10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2006

Commission file number 001-11460

NTN Buzztime, Inc.

(Exact name of registrant as specified in its charter)

DELAWARE	31-1103425
(State of incorporation)	(I.R.S. Employer
	Identification No.)
5966 LA PLACE COURT, CARLSBAD, CALIFORNIA	92008
(Address of principal executive offices)	(Zip Code)

(760) 438-7400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨                Accelerated filer  x                Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES  ¨    NO  x

At October 31, 2006, the registrant had outstanding 54,509,302 shares of common stock, $.005 par value.

NTN BUZZTIME, INC. AND SUBSIDIARIES

FORM 10-Q INDEX

		Page
PART 1	FINANCIAL INFORMATION
ITEM 1	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2006 (unaudited) and December 31, 2005	3
	Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2006 and 2005 (unaudited)	4
	Condensed Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2006 and 2005 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2006 and 2005 (unaudited)	6
	Notes to Condensed Consolidated Financial Statements	8
ITEM 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk	30
ITEM 4	Controls and Procedures	30
PART II	OTHER INFORMATION
ITEM 1	Legal Proceedings	31
ITEM 1A	Risk Factors	31
ITEM 2	Unregistered Sales of Equity Securities and Use of Proceeds	31
ITEM 3	Defaults Upon Senior Securities	31
ITEM 4	Submission of Matters to a Vote of Security Holders	31
ITEM 5	Other Information	31
ITEM 6	Exhibits	31
	Signatures	32

2

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements.

NTN BUZZTIME, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands, except share data)

	September 30, 2006			December 31, 2005
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	7,997		$	5,982
Restricted cash		59			69
Accounts receivable, net		2,833			3,630
Inventory		376			371
Investments available-for-sale		262			258
Deposits on broadcast equipment		553			799
Deferred costs		1,148			1,118
Prepaid expenses and other current assets		856			955
Total current assets		14,084			13,182
Broadcast equipment and fixed assets, net		6,952			8,085
Software development costs, net		842			706
Deferred costs		1,041			1,256
Goodwill		3,658			3,658
Intangible assets, net		2,383			2,946
Other assets		183			185
Total assets	$	29,143		$	30,018
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	839		$	725
Accrued expenses		1,336			1,799
Sales tax payable		909			714
Accrued salaries		819			643
Accrued vacation		584			619
Income taxes payable		68			147
Obligations under capital leases – current portion		412			436
Deferred revenue		2,317			2,024
Deferred revenue - Buzztime		380			632
Revolving line of credit		—			700
Total current liabilities		7,664			8,439
Obligations under capital leases, excluding current portion		55			366
Deferred revenue		298			321
Total liabilities		8,017			9,126
Commitments and contingencies (Notes 5 and 9)
Shareholders’ equity:
Series A 10% cumulative convertible preferred stock, $.005 par value, $161 liquidation preference, 5,000,000 shares authorized; 161,000 shares issued and outstanding at September 30, 2006 and December 31, 2005		1			1
Common stock, $.005 par value, 84,000,000 shares authorized; 54,509,000 and 53,877,000 shares issued and outstanding at September 30, 2006 and December 31, 2005, respectively		271			268
Additional paid-in capital		111,246			109,860
Accumulated deficit		(90,623	)		(88,788	)
Accumulated other comprehensive income (loss)		231			(449	)
Total shareholders’ equity		21,126			20,892
Total liabilities and shareholders’ equity	$	29,143		$	30,018

See accompanying notes to unaudited condensed consolidated financial statements.

3

NTN BUZZTIME, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Revenues	$	10,938		$	10,425		$	32,856		$	29,561
Direct operating costs (includes depreciation of $985 and $821 for the three months ended September 30, 2006 and 2005, respectively, and $2,926 and $2,386 for the nine months ended September 30, 2006 and 2005, respectively)		3,579			3,249			10,778			10,107
Selling, general and administrative		6,700			6,396			21,195			19,624
Litigation, legal and professional fees		454			267			1,168			837
Depreciation and amortization (excluding depreciation included in direct costs)		205			212			622			632
Research and development		56			70			178			195
Non-cash charge related to software product sale		—			—			—			276
Total operating expenses		10,994			10,194			33,941			31,671
Operating income (loss)		(56	)		231			(1,085	)		(2,110	)
Other income (expense):
Interest income		45			20			94			71
Interest expense		(19	)		(55	)		(104	)		(128	)
Impairment on investments available-for-sale		—			—			(652	)		—
Total other income (expense)		26			(35	)		(662	)		(57	)
Income (loss) from operations before income taxes		(30	)		196			(1,747	)		(2,167	)
Provision (benefit) for income taxes		25			(50	)		88			26
Net income (loss)	$	(55	)	$	246		$	(1,835	)	$	(2,193	)
Net income (loss) per share:
Basic and diluted	$	(0.00	)	$	0.00		$	(0.03	)	$	(0.04	)
Weighted average shares outstanding:
Basic		54,427			53,604			54,173			53,411
Diluted		54,427			60,632			54,173			53,411

See accompanying notes to unaudited condensed consolidated financial statements.

4

NTN BUZZTIME, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)

(In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Net income (loss)	$	(55	)	$	246		$	(1,835	)	$	(2,193	)
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments		(1	)		44			24			37
Unrealized gain (loss) on securities, net of reclassification adjustment		98			(77	)		656			41
Other comprehensive income (loss)		97			(33	)		680			78
Comprehensive income (loss)	$	42		$	213		$	(1,155	)	$	(2,115	)

See accompanying notes to unaudited condensed consolidated financial statements.

5

NTN BUZZTIME, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Nine Months Ended September 30,
	2006			2005
Cash flows from operating activities:
Net loss from operations	$	(1,835	)	$	(2,193	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		3,548			3,018
Provision for doubtful accounts		583			801
Non-cash stock-based compensation		912			239
Impairment on investments		652			—
Loss from disposition of equipment		146			216
Non-cash charge related to software product sale		—			276
Provision for sales returns		—			(1	)
Changes in assets and liabilities:
Restricted cash		10			—
Accounts receivable		214			(791	)
Inventory		(5	)		96
Deferred costs		185			(498	)
Prepaid expenses and other assets		99			12
Accounts payable and accrued expenses		30			(493	)
Income taxes payable		(79	)		(72	)
Deferred revenue		19			1,025
Net cash provided by operating activities		4,479			1,635
Cash flows from investing activities:
Capital expenditures		(920	)		(3,241	)
Software development expenditures		(339	)		(321	)
Deposits on broadcast equipment		(620	)		(136	)
Net cash used in investing activities		(1,879	)		(3,698	)
Cash flows from financing activities:
Principal payments on capital leases		(335	)		(266	)
Principal payments on revolving line of credit		(700	)		—
Proceeds from exercise of stock options and warrants		477			406
Principal payments on equipment notes payable		—			(541	)
Borrowings against revolving line of credit		—			700
Net cash (used in) provided by financing activities		(558	)		299
Net increase (decrease) in cash and cash equivalents		2,042			(1,764	)
Effect of exchange rate on cash		(27	)		28
Cash and cash equivalents at beginning of period		5,982			6,710
Cash and cash equivalents at end of period	$	7,997		$	4,974

See accompanying notes to unaudited condensed consolidated financial statements.

6

NTN BUZZTIME, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows (Continued)

(Unaudited)

(In thousands)

	Nine Months Ended September 30,
	2006			2005
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	103		$	128
Income taxes	$	309		$	95
Supplemental disclosure of non-cash investing and financing activities:
Equipment acquired under capital leases and notes payable	$	—		$	671
Reclass of deposits for equipment placed in service	$	800		$	—
Unrealized holding loss (gain) on investments available for sale	$	(98	)	$	40
Issuance of common stock in payment of dividends	$	5		$	8
Investment in limited partnership	$	—		$	69

Supplemental non-cash disclosure of warrants exercised - during the nine months ended September 30, 2005 Allen & Company LLC exercised warrants for approximately 433,000 shares into approximately 284,000 shares of NTN common stock on a cashless exercise basis.

See accompanying notes to unaudited condensed consolidated financial statements.

7

NTN BUZZTIME, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) BASIS OF PRESENTATION

In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments (consisting of only normal, recurring adjustments) that are necessary for a fair presentation of the financial position of NTN Buzztime, Inc. and its wholly-owned subsidiaries: Buzztime Entertainment, Inc., NTN Wireless Communications, Inc., NTN Software Solutions, Inc. and NTN Canada, Inc. (collectively, “we”, “our” or “NTN”) and the results of operations and cash flows of NTN for the interim periods presented. Management has elected to omit substantially all notes to our condensed consolidated financial statements as permitted by the rules and regulations of the Securities and Exchange Commission. The results of operations for the interim periods are not necessarily indicative of results to be expected for any other interim period or for the year ending December 31, 2006.

The condensed consolidated financial statements for the three and nine months ended September 30, 2006 and 2005 are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in our Form 10-K for the year ended December 31, 2005.

Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and require us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures 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, bad debts, investments, intangible assets, taxes and tax settlements, contingencies and litigation. 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 making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

(2) SHARE-BASED COMPENSATION

Stock-Based Compensation Valuation Assumptions

We estimate the fair value of our stock options using a Black-Scholes option pricing model, consistent with the provisions of Statement of Financial Accounting Standards No. 123R, Share Based Payment (SFAS No. 123R), Securities and Exchange Commission Staff Accounting Bulletin No. 107 (“SAB 107”) and our prior period pro forma disclosures of net income (loss), including stock-based compensation as required by SFAS No. 123. The fair value of stock options granted is recognized to expense over the requisite service period. 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 materially all of the associated employees report.

We used the historical stock price volatility as an input to value our stock options under SFAS No. 123R and in accordance with SFAS No. 123 for purposes of its pro forma information. 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 NTN’s history and expectation of dividend payouts.

The following weighted average assumptions were used for grants issued for the three and nine months ended September 30, 2006 under the SFAS No. 123R requirements and for the three and nine months ended September 30, 2005 under the SFAS No. 123 requirements:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2006		2005		2006		2005
Risk-free interest rate	5.01	%	3.88	%	4.99	%	3.74	%
Dividend yield	0.0	%	0.0	%	0.0	%	0.0	%
Volatility	63.5	%	74.2	%	63.8	%	75.4	%
Expected Life	5.0 years		4.8 years		5.0 years		4.8 years

8

In our pro forma disclosures prior to the adoption of SFAS No. 123R, we accounted for forfeitures as they occurred. SFAS No. 123R 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. For both the three and nine months ended September 30, 2006, we estimated a 13% annual forfeiture rate.

Impact of SFAS No. 123R

The following table presents the impact to our condensed consolidated financial statements as a result of our adoption of SFAS No. 123R for the three and nine months ended September 30, 2006 (in thousands, except per share amounts):

	Three months ended September 30, 2006		Nine months ended September 30, 2006
Stock-based compensation expense	$	278	$	846
Effect on earnings per share:
Basic and diluted	$	0.01	$	0.02

As of September 30, 2006, the unamortized compensation expense related to outstanding unvested options was approximately $1,579,000 with a weighted average remaining vesting period of 2.45 years. We expect to amortize this expense over the remaining vesting period of these stock options.

Prior to the adoption of SFAS No. 123R, for options granted to employees, we applied Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” and provided the pro forma disclosures of SFAS No. 123 as amended by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure”. No compensation expense has been recognized for options granted unless the grants were issued at exercise prices below fair market value prior to the adoption of SFAS No. 123R.

We account for options and warrants granted to non-employees under SFAS No. 123 and Emerging Issues Task Force Issue No. 96-18, “Accounting for Equity Instruments that are Issued to other than Employees for Acquiring or in Conjunction with Selling Goods or Services”. We measure the fair value of such options using the Black-Scholes option pricing model at each financial reporting date. We account for changes in fair values between reporting dates in accordance with FIN 28. Stock-based compensation expense related to options and warrants granted to non-employees for the three months ended September 30, 2006 and 2005, and nine months ended September 30, 2006 and 2005 was $0, $14,000, $13,000, and $65,000, respectively.

Pro forma for 2005 Under SFAS No. 123R

The following table reconciles the reported earnings (loss) per share to the pro forma amounts that we would have reported for the three and nine months ended September 30, 2005 had we recognized compensation expense for our stock-based compensation plans in accordance with SFAS No. 123R (in thousands, except per share amounts):

	Three months ended September 30, 2005			Nine months ended September 30, 2005
Net income (loss) as reported	$	246		$	(2,193	)
Add: stock option-based employee compensation expense included in reported net income (loss), net of related tax effects		33			174
Deduct: stock-based employee compensation expense, net of related tax effects		(453	)		(1,370	)
Pro forma net loss	$	(174	)	$	(3,389	)
Basic and diluted net loss per share, as reported	$	0.00		$	(0.04	)
Basic and diluted net loss per share, pro forma	$	(0.00	)	$	(0.06	)

9

Stock Option Plans

2004 Performance Incentive Plan

In September 2004, at a Special Meeting of Stockholders (Special Meeting), our 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 the Company's 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 our 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. As of September 30, 2006, a total of 9,566,000 options were outstanding and options to purchase 7,714,000 shares were exercisable under both plans. As of September 30, 2004, there were 1,063,000 shares available for future grant under the 2004 Plan.

Special Stock Option Plan

In 1996, NTN adopted a Special Stock Option Plan (the “Special Plan”). Options issued under the Special Plan are made at the discretion of the Board of Directors and are designated only as nonqualified options. The options generally have a term of up to ten years, are exercisable at a price per share not less than the fair market value on the date of grant and vest over various terms. The aggregate number of shares issued and outstanding under the Special Plan as of December 31, 2005 is 500,000. As of September 30, 2006, a total of 400,000 options were outstanding, 400,000 shares were exercisable, and zero shares were available for future grant under the Special Plan.

Buzztime Entertainment Inc. Stock Incentive Plan

On May 31, 2001, Buzztime Entertainment, Inc. (“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 Options

The following table summarizes stock option activity for the nine months ended September 30, 2006 (in thousands, except per share data):

	Special Plan				Option Plans
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Balance at January 1, 2006	500		$	2.81	10,428		$	1.49
Granted	—			—	1,449			1.41
Exercised	—			—	(608	)		0.78
Forfeited or expired	(100	)		2.81	(1,703	)		2.33
Outstanding at September 30, 2006	400		$	2.81	9,566		$	1.38

10

The following table summarizes information concerning currently outstanding and exercisable options (in thousands, except contractual life and exercise price data):

	Options Outstanding				Options Exercisable			Aggregate Intrinsic Value
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life (in years)	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
Special Plan:     $2.81	400	0.88	$	2.81	400	$	2.81	$	—
Option Plans:
$0.45-$1.50	6,830	5.09		1.04	5,236		0.93		1,937
$1.51-$3.00	2,643	6.27		2.18	2,387		2.17		—
$3.01-$4.94	93	1.48		3.47	91		3.50		—
	9,566				7,714			$	1,937

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on a per share price of $1.30 the closing price of our common stock on September 29, 2006 as reported by the American Stock Exchange, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money stock options exercisable as of September 30, 2006 was 4,945,000.

The per share weighted-average fair value of stock options granted during the three months ended September 30, 2006 and 2005 and nine months ended September 30, 2006 and 2005 was $0.82, $1.15, $0.81, and $1.18, respectively.

The total intrinsic value of options exercised during the three months ended September 30, 2006 and 2005 and nine months ended September 30, 2006 and 2005 was $113,000, $90,000, $365,000 and $321,000, respectively.

The total cash received as a result of stock option and warrant exercises during the three months ended September 30, 2006 and 2005 and nine months ended September 30, 2006 and 2005 was approximately $200,000, $139,000, $477,000 and $406,000, respectively.

Warrants

In previous years, we granted warrants to non-employees in payment for services received and in connection with our public offering in January 2004.

The following table summarizes warrant activity for the nine months ended September 30, 2006:

	Outstanding Warrants	Weighted Average Exercise Prices
December 31, 2005	1,344,000	$	2.16
Granted	—		—
Exercised	—		—
Canceled	—		—
September 30, 2006	1,344,000		2.16
Balance exercisable at September 30, 2006	1,344,000	$	2.16

A summary of warrants outstanding and exercisable by exercise price range as of September 30, 2006 is as follows:

	Warrants Outstanding				Warrants Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number Exercisable	Weighted Average Exercise Price
$1.00-$1.30	667,000	1.71 years	$	1.11	667,000	$	1.11
$1.31-$3.91	677,000	1.18 years	$	3.19	677,000	$	3.19
	1,344,000				1,344,000

11

(3) INCOME (LOSS) PER SHARE

For the three months ended September 30, 2006, and the nine months ended September 30, 2006 and 2005, the weighted average of options, warrants and convertible preferred stock representing approximately 12,896,000, 12,265,000 and 11,948,000 potential common shares, respectively, have been excluded from the computation of net loss per share, respectively, as their effect was anti-dilutive. For the three months ended September 30, 2005, the weighted average of options, warrants, deferred stock units and convertible preferred stock representing approximately 5,482,000 potential common shares, respectively, have been excluded from the computation of net income per share, as their effect was anti-dilutive.

(4) SEGMENT INFORMATION

We produce and distribute interactive entertainment and hospitality communications products, and manage our business via two operating divisions: Entertainment and Hospitality. Our reportable segments have been determined based upon the information provided to our chief decision makers.

The Entertainment Division is comprised of the Buzztime Interactive Television Network (Buzztime iTV Network or iTV Network) and Buzztime Distribution.

In 2006, we completed the re-branding of our entertainment product offerings under the Buzztime brand, including the re-naming of the NTN iTV Network as the Buzztime iTV Network. Beginning with the 2006 first quarter report, we modified our segment reporting by moving the Buzztime iTV Network segment out of the Hospitality Division and into the newly created Entertainment Division.

Additionally, the segment formerly known as Buzztime Entertainment, Inc., is now presented as the Buzztime Distribution segment. The Buzztime Entertainment, Inc. segment formerly absorbed all of the costs to produce and manage our game content. The newly designated Buzztime Distribution will now include only 10% of the costs of producing and managing the content, as this better matches the nature of the services provided to the segment. The remaining 90% of content costs are charged to the iTV Network segment.

The Buzztime iTV Network generates revenue from providing an interactive television promotional game network to restaurants, sports bars, taverns and pubs in North America and the U.K. and from selling third-party advertising on the Network. Buzztime Distribution generates revenue from distributing and licensing the company’s game content and technology to third-party consumer platforms, including cable television, satellite television, mobile phones, online, retail games and toys, airlines and books.

Included in the operating income (loss) for the segments is an allocation of corporate expenses, while the related corporate assets are not allocated to the segments. The segment results for the three and nine months ended September 30, 2005, below were reclassified to conform to the 2006 presentation.

12

The following tables set forth certain information regarding our segments for 2006 and 2005 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Revenues:
Entertainment Division
Buzztime iTV Network	$	7,978		$	7,385		$	23,889		$	21,097
Buzztime Distribution		354			515			641			1,041
Total Entertainment Division		8,332			7,900			24,530			22,138
Hospitality Division
NTN Wireless		1,483			1,269			4,656			4,240
Software Solutions		1,123			1,256			3,670			3,183
Total Hospitality Division		2,606			2,525			8,326			7,423
Total revenues	$	10,938		$	10,425		$	32,856		$	29,561
Operating income (loss):
Entertainment Division
Buzztime iTV Network	$	517		$	458		$	531		$	(46	)
Buzztime Distribution		(190	)		(167	)		(812	)		(1,202	)
Total Entertainment Division		327			291			(281	)		(1,248	)
Hospitality Division
NTN Wireless		47			78			367			367
Software Solutions		(430	)		(138	)		(1,171	)		(1,229	)
Total Hospitality Division		(383	)		(60	)		(804	)		(862	)
Total operating income (loss)	$	(56	)	$	231		$	(1,085	)	$	(2,110	)
Net income (loss):
Entertainment Division
Buzztime iTV Network	$	518		$	475		$	(216	)	$	(124	)
Buzztime Distribution		(191	)		(169	)		(814	)		(1,207	)
Total Entertainment Division		327			306			(1,030	)		(1,331	)
Hospitality Division
NTN Wireless		47			78			367			367
Software Solutions		(429	)		(138	)		(1,172	)		(1,229	)
Total Hospitality Division		(382	)		(60	)		(805	)		(862	)
Total net income (loss)	$	(55	)	$	246		$	(1,835	)	$	(2,193	)

	As of September 30,  2006		As of December 31, 2005
Goodwill:
Entertainment Division
Buzztime iTV Network	$	974	$	974
Buzztime Distribution		—		—
Total Entertainment Division		974		974
Hospitality Division
NTN Wireless		449		449
Software Solutions		2,235		2,235
Total Hospitality Division		2,684		2,684
Total goodwill	$	3,658	$	3,658

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	As of September 30, 2006		As of December 31, 2005
Total assets:
Entertainment Division
Buzztime iTV Network	$	18,450	$	16,989
Buzztime Distribution		2,358		2,791
Total Entertainment Division		20,808		19,780
Hospitality Division
NTN Wireless		2,146		1,704
Software Solutions		3,752		4,178
Total Hospitality Division		5,898		5,882
Corporate		2,437		4,356
Total assets	$	29,143	$	30,018

(5) CONTINGENCIES

From time to time, state tax authorities 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. Today many states are expanding their interpretation of their sales and use tax statutes to derive additional revenue. While in the past our sales and use tax assessments have not been significant to our operations, it is likely that such expenses will grow in the future.

We evaluate such inquiries on a case-by-case basis and have favorably resolved these tax issues in the past without any material adverse consequences. During 2003, the state of Texas, our largest state in terms of Buzztime iTV Network sites, began a sales tax audit. The state of Texas concluded that our services are amusement services and are therefore subject to sales taxes. On January 12, 2004, the state assessed us for approximately $1,115,000 for the five year audit period ended December 31, 2002. We have objected to this approach since our services are provided to the consumers for free as a promotional service, which we believe falls outside the definition of amusement services as defined by the Texas tax code. We appealed the assessment at the administrative appeals level and on August 1, 2006 we received a position letter from the state. The state agreed with our position that our services do not represent taxable amusement services. However, the state has now adopted the position that our services constitute taxable cable television services. We intend to aggressively defend our position that the service fee is a tax-exempt promotional service. The next opportunity to do so will be at a formal hearing, which is scheduled for November 15, 2006. While we believe that we have a strong position in this matter, there can be no assurances that we will resolve this matter in our favor.

We are involved in various other claims and legal actions arising in the ordinary course of business. In our opinion, the ultimate disposition of these matters will not have a material adverse effect on our consolidated financial position, results of operations, or liquidity.

The Company has agreements with certain key employees which include payment obligations to such employees if they are terminated without cause. As of September 30, 2006, the aggregate amount potentially payable pursuant to such agreements total approximately $760,000.

(6) DEFERRED REVENUE – BUZZTIME DISTRIBUTION

In February 2003, we entered into a Trial Agreement with a major cable operator that involves developing the Buzztime Trivia Channel for potential deployment on two different cable technology platforms within its system. Under the Trial Agreement, the cable operator has the right to apply 50% of any amount it pays us related to the Trial Agreement against future development and/or license fees paid for the carriage of the Buzztime Trivia Channel. During 2003 and 2004, we received $500,000 under this agreement to be used for license fees and professional services. As of September 30, 2006 and December 31, 2005, $95,000 and $250,000, respectively, remained in Deferred Revenue – Buzztime.

In 2005, we amended this Trial Agreement to add license option rights to new game applications (in addition to the Buzztime Trivia Channel) and new development platforms. We also extended the expiration date of the Trial Agreement through December 2006 and have also extended the right for the cable operator to use its 50% credit per the original agreement. In March 2005, $500,000 was received under this amendment to be applied towards license fees incurred. As of September 30, 2006 and December 31, 2005, $280,000 and $379,000, respectively, related to this amendment remained in Deferred Revenue – Buzztime.

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(7) SALE OF SOFTWARE PRODUCTS

On February 4, 2005, we entered into an Asset Purchase Agreement with Intura Solutions LP (Intura), a Texas limited partnership, pursuant to which we sold the point-of-sale software products developed and maintained by our Software Solutions segment. We received a non-dilutable 10% partnership interest in Intura in the transaction and will receive a royalty representing 20% of Intura’s revenues generated during the two years after February 4, 2005, up to a maximum of $100,000. Further, Intura will provide software development maintenance services for certain software for two years, while we retain the rights to the maintenance and support revenue from legacy products.

(8) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

Accumulated other comprehensive income (loss) is the combination of accumulated net unrealized losses on investments available for sale and the accumulated gains or losses from foreign currency translation adjustments. We translated the assets and liabilities of NTN Canada and of our United Kingdom operations into U.S. dollars using the period end exchange rate. Revenue and expenses were translated using the average exchange rates for the reporting period. The unrealized gain (loss) of the Company’s Australian investment as of September 30, 2006 and December 31, 2005 was $98,000 and $(558,000), respectively. The Company recorded an impairment charge of $652,000 in the second quarter of 2006. Since that time the carrying value of this investment has increased $98,000 to $262,000. The table below reflects the reversal of the previously recorded unrealized loss as well as the current unrealized gain.

For the three and nine months ended September 30, 2006, and 2005, the components of accumulated other comprehensive loss were as follows (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2006			2005			2006			2005
Beginning balance	$	134		$	(358	)	$	(449	)	$	(469	)
Foreign currency translation adjustments		(1	)		44			24			37
Unrealized gain (loss) during period in investment available-for-sale		98			(77	)		4			41
Reclassification adjustment for loss included in net loss		—			—			652			—
Ending balance	$	231		$	(391	)	$	231		$	(391	)

(9) LINE OF CREDIT

In March 2006, we signed a one-year $2.0 million credit facility agreement with Discovery Bank. Interest on the line is based on the Wall Street Journal’s Prime Rate. The interest rate to be applied to the unpaid principal balance is not to exceed the Wall Street Journal Prime rate plus 0.5%. The line is secured by all inventories, equipment, accounts receivable and various other assets of NTN.

On July 16, 2003, we entered into a $1,000,000 line of credit arrangement with Pacific Mercantile Bank. In April 2006, we repaid in full the outstanding balance of approximately $700,000 of principal and interest on this line of credit.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

THIS QUARTERLY REPORT ON FORM 10-Q, INCLUDING MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTAINS FORWARD-LOOKING STATEMENTS WITH THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES ACT OF 1934. THESE FORWARD-LOOKING STATEMENTS REFLECT FUTURE EVENTS, RESULTS, PERFORMANCE, PROSPECTS AND OPPORTUNITIES, INCLUDING STATEMENTS RELATED TO OUR STRATEGIC PLANS, CAPITAL EXPENDITURES, INDUSTRY TRENDS AND FINANCIAL POSITION OF NTN BUZZTIME, INC. AND ITS SUBSIDIARIES. FORWARD-LOOKING STATEMENTS ARE BASED ON INFORMATION CURRENTLY AVAILABLE TO US AND OUR CURRENT EXPECTATIONS, ESTIMATES, FORECASTS, AND PROJECTIONS ABOUT THE INDUSTRIES IN WHICH WE OPERATE AND THE BELIEFS AND ASSUMPTIONS OF MANAGEMENT. WORDS SUCH AS ‘EXPECTS,’ ANTICIPATES,’ ‘COULD,’ ‘TARGETS,’ ‘PROJECTS,’ ‘INTENDS,’ ‘PLANS,’ ‘BELIEVES,’ ‘SEEKS,’ ‘ESTIMATES,’ ‘MAY,’ ‘WILL,’ ‘WOULD,’ VARIATIONS OF SUCH WORDS, AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. IN ADDITION, ANY STATEMENTS WHICH REFER TO PROJECTIONS OF OUR FUTURE FINANCIAL PERFORMANCE, OUR ANTICIPATED GROWTH AND TRENDS IN OUR BUSINESSES, AND OTHER CHARACTERIZATIONS OF FUTURE EVENTS OR CIRCUMSTANCES, ARE FORWARD-LOOKING STATEMENTS. READERS ARE CAUTIONED THAT THESE FORWARD-LOOKING STATEMENTS ARE ONLY PREDICTIONS AND ARE SUBJECT TO RISKS, UNCERTAINTIES, AND ASSUMPTIONS THAT MAY BE DIFFICULT TO PREDICT. THEREFORE, ACTUAL RESULTS MAY DIFFER MATERIALLY AND ADVERSELY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN OUR ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005, UNDER THE SECTION ENTITLED ‘RISK FACTORS,’ AND IN OTHER REPORTS WE FILE WITH THE SECURITIES AND EXCHANGE COMMISSION FROM TIME TO TIME. WE UNDERTAKE NO OBLIGATION TO REVISE OR UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENT FOR ANY REASON.

Web Site Access to SEC Filings

We maintain an Internet website at www.ntn.com. We make available free of charge on our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

OVERVIEW

We produce and distribute interactive entertainment and hospitality communications products, and manage our business via two operating divisions: Entertainment and Hospitality.

The Entertainment Division is comprised of the Buzztime Interactive Television Network (Buzztime iTV Network or iTV Network) and Buzztime Distribution (formerly Buzztime Entertainment, Inc.). The Buzztime iTV Network distributes an interactive television promotional game network to restaurants, sports bars, taverns and pubs in North America and the U.K. Buzztime Distribution distributes the company’s game content and technology to other third-party consumer platforms, including cable television, satellite television, mobile phones, online, retail games and toys, airlines and books.

The Hospitality Division is comprised of NTN Wireless Communications (NTN Wireless) and NTN Software Solutions (Software Solutions). NTN Wireless produces and distributes guest and server paging systems to restaurants and other markets. NTN Software Solutions develops and distributes customer management software to manage reservations and table service in restaurants.

In the third quarter of 2005 we were approached by a hospitality-focused company stating an interest in purchasing the assets of NTN Wireless and Software Solutions. In the fourth quarter of 2005, we disclosed our interest in considering the sale of these businesses. This interest continues. If we cannot find buyers willing to pay what we believe are the market values for the assets, we may decide to maintain these operations. Until a transaction is completed, we intend to continue to grow these two businesses.

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Entertainment Division

Buzztime iTV Network Segment

The Buzztime iTV Network (iTV Network; formerly the “NTN iTV Hospitality Network”) has maintained a unique and preemptive position in the hospitality industry for over 20 years as a promotional platform providing interactive entertainment to patrons in restaurants and sports bars (hospitality venues). Approximately 74% of our current consolidated revenues are derived from this segment as we receive recurring service fees from subscribing hospitality venues (Network subscribers) and advertising revenues.

The iTV Network transmits a wide variety of engaging interactive multiplayer games, including trivia quiz shows, play-along sports programming, casino-style and casual games to our Network Subscribers. Patrons use our wireless game controllers (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 Subscriber 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 September 30, 2006, we had 3,677 United States Network subscribers, 365 Canadian subscribers and 51 U.K. subscribers. Approximately 28% of our Network subscribers come from leading national chains in the casual-dining restaurant segment such as Buffalo Wild Wings, TGIFriday’s, Bennigan’s Irish Grill, Applebee’s and Damon’s Grill.

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 earns revenue from advertising and marketing services to companies seeking to reach the millions of consumers that visit the Buzztime iTV Network’s 4,093 venues.

United Kingdom Network Launch

In March 2005, we launched the Buzztime iTV Network product in the United Kingdom under the brand “Buzztime Network.” In the late fall of 2005, we began our first broad marketing programs with a goal of driving sales growth early in 2006. U.K. sales are made through our exclusive United Kingdom representative, Q109 Limited. As of September 30, 2006 we had 51 subscribers installed in the U.K.

Buzztime Distribution Segment (formerly presented as Buzztime Entertainment, Inc. subsidiary)

Note - Beginning with the 2006 first quarter report, the segment formerly known as Buzztime Entertainment, Inc. is now presented as Buzztime Distribution. Revenues and expenses in the Buzztime Entertainment, Inc. segment formerly reflected both our efforts to license our game content and technology to emerging interactive platforms and all of the costs to produce and manage that content. Buzztime Distribution will now include all costs of licensing but only 10% of the cost of creating and managing the content, as this better matches content costs with revenues in the segment. The remaining 90% of content costs are charged to the Buzztime iTV Network segment.

Buzztime Distribution generates revenue from distributing and licensing our Buzztime-branded content and related technology to interactive consumer platforms, with a primary focus on interactive cable and satellite television. Our distribution efforts focus on licensing real-time, mass-participation games, head-to-head multi-player games and single-player games.

The company develops, produces and distributes casual games for both one-way and two-way consumer platforms with a primary focus on interactive television. The games are designed for general audiences and include trivia quiz shows, real-time sports prediction competitions that are played along with live sporting events, multi-player card and billiard games as well as single-player card, arcade, puzzle and board games. The games are distributed through several platforms including the Buzztime iTV Network (restaurants and sports bars), cable television, satellite television, mobile phones, home electronic games, cards and books.

The Buzztime Trivia Channel debuted in June 2002 to Susquehanna Communications’ (now a Comcast-owned system) digital cable subscribers in York, Pennsylvania. We believe this was the first deployment of a real-time, two-way game channel via digital cable television in the United States that operates on commercially deployed digital set-top boxes in the home. The Buzztime Network is installed in 10 U.S. cable systems and is available to over 300,000 Comcast, Time Warner, and Blue Ridge digital cable subscribers within cable television systems in Pennsylvania, Virginia, Maryland, Maine, Louisiana and Alabama. Buzztime also has trivia games deployed on satellite television through Echostar’s DISH Network in the United States and Bell Canada’s ExpressVu in Canada, as well as to major North American wireless carriers through a licensing and development agreement with Airborne Entertainment. Buzztime currently works with leading companies such as Media General, Airborne Entertainment, Cadaco, Square One Publishers and others to deliver Buzztime game content to consumers.

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Revenue for Buzztime Distribution is derived from license fees and royalties from third-party licensees who distribute Buzztime content to end-users, as well as from third-party development and production fees. It is also our plan to sell advertising when we achieve a critical mass of subscribers particularly via cable television distribution.

The Hospitality Division

NTN Wireless Segment

NTN Wireless earns revenue from the sale of on-site wireless paging products to restaurants and other hospitality locations. These products are provided to customers waiting for a table and will activate to let them know when their table is ready. These products can also be used to alert restaurant staff to issues such as when hot food is ready to be served.

Software Solutions Segment

Software Solutions earns revenue from the licensing of seating management and reservation systems software as well as from providing professional services to Domino’s Pizza LLC and to other customers. Software Solutions was formed in July 2003 when we acquired the assets and assumed certain liabilities of Breakaway International, Inc.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these consolidated 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 site equipment, share-based compensation, bad debts, investments, intangible assets, taxes and tax settlements and contingencies and litigation. 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 making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

• We record deferred costs and revenues related to the costs and related installation revenue associated with installing new customer sites. Based on SEC Staff Accounting Bulletin (SAB) 104, Revenue Recognition, we amortize these amounts over an estimated three-year average life of a customer relationship.

• We incur a relatively significant level of depreciation expense in relationship 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, VSAT satellite dishes and associated electronics and the computers located at our customer sites. The Playmakers are depreciated over a four-year life, VSAT dishes and associated electronics over a four-year life and the computers over a three-year life. The depreciable life of these assets was determined based on their estimated useful life, which considers anticipated technological changes. If our Playmakers, VSAT dishes 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, VSAT dishes 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.

• We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. We reserve for all accounts that have suspended or terminated our Buzztime iTV Network services, all auto debit customers with balances that are greater than 60 days past due, plus 3%-6% of all outstanding balances for iTV customers and 6% of outstanding balances for NTN Wireless and Software Solutions’ customers. Additional reserves may be established if specific customers’ balances are identified as potentially uncollectible. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

• We assess our inventory for estimated obsolescence or unmarketable inventory and write down the difference between the cost of inventory and the estimated market value, based on assumptions about future sales and supply on-hand. If actual market conditions are less favorable than those we have projected, additional inventory write-downs may be required.

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• Revenues from sales of software generally contain multiple elements, and are recorded in accordance with Statement of Position (SOP) No. 97-2, Software Revenue Recognition, as amended. Software license fee revenue is recognized when persuasive evidence of an arrangement exists, delivery of the product has occurred at our customer’s location, the fee is fixed or determinable and collection is probable, provided that vendor specific evidence exists for any undelivered elements, namely annual support and maintenance. Along with the basic software license, our customers have the option to elect post contract support for an additional fee, which is based on a stipulated percentage of the license fee. Post contract support consists of technical support as well as unspecified software upgrades and releases when and if made available by us during the term of the support period.

If, at the outset of an arrangement, we determine that the arrangement fee is not fixed or determinable, revenue is deferred until the arrangement fee becomes due. If, at the outset of an arrangement, we determine that collectibility is not probable, revenue is deferred until the earlier of when collectibility becomes probable or when payment is received. If an arrangement allows for customer acceptance, revenue is not recognized until the earlier of receipt of customer acceptance or expiration of the acceptance period.

Revenue from development services consists of customizations and, therefore, we recognize revenue from development services as the services are performed under the agreements. We recognize revenues from post contract support, such as maintenance, on a straight-line basis over the term of the contract.

Additionally, we provide consulting and training services under both hourly-based time and materials and fixed-priced contracts. Revenues from these services are generally recognized as the services are performed.

• We have a significant amount of goodwill and intangible assets on our balance sheet related to acquisitions. As of September 30, 2006, the combined net amount of $6,041,000 goodwill and intangible assets represented 20.7% of total assets. Goodwill represents the excess of costs over fair value of assets of businesses acquired. As of January 1, 2002, we adopted the provisions of SFAS No. 142, Goodwill and Other Intangible Assets. Goodwill and intangible assets acquired in a purchase combination determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 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 SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

We performed our annual test for goodwill impairment for Software Solutions and NTN Canada, Inc., as of August 31, 2006, and concluded that there was no indication of impairment. We retained a third-party valuation firm to assist in calculating fair values. We performed our annual test for goodwill impairment for NTN Wireless as of December 31, 2005 and concluded that there was no indication of impairment. The analysis was based on consideration of (1) the market value of comparable publicly traded companies; (2) the market value of similar companies involved in business combinations; and (3) an income approach of discounting the projected cash flows of operations. The projections of those units involved a number of assumptions and estimates, including revenue growth and operating margins, which we believe are reasonable based on existing operations and prospective business opportunities. We completed our evaluation and concluded that goodwill was not impaired as the fair values exceeded carrying values, including goodwill. The amount of goodwill as of September 30, 2006 was $3,658,000. Future events could cause us to conclude that impairment indicators exist and that goodwill and other intangible assets associated with our acquired businesses are impaired.

We continually monitor for any potential indicators of impairment of goodwill and intangible assets and we have determined that no such indicators have arisen to date. Any impairment loss could have a material adverse impact on our financial condition and results of operations.

• For long-lived assets, other than goodwill, Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, requires the evaluation for impairment whenever events or changes in circumstances have indicated that an asset may not be recoverable. Long-lived assets evaluated for impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows (excluding interest charges) is less than the carrying value of the assets, the assets will be written down to the estimated fair value, and the loss recognized in income from continuing operations in the period in which the determination is made.

• SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, and SEC SAB 59, Accounting for Noncurrent Marketable Equity Securities, provide guidance on determining when an investment is other-than-temporarily impaired. Investments are reviewed quarterly for indicators of other-than-temporary impairment. This determination

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requires significant judgment. In making this judgment, we employ a systematic methodology quarterly 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 for, 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 investee conditions deteriorate, we may incur future impairments.

As of September 30, 2006, we owned common stock of an Australian company that is subject to market risk. As of September 30, 2006, the carrying value of this investment was $262,000, which is net of a $652,000 realized impairment loss recognized in the second quarter of 2006 as we determined that the loss on the investment was other-than-temporary and a $98,000 unrealized gain in the third quarter of 2006. This investment is exposed to further market risk in the future based on the operating results of the Australian company and stock market fluctuations.

We do not have any of the following:

• Off-balance sheet arrangements except for purchase orders, purchase commitments and operating leases;

• Certain trading activities that include non-exchange traded contracts accounted for at fair value or speculative or hedging instruments; or

• Relationships and transactions with persons or entities that derive benefits from any non-independent relationship other than the related party transactions discussed in Note 16 – Related Parties in our Form 10-K for the year ended December 31, 2005, Item 13. Certain Relationships and Related Transactions, or which are so non-material to fall below the materiality threshold of such item.

Assessments of functional currencies. The United States dollar is our functional currency except for our operations in Canada and the United Kingdom, in which the respective functional currencies are the Canadian Dollar and Pound Sterling.

RESULTS OF OPERATIONS

Three Months Ended September 30, 2006 and September 30, 2005

Change in Reporting Format and Allocations

In the past year, we completed the re-branding of our entertainment product offerings under the Buzztime brand, including the re-naming of the NTN iTV Network as the Buzztime iTV Network.

In 2006, we initiated a new presentation format of four operating segments, reflecting a change of primary focus and a consolidation of entertainment operations under one entity, which reflects the information provided to our chief decision makers. Formerly all costs of content development for all aspects of our entertainment operations were included in the Buzztime Entertainment, Inc. segment operating results. With the consolidation of operations, 90% of content development costs are now charged to the Buzztime iTV Network segment and 10% to Buzztime Distribution. The 2005 results have been restated to conform to the 2006 presentation format.

Additionally, beginning with the 2006 first quarter report, we have modified our reporting format by moving the Buzztime iTV Network segment out of the Hospitality Division and into the Entertainment Division. Thus the Buzztime iTV Network and Buzztime Distribution now comprise the Buzztime Entertainment Division. The NTN Wireless and NTN Software Solutions segments represent the Hospitality Division.

General

Operations for the three months ended September 30, 2006, resulted in a net loss of $55,000 compared to net income of $246,000 for the three months ended September 30, 2005.

Revenues

The consolidated revenues of NTN Buzztime, Inc. increased $513,000, or 4.9%, to $10,938,000 for the three months ended September 30, 2006, from $10,425,000 for the three months ended September 30, 2005. The following table compares the revenues for each of our operating segments for the three months ended September 30, 2006 and 2005, respectively (in thousands):

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Segment Revenues

	Three Months Ended September 30,
	2006		2005		Change
Entertainment Division
Buzztime iTV Network	$	7,978	$	7,385	$	593
Buzztime Distribution		354		515		(161	)
Entertainment Division		8,332		7,900		432
Hospitality Division
NTN Wireless		1,483		1,269		214
Software Solutions		1,123		1,256		(133	)
Hospitality Division		2,606		2,525		81
Consolidated revenues	$	10,938	$	10,425	$	513

Our Buzztime iTV Network revenue from core subscription operations increased $593,000, or 8.0%, for the three months ended September 30, 2006 due primarily to a worldwide increase of 134 sites compared to September 30, 2005 as follows:

	Network Subscribers As of September 30,
	2006	2005
United States	3,677	3,558
Canada	365	401
United Kingdom	51	—
Total	4,093	3,959

Buzztime Distribution revenues decreased $161,000 or 31.3% to $354,000 for the three months ended September 30, 2006, from $515,000 for the three months ended September 30, 2005. The decrease was primarily the result of a reduction in royalties earned on retail game products offset by development service revenue earned during the third quarter 2006.

Revenues from NTN Wireless increased $214,000 or 16.9% to $1,483,000 for the three months ended September 30, 2006, from $1,269,000 for the three months ended September 30, 2005. The 2006 increase over the prior year period was primarily due to a significant sale to a retail customer in excess of $200,000 through our dealer channel.

Revenues from Software Solutions decreased $133,000 or 10.6% to $1,123,000 for the three months ended September 30, 2006, from $1,256,000 for the three months ended September 30, 2005. The decrease was primarily attributable to two large installations which were completed during the third quarter of 2005 compared to no large installations during the third quarter of 2006.

Direct Operating Costs

Consolidated direct operating costs increased $330,000 or 10.2%, to $3,579,000 in the three months ended September 30, 2006, from $3,249,000 in the three months ended September 30, 2005. The following table compares the direct costs for each of our operating segments for the three months ended September 30, 2006 and 2005, respectively (in thousands):

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	Direct Operating Costs Three Months Ended September 30,
	2006		2005		Change
Entertainment Division
Buzztime iTV Network	$	2,445	$	2,270	$	175
Buzztime Distribution licensing		130		119		11
Entertainment Division		2,575		2,389		186
Hospitality Division
NTN Wireless		941		717		224
Software Solutions		63		143		(80	)
Hospitality Division		1,004		860		144
Consolidated direct operating costs	$	3,579	$	3,249	$	330

The $175,000, or 7.7%, increase in the Buzztime iTV Network’s direct operating costs was primarily due to an increase of $150,000 in depreciation expense related to equipment deployed to new sites and continued deployment of new equipment to convert customers to iTV2 and an increase in costs related to technical site visits and installations as a result of the increased number of sites. These increases were partially offset by reductions in freight costs related to equipment shipments and the cost of marketing site visits. Our gross margin as a percentage of revenue in the Buzztime iTV Network segment for the three months ended September 30, 2006 was 69.4% compared to 69.3% for the three months ended September 30, 2005.

The $11,000, or 9.2%, increase in the direct operating costs of Buzztime Distribution was primarily related to increased amortization of capitalized costs as our projects reached commercialization.

The $224,000, or 31.2%, increase in the direct operating costs of NTN Wireless was associated with the NTN Wireless revenue increase noted above, as well as increases in the per unit cost of our coaster pager from our suppliers. Our gross margin as a percentage of revenue in the NTN Wireless segment for the three months ended September 30, 2006 was 36.5% compared to 43.5% for the three months ended September 30, 2005. The decrease in margin was primarily due to a higher percentage of sales derived from our reseller channel, which typically yields a lower margin and to a lesser extent an increase in the per unit cost of our coaster pager.

The $80,000, or 55.9%, decrease in the direct operating costs of Software Solutions was primarily due to lower hardware sales as compared to the three months ended September 30, 2005 which tend to yield a lower gross margin than software sales. Our gross margin as a percentage of revenue in the Software Solutions segment in the three months ended September 30, 2006, was 94.0% compared to 88.6% for the three months ended September 30, 2005.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses (SG&A) increased $304,000, or 4.8%, to $6,700,000 for the three months ended September 30, 2006, from $6,396,000 for the three months ended September 30, 2005. The following table compares the selling, general and administrative expenses for each of our operating segments for the three months ended September 30, 2006, and 2005 (in thousands):

	Selling, General and Administrative Expenses Three Months Ended September 30,
	2006		2005		Change
Entertainment Division
Buzztime iTV Network	$	4,376	$	4,181	$	195
Buzztime Distribution		380		525		(145	)
Entertainment Division		4,756		4,706		50
Hospitality Division
NTN Wireless		477		461		16
Software Solutions		1,467		1,229		238
Hospitality Division		1,944		1,690		254
Consolidated selling, general and administrative expenses	$	6,700	$	6,396	$	304

22

The $195,000, or 4.7%, increase in the SG&A expenses of the Buzztime iTV Network segment was primarily due to an increase of $100,000 in stock based compensation due to the implementation of FAS 123R, increases in temporary labor and recruiting expenses as we worked to replace vacant positions. This increase is partially offset by a decrease in bad debt expense due to better collection efforts within this segment and decreases in sales and marketing expenses as a result of personnel and travel expenses allocated to other segments due to certain personnel being utilized by other segments.

The $145,000, or 27.6%, decrease in the SG&A expenses of Buzztime Distribution was due primarily to reduced staffing associated with completion of development projects in third quarter 2005 and an increase in stock based compensation due to the implementation of FAS 123R.

The $16,000, or 3.5%, increase in SG&A expenses of the NTN Wireless segment compared to the prior year period was primarily due to increased sales and marketing expenses as a result of an increase in personnel and travel expenses allocated to this segment, increases in bad debt expense associated with the identification of specific customer accounts that were determined to be uncollectible partially offset by decreases in salaries and benefits associated with reduced staffing, lower commission expenses due to lower margin sales and reductions in moving expenses associated with a facility move in third quarter 2005.

The $238,000, or 19.4%, increase in SG&A in the Software Solutions segment compared to the prior year period was primarily due to increased sales and marketing expenses as a result of an increase in personnel and travel expenses allocated to this segment, increases in bad debt expense associated with the identification of specific customer accounts that were determined to be uncollectible, and increased use of consultants for software programming. This increase is primarily offset by a decrease in commission expenses due to lower sales in the third quarter 2006.

Litigation, Legal and Professional fees

Litigation, legal and professional fees increased $187,000 or 70.0% to $454,000 for the three months ended September 30, 2006, compared to $267,000 for the three months ended September 30, 2005. The increase was primarily due to an increase in consultant and professional fees associated with the ongoing compliance with Section 404 of the Sarbanes-Oxley Act as well as increases in professional fees related to sales tax audits and an increase in the number of state filings.

Depreciation and Amortization Expenses

Depreciation and amortization not related to direct operating costs decreased by $7,000, or 3.3%, to $205,000 for the three months ended September 30, 2006 from $212,000 for the three months ended September 30, 2005 due to assets that have become fully depreciated.

Research and Development Expenses

Research and development expenses decreased $14,000 or 20.0% to $56,000 for the three months ended September 30, 2006, from $70,000 for the three months ended September 30, 2005, due primarily to the completion of certain projects for the iTV Network.

Other Income (Expense)

Interest Income and Expense

Interest income increased $25,000, or 125%, to $45,000 for the three months ended September 30, 2006 compared to $20,000 for the three months ended September 30, 2005 due to an increase in our average cash balance and higher average interest rates. Interest expense decreased $36,000 or 65.5% to $19,000 in the three months ended September 30, 2006, compared to $55,000 in the three months ended September 30, 2005 primarily due to a zero balance under our line of credit during the third quarter of 2006 compared to $700,000 outstanding under the line of credit as of September 30, 2005 and reduced obligations under capital leases as of September 30, 2006 as compared to September 30, 2005.

Income Taxes

The Company is expected to report a taxable loss for the year ending December 31, 2006. We expect that we will not incur a federal tax liability; however we will likely incur state tax liabilities for various state income taxes. 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 $25,000 for the three months ended September 30, 2006. This was a $75,000 increase compared to the $50,000 income tax benefit recorded for the three months ended September 30, 2005.

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Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization, non-cash stock based compensation and payments, non-cash charge related to software product sale and non-cash charge related to investment for sale (“Adjusted EBITDA”) is not intended to represent a measure of performance in accordance with accounting principles generally accepted in the United States (“GAAP”), nor should Adjusted EBITDA be considered as an alternative to statements of cash flows as a measure of liquidity. Adjusted 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 NTN that carry significant levels of non-cash depreciation and amortization charges in comparison to their GAAP earnings.

Our Adjusted EBITDA increased $37,000, or 2.8%, to $1,348,000 for the three months ended September 30, 2006, from Adjusted EBITDA of $1,311,000 for the three months ended September 30, 2005. This Adjusted EBITDA increase was primarily due to an increase in the net income from our Buzztime iTV Network segment primarily offset by an increase in the net loss of our Software Solutions segment.

The following table reconciles our net income (loss) per GAAP to Adjusted EBITDA, with the 2005 numbers restated to conform to the 2006 presentation format (in thousands):

Adjusted EBITDA Calculation (in thousands)	Three Months Ended September 30,
	2006			2005
Net income (loss) per GAAP	$	(55	)	$	246
Interest expense (net)		(26	)		35
Depreciation and amortization		1,190			1,033
Non-cash stock-based compensation		214			47
Income taxes		25			(50	)
Adjusted EBITDA	$	1,348		$	1,311

On a segment basis, our segments generated Adjusted EBITDA levels as follows (in thousands):

	Three Months Ended September 30, 2006
	Entertainment						Hospitality					Corporate		Total
Adjusted EBITDA Calculation (in thousands)	Buzztime iTV Network			Buzztime Distribution			Software Solutions			NTN Wireless
Net income (loss) per GAAP	$	518		$	(191	)	$	(429	)	$	47	$	—	$	(55	)
Interest expense (net)		(27	)		1			—			—		—	$	(26	)
Depreciation and amortization		947			144			82			17		—		1,190
Non-cash stock-based compensation		146			42			23			3		—		214
Income taxes		25			—			—			—		—		25
Adjusted EBITDA	$	1,609		$	(4	)	$	(324	)	$	67	$	—	$	1,348
Total Assets	$	18,450		$	2,358		$	3,752		$	2,146	$	2,437	$	29,143
	Three Months Ended September 30, 2005
	Entertainment						Hospitality					Corporate		Total
Adjusted EBITDA Calculation (in thousands)	Buzztime iTV Network			Buzztime Distribution			Software Solutions			NTN Wireless
Net income (loss) per GAAP	$	475		$	(169	)	$	(138	)	$	78	$	—	$	246
Interest expense (net)		34			1			—			—		—		35
Depreciation and amortization		807			129			83			14		—		1,033
Non-cash stock-based compensation		47			—			—			—		—		47
Income taxes		(50	)		—			—			—		—		(50	)
Adjusted EBITDA	$	1,313		$	(39	)	$	(55	)	$	92	$	—	$	1,311
Total Assets	$	15,204		$	2,974		$	4,677		$	1,641	$	4,556	$	29,052

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Nine Months Ended September 30, 2006 and September 30, 2005

Operations for the nine months ended September 30, 2006, resulted in a net loss of $1,835,000 compared to a net loss of $2,193,000 for the nine months ended September 30, 2005.

Revenues

The consolidated revenues of NTN Buzztime, Inc. increased $3,295,000, or 11.1%, to $32,856,000 for the nine months ended September 30, 2006, from $29,561,000 for the nine months ended September 30, 2005. The following table compares the revenues for each of our operating segments for the three months ended September 30, 2006 and 2005, respectively (in thousands):

Segment Revenues

	Nine Months Ended September 30,
	2006		2005		Change
Entertainment Division
Buzztime iTV Network	$	23,889	$	21,097	$	2,792
Buzztime Distribution		641		1,041		(400	)
Entertainment Division		24,530		22,138		2,392
Hospitality Division
NTN Wireless		4,656		4,240		416
Software Solutions		3,670		3,183		487
Hospitality Division		8,326		7,423		903
Consolidated revenues	$	32,856	$	29,561	$	3,295

Our Buzztime iTV Network revenues from core subscription operations increased $2,792,000, or 13.2% due to a worldwide increase of 120 sites compared to September 30, 2005 as follows:

	Network Subscribers As of September 30,
	2006	2005
United States	3,677	3,558
Canada	365	401
United Kingdom	51	—
Total	4,093	3,959

Buzztime Distribution revenues decreased $400,000 or 38.4% to $641,000 for the nine months ended September 30, 2006, from $1,041,000 for the nine months ended September 30, 2005 primarily due to lower royalties earned on retail games.

Revenues from NTN Wireless increased $416,000 or 9.8% to $4,656,000 for the nine months ended September 30, 2006, from $4,240,000 for the nine months ended September 30, 2005 primarily due to increased sales through our dealer channel.

Revenues from Software Solutions increased $487,000 or 15.3% to $3,670,000 for the nine months ended September 30, 2006, from $3,183,000 for the nine months ended September 30, 2005 primarily due to increased deployments to Harrah’s Casinos and other large properties.

Direct Operating Costs

Consolidated direct operating costs increased $671,000, or 6.6%, to $10,778,000 for the nine months ended September 30, 2006, from $10,107,000 for the nine months ended September 30, 2005. The following table compares the direct costs for each of our operating segments for the nine months ended September 30, 2006 and 2005, respectively (in thousands):

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	Direct Operating Costs Nine Months Ended September 30,
	2006		2005		Change
Entertainment Division
Buzztime iTV Network	$	7,246	$	6,724	$	522
Buzztime Distribution licensing		368		545		(177	)
Entertainment Division		7,614		7,269		345
Hospitality Division
NTN Wireless		2,875		2,425		450
Software Solutions		289		413		(124	)
Hospitality Division		3,164		2,838		326
Consolidated direct operating costs	$	10,778	$	10,107	$	671

The $522,000, or 7.8%, increase in the Buzztime iTV Network’s direct operating costs was primarily due to an increase in depreciation expense related to the increased number of sites and increased expenses associated with the continued deployment of new equipment to convert customers to iTV2 and an increase in installation expenses as a result of the increase in the number of sites. The increases were partially offset by a decrease in marketing site visit expenses due to a reduced number of sites assigned to independent representatives. Our gross margin as a percentage of revenue in the Buzztime iTV Network segment for the nine months ended September 30, 2006 was 69.7% compared to 68.1% for the nine months ended September 30, 2005.

The $177,000, or 32.5%, decrease in the direct operating costs of Buzztime Distribution was primarily due to the 2005 write-off of capitalized salaries associated with discontinued projects and decreased amortization due to projects being fully amortized.

The $450,000, or 18.6%, increase in the direct operating costs of NTN Wireless was a result of increased cost of goods sold associated with the NTN Wireless revenue increase noted above, as well as an increase in the per unit cost of our coaster pager from our suppliers. Our gross margin as a percentage of revenue in the NTN Wireless segment for the nine months ended September 30, 2006, was 38.2% compared to 42.8% for the nine months ended September 30, 2005. The decrease in margin was primarily due to a higher percentage of sales derived from the dealer channel which typically yields a lower margin.

The $124,000, or 30.0%, decrease in the direct operating costs of Software Solutions was primarily due the lower hardware sales as compared to the nine months ended September 30, 2005 which tend to yield a lower gross margin than software sales. Our gross margin as a percentage of revenue in the Software Solutions segment for the nine months ended September 30, 2006, was 92.0% compared to 87.0% for the nine months ended September 30, 2005.

Selling, General and Administrative Expenses

Consolidated selling, general and administrative expenses (SG&A) increased $1,563,000, or 8.0%, to $21,187,000 for the nine months ended September 30, 2006, from $19,624,000 for the nine months ended September 30, 2005. The following table compares the selling, general and administrative expenses for each of our operating segments for the nine months ended September 30, 2006, and 2005 (in thousands):

	Selling, General and Administrative Expenses Nine Months Ended September 30,
	2006		2005		Change
Entertainment Division
Buzztime iTV Network	$	14,398	$	13,058	$	1,340
Buzztime Distribution		976		1,574		(598	)
Entertainment Division		15,374		14,632		742
Hospitality Division
NTN Wireless		1,336		1,341		(5	)
Software Solutions		4,485		3,651		834
Hospitality Division		5,821		4,992		829
Consolidated selling, general and administrative expenses	$	21,195	$	19,624	$	1,571

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The $1,340,000, or 10.3%, increase in SG&A in the Buzztime iTV Network segment expenses was primarily due to an increase in stock-based compensation of $508,000 due to the implementation of FAS123R, a one-time severance charge of $435,000 related to the departure of our former CEO, and increases in temporary labor and recruiting expenses as we worked to replace vacant positions. These increases were partially offset by decreases in sales and marketing expenses as a result of personnel and travel expenses allocated to other segments due to certain personnel being utilized by other segments.

The $598,000, or 38.0%, decrease in SG&A in the Buzztime Distribution segment was primarily due to reduced staffing as a result of the completion of development projects in mid-2005.

The $834,000, or 22.8%, increase in SG&A in the Software Solutions segment was primarily due to increased payroll related costs including a one-time payment of $127,000 related to an employment agreement, increased sales and marketing expenses as a result of an increase in personnel and travel expenses allocated to this segment and an increase in stock-based compensation as a result of the implementation of FAS123R. These increases were partially offset by the non-cash software product sale of $276,000 in 2005.

Litigation, Legal and Professional fees

Litigation, legal and professional fees increased $331,000 or 39.5% to $1,168,000 for the nine months ended September 30, 2006, from $837,000 for the nine months ended September 30, 2005 primarily due to an overall increase in legal and other professional fees associated with the hiring of a new CEO as well as increases in consultant and professional fees associated with the ongoing compliance with Section 404 of the Sarbanes-Oxley Act and professional fees related to sales tax audits and an increase in the number of state filings.

Depreciation and Amortization Expenses

Depreciation and amortization not related to direct operating costs decreased slightly by $10,000, or 1.6%, to $622,000 for the nine months ended September 30, 2006 from $632,000 for the nine months ended September 30, 2005, due to certain assets becoming fully depreciated.

Research and Development Expenses

Research and development expenses decreased by $17,000 or 8.7% to $178,000 for the nine months ended September 30, 2006, from $195,000 for the nine months ended September 30, 2005, due to the completion of certain projects for the iTV Network.

Non-Cash Charge Related to Software Product Sale

On February 4, 2005, we entered into an Asset Purchase Agreement with Intura Solutions LP (Intura), a Texas limited partnership, pursuant to which we sold the point of sale software products developed and maintained by our Software Solutions segment as well as a non-exclusive right to develop and market the Enterprise software. We received a non-dilutable 10% partnership interest in Intura in the transaction and will receive a royalty representing 20% of Intura’s revenues generated during the next two years, up to a maximum of $100,000. Intura will provide software development maintenance services for certain software for two years. The transfer of the software products, which we carried as part of our intangible assets, resulted in a one-time, non-cash charge of $276,000 for the nine months ended September 30, 2005.

Other Income (Expense)

Interest Income and Expense

Interest income for the nine months ended September 30, 2006 was $94,000 compared to $71,000 for the nine months ended September 30, 2005 due to an increase in the average cash balance and higher average interest rates. Interest expense decreased $24,000, or 18.8% to $104,000 for the nine months ended September 30, 2006, compared to $128,000 for the nine months ended September 30, 2005 primarily due to the pay-off of our line of credit during the third quarter of 2006 compared to $700,000 outstanding under the line of credit as of September 30, 2005 and reduced obligations under capital leases as of September 30, 2006 as compared to September 30, 2005.

Impairment on Investments Held for Sale

We performed an evaluation in the second quarter of 2006 and concluded that the decline in value of our Australian investment was other-than-temporary and incurred an impairment loss of $652,000 to reflect the investment at its June 30, 2006 fair value. There were no similar impairments in 2005.

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Income Taxes

The Company is expected to report a taxable loss for the year ending December 31, 2006. We expect that we will not incur a federal tax liability; however we will likely incur state tax liabilities for various state income taxes. 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 $88,000 for the nine months ended September 30, 2006. This was a $62,000 increase compared to the $26,000 provision for income taxes recorded for the nine months ended September 30, 2005.

Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization, non-cash stock based compensation and payments, non-cash charge related to software product sale and non-cash charge related to investment for sale (“Adjusted EBITDA”) is not intended to represent a measure of performance in accordance with accounting principles generally accepted in the United States (“GAAP”). Nor should Adjusted EBITDA be considered as an alternative to statements of cash flows as a measure of liquidity. Adjusted 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 NTN that carry significant levels of non-cash depreciation and amortization charges in comparison to their GAAP earnings.

Our adjusted EBITDA increased $1,300,000, or 91.4%, to $2,723,000 for the nine months ended September 30, 2006, from adjusted EBITDA of $1,423,000 for the nine months ended September 30, 2005. This Adjusted EBITDA increase was primarily due to improved operating performance in the Entertainment Division offset by increased losses generated by Software Solutions.

The following table reconciles our net income (loss) per GAAP to Adjusted EBITDA, with the 2005 numbers restated to conform to the 2006 presentation format (in thousands):

	Nine Months Ended September 30,
Adjusted EBITDA Calculation (in thousands)	2006			2005
Net income (loss) per GAAP	$	(1,835	)	$	(2,193	)
Interest expense (net)		10			57
Depreciation and amortization		3,548			3,018
Non-cash stock-based compensation		912			239
Non-cash charge related to software product sale		—			276
Income taxes		88			26
Adjusted EBITDA	$	2,723		$	1,423

On a segment basis, our segments generated adjusted EBITDA levels as follows (in thousands):

	Nine Months Ended September 30, 2006
	Entertainment						Hospitality					Corporate		Total
Adjusted EBITDA Calculation (in thousands)	Buzztime iTV Network			Buzztime Distribution			Software Solutions			NTN Wireless
Net income (loss) per GAAP	$	(216	)	$	(814	)	$	(1,172	)	$	367	$	—	$	(1,835	)
Interest expense (net)		7			3			—			—		—		10
Depreciation and amortization		2,832			416			250			50		—		3,548
Non-cash stock-based compensation		747			66			83			16		—		912
Income taxes		88			—			—			—		—		88
Adjusted EBITDA	$	3,458		$	(329	)	$	(839	)	$	433	$	—	$	2,723
Total Assets	$	18,450		$	2,358		$	3,752		$	2,146	$	2,437	$	29,143

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	Nine Months Ended September 30, 2005
	Entertainment						Hospitality					Corporate		Total
Adjusted EBITDA Calculation (in thousands)	Buzztime iTV Network			Buzztime Distribution			Software Solutions			NTN Wireless
Net income (loss) per GAAP	$	(124	)	$	(1,207	)	$	(1,229	)	$	367	$	—	$	(2,193	)
Interest expense (net)		52			5			—			—		—		57
Depreciation and amortization		2,259			445			261			53		—		3,018
Non-cash stock-based compensation		239			—			—			—		—		239
Non-cash charge related to software product sale		—			—			276			—		—		276
Income taxes		26			—			—			—		—		26
Adjusted EBITDA	$	2,452		$	(757	)	$	(692	)	$	420	$	—	$	1,423
Total Assets	$	15,204		$	2,974		$	4,677		$	1,641	$	4,556	$	29,052

LIQUIDITY AND CAPITAL RESOURCES

As of September 30, 2006, we had cash and cash equivalents of $7,997,000 and working capital (current assets in excess of current liabilities) of $6,420,000 compared to cash and cash equivalents of $5,982,000 and working capital of $4,743,000 at December 31, 2005. For the nine months ended September 30, 2006 and 2005 net cash provided by operations was $4,479,000 and $1,635,000, respectively. The $2,844,000 increase in the cash generated by our operating activities was primarily due to a reduced net loss, improvements in collections and other favorable changes to working capital requirements.

For the nine months ended September 30, 2006 and 2005 net cash used in investing activities was $1,879,000 and $3,698,000, respectively. The decrease in investing activities compared to 2005 was primarily due to reduced capital expenditures associated with Game Pads (Playmakers).

For the nine months ended September 30, 2006 net cash used in financing activities was $558,000 as compared to $299,000 provided by financing activities for the nine months ended September 30, 2005. Included in net cash used by financing activities in 2006 was $700,000 in principal payments on the revolving line of credit and $335,000 payments on capital leases offset by $477,000 in proceeds from the exercise of options and warrants.

We believe existing cash and equivalents, together with funds generated from operations, will be sufficient to meet our operating cash requirements.

RECENTLY ISSUED ACCOUNTING STANDARDS

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (“SAB”) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Current Year Misstatements. SAB No. 108 requires analysis of misstatements using both an income statement (rollover) approach and a balance sheet (iron curtain) approach in assessing materiality and provides for a one-time cumulative effect transition adjustment. SAB No. 108 is effective for our fiscal year 2006 annual consolidated financial statements. We are currently assessing the potential impact that the adoption of SAB No. 108 will have on our consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. This statement is effective for us beginning January 1, 2008. We are currently assessing the potential impact that the adoption of SFAS No. 157 will have on our consolidated financial statements.

In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, which clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. The interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN No. 48 requires recognition of tax benefits that satisfy a greater than 50% probability threshold. FIN No. 48 also provides

29

guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN No. 48 is effective for us beginning January 1, 2007. We are currently assessing the potential impact that the adoption of FIN No. 48 will have on our financial statements.

In June 2006, the FASB ratified the Emerging Issues Task Force (“EITF”) consensus on EITF Issue No. 06-2, “Accounting for Sabbatical Leave and Other Similar Benefits Pursuant to FASB Statement No. 43”. EITF Issue No. 06-2 requires companies to accrue the costs of compensated absences under a sabbatical or similar benefit arrangement over the requisite service period. EITF Issue No. 06-2 is effective for us beginning January 1, 2007. The cumulative effect of the application of this consensus on prior period results should be recognized through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. Elective retrospective application is also permitted.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to risks related to currency exchange rates, stock market fluctuations, and interest rates. As of September 30, 2006, we owned common stock of an Australian company that is subject to market risk. As of September 30, 2006, the carrying value of this investment was $262,000, which reflects a $652,000 impairment loss taken in the second quarter of 2006 and a $98,000 unrealized gain in the third quarter of 2006. This investment is exposed to further market risk in the future based on the operating results of the Australian company and stock market fluctuations. Additionally, the value of the investment is further subject to changes in Australian currency exchange rates. As of September 30, 2006, a hypothetical 10% decline in the value of the Australian dollar would result in a reduction of $26,000 in the carrying value of the investment.

During the nine months ended September 30, 2006, we derived approximately 11.4% of our revenues from sales outside the United States, and we lease an office in Canada. Therefore, our results could be negatively affected by such factors as changes in foreign currency exchange rates, trade protection measures, longer accounts receivable collection patterns, and changes in regional or worldwide economic or political conditions. We have limited foreign currency risk on revenues and operating expenses such as salaries and overhead costs of our foreign operations and a small amount of cash maintained by these operations. Revenues denominated in foreign currencies accounted for approximately 11.4% of total revenues during the nine months ended September 30, 2006. Operating expenses, including cost of sales, for our foreign subsidiaries, which are in our Buzztime iTV segment, were approximately $4,252,000 for the nine months ended September 30, 2006. Based upon the expenses for the nine months ended September 30, 2006, a 1% change in foreign currency rates throughout a one-year period would have an annual effect of approximately $43,000 on our operating income.

At September 30, 2006, we did not have any balances outstanding under our bank line of credit arrangement; however, the amount of outstanding debt at any time may fluctuate and we may from time to time be subject to refinancing risk.

Our interest income is sensitive to changes in the general level of U.S. interest rates, particularly since a significant portion of our investments is in short-term marketable securities and U.S. government securities. Due to the nature and maturity of our short-term investments, we have concluded that there is no material market risk exposure to our principal. As of September 30, 2006, a 1% change in interest rates throughout a one-year period would have an annual effect of approximately $80,000 on our income before income taxes.

We do not have any derivative financial instruments and we do not have any speculative or hedging instruments.

Item 4. Controls and Procedures.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.

We maintain disclosure controls and procedures (as defined in Rules 13a-l5(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC 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 disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on such evaluation, our chief executive officer and chief financial officer concluded that as of the end of the period covered by this report our disclosure controls and procedures were effective.

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Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2006, one of our independent directors resigned from our Board of Directors to become our Chief Financial Officer. This director also served as a member of the Board’s Audit Committee and was the person that we had designated as our Audit Committee “financial expert.” Following her resignation, our Audit Committee is currently comprised of only two independent directors and no longer includes a member who has the education and experience to qualify as a “financial expert.” Our failure to have at least one independent director on our Audit Committee who qualifies as a “financial expert” may materially affect our internal control over financial reporting.

Effective November 6, 2006, our Board of Directors elected Mark Buckner to our Board of Directors to fill a vacancy on the Board. Mr. Buckner was also appointed to our Audit Committee and appointed Chairman of the audit Committee. Our Board of Directors evaluated Mr. Buckner’s education and experience and determined that Mr. Buckner qualified as a “financial expert.”

There were no other changes in our system of internal control over financial reporting during our quarter ended September 30, 2006 that has materially affected, or is reasonably likely to affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

There are no known material legal proceedings. However, we are subject to litigation from time to time in the ordinary course of our business.

Item 1A. Risk Factors.

Risk Factors That May Affect Future Results

An investment in our common stock involves a high degree of risk. You should consider carefully the risks and uncertainties described under Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2005 together with all other information contained or incorporated by reference in this report before you decide to invest in our common stock. The risks described in our annual report have not materially changed. If any of the risks described in our annual report or in our annual report actually occurs, our business, financial condition, results of operations and our future growth prospects could be materially and adversely affected. Under these circumstances, the trading price of our common stock could decline, and you may lose all or part of your investment.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

On July 7, 2006, we entered into a Severance Agreement and General Release of All Claims with Stanley Kinsey, our former Chief Executive Officer. This agreement is filed as Exhibit 10.2 to this report.

Item 6. Exhibits.

Exhibit No.	Description
3.1	By-laws of the Company (1)
10.1*	Employment Agreement dated June 28, 2005 by and between NTN Buzztime, Inc. and Stanley B. Kinsey (1)
10.2	Severance Agreement and General Release of all Claims, dated July 7, 2006, by and between NTN Communications, Inc. and Stanley B. Kinsey (1)
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934 (1)
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934 (1)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (1)
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (1)

* Management Contract or Compensatory Plan.

(1) Filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	NTN BUZZTIME, INC.
Date: November 9, 2006	By:	/s/ Kendra Berger
		Kendra Berger
		Chief Financial Officer
		(As Principal Financial and Accounting Officer)

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EX-3.1

Exhibit 3.1

BYLAWS

OF

NTN BUZZTIME, INC.

(the “Corporation”)

ARTICLE I

OFFICES

Section 1.    Registered Office.

The registered office of the Corporation shall be in the City of Wilmington, County of New Castle, State of Delaware.

Section 2.    Other Offices.

The Corporation also may have offices at such other places both within and outside the State of Delaware as the Board of Directors may from time to time determine.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1.    Place of Meetings.

Meetings of stockholders shall be held at any place within or outside the State of Delaware designated by the Board of Directors. In the absence of any such designation, meetings of stockholders shall be held at the principal executive office of the Corporation.

Section 2.    Annual Meeting.

The annual meeting of stockholders shall be held on April 13, or at such other date and time as the Board of Directors may determine. However, if this day falls on a legal holiday, the meeting shall be held at the same time and place on the next succeeding full business day. The annual meeting shall be held at the Corporation’s principal offices or at any other location as may be determined by the Board of Directors. At each annual meeting, directors shall be elected and any other proper business may be transacted.

Section 3.    Special Meetings.

Special meetings of the stockholders may be called at any time by the Board of Directors, by the Chairman of the Board of Directors, by the

President or by one or more stockholders holding shares in the aggregate entitled to cast not less than 10% of the votes at such meeting. If a special meeting is called by any person or persons other than the Board of Directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the Chairman of the Board, the President, any Vice-President or the Secretary of the Corporation. The officer receiving the request shall promptly cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Sections 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not fewer than 35 or more than 60 days after receipt of the request. If such notice is not given within 20 days after the receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 3 shall be construed as limited, fixing or affecting the time when a meeting of stockholders called by action of the Board of Directors may be held.

Section 4.    Notice of Meetings of Stockholders.

All notices of meetings of stockholders shall be sent or otherwise given in accordance with Section 5 of this Article II not fewer than 10 or more than 60 days before the date of the meeting. Such notice shall specify the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, or (ii) in the case of the annual meeting, those matters that the Board of Directors, at the time of giving the notice, intends to present for action by the stockholders. The notice of any meeting at which directors are to be elected shall include the name of any nominee or nominees whom, at the time of the notice, management intends to present for election.

Section 5.    Manner of Giving Notice; Affidavit of Notice.

Notices of any meeting of stockholders shall be given either personally or by mail or telegraphic or other written communication, charges prepaid, addressed to each stockholder at the address of such stockholder appearing on the books of the Corporation or given by the stockholder to the Corporation for the purpose of notice. Notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by telegram or other means of written communication.

Whenever notice is required to be given, under any provision of these Bylaws or the certificate of incorporation, to any stockholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings or of the taking of action by written consent without a meeting to such person

during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a twelve month period, have been mailed addressed to such person at his address as shown on the records of the corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the corporation a written notice setting forth his then current address, the requirement that notice be give to such person shall be reinstated.

An affidavit of the mailing or other means of giving any notice of any meeting of stockholders shall be executed by the Secretary, Assistant Secretary or any transfer agent of the Corporation giving the notice and shall be filed and maintained in the minute book of the Corporation.

Section 6.    Quorum.

The presence in person or by proxy of the holders of a majority of the shares entitled to vote at a meeting of the stockholders shall constitute a quorum for the transaction of business at such meeting. The stockholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum, if any action taken (other than adjournment) is approved by at least a majority of the shares required to constitute a quorum.

Section 7.    Adjourned Meeting; Notice.

Any meeting of stockholders, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at such meeting either in person or by proxy; but in the absence of a quorum, no other business may be transacted at such meeting, except as provided in Section 6 of this Article II.

When any meeting of stockholders, annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place are announced at a meeting at which the adjournment is taken, unless a new record date for the adjourned meeting is fixed or unless the adjournment is for more than 45 days from the date set for the original meeting, in which case the Board of Directors shall set a new record date. Notice of any such adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Section 4 and 5 of this Article II. At any

adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting.

Section 8.    Voting.

Unless otherwise required by law, the Certificate of Incorporation or these Bylaws, any question brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. Each stockholder represented at a meeting of stockholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy, but no proxy shall be voted on or after three years from its date, unless such proxy provides for a longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting be cast by written ballot.

Section 9.    Consent of Stockholders in Lieu of Meeting.

Unless otherwise provided in the Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of stockholders may be taken without a meeting being held, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall have been signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.

Section 10.    List of Stockholders Entitled to Vote.

The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present.

Section 11.    Stock Ledger.

The stock ledger of the Corporation shall be the only evidence as to which stockholders are entitled to examine the stock ledger, the list required by Section 10 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

Section 12.    Waiver of Notice or Consent by Absent Stockholders.

The transactions of any meeting of stockholders, annual or special, however called and noticed and wherever held, shall be as valid as though they had occurred at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after such meeting, each person entitled to vote who was not present in person or by proxy signs a written waiver of notice or a consent to a holding of such a meeting or an approval of the minutes thereof. Such waiver of notice or consent need not specify either the business to be transacted or the purpose of any annual or special meeting of stockholders. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

Section 13.    Inspectors of Election.

Before any meeting of stockholders, the Board of Directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are so appointed, the chairman of the meeting may, and on the request of any stockholder or a stockholder’s proxy shall, appoint inspectors of election at the meeting. The number of such inspectors shall be either one or three. If such inspectors are appointed at a meeting on the request of one or more stockholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one or three inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the chairman of the meeting may, and upon the request of any stockholder or a stockholder’s proxy shall, appoint a person to fill that vacancy.

Such inspectors shall:

(a) Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;

(b) Receive votes, ballots or consents;

(c) Hear and determine all challenges and questions in any way arising in connection with the right to vote;

(d) Count and tabulate all votes or consents;

(e) Determine when the polls shall close;

(f) Determine the results; and

(g) Do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.

ARTICLE III

DIRECTORS

Section 1.    Number, Election and Term of Directors.

The Board of Directors shall consist of not less than five nor more than thirteen members, the exact number of which shall be determined by the Board of Directors. Except as provided in Section 2 of this Article III, directors shall be elected by a plurality of the votes cast at annual meetings of stockholders, and each director so elected shall hold office until the next annual meeting and until his successor is duly elected and qualified, or until his earlier resignation or removal. Any director may resign at any time upon notice to the Corporation. Directors need not be stockholders.

Section 2.    Vacancies.

Vacancies and newly created directorships resulting from any increase in the authorized number of directors shall be filled by a majority vote or consent of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and qualified, or until their earlier resignation or removal. The stockholders shall have no right or power to fill any such vacancies or newly created directorships.

Section 3.    Duties and Powers.

The business of the Corporation shall be managed by or under the direction of the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by stature or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders.

Section 4.    Meetings.

The Board of Directors may hold meetings, both regular and special, either within or outside the State of Delaware. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the chairman, if there is one, the President or a majority of the directors. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than 48 hours before the date of the meeting, by telephone or by telegram on 24 hours’ notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.

Section 5.    Quorum.

Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

Section 6.    Action of Board.

Unless otherwise provided by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or any committee designated by the Board of Directors, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or any such designated committee.

Section 7.    Meetings by Means of Conference Telephone.

Unless otherwise provided by the Certificate of Incorporation or these Bylaws, members of the Board of Directors or any committee designated by the Board of Directors may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 7 shall constitute presence in person at such meeting.

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Section 8.    Committees.

The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when required.

Section 9.    Compensation.

The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefore. Members of special or standing committees may be allowed like compensation for attending committee meetings.

Section 10.    Interested Directors.

No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or the committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors are less than a quorum; or (ii) the material facts as

8

to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by the vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

ARTICLE IV

OFFICERS

Section 1.    Officers.

The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, a Secretary and a Treasurer. The Board of Directors, in its discretion, also may choose a Chairman of the Board of Directors (who must be a director) and one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these Bylaws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation. Except as otherwise provided herein, the officers of the Corporation shall perform such duties as the Board of Directors shall determine.

Section 2.    Election.

The Board of Directors at its first meeting held after each annual meeting of stockholders shall elect the officers of the Corporation, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. All officers of the Corporation shall hold office until their successors are chosen and qualified or until their earlier resignation or removal. Any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers of the Corporation shall be fixed by the Board of Directors.

9

Section 3.    Voting Securities Owned by the Corporation.

Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President or any Vice-President. Any such officer may, in the name of and on behalf of the Corporation, take all such actions as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may from time to time confer, by resolution, like powers upon any other person or persons.

Section 4.    President.

The President shall, subject to the control of the Board of Directors and, if there is one, the Chairman of the Board of Directors, have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are effected. He shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these Bylaws, the Board of Directors or the President. In the absence or disability of the Chairman of the Board of Directors, or if there is none, the President shall preside at all meetings of the stockholders and the Board of Directors. If there is no Chairman of the Board of Directors, the President shall be the Chief Executive Officer of the Corporation. The President also shall perform such other duties and may exercise such other powers as from time to time may be assigned to him by these Bylaws or by the Board of Directors.

Section 5.    Removal and Resignation of Officers.

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board of Directors at any regular or special meeting of the Board or, except in the case of any officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors.

Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take shall take effect at the date of the receipt of such notice or at any later time specified in such notice; and, unless otherwise specified in such notice, the acceptance of such resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the resigning officer is a party.

Section 6.    Vacancies in Offices.

A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to such offices.

ARTICLE V

STOCK

Section 1.    Form of Certificates.

Every holder of stock in the Corporation shall be entitled to have a certificate signed, in the name of the Corporation, (i) by the Chairman of the Board of Directors, the President or a Vice-President, and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary of an Assistant Secretary, certifying the number of shares owned by him in the Corporation.

Section 2.    Signatures.

Where a certificate is countersigned by (i) a transfer agent other than the Corporation or its employee, or (ii) a registrar other than the Corporation or its employee, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or shoes facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

Section 3.    Lost Certificate.

The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person

claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, required the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

Section 4.    Transfers.

Stock of the Corporation shall be transferable in the manner prescribed by law and these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefore, which shall be cancelled before a new certificate shall be issued.

Section 5.    Record Date.

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights with respect to any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than 60 days or less than 10 days before the date of such meeting, nor more than 60 days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

Section 6.    Beneficial Owners.

The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares. The Corporation shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not is shall have express or other notice thereof, except as otherwise provided by law.

ARTICLE VI

NOTICES

Section 1.    Notices.

Whenever written notice is required by law, the Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice also may be given personally or by telegram, telex or cable.

Section 2.    Waivers of Notice.

Whenever any notice is required by law, the Certificate of Incorporation or these Bylaws to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

ARTICLE VII

GENERAL PROVISIONS

Section 1.    Dividends.

Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property or in shares of the capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.

Section 2.    Disbursements.

All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

Section 3.    Fiscal Year.

The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

Section 4.    Corporate Seal.

The corporate seal shall have inscribed thereon the name of the Corporation and the words “Corporate Seal, Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or otherwise reproduced.

ARTICLE VIII

INDEMNIFICATION

Section 1.    Power to Indemnify in Actions, Suits or Proceedings Other Than Those by or in the Right of the Corporation.

Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the person did not act in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any

criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful.

Section 2.    Power to Indemnify in Actions, Suits or Proceedings by or in the Right of the Corporation.

Subject to Section 3 of this Article VIII, the Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suite by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation; except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Section 3.    Authorization of Indemnification.

Any indemnification under this Article VIII (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the stockholders. To the extent, however, that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding described above, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith, without the necessity of authorization in the specific case.

Section 4.    “Good Faith” Defined.

For purposes of any determination under Section 3 of this Article VIII, a person shall be deemed to have acted in “good faith” and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, to have had no reasonable cause to believe his conduct was unlawful, if his action is based on the records or books of account of the Corporation or another enterprise, or on information supplied to him by the officers of the Corporation or another enterprise in the course of their duties, or on the advice of legal counsel for the Corporation or another enterprise or on information or records given or reports made to the Corporation or another enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Corporation or another enterprise. The term “another enterprise” as used in this Section 4 shall mean any other corporation or any partnership, joint venture, trust or other enterprise of which such person is or was serving at the request of the Corporation as a director, officer, employee or agent. The provisions of this Section 4 shall not be deemed to be exclusive or to limit in any was the circumstances in which a person may be deemed to have met the applicable standard of conduct set forth in Section 1 or Section 2 of this Article VIII, as the case may be.

Section 5.    Indemnification by a Court.

Notwithstanding any contrary determination in the specific case under Section 3 of this Article VIII, and notwithstanding the absence of any determination there under, any director, officer, employee or agent may apply to any court of competent jurisdiction in the State of Delaware for indemnification to the extent otherwise permissible under Sections 1 and 2 of this Article VIII. The basis of such indemnification by a court shall be a determination by such court that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standards of conduct set forth in Section 1 or Section 2 of this Article BVIII, as the case may be. Notice of any application for indemnification pursuant to this Section 5 shall be given to the Corporation promptly upon the filing of such application.

Section 6.    Expenses Payable in Advance.

Expenses incurred in defending or investigating a threatened or pending action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article VIII.

Section 7.    Nonexclusivity of Indemnification and Advancement of Expenses.

The indemnification and advancement of expenses provided by or granted pursuant to this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, contract, vote of stockholders or disinterested directors or pursuant to the direction (howsoever embodied) of any court of competent jurisdiction or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. It is the policy of the Corporation that indemnification of the persons specified in Sections 1 and 2 of this Article VIII shall be made to the fullest extent permitted by law. The provisions of this Article VIII shall not be deemed to preclude the indemnification of any person who is not specified in Section 1 or 2 of this Article VIII but whomever the Corporation has the power or obligation to indemnify under the provisions of the General Corporation Law of the State of Delaware, or otherwise.

Section 8.    Insurance.

The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power or the obligation to indemnify him against such liability under the provisions of this Article VIII>

Section 9.    Meaning of “Corporation” for Purposes of Article VIII.

The purposes of this Article VIII references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officer, and employees or agents so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article VIII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.

Section 10.    Survival of Indemnification and Advancement of Expenses.

The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 10 shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

ARTICLE IX

AMENDMENTS

Section 1.    Amendments by Stockholders or Board.

These Bylaws may be altered, amended or repealed, in whole or in part, or new Bylaws may be adopted by the majority vote or written consent of the stockholders or the Board of Directors.

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

This EMPLOYMENT AGREEMENT, dated June 28, 2005, is entered into by and between NTN COMMUNICATIONS, INC., a Delaware corporation (the “Company”), and Stanley B. Kinsey (the “Executive”).

1. Term of Employment

Subject to the provisions of Section 10 below, the Company shall employ the Executive, and the Executive shall serve the Company in the capacity of Chief Executive Officer for a term of eight months commencing as of July 1, 2005, and ending February 28, 2006 (the “Term of Employment”).

2. Duties

During the Term of Employment, the Executive will serve as the Company’s Chief Executive Officer and will report directly to the Board of Directors. Executive will serve the Company faithfully, diligently, and competently and to the best of his ability. During the Term of Employment under this Agreement, the Executive shall also serve as a member of the Company’s Board of Directors.

3. Compensation

During the Term of Employment, the Company shall pay to the Executive as compensation for the performance of his duties and obligations hereunder a salary at the rate of $394,000 per annum through February 28, 2006. Such salary shall be paid bi-weekly. In addition, the Executive will be included in the Company executive bonus pool in a manner consistent with the 2004 executive bonus program.

4. Expenses and Other Benefits.

All travel, entertainment and other reasonable business expenses incident to the rendering of services by the Executive hereunder will be promptly paid or reimbursed by the Company subject to submission by the Executive in accordance with the Company’s policies in effect from time to time.

The Executive shall be entitled during the Term of Employment to participate in employee benefit and welfare plans and programs of the Company including any employee incentive stock option plans, qualified or unqualified, to the extent that any other executives or officers of the Company or its subsidiaries are eligible to participate and subject to the provisions, rules, regulations, and laws applicable thereto. Notwithstanding the foregoing, the Company shall provide the Executive, at a minimum, with the following benefits:

(a) Coverage, at no expense to the Executive, of the Executive, his wife, if any, and those of his children who qualify as his dependents under Section 152 of the Internal Revenue code of 1954, under a major medical insurance program with an annual cumulative deductible amount of no more than $500;

(b) Coverage of the Executive by term life insurance, payable to his designated beneficiary, in the amount of $1,000,000, and, in the event of accidental death or dismemberment, in the amount of $2,000,000. The premium relating to such coverage shall not exceed $4,000 per year. Coverage shall begin the first day of the Term of Employment hereunder and shall continue throughout the Term of Employment; and

(c) A paid vacation of five (5) weeks, in addition to any authorized holidays of the Company, during the Term of Employment.

(d) Incentive Stock Option Compensation - The Company will grant the Executive 250,000 Incentive Stock Options (ISO’s) at a price of $1.88 per share. The ISOs shall vest ratably over the 12 months beginning July 1, 2005. The form of such share grant is attached hereto as Exhibit “A.” Notwithstanding anything to the contrary contained in the options, all of the Executive’s options will immediately vest upon a “Change of Control Event,” as defined in Section 10 hereof.

5. Death or Disability

This Agreement shall be terminated by the death of the Executive and also may be terminated by the Board of Directors of the Company if the Executive shall be rendered incapable by illness or any physical or mental disability (individually, a “disability”) from substantially complying with the terms, conditions and provisions to be observed and performed on his part for a period in excess of six months (whether or not consecutive) during any 12 months during the Term of Employment. If this Agreement is to be terminated by reason of illness, or any physical or mental disability of the Executive, the Company shall give thirty days’ written notice to that effect to the Executive in the manner provided herein and the Executive shall be entitled to the greater of: i) one year’s additional compensation; or ii) the compensation that was to accrue during the balance of the Term of Employment; and, in each case, including those benefits described in Sections 4(a), (b), (c) and (d) hereof.

6. Disclosure of Information; Inventions and Discoveries

Except as provided in the California Labor Code, the Executive shall promptly disclose to the Company all processes, trademarks, inventions, improvements, discoveries and other information (collectively, “developments”) directly related to the business of the Company conceived, developed or acquired by him alone or with others during the Term of Employment by the Company, whether or not during regular working hours or through the use of material or facilities of the Company. For the purpose of Sections 6, 7 and 8 hereof, the business of the Company includes without limitation the fields of electronically simulated sports games or interactive television applications. All such developments shall be the sole and exclusive property of the Company, and upon request the Executive shall deliver to the Company all drawings, sketches, models and other data and records relating to such development. In the

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event any such development shall be deemed by the Company to be patentable, the Executive shall, at the expense of the Company, assist the Company in obtaining a patent or patents thereon and execute all documents and do all other things necessary or proper to obtain letters patent and invest the Company with full title thereto.

7. Non-Competition

The Company and the Executive agree that the services rendered by the Executive hereunder are unique and irreplaceable. During his employment by the Company and to the extent permitted by law, for a period of one year thereafter, the Executive shall not become an executive officer (other than an officer whose function substantially relates to financial matters) of any business in the fields of electronically simulated sports games or interactive television, which in the judgment of the Company is, or as a result of the Executive’s engagement or participation would become, directly competitive with any aspect of the business of the Company.

8. Non-Disclosure

The Executive will not at any time after the date of this Employment Agreement divulge, furnish or make accessible to anyone (otherwise than in the regular course of business of the Company) any knowledge or information with respect to confidential or secret processes, inventions, discoveries, improvements, formulas, plans, material, devices, ideas or other know-how, whether patentable or not, with respect to any confidential or secret engineering, development or research work or with respect to any other confidential or secret aspect of the business of the Company (including, without limitation, customer lists, supplier lists and pricing arrangements with customers or suppliers), except to the extent such disclosure is (a) in the performance of his duties under this Agreement, (b) required by applicable law, (c) lawfully obtainable from other sources, (d) authorized in writing by the Company, or (e) when required to do so by legal process, that requires him to divulge, disclose or make accessible such information.

9. Remedies

The Company may pursue any appropriate legal, equitable or other remedy, including injunctive relief, in respect of any failure by the Executive to comply with the provisions of Sections 6, 7 or 8 hereof, it being acknowledged by the Executive that the remedy at law for any such failure would be inadequate. If the Company shall have failed to cure any material breach by the Company of any material provision of this Agreement within 30 days after notice by the Executive to the Company specifying such breach with particularity, the Executive may, in addition to other remedies, give notice to the Company of acceleration of the entire amount of compensation which was to accrue to the Executive during the balance of the Term of Employment, and such amount shall be immediately due and payable to the Executive.

10. Termination

The Executive’s employment with the Company may be terminated by the Board of Directors of the Company (i) upon three (3) days’ notice to the Executive in the event of the Executive’s personal dishonesty, willful misconduct or breach of fiduciary duty or (ii) upon

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thirty (30) days’ notice to the Executive if the Executive shall be in material breach of any material provision of this Employment Agreement other than as provided in clause (i) above and shall have failed to cure such breach during such thirty day period. Any such notice to the Executive shall specify with particularity the reason for termination or proposed termination.

In the event of termination under this Section 10 or under Section 5 (except as provided therein), the Company’s unaccrued obligations under this Agreement shall cease and the Executive shall forfeit all right to receive any unaccrued compensation or benefits hereunder but shall have the right to reimbursement of expenses already incurred. Notwithstanding any termination of the Agreement pursuant to this Section 10 or by reason of disability under Section 5, the Executive, in consideration of his employment hereunder to the date of such termination, shall remain bound by the provisions of Sections 6, 7 and 8 (unless this Agreement is terminated on account of the breach hereof by the Company) of this Agreement except that if this Agreement is terminated following a Change in Control Event (as defined below) then the Executive shall remain bound only by the provisions of Sections 6 and 8.

Termination without cause or any attempt by the Board of Directors of the Company to reassume any of the responsibilities or duties from the Executive or to change the duties of the Executive without cause shall be deemed a breach of this Agreement by the Company without cause and shall immediately entitle the Executive, as liquidated damages therefore, to the greater of: i) one year’s additional compensation; or ii) the compensation that was to accrue during the balance of the Term of Employment; and, in each case, including those benefits described in Sections 4(a), (b), (c) and (d) hereof.

Notwithstanding anything to the contrary contained herein, the Executive or the Company shall have the option to terminate this Agreement at any time following a “Change in Control Event.” In the event of such termination either by the Company or by the Executive following a Change in Control Event, the company shall immediately entitle the Executive, as liquidated damages therefore, to one year’s additional compensation, including those benefits described in Sections 4(a), (b), (c) and (d) hereof. A “Change in Control Event” shall mean:

(a) The acquisition by any individual entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”) of beneficial ownership of 50% or more of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Voting Securities”) or any approval of such acquisition by the Board of Directors of the Company, provided that such acquisition is accomplished within six months of such approval; provided, however, that the following acquisitions shall not constitute a Change in Control Event: (A) any acquisition by the Company or (B) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company.

(b) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual who becomes a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be

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considered as though such individual were a member of the Incumbent Board; but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(c) Approval by the shareholders of the Company of a reorganization, merger or consolidation (a “transaction”), unless, following such transaction in each case, more than 50% of, respectively, the then outstanding shares of common stock of the Company resulting from such transaction and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entitles who were the beneficial owners, respectively, of the outstanding Common stock and Outstanding Voting Securities immediately prior to such transaction; or

(d) Approval by the shareholders of the Company of (A) a complete liquidation or dissolution of the Company or (B) the sale or other disposition of all or substantially all of the assets of the Company unless such assets are sold to a corporation and following such sale or other disposition, the condition described in paragraph (c) above is satisfied.

(e) A non-voluntary removal by the Board of the Executive’s additional position of Chairman of the Board of Directors.

11. Resignation

In the event that the Executive’s services hereunder are terminated under Section 5 or 10 of this Agreement (except by death), the Executive agrees that he will deliver his written resignation as a Director of the Company to the Board of Directors, such resignation to become effective immediately.

Upon expiration of the Term of Employment or termination pursuant to Section 5 or 10 hereof, the Executive or his personal representative shall promptly deliver to the Company all books, memoranda, plans, records and written data of every kind relating to the business and affairs of the Company which are then in his possession on account of his employment hereunder, but excluding all such materials in the Executive’s possession which are personal and not property of the Company or which he holds on account of his past or current status as a director or shareholder of the Company.

12. Arbitration

Any dispute or controversy arising under this Agreement or relating to its interpretation or the breach hereof, including the arbitrability of any such dispute or controversy, shall be determined and settled by arbitration in San Diego, California pursuant to the Rules then obtaining of the American Arbitration Association. Any award rendered herein shall be final and binding on each and all of the parties, and judgment may be entered thereon in any court of competent jurisdiction.

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13. Insurance

The Company shall have the right at its own cost and expense to apply for and to secure in its own name, or otherwise, life, health or accident insurance or any or all of them covering the Executive, and the Executive agrees to submit to any usual and customary medical examination and otherwise to cooperate with the Company in connection with the procurement of any such insurance, and any claims thereunder.

14. Waiver of Breach

Any waiver of any breach of this Employment Agreement shall not be construed to be a continuing waiver or consent to any subsequent breach on the part either of the Executive or of the Company.

15. Assignment

Neither party hereto may assign his or its rights or delegate his or its duties under this Employment Agreement without the prior written consent of the other party; provided, however, that this Agreement shall inure to the benefit of and be binding upon the successors and assignees of the Company, all as though such successors and assignees of the Company and their respective successors and assignees were of the Company, upon (a) a sale of all or substantially all of the Company’s assets, or upon merger or consolidation of the Company with or into any other corporation, and (b) upon delivery on the effective day of such sale, merger or consolidation to the Executive of a binding instrument of assumption by such successors and assigns of the rights and liabilities of the Company under this Agreement, provided, however, that no such assignment or transfer will relieve the Company from its payment obligations hereunder in the event the transferee or assignee fails to timely discharge them. No rights or obligations of the Executive under this Agreement may be assigned or transferred other than his rights to compensation and benefits, which may be transferred by will or operation of law or as otherwise specifically provided or permitted hereunder or under the terms of any applicable employee benefit plan.

16. Contract Renewal

The Executive and the Company will attempt to have completed the negotiation of an extension of this agreement by January 1, 2006. If no agreement has been reached by that time, the Executive may ask the Company to extend this Agreement by one year under the existing terms of the Agreement, along with a 3% base compensation increase. If, by February 28, 2006, the Company has not presented a renewal offer comparable to the current contact, the Executive may be released from the agreement and will be entitled to one year’s compensation, including those benefits described in Sections 4(a), (b), (c) and (d) hereof.

17. Notices

Any notice required or desired to be given hereunder shall be in writing and shall be deemed sufficiently given when delivered or 3 days after mailing in United States certified or registered mail, postage prepaid, to the party for whom intended at the following address:

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The Company:

NTN COMMUNICATIONS, INC

5966 La Place Court

Suite 100

Carlsbad, CA 92001

The Executive:

Stanley B. Kinsey

P. O. Box 3050

6821 Farms View Court

Rancho Santa Fe, CA 92067

or to such other address as either party may from time to time designate by like notice to the other.

18. General

The terms and provisions of this Agreement shall constitute the entire agreement by the Company and the Executive with respect to the subject manner hereof, and shall supersede any and all prior agreements or understandings between the Executive and the Company, whether written or oral. This Agreement may be amended or modified only by a written instrument executed by the Executive and the Company, and any such amendment or modification or any termination of this Agreement shall become effective only after written approval thereof has been received by the Executive. This Agreement shall be governed by and construed in accordance with California law. In the event that any terms or provisions of this Agreement shall be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect the validity or enforceability of the remaining terms and provisions hereof. In the event of any judicial, arbitral or other proceeding between the parties hereto with respect to the subject matter hereof, the prevailing party shall be entitled, in addition to all other relief, to reasonable attorney’s fees and expenses and court costs.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year limit above written.

NTN COMMUNICATIONS. INC.
By:	/s/ Andy Wrobel
	Secretary

AGREED TO AND ACCEPTED:
By	/s/ Stanley B. Kinsey	By:	/s/ Gary Arten
	Stanley B. Kinsey		Gary Arten
			Chair, NTN Compensation Committee

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EX-10.2

Exhibit 10.2

SEVERANCE AGREEMENT

AND

GENERAL RELEASE OF ALL CLAIMS

This Severance Agreement and General Release of all Claims (“Agreement”) is made by and between Stanley Kinsey (hereinafter “EMPLOYEE”), and NTN Communications, Inc. (“EMPLOYER”).

RECITALS

A. EMPLOYEE was employed by EMPLOYER from November, 1997 through July 7, 2006, the date such employment was terminated (the “Effective Date”).

B. From time to time during his employment, EMPLOYER has granted to EMPLOYEE various stock options to purchase shares of EMPLOYER’s common stock (“Common Stock”), which options were issued pursuant to EMPLOYER’S 1995 Stock Option Plan (“1995 Plan”) and 2005 Performance Incentive Plan (“2005 Plan”; the 1995 Plan and the 2005 Plan are sometimes collectively referred to herein as the “Plans”).

C. Since July 1, 2005, the terms of EMPLOYEE’s employment by EMPLOYER has been as set forth in that certain Employment Agreement dated June 28, 2005 by and between EMPLOYEE and EMPLOYER (“Employment Agreement”).

D. Pursuant to the Employment Agreement and the Plans, EMPLOYEE is entitled to payment of certain amounts and certain rights with respect to such stock options following termination of his employment.

E. The parties wish to fully and finally settle all matters between them and, accordingly hereby enter into this Agreement.

NOW, THEREFORE, in consideration of the promises and mutual agreements hereinafter set forth, it is hereby agreed by and among the parties as follows:

1. PAYMENT

a. Final Wages. On the Effective Date, EMPLOYER agrees to pay EMPLOYEE all normal payroll amounts owing to him through and including that date, plus all accrued and unused vacation pay benefits. In addition, on or before the Effective Date, EMPLOYER agrees to pay EMPLOYEE his share of the 2005 Executive Bonus Pool, which the parties currently estimate to be approximately Five Thousand to Fifteen Thousand Dollars. In the event the Board does not approve the entire bonus payment, EMPLOYEE shall be entitled to receive a pro rata portion of any bonus paid to the senior management team at a ratio equal to the plan’s original percentages. In addition, at any time and from time to time following the Effective Date, in order to validate the calculations relating to his share of the 2005 Executive Bonus Pool, EMPLOYEE will have the right to audit EMPLOYER’S internal financial reports, at EMPLOYEE’S sole expense, provided EMPLOYEE provides reasonable advance notice and any such audit

1

will be conducted at EMPLOYER’S place of business and during normal business hours.

b. Severance Wages. EMPLOYER agrees to pay EMPLOYEE the following as severance wages:

(1) The total sum of Three Hundred Ninety Four Thousand Dollars ($394,000.00); such payment will be made in accordance with EMPLOYER’s normal payroll practices (less payroll withholdings for taxes and other amounts in accordance with federal and state law) payable in 26 equal biweekly increments of $15,153.85 each, commencing on the first pay date immediately subsequent to the eighth (8th) day after EMPLOYEE’S execution of this Agreement with the first payment retroactive to the Effective Date, and continuing each consecutive pay date until such sum is paid in full.

c. Other Severance Benefits. In addition to the foregoing, and the benefits described in subpart d. below, EMPLOYER shall pay, at its sole expense and at no cost to EMPLOYEE, and continue each of the following benefits in full force and effect for the twelve (12) month period immediately following the Effective Date:

(1) COBRA medical and dental premiums for EMPLOYEE and dependent coverage;

(2) Major medical insurance premiums with an annual cumulative deductible amount of no more than $500 for EMPLOYEE, his wife, if any, and those or his children who qualify as his dependents under Section 152 of the Internal Revenue code of 1954, and

(3) Term life insurance on EMPLOYEE’s life, payable to his designated beneficiary, in the amount of $1,000,000, and, in the event of accidental death or dismemberment, in the amount of $2,000,000; the premium relating to such coverage shall not exceed $4,000 per year.

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d. Stock Options. Further, EMPLOYER hereby certifies as being granted to, fully vested in and exercisable by, EMPLOYEE, with Exercise Periods following EMPLOYEE’s termination of employment for each as noted below, the stock option grants to purchase shares of EMPLOYER’s common stock (“Common Stock”) set forth in Table 1.A. below, which grants were made pursuant to the Plans:

Table 1. A.

Grant	# Options	Granted	Price	Expire	Exercise Period
A	100,000	11/03/97	1.8750	11/02/07	2 years
B	650,000	10/07/98	0.6250	10/06/08	3 years
C	650,000	10/07/98	1.0000	10/06/08	3 years
D	500,000	10/07/99	0.9800	10/06/09	3 years
E	350,000	01/26/01	0.8750	01/25/11	3 years
F	100,000	10/07/02	0.7500	10/05/12	3 years
G	400,000	02/18/03	1.1000	02/17/13	3 years
H	300,000	08/16/04	1.8600	08/15/14	3 years
I	250,000	06/28/05	1.8800	06/27/15	3 years
	#DSUs
	50,000	09/30/04	—	09/29/14

The following terms shall apply to such stock options in addition to the terms set forth in the Plans and the documents delivered pursuant thereto:

(1) Accelerated Vesting. EMPLOYEE shall be entitled to accelerated vesting in full of Stock Option Grant I, as set forth in Table 1.A. above.

(2) Cashless Exercise. In accordance with the authority vested in the Compensation Committee of the Board as Administrator of the Company’s stock option plans, the EMPLOYEE is granted both (a) the use of a cashless exercise program for any and all options , and (b) the use of Common Stock, acquired through DSU’s or the cashless exercise of stock options, to pay to the Company any required withholding taxes that the Company is required to withhold.

Several forms of cashless exercise are allowed by the Plans with approval of the Administrator: accordingly, EMPLOYER hereby grants EMPLOYEE the right to use any form of cashless exercise permitted under applicable law that generally follows the economic model in the following example:

In lieu of EMPLOYEE making a cash payment for any Common Stock he may purchase upon exercise of any of the above Options, EMPLOYEE may, in his sole discretion, elect to convert all or any portion of any of such Options to shares of Common Stock of EMPLOYER by the surrender of the particular Option or portion thereof in accordance with the provisions of the Plans, in exchange for a number of shares of Common Stock EMPLOYER determined in accordance with the following formula:

X = Y times (A minus B)

                              A

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where X = the number of shares of Common Stock of EMPLOYER to be issued to EMPLOYEE pursuant to this Section 1

Y = the number of shares of Common Stock of EMPLOYER that could be acquired upon a cash exercise of the portion of the Option being surrendered (as adjusted to the date of calculation)

A = the closing sale price of one share of Common Stock of EMPLOYER as of the end of the day immediately preceding the date of exercise

B = the then exercise price of one share of Common Stock per the above TABLE1.A.

For example, if the EMPLOYEE requests to exercise 100,000 options with an exercise price of $1.00 and a closing sale price on the day immediately preceding the date of exercise of $2.00, then the EMPLOYER would deliver to the EMPLOYEE 50,000 registered shares of Common Stock upon the surrender of the 100,000 stock options.

In addition, EMPLOYEE may also elect to have EMPLOYER withhold from the number of shares of Common Stock that would otherwise be delivered to the EMPLOYEE by the EMPLOYER on exercise of the option, a number of shares of Common Stock equal in value to the aggregate withholding taxes applicable to such exercise.

By entering into this Agreement, EMPLOYER agrees that neither it, the Plan Committee nor the Plan Administrator may modify or terminate the terms of EMPLOYEE’S cashless exercise, or other rights with respect to the stock options set forth herein, unless expressly required to do so by applicable law.

(3) Company Responsiveness to Option Exercise Request. As long as EMPLOYEE’S broker initiates an exercise request according to electronic DWAC system requirements, the EMPLOYER will act on such request as if signed by the EMPLOYEE and electronically deliver to the EMPLOYEE the required number of shares of Common Stock of the Company, either by standard exercise or cashless exercise, as the case may be, within 24 hours of each such request.

(4) Transferability of Options. Without limiting the applicability of any other provisions under the Plans, EMPLOYER confirms EMPLOYEE’S right to transfer the options, in the manner permitted under Section 2.4 of the 1995 Plan.

e. Outplacement Services. EMPLOYEE to receive $5,000 for reimbursement of standard senior executive outplacement service package or fees incurred in termination discussions.

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2 GENERAL RELEASE.

a. Release. In exchange for the foregoing consideration, EMPLOYEE and his heirs, assigns, executors, successors and each of them, hereby unconditionally, irrevocably and absolutely release and discharge EMPLOYER and all of their agents, brokers, attorneys, insurers, trustees, employees, officers, directors, partners, shareholders, representatives, predecessors-in-interest, successors-in-interest and all related, subsidiary or affiliated persons or entities (however described), (collectively, “Released Parties”) from any and all claims related in any way to the transactions, affairs or occurrences between them up to the date of this Agreement including, but not limited to, all losses, liabilities, claims (for example: unpaid wages, benefits, vacation pay), charges, demands and causes of action, known or unknown, suspected or unsuspected, arising directly or indirectly out of or in any way connected with the facts or circumstances arising from or out of his employment with EMPLOYER.

EMPLOYER will, and hereby does, forever release and discharge EMPLOYEE from any and all causes of action, judgments, liens, indebtedness, damages, losses, claims, liabilities, and demands of every kind and character, or any other matter or event occurring, or to occur, including attorneys’ fees and costs, whether or not previously brought before any state or federal court or before any state or federal or any other governmental agency.

EMPLOYEE SPECIFICALLY AGREES AND ACKNOWLEDGES HE IS WAIVING ANY RIGHT TO RECOVERY AGAINST EMPLOYER BASED ON STATE OF FEDERAL AGE, SEX, PREGNANCY, RACE, COLOR, NATIONAL ORIGIN, MARITAL STATUS, RELIGION, SEXUAL ORIENTATION, VETERAN’S STATUS, DISABILITY, PHYSICAL HANDICAP, MENTAL CONDITION, MEDICAL CONDITION, MENTAL HANDICAP OR OTHER ANTI-DISCRIMINATION LAWS, INCLUDING, WITHOUT LIMITATION, TITLE VII OF THE CIVIL RIGHTS ACT, THE AGE DISCRIMINATION IN EMPLOYMENT ACT, THE AMERICANS WITH DISABILITIES ACT AND TITLE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, ALL AS AMENDED, WHETHER SUCH CLAIM IS BASED UPON ANY ACTION FILED BY EMPLOYEE OR BY A GOVERNMENTAL AGENCY.

b. Legal Counsel; Additional Facts. EMPLOYEE declares and represents that he is executing this Agreement with the opportunity to obtain full advice from legal counsel. EMPLOYEE further acknowledges that he may discover facts or law different from, or in addition to, the facts or law that he knows or believes to be true with respect to the claims released in this Agreement, and agrees, nonetheless, that this Agreement and the release contained in it shall be and shall remain effective in all aspects, notwithstanding such different or additional facts, or the discovery of them.

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c. Known and Unknown Claims. EMPLOYEE acknowledges that he is aware of and is familiar with the provisions of Section 1542 of the California Civil Code, which provides as follows:

“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him, must have materially affected his settlement with the debtor.”

EMPLOYEE does, after opportunity to obtain independent advice of counsel, hereby waive and relinquish all rights and benefits he may have under Section 1542 of the California Civil Code, or the law of any other state or jurisdiction, or common law principle, to the same or similar effect.

d. Agreement Not to Sue. EMPLOYEE irrevocably and absolutely agrees that he will neither prosecute nor allow to be prosecuted on his behalf, in any administrative agency, whether federal or state, or in any court, whether federal or state, any claim or demand of any type related to the matter released in Section 2.a. above, it being the intention of all parties that with the execution of this Agreement, EMPLOYER and alt Released Parties will be absolutely, unconditionally and forever discharged of and from all obligations to or on behalf of EMPLOYEE related in any way to his employment with EMPLOYER or otherwise up to and including the date of this Agreement.

3. TWENTY-ONE DAY WAITING PERIOD. EMPLOYEE understands that he has been given a period of 21 days to review and consider this Agreement before signing it. EMPLOYEE further understands that he may use as much of this 21-day period as he wishes prior to signing it.

4. REVOCATION. EMPLOYEE may revoke this Agreement within seven days of signing it. Revocation can be made by delivering a written notice of revocation to Gary Arlen, Chairman of the Compensation Committee of the Board of Directors, NTN Buzztime, Inc., 5966 La Place Court, Carlsbad, California 92008. For this revocation to be effective, written notice must be received by no later than the close of business on the seventh day after he signs this Agreement. If EMPLOYEE revokes this Agreement, it shall not be effective or enforceable and EMPLOYEE will not receive the benefits described in Section I other than those to which he is otherwise contractually entitled. If EMPLOYEE does not revoke this Agreement, its effective date shall be the eighth day after the date of his signature.

5. FUTURE COMMUNICATIONS. The terms and conditions of this Agreement shall remain confidential between the parties hereto, and the parties agree not to disclose any information concerning the fact, the amount, terms or conditions of this Agreement to any third party. Nothing contained in this Agreement, however, shall be construed to prevent the parties from disclosing the terms hereof to individuals or agencies to whom disclosure is required to fulfill the terms of this Agreement including his or its attorneys or accountants or as otherwise required by law. In addition, nothing herein shall preclude either party from complying with any legal process that can compel a disclosure of all terms of this Agreement or from discussing the Agreement with his or its attorney,

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accountant or his immediate family, as long as such party clearly advises any such individual that all information regarding the terms of the Agreement is disclosed in strict confidence and must not be repeated or disclosed to others.

Notwithstanding the foregoing, EMPLOYEE agrees that EMPLOYER, and any of its officers, directors, employees and agents, shall be permitted to make any public or private, written or oral communication, which shall state, in principle, as follows:

a) If made regarding EMPLOYEE’S separation from the Company:

“EMPLOYEE notified the Board of Directors in December 2005 that he would not renew his employment contract and urged the Board to seek a successor to replace him. A new CEO was put in place about three months after his notification.”

b) If made regarding any question pertaining to whether the EMPLOYEE was terminated by the Company:

“EMPLOYEE was not terminated by the Company. Employee notified the Board of Directors in December 2005 that he would not renew his employment contract and urged the Board to seek a successor to replace him. A new CEO was put in place about three months after his notification.”

If EMPLOYEE violates the provisions of this Section 5, EMPLOYEE’S right to exercise any of the stock options accelerated in accordance with Section 1 hereof remaining unexercised at the time of such violation shall expire.

If EMPLOYER, or any of its officers, directors, employees or agents, violates the provisions of this Section 5 including, without limitation, if any such person makes any communication not substantially the same as the responses presented above, which communication is made to any third party including, without limitation, the press or media, in any investor presentation, or in any written press release or presentation, EMPLOYER agrees that it has violated this confidentiality provision and EMPLOYER hereby acknowledges that damages have been incurred by the EMPLOYEE as a result of this, the exact amount of such damages shall be subject to proof at the time of trial. Without limiting the generality of Section 7.d. hereof relating to the award of attorneys fees and costs, the parties agree that the provisions of that section shall be applicable to any action for breach of this Section 5.

6. COMPANY PROPERTY. EMPLOYER also transferred all right, title and interest in the following Company property to EMPLOYEE effective upon termination of employment:

EMPLOYEE contacts in Outlook;

Treo 650 cellular telephone; and

HP TC1100 tablet PC.

EMPLOYEE is to receive the full cooperation of EMPLOYER in transferring contact names, historic calendar information and task list information, and forwarding personal e-mail, to his personal desktop system within 30 days following the Effective Date. EMPLOYER will allow EMPLOYEE to send and e-mail notification to all of his

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Microsoft Outlook^® contacts informing them of EMPLOYEE’S new e-mail address for future correspondence. EMPLOYER will also designate an executive assistant to scan any e-mails addressed to EMPLOYEE’S e-mail account at EMPLOYER during the six (6) month period following the Effective Date, and promptly forward any and all personal e-mails to such e-mail address as EMPLOYEE may designate during that period.

7. GENERAL PROVISIONS.

a. Binding Effect. The provisions of this Agreement shall inure to the benefit of and be binding upon the successors, assigns, heirs, administrators and executors of the parties hereto.

b. Freely Entering Agreement. EMPLOYEE is fully competent as of the date hereof, and this Agreement has been freely executed and entered into by EMPLOYEE without duress or any imbalance in bargaining position, and in determining to execute and enter into this Agreement, EMPLOYEE has relied, among other things, on the opportunity to obtain advice of independent legal counsel of his own selection.

c. Full Opportunity to Review. This Agreement has been reviewed by the parties hereto and their respective attorneys, and the parties have had a full opportunity to negotiate the contents hereof. The parties hereto expressly waive any common law or statutory rule of construction that ambiguity shall be construed against the drafter of this Agreement, and acknowledge that for purposes of any such rule all parties contributed equally to the drafting of this Agreement.

d. Prevailing Party. In any action at law or equity between the parties seeking enforcement of any of the terms and provisions of this Agreement, the prevailing party in such action shall be awarded, in addition to damages or other relief, its reasonable costs and expenses, including, but not limited to, taxable costs and reasonable attorneys’ fees. Such recovery shall also include out-of-pocket expenses and attorneys fees on appeal, if any. The court shall determine the prevailing party, unless the parties can resolve the matters between themselves.

e. No Waiver. No waiver by any party hereto of any breach of this Agreement by any other party shall operate or be construed as a waiver of any other or subsequent breach. No waiver by any party hereto of any breach of this Agreement by any other party hereto shall be effective unless it is in writing and signed by the party claimed to have waived such breach.

f. Amendment. This Agreement (and provisions) may be amended only by a written instrument executed by all parties hereto.

g. Further Assurances. The parties agree to do all things necessary and to execute all further documents necessary and appropriate to carry out and effectuate the terms and purposes of this Agreement.

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h. Entire Agreement. It is agreed that, except as otherwise provided herein, there are no collateral agreements or representations, written or oral, that are not contained in this Agreement. Rather, this Agreement is intended by all parties to be fully integrated and contains the entire agreement between the parties.

i. Severability. Should it be determined by a court that any term of this Agreement is unenforceable, that term shall be deemed to be deleted. However, the validity and enforceability of the remaining terms shall not be affected by the deletion of the unenforceable term.

j. Applicable Law/Venue. The validity, interpretation and performance of this Agreement shall be construed and interpreted according to the laws of the State of California. The parties further agree that if any party hereto commences litigation to enforce or interpret his/its rights hereunder, such litigation shall take place only in an appropriate court in San Diego County, and not elsewhere. To effectuate this provision, each party hereby consents to the jurisdiction of the California courts located in the county of San Diego.

k. Counterparts. This Agreement may be executed in counterparts and when signed by all parties hereto shall constitute one single document.

The parties to this Agreement, with the benefit of representation and advice of counsel, have read the foregoing Agreement, and fully understand each and every provision contained herein.

WHEREFORE, the parties have executed this Agreement on the dates shown below.

/s/ STANLEY B. KINSEY
STANLEY B. KINSEY
NTN BUZZTIME, INC.
By:	/s/ Gary Arlen
	Gary Arlen
By:	/s/ Barry Bergsman
	Barry Bergsman

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

AND RULE 13A-14(A) and 15D-14(A) OF THE EXCHANGE ACT OF 1934

I, Dario L. Santana, Chief Executive Officer of NTN Buzztime, Inc. (the “Company”) certify that:

1. I have reviewed this quarterly report on Form 10-Q of the Company;

2. Based on my knowledge, this quarterly 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 quarterly report; and

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report.

4. The registrant’s other certifying officers 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:

• 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;

• 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;

• 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

• 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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officers 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):

• 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

• 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: November 9, 2006	/s/ DARIO L. SANTANA
	Dario L. Santana,
	Chief Executive Officer
	NTN Buzztime, Inc.

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

AND RULE 13A-14(A) and 15D-14(A) OF THE EXCHANGE ACT OF 1934

I, Kendra Berger, Chief Financial Officer of NTN Buzztime, Inc. (the “Company”) certify that:

1. I have reviewed this quarterly report on Form 10-Q of the Company;

2. Based on my knowledge, this quarterly 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 quarterly report; and

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report.

4. The registrant’s other certifying officers 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:

• 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;

• 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;

• 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

• 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 that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officers 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):

• 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

• 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: November 9, 2006	/s/ KENDRA BERGER
	Kendra Berger
	Chief Financial Officer
	NTN Buzztime, Inc.

EX-32.1

Exhibit 32.1

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of NTN Buzztime, Inc. (the “Registrant”) on Form 10-Q for the period ended September 30, 2006, I, Dario L. Santana, Chief Executive Officer, do hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that, to my knowledge:

(1) the Quarterly Report on Form 10-Q of the Registrant for the period ended September 30, 2006, 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 result of operations of the Registrant.

Dated: November 9, 2006	/s/ DARIO L. SANTANA
	Dario L. Santana,
	Chief Executive Officer
	NTN Buzztime, Inc.

EX-32.2

Exhibit 32.2

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of NTN Buzztime, Inc. (the “Registrant”) on Form 10-Q for the period ended September 30, 2006, I, Kendra Berger, Chief Financial Officer, do hereby certify, pursuant to § 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350), that, to my knowledge:

(1) the Quarterly Report on Form 10-Q of the Registrant for the period ended September 30, 2006, 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 result of operations of the Registrant.

Dated: November 9, 2006	/s/ KENDRA BERGER
	Kendra Berger
	Chief Financial Officer
	NTN Buzztime, Inc.