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 June 30, 2008

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, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	x

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

As of July 31, 2008 the registrant had outstanding 55,652,908 shares of common stock, $.005 par value.

NTN BUZZTIME, INC. AND SUBSIDIARIES

FORM 10-Q

TABLE OF CONTENTS

Item		Page
PART I
1.	Financial Statements
	Condensed Consolidated Balance Sheets as of June 30, 2008 (unaudited) and December 31, 2007	1
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007 (unaudited)	2
	Condensed Consolidated Statements of Comprehensive (Loss) Income for the three and six months ended June 30, 2008 and 2007 (unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2008 and 2007 (unaudited)	4
	Notes to Condensed Consolidated Financial Statements	5
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
3.	Quantitative and Qualitative Disclosures About Market Risk	22
4.	Controls and Procedures	22
PART II
1.	Legal Proceedings	23
1A.	Risk Factors	23
2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
3.	Defaults Upon Senior Securities	23
4.	Submission of Matters to a Vote of Security Holders	23
5.	Other Information	24
6.	Exhibits	24
	Signatures	24

PART I

ITEM 1. Financial Statements.

NTN BUZZTIME, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

	June 30, 2008			December 31, 2007
ASSETS
Current assets:
Cash and cash equivalents	$	6,616		$	10,273
Restricted cash		37			55
Accounts receivable, net of allowances of $300 and $396, respectively		1,051			1,354
Investments available-for-sale		146			264
Prepaid expenses and other current assets		511			745
Assets held for sale (Note 14)		7			212
Total current assets		8,368			12,903
Broadcast equipment and fixed assets, net		3,701			4,101
Software development costs, net of accumulated amortization of $1,195 and $1,071, respectively		935			895
Deferred costs		1,129			1,204
Goodwill		1,248			1,285
Intangible assets, net		263			318
Other assets		150			154
Total assets	$	15,794		$	20,860
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	601		$	838
Accrued expenses		1,250			901
Sales taxes payable		1,071			982
Accrued salaries		704			357
Accrued vacation		469			447
Income taxes payable		88			36
Deferred revenue		797			972
Liabilities of discontinued operations (Note 14)		309			672
Total current liabilities		5,289			5,205
Deferred revenue, excluding current portion		90			87
Total liabilities		5,379			5,292
Commitments and contingencies (Note 10)
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 June 30, 2008 and December 31, 2007		1			1
Common stock, $.005 par value, 84,000,000 shares authorized; 55,657,000 and 55,640,000 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively		277			277
Treasury stock, at cost, 454,000 shares at June 30, 2008 and December 31, 2007		(444	)		(444	)
Additional paid-in capital		113,159			112,942
Accumulated deficit		(103,789	)		(98,870	)
Accumulated other comprehensive income (Note 11)		1,211			1,662
Total shareholders’ equity		10,415			15,568
Total shareholders’ equity and liabilities	$	15,794		$	20,860

See accompanying notes to unaudited condensed consolidated financial statements.

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NTN BUZZTIME, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share data)

	Three months ended						Six months ended
	June 30, 2008			June 30, 2007			June 30, 2008			June 30, 2007
Revenues	$	7,017		$	7,640		$	14,199		$	15,373
Operating expenses:
Direct operating costs (includes depreciation and amortization of $666 and $857 for the three months ended June 30, 2008 and 2007, respectively, and depreciation and amortization of $1,385 and $1,698 for the six months ended June 30, 2008 and 2007, respectively)		2,028			2,213			4,124			4,426
Selling, general and administrative		6,952			5,643			14,217			11,370
Depreciation and amortization (excluding depreciation and amortization included in direct operating costs)		145			139			267			292
Restructuring costs (Note 13)		—			26			—			478
Total operating expenses	$	9,125		$	8,021		$	18,608		$	16,566
Operating loss	$	(2,108	)	$	(381	)	$	(4,409	)	$	(1,193	)
Other income (expense):
Interest income		43			105			102			146
Interest expense		—			(8	)		—			(22	)
Other income		—			—			—			82
Total other income	$	43		$	97		$	102		$	206
Loss from continuing operations before income taxes	$	(2,065	)	$	(284	)	$	(4,307	)	$	(987	)
Provision for income taxes		64			93			105			153
Loss from continuing operations	$	(2,129	)	$	(377	)	$	(4,412	)	$	(1,140	)
Loss from discontinued operations, net of tax (including gain on sale of NTN Wireless of $396 for the six months ended June 30, 2007)		(216	)		(177	)		(507	)		(181	)
Net loss	$	(2,345	)	$	(554	)	$	(4,919	)	$	(1,321	)
Net loss per common share
Loss from continuing operations, basic and diluted	$	(0.04	)	$	(0.01	)	$	(0.08	)	$	(0.02	)
Loss from discontinued operations, basic and diluted	$	(0.00	)	$	(0.00	)	$	(0.01	)	$	(0.00	)
Net loss	$	(0.04	)	$	(0.01	)	$	(0.09	)	$	(0.02	)
Weighted average shares outstanding
Basic and diluted		55,203			54,691			55,195			54,722

See accompanying notes to unaudited condensed consolidated financial statements.

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NTN BUZZTIME, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive (Loss) Income

(Unaudited)

(In thousands)

	Three months ended						Six months ended
	June 30, 2008			June 30, 2007			June 30, 2008			June 30, 2007
Net loss	$	(2,345	)	$	(554	)	$	(4,919	)	$	(1,321	)
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustment		35			601			(332	)		578
Unrealized holding gain (loss) on investment available-for-sale		6			57			(119	)		24
Other comprehensive (loss) income	$	41		$	658		$	(451	)	$	602
Comprehensive (loss) income	$	(2,304	)	$	104		$	(5,370	)	$	(719	)

See accompanying notes to unaudited condensed consolidated financial statements.

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NTN BUZZTIME, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

	Six months ended
	June 30, 2008			June 30, 2007
Cash flows (used in) provided by operating activities:
Net loss	$	(4,919	)	$	(1,321	)
Loss from discontinued operations, net of tax		(507	)		(181	)
Loss from continuing operations	$	(4,412	)	$	(1,140	)
Adjustments to reconcile net loss to net cash (used in) provided from operating activities
Depreciation and amortization		1,652			1,990
Provision for doubtful accounts		338			204
Stock-based compensation		219			339
Loss from disposition of equipment and capitalized software		369			156
Changes in operating assets and liabilities:
Accounts receivable		(41	)		746
Prepaid expenses and other assets		233			475
Accounts payable and accrued expenses		171			(930	)
Income taxes payable		29			(48	)
Deferred costs		73			251
Deferred revenue		(573	)		(812	)
Net cash (used in) provided by operating activities from continuing operations		(1,942	)		1,231
Discontinued operations		151			(1,170	)
Net cash (used in) provided by operating activities		(1,791	)		61
Cash flows (used in) provided by investing activities:
Purchases of broadcast equipment and fixed assets		(1,119	)		(105	)
Software development expenditures		(512	)		(251	)
Deposits on broadcast equipment		—			(161	)
Restricted cash		16			10
Net cash (used in) provided by investing activities from continuing operations		(1,615	)		(507	)
Discontinued operations		20			2,298
Net cash (used in) provided by investing activities		(1,595	)		1,791
Cash flows (used in) provided by financing activities:
Principal payments on capital lease		(4	)		(219	)
Proceeds from exercise of warrants and options		—			639
Net cash (used in) provided by financing activities		(4	)		420
Net (decrease) increase in cash and cash equivalents		(3,390	)		2,272
Effect of exchange rate on cash		(267	)		349
Cash and cash equivalents at beginning of period		10,273			8,774
Cash and cash equivalents at end of period	$	6,616		$	11,395
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	—		$	19
Income taxes	$	94		$	172
Supplemental disclosure of non-cash investing and financing activities:
Reclassification of investment to accounts receivable	$	—		$	69
Reclassification of royalty receivable to prepaid maintenance contracts	$	—		$	73
Reclassification of deposits for equipment placed in service	$	—		$	524
Unrealized holding loss on investments available-for-sale	$	(119	)	$	(24	)
Sale of certain assets of Interactive Events business in lieu of severance payment	$	—		$	100

See accompanying notes to unaudited condensed consolidated financial statements.

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NTN BUZZTIME, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(1) BASIS OF PRESENTATION

Description of Business

The Company historically has operated principally through two operating divisions: Entertainment and Hospitality. The Entertainment division generates revenue primarily from the Buzztime iTV Network which distributes an interactive television promotional game network to restaurants, sports bars, taverns and pubs in North America and the United Kingdom. Additionally, the Company generates royalty revenue by distributing its game content and technology to other third-party consumer platforms, including cable television, satellite television, online, retail games and toys, airlines and books. Additionally, revenue is generated from advertising revenues sold for distribution via the television network.

The Hospitality division is comprised of NTN Wireless Communications, Inc. (“NTN Wireless”) and NTN Software Solutions, Inc. (“Software Solutions”). In 2006, the Company determined that the operation of the Hospitality division was not a strategic fit with its core business and committed to a divestiture plan. These operations have been reclassified as discontinued operations for all periods presented. NTN Wireless provided revenues from producing and distributing guest and server paging systems to restaurants and other markets. Software Solutions developed and distributed customer management software to manage reservations and table service in restaurants. Software Solutions also provided professional help desk services and outsourced software development and support and maintenance services.

On March 30, 2007, the Company completed the sale of substantially all of the assets of NTN Wireless. On October 25, 2007, the Company sold certain intellectual property assets of Software Solutions pursuant to an Asset Purchase Agreement, and in a separate agreement with a customer, the Company discontinued the outsourced software development. The Company continues to wind down the professional help desk and support and maintenance services as it fulfills its obligations under existing customer agreements (see Note 14).

Basis of Accounting Presentation

In the opinion of management, the accompanying condensed consolidated financial statements include all adjustments that are necessary for a fair presentation for the periods presented of the financial position, results of operations and cash flows of NTN Buzztime, Inc. and its wholly-owned subsidiaries: IWN, Inc., IWN, L.P., Buzztime Entertainment, Inc., NTN Wireless Communications, Inc., NTN Software Solutions, Inc., NTN Canada, Inc., and NTN Buzztime, Ltd. Interim results are not indicative of fiscal year-end results. Unless otherwise indicated, references to “Buzztime,” “we”, “us” and “our” include the Company and its consolidated subsidiaries.

IWN, Inc., IWN, L.P. and Buzztime Entertainment, Inc. are dormant subsidiaries. As of December 31, 2006, the Company’s Hospitality division was classified as discontinued operations in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, (see Discontinued Operations—Note 14). The operating results for these businesses have been separately classified and reported as discontinued operations in the condensed consolidated financial statements.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2007. The results of operations for the three and six months ended June 30, 2008 are not necessarily indicative of the results to be anticipated for the entire year ending December 31, 2008, or any other period.

Reclassifications

We reclassified the consolidated balance sheet and statement of cash flows for the year ended December 31, 2007 and the six months ended June 30, 2007 to conform to the 2008 presentation. We reclassified the consolidated statement of operations for the three and six months ended June 30, 2007 to conform to the 2008 presentation.

(2) CASH AND CASH EQUIVALENTS

Statement of Financial Accounting Standards (SFAS) No. 95, Statement of Cash Flows, defines “cash and cash equivalents” as any short-term, highly liquid investment that is both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. For the purpose of financial statement presentation, the Company has applied the provisions of SFAS No. 95, as it considers all highly liquid investment instruments with original maturities of three months or less or any investment redeemable without penalty or loss of interest to be cash equivalents.

As of June 30, 2008 and December 31, 2007, the Company had approximately $4,500,000 in Canadian dollars invested in a Canadian Variable Rate Guaranteed Investment Contract. The contract, when initiated, had a one year term, however, the security can be redeemed at any time without penalty or loss of interest; therefore, management has classified this security as a cash equivalent as the security is highly liquid. Approximately $4,500,000 matures July 31, 2008.

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

The restricted cash balance at June 30, 2008 and December 31, 2007 represents cash invested in an interest-bearing restricted account at a Canadian bank that collateralizes a letter of credit issued by that bank in favor of the landlord of the Company’s Canadian office.

(3) COMMON STOCK

On April 5, 2007, the Company’s Board of Directors authorized a Stock Repurchase Plan, whereby management is authorized to repurchase up to a maximum of $3,500,000 of the Common Stock of the Company from time to time in the open market at prevailing market prices or in privately negotiated transactions over an eighteen month period. During the quarter ended September 30, 2007, the Company purchased approximately 454,000 shares for a total of $444,000. No additional purchases have occurred before or subsequent to that quarter.

(4) EARNINGS PER SHARE

The Company computes basic and diluted earnings per share in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 128, Earnings per Share. Basic earnings per share excludes the dilutive effects of options, warrants and other convertible securities. Diluted earnings per share reflects the potential dilutions of securities that could share in our earnings. Options, warrants, convertible preferred stock and deferred stock units representing approximately 7,403,000 and 8,765,000 as of June 30, 2008 and 2007, respectively, were excluded from the computations of diluted net loss per common share as their effect was anti-dilutive.

(5) GOODWILL AND OTHER INTANGIBLE ASSETS

The Company’s goodwill balance relates to the purchase of NTN Canada. The Company performed its annual test for goodwill impairment for NTN Canada as of September 30, 2007 and it was determined that there were no indications of impairment.

(6) INVESTMENTS AVAILABLE-FOR-SALE

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

The one investment available-for-sale that the Company holds is a 2,518,260 share investment in its Australian licensee eBet Limited (eBet), an Australian gaming technology corporation. The Company’s original cost basis in the eBet shares is AUD$0.50 per share. The Company’s initial investment in 1999 was for 4,000,000 shares and at various points in 2000, the Company sold 1,481,740 eBet shares, leaving its existing holding of 2,518,260 shares, which represents less than 1.0% of eBet’s current shares outstanding.

The Company performed an evaluation in the second quarter of 2006 and concluded that the decline in value of its investment in eBet was other-than-temporary and incurred an impairment loss of $652,000 to reflect the investment at its fair value which was trading at AUD$0.09. The value of the investment increased $6,000 for the three months ended June 30, 2008 and decreased $119,000 for the six months ended June 30, 2008 and is recorded as other comprehensive income (loss) on our consolidated balance sheet (see Note 11).

(7) FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company adopted Statement of Financial Accounting Standards No. 157 (“SFAS No. 157”) as of January 1, 2008. SFAS No. 157 applies to certain assets and liabilities that are being measured and reported on a fair value basis. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosure about fair value measurements. This Statement enables the reader of the financial statements to assess the inputs used to develop those measurements by establishing a hierarchy for ranking the quality and reliability of the information used to determine fair values. The Statement requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories:

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

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

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

6

The fair value of the Company’s investment in eBet Limited is determined based on quoted market prices, which is a Level 1 classification. The Company records the investment on the balance sheet at fair value with changes in fair value recorded as a component of other comprehensive income (loss) in the consolidated balance sheet (see Note 11).

(8) SOFTWARE DEVELOPMENT COSTS

The Company capitalizes costs related to the development of certain software products for the Entertainment division in accordance with SOP No. 98-1, Accounting for the Costs of Software Developed or Obtained for Internal Use. Amortization of costs related to interactive programs is recognized on a straight-line basis over three years. Amortization expense relating to capitalized software development costs totaled $91,000 and $56,000 for the three months ended June 30, 2008 and 2007, respectively, and $180,000 and $136,000 for the six months ended June 30, 2008 and 2007, respectively. As of June 30, 2008 and December 31, 2007, approximately $464,000 and $388,000, respectively, of capitalized software costs was not subject to amortization as the development of various software projects was not complete.

The Company performed its quarterly review of software development projects for the three and six months ended June 30, 2008, and determined to abandon various software development projects that were determined to no longer fit with the current strategy or for which it was determined that the marketability of the content had decreased due to obtaining additional information regarding the specific industry for which the content was intended. As a result, an impairment of $292,000 was recognized which was included in selling, general, and administrative expenses for the six months ended June 30, 2008. There were no such impairments for the three months ended June 30, 2008 nor the three or six months ended June 30, 2007.

(9) STOCK-BASED COMPENSATION

The Company records stock-based compensation in accordance with SFAS No. 123R and SAB No. 107, Share Based Payment. The Company estimates the fair value of stock options using the Black-Scholes option pricing model. The fair value of stock options granted is recognized as expense over the requisite service period. Stock-based compensation expense for all share-based payment awards is recognized using the straight-line single-option method.

The Company uses the historical stock price volatility as an input to value its stock options under SFAS No. 123R. The expected term of stock options represents the period of time options are expected to be outstanding, and is based on observed historical exercise patterns of the Company, which the Company believes are indicative of future exercise behavior. For the risk-free interest rate, the Company uses the observed interest rates appropriate for the term of time options are expected to be outstanding. The dividend yield assumption is based on the Company’s history and expectation of dividend payouts.

Stock Option Activity

The following table summarizes stock option activity for the six months ended June 30, 2008:

	Shares		Weighted average exercise price
Outstanding as of December 31, 2007	7,781,000		$	1.30
Granted	287,000
Exercised	—
Forfeited or expired	(1,250,000	)
Outstanding as of June 30, 2008	6,818,000		$	1.24

The weighted-average fair value per share of the options granted during the three months ended June 30, 2008 and 2007, respectively, and six months ended June 30, 2008 and June 30, 2007, respectively, as computed using the Black-Scholes pricing model were $0.10, $0.60 $0.16 and $0.71, respectively. The following weighted-average assumptions were used for grants issued for the three and six months ended June 30, 2008 and 2007, respectively, under the SFAS No. 123R requirements:

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	Three months ended June 30,		Six months ended June 30,
	2008	2007	2008	2007
Risk-free interest rate	2.31% - 3.22%	4.91% - 5.10%	2.31% - 3.22%	4.45% - 5.10%
Expected volatility	57.93% - 59.78%	49.76% - 56.69%	53.64% - 59.78%	49.76% - 60.23%
Weighted average risk-free rate	3.15%	5.09%	2.90%	4.82%
Weighted average volatility	59.58%	56.47%	57.31%	58.45%
Forfeiture rate	17.63%	2.00%	17.63%	2.00%
Expected life	0.99 years	4.97 years	2.14 years	4.99 years
Dividend yield	0.00%	0.00%	0.00%	0.00%

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 the Company. Stock-based compensation expense for employees was $97,000 and $219,000 for the three and six months ended June 30, 2008, respectively, and $154,000 and $333,000 for the three and six months ended June 30, 2007, respectively, and is recorded in selling, general and administrative expenses based upon the departments to which substantially all of the associated employees report.

As of June 30, 2008, the Company had $792,000 of unrecognized compensation expense related to outstanding unvested options, net of estimated forfeitures, to be recognized over a weighted-average period of 2.60 years.

(10) CONTINGENCIES

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

Potential Legal Action

Trinad Capital Master Fund, Ltd., which beneficially owns 10.5% of the Company’s common stock, has written a series of letters and attempted to nominate an alternative slate of Board of Directors candidates for the Company’s 2008 annual meeting of stockholders. Trinad asserts it has received evidence that the Company and its Board have committed mismanagement, fraud, breach of fiduciary duty and waste of corporate assets. Trinad has made various other demands in these letters and has threatened to take unspecified actions.

The Company believes that Trinad’s concerns and claims are baseless. Nonetheless, there is a risk that Trinad could decide to bring litigation against the Company and/or against directors and officers whom the Company is obliged to indemnify and defend. In addition, Trinad might attempt to wage a corporate control contest against the Company and its current Board of Directors. Any such litigation and/or control contest would likely be significantly expensive and disruptive, could damage the Company’s image with customers, and could destabilize our relationships with key employees. Based on the guidance set forth by SFAS No. 5, Accounting for Contingencies, management has deemed the likelihood that an action would be brought against the Company, which could ultimately result in a material impact to the financial results of the Company, as reasonably possible.

Sales and Use Tax

From time to time, state tax authorities will make inquiries as to whether or not a portion of our services might require the collection of sales and use taxes from customers in those states. Many states have expanded 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 the Company’s operations, it is likely that such expenses will increase in the future.

The Company evaluates such inquiries on a case-by-case basis and has 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. It concluded that the Company’s services are subject to sales taxes on an amusement services basis. On January 12, 2004, the state assessed the Company for approximately $1,115,000 for the five year audit period ended December 31, 2002. The Company has objected to this approach since its services are provided to the consumers for free as a promotional service, which the Company believes falls outside the definition of amusement services as defined by the Texas Tax Code. In August 2006 the Company received a written response from the State Attorney’s office indicating that the State agreed that the Company’s services do not constitute taxable amusement services. However, the State adopted a new position whereby it has concluded that the Company provides taxable cable television services. The Company continues to believe that it provides interactive game services for the purpose of providing a vehicle for its customers to promote their businesses. The Company also believes that these services fall outside of the definition of cable broadcast services as defined by the Texas Tax Code. The Company has filed a request for a hearing with the Texas State Comptroller’s office. However, due to procedural changes within the department, a date has not yet been determined.

The Company is currently undergoing sales tax audits in several States. As a result of those audits, the Company has received assessments in the aggregate of $601,000 from the states of Minnesota and Ohio. The Company has received assessments in the past

8

from certain states, including Ohio, and successfully defended its position resulting in little or no tax liability. Based on the guidance set forth by SFAS No. 5, Accounting for Contingencies, management has deemed the likelihood that it will be forced to pay an assessment as reasonably possible.

Based on the Company’s assessment of its total sales tax exposure, the Company has recorded a $976,000 sales tax reserve which is included in the Company’s sales tax payable account as of June 30, 2008. As of December 31, 2007, the Company had recorded an $883,000 sales tax reserve which was included in the Company’s sales tax payable account.

(11) ACCUMULATED OTHER COMPREHENSIVE INCOME

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

During the third quarter of 2007, the Company recorded the cumulative effect of a foreign currency translation error, in the amount of $614,000. The error, of which $385,000 related to periods prior to December 31, 2006, has been reflected in comprehensive income for the year ended December 31, 2007. The Company has determined that the cumulative adjustment is immaterial to all periods affected and does not have any effect on net loss, retained earnings nor earnings per share. As a result, the Company concluded that it is not necessary to amend prior filings; however, the Company has adjusted accumulated other comprehensive income for the quarters ended March 31 and June 30, 2007. For the three and six months ended June 30, 2008 and 2007, the components of accumulated other comprehensive income were as follows:

	Three months ended				Six months ended
	June 30, 2008		June 30, 2007		June 30, 2008			June 30, 2007
Beginning balance	$	1,170,000	$	144,000	$	1,662,000		$	201,000
Foreign currency translation adjustment		35,000		601,000		(332,000	)		578,000
Unrealized gain / (loss) during period in investment available-for-sale		6,000		57,000		(119,000	)		23,000
Ending balance	$	1,211,000	$	802,000	$	1,211,000		$	802,000

(12) RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006 the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which is effective for fiscal years beginning after November 15, 2007. SFAS No. 157 provides a definition of fair value, establishes acceptable methods of measuring fair value, and expands disclosure for fair value measurements. The principles apply under accounting pronouncements which require measurement of fair value and do not require any new fair value measurements in accounting pronouncements where fair value is the relevant measurement attribute. On February 12, 2008, the FASB issued SFAS No. 157-2 deferring the effective date of SFAS No. 157 to November 15, 2008 for non financial assets and liabilities. The adoption of SFAS No. 157-2, ultimately deferring the adoption of SFAS No. 157, has not had a material impact on the condensed consolidated financial statements (see Note 7).

In February 2007 the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, which applies to all entities with available-for-sale and trading securities. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, Fair Value Measurements. The adoption of SFAS No.159 has not had a material impact on the condensed consolidated financial statements.

In December 2007 the FASB issued SFAS No. 141R, a revision of SFAS No. 141, Business Combinations, which applies to all acquiring entities. This Statement establishes principles and requirements for how the acquirer is to recognize and measure in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, and how to recognize and measure the goodwill acquired in the business combination or a gain from a bargain purchase. The objective is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is in the process of evaluating the impact of adopting SFAS No. 141R on its financial position, results of operations and cash flows.

9

Also, in December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51, Consolidated Financial Statements, which applies to all entities that prepare consolidated financial statements that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. The objective is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. The Statement requires entities that have noncontrolling interests to clearly identify in the financial statements their noncontrolling interest and the respective net income. Additionally, the provision requires that all changes in ownership of noncontrolling interests be treated as equity transactions and any subsidiaries that are deconsolidated are required to be measured at fair value and such valuation is to be used in determining the gain or loss on the deconsolidation. This Statement is applied prospectively and is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company currently does not have any noncontrolling interests in its subsidiaries.

In April 2008 the FASB posted FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB No. 142, Goodwill and Other Intangible Assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under FASB No. 142 and the period of expected cash flows used to measure the fair value of the asset under FASB No. 141R, Business Combinations, and other U.S. generally accepted accounting principles. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company is in the process of determining the effect, if any, the adoption of the FSP will have on its condensed consolidated financial statements.

In March 2008 the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133, which requires companies to provide additional disclosures about its objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and related interpretations, and how the derivative instruments and related hedged items affect the Company’s financial statements. SFAS No. 161 also requires companies to disclose information about credit risk-related contingent features in their hedged positions. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008 and is required to be adopted by the Company beginning in the first quarter of fiscal 2009. Although the Company will continue to evaluate the application of SFAS No. 161, management does not currently believe adoption will have a material impact on the Company’s financial condition or operating results.

In May 2008 the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, (“SFAS No. 162”), which becomes effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (“PCAOB”) amendments to US Auditing Standards (“AU”) Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP. This standard is not expected to have an impact on the Company’s financial position, results of operations or cash flow.

In June 2008 the FASB Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 08-3, Accounting by Lessees for Maintenance Deposits under Lease Agreements (“EITF No. 08-3”). EITF No. 08-3 provides that all nonrefundable maintenance deposits paid by a lessee, under an arrangement accounted for as a lease, should be accounted for as a deposit. When the underlying maintenance is performed, the deposit is expensed or capitalized in accordance with the lessee’s maintenance accounting policy. Once it is determined that an amount on deposit is not probable of being used to fund future maintenance expense, it is recognized as additional rent expense at that time. EITF No. 08-3 is effective for the Company on January 1, 2009. The Company is currently evaluating the impact of adopting EITF No. 08-3 on the Company’s financial position, results of operations and cash flows.

In June 2008 the EITF reached a consensus on EITF Issue No. 08-4, Transition Guidance for Conforming Changes to EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios (“EITF No. 08-4”). Subsequent to the issuance of EITF No. 98-5, certain portions of the guidance contained in EITF No. 98-5 were nullified by EITF Issue No. 00-27, Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios’ (“EITF No. 00-27”). EITF No. 08-4 specifically addresses the conforming changes to EITF Issue No. 98-5 and provides transition guidance for the conforming changes. EITF No. 08-4 is effective for the Company for the fiscal year ending December 31, 2008. The Company is currently evaluating the impact of adopting EITF No. 08-4 on the Company’s financial position, results of operations and cash flows.

(13) RESTRUCTURING

In January 2007 the Company restructured its Canadian operations to reduce costs and streamline operations. The restructuring involved a reduction of 10 employees, moving the operation to a smaller facility and subleasing the previously occupied facility until the end of the original lease. Along with the restructuring, the Company sold certain assets and granted a license for the related licensed materials of its Interactive Events business to a former employee. The communication date to the employees was January 11,

10

2007. The Company accounted for restructuring costs pursuant to SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred, as opposed to when there is a commitment to a restructuring plan. Severance for involuntary employee terminations was accrued as of the communication date and the costs to exit certain lease obligations were accrued as of March 31, 2007. Moving, relocation and other associated costs related to the restructuring were expensed as incurred. The restructuring costs are comprised of the following for the three and six months ended June 30, 2007:

	Three months ended		Six months ended
	June 30, 2007		June 30, 2007
Severance for involuntary employee terminations	$	—	$	337,000
Costs to exit certain contractual and lease obligations		—		99,000
Moving, relocation and other associated costs		26,000		51,000
Total restructuring costs	$	26,000	$	487,000

Approximately $9,000 was capitalized as leasehold improvements. Costs to exit lease obligations include the difference in the net present value of the lease payments in excess of the sublease payments to be received. The Company has a reserve of approximately $47,000 and $50,000 as of June 30, 2008 and December 31, 2007, respectively. The Company expects to complete the utilization of the reserve related to this restructuring by December 2014, the date the lease expires. The restructuring accrual is included in accrued expenses.

In June 2008 the Company made the decision to restructure its operations by removing its presence in the United Kingdom. The restructuring will involve the termination of six employees, relocation of nearly all assets to the United States and disposal of certain other assets. The communication to the employees occurred in July 2008. In accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities, all costs to be incurred as a result of this restructuring plan will be reflected in subsequent periods. Management estimates that total restructuring costs should approximate $200,000 and expects nearly all costs associated with this restructuring to be reflected in operations for three months ended September 30, 2008.

(14) DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

In November 2006 the Company began to actively pursue the sale of its Hospitality division comprised of NTN Wireless and Software Solutions. In the fourth quarter of 2006, the Company applied the provisions of SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, to certain of its assets which were held for sale. SFAS No. 144 requires that a long-lived asset classified as held for sale, be measured at the lower of its carrying amount or fair value, less costs to sell, and that the Company ceases depreciation, depletion and amortization. As of December 31, 2006, the Hospitality division’s assets have been classified as held for sale and the respective assets were revalued as of December 31, 2006. Depreciation on these assets ceased effective December 31, 2006.

On March 30, 2007 the Company completed the sale of substantially all of the assets of NTN Wireless for $2.4 million and recognized a gain, net of tax, of approximately $396,000. On October 25, 2007, the Company sold certain intellectual property assets of Software Solutions pursuant to an Asset Purchase Agreement, and in a separate agreement with a customer, the Company discontinued the outsourced software development it was providing. The Company continues to wind down the professional help desk and support and maintenance services as the Company fulfills its obligations under existing customer agreements. The intellectual property sold constituted substantially all of the remaining operating assets of the Company’s Hospitality division, which had originally consisted of its Software Solutions and Wireless communications businesses. The Company has accounted for its Hospitality division as a reportable segment and presented its operations as discontinued operations since the fourth quarter of 2006. The Company recognized approximately $65,000 in other income related to discontinuing the outsourcing of software development and a loss of approximately $62,000 for the sale of the Company’s intellectual property assets during the fourth quarter of 2007. The Company does not expect to incur any additional expenses related to the help desk and support and maintenance function in subsequent periods.

11

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

	Three months ended						Six months ended
	June 30, 2008			June 30, 2007			June 30, 2008			June 30, 2007
Operating revenues	$	4,000		$	921,000		$	21,000		$	3,504,000
Operating expenses		220,000			1,095,000			528,000			4,049,000
Operating loss	$	(216,000	)	$	(174,000	)	$	(507,000	)	$	(545,000	)
Gain on sale of assets		—			—			—			396,000
Other		—			(3,000	)		—			(3,000	)
Loss before income taxes	$	(216,000	)	$	(177,000	)	$	(507,000	)	$	(152,000	)
Income tax expense		—			—			—			29,000
Loss from discontinued operations, net of tax	$	(216,000	)	$	(177,000	)	$	(507,000	)	$	(181,000	)

The Company accounted for the dissolution of the help desk and support and maintenance operation pursuant to the provisions of SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146 requires that a liability for costs associated with an exit or disposal activity be recognized when the liability is incurred, as opposed to when there is a commitment to disposing a business segment. Severance for involuntary employee terminations is expensed over the requisite service period in which it is earned as certain employees are required to continue to render service until the Company has fulfilled its obligations under existing customer contracts. Moving, relocation and other associated costs related to the dissolution are expensed as incurred. Severance expense for involuntary employee terminations was approximately $29,000 and $60,000 for the three and six months ended June 30, 2008, respectively, and approximately $37,000 was accrued as of December 31, 2007 and $23,000 was accrued as of June 30, 2008.

The Company expects to complete the utilization of the reserve related to the dissolution by September 2008.

A summary of the components of assets and liabilities of discontinued operations on NTN Buzztime’s consolidated balance sheets as of June 30, 2008 and December 31, 2007 is as follows:

	June 30, 2008			December 31, 2007
Assets held for sale:
Current assets	$	7,000		$	192,000
Broadcast equipment and fixed assets		—			20,000
Total assets of discontinued operations	$	7,000		$	212,000
Liabilities of discontinued operations:
Current liabilities		309,000			672,000
Total liabilities of discontinued operations	$	309,000		$	672,000
Net assets of discontinued operations	$	(302,000	)	$	(460,000	)

(15) GEOGRAPHICAL INFORMATION

In 2007 and the first half of 2008, the Company marketed its products in the United States, Canada, and the United Kingdom. The table below contains information about these geographical areas in which the Company operated. Revenues are attributed to the Buzztime iTV Network segment in these areas. Long-lived assets are based on location of domicile. In December 2003 the Company began operations in Canada by acquiring most of the operating assets, certain liabilities and the operations of NTN Interactive Network, Inc, its Canadian licensee, from its parent, Chell Group Corporation Inc. In March 2005 the Company launched the Buzztime iTV Network product in the United Kingdom under the brand Buzztime Network.

	Three months ended				Six months ended
	June 30, 2008		June 30, 2007		June 30, 2008		June 30, 2007
Revenues by geographical area:
United States	$	6,071,000	$	6,631,000	$	12,190,000	$	13,290,000
Canada		869,000		904,000		1,832,000		1,881,000
United Kingdom		77,000		105,000		177,000		202,000
Total revenue	$	7,017,000	$	7,640,000	$	14,199,000	$	15,373,000

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	June 30, 2008		December 31, 2007
Assets by geographical area:
United States	$	8,073,000	$	11,075,000
Canada		7,297,000		8,936,000
United Kingdom		417,000		637,000
Total assets	$	15,787,000	$	20,648,000

(16) SIGNIFICANT CUSTOMER

For the three and six months ended June 30, 2008, the Company generated approximately 11% of revenue from a national chain, Buffalo Wild Wings together with its franchises. For the three and six months ended June 30, 2007, the Company generated approximately 10% of revenue from that chain. As of June 30, 2008 and 2007, approximately $65,000 and $74,000, respectively, were included in accounts receivable from this customer.

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 within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange 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, 2007, under the section entitled “Risk Factors,” and in Item 1A of Part II of this Quarterly Report on Form 10-Q, 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.

OVERVIEW

We historically have operated principally through two operating divisions: Entertainment and Hospitality. The Entertainment division generates revenue primarily from the Buzztime iTV Network which distributes an interactive television promotional game network to restaurants, sports bars, taverns and pubs, primarily in North America. Additionally, we generate royalty revenue by distributing our game content and technology to other third-party consumer platforms, including cable television, satellite television, online, retail games and toys, airlines and books. Additional revenue is generated from advertising revenues sold for distribution via the interactive television network.

The Hospitality division has been discontinued. It was comprised of NTN Wireless Communications, Inc. (“NTN Wireless”) and NTN Software Solutions, Inc. (“Software Solutions”). In 2006, we determined that the operation of the Hospitality division was not a strategic fit with our core business and committed to a divestiture plan. These operations have been reclassified as discontinued operations for all periods presented. NTN Wireless provided revenues from producing and distributing guest and server paging systems to restaurants and other markets. Software Solutions developed and distributed customer management software to manage reservations and table service in restaurants. Software Solutions also provided professional help desk services and outsourced software development and support and maintenance services.

On March 30, 2007, we completed the sale of substantially all of the assets of NTN Wireless. On October 25, 2007, we sold certain intellectual property assets of Software Solutions pursuant to an Asset Purchase Agreement, and in a separate agreement with a customer, we discontinued the outsourced software development. The Company does not expect to incur any additional expenses related to the help desk and support and maintenance function in subsequent periods.

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Restructuring of Operations

In January 2007 we restructured our Canadian operations to reduce our costs and streamline operations. The restructuring involved a reduction of ten employees, moving the operation to a smaller facility and subleasing the previously occupied facility until the end of the original lease. Along with the restructuring, we sold certain assets and granted a license for the related licensed materials of our Interactive Events business to a former employee.

In June 2008 we decided to terminate our United Kingdom presence. The restructuring will involve the termination of six employees, relocation of nearly all assets to the United States and disposal of certain other assets. Total restructuring costs should approximate $200,000 and nearly all costs associated with this restructuring are expected to be reflected in our statement of operations for the three months ended September 30, 2008. As of June 30, 2008, UK operations accounted for less than 1% of total subscribing sites.

The Entertainment Division

The out-of-home Buzztime iTV 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. The iTV Network distributes a wide variety of engaging interactive multi-player games, including trivia quiz shows, play-along sports programming, casino-style and casual games to our Network Subscribers. Patrons use our wireless game controllers, or Playmakers, to play along with the Buzztime games which are displayed on television screens. Buzztime players can compete with other players within their hospitality venue and also against players in other Network 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 June 30, 2008, we had 3,402 United States Network subscribers, 307 Canadian subscribers and 37 U.K. subscribers. Approximately 29% of our Network subscribers come from leading national chains in the casual-dining restaurant segment such as Buffalo Wild Wings, TGI Friday’s, 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 venues.

We also generate revenue from distributing and licensing our Buzztime-branded content and related technology to consumer platforms, with a focus on interactive networks such as cable TV, satellite TV and mobile phones. Our distribution efforts focus on licensing real-time, mass-participation games such as trivia, head-to-head multi-player games such as Texas Hold’em and single-player games such as solitaire. Our incremental licensing revenue derived from cable television, satellite television, mobile phones, home electronic games, cards and books. The game content is designed for broad audiences and includes trivia quiz shows, real-time sports prediction games that are played along with live televised sporting events, multi-player card and billiard games as well as single-player card, arcade, puzzle and board games.

Our games have been available as a two-way cable TV game service since June 2002. Currently, our games (including trivia, Texas Hold’em, Buzztime Billiards and assorted single-player games) are licensed to eight cable systems including Comcast and Blue Ridge Communications and are available to the digital cable subscribers for free. Our games are also available as a premium monthly subscription service to Echostar DISH and Bell ExpressVu satellite customers in the U.S. and Canada, respectively. We also have license arrangements with Cadaco for retail electronic and card games and Square One Publishers for the Buzztime Trivia Book Series. Revenue from our distribution division is derived primarily 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.

The Hospitality Division (Discontinued Operations)

NTN Wireless earned revenue from the sale of on-site wireless paging products primarily to restaurants but also hospitals, church and synagogue nurseries, salons, business offices and retail establishments in North America. In restaurants, these products were provided to customers while waiting for a table and activated to let them know when their table is ready, as well as to restaurant staff to alert them to certain issues, such as when hot food is ready to be served.

Software Solutions generated revenue from the licensing of proprietary seating management and reservation management systems software to restaurants, casinos and other venues. Software Solutions also provided professional help desk services and outsourced software development and support and maintenance services to Domino’s Pizza and their franchisees and other quick service restaurant locations.

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Web Site Access to SEC Filings

We maintain an Internet website at www.ntnbuzztime.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, amendments to those reports filed or furnished pursuant to Section 13(a) of the Exchange Act and certain other filings as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.

Materials we file with the SEC may be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website at www.sec.gov that contains reports, proxy and information statements, and other information regarding our Company that we file electronically with the SEC.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to deferred costs and revenues, depreciation of broadcast equipment, the provision for income taxes including the valuation allowance, bad debts, investments, intangible assets and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for 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. Critical accounting policies and estimates are defined as those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most subjective judgments.

We believe that the estimates, assumptions and judgments involved in the accounting policies described in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our most recent Annual Report on Form 10-K have the greatest potential impact on our financial statements, so we consider these to be our critical accounting policies.

RESULTS OF OPERATIONS

Our Hospitality division is classified as discontinued operations in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. The operating results for these businesses have been separately classified and reported as discontinued operations in the condensed consolidated financial statements.

Results of Continuing Operations

Three months ended June 30, 2008 compared to the three months ended June 30, 2007

Continuing operations, which consists of the Entertainment division, generated a net loss of $2,129,000 for the three months ended June 30, 2008 compared to net loss of $377,000 for the three months ended June 30, 2007.

Revenue

Revenue from continuing operations decreased $623,000 or 8%, to $7,017,000 in 2008 from $7,640,000 in 2007 due to a reduction in subscription fees predominantly driven by a reduction in our site count. Comparative site count information for Buzztime iTV Network is as follows:

	Network subscribers As of June 30,
	2008	2007
United States	3,402	3,511
Canada	307	311
United Kingdom	37	63
Total	3,746	3,885

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Direct Costs and Gross Margin

The following table compares the direct costs and gross margin from continuing operations for 2008 and 2007:

	Three months ended June 30,
	2008			2007
Revenue	$	7,017,000		$	7,640,000
Direct costs		2,028,000			2,213,000
Gross margin	$	4,989,000		$	5,427,000
Gross margin percentage		71	%		71	%

Gross margin decreased $438,000 to $4,989,000 in 2008 compared to $5,427,000 in 2007. The $438,000 decrease in gross margin in total dollars is due to the decrease in revenues, as the gross margin percentage remained stable.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $1,309,000 or 23%, to $6,952,000 in 2008 from $5,643,000 in 2007. Selling, general and administrative expenses increased due to several factors. Salaries and contract services increased $629,000 primarily due to an increase in personnel in content/programming, advertising, marketing and business development. Severance expense totaled $512,000 as a result of a reduction in force implemented in the second quarter of 2008 and the departure of the former CEO resulting in a $483,000 increase from the prior year. Marketing expenses increased $88,000 primarily due to research and measurement studies conducted on our audiences and professional fees increased $114,000 predominately due to legal fees related to corporate governance matters as well as a trademark infringement case. These increases were offset by an increase in capitalized salaries of $82,000 relating to additional software development for our network.

Interest Income and Expense

Interest income decreased $62,000, to $43,000 in 2008 from $105,000 in 2007. Our average cash balance invested in interest bearing securities decreased. Also, due to various capitalized leases expiring in 2007 we did not incur any interest expense in 2008.

Income Taxes

We expect to report a U.S. tax loss for the year ending December 31, 2008. We expect that we will not incur a federal tax liability, however; we will likely incur a state tax liability. 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 $64,000 for the three months ended June 30, 2008. This was a $29,000 decrease compared to the $93,000 provision for income taxes recorded for the three months ended June 30, 2007. We continue to provide a 100% valuation allowance against our deferred tax assets related to certain net operating losses as realization of such tax benefits is not assessed as more likely than not.

Results of Discontinued Operations

Three months ended June 30, 2008 compared to the three months ended June 30, 2007

Discontinued operations generated a net loss of $216,000 for the three months ended June 30, 2008 compared to a net loss of $177,000 for the three months ended June 30, 2007. The operating results of the discontinued operations are as follows for 2008 and 2007:

	Three months ended
	June 30, 2008			June 30, 2007
Operating revenues	$	4,000		$	921,000
Operating expenses		220,000			1,095,000
Operating loss	$	(216,000	)	$	(174,000	)
Other		—			(3,000	)
Loss from discontinued operations, net of tax	$	(216,000	)	$	(177,000	)

On March 30, 2007, we completed the sale of substantially all of the assets of NTN Wireless for $2.4 million and recognized a gain, net of tax, of approximately $396,000. On October 25, 2007, we sold certain intellectual property assets of Software Solutions pursuant to an Asset Purchase Agreement, and in a separate agreement with a customer, we discontinued the outsourced software development it was providing. The intellectual property sold constituted substantially all of the remaining operating assets of our Hospitality division, which had originally consisted of our Software Solutions and Wireless. We have

16

accounted for our Hospitality division as a reportable segment but we have presented its operations as discontinued operations since the fourth quarter of 2006. We do not anticipate any further costs related to the dissolution of the professional help desk and support and maintenance services.

Moving, relocation and other associated costs related to the dissolution are expensed as incurred. Severance for involuntary employee terminations was approximately $29,000 for the three months ended June 30, 2008 and approximately $23,000 was accrued as of June 30, 2008. We expect to complete the utilization of the reserve related to the dissolution by September 2008.

EBITDA – Consolidated Operations

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

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

	Three months ended
	June 30, 2008			June 30, 2007
Net loss per GAAP	$	(2,345,000	)	$	(554,000	)
Interest income, net		(43,000	)		(97,000	)
Depreciation and amortization		818,000			996,000
Income taxes		64,000			93,000
EBITDA	$	(1,506,000	)	$	438,000

Our operations generated EBITDA levels as presented below:

	Three months ended June 30, 2008
	Entertainment			Discontinued operations			Total
Net loss per GAAP	$	(2,129,000	)	$	(216,000	)	$	(2,345,000	)
Interest income, net		(43,000	)		—			(43,000	)
Depreciation and amortization		818,000			—			818,000
Income taxes		64,000			—			64,000
EBITDA	$	(1,290,000	)	$	(216,000	)	$	(1,506,000	)
	Three months ended June 30, 2007
	Entertainment			Discontinued operations			Total
Net loss per GAAP	$	(377,000	)	$	(177,000	)	$	(554,000	)
Interest income, net		(97,000	)		—			(97,000	)
Depreciation and amortization		996,000			—			996,000
Income taxes		93,000			—			93,000
EBITDA	$	615,000		$	(177,000	)	$	438,000

Six months ended June 30, 2008 compared to the six months ended June 30, 2007

Continuing operations, which consists of the Entertainment division, generated a net loss of $4,412,000 for the six months ended June 30, 2008 compared to net loss of $1,140,000 for the six months ended June 30, 2007.

Revenue

Revenue from continuing operations decreased $1,174,000 or 8%, to $14,199,000 in 2008 from $15,373,000 in 2007 due to a reduction in subscription fees predominantly driven by a reduction in our site count. Comparative site count information for Buzztime iTV Network is as follows:

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	Network subscribers As of June 30,
	2008	2007
United States	3,402	3,511
Canada	307	311
United Kingdom	37	63
Total	3,746	3,885

Direct Costs and Gross Margin

The following table compares the direct costs and gross margin from continuing operations for 2008 and 2007:

	Six months ended June 30,
	2008			2007
Revenue	$	14,199,000		$	15,373,000
Direct costs		4,124,000			4,426,000
Gross margin	$	10,075,000		$	10,947,000
Gross margin percentage		71	%		71	%

Gross margin decreased $872,000 to $10,075,000 in 2008 compared to $10,947,000 in 2007. The $872,000 decrease in gross margin in total dollars is due to the decrease in revenues, as the gross margin percentage remained stable.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased $2,847,000 or 25%, to $14,217,000 in 2008 from $11,370,000 in 2007. Selling, general and administrative expenses increased due to several factors. Salaries and contract services increased $1,324,000 primarily due to an increase in personnel in content/programming, advertising, marketing and business development. Severance expenses totaled $696,000 as a result of a reduction in force implemented in the second quarter of 2008 and the departure of the former CEO resulting in a $693,000 increase from the prior year. Additionally, bad debt expense increased $141,000 related to customer cancellations. Marketing expenses increased $203,000 primarily due to research and measurement studies conducted on our audiences and professional fees increased $232,000 predominately due to legal fees related to corporate governance matters as well as a trademark infringement case. These increases were offset by an increase in capitalized salaries of $175,000 relating to additional software development for our network.

Restructuring Costs

We recorded a restructuring charges totaling $26,000, and $478,000 during the three and six months ended June 30, 2007, respectively, in connection with the restructuring of the Canadian operation to reduce costs and streamline operations. Of this amount, approximately $337,000 was for one-time termination benefits, $99,000 related to costs to exit certain contractual and lease obligations and $16,000 for moving and relocation costs. The restructuring involved a reduction of 10 employees and leased space. No additional restructuring costs were incurred in 2008.

We expect to incur approximately $200,000 of restructuring charges in the third quarter of 2008 for the termination of our UK operations.

Depreciation and amortization

Depreciation and amortization not related to direct operating costs decreased $25,000 or 9%, to $267,000 in 2008 from $292,000 in 2007 due to various fixed assets becoming fully amortized, thereby reducing our depreciation in 2008.

Interest Income and Expense

Interest income decreased $44,000, to $102,000 in 2008 from $146,000 in 2007 due to a decrease in our average cash balance invested. Due to various capitalized leases expiring in 2007 we did not incur any interest expense in 2008.

Other Income

Along with the Hospitality restructuring, certain assets were sold and we granted a license for the related licensed materials to a former employee. During the six months ended June 30, 2007, we recognized a gain of approximately $82,000 for the sale of certain assets.

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Income Taxes

We expect to report a U.S. tax loss for the year ending December 31, 2008. We expect that we will not incur a federal tax liability, however; we will likely incur a state tax liability. 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 $105,000 for the six months ended June 30, 2008. This was a $48,000 decrease compared to the $153,000 provision for income taxes recorded for the six months ended June 30, 2007. We continue to provide a 100% valuation allowance against our deferred tax assets related to certain net operating losses as realization of such tax benefits is not assessed as more likely than not.

Results of Discontinued Operations

Six months ended June 30, 2008 compared to the six months ended June 30, 2007

Discontinued operations generated a net loss of $507,000 for the six months ended June 30, 2008 compared to a net loss of $181,000 for the six months ended June 30, 2007. The operating results of the discontinued operations are as follows for 2008 and 2007:

	Six months ended
	June 30, 2008			June 30, 2007
Operating revenues	$	21,000		$	3,504,000
Operating expenses		528,000			4,049,000
Operating loss	$	(507,000	)	$	(545,000	)
Gain on sale of assets		—			396,000
Income tax expense		—			29,000
Other		—			(3,000	)
Loss from discontinued operations, net of tax	$	(507,000	)	$	(181,000	)

On March 30, 2007, we completed the sale of substantially all of the assets of NTN Wireless for $2.4 million and recognized a gain, net of tax, of approximately $396,000. On October 25, 2007, we sold certain intellectual property assets of Software Solutions pursuant to an Asset Purchase Agreement, and in a separate agreement with a customer, we discontinued the outsourced software development it was providing. We continue to wind down the professional help desk and support and maintenance services as we fulfill our obligations under existing customer agreements. The intellectual property sold constituted substantially all of the remaining operating assets of our Hospitality division, which had originally consisted of our Software Solutions and Wireless. We have accounted for our Hospitality division as a reportable segment but we have presented its operations as discontinued operations since the fourth quarter of 2006. We do not anticipate any further costs related to the dissolution of the professional help desk and support and maintenance services.

Moving, relocation and other associated costs related to the dissolution are expensed as incurred. Severance for involuntary employee terminations was approximately $29,000 for the three months ended June 30, 2008 and approximately $23,000 was accrued as of June 30, 2008. We expect to complete the utilization of the reserve related to the dissolution by September 2008.

EBITDA – Consolidated Operations

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

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

	Six months ended
	June 30, 2008			June 30, 2007
Net loss per GAAP	$	(4,919,000	)	$	(1,321,000	)
Interest income, net		(102,000	)		(124,000	)
Depreciation and amortization		1,659,000			1,990,000
Income taxes		105,000			182,000
EBITDA	$	(3,257,000	)	$	727,000

Our operations generated EBITDA levels as presented below:

	Six months ended June 30, 2008
	Entertainment			Discontinued operations			Total
Net loss per GAAP	$	(4,412,000	)	$	(507,000	)	$	(4,919,000	)
Interest income, net		(102,000	)		—			(102,000	)
Depreciation and amortization		1,659,000			—			1,659,000
Income taxes		105,000			—			105,000
EBITDA	$	(2,750,000	)	$	(507,000	)	$	(3,257,000	)
	Six months ended June 30, 2007
	Entertainment			Discontinued operations			Total
Net loss per GAAP	$	(1,140,000	)	$	(181,000	)	$	(1,321,000	)
Interest income, net		(124,000	)		—			(124,000	)
Depreciation and amortization		1,990,000			—			1,990,000
Income taxes		153,000			29,000			182,000
EBITDA	$	879,000		$	(152,000	)	$	727,000

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2008, we had cash and cash equivalents of $6,616,000 and working capital (current assets in excess of current liabilities) of $3,079,000, compared to cash and cash equivalents of $10,273,000 and working capital of $7,698,000 as of December 31, 2007. Net cash used in operating activities was $1,791,000 for the six months ended June 30, 2008, and net cash provided by operations was $61,000 for the six months ended June 30, 2007. The increase in cash used in operating activities is principally due to the net loss generated in the first half of 2008.

For the six months ended June 30, 2008, net cash used in investing activities was $1,595,000 compared to net cash provided by investing activities of $1,791,000 for the six months ended June 30, 2007. The cash provided by investing activities in 2007 was primarily due to the proceeds received from the sale of the NTN Wireless, and fewer capital expenditures in 2007 compared to 2008.

For the six months ended June 30, 2008, net cash used in financing activities was $4,000 compared to net cash provided by financing activities of $420,000 for the six months ended June 30, 2007. The change in cash flows from financing activities was due to proceeds from the exercise of options and warrants received in 2007.

We believe existing cash and equivalents, together with funds generated from operations, will be sufficient to meet our operating cash requirements for the next 12 months. We have no debt obligations other than capital leases and we do not expect to incur debt in 2008.

We currently anticipate investing approximately $300,000 to $400,000 in the second half of 2008 for capital equipment necessary to support future growth. Our actual future capital requirement will depend on a number of factors, including our success in increasing sales, competition and technological developments as well as subscriber conversions from satellite to broadband.

RECENTLY ISSUED ACCOUNTING STANDARDS

Recent Accounting Pronouncements— In September 2006 the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which is effective for fiscal years beginning after November 15, 2007. SFAS No. 157 provides a definition of fair value, establishes acceptable methods of measuring fair value, and expands disclosure for fair value measurements. The principles apply under accounting pronouncements which require measurement of fair value and do not require any new fair value

20

measurements in accounting pronouncements where fair value is the relevant measurement attribute. On February 12, 2008, the FASB issued SFAS No. 157-2 deferring the effective date of SFAS No. 157 to November 15, 2008 for non financial assets and liabilities. The adoption of SFAS No. 157-2, ultimately deferring the adoption of SFAS No. 157, has not had a material impact on the condensed consolidated financial statements.

In February 2007 the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities—including an amendment of SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, which applies to all entities with available-for-sale and trading securities. This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, Fair Value Measurements. The adoption of SFAS No.159 has not had a material impact on the condensed consolidated financial statements.

In December 2007 the FASB issued SFAS No. 141R, a revision of SFAS No. 141, Business Combinations, which applies to all acquiring entities. This Statement establishes principles and requirements for how the acquirer is to recognize and measure in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, and how to recognize and measure the goodwill acquired in the business combination or a gain from a bargain purchase. The objective is to improve the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. This Statement applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The Company is in the process of evaluating the impact of adopting SFAS No. 141R on its financial position, results of operations and cash flows.

Also, in December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements, an amendment of ARB No. 51, Consolidated Financial Statements, which applies to all entities that prepare consolidated financial statements that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. The objective is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. The Statement requires entities that have noncontrolling interests to clearly identify in the financial statements their noncontrolling interest and the respective net income. Additionally, the provision requires that all changes in ownership of noncontrolling interests be treated as equity transactions and any subsidiaries that are deconsolidated are required to be measured at fair value and such valuation is to be used in determining the gain or loss on the deconsolidation. This Statement is applied prospectively and is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We currently do not have any noncontrolling interests in our subsidiaries.

In April 2008 the FASB posted FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of Intangible Assets. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB No. 142, Goodwill and Other Intangible Assets. The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under FASB No. 142 and the period of expected cash flows used to measure the fair value of the asset under FASB No. 141R, Business Combinations, and other U.S. generally accepted accounting principles. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. We are in the process of determining the effect, if any, the adoption of the FSP will have on our condensed consolidated financial statements.

In March 2008 the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133, which requires companies to provide additional disclosures about its objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and related interpretations, and how the derivative instruments and related hedged items affect the Company’s financial statements. SFAS No. 161 also requires companies to disclose information about credit risk-related contingent features in their hedged positions. SFAS No. 161 is effective for fiscal years and interim periods beginning after November 15, 2008 and is required to be adopted by the Company beginning in the first quarter of fiscal 2009. Although we will continue to evaluate the application of SFAS No. 161, management does not currently believe adoption will have a material impact on our financial condition or operating results.

In May 2008 the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles, (“SFAS No. 162”), which becomes effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (“PCAOB”) amendments to US Auditing Standards (“AU”) Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with US GAAP. This standard is not expected to have an impact on our financial position, results of operations or cash flow.

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In June 2008, the FASB Emerging Issues Task Force (“EITF”) reached a consensus on EITF Issue No. 08-3, Accounting by Lessees for Maintenance Deposits under Lease Agreements (“EITF No. 08-3”). EITF No. 08-3 provides that all nonrefundable maintenance deposits paid by a lessee, under an arrangement accounted for as a lease, should be accounted for as a deposit. When the underlying maintenance is performed, the deposit is expensed or capitalized in accordance with the lessee’s maintenance accounting policy. Once it is determined that an amount on deposit is not probable of being used to fund future maintenance expense, it is recognized as additional rent expense at that time. EITF No. 08-3 is effective for us on January 1, 2009. We are currently evaluating the impact of adopting EITF No. 08-3 on our financial position, results of operations and cash flows.

In June 2008, the EITF reached a consensus on EITF Issue No. 08-4, Transition Guidance for Conforming Changes to EITF Issue No. 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios (“EITF No. 08-4”). Subsequent to the issuance of EITF No. 98-5, certain portions of the guidance contained in EITF No. 98-5 were nullified by EITF Issue No. 00-27, Application of EITF Issue No. 98-5, ‘Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios’ (“EITF No. 00-27”). EITF No. 08-4 is effective for the Company for the fiscal year ending December 31, 2008. The Company is currently evaluating the impact of adopting EITF No. 08-4 on the Company’s financial position, results of operations and cash flows.

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 June 30, 2008, we owned common stock of an Australian company that is subject to market risk. We performed an evaluation in the second quarter of 2006 and concluded that the decline in value of this investment was other-than-temporary and recognized an impairment loss of $652,000 to reflect the investment at its fair value. The value of the investment has decreased $119,000 for the six months ended June 30, 2008 and is recorded as other comprehensive income on our consolidated balance sheet.

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 which would impact the value of the investment.

Our interest income is sensitive to changes in the general level of U.S. and Canadian interest rates, particularly since a significant portion of our investments are and will be in short-term marketable 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. The average redemption period of our investment portfolio is 30 days. A 1% change in interest rates would have an effect of approximately $75,000 for a one year period.

We do not believe that inflation has had a material impact on our business or operating results during the periods presented.

We do not have any derivative financial instruments, nor do we have any speculative or hedging instruments.

Item 4. Controls and Procedures.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this report, our management evaluated our disclosure controls and procedures (as defined in Securities Exchange Act Rule 13a-15(e)) as to whether such disclosure controls and procedures were effective in providing reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and ensuring that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that such disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

Since our evaluation as of December 31, 2007 we have had no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

There are no known material legal proceedings of the kind which would be required to be reported. 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, 2007 together with all other information contained or incorporated by reference in this report before you decide to invest in our common stock. Other than the additional risks addressed below, the risks described in our annual report have not materially changed. If any of the risks described in our annual report or in this 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.

We may incur litigation or other challenges related to company control.

Trinad Capital Master Fund, Ltd., which beneficially owns 10.5% of our common stock, has written us a series of letters. Trinad also attempted to nominate an alternative slate of Board of Directors candidates for our 2008 annual meeting of stockholders. However, the attempted nominations were invalid because Trinad did not comply with the advance-notice requirement in our Bylaws. Trinad asserts it has received evidence that we and our Board have committed mismanagement, fraud, breach of fiduciary duty and waste of corporate assets. Trinad has made various other demands on us in these letters, and has threatened to take unspecified action.

We believe that Trinad’s concerns and claims are baseless. Nonetheless, there is a risk that Trinad could decide to bring litigation against us and/or against directors and officers whom we are obliged to indemnify and defend. In addition, Trinad might attempt to wage a corporate control contest against us and our current Board of Directors.

Any such litigation and/or control contest would likely be significantly expensive and disruptive, could damage our image with customers, and could destabilize our relationships with key employees. If we were to lose a litigation, we might have to pay damages. If we were to lose a control contest, the new personnel and strategies implemented by Trinad may not be effective, might be less effective than the present and the changeover would involve significant disruption. In addition, even if we were to prevail in all respects or reach a settlement on mutually agreeable terms, the costs and expenses of any defense and/or settlement could be significant, and the litigation/control-contest process could be time consuming and could divert our management and key personnel from our business operations. The occurrence of any of these events could harm our business.

Our management transition creates uncertainties.

Dario Santana, our former CEO and President, separated from the Company in May 2008. Currently Michael Fleming is serving as Interim Chief Executive Officer. Changes in senior management are inherently disruptive, and efforts to implement any new strategic or operating goals may also prove to be disruptive. Executive leadership transition periods are often difficult as the new executives gain detailed knowledge of company operations and due to cultural differences and friction that may result from changes in strategy and style.

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.

Our 2008 Annual Meeting of Stockholders was convened on May 30, 2008 and, after an adjournment, concluded on June 26, 2008. At this meeting, our stockholders voted on the following two proposals: (1) to elect five directors to hold office until the 2009 annual meeting of stockholders and until their respective successors are duly elected, and (2) to ratify the appointment of Mayer Hoffman McCann P.C. as our independent registered public accounting firm for the fiscal year ending December 31, 2008.

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Proposal 1: Election of Directors

Nominees:	Votes for	Votes Withheld
Gary Arlen	22,046,351	13,800,762
Barry Bergsman	22,090,968	13,756,145
Robert B. Clasen	31,991,446	3,855,667
Joseph J. Farricielli, Jr.	33,539,797	2,307,316
Michael Fleming	31,985,565	3,861,548

Proposal 2: Ratification of Independent Registered Public Accounting Firm

Our stockholders voted to ratify the appointment of Mayer Hoffman McCann P.C. The votes regarding Proposal No. 2 were as follows:

Votes In Favor	Votes Against	Abstentions
33,654,052	1,882,500	310,561

Item 5. Other Information.

None

Item 6. Exhibits.

Exhibit Index

Exhibit No.	Description
3.1	Amended and Restated Certificate of Incorporation of the Company, as amended
10.16	Employment Agreement, dated May 29, 2008, by and between NTN Buzztime, Inc. and Michael Fleming
10.17	Retention and Severance Agreement, dated June 27, 2008, by and between NTN Buzztime, Inc. and Kendra Berger
10.18	Form of Stock Unit Award Agreement under the NTN Buzztime, Inc. 2004 Performance Incentive Plan
10.19	Release of Claims Agreement, dated July 9, 2008, by and between NTN Buzztime, Inc. and Dario Santana
31.1	Certification of principal executive officer pursuant to Rule 13a-14(a)
31.2	Certification of principal financial officer pursuant to Rule 13a-14(a)
32.1	Certification of principal executive officer pursuant to Rule 13a-14(b) / 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of principal financial officer pursuant to 13a-14(b) / 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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: August 8, 2008	By:	/s/ Kendra Berger
		Kendra Berger
		Chief Financial Officer
		(on behalf of the Registrant, and as its Principal Financial and Accounting Officer)

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EX-3.1

Exhibit 3.1

CERTIFICATE OF AMENDMENT

TO

RESTATED CERTIFICATE OF INCORPORATION

OF

NTN COMMUNICATIONS, INC.

Andy Wrobel hereby certifies as follows:

1. He is the duly appointed and acting Chief Financial Officer and Secretary of NTN Communications, Inc., a Delaware corporation.

2. The first sentence of Article I of the Restated Certificate of Incorporation of this corporation is hereby amended to read in its entirety as follows:

“The name of the corporation (the “Corporation”) is NTN Buzztime, Inc.”

3. The foregoing amendment of the Restated Certificate of Incorporation of this corporation has been duly adopted in accordance with Section 242 of the Delaware General Corporation Law effective January 1, 2006.

NTN Communications, Inc. has caused this Certificate of Amendment to Restated Certificate of Incorporation to be signed by Andy Wrobel, its authorized officer, this 28^th day of December, 2005.

By:
	Andy Wrobel
	Chief Financial Officer and Secretary

CERTIFICATE OF AMENDMENT

TO

RESTATED CERTIFICATE OF INCORPORATION OF

NTN COMMUNICATIONS, INC.

Andy Wrobel hereby certifies as follows:

1. He is the duly appointed and acting Chief Financial Officer and Secretary of NTN Communications, Inc., a Delaware corporation.

2. Sections A and B of Article IX of the Restated Certificate of Incorporation of this corporation are hereby amended to read in their entirety as follows:

“ARTICLE IX

A. Number, Election and Term of Directors. The number of Directors of the Corporation shall be fixed from time to time by or pursuant to the By-laws, Each director who is serving as a director on the date of this Amendment shall hold office until the next annual meeting of stockholders after such date and until his or her successor has been duly elected and qualified, notwithstanding that such director may have been elected for a term that extended beyond the date of such next annual meeting of stockholders. At each annual meeting of stockholders after the date of this Amendment, the Directors elected at such annual meeting shall hold office for a term expiring at the next annual meeting of stockholders to be held in the year following the year of their election, with the members to hold office until their successors are elected and qualified.

B. Newly Created Directorship and Vacancies. Newly created directorships resulting from any increase in the number of Directors and any vacancies on the Board of Directors resulting from the death, resignation, disqualification, or removal of a director shall be filled solely by the affirmative vote of the majority of the remaining Directors then in office, even though less than a quorum of the Board of Directors. Any Director elected (a) to fill any vacancy resulting from the death, resignation, disqualification or removal of a Director shall hold office for the remainder of the full term of the Director whose death, resignation, disqualification or removal created such vacancy or (b) to fill any vacancy resulting from a newly created directorship shall hold office until the next annual meeting of stockholders and, in each case, until such Director’s successors shall have become elected and qualified. No decrease in the number of Directors constituting the Board of Directors shall shorten the term of any incumbent Director.

3. The foregoing amendment of the Restated Certificate of Incorporation of this corporation has been duly adopted in accordance with Section 242 of the Delaware General Corporation Law.

NTN Communications, Inc. has caused this Certificate of Amendment to Restated Certificate of Incorporation to be signed by Andy Wrobel, its authorized officer, this 20^th day of October, 2005.

By:
Title:	Chief Financial Officer and Secretary

CERTIFICATE OF CHANGE OF REGISTERED AGENT

AND

REGISTERED OFFICE

*****

NTN Communications, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware

DOES HEREBY CERTIFY:

That the registered office of the corporation in the state of Delaware is hereby changed to Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle.

That the registered agent of the corporation is hereby changed to THE CORPORATION TRUST COMPANY, the business address of which is identical to the aforementioned registered office as changed.

That the changes in the registered office and registered agent of the corporation as set forth herein were duly authorized by resolution of the Board of Directors of the corporation.

IN WITNESS WHEREOF, the corporation has caused this Certificate to be signed by an authorized officer, this 23^rd day of January, 2004.

Kathy Miles

Assistant Secretary

CERTIFICATE OF AMENDMENT

TO

RESTATED CERTIFICATE OF INCORPORATION

OF

NTN COMMUNICATIONS, INC.

James B. Frakes hereby certifies as follows:

1. He is the duly appointed and acting Chief Financial Officer and Secretary of NTN Communications, Inc., a Delaware corporation.

2. The first sentence of Article IV of the Restated Certificate of Incorporation of this corporation is hereby amended to read in its entirety as follows:

“The total number of shares of stock which the corporation shall have authority to issue is 94,000,000 shares, of which 84,000,000 shares shall be Common Stock, par value $.005 per share, and 10,000,000 shall be Preferred Stock, par value $.005 per share.”

3. The foregoing amendment of the Restated Certificate of Incorporation of this corporation has been duly adopted in accordance with Section 242 of the Delaware General Corporation Law.

NTN Communications, Inc. has caused this Certificate of Amendment to Restated Certificate of Incorporation to be signed by James B. Frakes, its authorized officer, this 27^th day of May, 2003.

By:
Name:	James B. Frakes
Title:	Chief Financial Officer and Secretary

CORRECTED CERTIFICATE OF AMENDMENT

TO

RESTATED CERTIFICATE OF INCORPORATION

OF

NTN COMMUNICATIONS, INC.

NTN Communications, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, does hereby certify:

1. A Certificate of Amendment to Restated Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on March 22, 2000, which contains an inaccurate record of the corporate action taken therein, and said Certificate requires correction as permitted by subsection (f) of Section 103 of the General Corporation Law of the State of Delaware.

2. The inaccuracy in said Certificate is as follows: said Certificate should have amended and restated only the first sentence of Article IV rather than Article IV in its entirety.

3. The Certificate is corrected to read in its entirety as follows:

CERTIFICATE OF AMENDMENT

TO

RESTATED CERTIFICATE OF INCORPORATION

OF

NTN COMMUNICATIONS, INC.

Kendra Berger hereby certifies as follows:

1. She is the duly appointed and acting Chief Financial Officer and Secretary of NTN Communications, Inc., a Delaware corporation.

2. The first sentence of Article IV of the Restated Certificate of Incorporation of this corporation is hereby amended to read in its entirety as follows:

“The total number of shares of stock which the corporation shall have authority to issue is 80,000,000 shares, of which 70,000,000 shares shall be Common Stock, par value $.005 per share, and 10,000,000 shall be Preferred Stock, par value $.005 per share.”

3. The foregoing amendment of the Restated Certificate of Incorporation of this corporation has been duly adopted in accordance with Section 242 of the Delaware General Corporation Law.

NTN Communications, Inc. has caused this Corrected Certificate of Amendment to Restated Certificate of Incorporation to be signed by James B. Frakes, its authorized officer, this 22^nd day of April, 2003.

By:
Title:	Chief Financial Officer and Secretary

CERTIFICATE OF AMENDMENT

TO

RESTATED CERTIFICATE OF INCORPORATION

OF

NTN COMMUNICATIONS, INC.

Kendra Berger hereby certifies as follows.

1. She is the duly appointed and acting Chief Financial Officer and Secretary of NTN Communications, Inc., a Delaware corporation.

2. Articles IX, X and XI are hereby added to the Restated Certificate of Incorporation of this corporation and shall read in their entirety as follows:

“ARTICLE IX

A. Number, Election and Term of Directors. Except as otherwise fixed by or pursuant to the provisions of Article IV hereof relating to the rights of the holders of Preferred Stock to elect additional directors under specified circumstances, the number of the directors of the Corporation shall be fixed from time to time by or pursuant to the bylaws of the Corporation. The directors, other than those who may be elected by the holders of Preferred Stock, shall be classified, with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as shall be provided in the manner specified in the bylaws of the Corporation, one class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1994, another class to be originally elected for a term expiring at the annual meeting of stockholders to be held in 1995, and another class to be originally elected for a term expiring at the annual

meeting of stockholders to be held in 1996, with each class to hold office until its successor is elected and qualified. At each annual meeting of the stockholders of the Corporation, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election.

B. Newly Created Directorships and Vacancies. Except as otherwise provided for or fixed by or pursuant to the provisions of Article IV hereof relating to the rights of the holders of Preferred Stock to elect directors under specified circumstances, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in the office, even though less than a quorum of the Board of Directors. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director’s successor shall have been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

C. Removal. Subject to the rights of any Preferred Stock to elect directors under specified circumstances, any director may be removed from office, with or without cause, and only by

2

the affirmative vote of the holders of 80% of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class.

ARTICLE X

Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Except as otherwise required by law and subject to the rights of the holders of Preferred Stock, special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. Notwithstanding anything contained in this Restated Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of all shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to after, amend, adopt any provision inconsistent with or repeal this Article X.

ARTICLE XI

(a) Except as otherwise provided in this Article XI, no purchase by the Corporation from any Controlling Person (as hereinafter defined) of shares of any stock of the Corporation owned by such Controlling Person shall be made at a price exceeding the average price paid by such Controlling Person for all shares of stock of the Corporation acquired by such Controlling Person during the two-year period preceding

3

the date of such proposed purchase unless such purchase is approved by the affirmative vote of not less than a majority of the voting power of the shares of stock of the Corporation entitled to vote held by Disinterested Stockholders (as hereinafter defined).

(b) The provisions of this Article XI shall not apply to (i) any offer to purchase made by the Corporation which is made on the same terms and conditions to the holders of all shares of stock of the Corporation, (ii) any purchase by the Corporation of shares owned by a Controlling Person occurring after the end of two years following the date of the last acquisition by such Controlling Person of stock of the Corporation, (iii) any transaction which may be deemed to be a purchase by the Corporation of shares of its stock which is made in accordance with the terms of any stock option or other employee benefit plan now or hereafter maintained by the Corporation, or (iv) any purchase by the Corporation of shares of its stock at prevailing market prices pursuant to a stock repurchase program.

(c) This Article XI shall not be amended without the affirmative vote of not less than a majority of the stock of the Corporation entitled to vote thereon; provided, however, that if, at the time of such vote, there shall be one or more Controlling Persons, such affirmative vote shall include the affirmative vote in favor of such amendment of not less than a majority of the voting power of the shares of stock of the Corporation entitled to vote thereon held by Disinterested Stockholders.

(d) For purposes of this Article XI: (i) the term “Controlling Person” means any individual, corporation, partnership, trust, association or other organization or entity (including any group formed for the

4

purpose of acquiring, voting or holding securities of the Corporation) which either directly, or indirectly through one or more intermediaries, owns, beneficially or of record, or controls by agreement, voting trust or otherwise, at least 10% of the voting power of the stock of the Corporation, and such term also includes any corporation, partnership, trust, association or other organization or entity in which one or more Controlling Persons have the power, through the ownership of voting securities, by contract, or otherwise, to influence significantly any of the management, activities or policies of such corporation, partnership, trust, association, other organization or entity and (ii) the term “Disinterested Stockholders” means those holders of the stock of the Corporation entitled to vote on any matter, none of which is a “Controlling Person.”“

3. The foregoing amendment of the Restated Certificate of Incorporation of this corporation has been duly adopted in accordance with Section 242 of the Delaware General Corporation Law.

Dated: March 24, 2000	/s/ Kendra Berger
	Kendra Berger, Chief Financial
	Officer and Secretary

5

CERTIFICATE OF AMENDMENT

TO

RESTATED CERTIFICATE OF INCORPORATION

OF

NTN COMMUNICATIONS, INC.

Kendra Berger hereby certifies as follows:

1. She is the duly appointed and acting Chief Financial Officer and Secretary of NTN Communications, Inc., a Delaware corporation.

2. The first paragraph of Article IV of the Restated Certificate of Incorporation of this corporation is hereby amended to read in its entirety as follows:

“ARTICLE IV

The total number of shares of stock which the corporation shall have authority to issue is 80,000,000 shares, of which 70,000,000 shares shall be Common Stock, par value $.005 per share, and 10,000,000 shall be Preferred Stock, par value $.005 per share.”

3. The foregoing amendment of the Restated Certificate of Incorporation of this corporation has been duly adopted in accordance with Section 242 of the Delaware General Corporation Law.

Dated: March 22, 2000

/s/ Kendra Berger

Kendra Berger, Chief Financial

Officer and Secretary

CERTIFICATE OF DESIGNATIONS, PREFERENCES

AND RIGHTS OF SERIES B CONVERTIBLE PREFERRED STOCK

OF

NTN COMMUNICATIONS, INC.

NTN Communications, Inc. (the “Company”), a corporation organized and existing under the General Corporation Law of the State of Delaware, does hereby certify that, pursuant to authority conferred upon the Board of Directors of the Company by the Certificate of Incorporation, as amended, of the Company, and pursuant to Section 151 of the General Corporation Law of the State of Delaware, the Board of Directors of the Company at a meeting duly held, adopted resolutions (i) authorizing a new series of the Company’s previously authorized preferred stock, $.005 par value per share, and (ii) providing for the designations, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of eighty-five thousand (85,000) shares of Series B Convertible Preferred Stock of the Company, as follows;

RESOLVED, that the Company is authorized to issue 85,000 shares of Series B Convertible Preferred Stock (the “Series B Preferred Shares”), $.005 par value per share, and the stated value shall be $100 per share (the “Stated Value”) which shall have the following powers, designations, preferences and other special rights:

(1) Dividends. The holders of the outstanding Series B Preferred Shares shall be entitled to receive cumulative dividends at the annual rate of $4.00 per Series B Preferred Share. Such dividends shall be payable in quarterly payments of $1.00 per share on the last day of January, April, July and October of each year, commencing on January 31,1998 (each of such dates being a “Dividend Payment Date”). Such dividend shall accrue on each Series B Preferred Share from October 31, 1997 and shall accrue from day-to-day, whether or not earned or declared. Dividend payments made with respect to Series B Preferred Shares may be made, subject to the terms hereof, in cash or, at the option of and in the sole discretion of the Board of Directors, in full or in part, (i) by issuing fully paid and nonassessable Series B Preferred Shares such that the Stated Value of such Series B Preferred Shares plus the amount of cash dividend paid in part, if any, is equal to the amount of the cash dividend which would otherwise be paid on such Dividend Payment Date if such dividend were paid entirety in cash (ii) by increasing

the Stated Value of the Series B Preferred Shares by the amount of such dividend such that the amount of such increase in the Stated Value of the Series B Preferred Shares plus the amount of cash dividend paid in part, if any, is equal to the amount of the cash dividend which would otherwise be paid on such Dividend Payment Date if such dividend were paid entirely in cash. If the Board of Directors shall elect to pay any part of a dividend by such increase in Stated Value, the Company shall provide notice to such effect to the holders of the Series B Preferred Shares by no later than the applicable Dividend Payment Date. The issuance of such Series B Preferred Shares or any such increase in the Stated Value (plus the amount of cash dividend, if any, paid together therewith) shall constitute full payment of such dividend. In no event shall an election by the Board of Directors to pay dividends, in full or in part, in cash on any Dividend Payment Dates preclude the Board of Directors from electing any other available alternative in respect of all or any portion of any subsequent dividend. Declared but unpaid dividends shall not bear interest.

(2) Holder’s Conversion of Series B Preferred Shares. A holder of Series B Preferred Shares shall have the right, at such holder’s option, to convert the Series B Preferred Shares into shares of the Company’s common stock, $.005 par value per share (the “Common Stock”), on the following terms and conditions;

(a) Conversion Right. Subject to the provisions of Sections 2(f) below, any holder of Series B Preferred Shares shall be entitled to convert at any time or times (1) 23% of the number of Series B Preferred Shares owned by such holder on or after the earlier of (I) the date the Registration Statement (as defined below) is declared effective by the United States Securities and Exchange Commission (the “SEC”) and (II) 120 days after the initial date of issuance of the Series B Preferred Shares (the “Scheduled Effective Date”), (ii) an additional 25% of the Series B Preferred Shares held by such holder commencing on or after 60 days after the first 25% of such shares becomes convertible, (iii) an additional 25% of the Series B Preferred Shares held by such holder commencing on or after 90 days after the first 25% of such shares becomes convertible and (iv) the remaining 25% of the Series B Preferred Shares held by such holder commencing on or after 120 days after the first 25% of such Shares becomes convertible, into fully paid and nonassessable shares (rounded to the nearest whole share to accordance with Section 2(g) below) of Common Stock, at the Conversion Rate (as defined below); provided, however, that in no event shall any holder be entitled to convert Series A Preferred Shares in excess of that number of Series A Preferred Shares which, upon giving effect to such conversion, would cause the aggregate number of shares of Common Stock beneficially owned by the holder and its affiliates to exceed 4.9% of the outstanding shares of the Common Stock following such conversion. For purposes of this paragraph beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of l934, as amended,

(b) Conversion Rate. The number of shares of Common Stock issuable upon conversion of each of the Series B Preferred Shares pursuant to Sections (2)(a) and 2(f) shall be determined according to the following formula (the “Conversion Rate”):

$100 + amount of accrued but unpaid dividends

Conversion Price

- 2 -

For purposes of this Certificate of Designations, the following terms shall have the following meanings:

(i) “Conversion Price” means as of any Conversion Date (as defined below) or other date of determination, the lower of (I) 140% of the average Closing Bid Prices of the Common Stock on the five trading days immediately preceding the date on which the first 25% of the Series B Preferred Shares becomes convertible in accordance with Section 2(a), but in no event greater than $3.50 (the “Conversion Ceiling”) and (II) 85% of the lowest average of Closing Bid Prices of the Common Stock on any three trading days during the 20 trading days immediately preceding the Conversion Date, subject to adjustment as provided herein;

(ii) “Closing Bid Prices” means, for any security as of any date, the last closing bid price on the American Stock Exchange (“AMEX”) as reported by Bloomberg, L.P. (“Bloomberg”), or, if the AMEX is not the principal securities exchange for such security, the last closing bid price of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price is reported for such security by Bloomberg, or, if no last closing trade price is reported for such security by Bloomberg, the average of the bid prices of any market makers for such security as reported in the “pink sheets” by the National Quotation Bureau, Inc., the last closing trade price of such security as reported by Bloomberg; and

(iii) “Average Market Price” means the average of the Closing Bid Prices of the Common Stock for the five trading days immediately preceding the applicable date.

(c) Effect of Failure to Obtain and Maintain Effectiveness of Registration Statement. If the registration statement (the “Registration Statement”) covering the resale of the shares of Common Stock issuable upon conversion of the Series B Preferred Shares and required to be filed by the Company pursuant to the Registration Rights Agreement between the Company and the initial holders of the Series B Preferred Shares (the “Registration Rights Agreement”) is not declared effective by the SEC on or before the Scheduled Effective Date, then each holder of Series B Preferred Shares shall be entitled to the following payments until such time as the Registration Statement is declared effective by the SEC (all such payments to be made in cash and nonrefundable on the first day or the relevant thirty (30) day period):

(A) for the thirty (30) day period beginning immediately following the Scheduled Effective Date and ending 30 days following the

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Scheduled Effective Date, an amount equal to the product of (1) (.01), multiplied by (II) the quotient of (y) 100 (plus any accrued but unpaid dividends thereon) divided by (z) the Conversion Price, multiplied by (III) the number of Series B Preferred Shares held by such holder.

(B) for each consecutive thirty (30) day period beginning 31 days following the Scheduled Effective Date, an amount equal to the product of (I) (.02), multiplied by (II) the quotient of (y) 100 (plus any accrued but unpaid dividends thereon) divided by (z) the Conversion Price, multiplied by (III) the number of Series B Preferred Shares held by such holder, provided however that if, and only if, the Company has at all times used its best efforts to have the Registration Statement declared effective by the SEC and such Registration Statement shall not have been declared effective within 90 days after the Scheduled Effective Date the Company shall be required to redeem the Series B Preferred Shares in accordance with Section 3(a) and in connection therewith the Company shall pay the holders of the Series B Preferred Shares a price per Series B Preferred Share equal to the Major Transaction Redemption Price.

(d) Adjustment to Conversion Price—Dilution and Other Events. In order to prevent dilution of the rights granted under this Certificate of Designations, the Conversion Ceiling and the Closing Bid Prices for any days during any measuring period prior to any of the events set forth below (the “Adjusting Closing Bid Prices”) will be subject to adjustment from time to time as provided in this Section 2(d).

(i) Adjustment upon Declaration of Dividends and Other Events. If the Company shall (I) declare a dividend or make a distribution in shares of Common Stock, (II) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (III) combine or reclassify the outstanding Common Stock into a smaller number of shares, the Conversion Ceiling and the Adjusting Closing Bid Prices in effect on the record date of such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted.

(ii) Adjustment upon Issuance of Convertible Securities with Conversion Ceilings. If and whenever on or after the date of issuance of the Series B Preferred Shares, the Company in any manner issues or sells any stock or other securities convertible into or exchangeable for Common Stock (“Convertible Securities”) and the price per share for which Common Stock is issuable upon the conversion or exchange of such Convertible Securities is subject to a Conversion Ceiling (the “New Convertible Securities Ceiling”) which is greater than the Conversion Ceiling immediately prior to such time, then from and after the time of such issue or sale, the Conversion Ceiling shall be increased, if necessary, so that it shall not be less than the New Convertible Securities Ceiling.

- 4 -

(iii) Notices.

(A) Immediately upon any adjustment pursuant hereto of the Conversion Price, the Company will give written notice thereof to each holder of Series B Preferred Shares, setting forth in reasonable detail and certifying the calculation of such adjustment.

(B) The Company will give written notice to each holder of Series B Preferred Shares at least twenty (20) days prior to the date on which the Company closes its books or takes a record (I) with respect to any dividend or distribution upon the Common Stock, or (II) for determining rights to vote with respect to any Organic Change, dissolution or liquidation; provided that in no event shall such notice be provided to such holder prior to such information being made known to the public. “Organic Change” shall mean any recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person or other transaction which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities or assets with respect to or in exchange for Common Stock. “Person” shall mean an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

(C) The Company will also give written notice to each holder of Series B Preferred Shares at least twenty (20) days prior to the date on which any Organic Change, dissolution or liquidation will take place.

(iv) Successive adjustments in the Conversion Ceiling and the Adjusting Closing Bid Prices shall be made whenever any event specified above shall occur. All calculations under this Section 2(d) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. No adjustment in the Conversion Price shall be made if the amount of such adjustment would be less than $0.01, but any such amount shall be carried forward and an adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate $0.01 or more.

(e) Mechanics of Conversion. Subject to the Company’s inability to fully satisfy its obligations under a Conversion Notice (as defined below) as provided for in Section 5 below:

(i) Holder’s Delivery Requirements. To convert Series B Preferred Shares into full shares of Common Stock on any date (the “Conversion Date”), the holder thereof shall (A) deliver or transmit by facsimile, for receipt on or prior to 11:59 p.m., Pacific Time on such date, a copy of a fully executed notice of conversion in the form attached hereto as Exhibit I (the “Conversion Notice”), to the Company or its designated transfer agent (the “Transfer Agent”), and (B) surrender to a common carrier

- 5 -

for delivery to the Company or the Transfer Agent as soon as practicable following such date, the original certificates representing the Series B Preferred Shares being converted (or an indemnification undertaking with respect to such shares in the case of their loss, theft or destruction) (the “Preferred Stock Certificates”) and the originally executed Conversion Notice.

(ii) Company’s Response. Upon receipt by the Company of a facsimile copy of a Conversion Notice, the Company shall immediately send, via facsimile, a confirmation of receipt of such Conversion Notice to such holder. Upon receipt by the Company or the Transfer Agent of the Preferred Stock Certificates to be converted pursuant to a Conversion Notice, together with the originally executed Conversion Notice, the Company or the Transfer Agent (as applicable) shall, on the next business day following the date of receipt (or the second business day following the date of receipt if received after 11:00 a.m. local time of the Company or Transfer Agent, as applicable), (I) issue and surrender to a common carrier for overnight delivery to the address as specified in the Conversion Notice, a certificate, registered in the name of the holder or its designee, for the number of shares of Common Stock to which the holder shall be entitled, or (II) credit such aggregate number of shares of Common Stock to which the holder shall be entitled to the holder’s or its designers balance account with The Depository Trust Company.

(iii) Dispute Resolution. In the case of a dispute as to the determination of the Conversion Price, the Company shall promptly issue to the holder the number of shares of Common Stock that is not disputed and shall submit the disputed determinations or arithmetic calculations to the holder via facsimile within one (1) business day of receipt of such holder’s Convention Notice. If such holder and the Company are unable to agree upon the determination of the Conversion Price within one (1) business day of such disputed determination or arithmetic calculation being submitted to the holder, then the Company shall within one (1) business day submit via facsimile the disputed determination of the Conversion Price to an independent, reputable accounting firm of national standing acceptable to the Company and such holder of Series B Preferred Shares. The Company shall cause such accounting firm to perform the determinations or calculations and notify the Company and the holder of the results no later than forty-eight (48) hours from the time it receives the disputed determinations or calculations. Such accounting firm’s determination, shall be binding upon all parties absent manifest error.

(iv) Record Holder. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of Series B Preferred Shares shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date.

(v) Company’s Failure to Timely Convert. If the Company shall fail (other than as a result of the situations described in Section 4(a) with respect to which the holder has elected, and the Company has satisfied its obligations under, one of

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the options set forth in subparagraphs (i) through (iv) of Section 4(a)) to issue to a holder on a timely basis as described in this Section 2(e), a certificate for the number of shares of Common Stock to which such holder is entitled upon such holder’s conversion of Series B Preferred Shares, the Company shall pay damages to such holder equal to the greater of (A) actual damages incurred by such holder as a result of such holder’s needing to “buy in” shares of Common Stock to satisfy its securities delivery requirements (“Buy In Actual Damages”) and (B) after the effective date of the Registration Statement if ‘the Company fails to deliver such certificates within five days after the last possible date which the Company could have issued such Common Stock to such holder without violating this Section 2(e), on each date such conversion is not timely effected in an amount equal to 1% of the product of (A) the number of shares of Common Stock not issued to the holder on a timely basis and to which such holder is entitled and (B) the Closing Bid Price of the Common Stock on the last possible date which the Company could have issued such Common Stock to such holder without violating this Section 2(e).

(f) Mandatory Conversion. If any Series B Preferred Shares remain outstanding on the Mandatory Conversion Date (as defined below), then all such Series B Preferred Shares shall be converted as of such date in accordance with this Section 2 as if the holders of such Series B Preferred Shares had given the Conversion Notice on the Mandatory Conversion Date, and the Conversion Date had been fixed as of the Mandatory Conversion Date, for all purposes of this Section 2, and all holders of Series B Preferred Shares shall thereupon and within two (2) business days thereafter surrender all Preferred Stock Certificates, duly endorsed for cancellation, to the Company or the Transfer Agent. No person shall thereafter have any rights in respect of Series B Preferred Shares, except the right to receive shares of Common Stock on conversion thereof as provided in this Section 2. “Mandatory Conversion Date” means October 31, 2000.

(g) Fractional Shares. The Company shall not issue any fraction of a share of Common Stock upon any conversion. All shares of Common Stock (including fractions thereof) issuable upon conversion of more than one Series B Preferred Share by a holder thereof shall be aggregated for purposes of determining whether the conversion would result in the issuance of a fraction of a share of Common Stock. If, after the aforementioned aggregation, the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up or down to the nearest whole share.

(h) Taxes. The Company shall pay any and all taxes which may be imposed upon it with respect to the issuance and delivery of Common Stock upon the conversion of the Series B Preferred Shares.

(3) Redemption.

(a) Redemption Upon Major Transaction. After a Major Transaction (as defined below), the Company shall), be required to redeem all of the Series B Preferred

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Shares at a price per Series B Preferred Share equal to the product of (I) the aggregate number of shares of Common Stock for which each such Series B Preferred Share would be converted into on the date of the public announcement of such Major Transaction or the next date on -which the exchange or market on which the Common Stock is traded is open if such public announcement is made (X) after 12:00 p.m., Pacific Time, time on such date or (Y) on a date on which the exchange or market on which the Common Stock to traded is closed, multiplied by (II) the Average Market Price of the Common Stock on such date (“Major Transaction Redemption Price”).

(b) Redemption Option Upon Triggering Event. In addition to all other rights of the holders of Series B Preferred Shares contained herein, after a Triggering Event (as defined below), each holder of Series B Preferred Shares shall have the right in accordance with Section 3(f), at such holder’s option, to require the Company to redeem all or a portion of such holder’s Series B Preferred Shares at a price per Series B Preferred Share equal to the product of (I) the aggregate number of shares of Common Stock for which each such Series B Preferred Share would be converted into as of the date immediately preceding such Triggering Event on which the exchange or market on which the Common Stock is traded is open multiplied by (II) the Average Market Price of the Common Stock on such date (“Triggering Event Redemption Price” and, collectively with “Major Transaction Redemption Price,” the Redemption Price”).

(c) “Major Transaction”. A “Major Transaction” shall be deemed to have occurred at such time as any of the following events:

(i) the consolidation or merger of the Company with or into another Person (other than pursuant to a migratory merger effected solely for the purpose of clanging the jurisdiction of incorporation of the Company or pursuant to a merger after which the holders of the Company’s outstanding capital stock immediately prior to the merger own a number of shares of the resulting company’s outstanding capital stock sufficient to elect a majority of the resulting company’s) board of directors);

(ii) the sale or transfer of substantially all of the Company’s assets (Other than a sale or transfer to an entity controlling, controlled by or under common control with the Company); or

(iii) a purchase, tender or exchange offer for more than 50% of the outstanding shares of Common Stock is made and accepted by the holders thereof.

(d) “Triggering Event”. A “Triggering Event” shall be deemed to have occurred at such time as any of the following events:

(i) notice from the Company that Common Stock Issued or issuable upon conversion of the Series B Preferred Shares cannot be sold under the Registration Statement (the “Suspension Period”), for any period of 45 consecutive days that is (A) after the date the Registration Statement has been declared effective by the SEC and (B) prior to the time that the Conversion Shares may be sold without limitation

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in accordance with Rule H4(k) under the 1933 Act; provided that any demand for redemption under this Section 3(d)(i) must be made by a holder of Series B Preferred Shares within 10 days after receipt of notice from the Company of the termination of the Suspension Period; and provided further that if the aggregate number of days in all Suspension Periods (the “Suspension Days”) is equal to or greater than forty-five (45) days, then the Mandatory Conversion Date shall be extended by the number of Suspension Days;

(ii) the failure of the Common Stock or the Conversion Shares to be listed on the AMEX, The New York Stock Exchange or the Nasdaq National Market System for a period of 15 consecutive days; provided however that any demand for redemption under this Section 3(d)(ii) must be made by a holder of Series B Preferred Shares within 30 days after receipt of the Notice of Triggering Event (as defined in Section 3(f)); or

(iii) the Company’s notice to any holder of Series B Preferred Shares, including by way of public announcement, at any time, of its intention not to comply with proper requests for conversion of any Series B Preferred Shares into shares of Common Stock, including due to any of the reasons set forth in Section 4(a) below, except in any case in which the basis for such intention by the Company is a bona fide dispute as to the right of such holder to such conversion.

(e) Mechanics of Redemption Upon Major Transaction. No sooner than fifteen (15) days nor later than ten (10) days prior to the consummation of a Major Transaction, but not prior to the public announcement of such Major Transaction, the Company shall deliver written notice thereof via facsimile and overnight courier (“Notice of Major Transaction”) to each holder of Series B Preferred Shares.

(f) Mechanics of Redemption at Option of Holder Upon Triggering Event. Within one (1) day after the occurrence of a Triggering Event, the Company shall deliver written notice thereof via facsimile and overnight courier (“Notice of Triggering Event”) to each holder of Series B Preferred Shares. At any time after receipt of a Notice of Triggering Event, but only for as long as the facts giving time to the Triggering Event continue to exist, the holders of at least two-thirds (2/3) of the Series B Preferred Shares then outstanding may require the Company to redeem all of the Series B Preferred Shares by delivering written notice thereof via facsimile and overnight courier (“Notice of Redemption at Option of Holder Upon Triggering Event”) to the Company, which Notice of Redemption at Option of Holder Upon Triggering Event shall indicate (i) the number of Series B Preferred Shares that such holders are voting in favor of redemption and (ii) the applicable Redemption Price, as calculated pursuant to Section 3(b) above.

(g) Payment of Redemption Price. Upon the occurrence of a Major Transaction or the Company’s receipt of & Notice(s) of Redemption at Option of Holder Upon Triggering Event from the holders of at least two-thirds (2/3) of the Series B Preferred Shares then outstanding, the Company shall immediately notify each holder by

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facsimile of the mechanics of the delivery of each holder’s Preferred Stock Certificate and, if applicable, the Company’s receipt of such requisite notices necessary to effect a redemption and each holder of Series B Preferred Shares shall thereafter promptly send such holder’s Preferred Stock Certificates to be redeemed to the Company or its Transfer Agent. The Company shall deliver the applicable Redemption Price to such holder within thirty (30) days after the Company’s delivery of a Notice of Major Transaction or the Company’s receipt of the requisite notices required to affect a redemption; provided that a holder’s Preferred Stock Certificates shall have been so delivered to the Company or its Transfer Agent; provided further that if the Company is unable to redeem all of the Series B Preferred Shares, the Company shall redeem an amount from each holder of Series B Preferred Shares equal to such holder’s pro-rata amount (based on the number of Series B Preferred Shares held by such holder relative to the number of Series B Preferred Shares outstanding) of all Series B Preferred Shares being redeemed. If the Company shall fail to redeem all of the Series B Preferred Shares submitted Tor redemption (other than pursuant to a dispute as to the arithmetic calculation of the Redemption Price), in addition to any remedy such holder of Series B Preferred Shares may have under this Certificate of Designations and the Securities Purchase Agreement between the Company and the initial holders of the Series B Preferred Shares (the “Securities Purchase Agreement”), the Redemption Price payable in respect of such unredeemed Series B Preferred Shares shall bear interest at the rate of 1.25% per month (prorated for partial months) until paid in full. In the case of a Triggering Event, until the Company pays such unpaid Redemption Price in full to each holder, holders of at least two-thirds (2/3) of the Series B Preferred Shares then outstanding, including shares of Series B Preferred Shares submitted for redemption pursuant to this Section 3 and for which the applicable Redemption Price has not been paid, shall have the option (the “Void Optional Redemption Option”) to, in lieu of redemption, require the Company to promptly return to each holder all of the Series B Preferred Shares that were submitted for redemption by such holder under this Section 3 and for which the Redemption Price has not been paid, by sending written notice thereof to the Company via facsimile (the “Void Optional Redemption Notice”). Upon the Company’s receipt of such Void Optional Redemption Notice(s) and prior to payment of the full Redemption Price to each holder, (i) the Notice(s) of Redemption at Option of Holder Upon Triggering Event shall be null and void with respect to those Series B Preferred Shares submitted for redemption and for which the Redemption Price has not been paid, and (ii) the Company shall immediately return any Series B Preferred Shares submitted to the Company by each holder for redemption under this Section 3(i) and for which the Redemption Price has not been paid. Notwithstanding the foregoing, in the event of a dispute as to the determination of the arithmetic calculation of the Redemption Price, such dispute shall be resolved pursuant to Section 2(c)(iii) above. Payments provided for in this Section 3 shall have priority to payments to other stockholders in connection with a Major Transaction.

(4) Inability to Fully Convert.

(a) Holders Option if Company Cannot Fully Convert. If, Upon the Company’s receipt of a Conversion Notice, the Company cannot issue shares of Common

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Stock registered for resale under the Registration Statement for any reason, including, without limitation, because the Company (x) does not have a sufficient number of shares of Common Stock authorized and available, (y) is otherwise prohibited by applicable law or by the rules or regulations of any stock exchange, interdealer quotation system or other self-regulatory organization with jurisdiction over the Company or its Securities, including without limitation the AMEX, from issuing all of the Common Stock which is to be issued to a holder of Sales D Preferred Shares pursuant to a Conversion Notice or (z) fails to have a sufficient number of shares of Common Stock registered for resale under the Registration Statement, then the Company shall issue as many shires of Common Stock as it is able to issue in accordance with such holder’s Conversion Notice and pursuant to Section 2(e) above and, with respect to the unconverted Series B Preferred Shares, the holder, solely at such holder’s option, can elect to (unless the Company issues and delivers the Convention Shares underlying the unconverted Series B Preferred Shares prior to the holder’s election hereunder, in which case such holder shall only be entitled to receive Buy In Actual Damages under Section 2(e)(v)):

(i) require the Company to redeem from such holder those Series B Preferred Shares for which the Company is unable to issue Common Stock in accordance with such holder’s Conversion Notice (“Mandatory Redemption”) at a price per Series B Preferred Share (the Mandatory Redemption Price”) equal to the Triggering Event Redemption Price as of such Conversion Date;

(ii) if the Company’s inability to fully convert Series B Preferred Shares is pursuant to Section 4(a)(z) above, require the Company to issue restricted shares of Common Stock in accordance with such holder’s Conversion Notice and pursuant to Section 2(e) above;

(iii) void its Conversion Notice and retain or have returned, as the case may be, the nonconverted Series B Preferred Shares that were to be convened pursuant to such holder’s Conversion Notice; or

(iv) if the Company’s inability to fully convert Series B Preferred Shares it pursuant to the AMEX rules and regulations described in Section 4(a)(y) above, require the Company to issue shares of Common Stock in accordance with such holder’s Conversion Notice and pursuant to Section 2(e) above at a Conversion Price equal to the Average Market Price of the Common Stock for the five (5) consecutive trading days preceding such holder’s Notice in Response to Inability to Convert (as defined below),

(b) Mechanics of Fulfilling Holder’s Election. The Company shall immediately send via facsimile to a holder of Series B Preferred Shares, upon receipt of a facsimile copy of a Conversion Notice from such holder which cannot be fully satisfied as described in Section 4(a) above, a notice of the Company’s inability to fully satisfy such holder’s Conversion Notice (the “Inability to Fully Convert Notice”). Such Inability to Fully Convert Notice shall indicate (i) the reason why the Company is unable

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to fully satisfy such holder’s Conversion Notice, (ii) the number of Series B Preferred Shares which cannot be converted and (iii) the applicable Mandatory Redemption Price. Such holder must within five (5) business days of receipt of such Inability to Fully Convert Notice deliver written notice via facsimile to the Company (“Notice in Response to Inability to Convert”) of its election pursuant to Section 4(a) above.

(c) Payment of Redemption Price. If such holder shall elect to have its shares redeemed pursuant to Section 4(a)(i) above, the Company shall pay the Mandatory Redemption Price in cash to such holder within thirty (30) days of the Company’s receipt of the holder’s Notice in Response to Inability to Convert. If the Company shall fail to pay the applicable Mandatory Redemption Price to such holder on a timely basis as described in this Section 4(c) (other than pursuant to a dispute as to the determination of the arithmetic calculation of the Redemption Price), in addition to any remedy such holder of Series B Preferred Shares may have under this Certificate of Designations and the Securities Purchase Agreement, such unpaid amount shall bear interest at the rate of 1.25% per month (prorated for partial months) until paid in full. Until the full Mandatory Redemption Price is paid in full to such holder, such holder may void the Mandatory Redemption with respect to those Series D Preferred Shares for which the full Mandatory Redemption Price has not been paid and receive back such Series B Preferred Shares. Notwithstanding the foregoing, if the Company fails to pay the applicable Mandatory Redemption Price within such thirty (30) days time period due to a dispute as to the determination of the arithmetic calculation of the Redemption Price, such dispute shall be resolved pursuant to Section 2(e)(iii) above.

(d) Pro-rata Conversion and Redemption. In the event the Company receives a Conversion Notice from more than one holder of Series B Preferred Shares on the same day and the Company can convert and redeem some, but not all, of the Series B Preferred Shares pursuant to this Section 4, the Company shall convert and redeem from each holder of Series B Preferred Shares electing to have Series B Preferred Shares converted and redeemed at such time an amount equal to such holder’s pro-rata amount (based on the number of Series B Preferred Shares held by such holder relative to the number of Series B Preferred Shares outstanding) of all Series B Preferred Shares being converted and redeemed at such time.

(5) Reissuance of Certificates. In the event of a conversion or redemption pursuant to this Certificate of Designations of less than all of the Series B Preferred Shares represented by a particular Preferred Stock Certificate, the Company shall promptly cause to be issued and delivered to the holder of such Series B Preferred Shares a preferred stock certificate representing the remaining Series B Preferred Shares which have not been so converted or redeemed.

(6) Reservation of Shares. The Company shall, so long as any of the Series B Preferred Shares are outstanding, reserve and keep available out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion of the Series B Preferred Shares, such number of shares of Common Stock as shall from time to

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time be sufficient to effect the conversion of all of the Series B Preferred Shares then outstanding; provided that the number of shares of Common Stock so reserved shall at no time be less than 200% of the number of shares of Common Stock for which the Series B Preferred Shares are at any time convertible; provided further that such shares of Common Stock so reserved shall be allocated for issuance upon conversion of Series B Preferred Shares pro rata among the holders of Series B Preferred Shares based on the number of Series B Preferred Shares held by such holder relative to the total number or authorized Series B Preferred Shares.

(7) Voting Rights. Holders of Series B Preferred Shares shall have no voting rights, except as required by law, including but not limited to the General Corporation Law of the State of Delaware, and as expressly provided in this Certificate of Designations.

(8) Liquidation, Dissolution, Winding-Up. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of the Series B Preferred Shares shall be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders (the “Preferred Funds”), before any amount shall be paid to the holders of any of the capital stock of the Company of any class junior in rank to the Series B Preferred Shares in respect of the preferences us to the distributions and payments on the liquidation, dissolution and winding up of the Company, an amount per Series B Preferred Share equal to the sum of (i) $100 and (ii) all accrued and unpaid dividends (such sum being referred to as the “Liquidation Value”); provided that, if the Preferred Funds are insufficient to pay the full amount due to the holders of Series B Preferred Shares and holders of shares of other classes or series of preferred stock of the Company that are of equal rank with the Series B Preferred Shares as to payments of Preferred Funds (the “Pari Passu Shares”), then each holder of Series B Preferred Shares and Pari Passu Shares shall receive a percentage of the Preferred Funds equal to the full amount of Preferred funds payable to such holder as a liquidation preference, in accordance with their respective Certificate of Designations, Preferences and Rights, as a percentage of the full amount of Preferred Funds payable to all Holders of Series B Preferred Shares and Pari Passu Shares. The purchase or redemption by the Company of stock of any class, in any manner permitted by law, shall not, for the purposes hereof, be regarded as a liquidation, dissolution or winding up of the Company. Neither the consolidation or merger of the Company with or into any other Person, nor the sale or transfer by the Company of less than substantially all of its assets, shall, for the purposes hereof, be deemed to be a liquidation, dissolution or winding up of the Company.

(9) Preferred Rank. All shares of Common Stock shall be of junior rank to all Series B Preferred Shares in respect to the preferences as to distributions and payments upon the liquidation, dissolution and winding up of the Company. The rights of the shares of Common Stock shall be subject to the preferences and relative rights of the Series B Preferred Shares. As long as at least one-third (1/3) of the Series B Preferred Shares initially issued remain outstanding, then without the prior express written consent

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of the holders of not less than two-thirds (2/3) of the then outstanding Series B Preferred Shares, the Company shall not hereafter authorise or issue additional or other capital stock that is of senior rank to the Series B Preferred Shares in respect of the preferences as to distributions and payments upon the liquidation, dissolution and winding up of the Company. Without the prior express written consent of the holders of not less than two-thirds (2/3) of the then outstanding Series B Preferred Shares, the Company shall not hereafter authorize or make any amendment to the Company’s Certificate of Incorporation or bylaws, or file any resolution of the board of directors of the Company with the Delaware Secretary of State containing any provisions, which would adversely affect or otherwise impair the rights or relative priority of the holders of the Series B Preferred Shares relative to the holders of the Common Stock of the holders of any other class of capital stock. In the event of the merger or consolidation of the Company with or into another corporation, the Series B Preferred Shares shall maintain their relative powers, designations and preferences provided for herein and no merger shall result inconsistent therewith.

(10) Restriction on Redemption and Cash Dividends with respect to Other Capital Stock. Until all of the Series B Preferred Shares have been converted or redeemed as provided herein, the Company shall not, directly or indirectly, declare or pay any cash dividend on its Common Stock without the prior express written consent of the holders of not less than two-thirds (2/3) of the then outstanding Series B Preferred Shares.

(11) Vote to Change the Terms of Series B Preferred Shares. The affirmative vote at a meeting duly called for such purpose or the written consent without a meeting, of the holders of not less than two-thirds (2/3) of the then outstanding Series B Preferred Shares, shall be required for any change to this Certificate of Designations or the Company’s Certificate of Incorporation which would amend, alter, change or repeal any of the powers, designations, preferences and rights of the Series B Preferred Shares.

(12) Lost or stolen Certificates. Upon receipt by the Company of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any Preferred Stock Certificates representing the Series B Preferred Shares, and, in the case of loss, theft or destruction, of any indemnification undertaking by the holder to the Company and, in the case of mutilation, upon surrender and cancellation of the Preferred Stock Certificate(s), the Company shall execute and deliver new preferred stock certificate(s) of like tenor and date; provided, however, the Company shall not be obligated to re-issue preferred stock certificates if the holder contemporaneously requests the Company to convert such Series B Preferred Shares into Common Stock.

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IN WITNESS WHEREOF, the Company has caused this Certificate of Designations to be signed by Gerald Sokol, its President and Chief Executive Officer, as of the 31st day of October 1997.

NTN COMMUNICATIONS, INC.
By:
Name:	Gerald Sokol
Its:	President and Chief Executive Officer

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EXHIBIT I

NTN COMMUNICATIONS, INC.

CONVERSION NOTICE

Reference is made to the Certificate of Designations, Preferences and Rights of NTN Communications, Inc. (the “Certificate of Designations”). In accordance with and pursuant to the Certificate of Designations, the undersigned hereby elects to convert the number of shares of Series B Convertible Preferred Stock, $.005 par value per share (the “Series B Preferred Shares”), of NTN Communications, Inc,, a Delaware corporation (the “Company”), indicated below into shares of Common Stock, $.005 par value per share (the “Common Stock”), of the Company, by tendering the stock certificate(s) representing the share(s) of Series B Preferred Shares specified below as of the date specified below.

Date of Conversion:
Number of Series B
Preferred Shares to be convened:
Stock certificate no(s). of Series B
Preferred Shares to be converted:
Please confirm the following information:
Conversion Price:
Number of shares of Common Stock to be issued:
Please issue the Common Stock and, if applicable, any check drawn on an account of the Company into which the Series B preferred Shares are being converted in the following name and to the following address:
Issue to:
Facsimile Number:
Authorization:
	By:
	Title:
Dated:

RESTATED CERTIFICATE OF

OF

INCORPORATION

NTN Communications, Inc. a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:

1. The name of the corporation is NTN Communications, Inc. NTN Communications, Inc. was originally incorporated under the name Alroy Industries, Inc., and the original Certificate of Incorporation of the corporation was filed with the Secretary of State of the State of Delaware on April 13, 1984.

2. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation restates and integrates and further amends the provisions of the Certificate of Incorporation of this corporation.

3. The Board of Directors of NTN Communications, Inc. has duly adopted resolutions setting forth proposed amendments to the Certificate of Incorporation of said corporation, declaring said amendments to be advisable, and directing the officers of said corporation to solicit the written consent of the stockholders of said corporation to said amendments.

4. Thereafter, said amendments to the Certificate of Incorporation herein certified were duly adopted in accordance with Section 242 of the Delaware General Corporation Law by affirmative written consent of a majority of the outstanding stock of each class entitled to vote thereon in accordance with Section 228 of the Delaware General Corporation Law. Written notice of the taking of such action by written consent of stockholders has been given to those stockholders who have not so consented in writing, as provided in Section 228 of the Delaware General Corporation Law.

5. The text of the Restated Certificate of Incorporation as heretofore amended or supplemented is hereby restated and further amended to read in its entirety as follows:

1.

RESTATED CERTIFICATE OF INCORPORATION

NTN COMMUNICATIONS. INC.

ARTICLE I

The name of the corporation (the “Corporation”) is NTN COMMUNICATIONS, INC.

ARTICLE II

The address of the corporation’s registered office in the State of Delaware is 1013 Centre Road, in the City of Wilmington, county of New Castle, Delaware. The name of the Corporation’s registered agent at such address is Corporate Agents, Inc.

ARTICLE III

The nature of the business or purpose to be conducted or promoted is to be engaged in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.

ARTICLE IV

After giving effect to the reverse stock split described below, the total number of shares of stock which the corporation shall have authority to issue is 60,000,000 shares, of which 50,000,000 shares shall be Common Stock, par value $.005 per share, and 10,000,000 shares shall be Preferred Stock, par value $.005 per share.

(a) Series A Preferred Stock. This corporation is authorized to issue a series of Preferred Stock designated “Series A Convertible Preferred Stock” consisting of 5,000,000 shares.

(1) Dividend Rights.

(i) Rights to Cash Dividends. In the absence of any action pursuant to part (ii) of this subdivision (a)(l), the holders of the Series A Preferred shall be entitled to receive cumulative dividends of ten cents per share per annum, payable semiannually in equal installments of five cents per share on December 1 and June 1 of each year. The dividends so payable on any December 1 or June 1 will be paid by check or draft to the person (the “Registered Holder”) in whose name the Series A Preferred is registered as of the close of business on November 15 or May 15 next preceding the interest payment date (whether or not a business day), at such person’s address as it appears on the registration books of the Corporation.

(ii) Rights to Stock Dividends. At the Corporation’s option, the Corporation may declare and pay a dividend for any dividend payment date(s) in the form of its common stock, $.005 par value per share (the “Common Stock”), such stock dividend to be in lieu of the dividend provided for by part (i) of this subdivision (a)(l). To determine the amount of Common Stock to be issued as a substitute dividend on the Series A Preferred, the Common Stock will be valued at its market value. Market value is defined for this purpose as the average closing bid price for the twentieth through eleventh trading days preceding the date on which interest is due.

(2) Voting Rights. The Series A Preferred shall have no voting rights.

2.

(3) Rights on Liquidation, Dissolution and Winding Up. Upon liquidation, dissolution and winding up, each share of the Series A Preferred shall have preference over the Common Stock to the extent of $1.00 per share, but shall not otherwise be entitled to share in the proceeds of any liquidation, dissolution or winding up. The preference or subordination of the rights of the Series A Preferred with respect to any other class of stock, or any other series of preferred stock, shall be as stated in the instrument defining the rights of such other class or series. Neither the merger or consolidation of the Corporation into or with any other corporation or any other corporation into or with the Corporation, nor a sale, transfer or lease of all or any part of the assets of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this subdivision (3).

(4) Conversion Rights. Commencing on the date of the issuance of the Series A Preferred, the Series A Preferred shall at any time be convertible at the option of the holder thereof into duly authorized, validly issued, fully paid and nonassessable shares of Common Stock at a conversion rate (the “Conversion Rate”) as set forth below (subject to adjustment as provided in subdivision (5) hereof).

(i) The Registered Holder shall have the right at any time to convert shares of Series A Preferred into that number of fully paid and nonassessable shares of Common Stock of the Corporation that equals the number of shares of Series A Preferred that are surrendered for conversion divided by the Conversion Rate. The Conversion Rate shall initially be 100%, and shall be subject to adjustment pursuant to subdivision (5) hereof. Upon the surrender of the Series A Preferred accompanied by the written request for conversion from the Registered Holder, the Corporation shall issue and deliver to such Registered Holder certificates evidencing such shares of Common Stock.

(ii) In order to exercise the conversion privileges, the Registered Holder shall surrender the Series A Preferred to the Corporation at its principal address, accompanied by written notice to the Corporation that such holder elects to convert all or a portion of the same. Such notice shall also state the name or names (with address) in which the certificate or certificates for shares of Common Stock and any re-issued Series A Preferred shall be issued upon such conversion. As promptly as practicable after the receipt of such notice and surrender of the Series A Preferred, the Corporation shall issue and deliver to such holder, or to his assignee or assignees on his written order, a certificate or certificates for the number of full shares of Common Stock and any re-issued Series A Preferred issuable upon the conversion of the Series A Preferred. Such conversion shall be deemed to have been effected at the close of business of the first business day after the date on which such notice shall have been received by the Corporation and such Series A Preferred shall have been surrendered.

(iii) No fractional shares shall be issued upon conversion of the Series A Preferred and any portion of the same which would otherwise be convertible into a fractional share shall be paid in cash in the amount of the liquidation preference of the fractional share. No payment or adjustment shall be made upon any conversion on account of any cash dividends on the Common Stock issued upon such conversion.

(5) Adjustments to Conversion Rate.

The Conversion Rate shall be subject to adjustment as provided in this subdivision (5).

(i) In case the Corporation shall (A) pay a dividend, or make a distribution, in shares of its Common Stock (the “Shares”), (B) subdivide its outstanding Shares into a greater number of Shares, (C) combine its outstanding Shares into a smaller number of Shares, or (D) issue by reclassification of its Shares any shares of Common Stock of the Corporation (other than a change in par value, or from par value to no par value, or from no par value to par value), the Conversion Rate in effect immediately prior thereto shall be adjusted so that the Registered Holder shall

3.

be entitled to receive the number of Shares which he would have owned or have been entitled to receive immediately following the happening of any of the events described above, had the Series A Preferred been converted immediately prior to the record or effective date thereof.

An adjustment made pursuant to subparts (i)(A)-(D) above shall become effective immediately after the record date in the case of a dividend or distribution in Shares and shall become effective immediately after the effective date in the case of a subdivision, combination or reclassification. If, as a result of an adjustment made pursuant to this paragraph, the Registered Holder shall become entitled to receive shares of two or more classes of Common Stock of the Corporation, the Board of Directors (whose determination shall be conclusive and shall be evidenced by a resolution) shall determine the allocation of the adjusted Conversion Rate between or among the shares of such classes of Common Stock.

(ii) In case of any reclassification of the outstanding Shares (other than a change in par value, or from par value to no par value, or from no par value to par value, or as a result of a subdivision, combination or stock dividend), or in case of any consolidation of the Corporation with, or merger of the Corporation into, another corporation wherein the Corporation is not the surviving entity, or in case of any sale of all, or substantially all, of the property, assets, business and goodwill of the Corporation, the Corporation, or such successor or purchasing corporation, as the case may be, shall provide, by a written instrument delivered to the Registered Holder, that the Registered Holder shall thereafter be entitled upon conversion to the kind and amount of shares of stock or other equity securities, or other property or assets which would have been receivable by such Registered Holder upon such reclassification, consolidation, merger or sale, if the Series A Preferred had been converted immediately prior thereto. Such corporation, which thereafter shall be deemed to be the “Corporation” for purposes of the Series A Preferred, shall provide in such written instrument for adjustments to the Conversion Rate which shall be as nearly equivalent as may be practicable to the adjustments provided for in this subdivision (5).

(iii) Common Stock Issued at Less Than the Conversion Price. If the Corporation shall issue any Common Stock without consideration or for a consideration per share less than the then applicable Equivalent Preference Amount, the Equivalent Preference Amount shall immediately be reduced to the amount determined by dividing (A) an amount equal to the sum of (1) the number of shares of Common Stock outstanding immediately prior to such issuance multiplied by the Equivalent Preference Amount in effect immediately prior to such issuance and (2) the consideration, if any, received by the Corporation upon such issuance, by (B) the total number of shares of Common Stock outstanding immediately after such issuance. The Equivalent Preference Amount at any time shall be the value that results when the liquidation preference of one share of Series A Preferred is multiplied by the Conversion Rate in effect at that time; thus the Conversion Rate applicable after the adjustment in the Equivalent Preference Amount provided by this part (iii) shall be the figure that results when the adjusted Equivalent Preference Amount is divided by the liquidation preference of one share of Series A Preferred.

For the purpose of determining the date on which an adjustment to the Conversion Rate pursuant to this part (iii) shall take effect, the Conversion Rate shall be adjusted as of the earlier of (x) the date, if any, on which the Corporation shall enter into a firm contract for the issuance of such shares of Common Stock, or securities convertible into or exchangeable or exercisable for shares of Common Stock, or (y) the date of actual issuance of such shares of Common Stock or such other securities.

For the purposes of any adjustment of the Conversion Rate pursuant to this part (iii), the following provisions shall also be applicable:

(A) Cash. In the case of the issuance of Common Stock for cash, the amount of the consideration received by the Corporation shall be deemed to be the amount of the cash proceeds received by the Corporation for such Common Stock before deducting therefrom any discounts, commissions, taxes or other expenses allowed, paid or incurred by the Corporation for any underwriting or otherwise in connection with the issuance and sale thereof.

4.

(B) Consideration Other Than Cash. In the case of the issuance of Common Stock (otherwise than upon the conversion of shares of capital stock or other securities of the Corporation) for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as determined by the Board of Directors, irrespective of any accounting treatment; provided that such fair value as determined by the Board of Directors shall not exceed the aggregate current market price of the shares of Common Stock being issued as of the date the Board of Directors authorizes the issuance of such shares.

(C) Options and Convertible Securities. In the case of the issuance of (x) options, warrants or other rights to purchase or acquire Common Stock (whether or not at the time exercisable), (y) securities by their terms convertible into or exchangeable for Common Stock (whether or not at tie time so convertible or exchangeable) or (z) options, warrants or rights to purchase such convertible or exchangeable securities (whether or not at the time exercisable):

(1) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options, warrants or other rights to purchase or acquire Common Stock shall be deemed to have been issued at the time such options, warrants or rights were issued and for a consideration equal to the consideration (determined in the manner provided in subparts (A) and (B) above), if any, received by the Corporation upon the issuance of such options, warrants or rights plus the minimum purchase price provided in such options, warrants or rights for the Common Stock covered thereby;

(2) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities, or upon the exercise of options, warrants or other rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof, shall be deemed to have been issued at the time such securities were issued or such options, warrants or rights were issued and for a consideration equal to the consideration, if any, received by the Corporation for any such securities and related options, warrants or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration (determined in the manner provided in subparts (A) and (B) above), if any, to be received by the Corporation upon the conversion or exchange of such securities, or upon the exercise of any related options, warrants or rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof.

(3) on any change in the number of shares of Common Stock deliverable upon exercise of any such options, warrants or rights or conversion or exchange of such convertible or exchangeable securities or any change in the consideration to be received by the Corporation upon such exercise, conversion or exchange (the “Change in Number or Consideration”), including, but not limited to, a change resulting from the anti-dilution provisions thereof, the Conversion Rate as then in effect shall forthwith be readjusted to such Conversion Rate as would have been obtained had an adjustment been made upon the issuance of such options, warrants or rights not exercised prior to the Change in Number or Consideration, or of such convertible or exchangeable securities not converted or exchanged prior to the Change in Number or Consideration, upon the basis of the Change in Number or Consideration;

5.

(4) on the expiration or cancellation of any such options, warrants or rights, or the termination of the right to convert or exchange such convertible or exchangeable securities, if the Conversion Rate shall have been adjusted upon the issuance thereof, the Conversion Rate shall forthwith be readjusted to such Conversion Rate as would have been obtained had an adjustment been made upon the issuance of such options, warrants, rights or such convertible or exchangeable securities on the basis of the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options, warrants or rights, or upon the conversion or exchange of such convertible or exchangeable securities; and

(5) if the Conversion Rate shall have been adjusted upon the issuance of any such options, warrants, rights or convertible or exchangeable securities, no further adjustment of the Conversion Rate shall be made for the actual issuance of Common Stock upon the exercise, conversion or exchange thereof.

(iv) Whenever the Conversion Rate shall be adjusted as herein provided, the Corporation shall compute the adjusted Conversion Rate in accordance with such provisions and shall prepare a certificate signed by its President, any Vice-President or the Chief Financial Officer setting forth the adjusted Conversion Rate and showing in reasonable detail the facts upon which such adjustment was based and shall mail such certificate to the Registered Holders of the Series A Preferred.

(6) Reservation of Shares. The Corporation shall at all times reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Series A Preferred, such number of shares as shall from time to time be sufficient to effect the conversion of all shares of Series A Preferred from time to time outstanding, and, if at any time the number of shares of Common Stock remaining unissued are not sufficient to permit the conversion of all the then-outstanding shares of Series A Preferred, the Corporation shall take such action as is necessary to increase the authorized amount of Common Stock to such number of shares as shall be sufficient for such purposes.

(b) Other Series or Classes of Preferred Stock. Shares of an additional Preferred Stock may be issued from time to time in one or more series, each such series to have such distinctive designation or title as may be stated and expressed in this Article IV or as may be fixed by the Board of Directors prior to the issuance of any shares thereof. Each such series of Preferred Stock shall have such voting powers, full or limited, or no voting powers, and such designations, preferences and such relative, participating, optional or other special rights (including, without limitation, the right to convert the shares of such Preferred Stock into shares of the Corporation’s Common Stock at such rate and upon such terms and conditions as may be fixed by the Corporation’s Board of Directors), with such qualifications, limitations, or restrictions of such preferences or rights as shall be stated and expressed in this Article IV or in the resolution or resolutions providing for the issue of such series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof, in accordance with the laws of the State of Delaware.

Except as may be otherwise provided in this Article IV or in the resolution or resolutions providing for the issue of a particular series, the Board of Directors may from time to time increase the number of shares of any series already created by providing that any unissued shares of Preferred Stock shall constitute part of such series, or may decrease (but not below the number of shares thereof then outstanding) the number of shares of any series already created by providing that any unissued shares previously assigned to such series shall no longer constitute part thereof.

All shares of Preferred Stock of all series shall be of equal rank and be identical in all respects except in respect to the particulars which may be fixed by the Board of Directors as provided in this Article IV.

6.

(c) Common Stock.

(1) After the requirements with respect to the preferential dividends of the Preferred Stock shall be met, and after the Corporation shall have complied with all of the requirements, if any, with respect to the setting aside of sums for redemption, the holders of Common Stock shall be entitled to receive such dividends as may be declared from time to time by the Board of Directors.

(2) After distribution in full of the preferential amounts required to be distributed to the holders of the Preferred Stock and to the holders of any class of stock of the Corporation ranking as to distribution of assets senior to the Common Stock, in the event of voluntary or involuntary liquidation or dissolution or winding-up of the Corporation, the holders of the Common Stock shall be entitled to receive all of the remaining assets of the Corporation, tangible and intangible, of whatever kind available to distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them, respectively.

(3) Each holder of record of Common Stock shall have the right to vote each share of Common Stock standing in his name on the record books of the Corporation. Except as otherwise provided herein or in any Certificate of Designations, Preferences and Rights of Preferred Stock filed in the Office of the Secretary of State of the State of Delaware, or otherwise as required by law, the holders of Preferred Stock and the holders of Common Stock shall vote together as one class on all matters.

Upon the filing of this Restated Certificate of Incorporation all outstanding shares of Common Stock held by each holder of record on such date shall be automatically combined at the rate of l-for-20 without any further action on the part of the holders thereof or this Corporation. No fractional shares will be issued. All fractional shares resulting from such combination shall be rounded upwards to the next whole number of shares of Common Stock.

ARTICLE V

The Corporation is to have perpetual existence.

ARTICLE VI

The Board of Directors is authorized to make, alter or repeal the Bylaws of the Corporation, to fix the amount reserved as working capital, and to authorize and cause to be executed, mortgages and liens without limit as to the amount upon the property and franchise of this corporation.

With the consent in writing, and pursuant to a vote of the holders of a majority of the capital stock issued and outstanding, the Directors shall have the authority to dispose, in any manner, of the whole property of the Corporation.

ARTICLE VII

The Corporation shall indemnify, in the manner and to the full extent permitted by law, any person (or the estate of 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 or not by or in the right of the Corporation, and whether civil, criminal, administrative, investigative or otherwise, by reason of the fact that such person 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. Where required by law, the indemnification provided for herein shall be made only as authorized in the specific case upon a determination in the

7.

manner provided by law, that indemnification of the director, officer, employee or agent is proper under the circumstances. The Corporation may, to the full extent permitted by law, purchase and maintain insurance on behalf of any such person against any liability which may be asserted against him. To the full extent permitted by law, the indemnification provided herein shall include expenses (including attorneys’ fees) in any action, suit or proceeding, or in connection with any appeal therein, judgments, fines and amounts paid in settlement, and in the manner provided by law any such expenses may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding. The indemnification provided herein shall not be deemed to limit the right of the Corporation to indemnify any other person for any such expense to the full extent permitted by law, nor shall it be deemed exclusive of any other rights to which any person seeking indemnification from the Corporation may be entitled under any agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.

To the extent permitted by law, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) under section 174 of the Delaware General Corporation Law; or (iv) for any transaction from which the director derived an improper personal benefit.

ARTICLE VIII

The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation in the manner now or hereafter prescribed by law.

IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been signed under the seal of the Company this tenth day of June, 1991.

NTN COMMUNICATIONS, INC.
By
	Patrick J. Downs, President

[Seal]

Attest :

Ronald E. Hogan, Secretary

8.

EX-10.16

Exhibit 10.16

[NTN BUZZTIME LETTERHEAD]

May 29, 2008

Michael Fleming

1265 Hillside Road

Pasadena, CA 91105

PERSONAL AND CONFIDENTIAL

Dear Michael:

On behalf of NTN Buzztime, Inc. (the “Company”), I am pleased to offer you the full-time position of interim Chief Executive Officer (“interim CEO”) of the Company. As you know, the Company has commenced a search for candidates for the Chief Executive Officer position. The terms of your position as interim CEO of the Company are as set forth below in this Letter Agreement:

1. Duties and Scope of Employment.

(a) Position. As of the Start Date (as defined below), you will serve as interim CEO of the Company. In such capacity you will report to and be subject to the direction and control of the Company’s Board of Directors (the “Board”). You will render such business and professional services in the performance of your duties, consistent with your position within the Company, as shall reasonably be assigned to you by the Board. You will work out of the Company’s headquarters office in Carlsbad, California.

(b) Board Membership. During the Employment Term (as defined below), you will continue to serve as a member of the Board, subject to stockholder approval as required in the future, and you will serve as Chairman of the Board. You will resign as a member and chairman of the Audit Committee and the Nominating and Corporate Governance Committee effective as of the Start Date. At the time your employment as interim CEO terminates, you will continue to serve as Chairman of the Board if duly elected by other members of the Board and you will be eligible to receive such compensation as is customarily provided by the Company for this position. At that time, the Board will consider your reappointment to the Audit Committee and the Corporate Governance Committee. In the event that your employment as interim CEO is terminated by the Company for Cause (as such term is defined in the form Executive Employee Incentive Stock Option Agreement issued under the Company’s 2004 Performance Incentive Plan), you shall immediately resign as a member of the Board.

(c) Obligations to the Company. You agree to the best of your ability and experience that you will at all times loyally and conscientiously perform all of the duties and obligations required of and from you pursuant to the terms hereof. During the Employment Term, you further agree that you will devote all of your business time and attention to the business of the Company, you will not render commercial or professional services of any nature to any person or organization, whether or not for compensation, without the prior written consent

of the Board, and you will not directly or indirectly engage or participate in any business that is competitive in any manner with the business of the Company. Notwithstanding the foregoing, you may continue to serve in your capacity as a member of the board of directors of Contendo Vici LLC as long as such service does not materially interfere with your performance of your duties and responsibilities to the Company under this Agreement. Nothing in this Letter Agreement will prevent you from accepting speaking engagements in exchange for honoraria, from serving on boards of charitable organizations, or from investing in other businesses provided you are not actively participating in any such business as a director, employee, independent contractor, partner, principal, agent or otherwise, and provided further that any such business is not competitive with the business conducted by the Company (as conducted now or during the Employment Term), and no consent from the Board shall be required for any such activities. You will comply with and be bound by the Company’s operating policies, procedures and practices from time to time in effect during the Employment Term.

(d) Term. Subject to fulfillment of any conditions imposed by this Letter Agreement, you will commence full-time employment with the Company on May 29, 2008 (the “Start Date”). Your period of employment under this Letter Agreement will end at the close of business on December 31, 2008, unless either party terminates this Letter Agreement earlier pursuant to Section 3(b). The period of your employment under this Letter Agreement is referred to herein as the “Employment Term.”

2. Compensation. For the duties and services to be performed by you hereunder, the Company shall pay you, and you agree to accept, the salary, bonus, stock option and other benefits described below in this Section 2 during the Employment Term.

(a) Salary. You will receive a monthly salary of $33,333.33, payable in two equal payments per month pursuant to the Company’s normal payroll practices and subject to applicable tax withholding and authorized deductions.

(b) Bonus. During the Employment Term, you will be eligible to receive a cash bonus based exclusively on the Company’s performance against the FY 2008 EBITDA metric (the “Metric”) described in the Company’s forecast dated May 23, 2008, a copy of which was provided to you as a member of the Board. For each $500,000 increment (which shall not be subject to proration) of EBITDA improvement against the Metric, you will earn a cash bonus of $50,000 (up to a maximum aggregate amount of 50% of your Base Salary during the Employment Term). The Compensation Committee of the Board will measure the level of such improvement achieved by the Company for the year-to-date period ending as of the earlier of (A) the end of the last full month of your employment as interim CEO or (B) December 31, 2008. Any bonus earned under this paragraph will be paid to you net of all applicable taxes and withholdings within 30 days of completion of the Company’s audited financial statements for FY 2008 prepared by and for the Company and filed by the Company with its Form 10-K for that fiscal year, but in no event later than March 15, 2009. Any bonus earned by you will be paid to you even if your employment with the Company as interim CEO terminates prior to December 31, 2008 or prior to the date of payment of the bonus. You will not eligible to earn any other bonus or incentive compensation from the Company during the Employment Term.

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(c) Stock Option. In connection with the commencement of your employment as interim CEO, the Company will recommend to the Board that you be granted a stock option (the “Option”) to purchase 150,000 shares of the Company’s Common Stock at the next regularly scheduled Board meeting following your Start Date. The Option shall be granted with an exercise price equal to the closing price of the Company’s Common Stock as reported on the American Stock Exchange on the date of the grant. The Option will vest and become exercisable with respect to 14.28% of the shares on each monthly anniversary of the Option grant date during your Employment Term. The Option will be intended to qualify as an “incentive stock option” within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), to the maximum extent possible within the limitations of the Code. The Option will be subject to the terms of the Company’s 2004 Performance Incentive Plan and the form of Executive Employee Incentive Stock Option Agreement, which agreement must be executed as a condition of the grant and exercise of the Option.

(d) Benefits. You will be entitled to participate, to the extent you are eligible under the terms and conditions thereof, in any medical insurance plans, 401(k) plans, deferred compensation plans, life insurance plans, vacation, retirement or other benefit plans which are generally available to employees of the Company and which may be in effect from time to time during your employment with the Company. The Company will be under no obligation to institute or continue the existence of any benefit plan described herein and may from time to time amend, modify or terminate any such benefit plan.

(e) Reimbursement of Business Expenses. You will be authorized to incur on behalf and for the benefit of, and shall be reimbursed by, the Company for reasonable business expenses, provided that such expenses are substantiated in accordance with Company policies.

(f) Reimbursement of Living Expenses. The Company will reimburse you for living expenses you incur for housing, food, transportation and other incremental expenses you incur during the Employment Term while maintaining your personal residence outside of the greater San Diego area, up to a maximum aggregate reimbursement of $5,000 per month. You will be required to provide substantiation of all of such expenses on Company approved expense report forms in accordance with Company policies. This $5,000 monthly amount may not be carried forward to a subsequent month to the extent not fully used in a particular month. These payments may be made as direct payments of your invoices or bills or by reimbursement to you of costs that you pay. You will be responsible for all income and employment taxes due on such payments; the Company will not provide a gross-up payment to cover such tax liabilities.

(g) Director Compensation. You acknowledge and agree that while serving as interim CEO you will forego the receipt of the annual stock option grant that you otherwise would have received on the date of the Company’s 2008 annual stockholder meeting as a non-employee director and you will forego the receipt of any other compensation that you otherwise would have received as a non-employee director of the Company during the Employment Term.

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3. Nature of Employment.

(a) At-Will Employment. Your employment with the Company will at all times be “at will,” which means that either you or the Company may terminate your employment at any time, for any or no reason, with or without cause, subject only to the specific provisions of this Letter Agreement. Any contrary representations that may have been made or may be made to you at any time shall be superseded and governed by this Section 3. This Letter Agreement shall constitute the full and complete agreement between you and the Company on the “at will” nature of your employment, which may only be changed in an express written agreement signed by you and a duly authorized officer of the Company.

(b) Termination. The Company may terminate your employment at any time and for any or no reason, and with cause or without cause, by giving you no less than 60 days advance notice in writing. You may terminate your employment at any time by giving the Company no less than 60 days advance notice in writing. Your employment will terminate automatically in the event of your death or total and permanent disability.

(c) Termination of Agreement. This Letter Agreement will terminate on the earlier of December 31, 2008 or when all obligations of the parties hereunder have been satisfied. The termination of this Letter Agreement shall not limit or otherwise affect any of your obligations under Section 5(a), 7 or 8 or the Company’s obligations under Section 10.

4. Benefits Following Termination of Employment. If your employment terminates for any reason, you will not be entitled to receive payment of any severance benefits. You (or, in the event of your death, your estate) will receive payment(s) for all salary and unpaid vacation accrued as of the date of your termination of employment. In addition, your benefits will be continued under the Company’s then existing benefit plans and policies to the extent, if any, provided for under such plans and policies in effect on the date of termination and in accordance with applicable law.

5. Pre-employment Conditions.

(a) Confidentiality and Work for Hire Agreement. Your acceptance of this offer and commencement of employment with the Company is contingent upon the execution and delivery to an officer of the Company of the Confidentiality and Work for Hire Agreement in the form attached hereto as Exhibit A (the “Confidentiality Agreement”). You hereby agree to continue to abide by the terms of the Confidentiality Agreement and further agree that the provisions of the Confidentiality Agreement shall survive any termination of this Letter Agreement or of your employment relationship with the Company.

(b) Right to Work. For purposes of federal immigration law, you will be required to provide to the Company documentary evidence of your identity and eligibility for employment in the United States. Such documentation must be provided to us within three business days of your Start Date, or our employment relationship with you may be terminated.

6. Conflicting Obligations. You represent that your performance of all the terms of this Letter Agreement will not breach any other agreement to which you are a party. You have not, and will not during the term of this Letter Agreement, enter into any oral or written agreement in conflict with any of the provisions of this Letter Agreement.

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7. Protective Covenant. You acknowledge and agree that should you take a position as an executive officer (other than an officer whose function substantially relates to financial matters) of any business where your duties, or those of others who report directly or indirectly to you, include any activities in the fields of electronically simulated sports games or interactive television, which in the reasonable judgment of the Company is, or as a result of your engagement or participation would become, directly competitive with any aspect of the business of the Company or any of its affiliates (a “Covered Position”), that such position would inevitably lead to a disclosure of confidential information in contravention of the Confidentiality Agreement. Accordingly and without limiting the provisions of the Confidentiality Agreement, you agree that during the Employment Term, you shall not accept employment in a Covered Position. You expressly acknowledge and agree that the foregoing restriction is reasonable and necessary in order to protect the confidential information of the Company and it affiliates.

8. Anti - Solicitation.

(a) Business Relationships. You promise and agree that you will not use any confidential information of the Company (as described in the Confidentiality Agreement) to influence or attempt to influence customers, vendors, suppliers, joint venturers, associates, consultants, agents, or partners of the Company or any of its affiliates, either directly or indirectly, to divert their business away from the Company or any of its affiliates, to any individual, partnership, firm, corporation or other entity then in competition with the business of the Company or any of its affiliates, and you will not use any confidential information of the Company (as set forth in the Confidentiality Agreement) to otherwise materially interfere with any business relationship of the Company or any of its affiliates.

(b) Employees. You promise and agree that during the Employment Term and for a period of one year thereafter, you will not, directly or indirectly, individually or as a consultant to, or as an employee, officer, stockholder, director or other owner of or participant in any business, solicit (or assist in soliciting) any person who is then, or at any time within six months prior thereto was, an employee of the Company or any of its affiliates who earned annually $25,000 or more as an employee of such entity during the last six months of his or her own employment to work for (as an employee, consultant or otherwise) any business, individual, partnership, firm, corporation, or other entity whether or not engaged in competitive business with the Company or any of its affiliates.

9. Successors.

(a) Company’s Successors. This Letter Agreement shall be binding upon any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets. For all purposes under this Letter Agreement, the term “Company” shall include any successor to the Company’s business and/or assets, which becomes bound by this Letter Agreement.

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(b) Your Successors. This Letter Agreement and all of your rights hereunder shall inure to the benefit of, and be enforceable by, your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

10. Indemnification. The Company agrees to indemnify you and hold you harmless to the fullest extent permitted by applicable law and under the bylaws of the Company against and in respect to any and all actions, suits, proceedings, claims, demands, judgments, costs, expenses (including reasonable attorneys’ fees), losses and damages resulting from your good-faith performance of your duties and obligations to the Company. The Company shall cover you under directors and officers liability insurance both during and, while potential liability exists (but in any case not for more than six years), after the term of this Letter Agreement in the same amount and on the same terms as the Company covers its other active officers and directors, if such coverage is obtainable, but in all events such coverage shall be at least in substantially the same amount and on substantially the same terms as the Company covers its other active officers and directors.

11. Tax Matters.

(a) Responsibility for Tax Obligations. You agree that you are responsible for any applicable taxes of any nature (including any penalties or interest that may apply to such taxes) that the Company reasonably determines apply to any payment or equity award made to you hereunder (or any arrangement contemplated hereunder), that your receipt of any benefit hereunder is conditioned on your satisfaction of any applicable withholding or similar obligations that apply to such benefit, and that any cash payment owed to you hereunder will be reduced to satisfy any such withholding or similar obligations that may apply thereto.

(b) Code Section 409A. This Agreement is intended to comply with the requirements of Code Section 409A so that none of the benefits to be provided to you will be subject to the additional tax imposed under Code Section 409A, and any ambiguities herein will be interpreted to so comply. You and the Company agree to work together in good faith to consider and implement amendments to this Letter Agreement and to take such reasonable actions which are necessary, appropriate or desirable to ensure that you are not subject to additional tax or income recognition prior to actual payment to you under Code Section 409A; provided however that nothing in this sentence shall obligate the Company to amend this Letter Agreement in any way that increases the aggregate cost to the Company of providing the benefits specified herein.

12. Miscellaneous Provisions.

(a) Amendments and Waivers. Any term of this Letter Agreement may be amended or waived only with the written consent of the parties.

(b) Sole Agreement. This Letter Agreement, including any Exhibit hereto, constitutes the sole agreement of the parties and supersedes all oral negotiations and prior writings with respect to the subject matter hereof.

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(c) Notices. Any notice required or permitted by this Letter Agreement shall be in writing and shall be deemed sufficient upon receipt, when delivered personally or by a nationally-recognized delivery service (such as Federal Express or UPS), or forty-eight (48) hours after being deposited in the U.S. mail as certified or registered mail with postage prepaid, if such notice is addressed to the party to be notified at such party’s address as set forth below or as subsequently modified by written notice.

(d) Severability. If one or more provisions of this Letter Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (i) such provision shall be excluded from this Agreement, (ii) the balance of the Letter Agreement shall be interpreted as if such provision were so excluded and (iii) the balance of the Letter Agreement shall be enforceable in accordance with its terms.

(e) Counterparts. This Letter Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

(f) Arbitration. Any controversy arising out of or relating to your employment (whether or not before or after the expiration of the Employment Term), any termination of your employment, this Letter Agreement, the Confidentiality Agreement referred to in Section 5, the option agreement, the enforcement or interpretation of any of such agreements, or because of an alleged breach, default or misrepresentation in connection with any of the provisions of any such agreement, including (without limitation) any state or federal statutory claims, shall be submitted to arbitration in San Diego County, California, before a sole arbitrator selected from Judicial Arbitration and Mediation Services, Inc. or its successor (“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected from the American Arbitration Association; provided, however, that provisional injunctive relief may, but need not, be sought in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the arbitrator. The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. Judgment on the award may be entered in any court having jurisdiction.

The parties acknowledge and agree that they are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other in connection with any matter whatsoever arising out of or in any way connected with any of the matters referenced in the first sentence of the first paragraph of this Section 12(f).

The parties agree that the Company shall be responsible for payment of the forum costs of any arbitration hereunder, including the arbitrator’s fee. The parties further agree that in any proceeding with respect to such matters, the prevailing party will be entitled to recover its reasonable attorney’s fees and costs from the non-prevailing party (other than forum costs associated with the arbitration which in any event shall be paid by the Company).

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Without limiting the remedies available to the parties and notwithstanding the foregoing provisions of this Section 12(f), you and the Company acknowledge that any breach of any of the covenants or provisions contained in Sections 7 or 8 of this Agreement or in the Confidentiality Agreement could result in irreparable injury to either of the parties hereto for which there might be no adequate remedy at law, and that, in the event of such a breach or threat thereof, the non-breaching party shall be entitled to obtain a temporary restraining order and/or a preliminary injunction and a permanent injunction restraining the other party hereto from engaging in any activities prohibited by any covenant or provision in Sections 7 or 8 of this Agreement or in the Confidentiality Agreement or such other equitable relief as may be required to enforce specifically any of such covenants or provisions.

(g) Advice of Counsel. Each party to this Letter Agreement acknowledges that, in executing this Letter Agreement, such party has had the opportunity to seek the advice of independent legal counsel, and has read and understood all of the terms and provisions of this Letter Agreement. This Letter Agreement shall not be construed against any party by reason of the drafting of preparation hereof.

To indicate your acceptance of the Company’s offer, please sign and date this Letter Agreement in the space provided below and return it to me on or before May 30, 2008, along with a signed and dated original copy of the Confidentiality Agreement. This Letter Agreement, together with the Confidentiality Agreement and the agreements expressly referenced herein, set forth the terms of your employment with the Company and supersede any prior representations or agreements, whether written or oral. This Letter Agreement will be governed by the laws of California, without regard to its conflict of laws provisions. In the event of any conflict in terms between this Letter Agreement and any other agreement between you and the Company (including without limitation the two exhibits and the other agreements referenced herein), the terms of this Letter Agreement shall prevail. This Letter Agreement may not be modified or amended except by a written agreement, signed by a member of the Board (other than you) and yourself. No waiver by either party of any breach of, or of compliance with, any condition or provision of this letter agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

Very truly yours,
NTN Buzztime, Inc.
By:	/S/ GARY ARLEN
Gary Arlen, on behalf of the Board of Directors

ACCEPTED AND AGREED:
/S/ MICHAEL FLEMING
Signature
May 29, 2008
Date
Exhibit A:	Confidentiality and Work for Hire Agreement

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EXHIBIT A

CONFIDENTIALITY AND WORK FOR HIRE AGREEMENT

(Employee)

This Agreement is made and entered into as of May 29, 2008 by and between NTN BUZZTIME, INC. and any of its affiliates, having a principal place of business at 5966 La Place Court, Carlsbad, California 92008-8830 and Michael Fleming (“Employee”), and shall remain in full force and effect from and after the date hereof.

Employee acknowledges that by reason of his or her affiliation with NTN BUZZTIME, INC. Employee will have access to confidential information (as defined herein) relating to existing and planned business activities, including but not limited to, entertainment programming, the development of certain computer hardware and computer software and the marketing and advertising strategies related thereto in connection with the development, implementation and operation of information, education and entertainment products and services.

Confidential information shall mean all intellectual property rights and information, whether written or oral, including but not limited to, data, computer hardware and/or software programs, summaries, diagrams, reports and/or memoranda, as if written, however produced or reproduced, which is identified or marked confidential, or which, by the nature of the circumstances surrounding disclosure, should be considered, in good faith, to be treated as proprietary and confidential, and all other proprietary information relating to NTN BUZZTIME, INC. and any of its affiliates and their respective businesses (as currently conducted and as proposed to be conducted), properties and assets.

Employee shall not (1) divulge or disclose, directly or indirectly, any confidential information to any person, firm, corporation or other entity, for any purpose or reason whatsoever, or (2) make use of any confidential information for Employee’s purposes or for the benefit of any person, firm, corporation or other business entity except to the extent that (a) such confidential information is, in fact, obtainable from public sources (other than as a result of Employee’s breach of this agreement) or (b) such disclosure is required by applicable law or authorized in writing by an authorized representative of NTN BUZZTIME, INC. The prohibition against disclosure of confidential information shall survive the termination of Employee’s employment with NTN BUZZTIME, INC.

Employee shall promptly disclose and hereby irrevocably grants and assigns to NTN BUZZTIME, INC. for NTN BUZZTIME, INC.’s. sole use and benefit, all rights of every kind and character whatsoever, exclusively and perpetually, in and to all services performed by Employee, and to any and all (a) inventions, improvements, technical information, systems, software, programs, designs, drawings and suggestions, whether patented, patentable or unpatentable (“Inventions”), and (b) characters, character names, original works of authorship, literary works (including, but not limited to, computer software), audiovisual works, translations, compilations and other copyrightable or uncopyrightable works which are originated or produced by Employee (solely or jointly with others) (“Works”) which Employee may conceive, develop or acquire during his or her employment with NTN BUZZTIME, INC. (whether or not during usual working hours), together with all patent applications, letters patent, or other patent rights, and trademark, trade name, service marks and copyrights and all applications, registrations, renewals and reissues thereof that may at any time be granted for or upon any such Invention or Works, and (c) to all other such intangible rights (collectively, the “Developed Properties”). If for any reason such results and proceeds are deemed not to be a work made for hire, Employee hereby irrevocably assigns to NTN BUZZTIME, INC., to the fullest extent permitted by law, all of Employee’s right, title and interest thereto. Employee waives all so-called “moral rights of authors”, “droit moral” rights and other similar rights throughout the world, however denominated. Employee will, upon NTN BUZZTIME, INC.’s request, execute, acknowledge and deliver to NTN BUZZTIME, INC.

Page 9

such additional documents as NTN/BUZZTIME, INC. may deem necessary to evidence and effectuate NTN BUZZTIME, INC’s rights hereunder. Employee hereby grants NTN BUZZTIME, INC. the right, as Employee’s attorney-in-fact, to execute, acknowledge, deliver and record in the U.S. Copyright Office or elsewhere any and all such documents that Employee fails to execute, acknowledge, deliver and record. In connection therewith:

(i) Employee warrants that all Works will be original, will not have been previously published in whole or in part, will not infringe upon any rights of others or contain libelous material, and will not have been previously assigned, licensed or otherwise encumbered;

(ii) Employee shall, without charge, but at the expense of NTN BUZZTIME, INC., promptly at all times hereafter execute and deliver such applications, assignments, descriptions and other instruments as may be necessary or proper in the opinion of NTN BUZZTIME, INC. to vest title to the Developed Properties in NTN BUZZTIME, INC. and to enable NTN BUZZTIME, INC. to maintain the entire right, title and interest thereto throughout the universe; and

(iii) Employee shall render to NTN BUZZTIME, INC. at its expense all such reasonable assistance as it may require in the prosecution of applications for said copyrights, patents, trademarks, trade names, service marks or renewals or reissues thereof, in the prosecution or defense of interferences which may be declared involving any of said copyrights, NTN BUZZTIME, INC. may be involved relating to any Developed Properties.

(iv) Employee’s obligation to cooperate with and assist NTN BUZZTIME, INC. in obtaining and enforcing patents, copyrights, trademarks, trade secrets, and other rights and protection shall continue beyond the termination of Employee’s engagement by NTN BUZZTIME, INC..

(v) In the event NTN BUZZTIME, INC. is unable for any reason whatsoever to secure the signature of Employee to any lawful and necessary documents required, including those necessary for the assignment of, application for, or prosecution of any United States or foreign applications for letters patent or copyright, Employee hereby irrevocably designates and appoints NTN BUZZTIME, INC. and its duly authorized officers and agents as agent and attorney-in-fact, to act for and in Employee’s behalf and stead to execute and file any such application and to do all other lawfully permitted acts to further the assignment, prosecution and issuance of letters patent or copyright thereon with the same legal force and effect as if executed by Employee. Employee hereby waives and quitclaims to NTN BUZZTIME, INC. any and all claims of any nature whatsoever which Employee may now have or may hereafter have for infringement of any patent or copyright resulting from any such application.

(vi) Employee represents that there is no agreement with any other party that would conflict with his/her obligations under this Agreement.

All documents, drawings, writings, information and data of whatever kind and nature that may be provided to Employee in connection with his or her employment with NTN BUZZTIME, INC., and all copies thereof, shall be promptly returned to NTN BUZZTIME, INC. upon completion or termination of the business relationship between Employee and NTN BUZZTIME, INC..

This Agreement is made and entered into in the State of California and shall in all respects be interpreted, enforced and governed under the laws of said State. If any provision of this Agreement is held to be illegal or invalid, such provision shall be deemed to be severed and deleted, and neither the provision nor its deletion shall effect the validity of the remaining provisions, except where specifically stated otherwise herein. This Agreement may be modified only by a writing signed by NTN BUZZTIME, INC. and Employee.

The parties agree to indemnify, defend and hold each other harmless and each other’s officers, employees, and representatives and such party’s successors, licensees and assigns in the event of any threat or assertion of any claim, action or proceeding inconsistent with any of the foregoing representations and/or warranties.

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Employee may not assign this Agreement, in whole or in part. This Agreement shall inure to the benefit of and may be enforced by NTN BUZZTIME, INC., its successors, affiliates or assigns and shall be binding upon the Employee, his or her heirs, successors, assigns, legal representatives, executors, administrators and other successors-in-interest.

Employee agrees to execute all documents and do all acts as may be reasonably necessary, convenient or desirable in order to effect the provisions of this Agreement.

In the event that either party is required to bring any action, suit or other proceeding against the other party arising out of this Agreement, the prevailing party shall recover all of such party’s reasonable attorneys’ fees and costs throughout the entire proceedings.

This Agreement may be executed in counterparts which taken together shall constitute one document.

ACCEPTED AND AGREED:		ACCEPTED AND AGREED:
EMPLOYEE		NTN BUZZTIME, INC.
By:	/S/ MICHAEL FLEMING	By:	/S/ GARY ARLEN
	Signature		Signature
Print Name:	MICHAEL FLEMING	Title:	On behalf of the Board of Directors
Dated:	May 29, 2008	Dated:	May 30, 2008

Page 11

EXHIBIT “A”

Section 2872. NOTICE TO EMPLOYEE; BURDEN OF PROOF

If an employment agreement entered into after January 1, 1980, contains a provision requiring the employee to assign or offer to assign any of his or her rights in any invention to his or her employer, the employer must also, at the time the agreement is made, provide a written notification to the employee that the agreement does not apply to an invention which qualifies fully under the provisions of Section 2870. In any suit or action arising thereunder, the burden of proof shall be on the employee claiming the benefits of its provisions.

(Added to Stats. 1979, c. 1001, p. 3401, Section 1.)

Section 2870. EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS

(a) Any provision in an employment agreement which provides that an employee shall assign or offer to assign any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information except for those inventions that either:

(1) Relate at the time of conception or reduction to practice of the invention to the employer’s business, or actual or demonstrably anticipated research or development of the employer.

(2) Result from any work performed by the employee for the employer.

(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (a), the provision is against the public policy of this state and is unenforceable.

(Added by Stats. 1979, c. 1001, p. 3401, Section 1. Amended by Stats. 1986, c. 345, Section 1.)

Nothing herein shall be deemed to vary or modify the status or nature of the undersigned employee’s relationship to Company.

I hereby acknowledge receipt of notice from the Company pursuant to Section 2872 of Art. 3.5, Chapter 2 of Division 3 of the California Labor Code (as set forth herein as Exhibit “A”). I understand that the Company agrees that notwithstanding anything to the contrary in this Section 2, nothing in this Agreement shall apply to any invention which qualifies fully under the provisions of Section 2872 of the California Labor Code.

Date:	May 29, 2008	By:	/S/ MICHAEL FLEMING
		Employee Signature
			MICHAEL FLEMING
		(Print Name)

EX-10.17

Exhibit 10.17

RETENTION AND SEVERANCE AGREEMENT

THIS RETENTION AND SEVERANCE AGREEMENT is entered into as of June 27, 2008, by and between NTN Buzztime, Inc. and Kendra Berger (“Employee”).

WHEREAS, the Company desires to continue to retain the services of Employee;

WHEREAS, the parties desire to enter into this Retention and Severance Agreement (this “Agreement”) to set forth certain terms and conditions under which Employee may be eligible to receive retention and severance payments in the event of her employment continuation and termination;

NOW, THEREFORE, in consideration of the mutual agreements and covenants herein and other good and valuable consideration, the sufficiency of which is acknowledged, the Company and Employee hereby agree as follows:

1. Retention Bonus. The Company shall pay Employee a retention bonus equal to three months of Employee’s then current annual base salary (the “Retention Bonus”) in a lump sum cash payment on September 1, 2008 (subject to applicable payroll taxes and other withholding), provided Employee continues as of that date to serve as an employee of the Company.

2. Severance Payment. If Employee’s employment is terminated by the Company without Cause during the period from June 1, 2008 to May 31, 2009 and subject to the Company’s receipt of an effective release executed by Employee in a form acceptable to the Company (the “Release”), Employee shall be entitled to be paid a cash amount equal to the greater of $15,000 or the amount payable under NTN Buzztime’s executive severance formula or six months of Employee’s then current annual base salary (the “Severance Payment”), subject to applicable payroll taxes and other withholding. The Severance Payment shall be payable in one lump sum within 10 days of the effective date of the Release, provided that in any event such payment must be paid within 60 days of Employee’s “separation of service” (as defined under Internal Revenue Code Section 409A) subject to the Company’s receipt of an effective Release.

3. Definition of “Cause.” For purposes of this Agreement, “Cause” shall mean as reasonably determined by the Company’s Board of Directors, (i) any act of personal dishonesty taken by Employee in connection with her responsibilities as an employee of the Company which is intended to result in substantial personal enrichment of Employee and is reasonably likely to result in material harm to the Company, (ii) Employee’s conviction of a felony which the Board reasonably believes has had or will have a material detrimental effect on the Company’s reputation or business, (ii) a willful act by Employee which constitutes misconduct and is materially injurious to the Company, or (iv) continued willful violations by Employee of Employee’s obligations to the Company after there has been delivered to Employee a written demand for performance from the Company which describes the basis for the Company’s belief that Employee has willfully violated her obligations to the Company.

4. No Employment Contract. This Agreement shall not be deemed to constitute a contract of employment for any specific term or period, nor shall any provision hereof affect the right of the Company to discharge Employee at will.

5. Entire Agreement; Prior Agreements. This Agreement contains the entire agreement between Employee and the Company regarding the subject matter hereof and, as such, fully supersedes any and all prior agreements or understandings, whether oral or written, between Employee and the Company pertaining to the subject matter addressed in this Agreement. To the extent any term or condition of this Agreement conflicts with any term or condition of any other agreement between the parties, whether written or oral, this Agreement shall prevail.

6. Choice of Law. This Agreement shall be governed by the laws of the State of California without giving effect to the principle of choice of law thereof.

7. Tax Matters. Employee is responsible for payment of all taxes (including any interest and penalties) legally imposed upon her in connection with benefits provided under this Agreement, and the Company shall have no liability to Employee or any other party with respect to any such tax or amount. All benefits and payments provided hereunder are subject to applicable tax and other withholdings required by law, and they will be made net of such withholding amounts. Notwithstanding anything to the contrary in this Agreement, to the extent that any benefits or payments provided hereunder constitute “deferred compensation” under Internal Revenue Code Section 409A (and any guidance, whenever issued, thereunder) and Employee is a “specified employee” (also as defined thereunder) of the Company, no distribution or payment of any amount shall be made before a date that is six months following the date of Employee’s “separation from service” (also as defined in Section 409A) or, if earlier, the date of the Employee’s death. To the extent any delay in payment is required under the preceding sentence, the amounts that would otherwise have been required to be made during such period of delay shall accumulate during such period and shall be paid within five business days after the end of such period.

8. Arbitration. Any controversy arising out of or relating to this Agreement or an alleged breach of this Agreement shall be submitted to arbitration in San Diego County, California, before a sole arbitrator selected from Judicial Arbitration and Mediation Services, Inc. or its successor (“JAMS”), or if JAMS is no longer able to supply the arbitrator, such arbitrator shall be selected from the American Arbitration Association; provided, however, that provisional injunctive relief may, but need not, be sought in a court of law while arbitration proceedings are pending, and any provisional injunctive relief granted by such court shall remain effective until the matter is finally determined by the arbitrator. The arbitration shall be administered by JAMS pursuant to its Comprehensive Arbitration Rules and Procedures. Judgment on the award may be entered in any court having jurisdiction. The parties acknowledge and agree that they are hereby waiving any rights to trial by jury in any action, proceeding or counterclaim brought by either of the parties against the other in connection with any matter whatsoever arising out of or in any way connected with any of the matters referenced in the first sentence of the first paragraph of this Section 8. The parties agree that the Company shall be responsible for payment of the forum costs of any arbitration hereunder, including the

arbitrator’s fee. The parties further agree that in any proceeding with respect to such matters, the prevailing party will be entitled to recover its reasonable attorney’s fees and costs from the non-prevailing party (other than forum costs associated with the arbitration which in any event shall be paid by the Company).

9. Company’s Successors. This Agreement shall be binding upon any successor (whether direct or indirect and whether by purchase, lease, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets, which becomes bound by this Agreement.

10. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall be deemed to be one and the same instrument.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date written below.

June 27, 2008	/S/ KENDRA BERGER
Date	KENDRA BERGER
June 27, 2008	/S/ GARY ARLEN
Date	NTN BUZZTIME, INC.

EX-10.18

Exhibit 10.18

NTN BUZZTIME, INC.

2004 PERFORMANCE INCENTIVE PLAN

STOCK UNIT AGREEMENT

THIS STOCK UNIT AGREEMENT (the “Agreement”), dated                     , 20     (the “Grant Date”) between NTN Buzztime, Inc., a Delaware corporation (the “Corporation”), and                                          (the “Recipient”), is entered into as follows:

WHEREAS, the continued commitment of the Recipient is considered by the Corporation to be important for the Corporation’s continued growth; and

WHEREAS, in order to give the Recipient an incentive to continue in the employ or service of the Corporation and to assure his or her continued commitment to the success of the Corporation, the Compensation Committee of the Board of Directors of the Corporation or its delegates (the “Committee”) has determined that the Recipient shall be granted units (“Stock Units”) representing hypothetical shares of the Corporation’s Common Stock, with each Stock Unit equal in value to one share of the Corporation’s Common Stock, subject to the restrictions stated below and in accordance with the terms and conditions of the NTN Buzztime, Inc. 2004 Performance Incentive Plan (the “Plan”), a copy of which can be obtained by written or telephonic request to the Stock Plan Administrator.

THEREFORE, the parties agree as follows:

1. Grant of Stock Units. Subject to the terms and conditions of this Agreement and of the Plan, the Corporation hereby grants to the Recipient Stock Units covering                                          shares of Stock (the “Shares”).

2. Vesting Schedule. Subject to the Recipient’s not experiencing a termination of employment or service during the following vesting period, the interest of the Recipient in the Stock Units shall vest as follows: 100% of the Shares shall vest on the fourth anniversary of the Grant Date; provided that in the event the Corporation achieves one or all of the revenue targets set forth below, a portion of the Stock Units shall immediately vest on the applicable date set forth below:

Date	Revenue Target	% Acceleration
March 15, 2010	5% revenue growth over 2008 revenue	10	%
March 15, 2011	17% revenue growth over 2008 revenue	40	%
March 15, 2012	30% revenue growth over 2008 revenue	50	%

The vesting schedule requires continued employment or service through each applicable vesting date as a condition to the vesting and the rights and benefits under this Agreement. Partial employment or service, even if substantial, during any vesting period will not entitle the Recipient to any proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or service as provided in Section 4(b) below or under the Plan.

Additional vesting may apply under the circumstances specified in Section 5 below.

3. Benefit Upon Vesting. Upon the vesting of the Stock Units and subject to any limitations set forth in this Agreement, the Recipient shall be entitled to receive, and the Corporation shall as soon as reasonably practicable (but in any event, within the period ending on the later to occur of the date that is two and one half (2 ¹/2) months after the end of (a) the Recipient’s tax year that includes the applicable vesting date, or (b) the Corporation’s tax year that includes the applicable vesting date) issue to the Recipient, a number of Shares equal to the number of Stock Units that have vested on the applicable vesting date subject to Section 7 below.

4. Restrictions.

(a) Except as otherwise provided for in this Agreement, the Plan or applicable law, the Stock Units or any related rights granted hereunder may not be sold, pledged or otherwise transferred until the Stock Units become vested in accordance with Section 2 and the Shares are issued under Section 3. The period of time between the date hereof and the date the Stock Units become fully vested is referred to as the “Restriction Period.”

(b) Except as otherwise provided for in this Agreement, if the Recipient’s employment or service with the Corporation is terminated at any time for any reason, prior to the lapse of the Restriction Period, all Stock Units granted hereunder that have not vested by such termination date and that are held by the Recipient as of such date shall be forfeited by, and no further rights shall accrue to, the Recipient, without payment of any consideration by the Corporation and without any other action by the Recipient or the Recipient’s beneficiary or personal representative, as the case may be. If the Recipient is employed or engaged by a Subsidiary and that entity ceases to be a Subsidiary, such event shall be deemed to be a termination of employment or service of the Recipient for purposes of this Agreement, unless the Recipient otherwise continues to be employed or engaged by the Corporation or another of its Subsidiaries following such event.

5. Change in Control. Notwithstanding any contrary vesting period or other limitation or restriction in this Agreement or the Plan, in the event of a Change in Control Event (as defined in Section 7.3 of the Plan), the Stock Units shall become fully vested (and any Shares subject hereto shall be issued and settled and the Stock Units shall terminate) effective as of immediately prior to and contingent upon consummation of the Change in Control Event.

6. No Stockholder Rights. Stock Units represent hypothetical shares of Common Stock. During the Restriction Period, and except as otherwise provided for under the Plan or this Agreement, the Recipient shall not be entitled to any of the rights or benefits (including without limitation any voting or dividend rights) generally accorded to stockholders.

7. Taxes. To meet the obligations of the Corporation (or a Subsidiary if the Recipient is employed by an entity other than the Corporation) and the Recipient with respect to any income or employment withholding taxes, FICA contributions, or the like under any federal, state, local or foreign statute, ordinance, rule, or regulation in or connection with the award grant, vesting or settlement of the Stock Units, the Corporation may, at its sole discretion, either require the

Recipient to deposit with the Corporation an amount of cash sufficient to meet such obligations and/or, withhold the required amounts from the Recipient’s pay during the pay periods immediately preceding the date on which any such applicable withholding tax or similar obligation otherwise arises. The Corporation may also in lieu of or in addition to the foregoing, at its sole discretion, withhold a number of shares of Common Stock otherwise deliverable under this award having a fair market value sufficient to satisfy the statutory minimum (or such higher amount as is allowable without adverse accounting consequences) of the Recipient’s estimated total federal, state, local and/or foreign tax obligations associated with the grant, vesting or settlement of the Stock Units. The Corporation shall not deliver any of the Shares until and unless the Recipient has made the deposit required herein or proper provision for all applicable tax withholding and similar obligations has been made. The Recipient hereby consents to any action reasonably taken by the Corporation to meet all or any of such obligations.

8. Data Privacy Consent. The Recipient hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Recipient’s personal data as described in this document by the Corporation for the exclusive purpose of implementing, administering and managing the Recipient’s participation in the Plan. The Recipient understands that the Corporation holds certain personal information about the Recipient, including, but not limited to, name, home address and telephone number, date of birth, social security or insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Corporation, details of all options or any other entitlement to shares of stock awarded, canceled, purchased, exercised, vested, unvested or outstanding in the Recipient’s favor for the purpose of implementing, managing and administering the Plan (“Data”). The Recipient understands that the Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Recipient’s country or elsewhere and that the recipient country may have different data privacy laws and protections than the Recipient’s country. The Recipient understands that the Recipient may request a list with the names and addresses of any potential recipients of the Data by contacting the Stock Plan Administrator. The Recipient authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Recipient’s participation in the Plan, including any requisite transfer of such Data, as may be required to a broker or other third party with whom the Recipient may elect to deposit any Stock acquired under the Plan. The Recipient understands that Data will be held only as long as is necessary to implement, administer and manage participation in the Plan. The Recipient understands that the Recipient may, at any time, view Data, request additional information about the storage and processing of the Data, require any necessary amendments to the Data or refuse or withdraw the consents herein, in any case without cost, by contacting the Stock Plan Administrator in writing. The Recipient understands that refusing or withdrawing consent may affect the Recipient’s ability to participate in the Plan. For more information on the consequences of refusing to consent or withdrawing consent, the Recipient understands that he or she may contact the Stock Plan Administrator at the Corporation.

9. Plan Information. The Recipient acknowledges that the Recipient has received copies of the Plan and the Plan prospectus from the Corporation and agrees to receive stockholder information, including copies of any annual report, proxy statement and periodic report, from the

SEC Filings section in the Investor Relations section of the Corporation’s website at www.ntnbuzztime.com. The Recipient acknowledges that copies of the Plan, Plan prospectus, Plan information and stockholder information are also available upon written or telephonic request to the Stock Plan Administrator.

10. Recipient Acknowledgments. By accepting this grant of Stock Units, the Recipient acknowledges and agrees that the Plan is established voluntarily by the Corporation, it is discretionary in nature and may be modified, amended, suspended or terminated by the Corporation at any time unless otherwise provided in the Plan or this Agreement. The Recipient acknowledges that all decisions with respect to future grants, if any, will be at the sole discretion of the Corporation. The Recipient’s participation in the Plan shall not create a right to further employment or service with the Corporation and shall not interfere with the ability of the Corporation to terminate the Recipient’s employment or service relationship at any time with or without cause and it is expressly agreed and understood that employment or service is terminable at the will of either party, insofar as permitted by law. The Recipient agrees that stock units, stock unit grants and resulting benefits are an extraordinary item that do not constitute compensation of any kind for services of any kind rendered to the Corporation and are outside the scope of the Recipient’s employment or service contract, if any. Stock units, stock unit grants and resulting benefits are not part of normal or expected compensation or salary for any purposes, including, but not limited to calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments insofar as permitted by law. In the event that the Recipient is not an employee of the Corporation, this grant of Stock Units will not be interpreted to form an employment contract or relationship with the Corporation or any Subsidiary of the Corporation. The Recipient acknowledges that the future value of the Shares is unknown, may increase or decrease from the date of grant or vesting of the Stock Unit and cannot be predicted with certainty. In consideration of this grant of Stock Units, no claim or entitlement to compensation or damages shall arise from termination of this grant of Stock Units or diminution in value of this grant of Stock Units resulting from the Recipient’s termination of employment or service by the Corporation (for any reason whatsoever and whether or not in breach of applicable laws).

10. Code Section 409A Matters. The Company has attempted in good faith to structure the Stock Units in a manner that conforms to the requirements of Code Section 409A(a)(2), (3) and (4), and any ambiguities herein will be interpreted to so comply with these requirements to the maximum extent permissible. To the extent the IRS challenges whether the Stock Units in fact comply with Code Section 409A(a)(2), (3) and (4), the Recipient shall be fully responsible for any additional taxes, penalties and/or interest that might apply as a result of any adverse determination resulting from such challenge. To the extent the Stock Units contemplate multiple distribution dates, each amount to be paid (Shares to be distributed) hereunder on any particular distribution date is designated as a separate payment and such payments will not collectively be treated as a single payment. Notwithstanding anything else to the contrary in this Agreement or the Plan, the Company may accelerate distribution of Shares under this Agreement only in accordance with Treas. Reg. §1.409A-3(j)(4).

11. Miscellaneous.

(a) The Corporation shall not be required to treat as the owner of Stock Units, and associated benefits hereunder, any transferee to whom such Stock Units or benefits shall have been so transferred in violation of this Agreement.

(b) The parties agree to execute such further instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

(c) Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon delivery to the Recipient at the Recipient’s address then on file with the Corporation.

(d) The Plan is incorporated herein by reference. The Plan and this Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Corporation and the Recipient with respect to the subject matter hereof, and may not be modified adversely to the Recipient’s interest except by means of a writing signed by the Corporation and the Recipient. This Agreement is governed by the laws of the state of Delaware. In the event of any conflict between the terms and provisions of the Plan and this Agreement, the Plan terms and provisions shall govern. Capitalized terms used but not defined in this Agreement have the meanings assigned to them in the Plan. Certain other important terms governing this contract are contained in the Plan.

(e) The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

Accepted by Recipient:	NTN BUZZTIME, INC.
	By:
[Recipient Name]	Name:
	Title:

RETAIN THIS AGREEMENT FOR YOUR RECORDS

EX-10.19

Exhibit 10.19

July 9, 2008

Mr. Dario L. Santana

5966 La Place Court

Carlsbad, California 92008

Re: Release of Claims

Dear Dario:

This letter confirms the agreement between you and NTN Buzztime, Inc. (the “Company”) concerning the terms of your separation and offers you the separation compensation identified in your Employment Agreement following the effectiveness of a release of claims.

1. Separation Date: July 9, 2008 is your last day of employment with the Company (the “Separation Date”). On the Separation Date, you will have a “separation from service” under Internal Revenue Code Section 409A and the regulations issued thereunder.

2. Acknowledgment of Payment of Wages: By your signature below, you acknowledge that on July 9, 2008, we provided you final paychecks in the amount of $16,298.42 for all wages, salary, bonuses, reimbursable expenses, accrued vacation and any similar payments due you from the Company as of the Separation Date. By signing below, you acknowledge that the Company does not owe you any other amounts.

3. Stock Options. Vesting with respect to the stock options granted to you under the Company’s 2004 Performance Incentive Plan will cease on the Separation Date. All unvested shares will be forfeited on the Separation Date, and you will have 3 years and 1 year respectively as stated in your stock option agreements dated July 10, 2006 and July 10, 2007 from the Separation Date to exercise the options with respect to any shares vested as of the Separation Date. As of the Separation Date, you have an aggregate of 416,666 vested option shares (see the attached stock option report). You acknowledge and agree that all unvested shares will be forfeited on the Separation Date and that you have no right, title, or interest in or to any shares of the Company’s capital stock under the stock option agreements issued to you or any other agreement (oral or written) or plan with the Company.

4. Separation Compensation: Upon the effectiveness of the waiver of claims set forth in paragraph 7, below, the Company agrees:

a. To continue payments of your base salary in effect on the Separation Date (i.e., $15,384.62 bi-weekly), less applicable state and federal payroll deductions, on the Company’s regular bi-weekly payroll dates through July 8, 2009; and

b. To make the payments necessary under COBRA to continue health insurance coverage reasonably equivalent to that in effect immediately prior to your Separation Date, for up to twelve (12) months of coverage. You must notify the Company if you receive comparable health insurance overage from another source (e.g., a new employer) before the twelve (12) months elapses, at which time the Company’s obligation to make the payments identified in this paragraph 4.b. ceases.

By signing below, you acknowledge that the separation compensation outlined in this paragraph constitutes adequate consideration for waiving your rights to claims referred to in this agreement.

5. Return of Company Property: You hereby warrant to the Company that you have returned to the Company all property or data of the Company of any type whatsoever that has been in your possession or control.

6. Confidential Information: You hereby acknowledge that you are bound by the attached agreement dated June 7, 2006, and that as a result of your employment with the Company you have had access to the Company’s Proprietary Information (as defined in the agreement), that you will hold all Proprietary Information in strictest confidence and that you will not make use of such Proprietary Information on behalf of anyone. You further confirm that you have delivered to the Company all documents and data of any nature containing or pertaining to such Proprietary Information and that you have not taken with you any such documents or data or any reproduction thereof.

7. Waiver of Claims: The payments and promises set forth in this agreement are in full satisfaction of all accrued salary, vacation pay, bonus pay, profit-sharing, stock options, termination benefits or other compensation to which you may be entitled by virtue of your employment with the Company or your separation from the Company. You hereby release and waive any other claims you may have against the Company and its owners, agents, officers, shareholders, employees, directors, attorneys, subscribers, subsidiaries, affiliates, successors and assigns (collectively “Releasees”), whether known or not known, including, without limitation, claims under any employment laws, including, but not limited to, claims of unlawful discharge, breach of contract, breach of the covenant of good faith and fair dealing, fraud, violation of public policy, defamation, physical injury, emotional distress, claims for additional compensation or benefits arising out of your employment or your separation of employment, claims under Title VII of the 1964 Civil Rights Act, as amended, the California Fair Employment and Housing Act and any other laws and/or regulations relating to employment or employment discrimination, including, without limitation, claims based on age or under the Age Discrimination in Employment Act or Older Workers Benefit Protection Act. By signing below, you expressly waive any benefits of Section 1542 of the Civil Code of the State of California, which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

Notwithstanding the foregoing, this waiver and release of claims does not extend to any rights which as a matter of law cannot be waived and released.

8. Nondisparagement: You agree that you will not disparage Releasees or their products, services, agents, representatives, directors, officers, shareholders, attorneys, employees, vendors, affiliates, successors or assigns, or any person acting by, through, under or in concert with any of them, with any written or oral statement.

9. Legal and Equitable Remedies: You agree that Releasees have the right to enforce this agreement and any of its provisions by injunction, specific performance or other equitable relief without prejudice to any other rights or remedies Releasees may have at law or in equity for breach of this agreement.

10. Attorneys’ Fees: If any action is brought to enforce the terms of this agreement, the prevailing party will be entitled to recover its reasonable attorneys’ fees, costs and expenses from the other party, in addition to any other relief to which the prevailing party may be entitled.

11. No Admission of Liability: This agreement is not and shall not be construed or contended by you to be an admission or evidence of any wrongdoing or liability on the part of Releasees, their representatives, heirs, executors, attorneys, agents, partners, officers, shareholders, directors, employees, subsidiaries, affiliates, divisions, successors or assigns. This agreement shall be afforded the maximum protection allowable under California Evidence Code Section 1152 and/or any other state or Federal provisions of similar effect.

12. Entire Agreement: This agreement constitutes the entire agreement between you and Releasees with respect to the subject matter hereof and supersedes all prior negotiations and agreements, whether written or oral, relating to such subject matter other than the confidentiality agreement referred to in paragraph 6, above. You acknowledge that neither Releasees nor their agents or attorneys have made any promise, representation or warranty whatsoever, either express or implied, written or oral, which is not contained in this agreement for the purpose of inducing you to execute the agreement, and you acknowledge that you have executed this agreement in reliance only upon such promises, representations and warranties as are contained herein.

13. Modification: It is expressly agreed that this agreement may not be altered, amended, modified, or otherwise changed in any respect except by another written agreement that specifically refers to this agreement, executed by authorized representatives of each of the parties to this agreement.

14. Review of Separation Agreement: You understand that you may take up to twenty-one (21) days to consider this agreement and, by signing below, affirm that you were advised to consult with an attorney prior to signing this agreement. You also understand you may revoke this agreement within seven (7) days of signing this document and that the separation compensation to be provided to you pursuant to paragraph 4 will be provided only at the end of that seven (7) day revocation period.

If you agree to abide by the terms outlined in this letter, please sign this letter below and also sign the attached copy and return it to me. I wish you the best in your future endeavors.

Sincerely,
NTN BUZZTIME, INC.
By:	/S/ MICHAEL FLEMING
	Michael Fleming,
	Chairman of the Board of Directors

READ, UNDERSTOOD AND AGREED:
Signature:	/S/ DARIO L. SANTANA	Date:	July 11, 2008
	Dario L. Santana

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

AND RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934

I, Michael Fleming, 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 8, 2008	/s/ MICHAEL FLEMING
	Michael Fleming,
	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) OF THE SECURITIES 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 8, 2008	/s/ KENDRA BERGER
	Kendra Berger
	Chief Financial Officer
	NTN Buzztime, Inc.

EX-32.1

Exhibit 32.1

Certification pursuant to Rule 13a-14(b) / Section 1350

In connection with the Quarterly Report of NTN Buzztime, Inc. (the “Registrant”) on Form 10-Q for the period ended June 30, 2008, I, Michael Fleming, Chief Executive Officer, do hereby certify that:

(1) the Quarterly Report on Form 10-Q of the Registrant for the period ended June 30, 2008, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: August 8, 2008	/s/ MICHAEL FLEMING
	Michael Fleming,
	Chief Executive Officer
	NTN Buzztime, Inc.

EX-32.2

Exhibit 32.2

Certification pursuant to Rule 13a-14(b) / Section 1350

In connection with the Quarterly Report of NTN Buzztime, Inc. (the “Registrant”) on Form 10-Q for the period ended June 30, 2008, I, Michael Fleming, Chief Executive Officer, do hereby certify that:

(1) the Quarterly Report on Form 10-Q of the Registrant for the period ended June 30, 2008, as filed with the Securities and Exchange Commission (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Dated: August 8, 2008	/s/ KENDRA BERGER
	Kendra Berger
	Chief Financial Officer
	NTN Buzztime, Inc.