<PAGE>
As filed with the Securities and Exchange Commission
on January 29, 1996 Reg. No. ______________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
NTN COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
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.)
(619)438-7400
</TABLE>
(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 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 delivery of the prospectus is expected to be made pursuant to
Rule 434, please check the following box. [_]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==========================================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Securities Amount To Offering Price Aggregate Offering Amount of
To Be Registered Be Registered Per Share Price Registration Fee
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.005 par value....... 1,364,712 shares $3.72(1) $5,076,729(1) $1,751
=========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating fee and based, pursuant to
Rule 457(c), on the average of the high and low sale prices of Registrant's
Common Stock as reported on the American Stock Exchange on January 23, 1996.
____________________
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.
Pursuant to Rule 429 of the Securities Act of 1933, the Prospectus herein
also relates to the Registration Statement on Form S-3 (Reg. No. 33-97780), as
amended.
<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, JANUARY 29, 1996
PROSPECTUS
NTN COMMUNICATIONS, INC.
3,973,212 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 3,973,212 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 _______________, 1996, 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 __________, 1996.
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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.
2
<PAGE>
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,
3
<PAGE>
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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<PAGE>
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 8% of the outstanding Common Stock, and have the
right, through the exercise of currently exercisable options and warrants to
purchase 3,739,814 shares of Common Stock, to increase their percentage
ownership to 20%. 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, and there can be no
assurance that this trading price will not decline from the current level. 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 January 24, 1996, there were 4,477,230 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 2,819,263 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 3,497,829 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 6,533,000 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.
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 $56,751. 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>
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............................. 4.12 5.19
1996
----
First Quarter (through January 26, 1996)... 3.44 4.44
</TABLE>
For a recent closing price for the Common Stock as reported on the AMEX
see the cover page of this Prospectus. As of January 24, 1996, there were
1,801 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.
SELECTED CONSOLIDATED STATEMENT OF OPERATIONS DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
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 and issued 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 a 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 a Valuation Period is greater than $4.70, then the Private
Placement Investors are obligated to deliver to the Company a number of shares
of Common Stock equal to the additional shares that they have been issued in
the interim as described below and to pay the Company the dollar amount, if
any, 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. Any such adjustment also is to be accomplished by the Company issuing
additional shares to the Private Placement Investors.
In January 1996, the Company issued to the Private Placement Investors an
aggregate of 1,364,712 shares of Common Stock offered hereby in advance of
the final determination of the Average Share Price. As described above, under
the terms of the agreements between the Company and the Private Placement
Investors, in the event the total number of shares received by a Private
Placement Investor exceeds the number of shares to which they are entitled
based on the Average Share Price during a Valuation Period, the Private
Placement Investors will be obligated to deliver to the Company a number of
shares of Common Stock equal to such excess shares they received.
In connection with the foregoing transactions, the Company agreed to file
the Form S-3 Registration Statement of which this Prospectus is a part
covering the shares of Common Stock acquired by the Private Placement
Investors. The Company also granted the Private Placement Investors certain
future 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
11
<PAGE>
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 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, based on information available to the
Company as of January 26, 1996, 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+......... 941,177 3.95% 941,177 0 0%
Kayne, Anderson Non-Traditional
Investments, L.P.+............... 823,530 3.46 823,530 0 0
Offense Group Associates, L.P.+... 392,157 1.65 392,157 0 0
ARBCO Associates, L.P.+........... 342,157 1.65 292,157 0 0
Gershon Partners, L.P.+........... 313,726 1.32 313,726 0 0
Granite Global Debt Fund, Ltd.+... 313,726 1.32 313,726 0 0
Hudson, Inc. Panama+.............. 196,079 * 196,079 0 0
Pictet et. Cie+................... 78,432 * 72,432 0 0
Banque Scandinave en Suisse+...... 78,432 * 72,432 0 0
Mirelis S.A+...................... 78,432 * 72,432 0 0
The Gifford Fund+................. 78,432 * 72,432 0 0
Carousel Investments, Inc.+....... 78,432 * 72,432 0 0
Continuum Capital, Inc............ 312,500 1.31 50,000(3) 262,500(4) 1.1
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 23,827,419 shares of Common Stock issued as of January 26, 1996.
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 January 26, 1996, there were 23,827,419 shares of Common Stock issued.
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 January 26, 1996, 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 certain
14
<PAGE>
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 23,827,419 shares of Common Stock issued. Of such shares of
Common Stock, approximately 6,533,000 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.
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
16
<PAGE>
prices for the Common Stock and could impair the Company's ability to raise
capital through the sale of its equity securities.
As of January 24, 1996, there were 4,477,230 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 2,819,263 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 future grant
under the Company's 1995 Stock Option Plan. In addition, the Company has
outstanding warrants to purchase an aggregate of 3,497,829 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 offering hereby, 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
Page
----
Available Information..................................
Incorporation of Certain...............................
Documents by Reference.................................
Risk Factors...........................................
Certain Recent Developments............................
Use of Proceeds........................................
Price Range of Common Stock
and Dividend Policy...................................
Selected Consolidated Financial Data...................
Selling Securityholders................................
Plan of Distribution...................................
Description of Securities..............................
Legal Matters..........................................
Experts................................................
================================================================================
================================================================================
3,973,212 Shares of Common Stock
NTN COMMUNICATIONS, INC.
____________
PROSPECTUS
____________
January __, 1996
================================================================================
<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.
SEC registration fee......................... $ 1,751
Printing expenses............................ 5,000
Accounting fees and expenses................. 5,000
Legal fees and expenses...................... 5,000
Fees and expenses for qualification under
state securities laws...................... 1,000
Miscellaneous................................ 1,000
-------
Total.................................... $18,751
=======
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 respective Investment Agreements between the Company and the Private
Placement Investors and the terms of the Warrants held by the other Selling
Securityholders provide that the Company shall indemnify the Selling
Securityholders, and the Selling Securityholders shall indemnify the Company
and the officers and directors of the Company, for certain liabilities,
including certain liabilities under the Securities Act.
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 (Reg. No. 0-19383) and
incorporated herein by reference)
4.2 Form of Investment Agreement between the Company and each of the
investors named in the attached schedule (previously filed as Exhibit
4.2 to the Company's Registration Statement on Form S-3 (Reg. No. 33-
97780) and incorporated herein by reference).
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)
---------------
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
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 January 29, 1996.
NTN COMMUNICATIONS, INC.
By: /s/ Patrick J. Downs
--------------------------
Patrick J. Downs,
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Patrick J. Downs and Ronald E. Hogan,
and each of them, his true and lawful attorneys-in-fact and agents, each with
power of substitution, for him in any and all capacities, to sign this
Registration Statement and any amendments hereto, and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as he might do or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents, or his or
their substitute or substitutes, may do or cause to be done by virtue hereof.
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 January 29, 1996
------------------------- and Chief Executive Officer
Patrick J. Downs
/s/ Daniel C. Downs President, Chief Operating Officer January 29, 1996
------------------------- and Director
Daniel C. Downs
/s/ Kenneth B. Hamlet Executive Vice-President, General January 29, 1996
------------------------- Manager and Director
Kenneth B. Hamlet
/s/ Ronald E. Hogan Senior Vice President - Finance and January 29, 1996
------------------------- Secretary (Principal Financial
Ronald E. Hogan and Accounting Officer)
/s/ Donald C. Klosterman Director January 29, 1996
-------------------------
Donald C. Klosterman
/s/ Norman Lear Director January 29, 1996
-------------------------
Norman Lear
/s/ Alan P. Magerman Director January 29, 1996
-------------------------
Alan P. Magerman
/s/ A.R. Rozelle Director January 29, 1996
-------------------------
A. R. Rozelle
</TABLE>
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<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 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
January 25, 1996
II-5
<PAGE>
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Description Number
- ------- ----------- ----------
<C> <S> <C>
4.1 Specimen Common Stock certificate (previously filed as an exhibit to the
Company's Registration Statement on Form 8-A (Reg. No. 0-19383), and
incorporated herein by reference)
4.2 Form of Investment Agreement between the Company and each of the
investors named in the attached schedule (previously filed as Exhibit
4.2 to the Company's Registration Statement on Form S-3 (Reg. No. 33-
97780) and incorporated herein by reference).
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)
</TABLE>
II-6
<PAGE>
EXHIBIT 5
---------
[Letterhead of Troy & Gould]
January 29, 1996 NTN 1.1
NTN Communications, Inc.
The Campus
5966 La Place Court
Carlsbad, California 92008
Re: Registration Statement on Form S-3
----------------------------------
Gentlemen:
At your request, we have examined the Registration Statement on Form
S-3, as amended by Post-Effective Amendment No. 1 thereto (as so amended,
the "Registration Statement"), of NTN Communications, Inc. (the "Company")
which has been prepared for filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, relating to
1,364,712 shares of Common Stock of the Company (the "Shares") that may be
resold by the selling securityholders identified in the Registration
Statement. All capitalized terms not defined herein shall have the
definitions ascribed to them in the Registration Statement.
We are familiar with corporate proceedings heretofore taken by the
Company in connection with the sale of the Shares. In addition, we have
examined such records of the Company as in our judgment were necessary or
appropriate to enable us to render the opinions expressed herein.
Based upon the foregoing, it is our opinion that the Shares have been
duly and validly authorized and issued, and are fully paid and
nonassessable.
We consent to the use of our name under the caption "Legal Matters" in
the Prospectus and the Registration Statement, and to the filing of this
opinion as an exhibit to the Registration Statement. By giving you this
opinion and consent, we do not admit that we are experts with respect to any
part of the Registration Statement or Prospectus within the meaning of the
term "expert" as used in Section 11 of the Securities Act of 1933, as
amended, or the rules and regulations promulgated thereunder, nor do we
admit that we are in the category of persons whose consent is required under
Section 7 of said Act.
Very truly yours,
/s/ TROY & GOULD
TROY & GOULD
Professional Corporation
