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As filed with the Securities and Exchange Commission on December 20, 1995
Reg. No. 33-64417
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
NTN COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
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Delaware The Campus 31-1103425
(State or other jurisdiction of 5966 La Place Court (I.R.S. Employer
incorporation or organization) Carlsbad, California 92008 Identification No.)
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(619) 438-7400
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
Ronald E. Hogan, Chief Financial Officer
NTN Communications, Inc.
The Campus
5966 La Place Court
Carlsbad, California 92008
(619) 438-7400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
With a copy to:
Dale E. Short, Esq.
Troy & Gould Professional Corporation
1801 Century Park East, Suite 1600
Los Angeles, California 90067
(310) 553-4441
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
_____________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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NTN COMMUNICATIONS, INC.
CROSS-REFERENCE SHEET
Pursuant to Item 501(b) of Regulation S-K, showing the location in the
Prospectus of the answers to the items in Part I of Form S-3.
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FORM S-3 ITEM NUMBER AND CAPTION PROSPECTUS CAPTION
- --------------------------------------------------------- ---------------------------------------------------------
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1. Front of the Registration Statement and Outside
Front Cover Page of Prospectus Facing Page; Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of Inside Front Cover Page and Back Cover Page
Prospectus
3. Summary Information, Risk Factors and Ratio Risk Factors
of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Outside Front Cover Page; Price Range of
Common Stock and Dividend Policy
6. Dilution Not Applicable
7. Selling Security Holders Selling Securityholders
8. Plan of Distribution Outside Front Cover Page; Plan of Distribution
9. Description of Securities to be Registered Outside Front Cover Page; Description of Securities
10. Interest of Named Experts and Counsel Not Applicable
11. Material Changes Certain Recent Developments
12. Incorporation of Certain Information by Reference Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities Not Applicable
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
State.
Subject to completion, dated December 20, 1995
PROSPECTUS
NTN COMMUNICATIONS, INC.
2,608,500 Shares
This Prospectus relates to the offer by certain securityholders named herein
(the "Selling Securityholders") for sale to the public from time to time of up
to 2,608,500 shares (the "Shares") of common stock, $.005 par value (the "Common
Stock"), of NTN Communications, Inc. See "Selling Securityholders." Unless
otherwise indicated herein, references herein to the "Company" mean NTN
Communications, Inc. and its subsidiaries.
Of the shares of Common Stock offered hereby, 208,500 are issuable upon the
exercise of certain warrants to purchase Common Stock of the Company (the
"Warrants") and the remainder are offered by certain Selling Securityholders who
recently purchased shares of Common Stock in the Company's private placement.
See "Selling Securityholders."
The Company will not receive any proceeds from the sale of the Common Stock
offered hereby, with the exception of the exercise price of such of the Warrants
as may be exercised. See "Use of Proceeds" and "Description of Securities."
The Common Stock is traded on the American Stock Exchange ("AMEX") under the
symbol "NTN." As of December ___, 1995, the last sale price for the Common Stock
as reported on the AMEX was $______. There is no established market for the
Warrants. See "Price Range of Common Stock and Dividend Policy."
SEE "RISK FACTORS" BEGINNING ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION OF
CERTAIN MATERIAL RISKS ASSOCIATED WITH AN INVESTMENT IN THE SHARES OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The date of this Prospectus is December ___, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy or information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, as well as at the following regional
offices: Seven World Trade Center, New York, New York 10048, and Northwestern
Atrium Center, 500 W. Madison Street, Chicago, Illinois 60661. Copies of such
material can be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Common Stock is listed on the AMEX, and the Company's reports, proxy
or information statements and other information filed with the AMEX may be
inspected at the AMEX's offices at 86 Trinity Place, New York, New York, 10006-
1881.
Additional information regarding the Company and the Shares offered hereby is
contained in the Registration Statement of which this Prospectus is a part, and
the exhibits thereto, filed with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). For further information pertaining to
the Company and the Shares, reference is made to the Registration Statement and
the exhibits thereto, which may be inspected without charge at, and copies
thereof may be obtained at prescribed rates from, the office of the Commission
at Judiciary Plaza, 450 Fifth Street, Washington, D.C. 20549. Statements
contained herein concerning the provisions of any document are not necessarily
complete and in each instance reference is made to the copy of the document
filed as an exhibit or schedule to the Registration Statement. Each such
statement is qualified in its entirety by reference to the copy of the
applicable documents filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under the
Exchange Act (Commission file no. 1-11460) are incorporated in this Prospectus
by reference: (a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, which contains consolidated financial statements for the
Company's year ended December 31, 1994; (b) the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995; (c) the Company's Current Report
on Form 8-K dated April 21, 1995; (d) the Company's Current Report on Form 8-K
dated July 5, 1995; (e) the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995; and (f) the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Shares offered hereby shall be deemed to
be incorporated by reference into this Prospectus and to be a part of this
Prospectus from the date of filing of such documents. Any statement contained in
a document incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents incorporated
by reference (other than exhibits to such documents that are not specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to Ronald E. Hogan, Chief Financial Officer, NTN
Communications, Inc., The Campus, 5966 La Place Court, Carlsbad, California
92008. Telephone requests may be directed to Mr. Hogan at (619) 438-7400.
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RISK FACTORS
The Shares offered hereby are speculative in nature and involve a high degree
of risk. The following risk factors should be considered carefully in
evaluating the Company and its business before purchasing the Shares offered by
this Prospectus.
HISTORY OF SIGNIFICANT LOSSES; RECENT PROFITABILITY
The Company has a history of significant losses and had an accumulated deficit
of $20,106,000 as of September 30, 1995. The year ended December 31, 1994, in
which the Company reported net earnings of $707,000, was the Company's first
year of profitable operations. The Company reported a net loss of $867,000 for
nine months ended September 30, 1995, and there can be no assurance that the
Company will operate profitably in the future. See "Selected Consolidated
Financial Data."
PENDING LITIGATION
The Company currently is defending litigation filed by securityholders of the
Company alleging violations by the Company of federal and state securities laws.
In June 1993, a class-action lawsuit against the Company was filed by certain
securityholders in the United States District Court for the Southern District of
California. The plaintiffs allege that announcements made by the Company
regarding a possible agreement in which the Company would sell certain equipment
and services to an arm of the Mexican Government were misleading. The
plaintiffs are seeking to recover unspecified damages for a drop in the market
price of the Company's Common Stock following a later announcement that the
anticipated agreement may be put out for bid. In September 1993, the class of
plaintiffs consisting of purchasers of Common stock during the period January
27, 1993 through June 24, 1993 was certified by the District Court. A motion by
the Company to dismiss the suit was denied in February 1994. Percipient
discovery has been undertaken by the parties.
In April 1995, a securityholder of the Company filed a class-action lawsuit
against the Company in the United States District Court for the Southern
District of California. The plaintiff seeks unspecified damages for alleged
violations of securities laws based upon public statements by the Company
regarding the projected results of operations of the Company and its wholly-
owned subsidiary, New World Computing ("New World"), for the fourth quarter 1994
and for fiscal 1994. The complaint filed in the action further alleges that
certain insiders sold stock following the projections based on information not
generally known to the public and seeks certification of a class of plaintiffs
consisting of purchasers of the Company's common stock during the period
November 9, 1994 through March 28, 1995. Preliminary discovery has been
undertaken by the parties.
In July 1995, the Company was named as a defendant in a separate action filed
in the United States District Court for the Northern District of Texas based
upon substantially the same allegations as set forth in the April 1995 class-
action suit against the Company. The Company recently filed its answer to the
complaint, which includes third-party claims for contribution against the
plaintiff's stock representative.
The Company plans to defend vigorously these actions, but there can be no
assurance that one or more of these actions will not be decided adversely to the
Company. Should the plaintiffs in these actions prevail, depending upon the
amount of any damages awarded, such claims could have a material adverse effect
on the Company. The Company expects to continue to incur litigation costs and
expenses relating to these and the other pending legal proceedings discussed
below. See "Certain Recent Developments --Recent Results of Operations."
The Company also is defending or prosecuting various lawsuits in federal courts
in both the United States and Canada involving Interactive Network, Inc. ("IN").
On June 11, 1992, the Company commenced an action against IN in the United
States District Court for the Northern District of California seeking a
declaration that the Company's United States programming does not infringe a
United States patent held by IN (the "IN/US Patent"), or, alternatively, that
such patent is invalid and unenforceable. On June 12, 1992 the Company, NTN
Canada, an unaffiliated licensee, and NTN Canada's subsidiary NTN Sports,
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Inc. filed a similar action against IN in the Federal Court of Canada, Trial
Division, seeking a declaration that the Company's activities (and those of NTN
Canada and NTN Sports, Inc.) in Canada do not infringe a Canadian patent held by
IN (the "IN/Canada Patents"). The Company subsequently amended its claims to
include an assertion of invalidity of the IN/Canada patent based upon untrue and
material allegations made by IN in its patent petition. No discovery has been
undertaken, and the existence of this litigation has not affected the operations
of the Company's Canadian licensee in Canada.
In July 1993, the United States District Court granted IN a summary judgment
dismissing the Company's claims involving the IN/US Patent. The Company's
subsequent appeals of the summary judgment were denied. IN moved for a court
order awarding it attorneys' fees, and on September 15, 1995, the District Court
ordered NTN to pay IN an aggregate of $359,165 in attorneys' fees and accrued
interest. NTN intends to appeal the District Court's order. The summary
judgment did not affect the Company's current license with IN and did not
constitute any finding that the Company's programming is infringing on the IN/US
Patent.
On June 18, 1992, IN filed an action against the Company, NTN Sports, Inc. and
NTN Canada in the Federal Court of Canada, Trial Division, seeking a declaration
that the IN/Canada Patent is valid and infringed by the Company's games
broadcast and associated equipment sold in Canada, an injunction against such
alleged infringement, unspecified damages based on certain games sold in Canada
since the 1990 issuance of the IN/Canada Patent and interest and costs of the
action. IN has not taken any action in furtherance of this litigation, and the
existence of this litigation has not affected the operations of the Company's
Canadian licensee in Canada.
On April 28, 1993, the Company commenced an action against IN in the Superior
Court for the County of Santa Clara, California, seeking an injunction against
IN's making certain untrue statements regarding the Company, unspecified damages
and a declaration of the Company's rights with respect to the broadcast of QB1.
That action was subsequently stayed by the court, pending the outcome of the
Company's June 11, 1992 United States District Court action against IN. The
stay has now been lifted, and the Company intends to vigorously pursue its
claims.
On or about February 28, 1994, IN filed its own action against the Company in
the Superior Court for the County of Santa Clara, California, which sets forth
causes of action for malicious prosecution, defamation, interference with
economic relations and unfair competition. IN seeks compensatory damages and
punitive damages on all causes of action and injunctive relief with respect to
its claim for unfair competition. The Company has filed a motion for summary
judgment with respect to the claim for malicious prosecution, which is scheduled
to be heard on October 12, 1995. The responsibility for the Company's legal
fees in this action has been assumed by the Company's insurance carrier under
reservation of rights.
On May 5, 1994, IN filed an action against the Company in the United States
District Court for the Northern District of California seeking a declaration
that the Company's interactive boxing game, "Uppercut", infringes the IN/US
patent and request injunctive relief. The Company's motion for summary judgment
was granted by the District Court on the basis that an agreement between the
parties called for arbitration of this matter. IN's motion for reconsideration
of the Court's ruling was denied, and an order in favor of the Company was
entered on February 22, 1995 which included an award of approximately $57,000 in
attorneys' fees to the Company. IN has voluntarily dismissed its notice of
appeal of the District Court's ruling and the Company has since collected the
court-awarded attorneys' fees. The Company had previously submitted this matter
to arbitration for a declaration of non-infringement pursuant to an earlier
agreement between the parties which provided for arbitration and for a license
to the Company for a specified royalty if infringement were to be found. There
has not been any significant action taken in furtherance of the pending
arbitration.
On October 18, 1994, the Company filed a complaint against IN in the United
States District Court for the Northern District of California for alleged
trademark infringement, false designation of origin, unfair competition,
misappropriation and dilution in connection with the Company's exclusive license
from the Canadian Football League ("CFL"). In response, IN filed a motion to
dismiss the complaint, which was heard before the Court on February 17, 1995.
The Court found that, since IN was not yet playing its interactive game in
connection with CFL games, the Company's claim would appropriately be one based
upon declaratory relief. The Court gave the Company the
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opportunity to amend its complaint, however, the Company will not pursue its
claim at this time since IN has ceased its business operations.
The Company believes, based in part on the advice of outside counsel, that any
adverse outcome of the foregoing litigation involving IN will not result in a
material adverse effect on the Company's financial position.
DEPENDENCE ON LICENSES FOR BROADCAST RIGHTS; LACK OF CERTAIN LICENSES
The Company's interactive sports games are broadcast in conjunction with live
telecasts of football, baseball, basketball and hockey games. In order to effect
this simultaneous broadcast, wherever possible the Company seeks to obtain
licenses from the owners of the broadcast rights to the sporting events to
utilize such telecasts for its interactive game programming. The Company's
original, exclusive license agreement with the National Football League ("NFL")
expired on March 31, 1995 and in August 1995, the Company entered into a new,
exclusive license with National Football League Properties, Inc. ("NFLP") for
QB1, which will expire on March 31, 1997 unless renewed by the NFLP. The
Company's rights under the license may not be transferred or assigned without
the NFLP's consent. For this purpose, an assignment includes, among other
things, a merger or consolidation of the Company or the termination of
employment of any of the Company's key management personnel. Major League
Baseball Properties, Inc. ("MLBP") has agreed to grant the Company a license for
the Company's proprietary interactive baseball game, "Diamondball." The
license, which is to expire December 31, 1996 unless renewed, is subject to
approval by the 28 major league clubs and the execution of MLBP's standard form
licensing agreement. The Company currently is broadcasting QB1 in conjunction
with college football games without any license. Limitations on the Company's
sports licenses could have an adverse effect upon the Company's business. In
addition, legal action by the owners or licensees of broadcast rights to college
football games seeking to enjoin further broadcasts by the Company or money
damages could preclude the playing of QB1 in connection with college football
games.
RELIANCE ON INDEPENDENT DISTRIBUTORS; DIRECT DISTRIBUTION BY NEW WORLD
The Company relies in large part on the efforts of independent distributors to
market and sell the NTN Network to its subscriber locations. The Company
currently uses approximately 25 distributors who cover 49 states. The Company
has entered into long-term agreements with certain of its distributors, but such
agreements are typically terminable upon short notice. The loss of a
significant number of these distributors would have a material adverse effect on
the Company's business until such time, if any, as the Company found alternate
means of servicing the markets currently served by such distributors.
Since June 1994, the Company's New World subsidiary has relied solely on its
in-house sales force to market and sell its products. Prior to such time, New
World's products had been distributed in North America under an affiliate-label
program with Broderbund Software, Inc. New World has only limited experience in
direct marketing and sales activities, and there can be no assurance that it
will be successful in directly marketing and selling its products.
COMPETITION
The market for interactive entertainment systems is in its formative stages and
is characterized by frequent introductions of new software and hardware and
advancing technologies. Numerous companies have commercialized, are developing
or are expected to introduce interactive products that are or may become
directly competitive with the Company's products. Most of the Company's
competitors have substantial experience and expertise in the electronics
industry and in interactive entertainment hardware systems and multimedia
technology and in producing and selling consumer products through retail
distribution, and also have substantially greater engineering, marketing and
financial resources than the Company.
Numerous major companies in the movie, cable and telecommunications industries
and in the computer and software industries have publicly announced large
development budgets and deployment plans for and field testing of interactive
television services and are developing methods for delivery of interactive
multimedia products and services
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through existing or planned cable and telephone networks. To the extent that
these companies provide interactive functionality through cable or telephone
networks, their products will compete directly with the Company's products. Some
of these companies include large, established companies such as AT&T Corp.,
Microsoft Corporation, Time Warner, Inc., Telecommunications, Inc., Intel
Corporation and Motorola, Inc. All of these companies have also devoted
substantial financial resources to development projects and many of them have
commenced trial testing or have announced their intention to commence trial
testing in the immediate future. The Company also anticipates competition from
emerging companies, including those that may be formed by persons with
substantial experience and credibility in interactive technology. There can be
no assurance that the Company can compete successfully against these companies.
The Company also competes with other providers of interactive television
services to in-home viewers. Each of the major providers of interactive video
services, which include GTE Mainstreet, ACTV, Video Jukebox Network, IN,
Interactive Systems, Explore Technology and Call Interactive, is focused on in-
home delivery of programming. The Company's strategy for in-home delivery has
been to be a provider of programming to systems operated by others, and the
Company's programming currently is available through GTE Mainstreet. The
Company may also face potential competition from businesses engaged in
information gathering and related businesses which may seek to enter the markets
served by the Company, many of which are larger and have far greater personnel
and financial resources than does the Company. If such larger businesses enter
the markets, if existing competitors increase their activities in areas in which
the Company intends to do business or if the Company is unable to distribute its
programming to home viewers through systems operated by others, such
developments may have a materially adverse effect upon the Company.
The video game and personal computer industry also is characterized by intense
competition. New World's products compete with a variety of video games and
personal computer entertainment software on the market and with new games and
software continuously being introduced. Competition in the video game and
personal computer software industry extends to competition for shelf space in
retail outlets, and there can be no assurance that New World will be able to
compete successfully. New World will also face competition from all other forms
of interactive hardware and software providers such as the current computer
hardware and videogame manufacturers, as well as other providers of interactive
entertainment systems, including Sega, Nintendo, and 3DO, as well as many
others. Most of these competitors are large corporations with significantly
greater financial and marketing resources, market share and name recognition
than New World.
POTENTIAL FOR TECHNOLOGICAL OBSOLESCENCE
The computer industry and related services have been marked by rapid and
significant technological development and change. There can be no assurance
that technological development will not render the Company's interactive
technology and services obsolete within a relatively short period, or that the
Company will have the resources to respond to such technological change.
UNCERTAIN PROPRIETARY PROTECTION
The Company has two patent applications pending for its proprietary interactive
technology. In addition, the Company relies on a combination of trademark and
unfair competition laws, trade secrets and confidentiality procedures and
agreements to protect rights it considers proprietary. The Company has
copyrights for all of its programming, and the Company has registered the
trademark QB1 and has registered trademarks for a significant number of its
other services. However, no assurance can be given that such patents will issue,
or if issued, the scope of the protection afforded by such patents. The Company
currently is involved in litigation concerning the enforceability, scope and
validity of proprietary rights. See "Risk Factors -Litigation."
New World regards all of its software as proprietary and attempts to protect
it. New World has no patents, and existing copyright laws afford only limited
practical protection for the New World's software. New World has entered into
license agreements with foreign entities for the translation of its software
into foreign languages and distribution in foreign countries. The laws of some
foreign countries do not protect proprietary rights to the same extent as do the
laws of the United States. In addition, New World has registered trademarks on
"New World,"
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"Might & Magic" and "King's Bounty." However, no assurance can be given as to
the scope of protection afforded by such trademarks, or that New World would be
able to effectively enforce such trademarks.
INFLUENCE OF MANAGEMENT
The Company's executive officers and directors and their affiliates own, in the
aggregate, approximately 9% of the outstanding Common Stock, and have the right,
through the exercise of currently exercisable options and warrants to purchase
3,127,314 shares of Common Stock, to increase their percentage ownership to 21%.
Therefore, these securityholders, if acting together, would have the ability to
significantly influence the Company's affairs and operations. See "Description
of Securities."
ANTI-TAKEOVER PROVISIONS
The Company's Certificate of Incorporation and Bylaws contain certain
provisions that may discourage attempts to acquire control of the Company that
are not negotiated with the Company's Board of Directors. These provisions may
have the effect of discouraging takeover attempts that some securityholders
might deem to be in their best interests, including takeover proposals in which
securityholders might receive a premium for their shares over the then current
market price, as well as making it more difficult for individual securityholders
or a group of securityholders to elect directors. The Board of Directors
believes, however, that these provisions are in the best interests of the
Company and its securityholders because such provisions may encourage potential
acquirors to negotiate directly with the Board of Directors, which is in the
best position to act on behalf of all securityholders. The Certificate of
Incorporation provides that the affirmative vote of the holders of at least 80%
of the total voting power of all outstanding securities of the Company then
entitled to vote generally in the election of directors, voting together as a
single class, is required to amend certain provisions of the Certificate of
Incorporation, including among others, those provisions relating to the number,
election and term of directors; the removal of directors and the filing of
vacancies; and the supermajority voting requirements of the Certificate of
Incorporation. These voting requirements will have the effect of making more
difficult any amendments, even if a majority of the Company's securityholders
believes that such amendment would be in their best interest. See "Description
of Securities --Anti-Takeover Provisions."
VOLATILITY OF STOCK PRICE
Historically, the trading price of the Company's Common Stock has fluctuated
widely, and it may be subject to similar future fluctuations in response to
quarter-to-quarter variations in the Company's operating results, announcements
regarding litigation, technological innovations or new products by the Company
or its competitors, general conditions in the industries in which the Company
competes and other events or factors. In addition, in recent years, broad stock
market indices, in general, and the securities of technology companies, in
particular, have experienced substantial price fluctuations. Such broad market
fluctuations also may adversely affect the future trading price of the Company's
Common Stock. See "Price Range of Common Stock and Dividend Policy."
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock and anticipates
that for the foreseeable future earnings, if any, will be retained for the
operation and expansion of the Company's business. See "Price Range of Common
Stock and Dividend Policy."
EFFECT OF OUTSTANDING OPTIONS, WARRANTS AND PREFERRED STOCK
As of October 16, 1995, there were 4,661,730 shares of Common Stock reserved
for issuance upon the exercise of stock options outstanding under the Company's
stock option plans at exercise prices ranging from $2.25 to $8.25 per share, of
which options to purchase 2,837,866 shares are currently exercisable. An
additional 58,400 shares of Common Stock (plus any shares of Common Stock
covered by stock options currently outstanding under the Company's 1985
Incentive Stock Option Plan and 1985 Nonqualified Stock Option Plan which are
subsequently terminated or expire without being exercised) are reserved for
issuance upon the exercise of options available for
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future grant under the Company's 1995 Stock Option Plan. In addition, the
Company has outstanding warrants to purchase an aggregate of 3,390,329 shares of
Common Stock at exercise prices ranging from $2.00 to $8.00 per share, all of
which warrants are currently exercisable. Substantially all of such warrants,
are subject to currently effective registration statements covering the resale
of the warrants and the underlying warrant shares by the holders. The Company
also has outstanding 162,612 shares of preferred stock which entitle holders
thereof, upon surrender of the shares of preferred stock, to receive 45,548
shares of Common Stock. Such options, warrants and preferred stock could
adversely affect the Company's ability to obtain future financing, since the
holders of those options, warrants and preferred stock can be expected to
exercise or surrender them for conversion, as the case may be, at a time when
the Company would be able to obtain additional capital through a new offering of
securities on terms more favorable than those provided by such options, warrants
and preferred stock. For the life of such options, warrants and preferred stock,
the holders are given the opportunity to profit from a rise in the market price
of the Common Stock without assuming the risk of ownership. To the extent the
trading price of the Common Stock at the time of exercise of any such options or
warrants exceeds the exercise price, such exercise will also have a dilutive
effect on the Company's stockholders.
SHARES ELIGIBLE FOR FUTURE SALE
Approximately 5,153,000 shares of Common Stock outstanding as of the date of
this Prospectus, including the Shares offered hereby, are "restricted
securities," as that term is defined under Rule 144 promulgated under the Act.
All or substantially all of such shares are covered by currently effective
registration statements and can be offered and sold publicly by the beneficial
owners at any time so long as registration statements remain effective.
Moreover, in general under Rule 144 as currently in effect, subject to the
satisfaction of certain conditions, if two years have elapsed since the later of
the date of acquisition of restricted shares from an issuer or from an affiliate
of an issuer, the acquiror or subsequent holder is entitled to sell in the open
market, within any three-month period, a number of shares that does not exceed
the greater of 1% of the outstanding shares of the same class or the average
weekly trading volume during the four calendar weeks preceding the filing of the
required notice of sale. A person who has not been an affiliate of the Company
for at least the three months immediately preceding the sale and who has
beneficially owned shares of Common Stock as described above for at least three
years is entitled to sell such shares under Rule 144(k) without regard to any of
the limitations described above. Of the 5,753,000 outstanding shares of Common
Stock constituting restricted shares, approximately 78,000 were eligible as of
October 16, 1995 to be resold publicly without restriction under Rule 144(k).
No predictions can be made with respect to the effect, if any, that sales of
Common Stock in the market or the availability of shares of Common Stock for
sale pursuant to currently effective registration statements or under Rule 144
will have on the market price of Common Stock prevailing from time to time.
Nevertheless, the possibility that substantial amounts of Common Stock may be
sold in the public market may adversely affect prevailing market prices for the
Common Stock and could impair the Company's ability to raise capital through the
sale of its equity securities.
CERTAIN RECENT DEVELOPMENTS
RECENT RESULTS OF OPERATIONS
As described under "Risk Factors -- Pending Litigation," the Company currently
is involved in a number of lawsuits. During the year ended December 31, 1994
and the nine months ended September 30, 1995, the Company incurred aggregate
legal fees and expenses, including fees and expenses relating to litigation
matters, of approximately $980,000 and $1,509,000, respectively. The Company
expects to incur substantial additional legal fees and expenses associated with
its pending litigation for the balance of fiscal 1995 and, perhaps, future
periods as well.
RECENT RETENTION OF INVESTMENT BANKER
In July 1995, the Company retained Donaldson, Lufkin & Jenrette to assist in
establishing the Company's long-term financial strategy.
8
<PAGE>
USE OF PROCEEDS
Other than the exercise price of such of the Warrants as may be exercised, the
Company will not receive any of the proceeds from the sale of the Common Stock
offered hereby. The Company will pay the costs of this offering, which are
estimated to be $38,000. Holders of the Warrants are not obligated to exercise
their Warrants, and there can be no assurance that such holders will choose to
exercise all or any of such Warrants. The gross proceeds to the Company in the
event that all of the Warrants are exercised would be approximately $1,032,438
(50,000 shares at an exercise price of $7.50 per share, 96,000 shares at an
exercise price of $4.00 per share and 62,500 shares at an exercise price of
$4.375 per share).
The Company intends to apply the net proceeds it receives from the exercise of
the Warrants, to the extent any are exercised, to augment its working capital
and for general corporate purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock is listed on the AMEX under the symbol "NTN." The
prices below are the high and low sales prices for the Common Stock as reported
on the AMEX for periods shown.
<TABLE>
<CAPTION>
LOW HIGH
----- ------
<S> <C> <C>
1993
----
First Quarter......................................... $4.37 $10.63
Second Quarter........................................ 6.37 11.50
Third Quarter......................................... 5.75 10.37
Fourth Quarter........................................ 8.50 10.50
1994
----
First Quarter......................................... 6.00 10.25
Second Quarter........................................ 4.63 7.50
Third Quarter......................................... 6.37 8.50
Fourth Quarter........................................ 5.75 7.87
1995
----
First Quarter......................................... 5.63 8.25
Second Quarter........................................ 4.44 5.81
Third Quarter......................................... 4.06 6.25
Fourth Quarter (through December 14, 1995)............ 5.19 4.25
===== ======
</TABLE>
For a recent closing price for the Common Stock as reported on the AMEX see the
cover page of this Prospectus. As of October 16, 1995, there were 1,757 record
owners of the Common Stock according to information available from the Company's
transfer agent.
To date, the Company has not declared or paid any cash dividends with respect
to its Common Stock, and the current policy of the Board of Directors is to
retain earnings, if any, after payment of dividends on the Company's outstanding
preferred stock to provide for the growth of the Company. Consequently, no cash
dividends are expected to be paid on the Company's Common Stock in the
foreseeable future. Further, there can be no assurance that the proposed
operations of the Company will generate the revenues and cash flow needed to
declare a cash dividend or that the Company will have legally available funds to
pay dividends.
9
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected data presented below under the captions "Selected Consolidated
Statement of Operations Data" and "Selected Consolidated Balance Sheet Data"
for, and as of the end of, each of the years in the five-year period ended
December 31, 1994, are derived from the consolidated financial statements of NTN
Communications, Inc., which financial statements have been audited by KPMG Peat
Marwick LLP, independent certified public accountants. The consolidated
financial statements as of December 31, 1994 and 1993, and for each of the years
in the three-year period ended December 31, 1994, and the report thereon, are
incorporated by reference elsewhere in this Prospectus. The selected data
should be read in conjunction with the consolidated financial statements for the
three-year period ended December 31, 1994, the related notes and the independent
auditors' report which contains an explanatory paragraph that states that the
Company is a defendant in a class action lawsuit. The litigation is in its
early stages and no prediction can be made as to the likelihood of the ultimate
outcome. Accordingly, no provision for any liability that may result from
adjudication has been recognized in the consolidated financial statements. The
report also refers to a change in the method of accounting for investments in
debt and equity securities in 1994. The following selected consolidated
statement of operations data for the nine months ended September 30, 1995 and
1994 and related consolidated balance sheet data as of September 30, 1995 are
derived from the unaudited consolidated financial statements of the Company and
reflect all adjustments (including only normal recurring accruals) which in the
opinion of management are necessary for a fair presentation of the Company's
financial position and results of operations for these periods. The operating
results for the nine months ended September 30, 1995 are not necessarily
indicative of the results that may be expected for the full fiscal year. The
following data should be read in conjunction with "Management's Discussions and
Analysis of Results of Operations and Financial Condition" and the Consolidated
Financial Statements and notes thereto incorporated by reference in this
Prospectus.
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED STATEMENT OF OPERATIONS DATA
(in thousands, except per share data)
Nine Months
Years Ended December 31 Ended September 30,
--------------------------------------------------- -------------------
1994 1993 1992 1991 1990 1995 1994
-------- -------- -------- ------- -------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues.............................. $24,646 $17,258 $10,702 $5,853 $ 5,871 $20,711 $16,730
Total cost of sales......................... 9,453 7,514 4,200 2,411 2,569 9,849 6,154
------- ------- ------- -------- ------- ------- -------
Gross profit................................ 15,193 9,744 6,502 3,442 3,302 10,862 10,576
Total operating expenses.................... 14,898 11,198 8,636 5,260 4,094 11,794 9,788
Interest income (expense), net.............. (412) (434) - 576 1,087 65 415
Income taxes................................ - 281 106 - - - 77
------- ------- ------- -------- ------- ------- -------
Earnings (loss) before extraordinary item... 707 (1,301) (2,240) (2,394) (1,879) (867) 1,126
Extraordinary item.......................... - - - 3,889 - - -
Net earnings (loss)......................... $ 707 $(1,301) $(2,240) $1,495 $(1,879) $ (867) $ 1,126
------- ------- ------- -------- ------- ------- -------
Earnings (loss) per share before
extraordinary item(1)..................... $.03 $(.08) $(.20) $(.38) $(.71) $(.04) $ .05
Net earnings (loss) per share............... $.03 $(.08) $(.20) $.24 $(.71) $(.04) $ .05
------- ------- ------- -------- ------- ------- -------
Weighted average equivalent shares
outstanding(1)............................ 21,124 17,135 11,344 6,263 2,661 19,618 21,122
</TABLE>
________
(1) As adjusted to reflect a 1-for-20 reverse stock split
effected in June 1991.
SELECTED CONSOLIDATED BALANCE SHEET DATA
(in thousands)
<TABLE>
<CAPTION>
December 31 September 30
--------------------------------------- -----------------
1994 1993 1992 1991 1990 1995
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total current assets........................ $22,106 $23,102 $9,004 $ 5,119 $ 2,358 $29,451
Total assets................................ 31,239 27,240 10,171 5,604 2,630 42,657
Total current liabilities................... 4,958 2,933 2,554 2,810 11,506 10,047
Long-term debt, less current portion........ 8 163 18 91 953 9
Shareholders' equity (deficiency)........... 25,457 23,653 7,432 2,703 (9,828) 31,528
</TABLE>
10
<PAGE>
SELLING SECURITYHOLDERS
PRIVATE PLACEMENT INVESTORS
In September and October 1995, the Company sold an aggregate of 2,400,000
shares of Common Stock at an initial purchase price of $4.00 per share to
certain institutional investors identified in the table below (collectively, the
"Private Placement Investors"). Pursuant to the terms of the sales, the initial
purchase price paid by the Private Placement Investors is subject to adjustment
based on the average of the closing prices (the "Average Share Price") of the
Common Stock as reported on the American Stock Exchange for all trading days
during the 60-day period commencing on January 15, 1996 and, for certain Private
Placement Investors, a second additional period that commences five business
days after the expiration of such 60-day period (each, a "Valuation Period").
The first Valuation Period may be extended for up to 30 additional trading days
by mutual agreement of the Company and the Private Placement Investors. If the
Average Share Price during the Valuation Period is less than $4.70, the Company
will issue to the Private Placement Investors, at no additional cost to them,
additional shares of Common Stock so as to result in a purchase price per share
of Common Stock equal to 85% of the Average Share Price. A Private Placement
Investor has the right to receive cash, however, if such issuances would cause
the investor (or any group of which the investor is a part) to own 4.99% or more
of the Company's outstanding Common Stock. If, on the other hand, the Average
Share Price during the Valuation Period is greater than $4.70, then the Private
Placement Investors are obligated to pay the Company the dollar amount by which
the product of 85% of the Average Share Price and 2,400,000 exceeds the
$9,600,000 previously paid. For those Private Placement Investors with two
Valuation Periods, the initial purchase of one-half of the shares of Common
Stock purchased by them is subject to adjustment during each Valuation Period.
In connection with the sale to the Private Placement Investors, the Company also
agreed that in the event the Company sells any shares of Common Stock on or
before the expiration of an applicable Valuation Period at a price less than the
initial purchase price per share, the purchase price per share is subject to
downward adjustment to the price paid in such subsequent sale or sales. Such
adjustment will be accomplished by the Company issuing additional shares to the
Private Placement Investors.
In connection with the foregoing transaction, the Company agreed to file the
Form S-3 Registration Statement of which this Prospectus is a part and to grant
to the Selling Securityholders certain demand and piggyback registration rights
under the Securities Act.
PRIVATE PLACEMENT WARRANTS
As compensation, in part, for the efforts of Cappello Capital Corp. in
connection with the above-described sale of Common Stock, Lawrence K.
Fleischman, Linda Cappello, Gerard K. Cappello and Index Securities Fund
received Warrants to purchase, in the aggregate, 96,000 shares of Common Stock
at an initial exercise price of $4.00 per share. In the event that the Average
Share Price determined as described above is greater than or less than
$4.70, the exercise price of the Warrants will be adjusted to an amount equal to
85% of such Average Share Price. Such Warrants were issued in September 1995,
are exercisable, in whole or in part, until September 2000, contain certain
other antidilution provisions that require adjustments in the event of a stock
dividend, subdivision or combination of the number of outstanding shares of
Common Stock, recapitalization and certain other events, and provide for
piggyback registration rights until September 2002. Such Warrants also allow for
a cashless exercise if the market price of the Common Stock exceeds the exercise
price. The foregoing Warrants constitute "restricted securities" within the
meaning of Rule 144 of the regulations promulgated under the Securities Act. As
such, they generally are not currently transferable. However, the shares of
Common Stock issuable upon exercise of such Warrants are being offered hereby
and, when issued upon exercise of the Warrants and sold pursuant to this
Prospectus, will be currently transferable.
In April 1995, Cappello Capital Corp. arranged for the Company's sale to
several other institutional investors of an aggregate of 600,000 additional
shares of Common Stock for an initial purchase price (subject to adjustment) of
$4.3563 per share, or $2,613,780 in the aggregate. For its services in
connection with the sale, Cappello Capital Corp. received from the Company a
cash payment of $130,000 and Lawrence K. Fleischman, Gerald K. Cappello and
Linda Cappello were granted additional warrants to purchase up to an aggregate
of
11
<PAGE>
30,000 shares of Common Stock at an initial exercise price (subject to
adjustment) of $5.125 per share. Such warrants shares are subject to a separate
registration statement and prospectus filed by the Company on behalf of these
Selling Securityholders.
CONTINUUM CAPITAL WARRANTS
In October 1994, the Company issued to Continuum Capital, Inc., a financial
consultant of the Company, in consideration of services rendered, warrants to
purchase 50,000 shares of Common Stock at an exercise price of $7.50 per share.
Such warrants are exercisable, in whole or in part, until October 1999, contain
antidilution provisions that require adjustments in the event of a stock
dividend, subdivision or combination of the number of outstanding shares of
Common Stock, A recapitalization of the Company and certain other events, and
provide for piggyback registration rights until October 2001. The
foregoing Warrants constitute "restricted securities" within the meaning of Rule
144 of the regulations promulgated under the Securities Act. As such, they
generally are not currently transferable. However, the shares of Common Stock
issuable upon exercise of such Warrants are being offered hereby and, when
issued upon exercise of the Warrants and sold pursuant to this Prospectus, will
be freely transferable.
Since March 1994, through the date of this Prospectus, the Company has granted
Continuum Capital, Inc. warrants to purchase an aggregate of up to 262,500
additional shares of Common Stock at prices ranging from $5.00 to $7.50 per
share in separate transactions under the same financial consulting arrangement.
All or a portion of such additional warrant shares are or may be subject to
Registration Statements filed by the Company on behalf of Continuum Capital,
Inc.
JF ADMINISTRATIVE CORP. WARRANTS
As part of the compensation for the financial consulting services rendered by
JF Administrative Corp. in connection with sale-leaseback transactions involving
certain of the Company's equipment, Selig Zises and Joel Magerman, each of whom
is an officer of JF Administrative Corp., received Warrants to purchase, in the
aggregate, 62,500 shares of Common Stock at an exercise price of $4.375 per
share. Such Warrants were issued in October 1995 and are exercisable, in whole
or in part, until October 2000. Other than the exercise price and the exercise
period, such Warrants are identical to the Warrants issued to Continuum Capital,
Inc. described above. Joel Magerman is the son of Alan Magerman, a director of
the Company.
The following table sets forth as of December 14, 1995 the number and
percent of shares of Common Stock owned by each of the Selling Securityholders,
the number of shares of Common Stock offered by each of them hereby, and the
number and percent of shares of Common Stock to be held by each of them after
the conclusion of this offering. Other than as described herein, no Selling
Securityholder or its affiliates has any position, office or other material
relationship with the Company.
12
<PAGE>
<TABLE>
<CAPTION>
Before Offering After Offering
----------------------------- -------------------------
Number of Number of
Shares Number of Shares
Selling Beneficially Shares Beneficially
Securityholder Owned(1) Percent(2) Being Offered Owned Percent
- --------------------- ------------ ---------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
Palladin Partners I,L.P+....... 600,000 2.7% 600,000 0 0%
Kayne, Anderson
Non-Traditional
Investments, L.P.+ ........... 525,000 2.3 525,000 0 0
Offense Group Associates, L.P.+ 250,000 1.1 250,000 0 0
ARBCO Associates, L.P.+........ 250,000 1.1 250,000 0 0
Gershon Partners, L.P.+........ 200,000 * 200,000 0 0
Granite Global Debt Fund, Ltd.+ 200,000 * 200,000 0 0
Hudson, Inc. Panama+........... 125,000 * 125,000 0 0
Pictet et. Cie+................ 50,000 * 50,000 0 0
Banque Scandinave en Suisse+... 50,000 * 50,000 0 0
Mirelis S.A+................... 50,000 * 50,000 0 0
The Gifford Fund+.............. 50,000 * 50,000 0 0
Carousel Investments, Inc.+.... 50,000 * 50,000 0 0
Continuum Capital, Inc. ....... 312,500 1.4 50,000(3) 262,500(4) 1.2
Selig Zises.................... 50,000 * 50,000(3) 0 0
Joel Magerman.................. 12,500 * 12,500(3) 0 0
Linda Cappello................. 50,625 * 39,825(3) 10,800(4) *
Gerard K. Cappello............. 33,750 * 26,550(3) 7,200(4) *
Lawrence K. Fleischman......... 34,125 * 22,125(3) 12,000(4) *
Index Securities Fund.......... 7,500 * 7,500(3) 0 *
- ------------------
</TABLE>
+Private Placement Investor.
(1) Subject to adjustment as described above.
(2) Based on 22,431,875 shares of Common Stock outstanding as of November 28,
1995. An asterisk denotes beneficial ownership of less than 1%.
(3) Constitute shares of Common Stock subject to currently exercisable
Warrants.
(4) All or a portion of the shares shown may be sold pursuant to
separate Prospectuses relating to such shares.
13
<PAGE>
PLAN OF DISTRIBUTION
Each of the Selling Securityholders has advised the Company that it may sell,
directly or through brokers, its Shares offered hereby in negotiated
transactions or in one or more transactions on the AMEX, or otherwise, at the
prices prevailing at the time of sale. In connection with such sales, the
Selling Securityholders and any participating broker may be deemed to be
"underwriters" of the Shares so sold within the meaning of the Securities Act,
although the offering of the Shares will not be underwritten by a broker-dealer
firm.
The Company will bear all costs and expenses of the registration of the Shares
under the Securities Act and certain state securities laws, other than fees of
counsel for the Selling Securityholders and any discounts or commissions payable
with respect to sales of such Shares.
The Company has informed the Selling Securityholders that the anti-manipulation
provisions of Rules 10b-6 and 10b-7 under the Exchange Act may apply to their
sales of the Shares and has furnished each of the Selling Securityholders with a
copy of these rules, as well as a copy of certain interpretations thereof by the
Securities and Exchange Commission. The Company also has advised the Selling
Securityholders of the requirement for delivery of this Prospectus in connection
with any sale of the Shares.
DESCRIPTION OF SECURITIES
The Company's authorized capital stock consists of 10,000,000 shares of
preferred stock, par value $.005 per share ("Preferred Stock"), and 50,000,000
shares of Common Stock. The Preferred Stock may be issued in one or more
series; the only series currently designated is a series of 5,000,000 shares of
Series A Convertible Preferred Stock (the "Series A Preferred Stock").
COMMON STOCK
On November 28, 1995, there were 22,431,875 shares of Common Stock
outstanding.
The holders of Common Stock are entitled to one vote per share on all matters
submitted to a vote of the securityholders. The holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Company's Board of Directors out of legally available funds, after payment of
any dividends required on the outstanding Preferred Stock. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets that are legally available for
distribution, after payment of or provision for all debts and liabilities and
for any payments with respect to the Preferred Stock. The holders of Common
Stock have no preemptive, subscription or conversion rights, and there are no
redemption or sinking fund provisions applicable to such shares. All of the
outstanding shares of Common Stock are fully paid and nonassessable. The
rights, preferences and privileges of holders of Common Stock are subject to the
rights of the holders of shares of the Series A Preferred Stock, and may be
subject to the rights of the holders of such other Preferred Stock as the
Company may issue in the future, although the Company has no plans at this time
to issue additional Preferred Stock.
PREFERRED STOCK
On November 28, 1995, there were 162,612 shares of Series A Preferred
Stock outstanding. The holders of the Series A Preferred Stock are entitled to
an annual dividend of 10% of the original issue price of $1.00 per share,
payable semiannually on December 1 and June 1 of each year in cash or, at the
option of the Company, by means of the issuance of shares of Common Stock, which
are to be valued for this purpose at the fair market value of the Common Stock.
The Company is current in the payment of all dividends on the Series A Preferred
Stock. Upon liquidation, dissolution and winding up of the Company, each holder
of the Series A Preferred Stock shall be entitled to receive $1.00 per share
before any payment shall be made with respect to the outstanding shares of the
Common Stock. Each share of the Series A Preferred Stock is convertible into
approximately .2801 share of Common Stock at any time at the option of the
holders of the Series A Preferred Stock. The rate of conversion is subject
to
14
<PAGE>
certain antidilution provisions. The holders of the Series A Preferred Stock do
not have any voting, preemptive, subscription or redemption rights.
Additional shares of Preferred Stock may be issued without securityholder
approval. The Board of Directors is authorized to issue such shares in one or
more series and to fix the rights, preferences, privileges, qualifications,
limitations and restrictions thereof, including dividend rights and rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of such series, without any vote or action by the shareholders. Any
Preferred Stock to be issued could rank prior to the Common Stock with respect
to dividend rights and rights on liquidation. The Board of Directors, without
securityholder approval, may issue Preferred Stock with voting and conversion
rights that could adversely affect the voting power of holders of Common Stock
or create impediments to persons seeking to gain control of the Company. The
Company has no present plan or arrangement to issue any additional shares of
common stock.
ANTI-TAKEOVER PROVISIONS
The provisions of the Company's Restated Certificate of Incorporation (the
"Certificate") and Bylaws (the "Bylaws"), summarized in the succeeding
paragraphs, may be deemed to have anti-takeover effects and may delay, defer or
prevent a tender offer, takeover attempt or change in control that a
securityholder might consider to be in such securityholder's best interest,
including those attempts that might result in a premium over the market price
for the shares held by securityholders.
Amendment of Certain Provisions of the Certificate of Incorporation and Bylaws
The Certificate provides that the affirmative vote of the holders of at least
80% of the total voting power of all outstanding securities of the Company then
entitled to vote generally in the election of directors, voting together as a
single class, is required to amend certain provisions of the Certificate,
including those provisions relating to the number, election and term of
directors; the removal of directors and the filling of vacancies;
indemnification of directors, officers and others; and the supermajority voting
requirements in the Certificate. The Certificate further provides that the
Bylaws may be amended by the Board of Directors or by an affirmative vote of the
holders of not less than 80% of the total voting power of all outstanding
securities of the Company then entitled to vote generally in the election of
directors, voting together as a single class. These voting requirements will
have the effect of making more difficult any amendment by securityholders, even
if a majority of the Company's securityholders believes that such amendment
would be in their best interests.
Classified Board of Directors
The Certificate and the Bylaws divides the Board of Directors into three
classes, each class to be nearly equal in number as possible, each class serving
staggered three-year terms. Presently, two directors of the Company are subject
to re-election at each annual meeting of securityholders.
The classification of directors and provisions in the Certificate that limit
the ability of securityholders to increase the size of the Board of Directors
without the vote of at least 80% of the total voting power of all outstanding
voting securities, together with provisions in the Certificate that limit the
ability of securityholders to remove directors and that permit the remaining
directors to fill any vacancies on the Board, will have the effect of making it
more difficult for securityholders to change the composition of the Board of
Directors. As a result, at least two annual meetings of securityholders may be
required for the securityholders to change a majority of the directors, whether
or not a change in the Board of Directors would be beneficial to the Company and
its securityholders and whether or not a majority of the Company's
securityholders believes that such a change would be desirable.
Certain Securityholder Action
The Certificate requires that securityholder action be taken at an annual
meeting or special meeting of securityholders called pursuant to a resolution
adopted by a majority of the Board of Directors and prohibits securityholder
action by written consent.
15
<PAGE>
Section 203 of the Delaware General Corporation Law
The Company is governed by the provisions of Section 203 of the Delaware
General Corporation Law ("Section 203"). Subject to certain exceptions
summarized below, Section 203 prohibits any Interested Securityholder from
engaging in a "business combination" with a Delaware corporation for three years
following the date such person became an Interested Securityholder. Interested
Securityholder, as defined, includes (i) any person who is the beneficial owner
of 15% or more of the outstanding voting stock of the corporation and (ii) any
person who is an affiliate or associate of the corporation and who held 15% or
more of the outstanding voting stock of the corporation at any time within three
years before the date on which such person's status as an Interested
Securityholder is determined. Subject to certain exceptions, a "business
combination" includes, among other things: (i) any merger or consolidation
involving the corporation; (ii) the sale, lease, exchange, mortgage, pledge,
transfer or other disposition of assets having an aggregate market value equal
to 10% or more of either the aggregate market value of all assets of the
corporation determined on a consolidated basis or the aggregate market value of
all the outstanding stock of the corporation; (iii) any transaction that results
in the issuance or transfer by the corporation of any stock of the corporation
to the Interested Securityholder, except pursuant to a transaction that effects
a pro rata distribution to all securityholders of the corporation; (iv) any
transaction involving the corporation that has the effect of increasing the
proportionate share of the stock of any class or series, or securities
convertible into the stock of any class or series, of the corporation that is
owned directly or indirectly by the Interested Securityholder; and (v) any
receipt by the Interested Securityholder of the benefit (except proportionately
as a securityholder) of any loans, advances, guarantees, pledges or other
financial benefits provided by or through the corporation.
Section 203 does not apply to a business combination if: (i) before a person
became an Interested Securityholder, the board of directors of the corporation
approved the transaction in which the Interested Securityholder became an
Interested Securityholder or the business combination; (ii) upon consummation of
the transaction that resulted in the person becoming an Interested
Securityholder, the Interested Securityholder owned at least 85% of the voting
stock of the corporation outstanding at the time the transaction commences
(other than certain excluded shares); or (iii) following a transaction in which
the person became an Interested Securityholder, the business combination is (a)
approved by the board of directors of the corporation and (b) authorized at a
regular or special meeting of securityholders (and not by written consent) by
the affirmative vote of the holders of at least 66-2/3% of the outstanding
voting stock of the corporation not owned by the Interested Securityholder.
SHARES ELIGIBLE FOR FUTURE PUBLIC SALE
There are 22,431,875 shares of Common Stock outstanding. Of such shares of
Common Stock, approximately 5,153,000 shares, including the Shares offered
hereby, are "restricted securities" within the meaning of Rule 144 of the
regulations promulgated under the Securities Act. All or substantially all of
such shares, including the Shares offered hereby, are covered by currently
effective registration statements and can be offered and sold publicly by the
beneficial owners at any time so long as the registration statements remain
effectively. Moreover, in general under Rule 144 as currently in effect, a
person (or persons whose shares are aggregated), including a person who may be
deemed to be an "affiliate" of the Company as that term is defined under the
Act, is entitled to sell within any three-month period a number of shares that
does not exceed the greater of (i) one percent of the then-outstanding shares of
Common Stock, or (ii) the average weekly trading volume in the Common Stock
during the four calendar weeks preceding such sale. If the shares in question
were acquired from the Company in transactions not involving a public offering,
then they may not be sold under Rule 144 until they have been outstanding for at
least two years. Sales under Rule 144 are also subject to certain requirements
as to the manner of sale, notice and the availability of current public
information about the Company. However, a person who is not deemed to have been
an affiliate of the Company during the 90 days preceding a sale by such person
is entitled to sell shares that have been outstanding for at least three years
without regard to the volume, manner of sale or notice requirements. Of the
5,153,000 outstanding shares of Common Stock constituting restricted shares,
approximately 78,000 were eligible as of October 16, 1995 to be resold publicly
without restriction under Rule 144(k).
No predictions can be made with respect to the effect, if any, that sales of
Common Stock in the market or the availability of shares of Common Stock for
sale pursuant to currently effective registration statements or under Rule 144
will have on the market price of Common Stock prevailing from time to time.
Nevertheless, the possibility
16
<PAGE>
that substantial amounts of Common Stock may be sold in the public market may
adversely affect prevailing market prices for the Common Stock and could impair
the Company's ability to raise capital through the sale of its equity
securities.
As of November 28, 1995, there were 3,022,230 shares of Common Stock reserved
for issuance upon the exercise of stock options outstanding under the Company's
stock option plans at exercise prices ranging from $2.25 to $8.25 per share, of
which options to purchase 1,364,263 shares are currently exercisable. An
additional 231,400 shares of Common Stock (plus any shares of Common Stock
covered by stock options currently outstanding under the Company's 1985
Incentive Stock Option Plan and 1985 Nonqualified Stock Option Plan which are
subsequently terminated or expire without being exercised) are reserved for
issuance upon the exercise of options available for future grant under the
Company's 1995 Stock Option Plan. In addition, the Company has outstanding
warrants to purchase an aggregate of 4,977,829 shares of Common Stock at
exercise prices ranging from $2.00 to $8.00 per share, all of which warrants are
currently exercisable. The Company also currently has effective registration
statements covering the resale of substantially all of such warrants (other than
the Warrants described in this Prospectus) and the shares issuable upon exercise
of such warrants (including the Shares offered hereby) by the holders. The
Company also has 162,612 shares of preferred stock outstanding which entitle
holders thereof to receive, upon surrender of the shares of preferred stock,
45,548 shares of Common Stock. Such options, warrants and preferred stock could
adversely affect the Company's ability to obtain future financing. Such options
and warrants are likely to be exercised and such preferred stock is likely to be
converted into shares of Common Stock, if at all, only at a time when the
exercise price or conversion price, as the case may be, is less than the market
price of the Common Stock. For the life of such options, warrants and preferred
stock, the holders are given the opportunity to profit from a rise in the market
price of the Common Stock without assuming the risk of ownership. Moreover, the
holders of those options, warrants and preferred stock can be expected to
exercise or surrender them, as the case may be, at a time when the Company would
be able to obtain additional capital through a new offering of securities on
terms more favorable than those provided by such options, warrants or preferred
stock. To the extent the trading price of the Common Stock at the time of
exercise of any such options or warrants exceeds the exercise price, such
exercise will also have a dilutive effect on the Company's securityholders.
TRANSFER AGENT AND WARRANT AGENT
The Transfer Agent for the Common Stock is American Stock Transfer & Trust
Company, New York, New York.
LEGAL MATTERS
Troy & Gould Professional Corporation, Los Angeles, California, has rendered an
opinion to the effect that the shares offered hereby by the Selling
Securityholders, when sold and paid for, will be duly and validly issued, fully
paid and nonassessable. Such counsel owns 12,671 shares of Common Stock as of
the date of this Prospectus.
EXPERTS
The financial statements and schedules of NTN Communications, Inc. as of
December 31, 1994, and for each of the years in the three-year period ended
December 31, 1994, incorporated by reference herein and elsewhere in the
registration statement have been incorporated by reference herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing. The
report of KPMG Peat Marwick LLP covering the December 31, 1994 financial
statements contains an explanatory paragraph that states that the Company is a
defendant in a class action lawsuit. The litigation is in its early stages and
no prediction can be made as to the likelihood of the ultimate outcome.
Accordingly, no provision for any liability that may result from adjudication
has been recognized in the financial statements. The report also refers to a
change in the method of accounting for investments in debt and equity securities
in 1994.
17
<PAGE>
================================================================================
No dealer, salesman or other person has been authorized to give any
information or make any representations, other than those contained in this
Prospectus, in connection with the offeringhereby, and, if given or made, such
information and representations must not be relied upon as having been
authorized by the Company or the Selling Securityholders. This Prospectus does
not constitute an offer to sell, or a solicitation of an offer to buy, any
securities to any person in any State or other jurisdiction in which such offer
or solicitation is unlawful. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the affairs of the Company or the facts herein set
forth since the date hereof .
_______________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information.................. 2
Incorporation of Certain
Documents by Reference............... 2
Risk Factors........................... 3
Certain Recent Developments............ 8
Use of Proceeds........................ 9
Price Range of Common Stock
and Dividend Policy.................. 9
Selected Consolidated Financial Data... 10
Selling Securityholders................ 11
Plan of Distribution................... 14
Description of Securities.............. 14
Legal Matters.......................... 17
Experts................................ 17
</TABLE>
================================================================================
================================================================================
2,608,500 Shares of Common Stock
NTN COMMUNICATIONS, INC.
____________
PROSPECTUS
____________
December __, 1995
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The Company estimates that expenses in connection with the distribution
described in this Registration Statement will be as follows. All expenses
incurred with respect to the distribution will be paid by the Company.
<TABLE>
<CAPTION>
<S> <C>
SEC registration fee $ 4,830
Printing expenses 5,000
Accounting fees and expenses 6,000
Legal fees and expenses 20,000
Fees and expenses for qualification under
state securities laws 1,000
Miscellaneous 1,170
-------
Total $38,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Certificate of Incorporation and Bylaws permit the Company to
indemnify officers and directors of the Company to the fullest extent permitted
by Section 145 of the Delaware General Corporation Law. Section 145 of the
Delaware General Corporation Law makes provision for the indemnification of
officers, directors and other corporate agents in terms sufficiently broad to
indemnify such persons, under certain circumstances, for liabilities (including
reimbursements of expenses incurred) arising under the Securities Act.
The Stock Purchase Agreement, dated as of April 24, 1995, between the Company
and the Selling Securityholders, provides that the Company shall indemnify the
Selling Securityholders under certain circumstances and the Selling
Securityholders shall indemnify the Company and the officers and directors of
the Company under certain circumstances.
The Company has entered into indemnity agreements with certain of its outside
directors. Pursuant to the indemnity agreement, the Company agrees to indemnify
each outside director who is a party to the indemnity agreement under certain
circumstances in which such outside director or the Company is named as a party
to a proceeding (as that term is defined).
II-1
<PAGE>
ITEM 16. EXHIBITS
The following exhibits are filed herewith or incorporated by reference as a
part of this Registration Statement:
4.1 Specimen Common Stock certificate (previously filed as an exhibit to the
Company's registration statement on Form 8-A, File No. 0-19383, and
incorporated herein by reference)
4.2 Form of Investment Agreement between the Company and each of the investors
named on the attached schedule, dated as of September 29, 1995*
5 Opinion of Troy & Gould Professional Corporation*
23.1 Consent of Troy & Gould Professional Corporation (included in
Exhibit 5)*
23.2 Consent of KPMG Peat Marwick LLP (included on page II-5 hereof)
24 Power of Attorney (included on page II-4)*
___________________
* Previously filed
ITEM 17. UNDERTAKINGS
(a) The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made of
the securities registered hereby, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in this registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that (i) and (ii) do not apply if the registration
statement is on Form S-3, and the information required to be included in
a post-effective amendment is contained in periodic reports filed by the
registrant pursuant to section 13 or section 15(d) of the Exchange Act
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned Company hereby undertakes:
That for purposes of determining any liability under the Securities Act,
each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Exchange Act) that is incorporated by reference in the registration statement
shall be deemed to be a new
II-2
<PAGE>
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 TO
Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of Carlsbad, State of
California, on December 20, 1995.
NTN COMMUNICATIONS, INC.
By: /s/ Patrick J. Downs
-------------------------------------------------
Patrick J. Downs,
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration Statement
on Form S-3 has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Patrick J. Downs* Chairman of the Board of Directors December 20, 1995
- ------------------------- and Chief Executive Officer
Patrick J. Downs
/s/ Daniel C. Downs* President, Chief Operating Officer December 20, 1995
- ------------------------- and Director
Daniel C. Downs
/s/ Kenneth B. Hamlet* Executive Vice-President, General December 20, 1995
- ------------------------- Manager and Director
Kenneth B. Hamlet
/s/ Ronald E. Hogan Senior Vice President - Finance and December 20, 1995
- ------------------------- Secretary (Principal Financial
Ronald E. Hogan and Accounting Officer)
/s/ Donald C. Klosterman* Director December 20, 1995
- -------------------------
Donald C. Klosterman
/s/ Norman Lear* Director December 20, 1995
- -------------------------
Norman Lear
/s/ Alan P. Magerman* Director December 20, 1995
- -------------------------
Alan P. Magerman
/s/ A.R. Rozelle* Director December 20, 1995
- -------------------------
A. R. Rozelle
*By:/s/ Ronald E. Hogan
- -------------------------
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
The Board of Directors
NTN Communications, Inc.:
We consent to the use of our reports incorporated by reference and to the
references to our firm under the headings "Selected Consolidated Financial Data"
and "Experts" in the Prospectus.
Our report dated March 28, 1995, contains an explanatoryparagraph that states
that the Company is a defendant in a class action lawsuit. The litigation is in
its early stages and no prediction can be made as to the likelihood of the
ultimate outcome. Accordingly, no provision for any liability that may result
from adjudication has been recognized in the consolidated financial statements.
Our report also refers to a change in the method of accounting for investments
in debt and equity securities in 1994.
KPMG Peat Marwick LLP
San Diego, California
December 19, 1995
II-5
