare the Equipment for disposition; (d) accelerate the due date of all remaining rent payments due hereunder for the entire remaining Initial Term of this Lease or any amendment thereto, including any renewal term then in effect, whereupon said amounts shall be immediately due and payable; (e) recover the sum of: (i) any accrued and unpaid rent, plus (ii) the present value of all future rentals reserved in this Lease and contracted to be paid over the unexpired Initial Term of this Lease (or any renewal period then in effect), discounted at the rate of four percent (4%) per annum; plus (ill) the anticipated residual value of the Equipment as of the expiration of this Lease or any renewal thereof discounted at the rate of four percent (4%) per annum, (iv) any indemnity payment, if then determinable; (v) all reasonable costs and expenses incurred by Lessor in any repossession, recovery, storage, repair, sale, release or other disposition of the Equipment, including but not limited to costs of transportation, possession, storage, refurbishing, advertising and broker's fees together with all attorney's fees and cost incurred in connection therewith or otherwise resulting from Lessee's default (including any incurred at trial, on appeal or any other proceeding) of the foregoing at the rate of one and one-half (134%) per month ("default interest') (f) expend such monies as Lessor deems appropriate to cure or mitigate the effect of the Event of Default, or to protect the Lessor's interest in the Equipment and this Lease, with all such sums to be immediately reimbursed to Lessor by Lessee; (g) setoff Lessee's security deposit or any other property of Lessee held by Lessor against any amount owed by Lessee to Lessor, and (h) exercise any other remedy permitted by law, equity or any other agreements with Lessee or any guarantor of this Lease. No remedy given in this paragraph is intended to be exclusive and each shall be cumulative. No express or implied waiver by Lessor of any Event of Default shall constitute a waiver of any subsequent Event of Default.

17. REPRESENTATIONS AND WARRANTIES BY LESSEE:

Lessee represents and warrants to Lessor that: (a) the Lease constitutes the Lessee's legal, valid and binding obligation and is enforceable against Lessee in accordance with its terms; (b) Lessee's entry into and performance under the Lease will not result in any breach, default or violation under Lessee's charter documents (articles of incorporation and bylaws in the case of a corporation or partnership agreement in the case of a partnership or articles of organization and operating agreement in the case of a limited liability company) or any other agreement to which Lessee is a party or to which it or its property is subject; (c) there are no suits or proceedings pending or threatened before any court, government agency or arbitrator which, if determined adversely to Lessee, would have a material adverse effect on its financial condition or ability to perform its obligations under the Lease; (d) that any financial statements or other information which Lessee has furnished Lessor concerning the business or condition of Lessee was true, correct and complete at the time furnished or as of the date of such financial statements; (e) the Equipment shall remain personal property; with respect to any Equipment that is the subject of any sale and leaseback transaction pursuant hereto, Lessee has good title to, rights in, and/or power to transfer all of the same. The Equipment is removable from and is not essential to the premises upon which it is located regardless of its attachment to realty, and Lessee agrees to take such action at its expense as may be necessary to prevent any third party from acquiring any interest in the Equipment as a result of its attachment to realty with respect to all of the Equipment leased hereto.

18. GENERAL:

A. The Equipment remains the personal property of Lessor and may be removed at any time, without notice, after termination of this Lease. The Equipment is removable from and is not essential to the premises at which the Equipment is located.

B. At Lessor's request, Lessee shall affix to the Equipment and each unit or element thereof, in a prominent place, appropriate tags, decals, or plates stating that the Equipment is owned by Lessor, and Lessee shall not cause or permit any such tags, decals, or plates to be removed, defaced or covered in any way.

C. Each Equipment Schedule (and this Master Equipment Lease to the extent incorporated therein), shall constitute the entire agreement between Lessor and Lessee with respect to the lease of the Equipment described in each Equipment Schedule. No waiver, consent, modification or change of terms of this Lease shall bind either party, including Lessor's Assignee, unless in writing and signed by an officer of the waiving party, and then such waiver, consent, modification or change shall be effective only in the specific instance and for the specific purpose given.

D. Each Equipment Schedule shall be executed in counterparts. Only that counterpart of an Equipment Schedule marked 'Secured Party's Original" (together with a copy of this Master Equipment Lease) shall constitute 'chattel paper' under the UCC and be effective to transfer Lessor's rights therein and all other counterparts of such Equipment Schedule have been marked to indicate that they are not the 'Secured Party's Original.'

E. All notices and other communications hereunder shall be in writing and shall be transmitted by hand, overnight courier, United States first class mail or certified mail (return receipt requested), postage prepaid. Such notices and other communications shall be addressed to the respective party at the address set forth above or at such other address as any party may from time to time designate by notice duly given in accordance with this section. Notices shall be deemed received on the earlier of (i) three days after deposit, postage prepaid, in the United States mail, if sent by United States first class, certified, or registered mail; (ii) the next day after delivery to an overnight courier, expenses prepaid, or (iii) the date of actual delivery if delivered by hand.

F. Any provision hereof prohibited by, or unlawful or unenforceable under, any applicable law of any jurisdiction shall, at the sole option of the Lessor, be ineffective as to such jurisdiction without invalidating the remaining provisions of this Lease; provided, however, that where the provisions of any such applicable law may be waived, they are hereby waived by Lessee to the full extent permitted by law, and this shall be deemed to be a valid and binding Lease enforceable in accordance with its terms.

H. TITLE:

Title to the Equipment shall at all times remain with Lessor and Lessee shall protect and defend the title of Lessor and keep it free of all claims and liens other than those of Lessee hereunder or created by Lessor. If the Lease shall be construed by a court to be a lease 'intended as security' and not a "true" lease, then Lessee, to secure all of Lessee's payment and performance obligations under the Lease, hereby grants to Lessor a first priority security interest in the Equipment and any and all insurance or other proceeds of the property and other collateral to which a security interest is granted.

I. This Lease shall be binding upon and inure to the benefit of Lessor and Lessee and their respective successors, assigns and permitted sublessees (subject, with respect to Lessee, to the provisions of Section 12 setting forth restrictions on Lessee's ability to assign this Lease or sublease the Equipment).

J. Lessee hereby authorizes Lessor to execute and/or file against Lessee in any public filing office deemed advisable by Lessor, any and all UCC financing statements (and amendments thereto) describing the Equipment and this Lease, and Lessee further irrevocably appoints Lessor as Lessee's attorney in fact to execute and/or file any and all such UCC financing statements (and amendments thereto) as Lessor considers advisable.

The filing of UCC Financing Statements against Lessee is precautionary and shall not be evidence that the Lease is intended as security.

K. Notwithstanding any other provisions of this Lease Agreement to the contrary, Lessee agrees, following the execution of the Lease by Lessee, to provide to Lessor at Lessor's demand, from time to time, any and all information reasonably required to establish Lessee's creditworthiness, including, but not limited to, financial statements and profit and loss statements, for the current period and for the proceeding three fiscal years. Lessor agrees that such information shall be kept confidential.

During the term of the Lease, as an additional condition of Lessee's performance, Lessee agrees to provide financial statements to Lessor within a reasonable period following the end of Lessee's fiscal year.

Lessee and Lessor do each hereby warrant and represent that their respective signatories whose signatures appear below have been and are on the date of this Lease duly authorized by all necessary and appropriate action to execute this Lease.

L. This Lease shall be governed by the laws of the State of Minnesota (without giving effect to principles of conflicts of law thereof). Lessee hereby: (i) irrevocably submits to the jurisdiction of any state or federal court located in Minnesota, over any action or proceeding to enforce or defend any matter arising from or related to this Lease; (ii) Irrevocably waives, to the fullest extent Lessee may effectively do so, the defense of an inconvenient forum to the maintenance of any such action or proceeding; and (iii) agrees that a final judgment In any such action or proceeding shall be conclusive and may be enforced in any other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this paragraph shall affect or impair Lessor's right to serve legal process in any manner permitte d by law or Lessor's right to bring any action or proceeding against Lessee or its property in the courts of any other jurisdiction.

M. LESSEE AND LESSOR HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS LEASE OR ANY OTHER AGREEMENT EXECUTED IN CONNECTION HEREWITH.

IN WITNESS WHEREOF, Lessor and Lessee have executed this Master Equipment Lease on the dates specified below. This Master Equipment Lease shall not become effective until accepted by Lessor, as evidenced by the signature below.

LESSEE:	NTN Buzztime, Inc.	ACCEPTED:
		LESSOR: DATA SALES CO., INC.


By:	/s/ Kendra Berg	/s/	Paul C. Breckner
Title:	CFO	Title:	President/CEO
Date:	10/1/09	Date:	9/29/09

3450 west burnsville parkway

burnsville, minnesota 55337

952-890-8838 • fax 952-890-8917

MINIMUM CASUALTY VALUE

FOR ALL EQUIPMENT SCHEDULES

MASTER LEASE 3-10125 AGREEMENT DATED 9/29/09

Between data sales co., Inc. ("Lessor")

And NTN Buzztime Inc. ("Lessee")

Pursuant to Article 8B (ii) of the Master Lease Agreement, the Minimum Casualty Value payable with respect to any item of Equipment in the above referenced Equipment Schedule will be the percent of Lessor's Acquisition Cost of such item set forth opposite the Monthly Rental Payment number due on the date such Minimum Casualty Value is payable.

Payment of the Minimum Casualty Value will be in addition to the then due Monthly Rental Payment for the Equipment.

On Due Date of Monthly Rental Payment No.	Percentage of the Acquisition Cost Of the Equipment	On Due Date of Monthly Rental Payment No.	Percentage of The Acquisition Cost of Equipment
1	110%	25	60%
2	110%	26	60%
3	110%	27	60%
4	110%	28	60%
5	110%	29	60%
6	110%	30	60%
7	100%	31	50%
8	100%	32	50%
9	100%	33	50%
10	100%	34	50%
11	100%	35	50%
12	100%	36	50%
13	80%	37	40%
14	80%	38	40%
15	80%	39	40%
16	80%	40	40%
17	70%	41	35%
18	70%	42	35%
19	70%	43	35%
20	70%	44	35%
21	70%	45	35%
22	70%	46	35%
23	70%	47	35%
24	70%	48	35%

LESSEE:	NTN Buzztime, Inc.	LESSOR: DATA SALES CO., INC.

By:	/s/ Kendra Berg	By:	Paul C. Breckner
Title:	CFO	Title:	President/CEO
Date:	10/5/09	Date:	9/29/09

EX-21.1 9 ntn_10k-ex2101.htm SUBSIDIARIES OF THE REGISTRANT ntn_10k-ex2101.htm

Exhibit 21.1

SUBSIDIARIES OF THE REGISTRANT

Certain active subsidiaries of the Company as of December 31, 2009 are listed below. The names of certain subsidiaries, which considered in the aggregate would not constitute a significant subsidiary, have been omitted.

Subsidiary		State Or Country Of Organization

Buzztime Entertainment, Inc.		Delaware

NTN Wireless Communications, Inc.		Delaware

Software Solutions, Inc.		Delaware

NTN Canada, Inc.		Canada

NTN Buzztime Limited		United Kingdom

EX-23.1 10 ntn_10k-ex2301.htm CONSENT ntn_10k-ex2301.htm

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-122024, 333-60814, 333-17247, 333-12777, and 033-95776 on Form S-8, and in Registration Statement Nos. 333-111538, 333-105429, 333-51650, 333-80143, 333-69383, 333-40625, and 333-14129 on Form S-3 of our report dated March 31, 2010 relating to the consolidated financial statements and the financial statement schedule of NTN Buzztime, Inc. and Subsidiaries, appearing in this Annual Report on Form 10-K for the year ended December 31, 2009.

/s/ Mayer Hoffman McCann P.C.

San Diego, California

March 31, 2010

EX-31.1 11 ntn_10k-ex3101.htm CERTIFICATION ntn_10k-ex3101.htm

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Terry A. Bateman, Chief Executive Officer of NTN Buzztime, Inc. (the “Company”) certify that:

1. I have reviewed this report on Form 10-K of the Company;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Dated: March 31, 2010		/s/ TERRY A. BATEMAN
		Terry A. Bateman, Chief Executive Officer NTN Buzztime, Inc.

EX-31.2 12 ntn_10k-ex3102.htm CERTIFICATION ntn_10k-ex3102.htm

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO

SECURITIES EXCHANGE ACT RULES 13a-14(a) AND 15(d)-14(a), AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kendra Berger, Chief Financial Officer of NTN Buzztime, Inc. (the “Company”) certify that:

1. I have reviewed this report on Form 10-K of the Company;

(a)

(b)

(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Dated: March 31, 2010		/s/ KENDRA BERGER
		Kendra Berger, Chief Financial Officer NTN Buzztime, Inc.

EX-32.1 13 ntn_10k-ex3201.htm CERTIFICATION ntn_10k-ex3201.htm

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of NTN Buzztime, Inc. (the “Registrant”) on Form 10-K for the year ended December 31, 2009, I, Terry A. Bateman, Chief Executive Officer of the Registrant, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(1) the Annual Report on Form 10-K of the Registrant for the year ended December 31, 2008, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


Dated: March 31, 2010		/s/ TERRY A. BATEMAN
		Terry A. Bateman, Chief Executive Officer NTN Buzztime, Inc.

EX-32.2 14 ntn_10k-ex3202.htm CERTIFICATION ntn_10k-ex3202.htm

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFIER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of NTN Buzztime, Inc. (the “Registrant”) on Form 10-K for the year ended December 31, 2009, I, Kendra Berger, Chief Financial Officer of the Registrant, do hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.


Dated: March 31, 2010		/s/ KENDRA BERGER
		Kendra Berger, Chief Financial Officer NTN Buzztime, Inc.

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Delaware	31-1103425
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

5966 La Place Court Carlsbad, California	92008
(Address of Principal Executive Offices)	(Zip Code)

Title of Each Class	Name of Each Exchange on Which Registered
Common Stock, $.005 par value	NYSE Amex

Large accelerated filer ¨	Accelerated filer ¨
Non accelerated filer ¨ (Do not check if a smaller reporting company)	Smaller reporting company x

	Playmaker Poker:	Compete against the house in a game of jacks-or-better poker.
	Acey Duecey:	Two cards are dealt face up. Players bet that the third card will fall between the previous two.
	Crystal Ball:	Ask the Crystal Ball a question and receive your answer.
	Shark Attack:	Just like hangman, but with an oceanic twist.


Item		Page

	Part I

1.	Business	1
1A.	Risk Factors	7
1B.	Unresolved Staff Comments	13
2.	Properties	13
3.	Legal Proceedings	13
4.	(Removed and Reserved)	13

	Part II

5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
6.	Selected Financial Data	14
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
7A.	Quantitative and Qualitative Disclosures About Market Risk	25
8.	Financial Statements and Supplementary Data	25
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	25
9A(T).	Controls and Procedures	25
9B.	Other Information	26

	Part III

10.	Directors, Executive Officers and Corporate Governance	27
11.	Executive Compensation	28
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	28
13.	Certain Relationships and Related Transactions, and Director Independence	28
14.	Principal Accounting Fees and Services	28

	Part IV

15.	Exhibits, Financial Statement Schedules	29
	Signatures	31
	Index to Financial Statements and Schedule	32

	●	Develop integrated product offering. We plan to leverage our 25 year history of providing compelling interactive entertainment in the out-of-home digital media industry by extending our brand to the internet and mobile devices. We believe expanding the availability of Buzztime branded games beyond our traditional hospitality venue-based platform to create a broadly integrated marketing platform and experience will allow us to capture new customer segments, to cross-promote our games across platforms to drive traffic to hospitality venues from the internet/mobile and from hospitality venues to the internet/mobile and to add value for our media partners and sponsors. In order to more efficiently and effectively allow us to build out our content o ffering at lower costs we are executing our plan to migrate our platform to a flash-based architecture. In late 2009, we introduced a downloadable application available on the iPhone that enables consumers to use their iPhone in place of the Playmaker® to play real-time in any of our over 4,000 locations. Additionally, we plan to promote Buzztime through online/mobile viral marketing and social networking, online trivia challenges and direct-to-consumer grassroots marketing designed to drive additional interest, excitement and traffic for our games and our venues. We believe that these initiatives could play a significant role in improving our customer retention and increasing sales to new customers.

	●	Continue to focus on national key accounts. Currently, national accounts represent approximately 29% of our total subscriber base. We believe we have significant opportunities to grow this segment by offering customized solutions to national accounts. These solutions will be aimed at addressing the revenue, promotional, branding and operational needs of these unique accounts.

	Year Ended December 31,
	2009		2008
United States		90%		87%
Canada		10%		12%
United Kingdom		—		1%
Total		100%		100%